As filed with the Securities and Exchange Commission on April 21, 1999
Registration No. 333-_________
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
Formica Corporation
(Exact name of registrant as specified in its charter)
Delaware 34-1046753
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 Independence Boulevard
Warren, NJ 07059
(908) 647-8700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
David T. Schneider
Vice President, Chief Financial Officer and Secretary
15 Independence Boulevard
Warren, NJ 07059
(908) 647-8700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------
Copies to:
Richard Truesdell, Jr., Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
-----------------------
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date.
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, please check the following box. |X|
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 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 number of the earliest 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. |_|
<TABLE>
CALCULATION OF REGISTRATION FEE
===================================================================================================================
<S> <C> <C> <C> <C>
Proposed Maximum Proposed Maximum
Title of Each Class Amount to be Offering Aggregate Offering Amount of
of Securities to be Registered Registered Price(1) Price(1) Registration Fee(2)
- -------------------------------------------------------------------------------------------------------------------
10 7/8% Series B Senior
Subordinated Notes due 2009... $215,000,000 100% $215,000,000 $59,770
===================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee.
(2) Calculated pursuant to Rule 457(f).
-----------------------
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>
EXPLANATORY NOTE
This Registration Statement covers the registration of an aggregate
principal amount of $215,000,000 of 10 7/8% Series B Senior Subordinated Notes
due 2009 (the "new notes") of Formica Corporation ("Formica") that may be
exchanged for equal principal amounts of Formica's outstanding 10 7/8% Series A
Senior Subordinated Notes due 2009 (the "old notes") (the "exchange offer").
This Registration Statement also covers the registration of the new notes for
resale by Donaldson, Lufkin & Jenrette Securities Corporation in market-making
transactions. The complete prospectus relating to the exchange offer (the
"prospectus") follows immediately after this Explanatory Note. Following the
prospectus are certain pages of the prospectus relating solely to such
market-making transactions (the "Market-Making Prospectus"), including
alternate front and back cover pages, a section entitled "Risk
Factors--Trading Market for the New Notes" to be used in lieu of the section
entitled "Risk Factors--Lack of Public Market," an alternate "Use of Proceeds"
section and an alternate "Plan of Distribution" section. In addition, the
Market-Making prospectus will not include the following captions (or the
information set forth under such captions) in the exchange offer prospectus:
"Summary--The Exchange Offer," "Summary--Consequences of Exchanging Old Notes
pursuant to the Exchange Offer," "Risk Factors--Lack of Public Market," "The
Exchange Offer" and "Certain United States Tax Consequences of the Exchange
Offer." All other sections of the exchange offer prospectus will be included
in the Market-Making prospectus.
2
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL o, 1999
PROSPECTUS
Formica Corporation
Offer to Exchange
10 7/8% Series A Senior Subordinated Notes Due 2009 for
10 7/8% Series B Senior Subordinated Notes Due 2009
which have been registered under the Securities Act of 1933, as amended
We are offering to exchange an aggregate principal amount of up to
$215,000,000 of our 10 7/8% Series B Senior Subordinated Notes due 2009 (the
"new notes"), which have been registered under the Securities Act of 1933 for
our existing 10 7/8% Series A Senior Subordinated Notes due 2009 (the "old
notes"). We are offering to issue the new notes to satisfy our obligations
contained in the registration rights agreement entered into when the old notes
were sold in transactions pursuant to Rule 144A and Regulation S under the
Securities Act and therefore not registered with the SEC.
The terms of the new notes are identical in all material respects to the
terms of the old notes, except that the new notes have been registered under
the Securities Act, and certain transfer restrictions and registration rights
relating to the old notes do not apply to the new notes.
To exchange your old notes for new notes:
o You must complete and send the letter of transmittal that accompanies
this prospectus to the exchange agent by 5:00 p.m., New York time,
on , 1999.
o If your old notes are held in book-entry form at The Depository Trust
Company ("DTC"), you must instruct DTC through your signed letter of
transmittal that you wish to exchange your old notes for new notes.
When the exchange offer closes, your DTC account will be changed to
reflect your exchange of old notes for new notes.
o You should read the section called "The Exchange Offer" for
additional information on how to exchange your old notes for new
notes.
See "Risk Factors" beginning in page for a discussion of certain risk
factors that should be considered by you prior to tendering your old notes in
the exchange offer.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes to be issued in
the exchange offer or passed upon the adequacy or accuracy of
this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 1999.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-1 under the Act with respect to our offering
of the new notes. This prospectus does not contain all the information
included in the registration statement and the exhibits and schedules thereto.
You will find additional information about us and the new notes in the
registration statement. The registration statement and the exhibits and
schedules thereto may be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the public reference facilities
of the SEC's Regional Offices: New York Regional Office, Seven World Trade
Center, Suite 1300, New York, New York 10048; and Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
this material may also be obtained from the Public Reference Section of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The SEC also maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants, including Formica, that file
electronically with the SEC. Statements made in this prospectus about legal
documents may not necessarily be complete and you should read the documents
which are filed as exhibits to the registration statement or otherwise filed
with the SEC.
If for any reason we are not required to comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), we are still required under the indenture to furnish the holders of the
new notes with the information, documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act. In addition, we have agreed that,
for so long as any notes remain outstanding, we will furnish to the holders of
the notes and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
2
<PAGE>
SUMMARY
This section summarizes the more detailed information in this prospectus
and you should read all of such information carefully and in its entirety. We
refer to ourselves as "Formica", "we," "us", "ourselves" or "our company."
Overview
We believe that our company, Formica Corporation, is one of the leading
brand names in the decorative surfacing products market. "Decorative surfaces"
are products that are used to finish a surface, which may be a wall, a
countertop or a floor, and include everything from inexpensive vinyl floor to
marble countertops. We produce:
o high-pressure decorative laminates (our primary product):
o we take sheets of attractively designed paper and then seal them
with laminate using a high-pressure press
o because high-pressure laminate is durable, attractively designed,
easy to maintain and very versatile, it is used in a wide range
of commercial and residential surfaces, including kitchen
cabinets, countertops and floors
o we believe that we are one of the largest producers of high
pressure decorative laminates, which we market under the
Formica name, in the world
o we estimate that the total size of the world-wide market was
approximately $3 billion in 1998, evenly distributed between
North America, Europe and the rest of the world
o solid-surfacing:
o unlike high -pressure laminates, which consists of a thin cover
applied to the top of a surface, solid surfacing is quite
thick, which makes it more durable and permits easier repair in
the event of a scratch, since the surface can be sanded down to
look like new
o we market our solid-surfacing product under the names "Surell"
and "Fountainhead"
o laminate flooring
o we take laminate and apply it over any dry, clean and level floor
surface
o the flooring is water-resistant and is ideally suited to
kitchens and bathrooms
o we introduced our flooring line under the Formica name in 1996
We believe that our Formica brand name, which is recognized by many
consumers without prompting, contributes significantly to the sales of our
products. For the year ended December 31, 1998, our net sales and Adjusted
EBITDA (as defined on page ) were $549.7 million and $50.2 million,
respectively.
o We market our products:
o through over 7,500 domestic and international independent
distributors and dealers as well as our own sales force
3
<PAGE>
o to major distributors, manufacturers of finished products, and
to architects and designers who specify products for commercial
and residential interiors.
Our company was founded in 1913 and created the world's first decorative
laminate in 1927. After several sales and an initial public offering, we were
sold to FM Acquisition Corporation in a buyout led by Vincent Langone, David
Schneider and Dillon Read & Co. in 1989. In January 1995, we were acquired by
BTR Nylex Ltd. an Australian company and a subsidiary of BTR plc. In May 1998,
we were bought by Laminates Acquisition Co., which was organized by DLJ
Merchant Banking Partners II, L.P., certain affiliated funds and entities,
certain institutional investors, including CVC European Equity Partners, L.P.
and CVC European Equity Partners (Jersey) L.P. and MMI Products L.L.C., and
Messrs. Langone and Schneider. You should read the section called "The
Acquisition" for additional information about our recent acquisition by
Laminates.
Competitive Strengths
We possess a number of competitive strengths, including:
Global Market Position
We have extensive global manufacturing capabilities and are one of the
largest producers of HPL on a worldwide basis. We are the largest or the
second largest seller of HPL in major national markets including the United
States, Canada, the United Kingdom, France, Spain, Taiwan and China, where our
principal manufacturing facilities are located. The location of our
manufacturing facilities and design centers and our worldwide distribution
network enable us to respond effectively to our customers' delivery and design
needs.
Worldwide Brand Awareness
We have an extremely high level of unprompted brand awareness and are one
of the most specified brands of HPL. The Formica brand name, which represents
superior design, quality and value, significantly contributes to our ability
to attract the business of designers, architects, distributors and direct
accounts.
Established, Effective Distribution Channels
We believe that we have one of the most extensive global distribution
capabilities in the industry. We have approximately:
o 250 sales representatives
o 1,500 distributor sales representatives in 300 locations
o sub-distributors and dealers in another 7,500 locations worldwide.
The efforts of our domestic and international and architectural specification
representatives, when combined with the sales force of our distributor
network, provides us with sales and marketing coverage in over 100 countries
throughout the world.
Acclaimed Design Leadership
We have a history of technological leadership and innovation in product
design. We maintain extensive design facilities and have consistently won
design and new product development awards, such as the 1996 Kitchen & Bath
Product Innovator Award, the 1997 Visual Marketing & Store Design Reader's
Choice Poll and the 1997 Green Product Award. In addition, our flooring
product was awarded the 1997 Dealer's Choice Award-Best Laminate Flooring
Introduction and the 1997 Kitchen & Bath Business Product of the Year Award.
We design many of our own
4
<PAGE>
proprietary decorative papers and own exclusive rights to these designs. The
strength of our reputation for innovative design is an important factor in our
success in the commercial segment of the market.
Diverse and Stable Customer Base
We benefit from a diversified sales base:
o Geographically, we sell our products in over 100 countries and
maintain a strong market position in the major markets of North
America and Europe and are positioned for continued growth in Asia.
In 1998, approximately 63% of our net sales were made in North
America, with the balance principally in Europe and Asia.
o We estimate that our net sales in 1998 were balanced between the
markets for new construction (33%) and remodeling (67%).
o We also estimate that our 1998 sales were also balanced between sales
to commercial and residential locations, each of which represented
approximately 50% of total net sales in 1997.
We believe that this diversification helps to mitigate the effect of regional
economic cycles and the changes in market conditions within the commercial and
residential new construction and remodeling markets.
Recent Developments
In connection with the acquisition, Vincent Langone, our chief executive
officer from 1988 to 1994, and David Schneider, our chief financial officer
from 1989 to 1994, have returned to assume senior management roles at Formica.
Messrs. Langone and Schneider, who have a combined 23 years of tenure at
Formica, have a successful record of managing two previous leveraged buyouts
of Formica. During their tenure at Formica, they consistently ran the business
at significantly lower selling, general and administrative expenses levels
than those incurred from 1995 to 1997 and successfully managed us through a
building products recession in North America from 1990 to 1992 with no
material deterioration in sales or EBITDA. Since 1994, although our net sales
increased from $489.2 million in 1994 to $533.4 million in 1997, our EBITDA
declined from $71.4 million to $38.6 million. With the assistance of Messrs.
Langone and Schneider, we have begun to implement a business strategy that is
intended to address declines in the financial results of the business since
1994.
We believe that our decline in profitability and cash flows from 1994
through 1997 was largely attributable to the following factors:
o a large increase in selling, general and administrative expenses,
which increased from 21.0% of net sales in 1994 to 31.5% of net
sales in 1997 (in each case excluding amortization), and which was
largely the result of increased advertising and promotion
o a significant increase in capital expenditures, which averaged
approximately $39.5 million per year from 1995 to 1997 as compared
to $12.4 million per year from 1985 to 1994, the majority of the
productivity and efficiency benefits of which management believes
have yet to be realized
o the autonomous operation of our North American, European and Asian
divisions, which prevented cost savings from integration and
hampered our ability to share improved manufacturing techniques,
purchasing, design and technology on a global basis
o significant management turnover, particularly in North America, which
led to a loss of strategic direction and to operational difficulties
5
<PAGE>
o prior management's emphasis on gross margins and the resulting
elimination of certain lower-margin accounts which had provided
positive variable contributions, and
o a change in the emphasis of our design program, which began to focus
on consumers rather than product specifiers such as architects and
designers
Business Strategy
We have begun to implement a strategy that we believe will return us to
pre-1995 levels of profitability and cash flows. We expect our operating
performance to benefit from the following factors:
o the return of Vincent Langone and David Schneider
o a targeted reduction in selling, general and administrative expense
spending
o an expected increase in unit volume shipments as customer service is
improved through better management of the inventory and distribution
systems
o the realization of substantial savings due to manufacturing
efficiencies resulting from the significant capital investments made
since 1994 and
o a reduction in capital spending to historical (pre-1995) levels.
For more complete information on our business strategies, you should read
the section called "Business--Business Strategies."
Cost Savings
We have begun to implement a cost savings program intended to reduce
operating expenses. We devised this program after a detailed review of our
financial and operating results from 1995 to 1997, based on our management's
expertise in successfully operating the business at significantly lower
selling, general and administrative spending levels than were incurred between
1995 and 1997, yet with stronger EBITDA results.
The majority of the savings relate to reductions in advertising and sales
promotion spending as well as other selling and administrative spending.
Implementation of the cost savings began early in 1998, but we do not expect
the full savings to be realized until 1999.
The following is a summary of the estimated annual cost savings and
management's estimate of
o the amount of such cost savings reflected in our results of
operations for the year ended December 31, 1998 and
o the annual cost savings expected to be reflected in our results of
operations for 1999 and thereafter (based on our 1999 budget
compared to management's estimate of total spending on such
categories in 1997):
Year ended Estimated
December 31, Annual Cost
1998 Savings
------------ -----------
($ in millions)
Excess Advertising & Sales Promotion/Other Selling
& Administrative Expenses.......................... $10.5 $18.0
Flooring............................................. 5.5 6.0
Operating Expenses................................... 2.0 4.0
Staff Reductions..................................... 3.0 5.0
6
<PAGE>
Consultants/Legal/Other................................ 4.0 4.0
----- -----
Total Estimated Net Cost Savings.................... $25.0 $37.0
Additional Standalone Costs....................... (3.0) (7.0)
----- -----
Total Estimated Net Costs Savings................... $22.0 $30.0
===== =====
Management expects to achieve reductions of:
o approximately $18.0 million in advertising and sales promotion
spending and other selling and administrative expenses as management
believes that much of our 1997 advertising and promotion spending
was ineffective;
o approximately $6.0 million in flooring spending as the launch of the
laminate flooring product line in 1997 required higher than normal
advertising and promotion spending;
o approximately $4.0 million in operating expenses due to reductions in
claims expenses, packaging and scrap and warehouse and
transportation costs;
o approximately $5.0 million in staff reductions; and
o approximately $4.0 million in fees paid to consulting, legal and
other outside service providers.
The $37.0 million in estimated cost savings is expected to be partly
offset by approximately $7.0 million in incremental costs associated with us
being independent from BTR. See "Business--Cost Savings."
While we believe that the advertising and promotional spending that
constituted a large part of the increased SG&A expenses was unnecessary, we
cannot assure you that a reduction in advertising and promotional spending
will not reduce net sales. See "Risk Factors--Cautionary Statement Concerning
Forward-Looking Statements" and "Risk Factors--Cost Cutting Strategy."
You should read the section called "Risk Factors" for a discussion of
certain risks that you should consider before you tender your old notes in
exchange for new notes.
-----------------------
Our principal executive offices are located at 15 Independence Boulevard,
Warren, New Jersey 07059, and our telephone number is 908-647-8700.
7
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered..............................We are offering up to $215,000,000 aggregate principal amount
of 10 7/8% Senior Subordinated Series B Notes due 2009, which
has been registered under the Securities Act.
The Exchange Offer...................................We are offering to issue the new notes in exchange for a
like principal amount of your old notes. We are offering to
issue the new notes to satisfy our obligations contained in
the registration rights agreement entered into when the old
notes were sold in transactions pursuant to Rule 144A under
the Securities Act and therefore not registered with the
SEC. For procedures for tendering, see "The Exchange
Offer."
Tenders, Expiration Date, Withdrawal.................The exchange offer will expire at 5:00 p.m. New York City
time on , 1999 unless it is extended. If you
decide to exchange your old notes for new notes, you must
acknowledge that you are not engaging in, and do not
intend to engage in, a distribution of the new notes. If you
decide to tender your old notes pursuant to the exchange
offer, you may withdraw them at any time prior to ,
1999. If we decide for any reason not to accept any old
notes for exchange, your old notes will be returned to you
without expense to you promptly after the exchange offer
expires.
Federal Income Tax Consequences......................Your exchange of old notes for new notes pursuant to the
exchange offer will not result in any income, gain or loss to
you for Federal income tax purposes. See "Certain United
States Federal Income Tax Consequences of the Exchange
Offer."
Use of Proceeds......................................We will not receive any proceeds from the issuance of the
new notes pursuant to the exchange offer.
Exchange Agent.......................................Summit Bank is the exchange agent for the exchange offer.
</TABLE>
8
<PAGE>
CONSEQUENCES OF EXCHANGING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Based on interpretations by the SEC's staff in no-action letters issued
to third parties, we believe that new notes issued in exchange for old notes
pursuant to the exchange offer may be offered for resale, resold or otherwise
transferred by you without registering the new notes under the Securities Act
or delivering a prospectus so long as:
o you are not one of our "affiliates", which is defined in Rule 405 of
the Securities Act;
o you acquire the new notes in the ordinary course of your business;
and
o unless you are a broker dealer, you do not have any arrangement with
any person to participate in the distribution of such new notes.
Unless you are a broker-dealer, you must acknowledge that:
o you are not engaged in, and do not intend to engage in, a
distribution of the new notes; and
o you have no arrangement or understanding to participate in a
distribution of the new notes.
If you are an affiliate of Formica, or you are engaged in, intend to
engage in or have any arrangement or understanding with respect to, the
distribution of new notes acquired in the exchange offer, you (1) should not
rely on our interpretations of the position of the SEC's staff and (2) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
If you are a broker-dealer and receive new notes for your own account
pursuant to the exchange offer:
o you must acknowledge that you will deliver a prospectus in connection
with any resale of such new notes. The letter of transmittal states
that by so acknowledging and by delivering a prospectus, you will
not be deemed to admit that you are an "underwriter" within the
meaning of the Securities Act;
o if you are a broker-dealer, you may use this prospectus, as it may be
amended or supplemented from time to time, in connection with the
resale of new notes received in exchange for old notes acquired by
you as a result of market-making or other trading activities.
For a period of 90 days after the expiration of the exchange offer, we
will make this prospectus available to any broker-dealer for use in connection
with any such resale.
In addition, you may offer or sell the new notes in certain jurisdictions
only if they have been registered or qualified for sale there, or an exemption
from registration or qualification is available and is complied with. Subject
to the limitations specified in the registration rights agreement, we will
register or qualify the new notes for offer or sale under the securities laws
of any jurisdictions that you reasonably request in writing. Unless you
request that the sale of the new notes be registered or qualified in a
jurisdiction, we currently do not intend to register or qualify the sale of
the new notes in any jurisdiction. If you do not comply with such requirement,
you could incur liability under the Securities Act, and we will not indemnify
you in such circumstances.
9
<PAGE>
SUMMARY DESCRIPTION OF THE NOTES
The terms of the new notes and the old notes are identical in all
material respects, except that the new notes have been registered under the
Securities Act, and certain transfer restrictions and registration rights
relating to old notes do not apply to the new notes.
<TABLE>
<S> <C>
Maturity Date...........March 1, 2009
Interest Payment Dates..Every March 1 and September 1, beginning September 1,
1999.
Optional Redemption.....We may redeem any of the notes at our option on or
after March 1, 2004 at the redemption prices set
forth on page , plus accrued interest. In
addition, we may redeem up to 35% of the notes on
or prior to March 1, 2002 at a redemption price of
110.875% of the principal amount, plus accrued
interest, with the net cash proceeds of one or
more public equity offerings provided that
at least 65% of the aggregate principal
amount of the notes remain outstanding after
such redemption.
Change of Control.......Upon the occurrence of certain change of control events,
you may require us to repurchase your notes at 101% of
their principal amount, plus accrued interest. We cannot
assure you that we will have sufficient resources to
satisfy our repurchase obligation in such circumstances.
See "Risk Factors--We May be Unable to Repurchase Your
Notes upon a Change of Control" and "Description of
Notes."
Ranking.................The notes:
o rank junior to all of our senior indebtedness and
secured indebtedness, including our credit facility
o will rank equally with any of our future senior
subordinated indebtedness
o will effectively rank junior to all liabilities of
subsidiaries.
As of December 31, 1998, after giving effect to our sale
of the old notes, Formica would have had outstanding
approximately $332.7 million of senior indebtedness.
Certain Covenants.......The indenture governing the notes contains certain
covenants limiting or prohibiting our ability and our
subsidiaries' ability to:
o incur additional indebtedness or issue preferred
stock;
10
<PAGE>
o pay dividends or make distributions on, and to
redeem or repurchase, capital stock or to repurchase
subordinated indebtedness;
o engage in transactions with affiliates;
o engage in sale and leaseback transactions;
o create liens securing indebtedness;
o make investments and sell assets; and
o consolidate with or merge into, or sell
substantially all of our assets to, another person.
See "Description of Notes--Certain Covenants."
Use of Proceeds.........We will not receive any proceeds from the exchange of
new notes for old notes.
</TABLE>
11
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
FINANCIAL AND OPERATING DATA
The following table includes:
o summary historical financial data for our company before we were
acquired from BTR (what we call "Predecessor I"), for the year ended
December 31, 1994.
o summary historical financial data for our company after we were
acquired by BTR (what we call Predecessor II"), for the eleven
months ended December 31, 1995 (beginning January 25, 1995, when we
were acquired by BTR), the years ended December 31, 1996 and 1997
and the four months ended April 30, 1998.
o summary historical financial data for our company for the eight
months ended December 31, 1998.
o summary pro forma financial data for the years ended December 31,
1997 and 1998.
The historical data for Predecessor I for the year ended December 31, 1994 has
been derived from the audited consolidated financial statements of Predecessor
I. The historical financial data for Predecessor II as of and for the eleven
months ended December 31, 1995 and as of and for the years ended December 31,
1996 and 1997 has been derived from the audited consolidated financial
statements of Predecessor II. The unaudited pro forma financial data is not
designed to represent and does not represent what our financial position or
results of operations actually would have been had the transactions described
under "Unaudited Pro Forma Condensed Consolidated Financial Statements" been
completed as of the date or at the beginning of the period indicated, or to
project our financial position or results of operations at any future date or
for any future period. You should read the following table in conjunction with
"Selected Consolidated Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Unaudited Pro Forma
Condensed Consolidated Financial Statements" and our consolidated financial
statements and notes thereto included elsewhere herein.
<TABLE>
Predecessor I Predecessor II Formica Pro Forma
------------- --------------------------------------------- ------- --------------------
Eleven Eight
Months Four Months
Ended Months Ended
Year Ended December Years Ended Ended April December Years Ended
December 31 31, December 31, 30, 31, December 31,
----------- -------- ------------------- ---------- -------- ---------------------
1994 1995 1996 1997 1998 1998 1997 1998
----------- -------- --------- -------- ---------- -------- -------- ---------
(dollars in millions) (dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $489.2 $468.2 $521.6 $533.4 $178.3 $371.4 $533.4 $549.7
Cost of products sold... 341.8 324.0 348.3 350.1 131.1 266.2 350.1 397.3
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 147.4 144.2 173.3 183.3 47.2 105.2 183.3 152.4
Selling, general and
administrative
expenses.............. 108.5 145.2 186.7 202.2 60.9 100.5 187.6 164.6
Cost of terminated
acquisition........... -- -- -- -- -- 3.0 -- 3.0
Goodwill impairment
charge(1)............. -- -- -- 484.4 -- -- -- --
------ ------ ------ ------ ------ ----- ------ ------
Operating income (loss). 38.9 (1.0) (13.4) (503.3) (13.7) 1.7 (4.3) (15.2)
Interest expense(2)..... (46.4) (31.7) (10.6) (3.1) (1.7) (25.7) (32.3) (35.5)
Other income............ 16.2 0.4 1.1 1.8 0.8 4.5 1.8 5.3
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes.......... 8.7 (32.3) (22.9) (504.6) (14.6) (19.5) (34.8) (45.4)
Income tax (provision)
benefit............... 7.0 5.8 (5.0) (0.2) -- (2.8) (0.2) (2.8)
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)(3).... 15.7 (26.5) (27.9) (504.8) (14.6) (22.3) (35.0) (48.2)
====== ====== ====== ====== ====== ====== ====== ======
12
<PAGE>
Other Data:
Adjusted EBITDA(4)...... $ 71.4 $ 36.7 $ 39.8 $ 38.6 $ 3.9 $ 46.3 $ 38.6 $ 50.2
Adjusted EBITDA
Margin................ 14.6% 7.8% 7.6% 7.2% 2.2% 12.5% 7.2% 9.1%
Depreciation and
amortization.......... $ 23.9 $ 37.3 $ 52.1 $ 55.7 $ 11.1 $ 29.3 $ 41.1 $ 43.6
Capital expenditures.... 17.5 27.5 44.5 46.5 8.3 35.5 46.5 43.8
Ratio of earnings to fixed
charges(5)................. 1.20 -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
As of
December 31, 1998
-----------------------------
Historical As Adjusted
----------- -----------
(in millions)
<S> <C> <C>
Balance Sheet Data (End of Period):
Working capital....................... $114.5 $122.5
Total assets.......................... 696.8 709.8
Net debt, net of cash and cash
equivalents......................... 286.1 293.1
Stockholder's equity.................. 119.8 117.8
</TABLE>
- -------------------
(1) During 1997, we recorded a goodwill impairment charge of $484.4 which was
determined utilizing the fair value of our assets considering, among
other things, the purchase price for the sale of our company. The
impairment charge did not result in the reduction of property, plant and
equipment.
(2) Interest expense is not net of interest income. For the year ended
December 31, 1994, the eleven months ended December 31, 1995, the years
ended December 31, 1996, 1997, the four months ended April 30, 1998, the
eight months ended December 31, 1998, and pro forma 1997 and 1998
interest income was $0.4, $0.5, $1.0, $1.1, $0.3, $1.1, $1.1 and $1.4,
respectively, and is included in other income.
(3) Net income for the year ended December 31, 1994 is exclusive of an
extraordinary loss of $9.2.
(4) "EBITDA" is defined as income before extraordinary item and change in
accounting principles plus interest expense (not net of interest income),
income tax expense, depreciation and amortization expenses and goodwill
impairment charge. EBITDA is a key financial measure but should not be
construed as an alternative to operating income or cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles). EBITDA for 1994 excludes a non-recurring gain of
$7.5 on a sale of a license. "Adjusted EBITDA" for the four months ended
April 30, 1998 and the eight months ended December 31, 1998 represents
EBITDA excluding $5.7 and $10.8 of non-cash charges reflecting adjustment
of (i) certain reserves for inventory obsolescence, doubtful accounts and
customer incentive rebate programs and (ii) certain accruals for customs,
property tax expenses and other items and cost of terminated acquisition
(the "1998 Charges"-- See Notes 12 and 14 to the consolidated financial
statements). We believe that EBITDA is a useful supplement to net
income(loss) and other consolidated income statement data in
understanding cash flows generated from operations that are available for
taxes, debt service and capital expenditures. However, the Company's
method of computation may or may not be comparable to other similarly
titled measures of other companies.
(5) For purposes of these computations, earnings consist of income (loss)
before income taxes, plus fixed charges. Fixed charges consist of
interest on indebtedness (including amortization of debt issuance costs)
plus that portion of lease rental expense representative of interest
(deemed to be one-third of lease rental expense). For the eleven months
ended December 31, 1995, the years ended December 31, 1996, 1997, the
four months ended April 30, 1998 and the eight months ended December 31,
1998, earnings were insufficient to cover fixed charges by $32.3, $23.1,
$509.9, $14.6 and $19.5, respectively.
13
<PAGE>
RISK FACTORS
In addition to the other matters described in this prospectus you should
carefully consider the following risk factors before accepting the exchange
offer.
Cautionary Statement Concerning Forward-Looking Statements
The information herein contains forward-looking statements that involve a
number of risks and uncertainties. A number of factors could cause our actual
results, performance, achievements, or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
These factors include, but are not limited to:
O the competitive environment in the general decorative surfacing
product market and in our specific market areas;
O changes in prevailing interest rates and the availability of and
terms of financing to fund the anticipated growth of our business;
O inflation;
O changes in costs of goods and services; economic conditions in
general and in our specific market areas;
O changes in or failure to comply with federal, state and/or local
government regulations;
O liability and other claims asserted against us;
O changes in operating strategy or development plans; the ability to
attract and retain qualified personnel;
O our significant indebtedness;
O labor disturbances;
O changes in our acquisition and capital expenditure plans;
O and other factors referenced herein.
In addition, such forward-looking statements depend upon assumptions,
estimates and dates that may not be correct or precise and involve known and
unknown risks, uncertainties and other factors. Accordingly, a forward-looking
statement in this prospectus is not a prediction of future events or
circumstances and may not occur. Given these uncertainties, prospective
investors are warned not to rely on such forward-looking statements.
Forward-looking statements can be identified by, among other things, the use
of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "seeks," "pro forma," "anticipates" or "intends" or by discussions
of strategy or intentions. We are not undertaking any obligation to update any
such factors or to publicly announce the results of any revisions to any of
the forward-looking statements due to future events or developments.
We have substantial debt
In connection with our acquisition by Laminates, we incurred significant
indebtedness. On a pro forma basis giving effect to our acquisition and the
offering of the old notes, for the year ended December 31, 1998, earnings
would have been insufficient to cover fixed charges by approximately $45.4
million. On a pro forma basis, as of December
14
<PAGE>
31, 1998 we had (1) total consolidated indebtedness of approximately $332.7
million and (2) approximately $91.0 million of additional borrowings available
under the new credit facility. In addition, subject to the restrictions in the
new credit facility and the indenture, we may incur significant additional
indebtedness, which may be secured, from time to time.
The level of our indebtedness could have important consequences to us,
including:
O limiting cash flow available for general corporate purposes,
including acquisitions, because a substantial portion of our cash
flow from operations must be dedicated to debt service;
O limiting our ability to obtain additional debt financing in the
future for working capital, capital expenditures or acquisitions;
O limiting our flexibility in reacting to competitive and other changes
in the industry and economic conditions generally; and
O exposing us to risks inherent in interest rate fluctuations because
certain of our borrowings may be at variable rates of interest, which
could result in higher interest expense in the event of increases in
interest rates.
Conditions that may impact our ability to repay our debt
Our ability to pay or to refinance our indebtedness will depend upon our
future operating performance, which will be affected by general economic,
financial, competitive, legislative, regulatory, business and other factors
beyond our control.
We anticipate that our operating cash flow, together with money we can
borrow under our new credit facility, will be sufficient to meet anticipated
future operating expenses, capital expenditures and to service debt as it
becomes due. However, if our future operating cash flows are less than
currently anticipated we may be forced, in order to meet our debt service
obligations, to reduce or delay acquisitions or capital expenditures, sell
assets or reduce operating expenses. If we were still unable to meet our debt
service obligations, we could attempt to restructure or refinance our
indebtedness or seek additional equity capital. We cannot assure you that we
will be able to accomplish that on satisfactory terms, if at all.
In addition, subject to the restrictions and limitations contained in our
debt agreements, we may incur significant additional indebtedness to finance
future acquisitions, which could adversely affect our operating cash flows and
our ability to service indebtedness. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
The agreements governing our debt contain covenants that restrict our ability
to engage in certain transactions
The indenture governing the notes contains various covenants that limit
our ability to engage in certain transactions. These covenants limit our and
certain of our subsidiaries' ability to:
O borrow and to place liens on assets
O pay dividends or make certain other restricted payments
O enter into certain transactions with affiliates; or
O merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of our
assets.
15
<PAGE>
In addition, our new credit facility contains other and more restrictive
covenants and prohibits us from prepaying our other indebtedness (including
the notes). Our new credit facility also requires us to maintain specified
financial ratios and satisfy certain other financial condition tests. Our
ability to meet those financial ratios and tests can be affected by events
beyond our control, and there can be no assurance that we will meet those
tests. A breach of any of these covenants could result in a default under our
new credit facility and/or the notes. Upon the occurrence of an event of
default under our new credit facility, the lenders could elect to declare all
amounts outstanding under our new credit facility to be immediately due and
payable and terminate all commitments to extend further credit. If we were
unable to repay those amounts, the lenders could proceed against the
collateral granted to them to secure that indebtedness. We have pledged
substantially all of our assets, other than assets of our foreign
subsidiaries, as security under our new credit facility. We cannot assure you
that, if the lenders under our new credit facility accelerate the repayment of
borrowings thereunder, we will have sufficient assets to repay our new credit
facility and our other indebtedness, including your notes. See "Description of
Certain Indebtedness--New Credit Facility."
Your notes rank junior to our senior debt
The notes rank junior to all of our existing and future senior
indebtedness, including all indebtedness under our new credit facility. As of
December 31, 1998, on a pro forma basis, we had approximately $85.0 million of
senior indebtedness.
As a result of such subordination, if:
(1) we are insolvent or enter into a bankruptcy or similar proceeding;
(2) we fail to make a payment when due on senior indebtedness; or
(3) any senior indebtedness is accelerated
then the holders of such senior indebtedness and any other creditors of
subsidiaries, if any, must be paid in full before the holders of the notes may
be paid. If we incur any additional debt that ranks equally with the notes,
the holders of such debt will be entitled to share ratably with you in any
proceeds distributed in connection with any insolvency, liquidation,
reorganization, dissolution or other winding-up of us. This may have the
effect of reducing the amount of such proceeds paid to you.
In addition, we cannot make any cash payments to you if we have failed to
make payments to holders of senior indebtedness. Under certain circumstances,
we cannot make any payments to you for a period of up to 179 days if we have
defaulted (other than failures to make payments) on our senior indebtedness
covenants. Also, holders of indebtedness and other liabilities of our
subsidiaries ($113.0 million as of December 31, 1998 excluding intercompany
obligations and guarantees of the new credit facility) will have claims that
are effectively senior to yours. On the date of the Indenture, none of our
subsidiaries will guarantee the notes. See "Description of
Notes--Subordination."
We may not be able to repurchase your notes upon a change of control
Upon the occurrence of certain change of control events, you may require
us to purchase your notes at 101% of their principal amount, plus accrued
interest. Please note that the terms of our new credit facility limit our
ability to purchase your notes in such circumstances. Any of our future debt
agreements may contain similar restrictions and provisions. Accordingly, we
may not be able to satisfy our obligations to purchase your notes unless we
are able to refinance or obtain waivers with respect to our existing bank
credit facility and certain other indebtedness. We cannot assure you that we
will have the financial resources to purchase your notes, particularly if such
change of control event triggers a similar repurchase requirement for, or
results in the acceleration of, other indebtedness. Our new credit facility
currently provides that certain change of control events will constitute a
default and could result in the acceleration of our indebtedness under the new
credit facility.
16
<PAGE>
Cost-cutting strategy
Our business strategy includes the reduction of operating costs,
primarily advertising and marketing costs, and a shift in marketing focus away
from consumer-targeted marketing that we believe is ineffective. However, we
cannot assure you that we will be successful in reducing such costs.
Additionally, reductions in advertising and marketing expenditures could have
an adverse impact on our sales.
Acquisition Growth Strategy
Our business strategy also includes the pursuit of an acquisition
strategy to promote our growth. Our failure to manage our future growth
effectively could have a material adverse effect on us. We cannot assure you
that we will be able to find suitable acquisition candidates or that we can
complete acquisitions on reasonable terms. Additionally, our ability to
finance acquisitions will be dependent on our ability to generate sufficient
cash flow or obtain sufficient capital for such purposes. We cannot assure you
that we will be able to generate sufficient cash flow or that financing will
be available on acceptable terms (or permitted to be incurred under the terms
of the Indenture, the new credit facility and any future indebtedness) to fund
acquisitions.
We acquired the solid surfacing division of International Paper which is
marketed under the name Fountainhead, in February 1999. The acquisition, which
was funded out of available cash, will not have a material effect on our
results of operations or financial condition.
The decorative surfacing products market is mature and cyclical
In the United States, high-pressure decorative laminate sales have
historically correlated closely with residential and commercial construction
activity. Spending on new construction and renovation in both the residential
and commercial markets depends, in large part, upon the overall strength of
consumer and business spending, which in turn is linked to the overall health
of the economy. A decrease in overall spending for new construction or
renovation in any geographic region in which we do a substantial amount of
business could have a material adverse effect on our financial conditions and
results of operations.
Reliance on Brands; Intellectual Property Concerns
Substantially all of our net sales are from sales of products bearing
proprietary trademarks, including Formica, the Anvil F mark, Colorcore, Surell
and Fountainhead. Accordingly, our future success may depend in part upon the
goodwill associated with our trademarks. Our principal trademarks are
registered in the United States and more than 100 foreign countries. However,
we cannot assure you that the steps taken by us to protect our proprietary
rights in such intellectual property will be adequate to prevent the
misappropriation thereof in the United States or abroad. In addition, the laws
of some foreign countries do not protect intellectual property to the same
extent as do the laws of the United States. The loss of our intellectual
property rights could have a material adverse effect on our financial
condition and results of operations.
Control by Principal Shareholders
Approximately 47.7% of the outstanding shares of Laminates common stock
is held by DLJ Merchant Banking funds, 23.9% is held by CVC and 23.9% is held
by MMI (without giving effect to 120,484 outstanding shares of Restricted
Stock issued to our management). Circumstances may occur in which the
interests of such principal shareholders could be in conflict with the
interests of the holders of the notes. In addition, such shareholders may have
an interest in pursuing transactions that, in their judgment, enhance the
value of their equity investment in us, even though such transactions may
involve risks to the holders of the notes.
The DLJ Merchant Banking funds, CVC, MMI and certain members of our
management who chose to purchase shares of Laminate's common stock entered
into a stockholders' agreement which contains provisions that, among other
17
<PAGE>
things, entitle the DLJ Merchant Banking funds to select two of the seven
members of Laminates and our respective Board of Directors, each of CVC and
MMI to select one member of each board, and the DLJ Merchant Banking funds,
CVC and MMI to collectively select two other members. As a result, these
shareholders control Laminates and, through Laminates, us, and have the power
to elect a majority of the directors of Laminates and us, appoint new
management and approve any action requiring the approval of the holders of
common stock of Laminates or us, including adopting amendments to the
certificate of incorporation of Laminates and us and approving acquisitions or
sales of all or substantially all of the assets of Laminates and us. The
directors elected by the DLJ Merchant Banking funds and the Institutional
Investors have the ability to control decisions affecting the capital
structure of Laminates and us, including the issuance of additional capital
stock, the implementation of stock repurchase programs and the declaration of
dividends.
The general partners of each of the DLJ Merchant Banking funds are
affiliates or employees of Donaldson, Lufkin & Jenrette, Inc. DLJ Capital
Funding, which is one of the lenders under the new credit facility, Laminates
Funding, Inc. which purchased bridge notes, and Donaldson, Lufkin & Jenrette
Securities Corporation, which was one of the initial purchasers of the old
notes, are also affiliates of Donaldson, Lufkin & Jenrette.
Our international operations expose us to additional risks
In 1998, approximately 37% of our net sales were made to purchasers
located, and all of our operating income was earned, outside of North America.
Because of our foreign operations, our business is subject to the currency
risks of doing business abroad, including exchange rate fluctuations and
limits on repatriation of funds. As a result of the current downturn in the
Asian economy, there may be a decrease in new construction and renovation in
the Asian region or an overall worldwide economic contraction, which could
have a material adverse effect on our business, financial condition and
results of operations. Further, many developing economies have a significant
degree of political and economic uncertainty. Social unrest, the absence of
trained labor pools and the uncertainty of entering into joint ventures or
other partnership arrangements with local organizations have slowed business
activities in some large developing economies. The political and economic
uncertainties present in these promising growth markets may adversely impact
our ability to implement and achieve our foreign growth objectives.
Competition
The decorative surfacing product market is highly competitive. Our
products compete around the world with high pressure decorative laminates
manufactured by other producers, as well as with wood, veneers, marble,
granite, solid surfacing, tile, plastics, foils, papers, vinyls, acrylics,
paint, wallpaper, wall and floor coverings, low pressure laminates and other
surfacing materials. Competition is based principally on breadth of product
line, product quality, marketing, technology, price and service. We compete in
a number of geographic markets and our success in each of these markets is
influenced by those factors. Many of our competitors are owned by larger
enterprises and may have greater assets or resources than us. See
"Business--Competition."
Dependence on Key Personnel
Our success depends, to a large extent, upon the efforts and abilities of
key managerial employees, particularly our executive officers. Competition for
qualified management personnel in the industry is intense. The loss of the
services of certain of these key employees or the failure to retain qualified
employees when needed could have a material adverse effect on our business,
financial condition or results of operations. We have taken certain steps to
minimize these risks by executing employment agreements with Messrs. Langone
and Schneider. See "Management --Employment Agreements." We do not currently
maintain key man life insurance.
18
<PAGE>
Environmental Considerations
Our operations are subject to various foreign and United States
environmental laws and regulations. We have conducted environmental
assessments on a limited number of properties. Based on such limited
assessments, the estimated range of costs and liabilities associated with
potential on-site soil and groundwater contamination and compliance with
existing and potential environmental regulations (exclusive of costs and
liabilities associated with off-site contamination at Superfund sites
described below) is approximately $1.6 million to $7.1 million in the
aggregate over the next several years. In addition, we estimate that we will
have additional capital expenditures of approximately $0.8 million relating to
air emissions equipment upgrades at our Rocklin, California facility. We
cannot assure you, however, that we will be required to incur these estimated
costs and liabilities or that the actual costs and liabilities will not be
significantly higher. Unforseen expenditures or liabilities relating to
contamination or compliance with environmental laws could have a material
adverse effect on our financial condition or results of operation.
We have been, from time to time, the subject of administrative
proceedings, litigation and investigations relating to environmental matters.
Currently, we have been named as a potentially responsible party at several
Superfund sites and have reserved approximately $4.0 million for liabilities
at December 31, 1998 with respect to two of such sites. Although we believe,
based on various factors, including, without limitation, certain
indemnification rights that we have with respect to some of the Superfund
sites, that the liabilities associated with such Superfund sites should not
have a material adverse effect on our financial condition or results of
operations, there can be no assurances that we will not become involved in
future proceedings, litigation or investigations, that such Superfund or other
environmental liabilities will not be material or that indemnification
pursuant to such indemnification rights will otherwise be available.
See "Business--Environmental Matters."
Year 2000
Until recently, computer programs were written to store only two digits
of date-related information in order to more efficiently handle and store
data. Thus, the programs were unable to properly distinguish between the year
1900 and the year 2000. This is frequently referred to as the "Year 2000
Problem." In 1996 we commenced a systems implementation project to address the
Year 2000 Problem and other operational issues. Utilizing both internal and
external resources, we have defined and assessed the requirements of the
project, and are in the process of converting and replacing various programs,
hardware and instrumentation systems to make them Year 2000 compatible. We are
approximately 75% complete with the implementation phase of the project. As of
December 31, 1998, project costs totalled approximately $20.3 million. We
currently expect the project to be substantially completed by mid 1999 and to
cost approximately $25.0 million.
Our plans to complete the Year 2000 modifications are based on our best
estimates, which are based on numerous assumptions about future events,
including the continued availability of certain resources and other factors.
Estimates on the status of completion and the expected completion dates are
based on the level of effort expected to date to total expected staff effort.
However, there could be no guarantee that these estimates will be achieved and
actual results could differ from those plans.
Net Losses
On a pro forma basis, we had a net loss of $48.2 million for the year
ended December 31, 1998. We cannot assure you that our future operations will
generate sufficient earnings to pay our obligations or comply with loan
covenants. See "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
19
<PAGE>
We are a holding company that conducts certain operations through our
subsidiaries
We conduct certain of our operations, including nearly all of our foreign
operations, through subsidiaries, and our ability to meet our debt service
obligations will be dependent upon the receipt of dividends from our direct
and indirect subsidiaries. The notes are structurally junior to all creditors
of our subsidiaries, except to the extent that we are recognized as a creditor
of any such subsidiary, in which case our claims would still be subordinate to
any secured debt of such subsidiary and any debt of such subsidiary senior to
that held by us. On a pro forma basis, as of December 31, 1998, our
subsidiaries would have had outstanding $113.0 million of Indebtedness and
other liabilities, including trade payables.
Fraudulent Transfer Statutes
Federal or state fraudulent transfer laws permit a court, if it makes
certain findings, to
O avoid all or a portion of our obligations to you;
O subordinate our obligations to you to other existing and future
indebtedness of Formica, entitling other creditors to be paid in full
before any payment is made on the notes; and
O take other action detrimental to you, including, in certain
circumstances, invalidating the notes.
In that event, there would be no assurance that you would ever be repaid.
Under federal and state fraudulent transfer laws, in order to take any of
the actions described above, courts will typically need to find that, at the
time the notes were issued, we:
(i) issued the notes with the intent of hindering, delaying or defrauding
current or future creditors; or
(ii) received less than fair consideration or reasonably equivalent value
for incurring the indebtedness represented by the notes and
(1) were insolvent or were rendered insolvent by reason of the
issuance of the notes,
(2) were engaged, or about to engage, in a business or transaction
for which our assets were unreasonably small; or
(3) intended to incur, or believed (or should have believed) we
would incur, debts beyond our ability to pay as such debts
mature (as all of the foregoing terms are defined in or
interpreted under such fraudulent transfer statutes).
Different jurisdictions define "insolvency" differently. However, we
generally would be considered insolvent at the time we incurred the
indebtedness constituting the notes if (1) the fair market value (or fair
saleable value) of our assets is less than the amount required to pay our
total existing debts and liabilities (including the probable liability on
contingent liabilities) as they become absolute or matured or (2) we were
incurring debts beyond our ability to pay as such debts mature. We cannot
assure you as to what standard a court would apply in order to determine
whether we were "insolvent" as of the date the notes were issued, and we
cannot assure you that, regardless of the method of valuation, a court would
not determine that we were insolvent on that date. Nor can we assure you that
a court would not determine, regardless of whether we were insolvent on the
date the notes were issued, that the payments constituted fraudulent transfers
on another ground. To the extent that proceeds from the sale of the notes are
used to repay the bridge notes, a court may find that we did not receive fair
consideration or reasonably equivalent value for the incurrence of the
indebtedness represented by the notes.
20
<PAGE>
Lack of Public Market
The new notes are being offered to holders of the old notes, which were
issued on February 22, 1999 to a limited number of investors. There is
currently no active trading market for the notes, and it is not possible to
predict how the notes will trade in the secondary market or whether such
market will be liquid or illiquid. If a trading market does develop, the notes
may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities and other
factors, including economic conditions and the financial condition, and the
performance of, and prospects for, Formica. The liquidity of, and trading
markets for, the notes may also be adversely affected by declines in the
market for high yield securities generally. We do not intend to apply for
listing of the notes on any securities exchange.
21
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes
offered hereby. New notes will be exchanged for old notes as described in this
prospectus on our receipt of old notes in like principal amount. We will
cancel all of the old notes surrendered in exchange for the new notes.
Our net proceeds from the sale of the old notes was approximately $208.0
million, after deduction of the initial purchasers' discounts and commissions
and other expenses of the offering. We used such net proceeds to repay in full
the $200 million principal amount outstanding under the bridge notes together
with accrued interest. The remaining net proceeds were used for general
corporate purposes and initially were temporarily invested in short-term
securities.
22
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
and as adjusted for the issuance of the old notes. This table should be read
in conjunction with our consolidated financial statements, including the notes
thereto, the "Unaudited Pro Forma Condensed Consolidated Financial Statements"
and notes thereto, included elsewhere herein, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "The
Acquisition."
As of December 31, 1998
-------------------------
Historical As Adjusted
----------- ----------
(in millions)
Cash and cash equivalents.......................... $ 31.6 $ 39.6
====== ======
Long term debt, including current portion:
New credit facility revolving loans (1)......... $0.0 $0.0
New credit facility term loan................... 85.0 85.0
Bridge notes.................................... 200.0 --
Senior subordinated notes....................... -- 215.0
Other debt...................................... 32.7 32.7
------ ------
Total debt................................... 317.7 332.7
Total stockholder's equity......................... 119.8 117.8
------ ------(2)
Total capitalization.............................. $437.5 $450.5
====== ======
- -------------------
(1) We have a total commitment for borrowings of $120.0 million under our new
credit facility (of which approximately $29.0 million has been used as of
December 31, 1998, to obtain letters of credit to provide credit
enhancement for certain assumed indebtedness). See "Description of New
Credit Facility."
(2) The decrease in stockholder's equity represents the elimination of the
deferred financing costs related to the bridge notes.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table includes historical consolidated financial data for
our company:
o prior to our acquisition by BTR (what we call Predecessor I below) as
of and for the year ended December 31, 1994;
o after our acquisition by BTR (what we call Predecessor II below) as
of and for the eleven months beginning January 25, 1995, when we were
bought by BTR, and ending December 31, 1995, the years ended
December 31, 1996 and 1997 and the four month period ended April 30,
1998;
o after our acquisition by Laminates for the eight month period ended
December 31, 1998;
o unaudited pro forma financial data for our company for the years
ended December 31, 1997 and 1998.
The historical financial data for Predecessor I for the year ended
December 31, 1994 has been derived from the audited consolidated financial
statements of Predecessor I. The historical financial data for Predecessor II
as of and for the eleven months ended December 31, 1995 and as of and for the
years ended December 31, 1996 and 1997 has been derived from the audited
consolidated financial statements of Predecessor II. The historical financial
data for the four months ended April 30, 1998 and for the eight months ended
December 31, 1998 has been derived from our audited consolidated financial
statements. The unaudited pro forma financial data is not designed to
represent and does not represent what our financial position or results of
operations actually would have been had the transactions described herein
under "Unaudited Pro Forma Condensed Consolidated Financial Statements" been
completed as of the date or at the beginning of the period indicated, or to
project our financial position or results of operations at any future date or
for any future period. You should read the following data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Condensed Consolidated Financial Statements"
and our consolidated financial statements and notes thereto included elsewhere
herein.
<TABLE>
Predecessor I Predecessor II Formica Pro Forma
------------- --------------------------------------------- ------- --------------------
Eleven Eight
Months Four Months
Ended Months Ended
Year Ended December Years Ended Ended April December Years Ended
December 31 31, December 31, 30, 31, December 31,
----------- -------- ------------------- ---------- -------- ---------------------
1994 1995 1996 1997 1998 1998 1997 1998
----------- -------- --------- -------- ---------- -------- -------- ---------
(dollars in (dollars in millions)
millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $489.2 $468.2 $521.6 $533.4 $178.3 $371.4 $533.4 $549.7
Cost of products sold... 341.8 324.0 348.3 350.1 131.1 266.2 350.1 397.3
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 147.4 144.2 173.3 183.3 47.2 105.2 183.3 152.4
Selling, general and
administrative
expenses.............. 108.5 145.2 186.7 202.2 60.9 100.5 187.6 164.6
Cost of terminated
acquisition........... -- -- -- -- -- 3.0 -- 3.0
Goodwill impairment
charge(1)............. -- -- -- 484.4 -- -- -- --
------ ------ ------ ------ ------ ----- ------ ------
Operating income (loss). 38.9 (1.0) (13.4) (503.3) (13.7) 1.7 (4.3) (15.2)
Interest expense(2)..... (46.4) (31.7) (10.6) (3.1) (1.7) (25.7) (32.3) (35.5)
Other income............ 16.2 0.4 1.1 1.8 0.8 4.5 1.8 5.3
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income
taxes................. 8.7 (32.3) (22.9) (504.6) (14.6) (19.5) (34.8) (45.4)
Income tax (provision)
benefit............... 7.0 5.8 (5.0) (0.2) -- (2.8) (0.2) (2.8)
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)(3).... 15.7 (26.5) (27.9) (504.8) (14.6) (22.3) (35.0) (48.2)
====== ====== ====== ====== ====== ====== ====== ======
Balance Sheet Data (
End of Period):
Cash equivalents............. $ 15.1 $ 9.8 $ 26.3 $ 27.2 $ 6.9 $ 31.6 $ 35.2 $ 39.6
Working capital.............. 123.2 57.4 64.3 66.6 48.8 114.5 74.6 122.5
Total assets................. 605.5 1,110.0 1,136.8 647.7 612.0 696.8 659.1 709.8
Total debt................... 371.9 441.1 42.2 90.0 83.9 317.7 105.0 332.7
Stockholder's equity......... 40.3 459.4 870.7 343.4 331.2 119.8 339.8 117.8
Other Financial Data:
Adjusted EBITDA(4)........... 71.4 36.7 39.8 38.6 3.9 46.3 38.6 50.2
Adjusted EBITDA margin....... 14.6% 7.8% 7.6% 7.2% 2.2% 12.5% 7.2% 9.1%
Depreciation and
amortization............... 23.9 37.3 52.1 55.7 11.1 29.3 41.1 43.6
Capital expenditures......... 17.5 27.5 44.5 46.5 8.3 35.5 46.5 43.8
Ratio of earnings to
fixed charges(5)........... 1.20 -- -- -- -- -- -- --
13
<PAGE>
Other Financial Data:
Adjusted EBITDA(4)........... $ 71.4 $ 36.7 $ 39.8 $ 38.6 $ 3.9 $ 46.3 $ 38.6 $ 50.2
Adjusted EBITDA
Margin.................... 14.6% 7.8% 7.6% 7.2% 2.2% 12.5% 7.2% 9.1%
Depreciation and
amortization.............. $ 23.9 $ 37.3 $ 52.1 $ 55.7 $ 11.1 $ 29.3 $ 41.1 $ 43.6
Capital expenditures......... 17.5 27.5 44.5 46.5 8.3 35.5 46.5 43.8
Ratio of earnings to fixed
charges(5).............. 1.20 -- -- -- -- -- -- --
</TABLE>
- -------------------
(1) During 1997, the Company recorded a goodwill impairment charge of $484.4
which was determined utilizing the fair value of the Company's assets
considering, among other things, the purchase price for the sale of the
Company. The impairment charge did not result in the reduction of
property, plant and equipment.
(2) Interest expense is not net of interest income. For the eleven months
ended December 31, 1995, the years ended December 31, 1996 and 1997, the
four months ended April 30, 1998 and the eight months ended December 31,
1998, interest income was $0.5, $1.0, $1.1, $0.3 and $1.1, respectively.
(3) Net income for the year ended December 31, 1994 is exclusive of an
extraordinary loss of $9.2.
(4) "EBITDA" is defined as income before extraordinary item and change in
accounting principles plus interest expense (not net of interest income),
income tax expense, depreciation and amortization expenses and goodwill
impairment charge. EBITDA is a key financial measure but should not be
construed as an alternative to operating income or cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles). EBITDA for 1994 excludes a non-recurring gain of
$7.5 on a sale of a license. "Adjusted EBITDA" for the four months ended
April 30, 1998 and the eight months ended December 31, 1998 represents
EBITDA excluding $5.7 and $10.8 of the 1998 Charges, respectively. We
believe that EBITDA is a useful supplement to net income (loss) and other
consolidated income statement data in understanding cash flows generated
from operations that are available for taxes, debt service and capital
expenditures. However, our method of computation may or may not be
comparable to other similarly titled measures of other companies.
(5) For purposes of these computations, earnings consist of income (loss)
before income taxes, plus fixed charges. Fixed charges consist of
interest on indebtedness (including amortization of debt issuance costs)
plus that portion of lease rental expense representative of interest
(deemed to be one-third of lease rental expense). For the eleven months
ended December 31, 1995, the years ended December 31, 1996, 1997, the
four months ended April 30, 1998 and the eight months ended December 31,
1998, earnings were insufficient to cover fixed charges by $32.3, $23.1,
$509.9, $14.6 and $19.5, respectively.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
We are engaged in the design, manufacture and distribution of decorative
laminates, solid surfacing, laminate flooring and other surfacing products.
Formica was founded in 1913 and created the world's first decorative laminate
in 1927. In May 1985, a group led by management and Shearson Lehman purchased
Formica from American Cyanamid Company. In 1989, Formica was sold to FM
Acquisition Corporation in a buyout led by Vincent Langone, David Schneider
and Dillon, Read & Company. In January 1995, Formica was acquired by BTR. In
May 1998, Laminates, together with Messrs. Langone and Schneider acquired
Formica. In connection with the acquisition, Messrs. Langone and Schneider
returned to Formica to assume senior management positions: Mr. Langone as
Chairman, President and Chief Executive Officer and Mr. Schneider as Chief
Financial Officer.
From 1995 to 1997, our financial results declined. Management believes
that the decline is largely attributable to the following factors:
o a large increase in selling, general and administrative expenses
from 21.0% of net sales in 1994 to 31.5% of net sales in 1997 (in
each case excluding amortization), which was largely the result of
increased advertising and promotion;
o a significant increase in capital expenditures, which averaged
approximately $39.5 million per year from 1995 to 1997 as compared
to $12.4 million per year from 1985 to 1994, the majority of the
productivity and efficiency benefits of which management believes
have yet to be realized;
o the autonomous operation of Formica's North American, European and
Asian divisions, which prevented integration and hampered Formica's
ability to share improved manufacturing techniques, purchasing,
design and technology on a global basis;
o significant management turnover, particularly in North America,
which led to a loss of strategic direction an to operational
difficulties;
o prior management's emphasis on gross margins and the resulting
elimination of certain lower-margin accounts which had provided
positive variable contributions; and
o a change in the emphasis of Formica's design program, which began to
focus on consumers rather than on product specifiers, such as
architects and designers.
We have begun to implement a business strategy that we believe will
address the decline in the financial results of the business and significantly
improve our profitability. The principal elements of this strategy include:
o a reduction in operating expenses, which management estimates will
result in net annualized savings of $30.0 million (net of $7.0
million of incremental standalone costs);
o the realization of significant manufacturing savings as a result of
completion of capital projects initiated under BTR management;
o the increased integration of and communication between Formica's
operating units;
o re-emphasis on quality and service in North America; and
26
<PAGE>
o the pursuit of acquisition opportunities that complement or expand
Formica's decorative surfaces business or that enable Formica to
enter new markets.
Results of Operations
Pro forma 1998 compared to pro forma 1997
The following analysis compares our results of operations for 1998 to
1997 and is presented on a pro forma basis assuming that our acquisition by
Laminates and the offering of the old notes each occurred at the beginning of
the relevant period. We believe that a pro forma presentation is the most
meaningful basis of comparison, but it does not represent what our financial
results would have been had we in fact been acquired at the beginning of such
period.
Changes in Accounting Estimates. During the four and eight month periods
ended April 30 and December 31, 1998, Formica made certain changes in
accounting estimates (the "1998 Charges") totaling $5.7 million and $7.8
million, respectively, due to new management plans with respect to asset
carrying and disposition policies and new information becoming available
regarding customers, products and competitive conditions in certain markets.
These changes in accounting estimates resulted in non-cash charges that
impacted Formica's results of operations. The changes in accounting estimates
for the four month period ended April 30, 1998 include increasing the
provision for customer incentive rebate programs by $2.7 million, increasing
the provision for doubtful accounts by $1.4 million and accruals for customs,
property tax exposures and other items totaling $1.6 million. The changes in
accounting estimates for the eight month period ended December 31, 1998
include increasing the provisions for doubtful accounts and inventory
obsolescence by $2.4 million and $5.4 million, respectively.
Net Sales. Net sales for 1998 were $549.7 million, compared to net sales
of $533.4 million for 1997, an increase of $16.3 million, or 3.1%. Net sales
in North America increased to $346.6 million in 1998 from $315.0 million in
1997, an increase of $31.6 million, or 10.0%. This increase is primarily due
to additional volume contributed by the new flooring product line. Net sales
in Europe and Asia decreased to $203.1 million in 1998 from $218.4 million in
1997, a decrease of $15.3 million, or 7.0%. Lower sales in Europe and Asia
were primarily the result of a decline in value of foreign currencies and the
weaker Asian economy.
Gross Profit. Gross profit for 1998 was $152.4 million, compared to gross
profit of $183.3 million for 1997, a decrease of $30.9 million, or 16.9%.
Adjusted for 1998 Charges, amounting to $8.1 million, gross profit was down
$25.2 million, or 13.7%. Gross profit as a percentage of net sales, excluding
the 1998 nonrecurring charges, decreased in 1998 to 28.8% from 34.4% in 1997.
Gross Profit in North America decreased to $95.9 million in 1998 from
$99.9 million in 1997, or 4.0%. Gross profit in North America, adjusted for
1998 Charges of $5.9 million, was consistent with 1997. Gross profit as a
percentage of net sales for North America, excluding the 1998 Charges,
decreased to 29.4% in 1998 from 31.7% in 1997, principally as a result of
increased raw material prices. Gross profit in Europe and Asia dropped to
$56.5 million in 1998 from $83.4 million in 1997, or 32.3%. Gross profit, in
Europe and Asia, adjusted for 1998 Charges amounting to $2.2 million, declined
29.6%. As a percentage of net sales, gross profit in Europe and Asia,
excluding 1998 Charges, decreased to 28.9% in 1998 from 38.2% in 1997. This
decrease is primarily the result of a larger mix of low margin products in
Europe and increased raw material prices magnified by a decline in purchasing
power of Formica's foreign operations due to currency impact on imported raw
materials, the prices of which are often based upon U.S. dollars.
Selling, General and Administrative Expenses, ("SG&A"). SG&A expenses for
1998 were $164.6 million compared to $187.6 million for 1997, a decrease of
12.3%. SG&A expenses as a percentage of net sales decreased to 29.9% in 1998
from 35.2% in 1997. The decrease in SG&A expenses was primarily due to lower
advertising and sales promotion expense and lower compensation expense due to
restructuring efforts. SG&A expenses, adjusted for the 1998 Charges amounting
to $5.4 million, were $159.2 million in 1998 compared to $187.6 million in
1997, a decrease of 15.1%.
27
<PAGE>
Operating Loss. Operating loss for 1998 was $15.2 million compared to an
operating loss of $4.3 million for 1997. The increase was primarily due to the
1998 Charges of $16.5 million.
Adjusted EBITDA. Primarily for the reasons stated above, Adjusted EBITDA
increased to $50.2 million in 1998 compared to $38.6 in 1997.
Interest Expense. Interest expense increased to $35.5 million in 1998
from $32.3 million for 1997. The increase in interest expense was the result
of the funding of capital expenditures.
Income Taxes. Income tax expense increased to $2.8 million in 1998 from
$0.2 million in 1997. The effective rates were 6.2% and 0.0% for 1998 and
1997, respectively. The effective tax rate was higher in 1998 as compared to
1997 primarily due to income taxes being payable in certain foreign locations
in 1998.
Net Loss. Net loss was $48.2 million in 1998 compared with $35.0 million
in 1997. The decrease is principally due to the decline in profit margin
partially offset by reduced SG&A expenses.
1997 compared to 1996
Net Sales. Net sales for 1997 were $533.4 million, compared to net sales
of $521.6 million for 1996, an increase of 2.3%. Net sales in North America
increased to $315.0 million in 1997 from $301.2 million in 1996, or 4.6%,
primarily due to additional volume contributed by the new flooring product
line. Net sales in Europe and Asia for 1997 were $218.4 million, compared to
net sales of $220.4 million for 1996, a decrease of 0.9%, primarily as a
result of lower selling prices in Europe offset by higher sales volume in
Asia.
Gross Profit. Gross profit for 1997 was $183.3 million, compared to gross
profit of $173.3 million for 1996, an increase of 5.8%. Gross profit as a
percentage of net sales increased in 1997 to 34.4% from 33.2% in 1996. The
increase in gross profit is primarily due to lower raw material prices and a
lower cost of sales mix in Asia. Gross profit for North America increased to
$99.9 million in 1997 from $98.6 million in 1996, or 1.3%, primarily due to
increased flooring volume, partially offset by higher manufacturing costs. For
North America, gross profit as a percentage of sales decreased in 1997 to
31.7% from 32.7% in 1996 primarily due to manufacturing inefficiencies and
increased sales of laminate flooring, which has a lower gross margin than
Formica's other principal products. Gross profit in Europe and Asia increased
to $83.4 million in 1997 from $74.7 million in 1996, or 11.6%. For Europe and
Asia, gross profit as a percentage of net sales increased to 38.2% in 1997
from 33.9% in 1996. The increase in gross profit in Europe and Asia was
primarily due to lower raw material prices in Europe, a lower cost of sales
mix in Asia, and lower cost production in China.
Selling, General and Administrative Expenses ("SG&A"). SG&A expenses for
1997 were $202.2 million, compared to $186.7 million for 1996, an increase of
8.3%. SG&A expenses as a percentage of net sales increased to 37.9% in 1997
from 35.8% in 1996. The increase in SG&A expenses was primarily due to higher
spending in North America partially offset by lower spending in Europe and
Asia. SG&A expenses for North America increased to $133.7 million in 1997 from
$111.9 million in 1996, or 19.5%. For North America, SG&A expenses for North
America sales increased to 42.4% in 1997 from 37.2% in 1996. The increase in
SG&A expenses for North America was primarily due to higher advertising and
sales promotional costs related to the start-up of the flooring product line
and HPL brand revitalization efforts. SG&A expense for Europe and Asia
declined to $68.5 million 1997 from $74.8 million in 1996, or 8.4%. For Europe
and Asia, SG&A expenses percentage of net sales decreased to 31.4% in 1997
from 33.9% in 1996. The decrease in SG&A expenses in Europe and Asia was
primarily due to a restructuring in Europe, which included a reduction in
headcount accompanied by tight spending controls. In connection with such cost
reduction efforts, Formica recognized significant restructuring charges in
1996 as compared to 1997, while the associated cost reductions were realized
in 1997.
Operating Loss. Operating loss for 1997 was $503.3 million compared to
$13.4 million for 1996. The increase was primarily due to a one-time
adjustment of $484.4 million for goodwill impairment. Excluding the goodwill
28
<PAGE>
adjustment, amounting to $484.4 million, operating loss in 1997 increased $5.5
million to $18.9 million. Operating loss for North America increased to $33.8
million in 1997 from $13.4 million in 1996 primarily due to higher selling,
general and administrative costs. Operating income for Europe and Asia
increased to $14.9 million in 1997 from $0.0 million in 1996 primarily due to
the impact of the European restructuring in 1996 and lower cost of sales and
selling, general and administrative costs.
EBITDA. As a result of the factors described above, EBITDA decreased to
$38.6 million for 1997 from $39.8 million for 1996, or 3.0%.
Interest Expense. Interest expense decreased to $3.1 million for 1997
from $10.6 million for 1996. The decrease in interest expense was the result
of the capitalization of a loan due to BTR in November 1996 and a change in
methodology relating to the interest calculation on certain intercompany
indebtedness related to BTR.
Income Taxes. Income tax expense decreased to $0.2 million in 1997 from
$5.0 million in 1996. The effective rates were 0.0% and 21.8% for 1997 and
1996, respectively. The tax rate was higher in 1996 as compared to 1997
because in 1996, due to concerns about realizability, a reserve was
established against certain tax assets arising from a net operating loss
incurred by a foreign subsidiary.
Net Loss. Net loss was $504.8 million in 1997 compared with $27.9 million
in 1996. The increase is due to a one-time adjustment of $484.4 million for
goodwill impairment and the factors discussed above.
Liquidity and Capital Resources
Post-Acquisition
Following our acquisition by Laminates, our principal sources of
liquidity are cash flows from operations and borrowings under the new credit
facility and certain local credit facilities obtained by certain of our
foreign subsidiaries. Formica's principal uses of cash will be debt service
requirements to service its debt described below, capital expenditures,
working capital and acquisitions.
Formica incurred substantial indebtedness in connection with the
acquisition. As of December 31, 1998, Formica had approximately $317.7 million
of indebtedness outstanding. Formica's significant debt service obligations
following the acquisition could, under certain circumstances, have material
consequences to security holders of Formica.
Formica spent approximately $43.8 million on capital expenditures in 1998
and anticipates that it will spend approximately $30.0 million and $15.0
million in 1999 and 2000, respectively. With such spending, Formica's major
capital investment program will be complete. Formica expects to realize
significant manufacturing cost savings, to be phased in over the next three
years, as a result of such program. The new credit facility contains
restrictions on Formica's ability to make capital expenditures. Based on
present estimates, management believes that the amount of capital expenditures
permitted to be made under the new credit facility will be adequate to
complete its investment program and maintain the properties and businesses of
Formica's continuing operations.
Working capital totaled $114.5 million at December 31, 1998. Management
believes that Formica will continue to require working capital consistent with
past experience and that current levels of working capital, together with
borrowings available under the new credit facility, will be sufficient to meet
expected liquidity needs in the near term.
In connection with the acquisition, our parent raised approximately
$137.1 million through the issuance of common and preferred stock to the DLJMB
Funds, the Institutional Investors and Messrs. Langone and Schneider. The
Laminates 8% Preferred Stock pays an 8% cumulative dividend that is paid in
cash when, as and if declared by the Laminates board. The Holdings 15% Senior
Exchangeable Preferred Stock due 2008 pays a 15% cumulative dividend which is
not payable in cash until May 2003 and is exchangeable at Holdings' option for
15% subordinated debentures of Holdings. Dividends from Formica, which are
restricted by the provisions of the new credit facility and
29
<PAGE>
the Indenture, are the primary source of funding for payments with respect to
Holdings and Laminates securities. Formica sold $200.0 million of bridge notes
and, together with its subsidiaries, borrowed $80.0 million of term loans
under the new credit facility. The bridge notes were refinanced in February
1999 with $215.0 million notes.
Formica is actively considering acquisitions that complement or expand
its decorative surfaces businesses or that will enable it to expand into new
markets. We acquired the solid surfacing division of International Paper which
is marketed under the name Fountainhead, in February 1999. In connection with
any future acquisitions, Formica may require additional funding which may be
provided in the form of additional debt, equity financing or a combination
thereof. There can be no assurance that any such additional financing will be
available to Formica on acceptable terms.
The new credit facility also includes a $120.0 million revolving credit
facility. The revolving credit facility may be increased by up to $25.0
million at the request of Formica, with the consent of the banks providing the
increased revolving commitments, and will terminate on May 1, 2004. The term
loans under the new credit facility consist of $40.0 million, $35.0 million
and $10.0 million loans.
Borrowings under the new credit facility generally bear interest based on
a margin over, at Formica's option, the base rate or the reserve-adjusted
LIBOR rate. The applicable margin, until the date of delivery of Formica's
December 31, 1998 financial statements (or earlier delivery by Formica of an
estimate of the ratio of consolidated debt to EBITDA (as defined)), will be
2.25% over LIBOR and 1.0% over the base rate. Thereafter, the applicable
margin will vary based upon Formica's ratio of consolidated debt to EBITDA (as
defined). Formica's obligations under the new credit facility are guaranteed
by Laminates, Holdings and all existing or future domestic subsidiaries of
Formica (the "subsidiary guarantors") and are secured by substantially all of
the assets of Formica and the subsidiary guarantors, including a pledge of the
capital stock of all existing and future subsidiaries of Formica (provided
that, with a single exception, no more than 65% of the voting stock of any
foreign subsidiary shall be pledged) and a pledge by Holdings of the stock of
Formica and by Laminates of the stock of Holdings. The new credit facility
contains customary covenants and events of default.
The notes mature in 2009. Interest on the notes are payable semiannually
in cash. The notes contain customary covenants and events of default,
including covenants that limit Formica's ability to incur debt, pay dividends
and make certain investments.
Formica maintains various credit facilities in foreign countries
(primarily in Asia) that provide for borrowings in local currencies. As of
December 31, 1998, Formica has secured approximately $29.0 million in letters
of credit under the new credit facility to provide credit enhancement for
certain of such credit facilities. Formica may replace certain of such
facilities availability (in such local currencies) under the new credit
facility and will maintain certain of such credit facilities to provide
financing for Formica's subsidiaries in such countries. Formica expects that
such facilities, together with the new credit facility and operating cash flow
in such countries, will be sufficient to fund Formica's expected liquidity
needs in such countries.
Formica anticipates that its operating cash flow, together with
borrowings under the new credit facility, will be sufficient to meet its
anticipated future operating expenses, capital expenditures and debt service
obligations as they become due. However, Formica's ability to make scheduled
payments of principal of, to pay interest on or to refinance its indebtedness
and to satisfy its other debt obligations will depend upon its future
operating performance, which will be affected by general economic, financial,
competitive, legislative, regulatory, business and other factors beyond its
control.
Formica will continue from time to time to explore additional auxiliary
financing methods and other means to lower its cost of capital which could
include stock issuance or debt financing and the application of the proceeds
therefrom to the payment of bank debt or other indebtedness.
30
<PAGE>
Historical
Cash provided by operating activities was $15.0 million in 1998 and $5.7
million in 1997. Net cash used in investing activities, consisting of capital
expenditures, was $43.8 million in 1998 and $46.5 million in 1997. Net cash
provided by financing activities was $32.9 million in 1998 compared to $47.1
million in 1997.
Although Formica has not yet realized the benefits of the capital
expenditures program, it expects to realize significant cost savings from such
programs to be phased in over the next three years.
Effect of Inflation; Seasonality
We do not believe that inflation has had a material impact on our
financial position or results of operations.
Our operations are generally not subject to seasonal fluctuations.
Year 2000 Compliance
Until recently, computer programs were written to store only two digits
of date-related information in order to more efficiently handle and store
data. Thus, the programs were unable to properly distinguish between the year
1900 and the year 2000. This is frequently referred to as the "Year 2000
Problem." In 1996 we commenced a systems implementation project to address the
Year 2000 Problem and other operational issues. Utilizing both internal and
external resources, we have defined and assessed the requirements of the
project, and are in the process of converting and replacing various programs,
hardware and instrumentation systems to make them Year 2000 compatible. We are
approximately 75% complete with the implementation phase of the project. As of
December 31, 1998, project costs totalled approximately $20.3 million. We
currently expect the project to be substantially completed by mid 1999 and to
cost approximately $25.0 million.
Our plans to complete the Year 2000 modifications are based on our best
estimates, which are based on numerous assumptions about future events,
including the continued availability of certain resources and other factors.
Estimates on the status of completion and the expected completion dates are
based on the level of effort expected to date to total expected staff effort.
However, there could be no guarantee that these estimates will be achieved and
actual results could differ from those plans.
Common European Currency
The Treaty on European Economic and Monetary Union (the "Maastricht
Treaty") provides for the introduction of a single European currency, the
Euro, in substitution for the national currencies of the member states of the
European Union that adopt the Euro. In May 1998 the European Council
determined
o the 11 member states that met the requirement for the Monetary
Union; and
o the currency exchange rates amongst the currencies for the member
states joining the Monetary Union.
The transitory period for the Monetary Union started on January 1, 1999.
According to council Resolution of July 7, 1997, the introduction of the Euro
will be made in three steps:
(1) a transitory period from January 1, 1999 to December 31, 2001, in
which current accounts may be opened and financial statements may be
drawn in Euros, and local currencies and Euros will coexist;
(2) from January 1, 2002 to June 30, 2002, in which local currencies will
be exchanged for Euros; and
(3) from July 1, 2002 in which local currencies will disappear.
31
<PAGE>
We cannot assure you as to the effect of the adoption of the Euro on our
payment obligations under loan agreements for borrowings in currencies to be
replaced by the Euro or on our commercial agreements in such currencies.
32
<PAGE>
BUSINESS
Overview
We believe that our company, Formica Corporation, is one of the leading
brand names in the decorative surfacing products market. "Decorative surfaces"
are products that are used to finish a surface, which may be a wall, a
countertop or a floor, and include everything from inexpensive vinyl floor to
marble countertops. We produce:
o high-pressure decorative laminates (our primary product):
o we take sheets of attractively designed paper and then seal them
with laminate using a high-pressure press
o because high-pressure laminate is durable, attractively designed,
easy to maintain and very versatile, it is used in a wide range
of commercial and residential surfaces, including kitchen
cabinets, countertops and floors
o we believe that we are one of the largest producers of high
pressure decorative laminates, which we market under the
Formica name, in the world
o we estimate that the total size of the world-wide market was
approximately $3.0 billion in 1998, evenly distributed between
North America, Europe and the rest of the world
o solid-surfacing:
o unlike high-pressure laminates, which are a thin cover applied to
the top of a surface, solid surfacing is quite thick, which
makes it more durable and permits easier repair in the event of
a scratch, since the surface can be sanded down to look like new
o we market our solid-surfacing product under the names "Surell"
and "Fountainhead"
o laminate flooring
o we take laminate and apply it over any dry, clean and level floor
surface
o the flooring is water-resistant and is ideally suited to kitchens
and bathrooms
o we introduced our flooring line under the Formica name in 1996
We believe that our Formica brand name, which is recognized by many
consumers without prompting, contributes significantly to the sales of our
products. For the year ended December 31, 1998, our net sales and adjusted
EBITDA (as defined on page 13), were $549.7 million and $50.2 million,
respectively.
We market our products:
o through over 7,500 domestic and international independent distributors
and dealers as well as our own sales force
o to major distributors, manufacturers of finished products, and to
architects and designers who specify products for commercial and
residential interiors.
33
<PAGE>
Invented in 1913 in Cincinnati by Herbert Faber and Daniel O'Conor,
Formica was originally intended to serve as an electrical insulator. It was
created as a replacement for mica which was then used for that purpose; hence
the name, "for mica." In 1927, we began lithographing images onto sheets of
our product and its decorative potential was discovered. By the 1930s, a
resistant melamine layer was added which gave Formica brand laminates their
legendary durability and ease of maintenance. World-renowned designers and
architects began to recognize the potential uses of decorative laminate and
specified it for Modernist and Art Deco interiors. We also have a
long-established presence in Europe, having entered the market in 1947.
Formica has been manufactured for many years in the United Kingdom (since
1947), Spain (1947) and France (1964). As a result of its long-standing
presence in these markets, the Formica brand name has exceptional customer
recognition. We installed our first HPL press in Taiwan in 1982. With Taiwan
as the manufacturing base, geographical expansion into other markets
throughout the years has made us one of the largest producers of HPL in Asia.
We began operating in China with a representative office in 1990, and through
a joint venture in 1992, and have owned our own manufacturing and distribution
there since 1996.
Competitive Strengths
We possess a number of competitive strengths, including:
Global Market Position
We have extensive global manufacturing capabilities and are one of
producers of HPL on a worldwide basis. We are the largest or the second
largest seller of HPL in major national markets including the United States,
Canada, the United Kingdom, France, Spain, Taiwan and China, where our
principal manufacturing facilities are located. The location of our
manufacturing facilities and design centers and our worldwide distribution
network enable us to respond effectively to our customers' delivery and design
needs.
Worldwide Brand Awareness
We have an extremely high level of unprompted brand awareness and are one
of the most specified brands of HPL. The Formica brand name, which represents
superior design, quality and value, significantly contributes to our ability
to attract the business of designers, architects, distributors and direct
accounts.
Established, Effective Distribution Channels
We believe that we have one of the most extensive global distribution
capabilities in the industry. We have approximately:
o 250 sales representatives
o 1,500 distributor sales representatives in 300 locations
o sub-distributors and dealers in another 7,500 locations worldwide.
The efforts of our domestic and international and architectural specification
representatives, when combined with the sales force of our distributor
network, provides us with sales and marketing coverage in over 100 countries
throughout the world.
Acclaimed Design Leadership
We have a history of technological leadership and innovation in product
design. We maintain extensive design facilities and have consistently won
design and new product development awards, such as the 1996 Kitchen & Bath
Product Innovator Award, the 1997 Visual Marketing & Store Design Reader's
Choice Poll and the 1997 Green Product Award. In addition, our floor product
was awarded the 1997 Dealer's Choice Award--Best Laminate Flooring
34
<PAGE>
Introduction and the 1997 Kitchen & Bath Business Product of the Year Award.
We design many of our own proprietary decorative papers and own exclusive
rights to these designs. The strength of our reputation for innovative design
is an important factor in our success in the commercial segment of the market.
Diverse and Stable Customer Base
We benefit from a diversified sales base:
o Geographically, we sell our products in over 100 countries and
maintain a strong market position in the major markets of North
America and Europe and are positioned for continued growth in
Asia. In 1998, approximately 63% of our net sales were made in
North America, with the balance principally in Europe and Asia.
o We estimate that our net sales in 1998 were balanced between the
markets for new construction (33%) and remodeling (67%).
o We also estimate that our 1998 sales were also balanced between sales
to commercial and residential locations, each of which represented
approximately 50% of total net sales in 1997.
We believe that this diversification helps to mitigate the effect of regional
economic cycles and the changes in market conditions within the commercial and
residential new construction and remodeling markets.
Recent Developments
In connection with the acquisition, Vincent Langone, our chief executive
officer from 1988 to 1994, and David Schneider, our chief financial officer
from 1989 to 1994, have returned to assume senior management roles at Formica.
Messrs. Langone and Schneider, who combined have 23 years of tenure at
Formica, have a successful track record of managing two previous leveraged
buyouts of Formica. During their tenure at Formica, they consistently ran the
business at significantly lower selling, general and administrative expense
spending levels than those incurred from 1995 to 1997 and successfully managed
us through a building products recession in North America from 1990 to 1992
with no material deterioration in sales or EBITDA. Since 1994, although our
net sales increased from $489.2 million in 1994 to $533.4 million in 1997, our
EBITDA declined from $71.4 million to $38.6 million. We, with the assistance
of Messrs. Langone and Schneider, have begun to implement a business strategy
that is intended to address declines in the business since 1994.
We believe that our declining profitability and cash flows from 1994
through 1997 is largely attributable to the following factors:
Increased SG&A Spending
From 1995 to 1997, we significantly increased spending on selling,
general and administrative expenses, particularly with respect to our North
America business. In 1994, when we were managed by Messrs. Langone and
Schneider, SG&A (excluding amortization) was $102.6 million, or 21.0% of 1994
net sales. By 1997, selling, general and administrative expenses (excluding
amortization) had increased to $168.1 million, or 31.5% of 1997 net sales.
Management believes that while a portion of the increase in spending
reinforced the Formica brand, a significant component was misdirected and
unnecessary, particularly with respect to the North American operations.
Management believes that previous management undertook advertising and
promotion strategies more suitable for a consumer product than a specified
product, the sales of which are driven by architects, designers, fabricators,
manufacturers and builders. For example, we initiated a system of design
centers for consumers and established, primarily in kitchen and bath retail
establishments, over 1,600 authorized Formica Design Centers. Since 1996, we
have spent over $8.0 million on the Design Center program. In addition, in
1997, we spent $14.9 million in connection with the roll-out of our North
35
<PAGE>
America flooring business. Management believes that the aggressive promotion
of the product was premature and unbalanced given that the business generated
only $15.0 million in net sales in 1997.
Significant Capital Investment
Beginning in 1995, we implemented a capital spending program intended to
reduce our cost of production. From 1995 to 1997, we invested a total of
approximately $118.5 million in capital expenditures (an average of
approximately $39.5 million per year), which is significantly higher than the
average annual spending of approximately $12.4 million incurred from 1985 to
1994. Management believes that the majority of the anticipated return on
investment from the investment has not yet been realized due to the timing and
implementation of the capital expenditure program, and expects to realize
substantial annualized manufacturing savings to be phased in over the next
three years. In addition, we will add additional HPL manufacturing capacity as
a result of these capital investments, allowing us to expand our customer base
and serve our existing customers more effectively. See "--Capital
Investments."
Management Decentralization/Turnover
Our operations in North America, Europe and Asia have been operated as
separate and autonomous divisions. Management believes that the lack of
integration and communication between our operating units negatively impacted
our profitability. Management believes that savings can be achieved by
integrating operations between regions and adopting consistent policies,
practices and products and by facilitating manufacturing and technology
exchange between regions. In addition, from 1995 to 1997, we had four
different Chief Executive Officers, three North American Division Presidents
and three Directors of Research and Development. The senior management
turnover led to a loss of strategic direction and operational difficulties,
particularly in North America.
Elimination of Certain Lower Margin Businesses
Beginning in 1995, we undertook certain steps intended to increase our
return on sales percentage. From 1994 to 1997, our gross margins increased
from 30.1% to 34.4%. Despite the increase in gross margins achieved during
this period, our EBITDA during this period decreased from $71.4 million
(excluding a non-recurring gain in 1994) to $38.6 million in 1997.
A key aspect of prior management's efforts to increase our gross margins
was our decision to focus our marketing efforts on higher margin business
(primarily distributors) and to de-emphasize or eliminate sales to certain
lower margin accounts (primarily direct customers such as office furniture
makers). Management believes that a number of the de-emphasized and eliminated
accounts previously provided us with a positive variable contribution and,
given our current excess manufacturing capacity, intends to re-establish a
significant amount of such sales.
Changed Emphasis on Design
We have a history of innovation and leadership in product design. We
believe that our reputation for innovative design is an important factor in
our success in the commercial segment of the market. Beginning in 1995,
however, we changed the emphasis of our design program by focusing on
consumers (e.g., the design center program) rather than on specifiers such as
architects and designers. Management believes that communication with the
architectural and design community is essential to our sales efforts,
particularly with respect to new product introductions.
Business Strategy
We have begun to implement a strategy that we believe will return us to
pre-1995 levels of profitability and cash flow. Management expects our
operating performance to benefit from the following factors:
o the return of Vincent Langone and David Schneider, who previously
managed us through two successful leveraged buyouts, as senior
management,
36
<PAGE>
o a targeted reduction in selling, general and administrative expenses,
which increased significantly since 1994,
o an expected increase in unit volume shipments as customer service is
improved through better management of the inventory and distribution
systems,
o the realization of substantial savings due to the manufacturing
efficiencies resulting from the significant capital investments made
since 1994 and
o a reduction in capital spending to historical (pre-1995) levels.
Specifically, our business strategy includes the following elements:
Reduce Operating Expenses
Management has begun to implement a program of reducing operating costs,
enhancing operating efficiencies and improving profitability. Management
believes that over the last three years, profitability was depressed by
unnecessarily high operating expenses, including spending on consumer-targeted
advertising and promotion programs that were either ineffective or related to
the launch of our flooring product. Management has identified approximately
$30.0 million in estimated net annualized operating cost savings that it
believes can be realized without affecting our overall sales or brand
franchise. The savings relate primarily to specific areas of advertising and
promotion spending and other selling and administrative expenses, and also
target other operating expenses, including outside consultant expenses and
transportation and warehousing costs. Implementation of the cost savings began
in early 1998 and, although management does not expect to fully realize such
savings until 1999, management believes that approximately $22.0 million of
the total is reflected in our results of operations for year ended December
31, 1998. See "--Cost Savings."
Improve Manufacturing Efficiency
We believe that the $134.8 million investment in new property, plant and
equipment over the last three years (along with the approximately $45.0
million of capital expenditures planned over the next two years) provides a
foundation for us to realize substantial manufacturing savings to be phased in
over the next three years. Key investments include:
o an expansion of the Taiwan manufacturing and distribution facilities;
o a continuous press line in the facility in Spain; and
o a high efficiency treater and ready-to-use print technology in the
United States facilities.
We expect that these investments will help to more efficiently meet
customer service requirements in these markets. See "--Capital Investments."
Re-establish Strategic Leadership
Management believes that increased integration of and communication
between our operating units will significantly improve our profitability. From
1995-1997, our North American, European and Asian divisions were operated as
separate and autonomous divisions. Management believes that significant cost
benefits will be realized from its recent implementation of a centrally
coordinated global purchasing program. In addition, management has begun to
re-emphasize our design leadership by evaluating our product line on a global
basis, addressing product line weaknesses and coordinating new product
launches. Management believes that worldwide specifications, product line
rationalization and global product launches are all opportunities for improved
profits.
37
<PAGE>
Increase North American HPL Sales by Improving Customer Service
Management believes that product quality and service (i.e., lead time,
availability, fill rates, delivery reliability and consistent quality) are key
criteria that customers consider in selecting an HPL vendor. Management has
begun to re-emphasize our quality and service focus in North America by
realigning our inventory stocking strategy to be responsive to regional demand
patterns.
Target Strategic Acquisitions
Management is pursuing opportunities to make acquisitions that complement
or expand our decorative surfaces businesses or that enable us to enter new
markets. We intend to focus on surfacing companies whose products can be
manufactured using our extensive global manufacturing capabilities or brands
whose products may be sold through our distribution channels or that would
benefit from the Formica brand name. The expansion opportunities include
domestic and international manufacturers of laminates, solid surfacing,
flooring, woods, tile, plastics and related surfacing products. We are
actively evaluating potential acquisition targets and will make acquisitions
that fit our acquisition strategy.
We acquired the solid surfacing division of International Paper which is
marketed under the name Fountainhead, in February 1999 to complement our
Surrell products. The acquisition significantly increases our solid surfacing
production capability and has increased our sales of solid surfacing products.
The acquisition, which was funded out of available cash, will not have a
material effect on our results of operations or financial condition.
Industry Overview
The decorative overlay market consists of high pressure decorative
laminates, wood, veneers, marble, granite, solid surfacing, tile, plastics,
foils, papers, vinyls, acrylics, paint, wallpaper, wall and floor coverings,
low pressure laminates and other surfacing materials. While substitution
exists across product categories, HPL remains one of the primary products used
in certain horizontal surfacing applications, such as kitchen and bathroom
countertops, where durability is a critical consideration. HPL products are
used in a wide range of applications, with other decorative surfacing products
competing at the high and low end of the market. At the high end are
decorative surfaces such as our Surell solid surfacing product, Fountainhead
and Corian solid surfacing, granite, marble, tile and natural wood. Low
pressure laminates are a low cost surfacing alternative for applications
requiring lower durability.
We estimate that the worldwide market for HPL was approximately $3
billion in 1997, evenly distributed between North America ($1 billion), Europe
($1 billion) and the rest of the world ($1 billion). The end-users of HPL
products generally fall into two market segments, residential and commercial,
each of which has in recent years accounted for approximately 50% of the
market. Demand for HPL products is driven by both the residential and
commercial new construction market and the remodeling/renovation market. The
residential market is comprised of independent contractors and manufacturers
of countertops, kitchen and bathroom cabinets and furniture. The commercial
market includes fabricators, contractors and manufacturers whose primary
business is the production of interiors (including store fixtures, furniture
and wall paneling) in airports, prisons, hospitals, schools, retail stores,
hotels and office buildings.
Products
Decorative laminates are used in a wide range of surfacing applications
where durability, design, construction versatility and ease of maintenance are
factors. Our principal products are high pressure decorative laminates (which
accounted for 90% of 1998 net sales), solid surfacing material, which is
marketed under the Surell brand name, and laminate flooring products, which we
introduced in late 1996 under the Formica brand name. We also manufacture and
sell resins and license our Formica brand name and proprietary technology and
know-how to third parties.
38
<PAGE>
High Pressure Decorative Laminates
HPL is principally used in a wide range of commercial and residential
surfacing applications where durability, design, construction versatility and
ease of maintenance are important factors. Traditional residential
applications include:
o kitchen cabinetry,
o countertops and bathroom vanities,
o horizontal and vertical surfaces in living rooms, family rooms and
dining rooms.
The commercial applications include:
o work surfaces,
o cabinetry,
o furniture,
o fixtures,
o panels,
o counter tops and
o interior walls with end-use applications in offices, computer
centers, airports, hospitals, schools, restaurants, hotels,
retail stores, ships, buses and railroad cars.
Our HPL products compete with decorative laminates manufactured by other
producers, as well as with other surfacing materials such as wood, veneers,
marble, tile, plastics and foils. Competition is based principally on breadth
of product line, design and appearance, product quality, functionality,
marketing, technology, price and service. Over the past twenty years,
less-expensive, less-durable low-pressure laminates have replaced HPL for
certain applications. Nevertheless, the more durable HPL still dominates the
market for certain surfaces such as countertops and tables.
Our HPL offerings include both general purpose products and premium
products, which generally have higher profit margins.
General Purpose HPL
Our standard U.S. decorative line consists of 96 solid colors, 126
abstract patterns, 32 woodgrain patterns and 114 other patterns. Surface
textures can range from very high gloss, smooth surfaces to deeply textured
surfaces and surfaces with other special design and performance features.
These products are generally sold in sheet form in standard sizes that
correspond to press sizes and vary from market to market.
There is substantial overlap of these colors and patterns among our three
principal regions (North America, Europe and Asia), and we have an active new
product harmonization program to conform regional product lines and reduce
costs. There will continue to be regional differences in colors and patterns
to meet local style differences.
39
<PAGE>
Premium HPL Products
Formica premium decorative laminates products have characteristics which
make them particularly suitable for various specialized applications and
generate higher profit margins than the standard line products. Premium
decorative laminates products include our Decometal (which incorporates real
metal foil on a laminate core, giving the solid appearance of a metal plate or
sheet) and Ligna (a multi-laminar veneer made with phenolic-backed real wood
and which replicates the grains of exotic woods) lines, our Design Concepts
and Formations collections and Colorcore surfacing material (a solid
"color-through" laminate), each of which are marketed for special end-use
applications such as office furniture, store fixtures, restaurant interiors,
airports and custom-built kitchens. Premium HPL products also include
laminates for uses requiring fire-related materials such as shipbuilding and
office interiors; textured laminates which are designed to look and feel like
leather or slate; and laminates applied to static-free flooring used in
computer centers.
Solid Surfacing Products
Our solid surfacing products accounted for about 6% of our total sales in
1998. These products, (similar to E.I. DuPont de Nemour's ("DuPont") Corian
product), distributed under the brand name Surell, are available in a
selection of colors and granite-like patterns, which run throughout the entire
thickness of the product. The products can be fabricated and shaped for use in
a variety of residential and commercial applications, such as vanities with
dripless edges and integral backsplashes, or produced in sheet form for work
surfaces, countertops and other surface applications. One of the advantages of
this product is that if it is scratched or gouged, the damaged exterior can be
easily repaired by simply sanding down the surface to provide a new smooth
exterior. Solid surfacing products are more expensive than laminates but less
expensive than comparable materials such as marble, granite and high-end
ceramic tile.
We acquired the solid surfacing division of International Paper which is
marketed under the name Fountainhead, in February 1999 to complement our
Surrell products. The acquisition significantly increases our solid surfacing
production capability and has increased our sales of solid surfacing products.
Laminate Flooring
In late 1996, we introduced the Formica laminate flooring product line in
North America to compete in the rapidly- growing market for laminate flooring.
The product is produced in a variety of colors and patterns and is sold in
both the new construction and renovation markets.
Formica flooring offers a virtually impermeable surface finish which is
resistant to wear, moisture and impact. It is constructed from dual layers of
direct pressure laminate sandwiching a high-density moisture-resistant
fireboard. Due to its durable surface, it is ideally suited for flooring in
locations such as kitchens, bathrooms and family rooms.
Formica flooring is currently offered in a variety of colors and
patterns, including marble, granite, wood and wood tints. The wood patterns
are produced in planks which are fit together in a tongue and groove assembly
system. Formica flooring is applied as a "floating" floor and can be fitted
over any subfloor with a dry, clean and level surface. In certain
circumstances the flooring can be laid directly on to an existing floor
covering such as linoleum or vinyl, which provides substantial cost savings to
the consumer. Formica flooring is manufactured in a dedicated facility in
Seattle, Washington, by Stel Industries, Inc., an independent manufacturer,
under a long-term exclusive "take-or-pay" contract with us. See Note 15 to our
Consolidated Financial Statements included elsewhere in this prospectus.
Design Development
Design is an important factor in the customer selection of decorative
HPL. New laminate designs are introduced periodically by us and our
competitors. We consider ourselves an industry leader worldwide in decorative
laminate design. Our design team works to anticipate market trends by
observing other areas that serve as leading indicators of
40
<PAGE>
design trends. We have consistently won numerous design and product awards
worldwide. These awards include: the 1996 Kitchen & Bath Business' Product
Innovator Award, the 1997 Visual Merchandising & Store Design Reader's Choice
Poll, the 1997 Green Product Award, the 1996 Gold Ink Award and the Graphic
Arts Recognition Committee Award of Excellence. Other awards include the
Professional Builder's ADQ Award, the Kitchen & Bath Design News' ADQ Award,
the 1997 Kitchen and Bath Business' Flooring Product of the Year Award and the
1997 Printing Industries of America Award, among others.
Our efforts to refine the designs of our products have resulted in such
products as the Design Concepts and Formations collections, Deco Metal, Ligna,
Colorcore, a solid "color-through" laminate, and the Stripes and Geometrica
collections featuring silk-screen printed pinstripes and bands in a variety of
colors. During the last several years, we introduced solid opaque laminates,
granite-like solid surfacing materials, and a number of other premium
products.
Marketing, Distribution and Customers
We believe our global distribution and dealer network, together with our
extensive sales force and the Formica brand name and Anvil F mark, are major
marketing strengths and key elements to our success. In addition, we believe
that none of our competitors have the brand recognition of the Formica brand
name.
Our products are sold through distributors of wholesale building
materials, distributors of products for the cabinet industry and directly to
original equipment manufacturers for both residential and commercial uses. In
1998, approximately 60% of our net sales were made through distributors and
the remaining 40% were made directly to users of our products.
Our distribution network includes approximately three hundred independent
distributor locations worldwide. Many distributors have sub-distributorship
and dealer networks. As a result, our brand products are represented in
thousands of locations worldwide. The effort of our domestic and international
sales and architectural specifications representatives, when combined with the
sales force of our distributor network, provide sales and marketing coverage
in over 100 countries throughout the world. Our architectural sales force
calls directly on architects, designers and specifiers on a full-time basis.
Our sales representatives market our products directly to end-users and work
with distributors by monitoring distributors' inventories, calling on
customers, architects and designers with the distributor's sales
representatives and assisting distributors in the development of advertising
and promotional campaigns and materials and the introduction of products.
Generally, our distributorship sales are made by distributors that
exclusively carry our brand of HPL. The typical distributor also sells some or
all of the following: other surfacing material, adhesives, cabinetry, flooring
material, particleboard, cabinet hardware and other related architectural and
building materials. We consider our distribution network to be an important
vehicle for the introduction of new products we may develop or distribute in
the future.
We estimate that of our net sales for the year ended December 31, 1998,
approximately one-half were derived from products used in commercial
applications and one-half from products used in residential applications. In
addition, we estimate that approximately two-thirds of our net sales for such
periods were derived from products used in remodeling or renovation projects,
while approximately one-third of our net sales for such periods were derived
from products used in new construction.
Sales in the commercial market are heavily influenced by the
specifications of architects and designers. In addition to our regular
salesforce, a specialized salesforce calls exclusively on architects and
designers.
Our backlog is not significant due to our ability to respond adequately
to customer requests for product shipments. Generally, our products are
manufactured from raw materials in stock and are delivered to our customers
within one to thirty days from receipt of the order, depending on customer
delivery specifications.
41
<PAGE>
We have no significant long-term contracts for the distribution of our
products. For the year ended December 31, 1998, no customer or affiliated
group of customers accounted for as much as 5% of our consolidated net sales.
Raw Materials
High pressure decorative laminates are produced from a few basic raw
materials which include kraft paper, fine decorative papers and melamine and
phenolic resins. The papers are impregnated with resins and placed between
stainless steel plates in a multi-opening press and cured under pressure and
elevated temperature. The number of paper laminations per sheet of laminate
varies with the specific type of product being produced, but all have melamine
resin on the surface to create a hard, durable surface. Surface textures can
range from very high gloss smooth surfaces to deeply textured surfaces and
surfaces with other special design and performance features. In addition to
patents, we have proprietary technology and know-how in the design and
manufacture of our products.
Kraft papers are available globally from several major sources and many
smaller producers. Fine papers are supplied by many producers in North
America, Europe and Asia. Melamine, phenol and formaldehyde, the primary raw
materials for resins, are global commodity chemicals available from many
suppliers. We currently purchase these raw materials from various suppliers at
market prices. We believe that we are one of the largest purchasers of these
raw materials on a worldwide basis in the high pressure laminate industry. We
may, from time to time, enter into one-year or longer-term contracts with
suppliers when advantageous to us. We also acquire certain chemicals under
exclusive arrangements from producers in connection with licensing technology
from those producers.
Manufacturing and Locations
We manufacture and distribute products on a global basis with eleven
manufacturing facilities located in the United States, Canada, the United
Kingdom, France, Spain, Taiwan and China and a 50% interest in a joint venture
manufacturing plant in Germany that produces specialized metallic surfaced
laminate products. These multiple manufacturing locations around the world
enable us to reduce delivery times, freight costs and duties that we would
otherwise encounter.
In general, each manufacturing facility produces a standard product line
for its geographic market and produces one or more specialty products which
may be sold in its market or exported to other markets. This allocation of
production responsibility is designed to insure prompt delivery to customers
of our standard product lines and economies of scale in the production of our
premium products. In addition, certain of our specialty products have been
developed in response to regional design preferences.
Our manufacturing facilities normally operate either on a five, six or
seven day a week schedule. Periodically, we operate on an overtime basis to
satisfy customer requirements during periods of peak demand. Generally, each
facility is shut down from one to four weeks annually for maintenance,
refurbishment and traditional vacation periods. Management believes that our
existing manufacturing facilities are satisfactory for our projected
requirements, and has no current plans to expand capacity significantly.
Our North American operations are headquartered in Evendale, Ohio (near
Cincinnati), which is also the site of an HPL manufacturing plant. We also
manufacture HPL in Rocklin, California (near Sacramento) and St. Jean, Quebec,
Canada (near Montreal). Surell solid surfacing is manufactured in Mt. Bethel,
Pennsylvania (near Allentown). HPL samples, which are produced in large
quantities for marketing purposes, are produced at a facility in Indianapolis,
Indiana. Certain products, such as Ligna and laminate flooring, are
manufactured by third parties and sold under our brand name through our
distribution system. We have distribution centers in Evendale, Ohio; Rocklin,
California; Dallas, Texas; Ft. Lauderdale, Florida; Mt. Bethel, Pennsylvania;
Atlanta, Georgia; St. Jean, Quebec, Canada; Vancouver, British Columbia,
Canada; San Juan, Puerto Rico; and Mexico City, Mexico.
Our European headquarters and United Kingdom operations are based in
North Shields, United Kingdom (near Newcastle), which is also the site of an
HPL manufacturing plant. The Spanish subsidiary is headquartered at its
42
<PAGE>
production facilities in Bilbao, Spain. The French subsidiary is based in
Lognes, France (near Paris), and we have an HPL plant in Quillan, France.
Distribution centers are located in North Shields, United Kingdom; Bilbao,
Spain; Paris, France; Cologne, Germany; Milan, Italy; Rumlang, Switzerland;
and Eugendorf, Austria. Our Homapal joint venture (which manufactures metallic
laminates) is based in Herzberg Am Harg, Germany. We also manufacture our own
steel press plates in La Plaine, France.
Our operations in Asia are headquartered in Taipei, Taiwan. Our largest
plant in Asia is located in Hsinfeng, which is near Taipei. We also have a
manufacturing plant in Shanghai, China and a separate marketing joint venture
in Shanghai. We have distribution centers in Taiwan, Singapore and Hong Kong
and four distribution centers and six sales offices in China.
Manufacturing Process
The HPL manufacturing process involves several major steps: resin
manufacturing, treating, collation, pressing, trimming, sanding, packaging and
shipping.
The resins are manufactured to exact formulations and procedures. Samples
are taken during resin manufacturing to identify any necessary production
modifications and ensure that the resin is being made to the correct
specifications.
The "webs" of untreated kraft paper or decorative paper are threaded into
the treaters. The web is then dipped into the liquid resin and floated on air
currents through an oven to dry it. As the product emerges from the machines,
it either gets cut and stacked automatically or rewound on a core and moved
into work-in-process inventory.
Orders are entered into computers and then given to workers who pull the
appropriate goods from the work-in-process inventory and transfer them to the
collation line. The barrier, core and overlay sheets are then stacked in the
order in which they will be sent to the multi-opening presses. These stacks of
unfinished laminate are placed between plates and moved into the press itself.
The stainless steel plates can create surface textures ranging from very high
gloss, metallic finishes to deeply textured surfaces with special designs.
Press size varies from 10 to 24 openings. Depending on the thickness of
the product, one to 16 sheets of unfinished laminate can be placed between
press plates. Once the plates and the unfinished laminate are placed in the
press, the press applies 1400 pounds per square inch of pressure and 300o F of
heat. This process takes approximately 40 to 80 minutes. The laminates and
plates are then removed from the press and the laminates are removed from
between the plates. After the sheets are separated, they are sent through the
trimming and sanding lines where the edges are removed and the backs are
sanded. The laminate is visually inspected at this point and moved into
finished goods inventory. The product is specifically packaged and then
shipped to a warehouse until it is delivered to the distributor or fabricator.
Cost Savings
We have begun to implement a cost savings program intended to reduce
operating expenses. We devised this program after a detailed review of our
financial and operation results from 1995 to 1997, based on our management's
expertise in successfully operating the business at significantly lower
selling, general and administrative spending levels than were incurred between
1995 and 1997, yet with stronger EBITDA results.
The majority of the savings relate to reductions in advertising and sales
promotion spending as well as other selling and administrative spending.
Implementation of the cost savings began early in 1998, but we do not expect
the full savings to be realized until 1999.
43
<PAGE>
The following is a summary of the estimated annual cost savings and
management's estimate of:
o the amount of such cost savings reflected in our results of
operations for the year ended December 31, 1998 and
o the annual cost savings expected to be reflected in our results of
operations for 1999 and thereafter (based on our 1999 budget compared
to management's estimate of total spending on such categories in
1997):
<TABLE>
Year ended Estimated
December Annual Cost
31, 1998 Savings
---------- -----------
($ in millions)
<S> <C> <C>
Excess Advertising & Sales Promotion/Other Selling & Administrative Expenses..... $10.5 $18.0
Flooring......................................................................... 5.5 6.0
Operating Expenses............................................................... 2.0 4.0
Staff Reductions................................................................. 3.0 5.0
Consultants/Legal/Other.......................................................... 4.0 4.0
----- -----
Total Estimated Cost Savings.................................................. $25.0 $37.0
Additional Standalone Costs................................................ (3.0) (7.0)
----- -----
Total Estimated Net Cost Savings.............................................. $22.0 $30.0
===== =====
</TABLE>
The $37.0 million in estimated cost savings is expected to be partly
offset by approximately $7.0 million in incremental costs associated with us
being independent from BTR.
While we believe that the advertising and promotional spending that
constituted a large part of the increased SG&A expenses was unnecessary, we
cannot assure you that a reduction in advertising and promotional spending
will not reduce net sales. See "Risk Factors--Cautionary Statement Concerning
Forward-Looking Statements" and "Risk Factors--Cost Cutting Strategy."
Excess Advertising & Sales Promotion/Other Selling & Administrative Expenses
We plan to reduce non-flooring advertising and sales promotion spending
and other selling and administrative expenses by approximately $18.0 million
in North America. A portion of the reduction reflects management's belief that
much of our advertising and promotion spending during the 1995 to 1997 period
was ineffective. In addition, we completed the launch of the Formica Design
Center program in 1997. Management believes that while the program has been
effective in establishing a stronger dealer base, the program has generated
only nominal incremental sales volumes. Other selling expenses include
literature and wallboard placements, sampling and regional sales expenses.
Future spending on literature and wallboards will maintain exposure after
previously higher spending levels in conjunction with the design center
program and significant product introductions. Similarly, sampling will be
reduced to support a more targeted product launch strategy, the use of scrap
versus virgin material as well as a printed sampling alternative which cuts
unit sample costs by 50% from laminate sample chains. Regional sales expenses
will also be reduced to levels more in line with ongoing market needs.
For the year ended December 31, 1998, we have realized $10.5 million in
savings from reduced advertising and sales promotion spending and other
selling expenses. A total of $18.0 million in such savings is estimated for
the fiscal year ended December 31, 1999.
Flooring
We completed the launch of the Formica laminate flooring product in 1997,
which included over $4.0 million in non-recurring television advertising.
Promotional spending for the launch included the one-time cost of placing over
6,500 displays at retailers (which included the majority of the higher volume
laminate flooring dealers). Although
44
<PAGE>
management expects that we will benefit from the significant investment in the
displays, future promotional spending will focus on incremental display
placement and add-on displays for future flooring product introductions.
For the year ended December 31, 1998, we estimate that we realized
approximately $5.5 million in savings due to the completion of the flooring
product launch. A total reduction of approximately $6.0 million in such
savings is estimated for the fiscal year ended December 31, 1999.
Operating Expenses
We plan to reduce operating expenses, including claims expense and scrap,
warehousing and transportation costs, by approximately $4.0 million. For the
year ended December 31, 1998, we believe that we have realized $2.0 million of
these savings from reduced operating expenses. A total of approximately $4.0
million in such savings is estimated for the fiscal year ended December 31,
1999.
Staff Reductions
Management intends to realize net annualized cost savings of
approximately $5.0 million as a result of a variety of staff reductions. For
the year ended December 31, 1998, we estimate that we have realized $3.0
million of these savings from already implemented staff reductions throughout
the organization. A total of approximately $5.0 million in such savings is
estimated for the fiscal year ended December 31, 1999. The 1999 staff
reductions primarily relate to additional head count reductions in the Asian
and European operations.
Consultants/Legal/Other
Management has reduced the costs of outside consultants, legal advisors
and other services by approximately $4.0 million for the year ended December
31, 1998. Management believes that there was no discernible benefit from much
of the consulting services provided to us from 1995 to 1997. In addition, we
have hired an in-house general counsel (the cost of which is reflected in our
additional standalone costs) and intend to reduce our dependence on outside
legal services.
Additional Standalone Costs
Additional standalone costs relate to the establishment of corporate
functions previously provided by BTR as well as additional insurance, pension
and related costs required following our separation from BTR. Our additional
standalone costs are estimated at $7.0 million per year, $3.0 million of which
is reflected in the financial results for the year ended December 31, 1998. A
total of approximately $7.0 million in such costs is estimated for the fiscal
year ended December 31, 1999.
Capital Investments
In the last several years, we have implemented a major capital investment
program that management believes will increase capacity, yield substantial
manufacturing savings and improve competitiveness. That investment included
$134.8 million in capital expenditures from 1996 through 1998, the majority of
which was related to specific projects expected to provide manufacturing cost
savings or capacity enhancement. With capital expenditures of $45.0 million
and $15.0 million in 1999 and 2000 in aggregate, we will have largely
completed our major capital spending program.
Ready-to-Use Print
We are investing in new technology called ready-to-use print ("RTUP").
The RTUP process, also referred to as dry print, eliminates the need to treat
the decorative paper with resin. Cost savings result as the total resin
content is reduced and the basis weight of the overlay paper is reduced. This
new system also improves decorative paper yield
45
<PAGE>
as it provides the ability to produce more optimal quantities. Labor savings
should also result from eliminating the treating step for the decorative paper
and reducing the labor associated with collating.
Taiwan Plant Expansion
We have expanded our Taiwan manufacturing plant with the addition of a
new large size press which became operational in 1998. This additional
capacity will eliminate the need to import substantial quantities of finished
laminate from North America and Europe to service the southeast Asia market
and will also provide capacity for future growth. In addition, we have built a
new finished goods warehouse next to the Taiwan manufacturing plant, thereby
eliminating the need for the previous warehouse, which was located 30 miles
away from the factory. This has eliminated the double handling of products,
cut down lead time, and saved warehouse rental expenses.
Continuous Press
We are in the final stages of commissioning a continuous press line in our
facility in Spain. The continuous press will
o simplify production flow;
o improve labor productivity;
o reduce press plate costs;
o lower in-process scrap; and
o permit the production of custom sheet lengths.
Phenolic Treater
Prior to the Acquisition, we purchased a new high efficiency phenolic
treater for our Evendale plant, which is expected to be operational in 1999.
Expected savings are primarily due to
o reduced treating labor;
o reduced utilities costs;
o improved control/reduced material loss and resin usage; and
o implementation of ARC technology. The introduction of the ARC system,
which eliminates the need for a wax separator between sheets of HPL
during pressing, will reduce materials costs, labor costs and yield
losses.
Other
We expect to realize manufacturing cost savings and/or capacity benefits
from the following projects:
o the introduction of a new, less expensive process to produce HPL with
a "sparkle" finish;
o a new boiler house at the North Shields, United Kingdom facility,
which was substantially finished in March 1998 and is yielding
savings from efficiency, labor and fuel;
46
<PAGE>
o a modified HPL manufacturing process in North America which provides
comparable finished goods quality from the usage of a reduced cost
resin; and
o the purchase of our minority partner's interest in the Shanghai,
China manufacturing plant and business.
Competition
Our products compete around the world with high pressure decorative
laminates manufactured by other producers, as well as with wood, veneers,
marble, granite, solid surfacing, tile, plastics, foils, papers, vinyls,
acrylics, paint, wallpaper, wall and floor coverings, low pressure laminates
and other surfacing materials. In recent years, there has been substitution of
other products for HPL, with increasing substitution of solid surfacing at the
high end and increasing substitution, particularly among North American
manufacturers of cabinets, inexpensive furniture and store fixtures, of low
pressure laminates at the low end. Competition is based principally on breadth
of product line, product quality, marketing, technology, price and service. We
compete in a number of geographic markets and our success in each of these
markets is influenced by those factors. We believe that we are one of the
largest producers of HPL on a worldwide basis. We also believe that we are the
largest or second largest producer of HPL in various national markets,
including the United States, Canada, the United Kingdom, France, Spain and
Taiwan. In many other national markets, we enjoy a smaller but nonetheless
significant market position. In the North American HPL market, our principal
competitor is Wilsonart (a subsidiary of Premark International) and in Europe
the principal competitor is Perstorp. In the solid surfacing market, DuPont is
the strongest competitor, and Perstorp is dominant in the laminate flooring
market. Many of our competitors are owned by larger enterprises and may have
greater assets or resources than us.
Research and Development
Technical support to our business is organized on a worldwide basis. The
major part of our research program, which involves the development of new
applications for existing products, new products and process improvements, is
carried out by the research and development departments located in the United
States. Technical groups located at each plant also participate in the overall
program and work on smaller projects under the direction of our research
director.
International Operations
Our net sales from international operations to third parties accounted
for approximately 49%, 48% and 44% of total net sales of our products for the
years ended December 31, 1996, 1997 and 1998, respectively, and international
operations contributed $0.0, $14.9 and $12.6 of our operating income for the
years ended December 31, 1996, 1997 and 1998, respectively. We have
manufacturing subsidiaries located in the United Kingdom, France, Spain,
Canada, Taiwan and China and a 50% interest in a German joint venture. Our
principal international markets are located in Europe, Asia, Canada and
Mexico. Our international operations are subject to foreign currency
fluctuations, local laws concerning repatriation of profits and other factors
normally associated with multinational operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 12 to our Consolidated Financial Statements included elsewhere in this
prospectus for information concerning our business by geographic area and
"Risk Factors--International Operations."
Environmental Matters
Our operations are subject to various foreign and United States
environmental laws and regulations. We have conducted environmental
assessments (which generally include a physical inspection, but not soil or
groundwater analyses) on a limited number of properties. The estimated range
of costs and liabilities associated with potential on-site soil and
groundwater contamination and compliance with existing and potential
environmental laws and regulations (exclusive of costs and liabilities
associated with off-site contamination at Superfund sites discussed below) is
approximately $1.6 million to $7.1 million in the aggregate over the next
several years. In addition, we estimate that
47
<PAGE>
we will have additional capital expenditures of approximately $0.8 million
relating to air emissions equipment upgrades at our Rocklin, California
facility. There can be no assurance, however, that we will be required to
incur these estimated costs and liabilities or that the actual costs and
liabilities will not be significantly higher. Unforseen expenditures or
liabilities relating to contamination or compliance with environmental laws
could have a material adverse effect on our financial condition or results of
operation. Pursuant to the Acquisition Agreement, we will be indemnified for
certain limited environmental claims generally relating to soil and
groundwater contamination at currently and previously owned and leased sites
and at sites to which we sent wastes prior to a certain date. This
indemnification, however, is subject to various limitations, including a cap,
threshold, survival period, and restrictions on the scope of claims that may
be indemnifiable.
We have been, from time to time, the subject of administrative
proceedings, litigation and investigations relating to environmental matters.
Currently, we have been named as a potentially responsible party at several
Superfund sites and have reserved approximately $4.0 million for liabilities
with respect to two of such sites. We believe, based on various factors,
including, without limitation, certain indemnification rights that we have
with respect to some of the Superfund sites, that the liabilities associated
with such Superfund sites should not have a material adverse effect on our
financial condition or results of operations. In addition, in September 1998,
we received a Citation and Notification of Penalty from the Occupational
Safety & Health Administration ("OSHA") relating to certain safety violations
at our Evendale, Ohio facility, with total penalties of $275,500 being sought.
Although there can be no assurance, we believe the amount of the penalty will
be reduced.
There can be no assurances that we will not become involved in future
proceedings, litigation or investigations, that such Superfund or other
environmental liabilities will not be material or that indemnification
pursuant to such indemnification rights will otherwise be available. See Note
15 to our Consolidated Financial Statements included elsewhere in this
prospectus.
Patents, Trademarks and Licenses
We own patents and possess proprietary information which relates to our
products and processes. We believe that the loss of any of our patents would
not have a material adverse effect on our business.
Trademarks are important to our business and licensing activities. We
have a vigorous program of trademark enforcement to prevent the unauthorized
use of our trademarks, to strengthen the value of our trademarks and to
improve our image and customer goodwill. We believe that the Formica trademark
and the Anvil F mark are our most significant trademarks. In addition to
registration in the United States, those trademarks are registered in over 100
countries. We have granted a perpetual, royalty-free license to the Formica
tradename or trademark to CSR Limited in Australia and New Zealand and to
certain laminate producers in India, South Africa and much of South America.
The Colorcore and Surell trademarks are registered in the United States and
several other countries. Additionally, we have numerous other registered
trademarks, trade names and logos, both in the United States and abroad. We
believe that our material trademarks are well protected in all of the major
markets in which we do business. However, effective trademark protection may
not be available in every country in which our products are available.
Historically, we have had a limited copyright portfolio of patterns and
designs, because the designs used in our laminates were typically owned by the
decorative paper manufacturer. In more recent years, we have increasingly
created our own proprietary designs, some of which are protected by copyright.
We believe that numerous opportunities exist to license our
internationally recognized FORMICA trademark and the Anvil F mark and our
proprietary technology and know-how. We have existing licensing arrangements
for our trademarks (and, in certain cases, our proprietary technology) with
manufacturers of adhesives.
48
<PAGE>
Properties
The location and general description of the principal properties owned or
leased by us (or by our German joint venture) are set forth in the table
below:
<TABLE>
Location Principal Function Square Feet
-------- ------------------ -----------
<S> <C> <C>
Atlanta, Georgia Distribution Center 60,000 Leased
Dallas, Texas Distribution Center 82,000 Leased
Evendale, Ohio Manufacturing Plant and United States Operations 1,000,000 Owned
Headquarters
Ft. Lauderdale, Florida Distribution Center 64,000 Leased
Indianapolis, Indiana Samples Facility 54,000 Leased
Mt. Bethel, Pennsylvania Manufacturing Plant and Distribution Center 150,000 Owned
Rocklin, California Manufacturing Plant 350,000 Owned
St. Jean, Quebec, Canada Manufacturing Plant 360,000 Owned
Shanghai, China Manufacturing Plant 340,000 Owned
North Shields, England Manufacturing Plant and Subsidiary Headquarters 560,000 Owned
LaPlaine, France Manufacturing Plant 25,000 Owned
Lognes, France Distribution Center and Subsidiary Headquarters 69,000 Leased
Quillan, France Manufacturing Plant 240,000 Owned
Herzberg Am Harz, Germany Manufacturing Plant and Joint Venture Headquarters 110,000 Leased
Bilbao, Spain Manufacturing Plant and Subsidiary Headquarters 360,000 Owned
Hsinfeng, Taiwan Manufacturing Plant 150,000 Owned
</TABLE>
We believe that our properties are suitable and adequate for our present
needs. We also believe that we have sufficient manufacturing and distribution
capacity for our present and foreseeable needs. Pursuant to the new credit
facility, the Rocklin, California and Evendale, Ohio facilities are subject to
liens as security for our obligations and our subsidiaries thereunder. One of
the Mt. Bethel, Pennsylvania properties is subject to a lien related to an
installment sale arrangement for the facility with a local development
authority and the Hsingfeng, Taiwan facility is subject to a lien pursuant to
a credit agreement in Taiwan.
The leases for our leased properties will expire from 1999 through 2003,
and the German joint venture has an annual lease that expires each December
31, unless renewed.
Employees
As of December 31, 1998, we had approximately 3,800 employees. In the
United States, approximately 1,000 of our employees are covered by collective
bargaining agreements that expire in the years 2000 and 2002. Of the
approximately 2,000 employees in our international operations, a majority are
represented by a variety of local unions.
We consider our employee relations to be satisfactory.
Litigation
See Note 15 to our Consolidated Financial Statements for discussion of
litigation and environmental matters.
49
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning the
directors, executive officers and key management of Formica. Each director of
Formica also serves as a director of Holdings and Laminates.
<TABLE>
Name Age Office
----- --- -------
<S> <C> <C>
Vincent P. Langone................... 56 Director, Chairman, President and Chief Executive Officer
David T. Schneider................... 49 Vice President, Chief Financial Officer and Secretary
William Adams........................ 47 President, European Operations
Steve Kuo............................ 43 President, Asian Operations
Thompson Dean........................ 40 Director
Peter T. Grauer...................... 53 Director
David Y. Howe........................ 34 Director
Alexander Donald Mackenzie........... 41 Director
</TABLE>
Vincent P. Langone has been Chairman, President and Chief Executive
Officer since May 1998. From 1995 until 1997, Mr. Langone was a principal of
Interbuild International, Inc. Mr. Langone was previously named President and
Chief Operating Officer of Formica Corporation in 1985 when Formica became
independent and privately held through a management-led leveraged buyout in
which he was a principal participant and investor. After taking Formica public
in 1987, Mr. Langone was appointed Chief Executive Officer in 1988. In 1989,
Mr. Langone organized a group of investors led by Dillon, Read & Co. and
Formica was again taken private. Under the new structure he assumed the
additional role of Chairman. Mr. Langone currently serves as a director of
Summit Bank, United Retail Group and Brand Scaffolding Services.
David T. Schneider has been Vice President, Chief Financial Officer and
Secretary since May 1998. From 1995 until 1997, Mr. Schneider was a principal
of Interbuild International, Inc. Mr. Schneider previously joined Formica
Corporation in 1986 as North American Controller following a management-led
leveraged buyout from American Cyanamid Company in 1985. He was appointed
Corporate Controller in 1987 and named Vice President and Chief Financial
Officer of Formica in 1989.
William Adams is President of Formica's International operations and
General Manager of Formica-U.K. He joined Formica Corporation in 1968. He has
held various positions in Formica involving the following functions: research
and development, yield improvement, warehousing, distribution, planning and
production.
Steve Kuo is President of Formica's Asian operations. He joined Formica
Corporation in March 1985 in sales and marketing and later served as General
Manager of North and East China. He was promoted to his present position in
December 1997.
Thompson Dean has been a director of Formica since May 1998. Mr. Dean has
been the Managing Partner of DLJ Merchant Banking, Inc., since November 1996.
Previously, Mr. Dean was a Managing Director of DLJ Merchant Banking Inc. (and
its predecessor). Mr. Dean serves as a director of Commvault Inc., Von Hoffman
Corporation, Manufacturer's Services Limited, Phase Metrics, Inc., Arcade
Holding Corporation, DeCrane Aircraft Holdings Inc. and Insilco Holding Co.
Peter T. Grauer has been a director of Formica since May 1998 and a
Managing Director of DLJ Merchant Banking Inc. (and its predecessor) since
September 1992. Mr. Grauer serves as a director of Doane Pet Care Company,
Co., Total Renal Care Holdings, Inc., DecisionOne Holdings Corp., Nebco Evans
Holding Company, Ameriserve Food Distribution, Inc., Bloomberg, Inc. and
Thermadyne Holdings Corporation.
David Y. Howe has been a director of Formica since May 1998 and a Vice
President of Citicorp Venture Capital, Ltd. since 1993. Mr. Howe serves as a
director of Aetna Industries, Inc., American Italian Pasta Company, Insilco
Holding Co., IPC Information Systems, Inc., Pen-Tab Industries, Inc. and
several private companies.
50
<PAGE>
A. Donald Mackenzie has been a director of Formica since May 1998 and a
Managing Director of CVC Capital Partners Limited since 1993. Previously, he
was a director of Citicorp Venture Capital Ltd. Mr. Mackenzie serves as a
director of Hamleys Plc and Hozelock Group Plc.
Pursuant to the terms of the Investors' Agreement among the DLJ Merchant
Banking funds, the Institutional Investors and certain other shareholders of
Laminates, Formica intends to elect two additional directors who are
unafilliated with Formica or any of DLJ Merchant Banking or the Institutional
Investors.
Executive Compensation
<TABLE>
Long Term Compensation
--------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------- --------------------------------------------
Restricted Securities
Other Stock Underlying All Other
Salary Bonus Compensation Award(s) Options/SARs LTIP Payouts Compensation
Name and Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- --------------------------- ----- -------- -------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Vincent P. Langone
Director, Chairman,
President and Chief
Executive Officer 1998 $400,000 -- -- -- -- -- $428,649(1)
David T. Schneider
Vice-President, Chief
Financial Officer and
Secretary 1998 $200,000 -- -- -- -- -- $134,153(1)
Albert F. Young
Former President 1998 91,668 325,000 -- -- -- -- 199,757(2)
Richard Nicholas
Former V.P. of Finance 1998 45,667 75,000 -- -- -- -- 124,233(2)
Gerald Carrino
Former V.P. of
Marketing 1998 57,733 75,000 -- -- -- -- 126,392(2)
</TABLE>
- -------------------
(1) Amounts principally represent payment for transaction fees--see
"Employment agreements."
(2) Amounts principally represent severance payments.
Employment Agreements
Vincent Langone and David Schneider. Messrs. Langone and Schneider have
entered into employment agreements (the "Employment Agreements") with
Laminates on the following terms, effective as of April 30, 1998. The
Employment Agreements have a duration of three years from their effectiveness
subject to automatic extensions for one year periods on their second and each
subsequent anniversary, absent notice of non-renewal by either party. The
Employment Agreements provide for initial annual base salaries of $600,000 and
$300,000, respectively, for Messrs. Langone and Schneider, and, contingent
upon Laminate's achievement of certain EBITDA targets, payment of cash
bonuses.
Mr. Langone was paid a $375,000 transaction fee in connection with the
acquisition and will be paid an advisory fee in connection with future
acquisitions and/or divestitures during the term of his employment. Mr.
Schneider was paid a $125,000 transaction fee in connection with the
acquisition.
51
<PAGE>
Each of Messrs. Langone and Schneider is entitled to participate in any
benefit and incentive compensation programs, plans and practices which
Laminates makes available generally to its senior executive officers. Upon a
termination without Cause (as defined in the Employment Agreements), for Good
Reason (as defined in the Employment Agreements, which definition includes the
occurrence of a Change of Control (as defined therein)) or due to non-renewal
of the Employment Agreement (each a "Severance Termination"), each of Messrs.
Langone and Schneider is entitled under the agreements to the following
severance benefits: (i) unpaid accrued base salary and vacation and earned
bonus; (ii) two times the sum of executive's then-current annual base salary
and bonus (as calculated pursuant to the agreement); (iii) 36 months continued
benefits coverage; (iv) a fully vested supplemental retirement benefit
pursuant to the Formica Corporation Supplemental Executive Retirement Plan
(the "SERP") and (v) accelerated vesting with respect to any time-based
options and time-vested equity based awards granted to or purchased by
executive. Laminates has agreed that it will "gross-up" executives for any
excise taxes to which they are subject as a result of any severance payments
being considered "golden parachute" payments by the Internal Revenue Service.
Pursuant to the Employment Agreements, each of Messrs. Langone and
Schneider will, during his term of employment with Formica and for a period of
two years following a Severance Termination, be bound by a covenant (i) not to
compete in the high-pressure laminates business or other line of business
significant to Laminates and any of its subsidiaries as a whole and (ii) not
to solicit any employees of Laminates or its subsidiaries.
The Restricted Stock Plan
On April 30, 1998, the Board of Directors and shareholders of Laminates
approved and adopted the Laminates Management Restricted Stock Program (the
"Plan"), effective as of such date. The Plan authorizes purchases by eligible
employees of Laminates and its subsidiaries, selected in the discretion of the
Committee (as defined below), of restricted shares of Common Stock of
Laminates (the "Restricted Stock"). Any shares of Restricted Stock purchased
pursuant to the Plan are subject to forfeiture upon the participating
employee's termination of employment with Laminates or any of its subsidiaries
until such shares have vested in accordance with the terms described below.
The only employees who have participated in the Plan to date are Messrs.
Langone and Schneider.
Administration. The Plan is administered by a committee (the "Committee")
of the Board established by the Board in a manner which complies with Rule
16b-3 under the Exchange Act and Section 162(m) of the Code, to the extent
such compliance is necessary, or if no such Committee has been established, by
the Board.
Number of Authorized Shares. Shares issuable under the Plan may include
shares of authorized but unissued or reacquired Common Stock.
52
<PAGE>
The number of shares which may be issued under the Plan is 157,153,
subject to adjustments upon the occurrence of certain events and as follows.
To date, 120,484 shares have been allocated pursuant to purchase by Messrs.
Langone and Schneider, and 36,669 shares are available under the Plan for
future purchase. Subject to certain exceptions, upon the issuance by Laminates
of additional equity following the effectiveness of the acquisition,
additional shares will be available under the Plan equal to from 12.5% to 5.5%
of the additional Common Stock issued, depending upon the amount and timing of
the issuance.
Purchase Price. Unless otherwise determined by the Committee, the price
at which each share of Restricted Stock (each a "Restricted Share") may be
purchased under the Plan shall be the fair market value of a share of Common
Stock on the date of purchase.
Vesting. Each Restricted Share will vest in accordance with the terms of
the applicable purchase agreement between Laminates and the participating
employee. 60% of the shares currently issued pursuant to the Plan will be
subject to time-based vesting (the "Time Based Shares") and 40% of the shares
issued pursuant to the Plan are subject to performance-based vesting (the
"Performance Based Shares"). The Time Based Shares vest on a five year
schedule, 20% on each anniversary of purchase, and the Performance Based
Shares vest on a five year schedule provided that certain EBITDA targets are
met. The issued Time Based Shares vest upon termination of a participating
employee's employment due to death, disability, without Cause or for Good
Reason and upon a change of control of Laminates and the issued Performance
Based Shares vest upon a change of control of Laminates occurring within 20
months of the effectiveness of the acquisition, and thereafter only if certain
investment return targets are met.
Puts and Calls. The Restricted Stock is subject to repurchase by
Laminates (the "Call Right") upon any termination of employment by the
employee and of sale by the employee (the "Put Right") upon termination of
employment other than for Cause or by the employee without Good Reason. The
applicable purchase price pursuant to the Call Right or Put Right, as
applicable, is set forth in the purchase agreement with respect to such
shares.
Amendment and Termination. The Board may amend, alter, suspend,
discontinue or terminate the Plan or any portion thereof at any time, provided
however, that the shareholders of Laminates shall be required to approve any
amendment if such approval is necessary to comply with any tax or regulatory
requirements.
Compensation of Directors
Currently, directors are not paid fees. Formica has not yet determined
whether the independent directors to be elected in accordance with the
Investors' Agreement will be paid any fees.
53
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF LAMINATES STOCKHOLDERS
All of Formica's issued and outstanding stock is owned by Holdings, which
is a wholly owned subsidiary of Laminates. The following table sets forth
information with respect to the beneficial ownership of Laminates' voting
securities as of May 1, 1998 by (i) each person or group known to Formica who
beneficially owns more than five percent of Laminate's voting securities, (ii)
each of Formica's directors, (iii) each executive officer of Formica and (iv)
all directors and executive officers of Formica as a group:
Number of Percentage
Name of Beneficial Owner Shares (1) of Class
------------------------ ---------- ----------
DLJ Merchant Banking funds (2)...................... 538,236(3) 45.1%
CVC European Equity Partners, L.P. (4).............. 240,198(5) 20.6%
CVC European Equity Partners (Jersey) L. P. (4)..... 28,920(6) 2.5%
MMI Products, L.L.C. (7)............................ 269,118(8) 23.0%
Thompson Dean (9)................................... -- --
DLJ Merchant Banking Inc.
277 Park Avenue
New York, New York 10072
Peter Grauer (9).................................... -- --
DLJ Merchant Banking Inc.
277 Park Avenue
New York, New York 10072
David Y. Howe (10)................................. -- --
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
Alexander Donald Mackenzie (11)..................... -- --
CVC Capital Partners Limited
Hudson House
8-10 Tavistock Street
London WC2E 7PP
Vincent Langone..................................... 140,061(12) 12.2%
David Schneider..................................... 27,479(13) 2.4%
Albert F. Young..................................... -- --
54
<PAGE>
Richard Nicholas.................................... -- --
Gerald Carrino...................................... -- --
All directors and officers as a group
(6 persons)(9)(10)(11)............................ 167,515 14.6%
- -------------------
(1) Under the applicable rules of the Securities and Exchange Commission,
each person or entity is deemed to be a beneficial owner with the power
to vote and direct the disposition of these shares. Shares of common
stock subject to warrants are deemed outstanding for computing the
percentage of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.
(2) Consists of shares held directly by DLJ Merchant Banking Partners II, L.P.
("DLJ Merchant Banking") and the following related investors: DLJ
Merchant Banking Partners II-A, L.P. ("DLJ Merchant BankingIIA"); DLJ
Offshore Partners II, C.V. ("Offshore"); DLJ Diversified Partners, L.P.
("Diversified"); DLJ Diversified Partners- A, L.P. ("Diversified A"); DLJ
Millennium Partners, L.P. ("Millennium"); DLJ Millennium Partners-A, L.P.
("Millennium A"); DLJ Merchant Banking Funding II, Inc. ("Funding"); DLJ
First ESC L.P. ("DLJ First ESC"); UK Investment Plan 1997 Partners, Inc.
("UK Partners"); DLJ EAB Partners, L.P. ("EAB") and DLJ ESC II L.P. ("DLJ
ESC II"). See "Certain Relationships and Related Transactions" and "Plan
of Distribution." The address of each of DLJ Merchant Banking, DLJ
Merchant BankingIIA, Diversified, Diversified A, Millennium, Millennium
A, Funding, DLJ First ESC, EAB and DLJ ESC II is 277 Park Avenue, New
York, New York 10172. The address of Offshore is John B. Gorsiraweg 14,
Willemstad, Curacao, Netherlands Antilles. The address of UK Partners is
2121 Avenue of the Stars, Fox Plaza, Suite 3000, Los Angeles, California
90067.
(3) Includes 50,000 shares that may be acquired upon exercise of Warrants. See
"The Acquisition."
(4) Such entity has an address at Hudson House, 8-10 Tavistock Street, London
WC2E 7PP.
(5) Includes 22,313 shares that may be acquired upon exercise of Warrants.
(6) Includes 2,687 shares that may be acquired upon exercise of Warrants.
(7) The address of MMI Products, L.L.C. is 399 Park Avenue, New York, New York
10043.
(8) Includes 25,000 shares that may be acquired upon exercise of Warrants.
(9) Messrs. Grauer and Dean are officers of DLJ Merchant Banking, Inc., an
affiliate of DLJ Merchant Banking and DLJSC. Share data shown for such
individuals excludes (i) shares shown as held by the DLJ Merchant Banking
funds, (ii) 1,000,000 shares of non-voting 15% Senior Exchangeable
Preferred Stock due 2008 of Holdings ("Holdings Preferred") held by the
DLJ Merchant Banking funds and (iii) 410,118 shares of non-voting 8%
Preferred Stock of Laminates ("Laminates Preferred") held by the DLJ
Merchant Banking funds, as to which such individuals disclaim beneficial
ownership.
(10) Mr. Howe is an officer of Citicorp Venture Capital, Ltd., an affiliate of
MMI. Share data for Mr. Howe excludes (i) shares shown as held by MMI,
(ii) 500,000 shares of Holdings Preferred held by MMI and (iii) 205,059
shares of Laminates Preferred held by MMI, as to which Mr. Howe disclaims
beneficial ownership.
(11) Mr. Mackenzie is an officer of CVC Capital Partners Limited, an affiliate
of CVC. Share data for Mr. MacKenzie excludes (i) shares shown as held by
CVC, (ii) 500,000 shares of Holdings Preferred held by CVC and (iii)
205,059 shares of Laminates Preferred held by CVC, as to which Mr.
Mackenzie disclaims beneficial ownership.
(12) Includes 104,769 shares of Restricted Stock, of which 62,861 are Time
Based Shares and 41,908 are Performance Based Shares. See
"Management--The Restricted Stock Plan."
(13) Includes 15,715 shares of Restricted Stock, of which 9,429 are Time Based
Shares and 6,286 are Performance Based Shares. See "Management--The
Restricted Stock Plan."
55
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In connection with the acquisition, an Investors' Agreement was entered
into at the Effective Time among Laminates, the DLJ Merchant Banking funds,
the Institutional Investors and the members of management who own shares of
Laminates common stock (the "Management Shareholders"). The terms of the
Investors' Agreement restrict transfers of the shares of Laminates common
stock by DLJ Merchant Banking, the Institutional Investors and the Management
Shareholders (collectively, the "Shareholders"), and provide that in certain
situations a selling Shareholder provides Laminates and the other Shareholders
with a right of first refusal prior to selling any such shares. The agreement
permits the other Shareholders to participate in certain sales of shares of
Laminates capital stock by the DLJ Merchant Banking funds or Institutional
Investors, permits the DLJ Merchant Banking funds and the Institutional
Investors to require the Management Shareholders to sell shares of Laminates
capital stock in certain circumstances should the DLJ Merchant Banking funds
and the Institutional Investors choose to sell any such shares owned by them,
permits the Shareholders to purchase equity securities proposed to be issued
by Formica on a preemptive basis, and provides for certain registration
rights. Similar provisions are made with respect to Holdings preferred stock
that is held by the Shareholders. The Investors' Agreement also provides that
the DLJ Merchant Banking funds have the right to appoint two of the seven
members of the Board of Directors of Laminates, Holdings and Formica, each of
CVC, MMI and the Management Shareholders have the right to appoint one
director, and two other directors will be independent directors mutually
satisfactory to DLJ Merchant Banking and the Institutional Investors, and
provides that certain actions may not be taken unless approved by each of the
DLJ Merchant Banking funds, CVC and MMI. The two independent directors have
not yet been selected.
Pursuant to the subscription agreement under which shares of Laminates
capital stock were sold, Laminates agreed to reimburse the DLJ Merchant
Banking funds, the Institutional Investors and the Management Shareholders for
all costs and expenses incurred by such persons or entities incurred in
connection with such subscription for stock of Laminates. Laminates also
agreed to reimburse up to $2.0 million to the DLJ Merchant Banking funds as
reimbursement for amounts previously paid by the DLJ Merchant Banking funds to
Messrs. Langone and Schneider in connection with consulting services provided
to the DLJ Merchant Banking funds with respect to our acquisition by
Laminates.
In connection with the acquisition, Laminates paid advisory fees of $1.0
million to each of DLJSC, an affiliate of the DLJ Merchant Banking funds, and
MMI, $2.0 million to CVC and $375,000 to Mr. Langone and $125,000 to Mr.
Schneider for services rendered in connection with the acquisition.
DLJ Capital Funding, an affiliate of DLJ Merchant Banking, has and will
receive customary fees and reimbursement of expenses in connection with the
arrangement and syndication of the new credit facility and as a lender
thereunder. Laminates Funding, Inc., an affiliate of DLJ Merchant Banking, was
a purchaser of a portion of the bridge notes and received customary fees and
expenses in connection therewith, which notes are being repaid with the
proceeds of the issuance and sale of the notes. The aggregate amount of all
fees paid or payable to the DLJ entities in connection with the acquisition
and the offering of the old notes is approximately $5.0 million.
Formica and its subsidiaries may from time to time enter into financial
advisory or other investment banking relationships with Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") or one of its affiliates pursuant to
which DLJSC or its affiliate will receive customary fees and will be entitled
to reimbursement for all reasonable disbursements and out-of-pocket expenses
incurred in connection therewith. Formica expects that any such arrangement
will include provisions for the indemnification of DLJSC against certain
liabilities, including liabilities under the federal securities laws. DLJSC is
one of the Initial Purchasers of the notes offered hereby.
56
<PAGE>
THE ACQUISITION
Laminates, our indirect parent, was organized by DLJ Merchant Banking,
the DLJ Merchant Banking funds, certain institutional investors and certain
management employees of Formica in order to acquire our company. For the same
purpose, Laminates formed LMS I, a Delaware corporation wholly owned by it,
LMS II (wholly owned by LMS I), LMS III (wholly owned by LMS II) and Formica
Holdco (UK) Limited ("Holdco UK"), wholly owned by LMS III.
Laminates and BTR entered into a share sale and purchase agreement dated
as of March 16, 1998 (the "acquisition agreement"). Pursuant to the
acquisition agreement, on May 1, 1998 Laminates acquired from BTR, for
consideration of approximately $405.4 million, all of the outstanding shares
of Holdings and certain of our foreign affiliates (the "foreign affiliates").
The consideration included $376.6 million of cash (which included repayment of
all indebtedness due to BTR and its affiliates) and $28.8 million of estimated
assumed net debt (net of estimated cash and cash equivalents).
In order to finance the acquisition, LMS II issued and sold $200.0
million aggregate principal amount of the bridge notes (which were repaid with
the proceeds of the old notes) and, together with Holdco UK and Formica
Limited, our indirect subsidiary, entered into a new credit facility, which
initially provided for term loan borrowings in the aggregate principal amount
of $80.0 million and revolving loan borrowings in the aggregate principal
amount of $125.0 million. At the effective time (as defined herein), LMS II
borrowed $40.0 million of term loans available thereunder and $40.0 million of
revolving loans (which was repaid as described below), and Holdco UK borrowed
the pounds sterling equivalent of $40.0 million of term loans. In addition,
LMS II obtained approximately $30.0 million aggregate amount of letters of
credit to provide credit enhancement for certain assumed indebtedness. The
remaining revolving loans will, subject to significant conditions, including
the absence of any material adverse change, be available to fund our working
capital requirements. See "Description of New Credit Facility."
The proceeds of LMS II's borrowings under the new credit facility and
from its issuance of the bridge notes were loaned by LMS II to LMS I. LMS I
raised an additional $50.0 million from the sale of its senior preferred stock
("Holdings Preferred") and warrants to purchase common stock of Laminates and
loaned the proceeds, along with the proceeds of the loan received from us, to
Laminates. Laminates used the proceeds of the loan, together with $87.1
million in proceeds from the sale of preferred stock ("Laminates Preferred")
and common stock ("Common Stock"), to fund the payment of the purchase price
of the shares of Holdings and the foreign affiliates.
Concurrently with the effectiveness of the acquisition (the "effective
time"), LMS II merged with and into us, which succeeded to all of our
obligations in respect of the bridge notes and the new credit facility, LMS I
merged into Holdings, LMS III merged into Formica International (our wholly
owned subsidiary) and Laminates contributed to Holdings, which contributed to
us, the shares of stock of the foreign affiliates, which became our
subsidiaries. As a result of the acquisition, we are a wholly owned subsidiary
of Holdings, which in turn is a wholly owned subsidiary of Laminates.
Immediately after the effective time, Holdco UK converted the proceeds of
its borrowing of term loans under the new credit facility into U.S. dollars
and used this to purchase the stock of Formica Limited from Formica
International. Formica International then dividended the $40.0 million
purchase price proceeds to us. We then repaid the $40.0 million of revolving
loan borrowings made under the new credit facility at the effective time with
the proceeds of the dividend (the "closing date repayment").
We refer to "acquisition" to include:
(1) the purchase by Laminates of Holdings, the mergers of LMS II into us,
LMS I into Holdings and LMS III into Formica International, and the
contribution of the foreign affiliates' stock to us and
57
<PAGE>
(2) the issuance and sale of the bridge notes, the initial borrowings
under the new credit facility, the effective time, the sale by LMS I of senior
preferred stock and warrants and the sale by Laminates of preferred stock and
common stock.
The following table sets forth the estimated cash sources and uses of
funds for the acquisition and related fees and expenses:
(in millions)
-------------
Sources
Bridge notes................................................... $200.0
New credit facility............................................ 80.0
Assumed net debt............................................... 28.8
LMS I senior preferred stock and warrants...................... 50.0
Laminates preferred stock...................................... 86.0
Laminates common stock......................................... 1.1
------
Total Sources............................................... $445.9
======
Uses
Cash consideration for acquisition (including repayment of
affiliate debt).............................................. $376.6
Assumed net debt............................................... 28.8
Excess cash.................................................... 10.5
Estimated transaction fees and expenses(1)..................... 30.0
------
Total Uses.................................................. $445.9
======
- -------------------
(1) Includes estimated fees and expenses incurred in connection with the
offering of the old notes.
58
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
The new credit facility is being provided by a syndicate of financial
institutions (each such financial institution being a "Lender" and,
collectively, the "Lenders") led by DLJSC, as arranger, and DLJ Capital
Funding, as syndication agent. The new credit facility includes an $85.0
million term loan facility, which provides for a pound sterling-denominated
facility in an amount equal to the pound sterling equivalent (determined as of
the date the loans under such facility are made) of US$40.0 million, a $35.0
million U.S. dollar-denominated facility and a Canadian dollar-denominated
facility in an amount equal to the Canadian dollar equivalent (determined as
of the date the loans under such facility are made) of US$10.0 million, and a
$120.0 million revolving credit facility, which provides for loans and under
which up to $75.0 million in letters of credit may be issued. The term loan
and revolving facilities each mature on May 1, 2004. A substantial portion of
the revolving credit facility may be made available to certain of Formica's
foreign subsidiaries in local currencies.
Loans under the new credit facility bear interest, at Formica's option,
at the alternate base rate or the reserve adjusted LIBOR rate plus, in each
case, applicable margins of 2.25% for LIBOR loans and 1.00% for base rate
loans. Formica pays commitment fees in an amount equal to 0.50% per annum on
the daily average unused portion of the revolving credit facility. Such fees
are payable quarterly in arrears and upon the maturity or termination of the
revolving credit facility. From and after the date of delivery of Formica's
December 31, 1998 financial statements (or earlier delivery by Formica of an
estimate of the Leverage Ratio (as defined below) as of such date), the
applicable margins and commitment fees will be determined based on the ratio
(the "Leverage Ratio") of consolidated total debt to consolidated EBITDA of
Formica and its subsidiaries (as defined in the new credit facility).
Formica pays a letter of credit fee on the outstanding undrawn amounts of
letters of credit issued under the new credit facility at a rate per annum
equal (i) in the case of standby letters of credit, the then applicable margin
for Euro-Dollar loans and (ii) in the case of documentary letters of credit,
1.25%, which shall be shared by all Lenders participating in such Letter of
Credit, and an additional 0.125% per annum to Formica of each letter of
credit.
The term loan is subject to the following amortization schedule:
Term Loan
Year Amortization (%)
----- ---------------
1 0.0
2 2.5
3 10.0
4 20.0
5 25.0
6 42.5
The new credit facility is subject to mandatory prepayment:
o with the net cash proceeds of the sale or other disposition of any
property or assets of, or receipt of casualty proceeds by, Formica,
subject to certain exceptions, including an exception for
reinvestment in the business of Formica and its subsidiaries,
o with 50% of the net cash proceeds received from the issuance of
equity securities of Formica to the extent that the Leverage Ratio
exceeds 3.5:1,
o with the net cash proceeds received from issuances of debt
securities by Formica or any of its restricted subsidiaries (as
defined in the new credit facility), subject to certain exceptions
and
o with 50% of excess cash flow (as defined in the new credit facility)
for each fiscal year to the extent that the Leverage Ratio exceeds
3.5:1.
59
<PAGE>
All mandatory prepayment amounts shall be applied first to the prepayment
of the term loan facility and thereafter to the prepayment of the revolving
credit facility.
Laminates, Holdings, and all existing or future domestic subsidiaries
(the "subsidiary guarantors") of Formica are or will be guarantors of the new
credit facility. Formica's obligations under the new credit facility will be
secured by
o all existing and after-acquired personal property of Formica and the
subsidiary guarantors, including a pledge of all of the stock of
all existing or future subsidiaries of Formica (provided that,
with a single exception, no more than 65% of the voting stock of
any foreign subsidiary shall be pledged),
o first-priority perfected liens on all material existing and
after-acquired real property fee and leasehold interests of
Formica and the subsidiary guarantors, subject to customary
permitted liens (as defined in the new credit facility),
o a pledge by Holdings of the stock of Formica and a pledge by
Laminates of the stock of Holdings, and
o a negative pledge on all assets of Formica and its subsidiaries.
The new credit facility contains customary covenants and restrictions on
Formica's ability to engage in certain activities, including, but not limited
to:
o limitations on other indebtedness, liens, investments and
guarantees,
o restrictions on dividends and redemptions and payments on
subordinated debt and
o restrictions on mergers and acquisitions, sales of assets and
leases.
The new credit facility also contains financial covenants requiring
Formica to maintain a minimum EBITDA, minimum coverage of interest expense,
minimum coverage of fixed charges and a maximum leverage ratio.
Borrowings under the new credit facility are subject to significant
conditions, including compliance with certain financial ratios and the absence
of any material adverse change. See "Risk Factors--Substantial Leverage;
Liquidity."
60
<PAGE>
DESCRIPTION OF NOTES
The Old Notes were issued under an Indenture, dated as of February 22,
1999 between Formica and Summit Bank as Trustee. The following summary
highlights certain material terms of the Indenture. Because this is a summary,
it does not contain all of the information that is included in the Indenture.
You should read the entire Indenture, including the definitions of certain
terms used below. The Indenture is by its terms subject to and governed by the
Trust Indenture Act of 1939, as amended. We have filed a copy of the Indenture
as an exhibit to the registration statement of which this prospectus forms a
part.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes. If we do not complete the
exchange offer by , 1999, Holders of Old Notes that have
complied with their obligations under the registration rights agreement will
be entitled, subject to certain exceptions, to liquidated damages in an amount
equal to $0.05 per week per $1,000 principal amount of Notes held by such
Holder until , 1999 and increasing every 90 days thereafter
up to a maximum amount equal to $0.25 per week per $1,000 principal amount of
Notes until the registration statement is declared effective.
As of the date of the Indenture, all of Formica's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, Formica will be
permitted to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to the restrictive
covenants set forth in the Indenture.
Principal, Maturity and Interest
The Notes will initially be limited in aggregate principal amount to
$215.0 million and will mature on March 1, 2009. Interest on the Notes will
accrue at the rate of 10 7/8% per annum and will be payable semi-annually in
arrears on March 1 and September 1, commencing on September 1, 1999, to
Holders of record on the immediately preceding February 15 and August 15.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. Principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes will be payable at the office or
agency of Formica maintained for such purpose within the City and State of New
York or, at the option of Formica, payment of interest and Liquidated Damages
may be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments of principal, premium, interest and Liquidated Damages with respect
to Notes represented by one or more permanent global Notes will be paid by
wire transfer of immediately available funds to the account of the Depository
Trust Company or any successor thereto. Until otherwise designated by Formica,
Formica's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of
$1,000 and integral multiples thereof. Subject to the covenants described
below, Formica may issue additional Notes under the Indenture having the same
terms in all respects as the Notes (or in all respects except for the payment
of interest on the Notes
(1) scheduled and paid prior to the date of issuance of such Notes; or
(2) payable on the first Interest Payment Date following such date of
issuance).
The Notes offered hereby and any such additional Notes would be treated
as a single class for all purposes under the Indenture.
Subordination
The payment of Subordinated Note Obligations will be subordinated in
right of payment, as set forth in the Indenture, to the prior payment in full
in cash or cash equivalents of all Senior Indebtedness, whether outstanding on
the date of the Indenture or thereafter incurred.
61
<PAGE>
Upon any distribution to creditors of Formica in a liquidation or
dissolution of Formica or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to Formica or their property, an
assignment for the benefit of creditors or any marshalling of Formica's assets
and liabilities, the Holders of Senior Indebtedness will be entitled to
receive payment in full in cash or cash equivalents of all Obligations due in
respect of such Senior Indebtedness (including interest after the commencement
of any such proceeding at the rate specified in the applicable Senior
Indebtedness) before the Holders of Notes will be entitled to receive any
payment with respect to the Subordinated Note Obligations, and until all
Obligations with respect to Senior Indebtedness are paid in full in cash or
cash equivalents, any distribution to which the Holders of Notes would be
entitled shall be made to the Holders of Senior Indebtedness (except that
Holders of Notes may receive and retain Permitted Junior Securities and
payments made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
Formica also may not make any payment upon or in respect of the
Subordinated Note Obligations (except in Permitted Junior Securities or from
the trust described under "--Legal Defeasance and Covenant Defeasance") if:
(1) a default in the payment of the principal of, premium, if any, or
interest on or commitment fees relating to, Designated Senior Indebtedness
occurs and is continuing beyond any applicable period of grace; or
(2) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits Holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice")
from Formica or the Holders of any Designated Senior Indebtedness.
Payments on the Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Indebtedness has been accelerated. No new period of payment
blockage may be commenced unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been waived
or cured for a period of not less than 90 days.
"Designated Senior Indebtedness" means
(1) any Indebtedness outstanding under the New Credit Facility; and
(2) any other Senior Indebtedness permitted under the Indenture the
principal amount of which is $25.0 million or more and that has been
designated by Formica in writing to the Trustee as "Designated Senior
Indebtedness."
"Permitted Junior Securities" means Equity Interests in Formica or debt
securities of Formica that are subordinated to all Senior Indebtedness (and
any debt securities issued in exchange for Senior Indebtedness) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Indebtedness.
"Senior Indebtedness" means, with respect to any Person
(1) all Obligations of such Person outstanding under the New Credit
Facility and all Hedging Obligations payable to a lender or an Affiliate
thereof or to a Person that was a lender or an Affiliate thereof at the time
the contract was entered into under the New Credit Facility or any of its
Affiliates, including, without limitation,
62
<PAGE>
interest accruing subsequent to the filing of, or which would have accrued but
for the filing of, a petition for bankruptcy, whether or not such interest is
an allowable claim in such bankruptcy proceeding;
(2) any other Indebtedness, unless the instrument under which such
Indebtedness is incurred expressly provides that it is subordinated in right
of payment to any other Senior Indebtedness of such Person and
(3) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include:
(a) any liability for federal, state, local or other taxes;
(b) any Indebtedness of such Person (other than pursuant to the New
Credit Facility) to any of its Subsidiaries or other Affiliates;
(c) any trade payables; or
(d) any Indebtedness that is incurred in violation of the Indenture.
"Subordinated Note Obligations" means all Obligations with respect to the
Notes, including, without limitation, principal, premium, if any, interest and
Liquidated Damages, if any, payable pursuant to the terms of the Notes
(including upon the acceleration or redemption thereof), together with and
including any amounts received or receivable upon the exercise of rights of
rescission or other rights of action (including claims for damages) or
otherwise.
The Indenture will further require that Formica promptly notify Holders
of Senior Indebtedness if payment of the Notes is accelerated because of an
Event of Default. As a result of the subordination provisions described above,
in the event of a liquidation or insolvency, Holders of Notes may recover less
ratably than creditors of Formica who are Holders of Senior Indebtedness.
Optional Redemption
Except as provided below, the Notes will not be redeemable at Formica's
option prior to March 1, 2004. Thereafter, the Notes will be subject to
redemption at any time at the option of Formica, in whole or in part, upon not
less than 30 nor more than 60 days' notice, in cash at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on March
1 of the years indicated below:
Year Percentage
- ----- ----------
2004.............................................................. 105.438%
2005.............................................................. 103.625%
2006.............................................................. 101.813%
2007 and thereafter............................................... 100.000%
Notwithstanding the foregoing, on or prior to March 1, 2002, Formica may
redeem up to 35% of the aggregate principal amount of Notes ever issued under
the Indenture in cash at a redemption price of 110.875% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the redemption date, with the net cash proceeds of one or more
Public Equity Offerings; provided that at least 65% of the aggregate principal
amount of Notes ever issued under the Indenture remains outstanding
immediately after the occurrence of any such redemption; and provided further
that such redemption shall occur within 90 days of the date of the closing of
any such Public Equity Offering.
63
<PAGE>
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection
of Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
note is to be redeemed in part only, the notice of redemption that relates to
such note shall state the portion of the principal amount thereof to be
redeemed. A New note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
Mandatory Redemption
Formica is not required to make mandatory redemption of, or sinking fund
payments with respect to, the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require Formica to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase (the "Change of Control Payment"). Within 60 days following any
Change of Control, Formica will (or will cause the Trustee to) mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment
Date"), pursuant to the procedures required by the Indenture and described in
such notice. Formica will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of the Indenture relating to such Change of Control Offer, Formica
will comply with the applicable securities laws and regulations and shall not
be deemed to have breached their obligations described in the Indenture by
virtue thereof.
On the Change of Control Payment Date, Formica will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by
Formica. The Paying Agent will promptly mail to each Holder of Notes
so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be
transferred by book-entry) to each Holder a New note equal in
principal amount to any unpurchased portion of the Notes surrendered,
if any; provided that each such New note will be in a principal amount
of $1,000 or an integral multiple thereof. The Indenture will provide
that, prior to complying with the provisions of this covenant, but in
any event within 90
64
<PAGE>
days following a Change of Control, Formica will either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Indebtedness to
permit the repurchase of Notes required by this covenant. Formica
will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that
Formica repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The New Credit Facility will prohibit Formica from purchasing any Notes
and also will provide that certain change of control events (which may include
events not otherwise constituting a Change of Control under the Indenture)
with respect to Formica would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Indebtedness to which
Formica becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when Formica are prohibited
from purchasing Notes, Formica could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain
such prohibition. If Formica does not obtain such a consent or repay such
borrowings, Formica will remain prohibited from purchasing Notes. In such
case, Formica's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture, which would, in turn, constitute a default
under the New Credit Facility. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the Holders of
Notes.
Formica will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by Formica
and purchases all Notes validly tendered and not withdrawn under such Change
of Control Offer.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the assets of
Formica and its Subsidiaries, taken as a whole, to any "person" or
"group" (as such terms are used in Section 13(d) of the Exchange Act),
other than the Principals and their Related Parties;
(2) the adoption of a plan for the liquidation or dissolution of
Formica;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that
any "person" or "group" (as such terms are used in Section 13(d) of
the Exchange Act), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, of 50% or more of the
voting power of the outstanding voting stock of Formica; or
(4) the first day on which a majority of the members of the
board of directors of Formica are not Continuing Members.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of Formica and its Subsidiaries taken as a
whole. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
Formica to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of Formica and
its Subsidiaries taken as a whole to another Person or group may be uncertain.
65
<PAGE>
"Continuing Members" means, as of any date of determination, any member
of the board of directors of Formica who:
(1) was a member of such board of directors immediately after
consummation of the Acquisition and the Acquisition Financing; or
(2) was nominated for election or elected to such board of
directors with the approval of, or whose election to the board of
directors was ratified by, at least a majority of the Continuing
Members who were members of such board of directors at the time of
such nomination or election.
Asset Sales
The Indenture will provide that Formica will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) Formica or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal
to the fair market value (evidenced by a resolution of the board of
directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise
disposed of; and
(2) at least 75% of the consideration therefor received by
Formica or such Restricted Subsidiary is in the form of:
(a) cash or Cash Equivalents; or
(b) property or assets that are used or useful in a Permitted
Business, or the Capital Stock of any Person engaged in a Permitted
Business if, as a result of the acquisition by Formica or any
Restricted Subsidiary thereof, such Person becomes a Restricted
Subsidiary; provided that the amount of:
(3) any liabilities (as shown on Formica's or such Restricted
Subsidiary's most recent balance sheet), of Formica or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are
by their terms subordinated to the Notes or any guarantee thereof)
that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases Formica or such Restricted
Subsidiary from further liability;
(4) any securities, Notes or other obligations received by
Formica or any such Restricted Subsidiary from such transferee that
are contemporaneously (subject to ordinary settlement periods)
converted by Formica or such Restricted Subsidiary into cash or Cash
Equivalents (to the extent of the cash or Cash Equivalents received);
and
(5) any Designated Noncash Consideration received by Formica or
any of its Restricted Subsidiaries in such Asset Sale having an
aggregate fair market value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (5) that is at
that time outstanding, not to exceed 15% of Total Assets at the time
of the receipt of such Designated Noncash Consideration (with the fair
market value of each item of Designated Noncash Consideration being
measured at the time received and without giving effect to subsequent
changes in value), shall be deemed to be cash for purposes of this
provision; and provided further that the 75% limitation referred to in
clause (2) above will not apply to any Asset Sale in which the cash or
Cash Equivalents portion of the consideration received therefrom,
determined in accordance with the foregoing proviso, is equal to or
greater than what the after-tax proceeds would have been had such
Asset Sale complied with the aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Formica or any such Restricted Subsidiary shall apply such Net Proceeds, at
its option (or to the extent Formica is required to apply such Net Proceeds
pursuant to the terms of the New Credit Facility), to:
66
<PAGE>
(1) repay or purchase Senior Indebtedness or Pari Passu
Indebtedness of Formica or any Indebtedness of any Restricted
Subsidiary, provided that, if Formica shall so repay or purchase Pari
Passu Indebtedness of Formica, it will equally and ratably reduce
Indebtedness under the Notes if the Notes are then redeemable, or, if
the Notes may not then be redeemed, Formica shall make an offer (in
accordance with the procedures set forth below for an Asset Sale
Offer) to all Holders of Notes to purchase at a purchase price equal
to 100% of the principal amount of the Notes, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of
purchase, the Notes that would otherwise be redeemed; or
(2) an investment in property, the making of a capital
expenditure or the acquisition of assets that are used or useful in a
Permitted Business, or Capital Stock of any Person primarily engaged
in a Permitted Business if:
(a) as a result of the acquisition by Formica or any
Restricted Subsidiary thereof, such Person becomes a Restricted
Subsidiary; or
(b) the Investment in such Capital Stock is permitted by
clause (f) of the definition of Permitted Investments. Pending
the final application of any such Net Proceeds, Formica may
temporarily reduce Indebtedness or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this paragraph will
be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $15.0 million, Formica will be
required to make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer,
Formica may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes surrendered by Holders thereof in
connection with an Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased as
set forth under "--Selection and Notice." Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset
at zero.
Formica will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of the Indenture relating to such Asset Sale Offer, Formica will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations described in the Indenture by virtue
thereof.
Certain Covenants
Restricted Payments
The Indenture will provide that Formica will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Formica's or any of its Restricted
Subsidiaries' Equity Interests (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of Formica
or dividends or distributions payable to Formica or any Wholly Owned
Restricted Subsidiary of Formica);
(2) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of Formica, any of its Restricted Subsidiaries or
any other Affiliate of Formica (other than any such Equity Interests
owned by Formica or any Restricted Subsidiary of Formica);
67
<PAGE>
(3) make any principal payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value,
any Indebtedness of Formica that is subordinated in right of payment
to the Notes, except in accordance with the mandatory redemption or
repayment provisions set forth in the original documentation governing
such Indebtedness (but not pursuant to any mandatory offer to
repurchase upon the occurrence of any event); or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) Formica would, immediately after giving pro forma
effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by Formica and its
Restricted Subsidiaries after the date of the Indenture
(excluding Restricted Payments permitted by clauses (1) (to the
extent that the declaration of any dividend referred to therein
reduces amounts available for Restricted Payments pursuant to
this clause (c)), (2) through (9), (11), (12), (14), (16), (17)
and (19) of the next succeeding paragraph), is less than the sum,
without duplication, of:
(A) 50% of the Consolidated Net Income of Formica for
the period (taken as one accounting period) commencing April
1, 1999 to the end of Formica's most recently ended fiscal
quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit,
less 100% of such deficit); plus
(B) 100% of the Qualified Proceeds received by Formica
on or after the date of the Indenture from contributions to
Formica's capital or from the issue or sale on or after the
date of the Indenture of Equity Interests of Formica or of
Disqualified Stock or convertible debt securities of Formica
to the extent that they have been converted into such Equity
Interests (other than Equity Interests, Disqualified Stock
or convertible debt securities sold to a Subsidiary of
Formica and other than Disqualified Stock or convertible
debt securities that have been converted into Disqualified
Stock); plus
(C) the amount equal to the net reduction in
Investments in Persons after the date of the Indenture who
are not Restricted Subsidiaries (other than Permitted
Investments) resulting from:
(x) Qualified Proceeds received as a dividend,
repayment of a loan or advance or other transfer of
assets (valued at the fair market value thereof) to
Formica or any Restricted Subsidiary from such Persons;
(y) Qualified Proceeds received upon the sale or
liquidation of such Investment; and
(z) the redesignation of Unrestricted
Subsidiaries (excluding any increase in the amount
available for Restricted Payments pursuant to clause
(10) or (15) below arising from the redesignation of
such Unrestricted Subsidiary) whose assets are used or
useful in, or which is engaged in, one or more
Permitted Business as Restricted Subsidiaries (valued
(proportionate to
68
<PAGE>
Formica's equity interest in such Subsidiary) at the
fair market value of the net assets of such Subsidiary
at the time of such redesignation); plus
(D) cash payments received by Formica on the Intercompany Note.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
(2) (a) the redemption, repurchase, retirement, defeasance or
other acquisition of any subordinated Indebtedness or Equity Interests
of Formica (the "Retired Capital Stock") in exchange for, or out of
the net cash proceeds of the substantially concurrent sale (other than
to a Subsidiary of Formica) of, other Equity Interests of Formica
(other than any Disqualified Stock) (the "Refunding Capital Stock"),
provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance
or other acquisition shall be excluded from clause (c)(B) of the
preceding paragraph;
(3) the defeasance, redemption, repurchase, retirement or other
acquisition of subordinated Indebtedness of Formica with the net cash
proceeds from an incurrence of, or in exchange for, Permitted
Refinancing Indebtedness;
(4) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of Formica, Laminates or
Holdings held by any member of Laminates', Holdings' or Formica's (or
any of its Restricted Subsidiaries') management pursuant to any
management equity subscription agreement or stock option agreement and
any dividend to Laminates or Holdings to fund any such repurchase,
redemption, acquisition or retirement, provided that:
(a) the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed:
(x) $7.5 million in any calendar year (with unused
amounts in any calendar year being carried over to
succeeding calendar years subject to a maximum (without
giving effect to the following clause (y)) of $15.0 million
in any calendar year); plus
(y) the aggregate cash proceeds received by Formica
during such calendar year from any reissuance of Equity
Interests by Formica, Laminates or Holdings to members of
management of Formica and its Restricted Subsidiaries; and
(b) no Default or Event of Default shall have occurred and be
continuing immediately after such transaction;
(5) payments and transactions in connection with the Acquisition
(including any purchase price adjustment), the Acquisition Financing, the
offering, the New Credit Facility (including commitment, syndication and
arrangement fees payable thereunder) and the application of the proceeds
thereof, and the payment of fees and expenses with respect thereto;
(6) the payment of dividends or the making of loans or advances by
Formica to Holdings not to exceed $5.0 million in any fiscal year for
costs and expenses incurred by Holdings or Laminates in its capacity
as a holding company or for services rendered by Holdings or Laminates
on behalf of Formica;
(7) payments or distributions to Holdings or Laminates pursuant to
any Tax Sharing Agreement;
69
<PAGE>
(8) the payment of dividends by a Restricted Subsidiary on any
class of common stock of such Restricted Subsidiary if:
(a) such dividend is paid pro rata to all Holders of such class
of common stock; and
(b) at least 51% of such class of common stock is held by Formica
or one or more of its Restricted Subsidiaries;
(9) the repurchase of any class of common stock of a Restricted
Subsidiary if (a) such repurchase is made pro rata with respect to
such class of common stock and (b) at least 51% of such class of
common stock is held by Formica or one or more of its Restricted
Subsidiaries;
(10) any other Restricted Investment made in a Permitted Business
which, together with all other Restricted Investments made pursuant to
this clause (10) since the date of the Indenture, does not exceed
$25.0 million (in each case, after giving effect to all subsequent
reductions in the amount of any Restricted Investment made pursuant to
this clause (10), either as a result of (a) the repayment or
disposition thereof for cash or (b) the redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary (valued
proportionate to Formica's equity interest in such Subsidiary at the
time of such redesignation) at the fair market value of the net assets
of such Subsidiary at the time of such redesignation), in the case of
clause (a) and (b), not to exceed the amount of such Restricted
Investment previously made pursuant to this clause (10); provided that
no Default or Event of Default shall have occurred and be continuing
immediately after making such Restricted Investment;
(11) the declaration and payment of dividends to Holders of any
class or series of Disqualified Stock of Formica or any Restricted
Subsidiary issued on or after the date of the Indenture in accordance
with the covenant described under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock"; provided that no
Default or Event of Default shall have occurred and be continuing
immediately after making such Restricted Payment;
(12) repurchases of Equity Interests deemed to occur upon exercise
of stock options if such Equity Interests represent a portion of the
exercise price of such options;
(13) the payment of dividends or distributions on Formica's common
stock, following the first public offering of Formica's common stock
or Holdings' or Laminates' common stock after the date of the
Indenture, of up to 6.0% per annum of (a) the net proceeds received by
Formica from such public offering of its common stock or (b) the net
proceeds received by Formica from such public offering of Holdings' or
Laminates' common stock as common equity or preferred equity (other
than Disqualified Stock), other than, in each case, with respect to
public offerings with respect to Formica's common stock or Holdings'
or Laminates' common stock registered on Form S-8; provided that no
Default or Event of Default shall have occurred and be continuing
immediately after any such payment of dividends or distributions;
(14) the cancellation or forgiveness (in whole or in part) or any
amendment to or refinancing of the Intercompany Note;
(15) any other Restricted Payment which, together with all other
Restricted Payments made pursuant to this clause (15) since the date
of the Indenture, does not exceed $25.0 million (in each case, after
giving effect to all subsequent reductions in the amount of any
Restricted Investment made pursuant to this clause (15) either as a
result of (a) the repayment or disposition thereof for cash or (b) the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary
(valued proportionate to Formica's equity interest in such Subsidiary
at the time of such redesignation) at the fair market value of the net
assets of such Subsidiary at the time of such redesignation), in the
case of clause (a) and (b), not to exceed the amount of such
Restricted Investment previously made pursuant to this clause (15);
provided that no Default or Event of Default shall have occurred and
be continuing immediately after making such Restricted Payment;
70
<PAGE>
(16) the pledge by Formica of the Capital Stock of an Unrestricted
Subsidiary of Formica to secure Non-Recourse Debt of such Unrestricted
Subsidiary;
(17) the purchase, redemption or other acquisition or retirement
for value of any Equity Interests of any Restricted Subsidiary issued
after the date of the Indenture, provided that the aggregate price
paid for any such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed the sum of (a) the amount of cash and Cash
Equivalents received by such Restricted Subsidiary from the issue or
sale thereof and (b) any accrued dividends thereon the payment of
which would be permitted pursuant to clause (11) above;
(18) any Investment in an Unrestricted Subsidiary that is funded
by Qualified Proceeds received by Formica on or after the date of the
Indenture from contributions to Formica's capital or from the issue
and sale on or after the date of the Indenture of Equity Interests of
Formica or of Disqualified Stock or convertible debt securities to the
extent they have been converted into such Equity Interests (other than
Equity Interests, Disqualified Stock or convertible debt securities
sold to a Subsidiary of Formica and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock) in an amount (measured at the time such Investment is made and
without giving effect to subsequent changes in value) that does not
exceed the amount of such Qualified Proceeds; and
(19) distributions or payments of Receivables Fees.
The board of directors of Formica may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not
cause a Default. For purposes of making such designation, all outstanding
Investments by Formica and its Restricted Subsidiaries (except to the
extent repaid in cash) in the Subsidiary so designated will be deemed to
be Restricted Payments at the time of such designation and will reduce
the amount available for Restricted Payments under the first paragraph of
this covenant. All such outstanding Investments will be deemed to
constitute Restricted Investments in an amount equal to the greater of:
(a) the net book value of such Investments at the time of
such designation; and
(b) the fair market value of such Investments at the time of
such designation. Such designation will only be permitted if
such Restricted Investment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary.
The amount of:
(a) all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the
asset(s) or securities proposed to be transferred or issued by
Formica or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment; and
(b) Qualified Proceeds (other than cash) shall be the fair
market value on the date of receipt thereof by Formica of such
Qualified Proceeds. The fair market value of any non-cash
Restricted Payment shall be determined by the board of directors
of Formica whose resolution with respect thereto shall be
delivered to the Trustee. Not later than the date of making any
Restricted Payment, Formica shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture will provide that:
71
<PAGE>
(a) Formica will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired
Indebtedness);
(b) Formica will not, and will not permit any of its
Restricted Subsidiaries to, issue any shares of Disqualified
Stock; and
(c) Formica will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; provided
that Formica or any Restricted Subsidiary may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for Formica's most
recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date
on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1,
determined on a consolidated pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified
Stock had been issued, as the case may be, at the beginning of
such four-quarter period.
The provisions of the first paragraph of this covenant will not apply
to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Indebtedness"):
(a) the incurrence by Formica and its Restricted
Subsidiaries of Indebtedness under the New Credit Facility and
the Foreign Credit Facilities; provided that the aggregate
principal amount of all Indebtedness (with letters of credit
being deemed to have a principal amount equal to the maximum
potential liability of Formica and such Restricted Subsidiaries
thereunder) then classified as having been incurred in reliance
upon this clause (a) that remains outstanding under the New
Credit Facility and the Foreign Credit Facilities after giving
effect to such incurrence does not exceed an amount equal to
$280.0 million;
(b) the incurrence by Formica and its Restricted
Subsidiaries of Existing Indebtedness;
(c) the incurrence by Formica of Indebtedness represented
by the Notes and the Indenture;
(d) the incurrence by Formica and its Restricted
Subsidiaries of Indebtedness denominated in Spanish pesetas (or a
European common currency as a result of the implementation of
European Monetary Union and the cessation of use of Spanish
pesetas as the lawful currency of the Republic of Spain) in an
aggregate principal amount (or accreted value, as applicable) not
to exceed $10.0 million outstanding after giving effect to such
incurrence;
(e) the incurrence by Formica or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Expenditure
Indebtedness, Capital Lease Obligations or purchase money
obligations, in each case, incurred for the purpose of financing
all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment (including
acquisitions of Capital Stock of a Person that becomes a
Restricted Subsidiary to the extent of the fair market value of
the property, plant or equipment so acquired) used in the
business of Formica or such Restricted Subsidiary, in an
aggregate principal amount (or accreted value, as applicable) not
to exceed $30.0 million outstanding after giving effect to such
incurrence;
(f) Indebtedness arising from agreements of Formica or any
Restricted Subsidiary providing for indemnification, adjustment
of purchase price or similar obligations, in each case, incurred
or assumed in connection with the disposition of any business,
assets or a Subsidiary, other than guarantees of Indebtedness
incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of
financing such acquisition; provided that (A) such Indebtedness
is not reflected on the balance sheet of Formica or any
Restricted Subsidiary (contingent obligations referred to in a
footnote or footnotes to financial statements and not otherwise
reflected on the balance sheet will not be deemed to be reflected
72
<PAGE>
on such balance sheet for purposes of this clause (A)) and (B)
the maximum assumable liability in respect of such Indebtedness
shall at no time exceed the gross proceeds including non-cash
proceeds (the fair market value of such non-cash proceeds being
measured at the time received and without giving effect to any
subsequent changes in value) actually received by Formica and/or
such Restricted Subsidiary in connection with such disposition;
(g) the incurrence by Formica or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund, refinance
or replace Indebtedness (other than intercompany Indebtedness)
that was permitted by the Indenture to be incurred;
(h) the incurrence by Formica or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among
Formica and/or any of its Restricted Subsidiaries; provided that
(1) if Formica is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the Notes and
(2)(A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person
other than Formica or a Restricted Subsidiary thereof and (B) any
sale or other transfer of any such Indebtedness to a Person that
is not either Formica or a Restricted Subsidiary thereof shall be
deemed, in each case, to constitute an incurrence of such
Indebtedness by Formica or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (h);
(i) the incurrence by Formica or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the
purpose of fixing or hedging (A) interest rate risk with respect
to any floating rate Indebtedness that is permitted by the terms
of this Indenture to be outstanding and (B) exchange rate risk
with respect to agreements or Indebtedness of such Person payable
denominated in a currency other than U.S. dollars, provided that
such agreements do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of
fees, indemnities and compensation payable thereunder;
(j) the guarantee by Formica or any of its Restricted
Subsidiaries of Indebtedness of Formica or a Restricted
Subsidiary of Formica that was permitted to be incurred by
another provision of this covenant;
(k) the incurrence by Formica or any of its Restricted
Subsidiaries of Indebtedness in connection with an acquisition in
an aggregate principal amount (or accreted value, as applicable)
not to exceed $50.0 million outstanding after giving effect to
such incurrence;
(l) obligations in respect of performance and surety bonds
and completion guarantees provided by Formica or any Restricted
Subsidiary in the ordinary course of business; and
(m) the incurrence by Formica or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) outstanding after
giving effect to such incurrence, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (m), not to
exceed $40.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (a) through (m)
above or is entitled to be incurred pursuant to the first paragraph of this
covenant, Formica shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such clauses or pursuant to the first paragraph hereof. In addition, Formica
may, at any time, change the classification of an item of Indebtedness (or any
portion thereof) to any other clause or to the first paragraph hereof provided
that Formica would be permitted to incur such item of Indebtedness (or such
portion thereof) pursuant to such other clause or the first paragraph hereof,
as the case may be, at such time of reclassification. Accrual of interest,
accretion or amortization of original issue discount will not be deemed to be
an incurrence of Indebtedness for purposes of this covenant.
73
<PAGE>
All Indebtedness under the New Credit Facility and the Foreign Credit
Facilities outstanding on the date on which Notes are first issued and
authenticated under the Indenture shall be deemed to have been incurred on
such date in reliance on the first paragraph of the covenant described under
the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock." As a result, Formica will be permitted to incur significant
additional secured indebtedness under clause (a) of the definition of
"Permitted Indebtedness." See "Risk Factors."
Liens
The Indenture will provide that Formica will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien, other than a Permitted Lien, that secures
obligations under any Pari Passu Indebtedness or subordinated Indebtedness of
Formica on any asset or property now owned or hereafter acquired by Formica or
any of its Restricted Subsidiaries, or any income or profits therefrom or
assign or convey any right to receive income therefrom, unless the Notes are
equally and ratably secured with the obligations so secured until such time as
such obligations are no longer secured by a Lien; provided that, in any case
involving a Lien securing subordinated Indebtedness of Formica, such Lien is
subordinated to the Lien securing the Notes to the same extent that such
subordinated Indebtedness is subordinated to the Notes.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture will provide that Formica will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (a)(1) pay dividends or make any
other distributions to Formica or any of its Restricted Subsidiaries (A) on
its Capital Stock or (B) with respect to any other interest or participation
in, or measured by, its profits, or (2) pay any Indebtedness owed to Formica
or any of its Restricted Subsidiaries, (b) make loans or advances to Formica
or any of its Restricted Subsidiaries or (c) transfer any of its properties or
assets to Formica or any of its Restricted Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the date of the
Indenture;
(b) the New Credit Facility as in effect as of the date of the
Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or
refinancings thereof;
(c) the Indenture and the Notes;
(d) applicable law and any applicable rule, regulation or
order;
(e) any agreement or instrument of a Person acquired by
Formica or any of its Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent created in
contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred;
(f) customary non-assignment provisions in leases entered
into in the ordinary course of business and consistent with past
practices;
(g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (e) above on the property so acquired;
74
<PAGE>
(h) contracts for the sale of assets, including, without
limitation, customary restrictions with respect to a Subsidiary
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary;
(i) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are, in the good faith judgment of
Formica's board of directors, not materially less favorable,
taken as a whole, to the Holders of the Notes than those
contained in the agreements governing the Indebtedness being
refinanced;
(j) secured Indebtedness otherwise permitted to be incurred
pursuant to the covenants described under "--Incurrence of
Indebtedness and Issuance of Preferred Stock" and "--Liens" that
limit the right of the debtor to dispose of the assets securing
such Indebtedness;
(k) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary
course of business;
(l) other Indebtedness or Disqualified Stock of Restricted
Subsidiaries permitted to be incurred subsequent to the Issuance
Date pursuant to the provisions of the covenant described under
"--Incurrence of Indebtedness and Issuance of Preferred Stock";
(m) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
and
(n) restrictions created in connection with any Receivables
Facility that, in the good faith determination of the board of
directors of Formica, are necessary or advisable to effect such
Receivables Facility.
Merger, Consolidation, or Sale of Assets
The Indenture will provide that Formica may not consolidate or merge with
or into (whether or not Formica is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
its properties or assets in one or more related transactions, to another
Person unless:
(a) Formica is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other
than Formica) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia;
(b) the Person formed by or surviving any such consolidation
or merger (if other than Formica) or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been
made assumes all the obligations of Formica under the Registration
Rights Agreement, the Notes and the Indenture pursuant to a
supplemental Indenture in a form reasonably satisfactory to the
Trustee;
(c) immediately after such transaction no Default or Event of
Default exists; and
(d) Formica or the Person formed by or surviving any such
consolidation or merger (if other than Formica), or to which such
sale, assignment, transfer, conveyance or other disposition shall
have been made (1) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock" or
(2) would (together with its Restricted Subsidiaries) have a
higher Fixed Charge Coverage Ratio
75
<PAGE>
immediately after such transaction (after giving pro forma effect
thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period) than the Fixed Charge
Coverage Ratio of Formica and its Restricted Subsidiaries
immediately prior to such transaction. The foregoing clause (d)
will not prohibit (a) a merger between Formica and a Wholly Owned
Subsidiary of Holdings created for the purpose of holding the
Capital Stock of Formica, (b) a merger between Formica and a
Wholly Owned Restricted Subsidiary or (c) a merger between
Formica and an Affiliate incorporated solely for the purpose of
reincorporating Formica in another State of the United States so
long as, in each case, the amount of Indebtedness of Formica and
its Restricted Subsidiaries is not increased thereby. The
Indenture will provide that Formica will not lease all or
substantially all of its assets to any Person.
Transactions with Affiliates
The Indenture will provide that Formica will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate of Formica (each of the foregoing,
an "Affiliate Transaction"), unless:
(a) such Affiliate Transaction is on terms that are no less
favorable to Formica or such Restricted Subsidiary than those
that would have been obtained in a comparable transaction by
Formica or such Restricted Subsidiary with an unrelated Person;
and
(b) Formica delivers to the Trustee, with respect to any
Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $7.5 million,
either (1) a resolution of the board of directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a) above and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the board of directors or (2) an opinion as to the
fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or
investment banking firm of national standing.
Notwithstanding the foregoing, the following items shall not be deemed to
be Affiliate Transactions:
(a) customary directors' fees, indemnification or similar
arrangements or any employment agreement or other compensation
plan or arrangement entered into by Formica or any of its
Restricted Subsidiaries in the ordinary course of business
(including ordinary course loans to employees not to exceed (1)
$5.0 million outstanding in the aggregate at any time and (2)
$2.0 million to any one employee) and consistent with the past
practice of Formica or such Restricted Subsidiary;
(b) transactions between or among Formica and/or its
Restricted Subsidiaries;
(c) payments of customary fees by Formica or any of its
Restricted Subsidiaries to DLJ Merchant Banking and its
Affiliates made for any financial advisory, financing,
underwriting or placement services or in respect of other
investment banking activities, including, without limitation, in
connection with acquisitions or divestitures which are approved
by a majority of the board of directors in good faith;
(d) any agreement as in effect on the date of the Indenture
or any amendment thereto (so long as such amendment is not
disadvantageous to the Holders of the Notes in any material
respect) or any transaction contemplated thereby;
(e) payments and transactions in connection with the
Acquisition and the Acquisition Financing, the New Credit
Facility (including commitment, syndication and arrangement fees
payable thereunder) and the offering (including underwriting
discounts and commissions in connection therewith) and the
application of the proceeds thereof, and the payment of the fees
and expenses with respect thereto;
76
<PAGE>
(f) Restricted Payments that are permitted by the provisions
of the Indenture described under the caption "--Restricted
Payments" and any Permitted Investments;
(g) sales of accounts receivable, or participations therein,
in connection with any Receivables Facility; and
(h) transactions pursuant to the Intercompany Note, and any
amendment or refinancing thereof.
Sale and Leaseback Transactions
The Indenture will provide that Formica will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that Formica or any Restricted Subsidiary may enter into
a sale and leaseback transaction if:
(a) Formica or such Restricted Subsidiary, as the case may
be, could have (1) incurred Indebtedness in an amount equal to
the Attributable Indebtedness relating to such sale and leaseback
transaction pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described under the
caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock" and (2) incurred a Lien to secure such Indebtedness
pursuant to the covenant described under the caption "--Liens,";
(b) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as
determined in good faith by the board of directors and set forth
in an Officers' Certificate delivered to the Trustee) of the
property that is the subject of such sale and leaseback
transaction; and
(c) the transfer of assets in such sale and leaseback
transaction is permitted by, and Formica applies the proceeds of
such transaction in compliance with, the covenant described under
the caption "Repurchase at the Option of Holders--Asset Sales."
No Senior Subordinated Indebtedness
The Indenture will provide that Formica will not Incur any Indebtedness
that is subordinate or junior in right of payment to any Senior Indebtedness
and senior in right of payment to the Notes.
Reports
The Indenture will provide that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, Formica will furnish to the Holders of
Notes:
(a) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission
on Forms 10-Q and 10-K if Formica were required to file such
Forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by Formica's
certified independent accountants (provided that Formica may
deliver financial information with respect to its (direct or
indirect) parent if Formica delivers to the Trustee an Officer's
Certificate certifying that such financial information is
substantially equivalent to the financial information with
respect to Formica); and
(b) all current reports that would be required to be filed
with the Commission on Form 8-K if Formica were required to file
such reports, in each case, within the time periods specified in
the Commission's rules and regulations. In addition, following
the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the
rules and regulations of the Commission,
77
<PAGE>
Formica will file a copy of all such information and reports with
the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such
information available to securities analysts and prospective
investors upon request. In addition, Formica has agreed that,
for so long as any Notes remain outstanding, it will furnish to
the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The Indenture will provide that each of the following constitutes an
Event of Default:
(a) default for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes (whether or
not prohibited by the subordination provisions of the Indenture);
(b) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the
subordination provisions of the Indenture);
(c) failure by Formica or any of its Restricted
Subsidiaries for 30 days after receipt of notice from the Trustee
or Holders of at least 25% in principal amount of the Notes then
outstanding to comply with the provisions described under the
captions "Repurchase at the Option of Holders--Change of
Control," "--Asset Sales," "Certain Covenants--Restricted
Payments," "--Incurrence of Indebtedness and Issuance of
Preferred Stock" or "Merger, Consolidation or Sale of Assets";
(d) failure by Formica for 60 days after notice from the
Trustee or the Holders of at least 25% in principal amount of the
Notes then outstanding to comply with any of its other agreements
in the Indenture or the Notes;
(e) default under any mortgage, Indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by Formica or
any of its Restricted Subsidiaries (or the payment of which is
guaranteed by Formica or any of its Restricted Subsidiaries),
whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (1) is caused by a
failure to pay Indebtedness at its stated final maturity (after
giving effect to any applicable grace period provided in such
Indebtedness) (a "Payment Default") or (2) results in the
acceleration of such Indebtedness prior to its stated final
maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or
the maturity of which has been so accelerated, aggregates $10.0
million or more;
(f) failure by Formica or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of
$10.0 million (net of any amounts with respect to which a
reputable and creditworthy insurance company has acknowledged
liability in writing), which judgments are not paid, discharged
or stayed for a period of 60 days; and
(g) certain events of bankruptcy or insolvency with respect
to Formica or any of its Restricted Subsidiaries that is a
Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately; provided that, so
long as any Indebtedness permitted to be incurred pursuant to the New Credit
Facility shall be outstanding, such acceleration shall not be effective until
the earlier of:
(a) an acceleration of any such Indebtedness under the
New Credit Facility; or
78
<PAGE>
(b) five business days after receipt by Formica and the
administrative agent under the New Credit Facility of written
notice of such acceleration. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to Formica or any
Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in
the Indenture. In the event of a declaration of acceleration of
the Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness
described in clause (e) of the preceding paragraph, the
declaration of acceleration of the Notes shall be automatically
annulled if the Holders of any Indebtedness described in clause
(e) have rescinded the declaration of acceleration in respect of
such Indebtedness within 30 days of the date of such declaration
and if (1) the annulment of the acceleration of the Notes would
not conflict with any judgment or decree of a court of competent
jurisdiction and (2) all existing Events of Default, except non-
payment of principal or interest on the Notes that became due
solely because of the acceleration of the Notes, have been cured
or waived.
Subject to certain limitations, Holders of a majority in principal amount
of the then outstanding Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
Formica is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and Formica is required upon becoming
aware of any Default or Event of Default to deliver to the Trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Member, Directors, Officers, Employees and Stockholders
No member, director, officer, employee, incorporator or stockholder of
Formica, as such, shall have any liability for any obligations of Formica
under the Notes or the Indenture or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of Notes by
accepting a note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws,
and it is the view of the Commission that such a waiver is against public
policy.
Legal Defeasance and Covenant Defeasance
Formica may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes, and the
Indenture ("Legal Defeasance") except for:
(a) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and
interest and Liquidated Damages, if any, on such Notes when such
payments are due from the trust referred to below;
(b) Formica's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of
an office or agency for payment and money for security payments
held in trust;
(c) the rights, powers, trusts, duties and immunities of the
Trustee, and Formica's obligations in connection therewith; and
79
<PAGE>
(d) the Legal Defeasance provisions of the Indenture. In
addition, Formica may, at its option and at any time, elect to
have their obligations released with respect to certain covenants
that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the
Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of
Default and Remedies" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) Formica must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Notes, cash in U.S.
dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case
may be, and Formica must specify whether the Notes are being
defeased to maturity or to a particular redemption date;
(b) in the case of Legal Defeasance, Formica shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (1) Formica
has received from, or there has been published by, the Internal
Revenue Service a ruling or (2) since the date of the Indenture,
there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion
of counsel shall confirm that, subject to customary assumptions
and exclusions, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as
a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance
had not occurred;
(c) in the case of Covenant Defeasance, Formica shall have
delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that,
subject to customary assumptions and exclusions, the Holders of
the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be
applied to such deposit) or, insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 123rd day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default
under, any material agreement or instrument (other than the
Indenture) to which Formica or any of its Subsidiaries is a party
or by which Formica or any of its Subsidiaries is bound;
(f) Formica must have delivered to the Trustee an opinion
of counsel to the effect that, subject to customary assumptions
and exclusions, after the 123rd day following the deposit, the
trust funds will not be subject to the effect of Section 547 of
the United States Bankruptcy Code or any analogous New York State
law provision or any other applicable federal or New York
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) Formica must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by Formica with
the intent of preferring the Holders of Notes over the other
creditors of Formica with the intent of defeating, hindering,
delaying or defrauding creditors of Formica or others; and
80
<PAGE>
(h) Formica must deliver to the Trustee an Officers'
Certificate and an opinion of counsel (which opinion may be
subject to customary assumptions and exclusions), each stating
that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and Formica may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. Formica are not required to transfer or exchange any note selected
for redemption. Also, Formica is not required to transfer or exchange any note
for a period of 15 days before a selection of Notes to be redeemed. The
registered Holder of a note will be treated as the owner of it for all
purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture,
and the Notes may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Notes), and any existing
default or compliance with any provision of the Indenture, or the Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including, without limitation, consents obtained
in connection with a purchase of, or tender offer or exchange offer for,
Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
note or alter the provisions with respect to the redemption of the
Notes (other than the provisions described under the caption "--
Repurchase at the Option of Holders");
(c) reduce the rate of or extend the time for payment of
interest on any note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest or Liquidated
Damages, if any, on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any note payable in money other than that stated
in the Notes;
(f) make any change in the provisions of the Indenture
relating to waivers of past Defaults;
(g) waive a redemption payment with respect to any note (other
than the provisions described under the caption "--Repurchase at the
Option of Holders"); or
(h) make any change in the foregoing amendment and waiver
provisions. Notwithstanding the foregoing, any (1) amendment to or
waiver of the covenant described under the caption "--Repurchase at
the Option of Holders--Change of Control," and (2) amendment to
Article 10 of the Indenture (which relates to subordination) will
require the consent of the Holders of at least two-thirds in
aggregate principal amount
81
<PAGE>
of the Notes then outstanding if such amendment would materially
adversely affect the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, Formica and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of Formica's obligations to Holders of Notes in the
case of a merger or consolidation or sale of all or substantially all of
Formica's assets, to make any change that would provide any additional rights
or benefits to the Holders of Notes or that does not materially adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or to provide for
guarantees of the Notes.
Governing Law
The Indenture and the Notes are governed by, and constructed in
accordance with, the laws of the State of New York, without regard to its
conflict of law principles.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of any Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign. Summit Bank purchased Notes in the offering.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Mr. Langone, the Chief Executive Officer of Formica, is a member of the
board of directors of the Trustee.
Book-Entry, Delivery and Form
The certificates representing the New Notes will be issued in fully
registered form, without coupons. Except as described below, the New Notes
will be deposited with, or on behalf of, The Depository Trust Company, New
York, New York, and registered in the name of Cede & Co. as DTC's nominee, in
the form of a global note (the "global registered note").
The Global Registered Note. Formica expects that pursuant to procedures
established by DTC (a) upon deposit of the global registered note, DTC or its
custodian will credit on its internal system interests in the global
registered Notes to the accounts of persons who have accounts with DTC
("Participants") and (b) ownership of the global registered note will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
Participants) and the records of Participants (with respect to interests of
persons other than Participants). Ownership of beneficial interests in the
global registered note will be limited to Participants or persons who hold
interests through Participants.
So long as DTC or its nominee is the registered owner or Holder of the
New Notes, DTC or such nominee will be considered the sole owner or Holder of
the New Notes represented by the global registered note for all purposes
82
<PAGE>
under the Indenture. No beneficial owner of an interest in the global
registered note will be able to transfer such interest except in accordance
with DTC's procedures, in addition to those provided for under the Indenture
with respect to the New Notes.
Payments of the principal of or premium and interest on the global
registered note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of Formica, the Trustee or any paying agent
under the Indenture will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in the global registered note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment of the
principal of or premium and interest on the global registered note, will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global
registered note as shown on the records of DTC or its nominee. We also expect
that payments by Participants to owners of beneficial interests in the global
registered note held through such Participants will be governed by standing
instructions and customary practice as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a Holder
requires physical delivery of a certificated exchange note for any reason,
including to sell New Notes to persons in states which require physical
delivery of the New Notes or to pledge such securities, such Holder must
transfer its interest in the global registered note in accordance with the
normal procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised us that DTC will take any action permitted to be taken by
a Holder of New Notes (including the presentation of New Notes for exchange as
described below) only at the direction of one or more Participants to whose
account at DTC interests in the global registered note are credited and only
in respect of such portion of the aggregate principal amount of New Notes as
to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Indenture, DTC will
exchange the global registered note for certificated New Notes, which it will
distribute to its Participants.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
Participants and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interest in the global registered Notes among
Participants, it is under no obligation to perform such procedures, and such
procedures may be discontinued at any time. Neither Formica nor the Trustee
will have any responsibility for the performance by DTC or its Participants or
Indirect Participants of their respective obligations under the rules and
procedures governing their operations.
Certificated Notes. Interests in the global registered Notes will be
exchangeable or transferable, as the case may be, for certificated notes if
83
<PAGE>
(1) DTC (a) notifies us that it is unwilling or unable to
continue as depositary for the global registered Notes and we fail to
appoint a successor depositary or (b) has ceased to be a clearing
agency registered under the Exchange Act,
(2) Formica, at its option, notifies the Trustee in writing that
it elects to cause the issuance of the Notes in certificated form or
(3) there shall have occurred and be continuing to occur a
Default or an Event of Default with respect to the Notes.
In addition, beneficial interests in the Notes may be exchanged for
certificated notes upon request but only upon at least 20 days' prior written
notice given to the Trustee by or on behalf of DTC in accordance with
customary procedures. In all cases, certificated Notes delivered in exchange
for any global Notes or beneficial interest therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the depositary (in accordance with its customary procedures).
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Accounts Receivable Subsidiary" means an Unrestricted Subsidiary of
Formica to which Formica or any of its Restricted Subsidiaries sells any of
its accounts receivable pursuant to a Receivables Facility.
"Acquired Indebtedness" means, with respect to any specified Person:
(a) Indebtedness of any other Person existing at the time such
other Person is merged with or into or became a Subsidiary of such
specified Person, including, without limitation, Indebtedness
incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such
specified Person; and
(b) Indebtedness secured by a Lien encumbering an asset
acquired by such specified Person at the time such asset is acquired
by such specified Person.
"Acquisition" means the acquisition of Holdings and certain affiliates of
Holdings by Laminates for consideration of $405.4 million (plus or minus any
subsequent purchase price adjustment), the merger of LMS I, a subsidiary of
Laminates, into Holdings, the merger of LMS II, a subsidiary of LMS I, into
Formica, the merger of LMS III, a subsidiary of LMS II, into Formica
International and the contribution by Laminates to Formica of the stock of
such affiliates of Holdings.
"Acquisition Financing" means:
(a) the issuance and sale by Formica (or its predecessor, LMS
II) of senior subordinated increasing rate Notes;
(b) the execution and delivery by Formica (or its predecessor)
and certain of its subsidiaries of the New Credit Facility and the
borrowing of loans thereunder;
(c) the issuance and sale by Laminates of common stock and
preferred stock for consideration;
84
<PAGE>
(d) the issuance and sale by LMS I of its preferred stock and
warrants to purchase Laminates common stock, the proceeds of each of
which were used to fund the purchase price for the Acquisition and
related fees and expenses; and
(e) the issuance and sale by Formica of the Notes and
repayment of all amounts owed in connection with the senior
subordinated increasing rate Notes.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" means;
(a) the sale, lease, conveyance, disposition or other transfer
(a "disposition") of any properties, assets or rights (including,
without limitation, by way of a sale and leaseback) (provided that
the sale, lease, conveyance or other disposition of all or
substantially all of the assets of Formica and its Subsidiaries taken
as a whole will be governed by the provisions of the Indenture
described under the caption "--Change of Control" and/or the
provisions described under the caption "--Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale
covenant); and
(b) the issuance, sale or transfer by Formica or any of its
Restricted Subsidiaries of Equity Interests of any of Formica's
Restricted Subsidiaries, in the case of either clause (a) or (b),
whether in a single transaction or a series of related transactions
(1) that have a fair market value in excess of $5.0 million or
(2) for net proceeds in excess of $5.0 million. Notwithstanding
the foregoing, the following items shall not be deemed to be
Asset Sales:
o dispositions in the ordinary course of business;
o a disposition of assets by Formica to a Restricted
Subsidiary or by a Restricted Subsidiary to Formica or
to another Restricted Subsidiary;
o a disposition of Equity Interests by a Restricted
Subsidiary to Formica or to another Restricted Subsidiary;
o the sale and leaseback of any assets within 90 days of
the acquisition thereof;
o foreclosures on assets;
o any exchange of like property pursuant to Section 1031 of
the Internal Revenue Code of 1986, as amended, for use in
a Permitted Business;
o any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary;
o a Permitted Investment or a Restricted Payment that is
permitted by the covenant described under the caption
"--Restricted Payments"; and
o sales of accounts receivable, or participations therein,
in connection with any Receivables Facility.
85
<PAGE>
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Capital Expenditure Indebtedness" means Indebtedness incurred by any
Person to finance the purchase or construction or any property or assets
acquired or constructed by such Person which have a useful life or more than
one year so long as:
(a) the purchase or construction price for such property or
assets is included in "addition to property, plant or equipment" in
accordance with GAAP;
(b) the acquisition or construction of such property or assets
is not part of any acquisition of a Person or line of business; and
(c) such Indebtedness is incurred within 90 days of the
acquisition or completion of construction of such property or
assets.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(a) in the case of a corporation, corporate stock;
(b) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(c) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or
limited); and
(d) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(a) Government Securities;
(b) any certificate of deposit maturing not more than 365 days
after the date of acquisition issued by, or demand deposit or time
deposit of, an Eligible Institution or any lender under the New
Credit Facility;
(c) commercial paper maturing not more than 365 days after the
date of acquisition of an issuer (other than an Affiliate of
Formica) with a rating, at the time as of which any investment
therein is made, of "A-3" (or higher) according to S&P or "P-2"
(or higher) according to Moody's or carrying an equivalent rating
by a nationally recognized rating agency if both of the two named
rating agencies cease publishing ratings of investments;
(d) any bankers acceptances of money market deposit accounts
issued by an Eligible Institution; and
86
<PAGE>
(e) any fund investing exclusively in investments of the types
described in clauses (a) through (d) above; and
(f) in the case of any Subsidiary organized or having its
principal place of business outside the United States,
investments denominated in the currency of the jurisdiction in
which such Subsidiary is organized or has its principal place of
business which are similar to the items specified in clauses (a)
through (e) above (including without limitation any deposit with
a bank that is a lender to any Restricted Subsidiary).
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period plus, to the extent deducted in computing
Consolidated Net Income:
(a) an amount equal to any extraordinary or non-recurring loss
plus any net loss realized in connection with an Asset Sale;
(b) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period;
(c) Fixed Charges of such Person for such period;
(d) depreciation, amortization (including amortization of
goodwill and other intangibles) and all other non-cash charges
(excluding any such non-cash charge, other than the 1998 Charges, to
the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period;
(e) net periodic post-retirement benefits;
(f) other income or expense net as set forth on the face of
such Person's statement of operations;
(g) expenses and charges of Formica related to the Acquisition
and Acquisition Financing, the New Credit Facility and the
application of the proceeds thereof which are paid, taken or
otherwise accounted for within 180 days of the consummation of
the Acquisition and the Acquisition Financing; and
(h) any non-capitalized transaction costs incurred in
connection with actual, proposed or abandoned financings,
acquisitions or divestitures (including, but not limited to,
financing and refinancing fees and costs incurred in connection
with the Acquisition and Acquisition Financing), in each case, on
a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, the Fixed Charges of, and the
depreciation and amortization and other non-cash charges of, a
Restricted Subsidiary of a Person shall be added to Consolidated
Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net
Income of such Person.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:
(a) the interest expense of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP (including amortization of original issue
discount, non-cash interest payments, the interest component of all
payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments, if any, pursuant to Hedging
Obligations; provided that in no event shall any amortization of
deferred financing costs be included in Consolidated Interest
Expense); and
87
<PAGE>
(b) the consolidated capitalized interest of such Person
and its Restricted Subsidiaries for such period, whether paid or
accrued; provided, however, that Receivables Fees shall be deemed
not to constitute Consolidated Interest Expense. Notwithstanding
the foregoing, the Consolidated Interest Expense with respect to
any Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary shall be included only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was
included in calculating Consolidated Net Income.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:
(a) the Net Income (or loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent
Person or a Restricted Subsidiary thereof;
(b) the Net Income (or loss) of any Restricted Subsidiary
other than a Subsidiary organized or having its principal place
of business outside the United States shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income
(or loss) is not at the date of determination permitted without
any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted
Subsidiary;
(c) the Net Income (or loss) of any Person acquired in a
pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded; and
(d) the cumulative effect of a change in accounting
principles shall be excluded.
"CVC" means CVC European Equity Partners, L.P. and CVC European Equity
Partners (Jersey) L.P., and their respective Affiliates.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Designated Noncash Consideration" means the fair market value of
non-cash consideration received by Formica or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, executed by the principal executive officer
and the principal financial officer of Formica, less the amount of cash or
Cash Equivalents received in connection with a sale of such Designated Noncash
Consideration.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable), or upon the happening of any event (other than any event solely
within the control of Formica thereof), matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, is exchangeable for
Indebtedness (except to the extent exchangeable at the option of such Person
subject to the terms of any debt instrument to which such Person is a party)
or redeemable at the option of the Holder thereof, in whole or in part, on or
prior to the date on which the Notes mature; provided that any Capital Stock
that would constitute Disqualified Stock solely because the Holders thereof
have the right to require Formica to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that Formica may
not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the covenant described
under the caption "--Certain Covenants--Restricted Payments," and provided
further that, if such Capital Stock is issued to any plan for the benefit of
employees of Formica or its Subsidiaries or by any such plan to such
employees, such Capital Stock shall
88
<PAGE>
not constitute Disqualified Stock solely because it may be required to be
repurchased by Formica in order to satisfy applicable statutory or regulatory
obligations.
"DLJ Merchant Banking" means DLJ Merchant Banking Partners II, L.P. and
its Affiliates.
"Domestic Subsidiary" means a Subsidiary that is organized under the laws
of the United States or any State, district or territory thereof.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus not less than $100.0 million or its equivalent in
foreign currency, whose short-term debt is rated "A-3" or higher according to
Standard & Poor's Ratings Group ("S&P") or "P-2" or higher according to
Moody's Investor Services, Inc. ("Moody's") or carrying an equivalent rating
by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of Formica and its Restricted
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of:
(a) the Consolidated Interest Expense of such Person for such
period; and
(b) all dividend payments on any series of preferred stock
of such Person (other than dividends payable solely in Equity
Interests that are not Disqualified Stock), in each case, on a
consolidated basis and in accordance with GAAP. "Fixed Charge
Coverage Ratio" means, with respect to any Person for any period,
the ratio of the Consolidated Cash Flow of such Person for such
period (exclusive of amounts attributable to discontinued
operations, as determined in accordance with GAAP, or operations
and businesses disposed of prior to the Calculation Date (as
defined)) to the Fixed Charges of such Person for such period
(exclusive of amounts attributable to discontinued operations, as
determined in accordance with GAAP, or operations and businesses
disposed of prior to the Calculation Date). In the event that
the referrent Person or any of its Subsidiaries incurs, assumes,
guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date
on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of
Indebtedness, or such issuance or redemption of preferred stock
and the use of the proceeds therefrom, as if the same had
occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the
computation referred to above, the Acquisition and acquisitions
that have been made by Formica or any of its Subsidiaries,
including all mergers or consolidations and any related financing
transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first
day of the four-quarter reference period and Consolidated Cash
Flow for such reference period shall be calculated to include the
Consolidated Cash Flow of the acquired entities on a pro forma
basis after giving effect to cost savings reasonably expected to
be realized in connection with such acquisition, as determined in
good faith by an officer of Formica (regardless of whether such
cost savings could then be reflected in pro forma financial
statements under GAAP, Regulation S-X promulgated by the
Commission or any other regulation or policy of the Commission)
and without giving effect to clause (c) of the proviso set forth
in the definition of Consolidated Net Income.
89
<PAGE>
"Foreign Credit Facilities" means any Indebtedness of a Restricted
Subsidiary organized or having its principal place of business outside the
United States. Indebtedness under the Foreign Credit Facilities outstanding on
the date on which the Notes are first issued and authenticated under the
Indenture shall be deemed to have been incurred on such date in reliance on
the first paragraph of the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit or
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under:
(a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements; and
(b) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates.
"Holdings" means FM Holdings, Inc., a Delaware corporation, the corporate
parent of Formica, or its successors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person in respect of borrowed money or evidenced by bonds, Notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing Indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any Indebtedness of any other
Person, provided that Indebtedness shall not include the pledge by Formica of
the Capital Stock of an Unrestricted Subsidiary of Formica to secure
Non-Recourse Debt of such Unrestricted Subsidiary. The amount of any
Indebtedness outstanding as of any date shall be:
(a) the accreted value thereof (together with any interest
thereon that is more than 30 days past due), in the case of any
Indebtedness that does not require current payments of interest; and
(b) the principal amount thereof, in the case of any other
Indebtedness provided that the principal amount of any Indebtedness
that is denominated in any currency other than United States dollars
shall be the amount thereof, as determined pursuant to the foregoing
provision, converted into United States dollars at the Spot Rate in
effect on the date that such Indebtedness was incurred (or, if such
indebtedness was incurred prior to the date of the Indenture, the
Spot Rate in effect on the date of the Indenture).
"Intercompany Note" means the note (and all obligations, including
interest, with respect thereto) issued by Holdings to Formica on the date of
the consummation of the Acquisition to evidence the loan by Formica to
Holdings of certain proceeds of the offering of bridge Notes and borrowings
under the New Credit Facility, which proceeds partially funded the merger
consideration and costs and expenses in connection therewith.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees by the referent Person of, and Liens on
90
<PAGE>
assets of the referent Person securing, Indebtedness or other obligations of
other Persons), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP, provided that an investment by Formica for consideration
consisting of common equity securities of Formica shall not be deemed to be an
Investment. If Formica or any Restricted Subsidiary of Formica sells or
otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of Formica such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of Formica, Formica
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described under the caption
"--Restricted Payments."
"Laminates" means Laminates Acquisition Co., a Delaware corporation, the
corporate parent of Holdings, or its successors.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Management Loans" means one or more loans by Formica, Laminates or
Holdings to officers and/or directors of Formica and any of its Restricted
Subsidiaries to finance the purchase by such officers and directors of common
stock of Holdings or Laminates; provided, however, that the aggregate
principal amount of all such Management Loans outstanding at any time shall
not exceed $5.0 million.
"MMI" means MMI Products, L.L.C. and its Affiliates.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(a) any gain (or loss), together with any related provision for
taxes on such gain (or loss), realized in connection with (1) any
Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (2) the extinguishment of any
Indebtedness of such Person or any of its Restricted
Subsidiaries; and
(b) any extraordinary or nonrecurring gain (or loss), together
with any related provision for taxes on such extraordinary or
nonrecurring gain (or loss). "Net Proceeds" means the aggregate cash
proceeds received by Formica or any of its Restricted Subsidiaries
in respect of any Asset Sale (including, without limitation, any
cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of, without
duplication, (1) the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment
banking fees, and sales commissions, recording fees, title transfer
fees and appraiser fees and cost of preparation of assets for sale)
and any relocation expenses incurred as a result thereof, (2) taxes
paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements),
(3) amounts required to be applied to the repayment of Indebtedness
(other than revolving credit Indebtedness incurred pursuant to the New
Credit Facility) secured by a Lien on the asset or assets that were
the subject of such Asset Sale and (4) any reserve established in
accordance with GAAP or any amount placed in escrow, in either case
for adjustment in respect of the sale price of such asset or assets
until such time as such reserve is reversed or such escrow arrangement
is terminated, in which case Net Proceeds shall include only the
amount of the reserve so reversed or the amount returned to Formica or
its Restricted Subsidiaries from such escrow arrangement, as the case
may be.
91
<PAGE>
"New Credit Facility" means that certain Credit Agreement, dated as of
May 1, 1998 among Formica (formerly LMS II, Co.), certain of its foreign
subsidiaries, various financial institutions party thereto, DLJ Capital
Funding, Inc., as syndication agent, Bankers Trust Company as administrative
agent and Credit Suisse First Boston, as documentation agent, including any
related Notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and, in each case, as amended, modified,
renewed, refunded, replaced or refinanced from time to time, including any
agreement:
(a) extending or shortening the maturity of any Indebtedness
incurred thereunder or contemplated thereby;
(b) adding or deleting borrowers or guarantors thereunder;
(c) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder, provided that
on the date such Indebtedness is incurred it would not be
prohibited by clause (i) of "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; or
(d) otherwise altering the terms and conditions thereof.
Indebtedness under the New Credit Facility outstanding on the
date on which Notes are first issued and authenticated under the
Indenture shall be deemed to have been incurred on such date in
reliance on the first paragraph of the covenant described under
the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock."
"1998 Charges" means the $16.5 million of charges resulting from changes
in accounting estimates and the cost of terminated acquisition in the four
months ended April 30, 1998 and the eight months ended December 31, 1998.
"Non-Recourse Debt" means Indebtedness:
(a) no default with respect to, which (including any rights
that the Holders thereof may have to take enforcement action
against an Unrestricted Subsidiary) would permit (upon notice,
lapse of time or both) any Holder of any other Indebtedness of
Formica or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof
to be accelerated or payable prior to its stated maturity; and
(b) as to which the lenders have been notified in writing
that they will not have any recourse to the stock (other than the
stock of an Unrestricted Subsidiary pledged by Formica to secure
debt of such Unrestricted Subsidiary) or assets of Formica or any
of its Restricted Subsidiaries; provided that in no event shall
Indebtedness of any Unrestricted Subsidiary fail to be Non-
Recourse Debt solely as a result of any default provisions
contained in a guarantee thereof by Formica or any of its
Restricted Subsidiaries if Formica or such Restricted Subsidiary
was otherwise permitted to incur such guarantee pursuant to the
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by Formica.
"Pari Passu Indebtedness" means Indebtedness of Formica that ranks pari
passu in right of payment to the Notes.
"Permitted Business" means the building products and furnishings industry
and any business in which Formica and its Restricted Subsidiaries are engaged
on the date of the Indenture or any business reasonably related, incidental or
ancillary thereto.
"Permitted Investments" means:
(a) any Investment in Formica or in a Restricted Subsidiary of
Formica;
92
<PAGE>
(b) any Investment in cash or Cash Equivalents;
(c) any Investment by Formica or any Restricted Subsidiary of
Formica in a Person, if as a result of such Investment (1) such
Person becomes a Restricted Subsidiary of Formica or (2) such
Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, Formica or a Wholly Owned Restricted Subsidiary
of Formica;
(d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described under the caption "--
Repurchase at the Option of Holders--Asset Sales,";
(e) any Investment acquired solely in exchange for Equity
Interests (other than Disqualified Stock) of Formica;
(f) any Investment in a Person engaged in a Permitted Business
(other than an Investment in an Unrestricted Subsidiary) having an
aggregate fair market value, taken together with all other
Investments made pursuant to this clause (f) that are at that
time outstanding, not to exceed 15% of Total Assets at the time
of such Investment (with the fair market value of each Investment
being measured at the time made and without giving effect to
subsequent changes in value);
(g) Investments relating to any special purpose Wholly Owned
Subsidiary of Formica organized in connection with a Receivables
Facility that, in the good faith determination of the board of
directors of Formica, are necessary or advisable to effect such
Receivables Facility; and
(h) the Management Loans.
"Permitted Liens" means:
(a) Liens on property of a Person existing at the time such
Person is merged into or consolidated with Formica or any Restricted
Subsidiary, provided that such Liens were not incurred in
contemplation of such merger or consolidation and do not secure any
property or assets of Formica or any Restricted Subsidiary other
than the property or assets subject to the Liens prior to such
merger or consolidation;
(b) Liens existing on the date of the Indenture;
(c) Liens securing Indebtedness consisting of Capitalized
Lease Obligations, purchase money Indebtedness, mortgage
financings, industrial revenue bonds or other monetary
obligations, in each case incurred solely for the purpose of
financing all or any part of the purchase price or cost of
construction or installation of assets used in the business of
Formica or its Restricted Subsidiaries, or repairs, additions or
improvements to such assets, provided that (1) such Liens secure
Indebtedness in an amount not in excess of the original purchase
price or the original cost of any such assets or repair,
additional or improvement thereto (plus an amount equal to the
reasonable fees and expenses in connection with the incurrence of
such Indebtedness), (2) such Liens do not extend to any other
assets of Formica or its Restricted Subsidiaries (and, in the
case of repair, addition or improvements to any such assets, such
Lien extends only to the assets (and improvements thereto or
thereon) repaired, added to or improved), (3) the Incurrence of
such Indebtedness is permitted by "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock" and
(4) such Liens attach within 365 days of such purchase,
construction, installation, repair, addition or improvement;
(d) Liens to secure any refinancings, renewals, extensions,
modification or replacements (collectively, "refinancing") (or
successive refinancings), in whole or in part, of any Indebtedness
secured by Liens referred
93
<PAGE>
to in the clauses above so long as such Lien does not extend to any
other property (other than improvements thereto);
(e) Liens securing letters of credit entered into in the
ordinary course of business and consistent with past business
practice;
(f) Liens on and pledges of the capital stock of any
Unrestricted Subsidiary securing Non-Recourse Debt of such
Unrestricted Subsidiary;
(g) Liens securing Indebtedness (including all Obligations)
under the New Credit Facility or any Foreign Credit Facility; and
(h) other Liens securing Indebtedness that is permitted by the
terms of the Indenture to be outstanding having an aggregate
principal amount at any one time outstanding not to exceed $75.0
million.
"Permitted Refinancing Indebtedness" means any Indebtedness of Formica or
any of its Restricted Subsidiaries issued within 60 days after repayment of,
in exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund other Indebtedness of Formica or any of its
Restricted Subsidiaries; provided that:
(a) the principal amount (or accreted value, if applicable)
of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus
premium, if any, and accrued interest on the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection
therewith);
(b) such Permitted Refinancing Indebtedness has a final
maturity date no earlier than the final maturity date of, and has
a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
and
(c) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right
of payment to the Notes, such Permitted Refinancing Indebtedness
is subordinated in right of payment to, the Notes on terms at
least as favorable, taken as a whole, to the Holders of Notes as
those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded.
"Principals" means DLJ Merchant Banking, CVC and MMI.
"Public Equity Offering" means any issuance of common stock by Formica
(other than to Holdings and other than Disqualified Stock) or common stock or
preferred stock by Holdings or Laminates (other than Disqualified Stock) that
is registered pursuant to the Securities Act, other than issuances registered
on Form S-8 and issuances registered on Form S-4, excluding issuances of
common stock pursuant to employee benefit plans of Laminates, Holdings or
Formica or otherwise as compensation to employees of Formica, Laminates or
Holdings.
"Qualified Proceeds" means any of the following or any combination of the
following:
(a) cash;
(b) Cash Equivalents;
(c) assets that are used or useful in a Permitted Business;
and
(d) the Capital Stock of any Person engaged in a Permitted
Business if, in connection with the receipt by Formica or any
Restricted Subsidiary of Formica of such Capital Stock, (A) such
Person becomes a
94
<PAGE>
Restricted Subsidiary of Formica or any Restricted Subsidiary of
Formica or (B) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, Formica or any Restricted
Subsidiary of Formica.
"Receivables Facility" means one or more receivables financing
facilities, as amended from time to time, pursuant to which Formica or any of
its Restricted Subsidiaries sells its accounts receivable to an Accounts
Receivable Subsidiary.
"Receivables Fees" means distributions or payments made directly or by
means of discounts with respect to any participation interests issued or sold
in connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"Related Party" means, with respect to any Principal:
(a) any controlling stockholder or partner of such
Principal on the date of the Indenture; or
(b) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons
beneficially holding (directly or through one or more
Subsidiaries) a 51% or more controlling interest of which consist
of the Principals and/or such other Persons referred to in the
immediately preceding clauses (a) or (b).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Spot Rate" means, for any currency, the spot rate at which such currency
is offered for sale against United States dollars as determined by reference
to the New York foreign exchange selling rates, as published in The Wall
Street Journal on such date of determination for the immediately preceding
business day or, if such rate is not available, as determined in any publicly
available source of similar market data.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(a) any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or Trustees
thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(b) any partnership or limited liability company (1) the sole
general partner or the managing general partner or managing
member of which is such Person or a Subsidiary of such Person or
(2) the only general partners or managing members of which are
such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
95
<PAGE>
"Tax Sharing Agreement" means any tax sharing agreement or arrangement
between Formica and Laminates and/or Holdings, as the same may be amended from
time to time; provided that in no event shall the amount permitted to be paid
pursuant to all such agreements and/or arrangements exceed the amount Formica
would be required to pay for income taxes were it to file a consolidated tax
return for itself and its consolidated Restricted Subsidiaries as if it were a
corporation that was a parent of a consolidated group.
"Total Assets" means the total consolidated assets of Formica and its
Restricted Subsidiaries, as shown on the most recent balance sheet (excluding
the footnotes thereto) of Formica.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
board of directors as an Unrestricted Subsidiary pursuant to a board
resolution, but only to the extent that such Subsidiary:
(a) has no Indebtedness other than Non-Recourse Debt;
(b) is not party to any agreement, contract, arrangement or
understanding with Formica or any Restricted Subsidiary of Formica
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Formica or such Restricted
Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of Formica;
(c) is a Person with respect to which neither Formica nor
any of its Restricted Subsidiaries has any direct or indirect
obligation (1) to subscribe for additional Equity Interests
(other than Investments described in clause (g) of the definition
of Permitted Investments) or (2) to maintain or preserve such
Person's financial condition or to cause such Person to achieve
any specified levels, of operating results; and
(d) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of Formica or any of
its Restricted Subsidiaries. Any such designation by the board
of directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the board resolution giving effect to
such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions and was
permitted by the covenant described under the caption entitled
"--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing
requirements as a Unrestricted Subsidiary, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed
to be incurred by a Restricted Subsidiary of Formica as of such
date (and, if such Indebtedness is not permitted to be incurred
as of such date under the covenant described under the caption
entitled "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," Formica shall be in default of such
covenant). The board of directors of Formica may at any time
designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of
Formica of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1)
such Indebtedness is permitted under the covenant described under
the caption entitled "--Certain Covenants--Incurrence of
Indebtedness and Issuance Preferred of Stock" and (2) no Default
or Event of Default would be in existence following such
designation.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(a) the sum of the products obtained by multiplying (1) the
amount of each then remaining installment, sinking fund, serial
maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (2) the number
of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by
(b) the then outstanding principal amount of such
Indebtedness.
96
<PAGE>
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares) shall at the time
be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries
of such Person or by such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
97
<PAGE>
discrepancies
THE EXCHANGE OFFER
Pursuant to a registration rights agreement between Formica and the
Initial Purchasers, we agreed
(1) to file a registration statement on or prior to 90 days after the
closing of the offering of the old notes with respect to an offer to
exchange the old notes for a new issue of debt securities of Formica
registered under the Securities Act, with terms substantially identical
to those of the old notes and
(2) to use our reasonable best efforts to cause the registration
statement to be declared effective by the SEC on or prior to 180 days
after the closing. In certain circumstances, we will be required to
provide a shelf registration statement to cover resales of the old notes
by the holders thereof.
The registration rights agreement provides that, in the event we fail to
satisfy our registration obligations under the registration rights agreement,
we will be required to pay Liquidated Damages to the holders of the old notes
under certain circumstances. Upon consummation of the exchange offer or the
effectiveness of such shelf registration statement, the provision for
Liquidated Damages on the old notes shall cease.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance thereof would not be in compliance with the securities
or blue sky laws of such jurisdiction.
Terms of the Exchange Offer; Period for Tendering Old Notes
This prospectus and the accompanying letter of transmittal contain the
terms and conditions of the exchange offer. Upon the terms and subject to the
conditions included in this prospectus and in the accompanying letter of
transmittal (which together constitute the exchange offer), we will accept for
exchange old notes which are properly tendered on or prior to the expiration
date, unless you have withdrawn them as permitted below.
o when you tender to us old notes as provided below, our acceptance of
the old notes will constitute a binding agreement between you and us
upon the terms and subject to the conditions in this prospectus and
in the accompanying letter of transmittal.
o for each $1,000 principal amount of old notes surrendered to us
pursuant to the exchange offer, we will give the you $1,000
principal amount of new notes.
o we will keep the exchange offer open for not less than 30 days (or
longer if required by applicable law) after the date that we first
mail notice of the exchange offer is mailed to the holders of the
old notes. We are sending this prospectus, together with the letter
of transmittal, on or about the date of this prospectus to all of
the registered holders of old notes at their addresses listed in the
trustee's security register with respect to old notes.
o the exchange offer expires at 5:00 p.m., New York City time, on ,
1999; provided, however, that if we, in our sole discretion, may
extend the period of time for which the exchange offer is open. The
term "expiration date" means , 1999 or, if extended by us, the
latest time and date to which the exchange offer is extended.
o as of the date of this prospectus, $215,000,000 in aggregate
principal amount of the old notes were outstanding. The exchange
offer is not conditioned upon any minimum principal amount of old
notes being tendered.
o our obligation to accept old notes for exchange pursuant to the
exchange offer is subject to certain conditions that we describe in
the section called "Certain Conditions to the Exchange Offer" below.
98
<PAGE>
o we expressly reserve the right, at any time, to extend the period of
time during which the exchange offer is open, and thereby delay
acceptance of any old notes, by giving oral or written notice of
such extension to the exchange agent and notice of such extension to
the holders as described below. During any such extension, all old
notes previously tendered will remain subject to the exchange offer
and may be accepted for exchange by us. Any old notes not accepted
for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the
expiration or termination of the exchange offer.
o we expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any old notes that we have not
yet accepted for exchange, upon the occurrence of any of the
conditions of the exchange offer specified below under "Certain
Conditions to the Exchange Offer."
o we will give oral or written notice of any extension, amendment,
termination or non-acceptance described above to holders of the old
notes as promptly as practicable. If we extend the expiration date,
we will give notice by means of a press release or other public
announcement no later than 9:00 a.m., New York City Time, on the
business day after the previously scheduled expiration date. Without
limiting the manner in which we may choose to make any public
announcement and subject to applicable law, we will have no
obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a release to the Dow Jones
News Service.
o holders of old notes do not have any appraisal or dissenters' rights
in connection with the exchange offer.
o old notes which are not tendered for exchange or are tendered but not
accepted in connection with the exchange offer will remain
outstanding and be entitled to the benefits of the indenture, but
will not be entitled to any further registration rights under the
registration rights agreement.
o we intend to conduct the exchange offer in accordance with the
applicable requirements of the Exchange Act and the rules and
regulations of the SEC thereunder.
o by executing, or otherwise becoming bound by, the letter of
transmittal, you will be making certain representations to us. See
"--Resales of the New Notes."
Important rules concerning the exchange offer
You should note that:
o all questions as to the validity, form, eligibility (including time
of receipt) and acceptance of old notes tendered for exchange will
be determined by Formica in its sole discretion, which determination
shall be final and binding.
o we reserve the absolute right to reject any and all tenders of any
particular old notes not properly tendered or to not accept any
particular old notes which acceptance might, in our judgment or the
judgment of our counsel, be unlawful.
o we also reserve the absolute right to waive any defects or
irregularities or conditions of the exchange offer as to any
particular old notes either before or after the expiration date
(including the right to waive the ineligibility of any holder who
seeks to tender old notes in the exchange offer). Unless we agree to
waive any defect or irregularity in connection with the tender of
old notes for exchange, such waiver must be cured within such
reasonable period of time as we shall determine.
o our interpretation of the terms and conditions of the exchange offer
as to any particular old notes either before or after the expiration
date (including the letter of transmittal and the instructions
thereto) shall be final and binding on all parties.
99
<PAGE>
o Neither Formica, the exchange agent nor any other person shall be
under any duty to give notification of any defect or irregularity
with respect to any tender of old notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
Procedures for Tendering Old Notes
What to submit and how
If you, as the registered holder of an old note, wish to tender your old
notes for exchange pursuant to the exchange offer, you must transmit a
properly completed and duly executed letter of transmittal, including all
other documents required by such letter of transmittal, to Summit Bank at the
address set forth below under "Exchange Agent" on or prior to the expiration
date.
In addition,
(1) certificates for such old notes must be received by the exchange
agent along with the letter of transmittal, or
(2) a timely confirmation of a book-entry transfer (what we call a
"book-entry confirmation") of such old notes, if such procedure is
available, into the exchange agent's account at DTC pursuant to the
procedure for book-entry transfer described below, must be received by the
exchange agent prior to the expiration date or
(3) you must comply with the guaranteed delivery procedures described
below.
The method of delivery of old notes, letters of transmittal and all other
required documents is at the your election and risk. If such delivery is by
mail, we recommend that registered mail, properly insured, with return receipt
requested, be used. In all cases, sufficient time should be allowed to assure
timely delivery. No letters of transmittal or old notes should be sent to
Formica.
How to sign your letter of transmittal and other documents
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the old notes surrendered for exchange
pursuant thereto are tendered
(1) by a registered holder of the old notes who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal or
(2) for the account of an Eligible Institution (as defined below).
If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by certain
eligible institutions, including:
o a firm which is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc.
o a commercial bank or trust company having an office or correspondent
in the United States
(collectively, "Eligible Institutions").
If old notes are registered in the name of a person other than the person
signing the letter of transmittal, the old notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
100
<PAGE>
transfer or exchange, in satisfactory form as determined by us in our sole
discretion, duly executed by the registered holder with the signature thereon
guaranteed by an Eligible Institution.
If the letter of transmittal is signed by a person or persons other than
the registered holder or holders of old notes, such old notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders that appear
on the old notes.
If the letter of transmittal or any old notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers or corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless waived by
Formica, proper evidence satisfactory to Formica of its authority to so act
must be submitted.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the exchange
offer, we will accept, promptly after the expiration date, all old notes
properly tendered and will issue the new notes promptly after acceptance of
the old notes. See "Certain Conditions to the Exchange Offer" below. For
purposes of the exchange offer, we shall be deemed to have accepted properly
tendered old notes for exchange when, as and if we have given oral or written
notice thereof to the Exchange Agent.
In all cases, we will only issue new notes in exchange for old notes that
are accepted for exchange only after timely receipt by the exchange agent of:
o certificates for such old notes or
o a timely book-entry confirmation of such old notes into the exchange
agent's account at DTC pursuant to the book-entry transfer procedures
described below, and
o a properly completed and duly executed letter of transmittal and all
other required documents.
If we do not accept any tendered old notes for any reason included in the
terms and conditions of the exchange offer or if you submit certificates
representing old notes in a greater principal amount than you wish to
exchange, we will return such unaccepted or non-exchanged old notes without
expense to the tendering holder or, in the case of old notes tendered by
book-entry transfer into the exchange agent's account at DTC pursuant to the
book-entry transfer procedures described below, such non-exchanged old notes
will be credited to an account maintained with DTC as promptly as practicable
after the expiration or termination of the exchange offer.
Book-Entry Transfer
The exchange agent will make a request to establish an account with
respect to the old notes at DTC for purposes of the exchange offer promptly
after the date of this prospectus. Any financial institution that is a
participant in DTC's systems may make book-entry delivery of old notes by
causing DTC to transfer such old notes into the exchange agent's account in
accordance with DTC's Automated Tender Offer Program ("ATOP") procedures for
transfer. However, the exchange for the old notes so tendered will only be
made after timely confirmation of such book-entry transfer of old notes into
the exchange agent's account, and timely receipt by the exchange agent of an
Agent's Message (as such term is defined in the next sentence) and any other
documents required by the Letter of transmittal. The term "Agent's Message"
means a message, transmitted by DTC and received by the exchange agent and
forming a part of a Book- Entry Confirmation, which states that DTC has
received an express acknowledgment from a Participant tendering old notes that
are the subject of such Book-Entry Confirmation that such Participant has
received and agrees to be bound by the terms of the letter of transmittal, and
that we may enforce such agreement against such Participant. Although delivery
of old notes may be effected through book-entry transfer into the exchange
agent's account at DTC, the letter of transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees
and
101
<PAGE>
any other required documents, must in any case be delivered to and received by
the exchange agent at its address set forth under "--Exchange Agent" on or
prior to the expiration date, or the guaranteed delivery procedure set forth
below must be complied with.
Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.
Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.
Guaranteed Delivery Procedures
If you are a registered holder of old notes and you want to tender such
old notes but your old notes are not immediately available, or time will not
permit your old notes or other required documents to reach the exchange agent
before the expiration date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if
(1) the tender is made through an Eligible Institution,
(2) prior to the expiration date, the exchange agent receives from
such Eligible Institution a properly completed and duly executed letter
of transmittal (or a facsimile thereof) and notice of guaranteed
delivery, substantially in the form provided by us (by facsimile
transmission, mail or hand delivery), stating:
o the name and address of the holder of old notes
o the amount of old notes tendered
o the tender is being made by delivering such notice and guaranteeing
that within five New York Stock Exchange trading days after the date
of execution of the notice of guaranteed delivery, the certificates
of all physically tendered old notes, in proper form for transfer,
or a book-entry confirmation, as the case may be, and any other
documents required by the letter of transmittal will be deposited by
that Eligible Institution with the exchange agent, and
(3) the certificates for all physically tendered old notes, in proper
form for transfer, or a book-entry confirmation, as the case may be, and
all other documents required by the letter of transmittal, are received by
the exchange agent within five New York Stock Exchange trading days after
the date of execution of the Notice of Guaranteed Delivery.
Withdrawal Rights
You can withdraw your tender of old notes may be withdrawn at any time
prior to the expiration date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent at one of the addresses listed below under
"Exchange Agent." Any such notice of withdrawal must specify:
o the name of the person having tendered the old notes to be withdrawn
o the old notes to be withdrawn (including the principal amount of such
old notes), and
o if certificates for old notes have been delivered to the exchange
agent, the name in which such old notes are registered, if different
from that of the withdrawing holder.
102
<PAGE>
o if certificates for old notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, you must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution
unless you are an Eligible Institution.
o if old notes have been tendered pursuant to the procedure for book-
entry transfer described above, any note of withdrawal must specify
the name and number of the account at DTC to be credited with the
withdrawn old notes and otherwise comply with the procedures of such
facility.
Please note that all questions as to the validity, form and eligibility
(including time of receipt) of such notices of withdrawal will be determined
by us, and our determination shall be final and binding on all parties. Any
old notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer.
If you have properly withdrawn old notes and wish to re-tender them, you
may do so by following one of the procedures described under "Procedures for
Tendering old notes" above at any time on or prior to the expiration date.
Certain Conditions to the Exchange Offer
Notwithstanding any other provisions of the exchange offer, we will not
be required to accept for exchange, or to issue new notes in exchange for, any
old notes and may terminate or amend the exchange offer, if at any time before
the acceptance of such old notes for exchange or the exchange of the new notes
for such old notes, such acceptance or issuance would violate applicable law
or any interpretation of the staff of the SEC.
The foregoing condition is for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to such condition. Our failure at
any time to exercise the foregoing rights shall not be deemed a waiver by us
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
In addition, we will not accept for exchange any old notes tendered, and
no new notes will be issued in exchange for any such old notes, if at such
time any stop order shall be threatened or in effect with respect to the
exchange offer of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act.
Exchange Agent
Summit Bank has been appointed as the exchange agent for the exchange
offer. All executed letters of transmittal should be directed to the exchange
agent at one of the addresses set forth below. Questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for notices of guaranteed delivery should be
directed to the exchange agent, addressed as follows:
Deliver To:
H. Lewis Stone
Summit Bank, Exchange Agent
Corporate Trust Administration
210 Main Street
6th Floor
Hackensack, NJ 07601
General: 1-800-403-4034
Direct: (201) 646-6311
Facsimile: (201) 646-0087
Delivery to an address other than as listed above or transmission
of instructions via facsimile other than as listed above does not
constitute a valid delivery.
103
<PAGE>
Fees and Expenses
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by our officers,
regular employees and affiliates. We will not pay any additional compensation
to any such officers and employees who engage in soliciting tenders. We will
not make any payment to brokers, dealers, or others soliciting acceptances of
the exchange offer. However, we will pay the exchange agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the
exchange offer will be paid by us and are estimated in the aggregate to be $ .
Transfer Taxes
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who
instruct us to register new notes in the name of, or request that old notes
not tendered or not accepted in the exchange offer to be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
Resale of the New Notes
Under existing interpretations of the staff of the SEC contained in
several no-action letters to third parties, the new notes would in general be
freely transferable after the exchange offer without further registration
under the Securities Act. However, any purchaser of old notes who is an
"affiliate" of Formica or who intends to participate in the exchange offer for
the purpose of distributing the new notes
(1) will not be able to rely on the interpretation of the staff of the
SEC,
(2) will not be able to tender its old notes in the exchange offer and
(3) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of the notes
unless such sale or transfer is made pursuant to an exemption from such
requirements.
By executing, or otherwise becoming bound by, the Letter of Transmittal
each holder of the old notes (other than certain specified holders) will
represent that:
(1) it is not our "affiliate";
(2) any new notes to be received by it were acquired in the ordinary
course of its business; and
(3) it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the new notes.
In addition, in connection with any resales of new notes, any broker-dealer
participating in the exchange offer who acquired notes for its own account as
a result of market-making or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The SEC has taken
the position that participating broker-dealers may fulfill their prospectus
delivery requirements with respect to the new notes (other than a resale of an
unsold allotment from the original sale of the old notes) with the prospectus
contained in the exchange offer exchange offer. Under the registration rights
agreement, we are required to allow participating broker-dealers and other
persons, if any, subject to similar prospectus delivery requirements to use
this prospectus as it may be amended or supplemented from time to time, in
connection with the resale of such new notes.
104
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of old notes for new notes pursuant to the exchange offer
will not result in any United States federal income tax consequences to
holders. When a holder exchanges an old note for a new note pursuant to the
exchange offer, the holder will have the same adjusted basis and holding
period in the new note as in the old note immediately before the exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. We have agreed that we will make this prospectus, as
amended or supplemented, available to any participating broker-dealer for use
in connection with any such resale and participating broker-dealers shall be
authorized to deliver this prospectus for a period not exceeding 90 days after
the expiration date.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the new notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such new notes. Any
broker-dealer that resells new notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of new notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
We will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any Participating Broker-Dealer
that requests such documents in the Letter of transmittal. See "The Exchange
Offer."
LEGAL MATTERS
The validity of the notes offered hereby will be passed upon for Formica
by Davis Polk & Wardwell, New York, New York.
CHANGE IN INDEPENDENT AUDITORS
On October 29, 1998, Formica dismissed its independent accountant, Ernst
& Young LLP ("E&Y"). E&Y's report on the financial statements for the years
ended December 31, 1997 and 1996 did not contain an adverse opinion or
disclaimer of opinion and was not modified as to uncertainty, audit scope or
accounting principles. The decision to change accountants was recommended by
the Audit Committee of the Board of Directors and approved by the full Board
of Directors on October 29, 1998. There were no disagreements with E&Y on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure (see Exhibit 16.1).
Formica retained the accounting firm of Arthur Andersen, LLP ("AA") on
October 29, 1998 to provide audit services for the four month period ended
April 30, 1998 and for the eight month period ended December 31, 1998.
105
<PAGE>
There were no consultations with AA regarding the application of accounting
principles to specific transactions, or the type of audit opinion that might
be rendered at the date of assignment.
EXPERTS
The consolidated balance sheet of Formica Corporation and its
subsidiaries as of December 31, 1998 and the related consolidated statements
of operations, stockholder's equity and cash flows for the four months ended
April 30, 1998 and for the eight months ended December 31, 1998 appearing in
this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements including the Financial Statement
Schedule included herein of Formica Corporation at December 31, 1997, and for
each of the two years in the period ended December 31, 1997, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
106
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements of the Company are based on the consolidated financial statements
of the Company, adjusted to give effect to the Acquisition including the
issuance of the Bridge Notes to finance the Acquisition and the issuance of
$215.0 million of Senior Subordinated Notes (the "Old Notes"). The unaudited
pro forma condensed consolidated financial statements have not been adjusted
to give effect to $30.0 million of estimated net annual (pre-tax) cost
savings, primarily SG&A reductions, that the Company began to implement in
early 1998. See "Business--Cost Savings" and "Risk Factors--Cost-Cutting
Strategy."
The unaudited pro forma condensed consolidated statement of operations
data are derived from the historical consolidated statements of operations of
Predecessor II and the Company (as applicable) for the years ended December
31, 1998 and 1997, and assumes that the Acquisition was consummated as of the
beginning of each respective period. The unaudited pro forma condensed
consolidated financial data are also adjusted for the issuance of the Old
Notes. The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements of
the Company included elsewhere in this Prospectus.
The unaudited pro forma condensed consolidated financial data do not
purport to be indicative of the results that would actually have been obtained
if the Acquisition and the issuance of the Old Notes had occurred on the dates
indicated or of the results that may be obtained in the future. The unaudited
pro forma condensed consolidated financial data is presented for comparative
purposes only. The pro forma adjustments, as described in the accompanying
data, are based on available information and certain assumptions that
management believes are reasonable.
P-1
<PAGE>
<TABLE>
FORMICA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1998
(In millions)
Adjustments
for Issuance
Historical of Old Notes Pro Forma
---------- ------------ ---------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................................... $ 31.6 $ 8.0 (c) $ 39.6
Accounts receivable, net.......................................... 64.9 64.9
Inventories....................................................... 110.3 110.3
Prepaid expenses and other current assets......................... 15.1 15.1
Deferred income taxes............................................. 7.9 7.9
----- ---- -----
Total current assets........................................... 229.8 8.0 237.8
Property, plant and equipment, net................................ 288.7 288.7
7.0 (b)
Other assets...................................................... 178.3 (2.0) (b) 183.3
----- ---- -----
Total assets................................................... $696.8 $13.0 $709.8
===== ==== =====
Liabilities and stockholder's equity
Current liabilities:
Current maturities--notes payable.............................. $21.8 $21.8
Accounts payable............................................... 40.0 40.0
Accrued expenses............................................... 53.5 53.5
----- ---- -----
Total current liabilities................................. 115.3 -- 115.3
Notes payable.................................................. 95.9 95.9
Deferred income taxes.......................................... 133.7 133.7
Other liabilities.............................................. 32.1 32.1
Bridge notes................................................... 200.0 $(200.0) (a) --
Senior subordinated notes...................................... -- 215.0 (a) 215.0
----- ---- -----
Total liabilities......................................... 577.0 15.0 592.0
Total stockholder's equity................................ 119.8 (2.0) (b) 117.8
----- ---- -----
Total liabilities and stockholder's equity..................... $696.8 $13.0 $709.8
===== ==== =====
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet.
P-2
<PAGE>
FORMICA CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) The Bridge Notes ($200.0 million) were refinanced with a portion of the net
proceeds from the Old Notes.
(b) Represents the capitalization of deferred financing costs related to the Old
Notes and the elimination of the deferred financing costs related to the
Bridge Notes against stockholder's equity ($3.6 million).
(c) Represents the net cash proceeds from the Old Notes after repaying the
Bridge Notes and paying related financing costs.
P-3
<PAGE>
FORMICA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(In millions)
<TABLE>
<CAPTION>
Adjustments Pro Forma Adjustments
for the for the for issuance
Historical Acquisition Acquisition of Old Notes Pro Forma
---------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net sales............................... $549.7 $549.7 $549.7
Cost of products sold................... 397.3 397.3 397.3
----- ---- ----- ----- -----
Gross profit............................ 152.4 152.4 152.4
Selling, general and administrative
expenses............................... 161.4 $3.2 (d) 164.6 164.6
Cost of terminated acquisition.......... 3.0 3.0 3.0
----- ---- ----- ----- -----
Operating loss.......................... (12.0) (3.2) (b) (15.2) (15.2)
Interest expense........................ 27.4 11.2 (c) 38.0 $(26.6) (f) 35.5
(0.6) (e) 24.1 (g)
Other income, net....................... 5.3 5.3 5.3
----- ---- ----- ----- -----
Loss before income taxes................ $(34.1) $(13.8) $(47.9) $2.5 $(45.4)
Income tax (provision) benefit.......... (2.8) -- (2.8) -- (2.8)
----- ---- ----- ----- -----
Net income (loss)....................... (36.9) (13.8) (50.7) 2.5 (48.2)
===== ==== ===== ===== =====
Other Data
Adjusted EBITDA (h)(i).................. $50.2 $50.2 $50.2
Depreciation and amortization........... 40.4 43.6 43.6
Cash interest expense (j)............... 24.8 32.8 34.4
Ratio of earnings to fixed charges (k).. -- -- --
</TABLE>
P-4
FORMICA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(In millions)
<TABLE>
<CAPTION>
Adjustments Pro Forma Adjustments
for the for the for issuance
Historical Acquisition Acquisition of Old Notes Pro Forma
---------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net sales............................... $533.4 $533.4 $533.4
Cost of products sold................... 350.1 350.1 350.1
----- ----- ----- ----- -----
Gross profit............................ 183.3 183.3 183.3
(24.2) (a)
Selling, general and administrative
expenses............................... 202.2 $9.6 (d) 187.6 187.6
Goodwill impairment charge.............. 484.4 (484.4) (b) -- --
----- ----- ----- ----- -----
Operating loss.......................... (503.3) (4.3) (4.3) -- (4.3)
Interest expense........................ 3.1 33.6 (c) 34.8 $(26.6) (f) 32.3
(1.9) (e) 24.1 (g)
Other income............................ 1.8 1.8 1.8
----- ----- ----- ----- -----
Income (loss) before income taxes....... (504.6) 467.3 (37.3) 2.5 (34.8)
Income tax (provision) benefit.......... (0.2) (0.2) (0.2)
----- ----- ----- ----- -----
Net income (loss)....................... $(504.8) $467.3 $(37.5) $2.5 $(35.0)
===== ===== ===== ===== =====
Other Data
Adjusted EBITDA (h)(i).................. $38.6 $38.6 $38.6
Depreciation and Amortization........... 55.7 41.1 41.1
Cash interest expense (j)............... 3.1 27.9 30.8
Ratio of earnings to fixed charges (k).. -- -- --
</TABLE>
P-5
<PAGE>
FORMICA CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions)
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
for the years ended December 31, 1998 and 1997 give effect to the Acquisition
and the issuance of the Old Notes as if both were effective at the beginning
of the applicable periods:
(a) Represents the reduction of goodwill amortization
attributable to the goodwill impairment charge recorded by
the Company as of December 31, 1997.
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
Goodwill Amortization......... $ -- $ 24.2
=== ====
(b) Represents the reversal of the goodwill impairment charge
recorded by the Company as of December 31, 1997.
(c) Represents the net increase in interest expense attributable
to the Bridge Notes and the New Credit Facility issued in
connection with the Acquisition to the extent not reflected
in the historical results for the applicable period.
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
Interest on $200.0 Bridge Notes (at an effective
interest rate of 10.25%)............................... 6.8 20.5
Interest on $85.0 term loans under the New Credit
Facility (at an interest rate of LIBOR(5%) + 2.25%)..... 2.1 6.2
Amortization of $6.1 of deferred financing costs related
to the Bridge Notes (over 1 year)...................... 2.0 6.1
Amortization of $5.0 of deferred financing costs related
to the New Credit Facility (over 6 years).............. 0.3 0.8
----- -----
$11.2 $33.6
===== =====
The Bridge Notes were to be repaid with a portion of the proceeds of
the Old Notes. The effective interest rate for the period during which
the Bridge Notes are expected to be outstanding is 10.25%.
(d) Represents net increase in depreciation and amortization
related to property plant and equipment and identified
intangibles (primarily patents and trademarks) based on the
allocation of the purchase price of the Acquisition for the
applicable period.
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
$ 3.2 $ 9.6
====== ======
P-6
<PAGE>
(e) Represents elimination of interest expense related to loans
due to affiliates which were repaid in connection with the
Acquisition.
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
$ 0.6 $ 1.9
====== ======
(f) Represents reversal of interest and amortization on deferred
financing costs related to the Bridge Notes.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Reversal of interest on $200.0 Bridge Notes (at an effective rate
of 10.25%)......................................................... $20.5 $20.5
Reversal of amortization of $6.1 of deferred financing costs
related to the Bridge Notes (over 1 year).......................... 6.1 6.1
---- ----
$26.6 $26.6
==== ====
</TABLE>
(g) Represents interest expense and amortization of deferred
financing costs related to the Old Notes to be issued in
connection with this Offering.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Interest on $215.0 Senior Subordinated Notes at an assumed
effective interest rate of 10.875%................................. $23.4 $23.4
Amortization of $7.0 of deferred financing costs related to the 0.7 0.7
Senior Subordinated Notes (over 10 years).......................... $24.1 $24.1
==== ====
</TABLE>
(h) "Adjusted EBITDA" is defined as income before extraordinary
item and change in accounting principles plus interest
expense, income tax expense, depreciation and amortization
expenses and goodwill impairment charge plus the 1998 Charges
totaling $16.5 for the year ended December 31, 1998. EBITDA
is a key financial measure but should not be construed as an
alternative to operating income or cash flows from operating
activities (as determined in accordance with generally
accepted accounting principles). The Company believes that
EBITDA is a useful supplement to net income (loss) and other
consolidated income statement data in understanding cash
flows generated from operations that are available for taxes,
debt service and capital expenditures. However, the Company's
method of computation may or may not be comparable to other
similarly titled measures of other companies.
(i) Adjusted EBITDA has not been adjusted for any of the
incremental annualized cost savings that the Company began
implementing in 1998. The Company began implementing certain
elements of the cost reduction program in the first quarter
of 1998 and accordingly, management believes that the
historical results for the
P-7
<PAGE>
periods ended December 31, 1998 reflect approximately $20.0
of the total anticipated benefits of such cost savings
program. The Company does not expect to fully realize the
benefits of such program until 1999. The Company expects to
realize $30.0 of annualized cost savings in 1999. The
savings relate primarily to specific areas of advertising
and promotion spending and also target other operating
expenses, including outside consultant expense and
transportation and warehousing costs. See "Business--Cost
Savings" and "Risk Factors--Cost-Cutting Strategy."
(j) Cash interest expense represents total interest expense less
amortization of deferred financing costs.
(k) For purposes of calculating the ratio of earnings to fixed
charges, earnings consist of income before income taxes plus
fixed charges. Fixed charges consist of interest expense,
which includes the amortization of deferred financing costs,
and one-third of the rent expense from operating leases,
which management believes is a reasonable approximation of
the interest component of rent expense. For the years ended
December 31, 1998 and 1997, earnings were insufficient, on a
pro forma basis, to cover fixed charges by $48.2 and $34.8,
respectively.
P-8
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Arthur Andersen LLP, Independent Public Accountants............... F-2
Report of Ernst & Young LLP, Independent Auditors........................... F-3
Consolidated Balance Sheets as of December 31, 1998 and 1997................ F-4
Consolidated Statements of Operations for the eight months ended
December 31, 1998, four months ended April 30, 1998 and years ended
December 31, 1997 and 1996............................................... F-5
Consolidated Statements of Stockholders' Equity for the eight months ended
December 31, 1998, four months ended April 30, 1998 and years ended
December 31, 1997 and 1996............................................... F-6
Consolidated Statements of Cash Flows for the eight months ended
December 31, 1998, four months ended April 30, 1998 and years ended
December 31, 1997 and 1996............................................... F-7
Notes to Consolidated Financial Statements.................................. F-8
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of
Formica Corporation:
We have audited the accompanying consolidated balance sheet of Formica
Corporation (a Delaware Corporation) and subsidiaries as of December 31,
1998, and the related consolidated statements of operations, changes in
stockholder's equity and cash flows for the four-month period ended April
30, 1998 and the eight-month period ended December 31, 1998 (see Note 1).
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Formica
Corporation and subsidiaries as of December 31, 1998, and the results of
their operations and their cash flows for the four-month period ended April
30, 1998 and the eight-month period ended December 31, 1998 in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Roseland, New Jersey
March 3, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Formica Corporation
We have audited the accompanying consolidated balance sheet of Formica
Corporation as of December 31, 1997, and the related consolidated statements of
operations, stockholder's equity and cash flows for the years ended December 31,
1997 and 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Formica
Corporation at December 31, 1997, and the consolidated results of its operations
and its cash flows for the years ended December 31, 1997 and 1996, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
White Plains, New York
May 7, 1998, except for Note 3--"Reclassifications" as
to which the date is March 3, 1999.
F-3
<PAGE>
FORMICA CORPORATION
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1998 AND 1997
(in millions, except share data)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................................. $31.6 $27.2
Accounts receivable, less allowance for doubtful accounts of
$4.2 and $1.5, respectively.......................................... 64.9 68.4
Due from affiliates.................................................... - 6.5
Inventories............................................................ 110.3 119.0
Prepaid expenses and other current assets.............................. 15.1 13.1
Deferred income taxes.................................................. 7.9 9.2
----- -----
Total current assets............................................. 229.8 243.4
Property, Plant and Equipment, net...................................... 288.7 280.0
Other Assets:
Intangible assets, net................................................. 176.5 114.9
Other noncurrent assets................................................ 1.8 9.4
----- -----
Total assets..................................................... $696.8 $647.7
===== =====
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities--notes payable...................................... $21.8 $33.4
Accounts payable....................................................... 40.0 42.5
Accrued expenses....................................................... 53.5 55.7
Due to affiliates...................................................... - 45.2
----- -----
Total current liabilities........................................ 115.3 176.8
Notes Payable........................................................... 295.9 11.4
Deferred Income Taxes................................................... 133.7 104.8
Other Liabilities....................................................... 32.1 11.3
----- -----
Total liabilities................................................ 577.0 304.3
Commitments and Contingencies
Stockholder's Equity:
Preferred stock--par value $.01 per share--authorized 1,000 shares,
none issued or outstanding........................................... - -
Common stock - par value $.01 per share - authorized 2,000 shares,
issued and outstanding 100 shares.................................... 0.1 0.1
Additional paid-in capital............................................. 137.0 919.9
Accumulated deficit.................................................... (22.3) (559.2)
Accumulated other comprehensive income (loss).......................... 5.0 (17.4)
----- -----
Total stockholder's equity....................................... 119.8 343.4
----- -----
Total liabilities and stockholder's equity....................... $696.8 $647.7
===== =====
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these consolidated balance sheets.
F-4
<PAGE>
FORMICA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)
<TABLE>
<CAPTION>
Four Year Ended
Eight Months Months December 31,
Ended Ended ---------------
December 31, April 30,
1998 1998 1997 1996
------------ --------- ------ ------
<S> <C> <C> <C> <C>
Net Sales...................................... $371.4 $178.3 $533.4 $521.6
Cost of Products Sold.......................... 266.2 131.1 350.1 348.3
------ ------ ------- ------
Gross Profit............................ 105.2 47.2 183.3 173.3
Selling, General and Administrative Expenses... 100.5 60.9 202.2 186.7
Cost of Terminated Acquisition................. 3.0 - - -
Goodwill Impairment Charge..................... - - 484.4 -
------ ------ ------- ------
Operating Income (Loss)................. 1.7 (13.7) (503.3) (13.4)
Interest Expense............................... (25.7) (1.7) (3.1) (10.6)
Other Income................................... 4.5 0.8 1.8 1.1
------ ------ ------- ------
Loss Before Income Taxes....................... (19.5) (14.6) (504.6) (22.9)
Income Tax Provision........................... (2.8) - (0.2) (5.0)
------ ------ ------- ------
Net Loss................................ $(22.3) $(14.6) $(504.8) $(27.9)
====== ====== ======= ======
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these consolidated balance sheets.
F-5
<PAGE>
FORMICA CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(in millions)
<TABLE>
<CAPTION>
Accumulated
Other
Additional Comprehen-
Common Paid-in- Accumulated sive Income
Stock Capital Deficit (Loss) Total
------ ---------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995........................ $ 0.1 $487.2 $ (26.5) $ (1.4) $459.4
Comprehensive loss:
Net loss........................................... - - (27.9) - (27.9)
Foreign currency translation adjustments........... - - - 1.7 1.7
------
(26.2)
Capital contributed by Parent....................... - 437.5 - - 437.5
----- ------- ------- ------ ------
Balance at December 31, 1996........................ 0.1 924.7 (54.4) 0.3 870.7
Comprehensive loss:
Net loss........................................... - - (504.8) - (504.8)
Foreign currency translation adjustments........... - - - (17.7) (17.7)
------
(522.5)
Contribution of intangible pension asset to Parent.. - (4.8) - - (4.8)
----- ------ ------- ------ ------
Balance at December 31, 1997 0.1 919.9 (559.2) (17.4) 343.4
Comprehensive loss:
Net loss........................................... - - (14.6) - (14.6)
Foreign currency translation adjustments........... 2.9 2.9
------
(11.7)
Dividend to Parent.................................. - - (0.5) - (0.5)
----- ------ ------- ------ ------
Balance at April 30, 1998........................... $ 0.1 $919.9 $(574.3) $(14.5) $331.2
===== ====== ======= ====== ======
- ------------------------------------------------------------------------------------------------------------------------
Capitalization of the Company at date of
acquisition, net of dividend to parent of $255.0... $ 0.1 $137.0 $ - $ - $137.1
Comprehensive loss:
Net loss........................................... - - (22.3) - (22.3)
Foreign currency translation adjustments........... - - - 5.0 5.0
------
(17.3)
----- ------ ------- ------ ------
Balance at December 31, 1998........................ $ 0.1 $137.0 $ (22.3) $ 5.0 $119.8
===== ====== ======= ====== ======
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these consolidated balance sheets.
F-6
<PAGE>
FORMICA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Four Year Ended
Eight Months Months December 31,
Ended Ended ------------------
December 31, April 30,
1998 1998 1997 1996
------------ --------- -------- -------
<S> <C> <C> <C> <C>
Operating Activities:
Net loss............................................... $ (22.3) $(14.6) $(504.8) $ (27.9)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization........................ 29.3 11.1 55.7 52.1
Goodwill impairment.................................. - - 484.4 -
Deferred income taxes................................ (0.8) 1.2 - 1.0
Changes in assets and liabilities:
Accounts receivable................................ 8.9 (5.4) 6.3 (4.0)
Inventories........................................ 7.8 (2.0) (6.4) (6.2)
Prepaid expenses and other current assets.......... (7.4) 5.8 1.7 (4.1)
Accounts payable................................... (2.6) 0.1 (10.4) 11.7
Accrued expenses................................... (3.0) (18.1) (11.2) (32.0)
Other, net......................................... 16.8 10.2 (9.6) 10.9
------- ------ ------- -------
Net cash provided by (used in) operating
activities..................................... 26.7 (11.7) 5.7 1.5
Investing Activities--Purchases of property, plant and
equipment............................................... (35.5) (8.3) (46.5) (44.5)
------- ------ ------- -------
Net cash used in investing activities............ (35.5) (8.3) (46.5) (44.5)
Financing Activities:
Proceeds from borrowings, net.......................... 288.1 - 47.1 56.5
Due from affiliates.................................... - 15.5 - -
Dividends paid......................................... (255.0) (0.5) - -
Payments of debt....................................... (0.1) (15.1) - -
------- ------ ------- -------
Net cash provided by (used in) financing
activities..................................... 33.0 (0.1) 47.1 56.5
Effects of Exchange Rate Changes on Cash................ 0.5 (0.2) (5.4) 3.0
------- ------ ------- -------
Increase/(Decrease) in Cash and Cash Equivalents........ 24.7 (20.3) 0.9 16.5
Cash and Cash Equivalents at the Beginning of Period.... 6.9 27.2 26.3 9.8
------- ------ ------- -------
Cash and Cash Equivalents at the End of Period.......... $ 31.6 $ 6.9 $ 27.2 $ 26.3
======= ====== ======= =======
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these consolidated balance sheets.
F-7
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
(1) BASIS OF PRESENTATION AND NATURE OF OPERATIONS:
Formica Corporation ("Formica" or the "Company") is a
wholly-owned subsidiary of FM Holdings, Inc. ("Holdings"), which is a
wholly-owned subsidiary of Laminates Acquisition Co. ("Laminates"). Holdings
and Laminates have no operations separate from the operations of the Company
and their assets consist primarily of their direct or indirect investment in
the Company.
The accompanying consolidated financial statements include the
accounts of the Company and its majority owned subsidiaries, prior to the
acquisition from BTR Nylex Ltd. (BTR) on May 1, 1998 (see Note 2), for the
years ended December 31, 1997 and 1996 and the four-month period ended April
30, 1998. The accounts of the Company as of and for the eight-month period
ended December 31, 1998 reflect the acquisition. The results for the
pre-acquisition period are not necessarily comparable to the results for the
post acquisition period because of the changes in organizational structure,
recorded asset values, cost structure and capitalization of the Company
resulting from the acquisition. Earnings per share data are not presented
because the Company's common stock is not publicly traded and the Company is a
wholly-owned subsidiary of Holdings.
The Company is a multinational organization, principally
engaged in the design, manufacture and distribution of high pressure
decorative laminates. The Company's operations and markets are primarily based
in North America, Europe and Asia.
(2) ACQUISITION:
Through April 30, 1998, the Company was an indirect
wholly-owned subsidiary of BTR. On May 1, 1998, Laminates acquired all of the
outstanding shares of Holdings, the Company's direct parent, from BTR, for
approximately $392.0 of cash (including transaction costs of approximately
$15.4) and the assumption of approximately $29.0 of net debt. The acquisition
was accounted for using the purchase method of accounting. Accordingly, the
excess of the purchase price over the book value of the net assets acquired of
$61.0 has been allocated primarily to intangible assets based on appraisals of
such assets.
Prior to May 1, 1998, the new management of Formica began to
formulate a plan to restructure certain operations. Included in the
allocation of the purchase price is a restructuring provision of $6.6 million.
The Company began to execute the restructuring in 1998 which will be
substantially completed in 1999.
The acquisition was financed with $87.1 in proceeds from the
sale of preferred and common stock by Laminates, $50.0 in proceeds from the
sale of senior preferred stock by an affiliate (which was merged into
Holdings) and from borrowings of $280.0 by the Company. The net proceeds to
Holdings from the sale of junior preferred stock and the net proceeds from
borrowings by the Company were transferred to Laminates as a dividend. After
the payments to BTR for the acquisition price, Laminates contributed the
remaining cash to the Company. See Note 8 for acquisition financing.
The following unaudited pro forma consolidated results of
operations for the years ended December 31, 1998 and 1997 assume the
acquisition had occurred at the beginning of the applicable period:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Net sales................ $549.7 $533.4
Net loss................. $(48.2) $(35.0)
</TABLE>
F-8
<PAGE>
In management's opinion, the unaudited pro forma combined
results of operations are not indicative of the actual results that would have
occurred had the acquisition been consummated at the beginning of 1997 or at
the beginning of 1998, or of future results.
In March 1999, Formica acquired a manufacturer of solid surface
products. The acquisition will not have a material effect on the Company's
financial position or results of operations.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and all of its subsidiaries. Investments in less than
majority-owned affiliates, over which the Company has significant influence,
are accounted for using the equity method. All intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized upon shipment of goods to customers.
Foreign Currencies
The Company's international operations are translated into U.S.
dollars using current exchange rates at the end of the period for the balance
sheets and a weighted-average rate for the period for the statements of
operations with currency translation adjustments reflected in accumulated
other comprehensive income (loss) in stockholder's equity. Realized gains and
losses from foreign currency transactions are reflected in the consolidated
statements of operations.
Foreign Exchange Contracts
The Company enters into forward sale and purchase contracts to
manage currency risk resulting from purchase and sale commitments denominated
in foreign currencies. Such contracts are usually short-term in nature and
generally involve the exchange of two foreign currencies. Gains and losses
related to these contracts are deferred and included in the measurement of the
related purchase or sale transaction. At December 31, 1998, the Company had
$1.5 in contracts to buy and $0.1 in contracts to sell foreign currencies.
Net unrealized gains or losses were not material to the consolidated financial
statements at December 31, 1998.
Concentration of Credit Risk-
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of entities comprising the
Company's customer base.
F-9
<PAGE>
Cash and Cash Equivalents
The Company considers all highly liquid instruments with
original maturities of three months or less when purchased to be cash
equivalents.
Inventories
Inventories are stated at the lower of cost or market.
Inventories are valued using the first-in, first-out (FIFO) method except for
the United States which utilizes the last-in, first-out (LIFO) method. As of
December 31, 1998 and 1997, 55.0% and 53.8%, respectively, of inventories were
valued under the LIFO method. Inventories at LIFO approximate inventories at
FIFO.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
charges are made on a straight-line basis over the estimated useful life of
the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements.................... 30 to 40 years
Machinery and equipment....................... 3 to 13 years
Computer and office equipment................. 3 to 10 years
</TABLE>
Leasehold improvements are amortized over the lesser of the
life of the asset or the lease term.
Intangible Assets
Intangible assets are amortized on a straight-line basis over
their estimated useful lives (5 to 20 years). The Company reviews intangible
assets to assess recoverability from future operations using undiscounted cash
flows and impairments are recognized in operating results to the extent that
the carrying value exceeds fair value. See Note 6 for the impairment charge
recorded by the Company in 1997.
Financial Instruments
At December 31, 1998, the fair value of substantially all of
the Company's financial instruments approximated their carrying value.
Research and Development Costs
Research and development costs are expensed as incurred.
Research and development costs included in selling, general and administrative
expenses were $1.4, $1.1, $3.3 and $1.2 for the eight-month period ended
December 31, 1998, the four-month period ended April 30, 1998, and the years
ended December 31, 1997 and 1996, respectively.
Environmental Compliance and Remediation Costs
Environmental compliance costs include ongoing maintenance,
monitoring and similar expenditures. Such costs are expensed as incurred.
Environmental remediation costs are accrued when environmental assessments
and/or remedial efforts are probable and the cost can be reasonably estimated
(see Note 15).
F-10
<PAGE>
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs
included in selling, general and administrative expenses were $10.3, $10.6,
$24.1 and $16.4 for the eight-month period ended December 31, 1998, the
four-month period ended April 30, 1998, and the years ended December 31, 1997
and 1996, respectively.
Income Taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Under SFAS 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based upon differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that are expected to be in effect when the differences are expected to reverse.
Reclassifications
Certain reclassifications have been made to prior year amounts
to conform with current year presentation. Effective January 1, 1998, the
Company adopted SFAS No. 130 - "Reporting Comprehensive Income," SFAS No. 131-
"Disclosures about Segments of an Enterprise and Related Information" and SFAS
No. 132- "Employers' Disclosures about Pensions and Other Postretirement
Benefits". These standards increased financial reporting disclosures and had
no impact on the Company's financial position or results of operations.
Certain reclassifications have been made to the December 31, 1997 and 1996
consolidated financial statements to conform with the financial reporting
requirements of SFAS No. 130 (see Consolidated Statements of Changes in
Stockholder's Equity), SFAS No. 131 (see Note 13) and SFAS No. 132 (see Note
9).
Recently Issued Accounting Standards
In June 1998, SFAS No. 133- "Accounting for Derivative
Instruments and Hedging Activities" was issued and is effective for fiscal
years beginning after June 15, 1999 although earlier application is permitted.
SFAS No. 133 requires all derivatives to be measured at fair value and
recognized as assets or liabilities on the balance sheet. Changes in the fair
value of derivatives should be recognized in either net income or other
comprehensive income, depending on the designated purpose of the derivative.
SFAS No. 133 is not expected to have a material impact on the Company's
financial position or results of operations. In February 1998, Statement of
Position ("SOP") 98-1- "Accounting for Costs of Computer Software Developed or
Purchased for Internal Use" was issued and is effective for fiscal years
beginning after December 15, 1998. In April 1998, SOP 98-5- "Reporting on the
Costs of Start-up Activities" was issued and is effective for fiscal years
beginning after December 15, 1998. SOP 98-1 and SOP 98-5 are not expected to
have a material impact on the Company's financial position or results of
operations.
(4) INVENTORIES:
Inventories consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Finished goods....................... $73.2 $75.5
Work-in-process...................... 12.2 10.6
Raw materials........................ 42.6 44.8
------ ------
Total........................... 128.0 130.9
Less: Obsolescence reserve........... 17.7 11.9
------ ------
$110.3 $119.0
====== ======
</TABLE>
F-11
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
(5) PROPERTY, PLANT AND EQUIPMENT:
Depreciable assets consisted of the following at December 31:
1998 1997
--------- ---------
Land.................................................... $ 17.7 $ 13.0
Buildings and improvements.............................. 51.0 59.2
Machinery and equipment................................. 237.2 261.0
--------- ---------
Total............................................. 305.9 333.2
Less: Accumulated depreciation.................... 17.2 53.2
--------- ---------
$ 288.7 $ 280.0
========= =========
Depreciation expense was $16.0, $7.9, $21.4, and $18.8 for the
eight-month period ended December 31, 1998, the four-month period ended April
30, 1998, and the years ended December 31, 1997 and 1996, respectively.
Interest costs incurred in connection with major capital expenditures are
capitalized. Capitalized interest is amortized over the lives of the related
assets. Net interest costs of $1.3 were capitalized in 1997. No interest costs
were capitalized in 1998.
(6) INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31:
1998 1997
--------- --------
Trademarks.................................................. $140.0 $150.0
Patents..................................................... 19.9 14.4
Proprietary technology and other............................ 29.4 40.3
--------- --------
Total................................................. 189.3 204.7
Less: Accumulated amortization........................ 12.8 89.8
-------- ---------
$ 176.5 $ 114.9
======== =======
During 1997, the Company recorded a goodwill impairment charge of $484.4
which was determined utilizing the fair value of the Company's assets. The
impairment charge did not result in the reduction of property, plant and
equipment.
(7) ACCRUED LIABILITIES:
Accrued liabilities consisted of the following at December 31:
1998 1997
----- -----
Accrued salaries and benefits.................................... $19.7 $15.4
Restructuring reserve............................................ 6.6 -
Other accrued expenses........................................... 27.2 40.3
----- -----
Total...................................................... $53.5 $55.7
===== =====
F-12
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
NOTES PAYABLE:
Notes payable consisted of the following at December 31:
1998 1997
------- --------
Senior subordinated notes.................................. $ 200.0 $ -
Term loans................................................. 85.0 -
Other...................................................... 32.7 44.8
------- --------
Total................................................ 317.7 44.8
Less: Current maturities............................. 21.8 33.4
------- -------
$ 295.9 $ 11.4
======= =======
In connection with the acquisition (see Note 2), Formica sold $200.0 of
senior subordinated unsecured increasing rate bridge notes (the "Bridge
Notes") which bear interest at the greater of prime plus an additional amount
or 10% and, together with its subsidiaries, borrowed $80.0 of term loans under
the new senior loan facility (the "New Credit Facility"). Borrowings under the
new credit facility were expanded to $85.0 after the acquisition.
On February 22, 1999, the Company issued $215 million of 10 7/8% Senior
Subordinated Notes due March 1, 2009 (the "Notes") and repaid the Bridge
Notes. Interest is payable semi-annually on March 1 and September 1 of each
year. The Notes are redeemable at the option of the Company in part beginning
in 2002 and in whole beginning in 2004 at specified redemption prices.
The Notes and related indenture place certain restrictions on the Company
and its subsidiaries including the ability to pay dividends, issue preferred
stock, repurchase capital stock, incur and pay indebtedness, sell assets and
make certain restricted investments.
The Company is subject to a Registration Rights Agreement that provides
that the Company will file an Exchange Offer Registration with the Securities
and Exchange Commission ("SEC") to register the Notes prior to 90 days from
February 22, 1999 and that the Company will use its reasonable best efforts to
have the Exchange Offer Registration Statement declared effective by the SEC
on or prior to 180 days from February 22, 1999. The Registration Rights
Agreement provides for certain liquidated damages to be paid to the holders of
the Notes if the registration timetable is not met.
The New Credit Facility includes a $120.0 revolving credit facility. The
revolving credit facility may be increased by up to $25.0 at the request of
the Company and will terminate on May 1, 2004. There were no borrowings
outstanding under the revolving credit facility at December 31, 1998. The term
loans under the New Credit Facility consist of $40.0, $35.0 and $10.0 loans.
Borrowings under the New Credit Facility generally bear interest based on
a margin over, at the Company's option, the base rate or LIBOR. The applicable
margin, until the date of delivery of the Company's December 31, 1998
financial statements, will be 2.25% over LIBOR or 1% over the base rate.
Thereafter, the applicable margin will vary based upon the Company's ratio of
consolidated debt to EBITDA (as defined). The Company's obligations under the
New Credit Facility are guaranteed by Laminates, Holdings and all existing or
future domestic subsidiaries of the Company (the "Subsidiary Guarantors") and
are secured by substantially all of the assets of the Company and the
Subsidiary Guarantors, including a pledge of the capital stock of all existing
and future subsidiaries of the Company (provided that no more than 65% of the
voting stock of any foreign subsidiary shall be pledged) and a pledge by
Holdings of the stock of the Company and by Laminates of the stock of
Holdings.
F-13
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
The New Credit Facility contains financial covenants requiring the
Company to maintain minimum earnings before interest, taxes, depreciation and
amortization; minimum coverage of interest expense and fixed charges; and a
maximum leverage ratio. The Company was in compliance with such financial
covenants at December 31, 1998.
The Company maintains various credit facilities in foreign countries
(primarily in Asia) that provide for borrowings in local currencies. At
December 31, 1998, the Company has secured approximately $29.0 in letters of
credit under the New Credit Facility to provide credit enhancement for certain
of such credit facilities.
In addition to the above, the Company has established borrowing
arrangements with various financial institutions at interest rates ranging
from 2.0% to 9.5% in order to fund the ongoing operations of the business. At
December 31, 1998 and 1997, there was approximately $32.7 and $44.8,
respectively, outstanding under these facilities. At December 31, 1998,
approximately $4.7 was available under these facilities.
The approximate aggregate debt maturities are as follows as of December
31, 1998:
1999............................................................ $ 21.8
2000............................................................ 7.0
2001............................................................ 15.0
2002............................................................ 20.3
2003............................................................ 32.5
Thereafter...................................................... 221.1
- ----- --------
$ 317.7
========
Interest expense for 1997 and 1996 were inclusive of $0.5 and $1.6,
respectively, attributable to affiliated companies. There was no interest
expense attributed to affiliated companies in 1998. Cash payments for interest
approximated $20.6, $0.2, $3.1, and $10.6 for the eight-month period ended
December 31, 1998, the four-month period ended April 30, 1998, and the years
ended 1997 and 1996, respectively.
(9) EMPLOYEE BENEFIT PLANS:
In 1998, the Company adopted SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits", which revises disclosures about
pension and other postretirement benefit plans.
The Company sponsors defined benefit pension plans covering substantially
all United States and Canadian employees and certain employees in other
countries. The benefits provided under the defined benefit pension plans are
determined under formulas using years of service and compensation, or formulas
using years of service and a flat dollar benefit rate. The Company's principal
funding policy for the defined benefit pension plans is to maintain the plans
in accordance with the minimum funding provisions of the Employee Retirement
Income Security Act of 1974. The majority of the defined benefit pension
plans' assets are held in trust, and consist principally of equity securities
and fixed income instruments.
The majority of the defined contribution plans sponsored by the Company
are qualified under Section 401(k) of the Internal Revenue Code, with the
amount of the Company's contributions determined under a matching formula tied
to employee payroll deduction contributions. In addition, some defined
contribution plans offer discretionary Company contributions based upon a
profit based formula. Expenses related to these plans totaled approximately
$1.1, $0.3, $0.7 and $0.7 during the eight-month period ended December 31,
1998, the four-month period ended April 30, 1998, and the years ended December
31, 1997 and 1996, respectively.
F-14
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
The net cost for Company and subsidiary defined benefit pension plans was
comprised of the following components:
Four
Eight Months Months Year Ended
Ended Ended December 31,
December 31, April 30, ---------------------
1998 1998 1997 1996
----------- --------- --------- ---------
Service cost......................... $2.9 $0.6 $1.7 $2.6
Interest cost........................ 3.0 1.2 3.5 6.0
Expected return on plan assets....... (2.8) (1.0) (3.1) (7.0)
Other................................ - - 0.1 0.1
---- ---- ---- ----
Net periodic pension cost............ $3.1 $0.8 $2.2 $1.7
==== ==== ==== ====
The net periodic pension cost attributable to international plans
included in the above table was $2.0, $0.2, $0.8 and $0.1 during the
eight-month period ended December 31, 1998, the four-month period ended April
30, 1998 and the years ended December 31, 1997 and 1996.
The Company provides for the estimated cost of postretirement benefits
(principally medical, dental and life insurance benefits provided to retirees
and eligible dependents). The Company does not fund its postretirement benefit
plans.
The net cost of postretirement benefits other than pensions was comprised
of the following components:
Four
Eight Months Months Year Ended
Ended Ended December 31,
December 31, April 30, -----------------
1998 1998 1997 1996
-----------------------------------------
Service cost........................... $0.1 $ - $0.1 $0.1
Interest cost.......................... 0.3 0.1 0.3 0.3
--- --- --- ---
Net postretirement benefit cost........ $0.4 $0.1 $0.4 $0.4
==== ==== ==== ====
The cost of health care and life insurance benefits for active employees
was $7.5, $3.8, $11.0 and $9.8 for the eight-month period ended December 31,
1998, the four-month period ended April 30, 1998, and the years ended December
31, 1997 and 1996, respectively.
Summarized information about the changes in plan assets and benefit
obligation is as follows:
Other
Postretirement
Pension Benefits Benefits
---------------- -----------------
1998 1997 1998 1997
------ ------ ------ -------
Fair value of plan assets at January 1... $ 40.3 $ 85.0 $ - $ -
Actual return on plan assets............. 4.8 6.5 - -
Company contributions.................... 4.1 3.8 - -
Transfer of plan's assets to BTR......... - (52.1)
Transfer of plan's assets from BTR....... 38.4 -
Benefits paid from plan assets........... (4.2) (2.9) - -
------ ------ ------ ------
Fair value of plan assets at December 31. $ 83.4 $ 40.3 $ - $ -
====== ====== ====== ======
F-15
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
Other
Postretirement
Pension Benefits Benefits
---------------- -----------------
1998 1997 1998 1997
------ ------ ------ -------
Benefit obligation at January 1.......... $ 52.7 $ 91.5 $ 5.5 $ 5.1
Service cost............................. 2.1 1.9 0.2 0.1
Interest cost............................ 2.0 3.5 0.1 0.3
Actuarial (gains) losses................. 0.9 2.8 - -
Benefits paid............................ (1.3) (2.9) - -
Transfer from (to) BTR and other......... 39.8 (44.1) - -
------ ------ ------ ------
Benefit obligation at December 31........ $96.2 $ 52.7 $ 5.8 $ 5.5
====== ====== ====== ======
The fair value of international pension plan assets included in the above
table was $44.6 and $8.2 in 1998 and 1997, respectively. The pension benefit
obligation of international plans included in this table was $49.3 and $12.7
in 1998 and 1997, respectively.
A reconciliation of the plans' funded status to the net asset (liability)
recognized at December 31 is as follows:
Other
Postretirement
Pension Benefits Benefits
---------------- -----------------
1998 1997 1998 1997
------ ------ ------ -------
Funded status (benefit obligation
in excess of plan assets).............. $(12.8) $(12.4) $(6.4) $(6.2)
Unrecognized net loss (gain)............. (1.4) 0.2 0.1 0.7
------ ------ ----- -----
Net asset (liability)............ (14.2) (12.2) (6.3) (5.5)
------ ------ ----- -----
Reported as:
Other liabilities...................... $ 14.2 $ 12.2 $ 6.3 $ 5.5
====== ====== ===== =====
For Company pension plans with benefit obligations in excess of plan
assets at December 31, 1998 and 1997, the fair value of plan assets was $45.9
and $32.1, respectively, and the benefit obligation was $61.7 and $45.2,
respectively.
Assumptions used in determining pension plan information are:
<TABLE>
Eight Months Four Months Year Ended
Ended Ended December 31,
December 31, April 30, -----------------------
1998 1998 1997 1996
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Rate of future compensation
increases........................ 0.0%-5.0% 0.0%-5.5% 0.0%-5.5% 4.0%-6.0%
Discount rate...................... 5.0%-7.0% 6.5%-8.0% 6.5%-8.0% 7.3%-10.0%
Expected long-term rate of
return on plan assets............ 0.0%-9.0% 0.0%-9.5% 0.0%-9.5% 0.0%-9.5%
</TABLE>
F-16
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
Assumptions used in determining other post retirement plan information
are as follows:
<TABLE>
Eight Months Four Months Year Ended
Ended Ended December 31,
December 31, April 30, -----------------------
1998 1998 1997 1996
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Rate of future compensation
increases........................ 0.0%-3.5% 0.0%-3.5% 4.0% 5.0%
Discount rate...................... 5.0%-7.0% 5.0%-7.0% 7.8% 7.3%
Expected long-term rate of
return on plan assets............ 0.0%-9.0% 0.0%-9.0% 9.0% 9.0%
</TABLE>
In the aggregate, average international plan assumptions do not vary
significantly from U.S. assumptions.
The health care cost trend rate for other postretirement benefit plans
was 10.0% at December 31, 1998. The rate will gradually decline to 6.0% over a
10-year period. A one percentage point change in the health care cost trend
rate would have had the following effects:
One Percentage Point
--------------------
Increase Decrease
-------- --------
Effect on total service and interest
cost components.................................... $0.1 $0.1
==== ====
Effect on benefit obligation......................... $0.2 $0.2
==== ====
(10) INCOME TAXES:
The provision (benefit) for income taxes consisted of the following:
<TABLE>
Eight Months Four Months Year Ended
Ended Ended December 31,
December 31, April 30, -----------------------
1998 1998 1997 1996
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Current:
Federal.................... $ -- $ -- $(2.1) $(4.8)
State...................... 0.1 -- (0.3) (1.0)
Foreign.................... 3.5 (1.2) 2.6 9.8
----- ----- ----- -----
3.6 (1.2) 0.2 4.0
Deferred:
Federal.................... -- -- (0.1) 0.3
State...................... -- -- -- --
Foreign.................... (0.8) 1.2 0.1 0.7
----- ----- ----- -----
(0.8) 1.2 -- 1.0
----- ----- ----- -----
$ 2.8 $ -- $ 0.2 $ 5.0
===== ===== ===== =====
</TABLE>
F-17
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
Pretax income (loss) was taxed in the following jurisdictions:
<TABLE>
Eight Months Four Months Year Ended
Ended Ended December 31,
December 31, April 30, -----------------------
1998 1998 1997 1996
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Domestic........................... $(25.6) $(12.6) $(518.4) $(52.2)
Foreign............................ 6.1 (2.0) 13.8 29.3
------ ------ ------- ------
Total pretax loss.......... $(19.5) $(14.6) $(504.6) $(22.9)
</TABLE>
The 1997 domestic pretax loss includes the goodwill impairment charge of
$484.4 (see Note 6).
Deferred tax assets and liabilities are comprised of the following at
December 31:
1997 1998
------ ------
Deferred tax liabilities:
Book over tax bases of assets acquired........... $133.6 $90.7
Depreciation..................................... 0.1 14.1
LIFO reserve..................................... 2.7 3.7
Other, net....................................... 7.0 1.9
------ -----
Total deferred tax liabilities.............. 143.4 110.4
------ -----
Deferred tax assets:
Accrued liabilities.............................. 15.0 10.1
Net operating loss carryforwards................. 15.4 9.6
Other, net....................................... 2.6 4.7
------ -----
Total deferred tax assets................... 33.0 24.4
Valuation allowance......................... (15.4) (9.6)
------ -----
Net deferred tax liabilities................ $125.8 $95.6
====== =====
The Company does not provide deferred income taxes on undistributed
earnings of its foreign subsidiaries as such earnings are considered
indefinitely reinvested. At December 31, 1998, the cumulative amount of
undistributed earnings on which the Company has not recognized deferred income
taxes is approximately $155.0. Determining the amount of unrecognized deferred
tax liability for this amount is not practicable. However, if the undistributed
earnings were remitted, any resulting federal tax would be substantially
reduced by foreign tax credits.
F-18
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
The reconciliation of income tax computed at the U.S. federal statutory
tax rates to the Company's tax expense (benefit) is as follows:
<TABLE>
Eight Months Four Months Year Ended
Ended Ended December 31,
December 31, April 30, -----------------------
1998 1998 1997 1996
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
U.S. statutory rate................ (35.0%) (35.0%) (35.0%) (35.0%)
State income taxes................. -- -- -- (4.3%)
Intangibles amortization........... -- -- 35.2% 39.0%
Subpart F income................... 2.6% 2.1% 0.1% 2.3%
Tax on income of foreign
subsidiaries and rate
differential..................... 13.8% -- (0.4%) 2.5%
Change in valuation allowance...... 32.3% 32.9% -- 16.7%
Other, net......................... 0.7% -- 0.1% 0.6%
---- ---- ---- ----
14.4% -- % -- % 21.8%
==== ==== ==== ====
</TABLE>
The Company is included in the consolidated federal and state tax returns
of its ultimate parent, Laminates. Cash (paid) received for income taxes
amounted to ($1.9), ($1.0), $4.0 and $8.5, for the eight-month period ended
December 31, 1998, the four-month period ended April 30, 1998, and years ended
December 31, 1997 and 1996, respectively. The utilization of net operating
loss carryforwards expiring in varying amounts in future periods may be
limited by Internal Revenue Service regulations regarding "change in
ownership" (see Note 2), therefore, the Company has provided a full valuation
allowance against the net operating loss carryforwards.
(11) RELATED PARTY TRANSACTIONS:
During 1996, the Company entered into an arrangement with BTR whereby
certain advances previously provided for the repayment of certain acquisition
related debt and other operating capital was contributed to the capital of the
Company. This transaction, totaling $437.5 million was accounted for as a
contribution of capital from BTR in the Consolidated Statement of Changes in
Stockholder's Equity.
In order to fund its normal working capital requirements, the Company had
entered into certain arrangements with BTR affiliated companies. Such
arrangements were primarily short-term in nature and generally charged no
interest. At December 31, 1997, there was approximately $45.2 outstanding
under these arrangements.
(12) TERMINATION OF PROPOSED ACQUISITION:
During the eight months ended December 31, 1998, the Company recorded a
charge of $3.0 for expenses incurred in connection with its proposed
acquisition of a decorative products business. The Company has abandoned the
proposed transaction.
F-19
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
(13) SEGMENT REPORTING:
In 1998, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for reporting
and disclosure requirements for operating segments.
The Company is principally engaged in a single line of business: the
design, manufacture and distribution of high pressure decorative laminates.
Substantially all revenues result from the sale of decorative laminates
through domestic and international distributors and dealers. The Company's
operations are managed on a geographic basis and, therefore, reportable
segments are based on geographic areas. Segment revenues are defined as net
sales to external customers of each segment. The Company measures segment
results as operating income (loss), which is defined as income (loss) before
goodwill impairment charge, interest expense, other income (expense) and
income taxes. Depreciation and amortization expense is included in the measure
of segment results. All intercompany sales and expenses have been eliminated
in determining segment revenues and segment profit (loss).
<TABLE>
Eight Months Four Months Year Ended
Ended Ended December 31,
December 31, April 30, -----------------------
1998 1998 1997 1996
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Segment revenues
North America................... $234.6 $112.0 $315.0 $301.2
Europe.......................... 92.5 48.4 146.1 156.1
Asia............................ 44.3 17.9 72.3 64.3
------ ------ ------ ------
Total.............. $371.4 $178.3 $533.4 $521.6
====== ====== ====== ======
Segment profit (loss)
North America................... $(10.7) $(13.9) $(33.8) $(13.4)
Europe.......................... 7.6 1.3 9.0 (0.1)
Asia............................ 4.8 (1.1) 5.9 0.1
------ ------ ------ ------
Total.............. $ 1.7 $(13.7) $(18.9) $(13.4)
====== ====== ====== ======
Depreciation and amortization
(included in segment profit
(loss))
North America................... $ 22.4 $ 6.2 $ 32.4 $ 29.3
Europe.......................... 4.6 3.5 17.2 17.5
Asia............................ 2.3 1.4 6.1 5.3
------ ------ ------ ------
Total.................... $ 29.3 $ 11.1 $ 55.7 $ 52.1
====== ====== ====== ======
Expenditures for long-lived assets
North America................... $ 20.6 $ 4.8 $ 27.6 $ 26.9
Europe.......................... 11.1 1.2 11.2 8.4
Asia............................ 3.8 2.3 7.7 9.2
------ ------ ------ ------
Total.................... $ 35.5 $ 8.3 $4 6.5 $ 44.5
====== ====== ====== ======
A reconciliation of total segment
profit (loss) to income (loss)
before income taxes is as follows-
F-20
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
Eight Months Four Months Year Ended
Ended Ended December 31,
December 31, April 30, -----------------------
1998 1998 1997 1996
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Segment revenues
Segment profit (loss)........... $1.7 $(13.7) $ (18.9) $(13.4)
Goodwill impairment charge...... -- -- (484.4) --
Interest expense................ (25.7) (1.7) (3.1) (10.6)
Other income (expense).......... 4.5 0.8 1.8 1.1
------ ------ ------ ------
Loss before income taxes. $(19.5) $(14.6) $(504.6) $(22.9)
====== ====== ======= ======
</TABLE>
December 31,
------------------------------------
1997 1998 1996
-------- -------- --------
Total assets:
United States................... $406.4 $374.0 $ 711.9
North America - Other........... 36.4 34.5 35.6
Europe.......................... 179.1 184.8 298.9
Asia............................ 74.9 54.4 90.4
------ ------ --------
Total.............. $696.8 $647.7 $1,136.8
====== ====== ========
Long-lived assets:
United States................... $128.6 $151.9 $ 122.6
North America - Other........... 14.3 15.4 16.8
Europe.......................... 106.6 80.7 92.9
Asia............................ 39.2 32.0 22.6
------ ------ --------
Total.............. $288.7 $280.0 $ 254.9
====== ====== ========
(14) CHANGES IN ACCOUNTING ESTIMATES:
During the eight and four-months periods ended December 31 and April 30,
1998, the Company made certain changes in accounting estimates, resulting in
charges totaling $7.8 million and $5.7 million, respectively, due to new
management plans with the respect to asset carrying and disposition policies
and new information becoming available, including information concerning
customers, products and competitive conditions in certain markets. The changes
in accounting estimates for the eight-month period ended December 31, 1998
include increasing the provisions for doubtful accounts and inventory
obsolescence by $2.4 million and $5.4 million, respectively. The changes in
accounting estimates for the four-month period ended April 30, 1998 include
increasing the provision for customer rebate programs by $2.7 million,
increasing the provision for doubtful accounts by $1.4 million and accruals
for customs, property tax exposures and other items totaling $1.6 million.
F-21
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
(15) COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases certain machinery, such as transportation and plant
equipment, and facilities, such as administrative offices and warehouse space,
under various non-cancelable operating lease agreements.
At December 31, 1998, future minimum lease payments under operating lease
agreements that have a remaining term in excess of one year are as follows:
1999.......................................................... $ 6.3
2000.......................................................... 5.7
2001.......................................................... 4.7
2002.......................................................... 3.7
2003.......................................................... 3.3
Thereafter.................................................... 2.9
-----
$26.6
=====
Rent expense aggregated $5.3, $2.4, $7.8 and $7.6 for the eight-month
period ended December 31, 1998, the four-month period ended April 30, 1998, and
the years ended December 31, 1997 and 1996, respectively.
Letters of Credit
At December 31, 1998, the Company was contingently liable for
approximately $30.3 of documentary and performance letters of credit.
Purchase Commitments
During 1996, the Company entered into a contract, expiring in 2002, to
purchase laminate flooring from an outside supplier. Minimum purchase
commitments for laminate flooring at December 31, 1998 are as follows:
1999.......................................................... $20.1
2000.......................................................... 22.0
2001.......................................................... 19.0
2002.......................................................... 4.5
-----
$65.6
=====
Purchases under such contract were $14.6 and $19.6 for the years ended
December 31, 1998 and 1997, respectively.
Assuming the Company did not make any of its annual minimum purchase
commitments over the remaining term of the contract, the maximum aggregate
penalty which could be incurred would approximate $32.8.
F-22
<PAGE>
FORMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)
Litigation and Environmental Matters
In the ordinary course of business, the Company is the subject of or
party to various pending litigation and claims. While it is not possible to
predict with certainty the outcome of any potential litigation or claims, the
Company believes, any known contingencies, individually or in the aggregate,
will not have a material adverse impact on its financial position or results
of operations.
The Company has been the subject of administrative proceedings, litigation
and investigations relating to environmental matters. Currently, the Company
has been named as a potentially responsible party at several Superfund sites
and has reserved $4.0 at December 31, 1998 and 1997 with respect to two such
sites. The Company believes that the ultimate resolution of these matters
should not have a material adverse effect on the Company's financial position
or results of operations.
F-23
<PAGE>
=====================================================
You should rely only on the information contained in
this document or that we have referred you to.
We have not authorized anyone to provide you with
information that is different. We are not making an
offer of these securities in any state where the
offer is not permitted. You should not assume that
the information in this prospectus or any prospectus
supplement is accurate as of any date other than the
date on the front of those documents.
----------------------
TABLE OF CONTENTS
Page
Prospectus Summary..................................3
Risk Factors.......................................14
Use of Proceeds....................................22
Capitalization.....................................23
Selected Consolidated Financial Data...............24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ...................................26
Business...........................................33
Management.........................................50
Security Ownership of Certain Beneficial
Owners and Management of Laminates
Stockholders..................................54
Certain Relationships and Transactions.............57
The Acquisition....................................58
Description of New Credit Facility.................60
Description of Notes...............................62
The Exchange Offer.................................99
Certain United States Tax Consequences
of the Exchange Offer........................106
Plan of Distribution..............................106
Legal Matters.....................................106
Change in Independent Auditors....................106
Experts...........................................107
Unaudited Pro Forma Condensed Consolidated
Financial Data...............................P-1
Index to Financial Statements.....................F-1
=====================================================
<PAGE>
=====================================================
$215,000,000
Formica Corporation
107/8% Series B Senior Subordinated Notes Due
2009
------------------------------------
Prospectus
------------------------------------
o, 1999
=====================================================
<PAGE>
The information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in an y state where the offer or sale is not
permitted.
[ALTERNATE FRONT COVER FOR MARKET-MAKING PROSPECTUS]
SUBJECT TO COMPLETION, DATED APRIL __, 1999
PROSPECTUS
FORMICA CORPORATION
107/8% Series B Senior Subordinated Notes due 2009
-----------------------
The Company
o We are one of the leading brand names in the decorative surfacing
products market and are one of the largest producers of high pressure
decorative laminates in the world.
The Original Offering:
o We issued the notes in a private offering on
February 22, 1999.
o We used such net proceeds to repay in full the $200 million principal
amount outstanding under the bridge notes together with accrued interest.
The remaining net proceeds were used for general corporate purposes and
initially were temporarily invested in short-term securities.
The Notes:
o Maturity: March 1, 2009
o Interest Payment: semi-annually on March 1 and September 1, commencing on
September 1, 1999.
o Optional Redemption: The notes will be redeemable on or after March 1,
2004 at the prices state herein. In addition, we may redeem up to 35% of
the notes on or prior to March 1, 2002 at a redemption price of 110.875%
of the principal amount, plus accrued interest, with the net cash proceeds
of one or more Public Equity Offerings provided that at least 65% of the
aggregate principal amount of the notes remain outstanding after such
redemption.
o Mandatory Redemption: We also have the right to redeem, and you have the
right to require us to purchase, the notes upon the occurrence of certain
change of control events, at the prices set forth herein.
o Ranking of Notes: The notes are general unsecured obligations,
subordinated to all of our senior obligations, including any borrowings
under our bank credit facility. The notes rank senior to all subordinated
indebtedness. The notes will effectively rank junior to all liabilities of
our subsidiaries.
o As of December 31, 1998, after giving effect to the offering, Formica had
outstanding approximately $85.0 million of senior indebtedness, and our
subsidiaries had approximately $113.0 million of outstanding liabilities,
including trade payables.
This investment involves risks. See "Risk Factors" beginning on page __.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
This prospectus will be used by Donaldson, Lufkin & Jenrette Securities
Corporation in connection with offers and sales in market-making transactions
at negotiated prices related to prevailing market prices. There is currently
no public market for the notes. We do not intend to list the notes on any
securities exchange. Donaldson, Lufkin & Jenrette Securities Corporation has
advised us that it is currently making a market in the notes; however, it is
not obligated to do so and may stop at any time. Donaldson, Lufkin & Jenrette
Securities Corporation may act as principal or agent in any such transaction.
We will not receive the proceeds of the sale of the notes but will bear the
expenses of registration.
- --------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette
The date of this Prospectus is , 1999.
<PAGE>
Trading Market for the Notes
There is no existing trading market for the notes, and we cannot assure
you about the future development of a market for the notes or your ability to
sell their new notes or the price at which you may be able to sell your notes.
If such market were to develop, the notes could trade at prices that may be
higher or lower than their initial offering price depending on many factors,
including prevailing interest rates, our operating results and the market for
similar securities. Although it is not obligated to do so, DLJSC intends to
make a market in the notes. Any such market-making activity may be
discontinued at any time, for any reason, without notice at the sole
discretion of DLJSC. No assurance can be given as to the liquidity of or the
trading market for the notes.
DLJSC may be deemed to be our "affiliate" (as defined the Securities Act)
and, as such, may be required to deliver a prospectus in connection with its
market-making activities in the notes. Pursuant to the registration rights
agreement that we signed with DLJSC in connection with the initial sale of the
notes, we have agreed to use our best efforts to file and maintain a
registration statement that would allow DLJSC to engage in market-making
transactions in the notes for up to 90 days from the date on which we
consummate the offer to exchange the notes for the old notes. We have agreed
to bear substantially all the costs and expenses related to registration.
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes by
DLJSC in market-making transactions. We will not receive any of the proceeds
from such transactions.
PLAN OF DISTRIBUTION
This prospectus is to be used by DLJSC in connection with offers and
sales of the new notes in market-making transactions effected from time to
time. DLJSC may act as a principal or agent in such transactions, including as
agent for the counterparty when acting as principal or as agent for both
counterparties, and may receive compensation in the form of discounts and
commissions, including from both counterparties when it acts as agent for
both. Such sales will be made at prevailing market prices at the time of sale,
at prices related thereto or at negotiated prices.
DLJ Merchant Banking, an affiliate of DLJSC, and certain of its
affiliates beneficially own approximately 45.1% of the common stock of
Formica. Thompson Dean and Peter T. Grauer, each of whom is a principal of DLJ
Merchant Banking, are members of the board of directors of Laminates, Holdings
and Formica. Further, DLJ Capital Funding, Inc., an affiliate of DLJSC, acted
as syndication agent in connection with the new credit facility for which it
received certain customary fees and expenses and Laminates Funding, Inc., an
affiliate of DLJSC, purchased a portion of the bridge notes, for which it
received customary fees and expenses. DLJSC has, from time to time, provided
investment banking and other financial advisory services to Formica in the
past for which it has received customary compensation, and will provide such
services and financial advisory services to Formica in the future. DLJSC acted
as purchaser in connection with the initial sale of the old notes and received
an underwriting discount of approximately $__ million in connection therewith.
In addition, DLJSC received a advisory fee of $1.0 million in cash from
Laminates after the consummation of the acquisition. See "Certain
Relationships and Related Transactions."
DLJSC has informed Formica that it does not intend to confirm sales of
the new notes to any accounts over which it exercises discretionary authority
without the prior specific written approval of such transactions by the
customer.
Formica has been advised by DLJSC that, subject to applicable laws and
regulations, DLJSC currently intends to make a market in the new notes
following completion of the exchange offer. However, DLJSC is not obligated to
do so and any such market-making may be interrupted or discontinued at any
time without notice. In addition, such market-making activity will be subject
to the limits imposed by the Securities Act and the Exchange Act. There can
<PAGE>
be no assurance that an active trading market will develop or be sustained.
See "Risk Factors--Trading Market for the New Notes."
DLJSC and Formica have entered into the Registration Rights Agreement
with respect to the use by DLJSC of this prospectus. Pursuant to such
agreement, Formica agreed to bear all registration expenses incurred under
such agreement, and Formica agreed to indemnify DLJSC against certain
liabilities, including liabilities under the Securities Act.
<PAGE>
[BACK COVER FOR MARKET-MAKING PROSPECTUS]
=====================================================
You should rely only on the information
contained in this document or that we have referred
you to. We have not authorized anyone to provide
you with information that is different. We are not
making an offer of these securities in any state
where the offer is not permitted. You should not
assume that the information in this prospectus or
any prospectus supplement is accurate as of any
date other than the date on the front of those
documents.
----------------------
TABLE OF CONTENTS
Page
Prospectus Summary..................................3
Risk Factors.......................................14
Use of Proceeds....................................22
Capitalization.....................................23
Selected Consolidated Financial Data...............24
Management's Discussion and Analysis of
Financial Condition and Results of Operations...26
Business...........................................33
Management.........................................50
Security Ownership of Certain Beneficial Owners
and Management of Laminates Stockholders........54
Certain Relationships and Transactions.............57
The Acquisition....................................58
Description of New Credit Facility.................60
Description of Notes...............................62
Plan of Distribution..............................106
Legal Matters.....................................106
Change in Independent Auditors....................106
Experts...........................................107
Unaudited Pro Forma Condensed Consolidated
Financial Data.................................P-1
Index to Financial Statements.....................F-1
=====================================================
<PAGE>
=====================================================
$215,000,000
Formica Corporation
107/8% Series B Senior Subordinated Notes Due
2009
------------------------------------
Prospectus
------------------------------------
Donaldson, Lufkin & Jenrette
o, 1999
=====================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than
underwriting discounts and commissions.
Item Amount
SEC Registration Fee................................................. $59,770
Printing and Engraving Costs......................................... *
Trustee Fees......................................................... *
Legal Fees and Expenses.............................................. *
Accounting Fees and Expenses......................................... *
Miscellaneous........................................................ *
-------
Total............................................................. *
=======
- ---------
*To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Exculpation. Section 102(b)(7) of the Delaware General Corporations Law
("Delaware Law") permits a corporation to include in its certificate of
incorporation a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision may not
eliminate or limit the liability of a director for any breach of the
director's duty of loyalty to the corporation or its stockholders, for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, for the payment of unlawful dividends, or for any
transaction from which the director derived an improper personal benefit.
The Formica certificate of incorporation (the "Formica Charter") limits
the personal liability of a director to Formica and its stockholders for
monetary damages for a breach of fiduciary duty as a director to the fullest
extent permitted by law.
Indemnification. Section 145 of the Delaware Law permits a corporation to
indemnify any of its directors or officers who was or is a party, or is
threatened to be made a party to any third party proceeding by reason of the
fact that such person is or was a director or officer of the corporation,
against expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reason to believe that such person's conduct was
unlawful. In a derivative action, i.e., one by or in the right of a
corporation, the corporation is permitted to indemnify directors and officers
against expenses (including attorneys' fees) actually and reasonably incurred
by them in connection with the defense or settlement of an action or suit if
they acted in good faith and in a manner that they reasonably believed to be
in or not opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable
to the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
directors or officers are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
The Formica Charter provides for indemnification of directors, officers,
employees or agents of Formica against liability they may incur in their
capacities as such to the fullest extent permitted under the Delaware Law.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On February 22, the Registrant sold $215,000,000 in aggregate principal
amount of its 10 7/8% Senior Subordinated Notes due 2009 (the "old notes"), to
Donaldson, Lufkin & Jenrette Securities Corporation, BT Alex. Brown and Credit
Suisse First Boston (the "initial purchasers") in a private placement in
reliance on Section 4(2) under the Securities Act, at an offering price of
$970 per $1,000 principal amount at maturity. The old notes were immediately
resold by the initial purchasers in transactions not involving a public
offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Exhibit No. Document
- ----------- ---------
1.1 Registration Rights Agreement dated as of February 22, 1999
between Formica and Donaldson, Lufkin & Jenrette Securities
Corporation, BT Alex. Brown Incorporated and Credit Suisse First
Boston as Initial Purchasers
3.1 Certificate of Incorporation
3.2 By laws
4.1 Indenture, dated as of February 22, 1999 between Formica and the
Trustee
5.1 Opinion of Davis Polk & Wardwell with respect to the new notes
10.1 Investors' Agreement dated as of April 30, 1998 among Laminates,
the DLJ Merchant Banking funds, the Institutional Investors and
the Management Shareholders
10.2 Restricted Stock Program
10.3 Employment Agreement of Vincent Langone
10.4 Employment Agreement of David Schneider
10.5 Amended and Restated Credit Agreement dated as of July 20, 1998
among Formica, certain Formica subsidiaries and a syndicate of
financial institutions led by DLJ Capital Funding, Inc.
12.1 Computation of Ratio of Earnings to Fixed Charges
16.1 Letter from Ernst & Young LLP regarding change in independent
auditors
21.1 Subsidiaries of Formica
23.1 Consent of Davis Polk & Wardwell (contained in their opinion
filed as Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Ernst & Young LLP
24.1 Power of Attorney (Included on the signature page of this
registration statement)
* 25.1 Statement of Eligibility of Summit Bank on Form T-1.
27 Financial Data Schedule
* 99.1 Form of Letter of Transmittal
* 99.2 Form of Notice of Guaranteed Delivery
* 99.3 Form of Letter to Clients
* 99.4 Form of Letter to Nominees
II-2
<PAGE>
Exhibit No. Document
- ----------- ---------
* 99.5 Form of Instructions to Registered Holder and/or Book-Entry
Transfer Participant from Owner
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules and Auditors' Reports thereon
Valuation and Qualifying Accounts
<TABLE>
- ----------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ----------------------------------------------------------------------------------------------------------
Additions
Charged Charged to
Balance at to Costs Other Balance
Beginning and Accounts Deductions at End of
Description of Period Expenses - Describe - Describe Period
- ----------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Deducted from assets accounts:
Allowance for doubtful accounts.... $1.5 $6.0 -- $(3.3)(1) $4.2
==== ==== === ===== ====
Year ended December 31, 1997:
Deducted from assets accounts:
Allowance for doubtful accounts.... 1.4 3.0 -- (2.9)(1) 1.5
==== ==== === ===== ====
Year ended December 31, 1996:
Deducted from assets accounts:
Allowance for doubtful accounts.... 2.6 1.8 -- (3.0)(1) 1.4
==== ==== === ===== ====
- ---------------------------------------------------------------------------------------------------------
(1) Write-off of uncollectible accounts.
</TABLE>
II-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of
Formica Corporation:
We have audited in accordance with generally accepted auditing
standards, the financial statements of Formica Corporation, as of December 31,
1998 and for the four-month period ended April 30, 1998 and for the eight-month
period ended December 31, 1998, included in this registration statement, and
have issued our report thereon dated March 3, 1999. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in Item 16(b) of this registration statement is the
responsibility of the company's management and is presented for purposes of
complying with the Securities and Exchange Commissions rules and is not part of
the basic financial statements. The information in this schedule for the year
ended December 31, 1998, has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly state
in all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Roseland, New Jersey
March 3, 1999
II-4
<PAGE>
Report of Independent Auditors on Schedule
We have audited the consolidated financial statements of Formica
Corporation as of December 31, 1997, and for each of the two years in the period
then ended, and have issued our report thereon dated May 7, 1998 (except for
Note 3 -- "Reclassifications" as to which the date is March 3, 1999), included
elsewhere in this Registration Statement. Our audits also included the financial
statement schedule as of December 31, 1997 and 1996 and for each of the two
years in the period ended December 31, 1997 listed in Item 16(b) of this
Registration Statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
White Plains, New York
May 7, 1998
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) under the
Securities Act of 1933 if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
II-6
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Formica pursuant to the foregoing provisions, or otherwise, Formica 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 Formica of expenses
incurred or paid by a director, officer or controlling person of Formica 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, Formica 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.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Warren, State of New Jersey, on
April 21, 1999.
FORMICA CORPORATION
By: /s/ David T. Schneider
-------------------------------------
David T. Schneider
Vice President, Chief Financial
Officer and Secretary
The registrant and each person whose signature appears below constitutes
and appoints David T. Schneider, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign and file (1) any and
all amendments (including post-effective amendments) to this registration
statement, with all exhibits thereto, and other documents in connection
therewith, and (2) a registration statement, and any and all amendments,
thereto, relating to the offering covered hereby filed pursuant to Rule 462(b)
under the Securities Act of 1933, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Vincent P. Langone
- ------------------------- Director, Chairman, President and April 21, 1999
Vincent P. Langone Chief Executive Officer
/s/ David T.Schneider
- ------------------------- Vice President, Chief Financial April 21, 1999
David T. Schneider Officer and Secretary (Principal
Financial and Accounting Officer)
/s/ Thompson Dean
- ------------------------- Director April 21, 1999
Thompson Dean
/s/ Peter T. Grauer
- ------------------------- Director April 21, 1999
Peter T. Grauer
/s/ David Y. Howe
- ------------------------- Director April 21, 1999
David Y. Howe
- ------------------------- Director April 21, 1999
Alexander Donald Mackenzie
II-8
EXHIBIT 1.1
EXECUTION COPY
================================================================================
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
FORMICA CORPORATION
as Issuer
$215,000,000
10-7/8% SENIOR SUBORDINATED NOTES DUE 2009
Dated as of February 22, 1999
-------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
CREDIT SUISSE FIRST BOSTON
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of February 22, 1999, by and among Formica Corporation, Inc., a Delaware
corporation (the "Issuer"), and Donaldson, Lufkin & Jenrette Securities
Corporation, BT Alex. Brown and Credit Suisse First Boston (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed
to purchase the Company's 10-7/8% Series A Senior Notes due 2009 (the "Series A
Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
February 17, 1999 (the "Purchase Agreement"), by and among the Issuer and the
Initial Purchasers. In order to induce the Initial Purchasers to purchase the
Series A Notes, the Issuer has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 3 of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them the Indenture, dated February 22, 1999,
between the Company and Summit Bank, as Trustee, relating to the Series A Notes
and the Series B Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144.
Affiliated Market Maker: A Broker-Dealer who is deemed to be an
Affiliate of the Issuer.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Issuer to
the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes validly
tendered and not withdrawn by Holders thereof pursuant to the Exchange Offer.
Consummation Date: The date on which the Exchange Offer is consummated.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Sections 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Issuer of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are validly tendered and not withdrawn in connection with
such exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act, and pursuant
to Regulation S.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Issuer
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) that is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Issuer's 10-7/8% Senior Subordinated Notes due 2009
to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) as
contemplated by Section 6(b) hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb),
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each (a) Series A Note, until the
earliest to occur of (i) the date on which such Series A Note is exchanged in
the Exchange Offer for a Series B Note, (ii) the date on which such Series A
Note has been disposed of in accordance with a Shelf Registration Statement (and
the purchasers thereof have been issued Series B Notes), and (iii) the date on
which such Series A Note is distributed to the public pursuant to Rule 144 under
the Act and (b) each Series B Note issued to a Broker-Dealer in the Exchange
Offer until the date on which such Series B Note is disposed of by such
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the Prospectus
contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person is the holder of record of Transfer
Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) hereof have been
complied with), the Issuer shall use its reasonable best efforts to (i) cause
the Exchange Offer Registration Statement to be filed with the Commission as
soon as practicable after the Closing Date, but in no event later than 90 days
after the Closing Date (such 90th day, the "Filing Deadline"), (ii) cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 180 days after the Closing Date (such
180th day, the "Effectiveness Deadline"), (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, and (B) subject to the proviso in Section 6(c)(xii) hereof, cause all
necessary filings, if any, in connection with the registration and qualification
of the Series B Notes to be made under the Blue Sky laws of such jurisdictions
as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and,
within the time periods contemplated by Section 3(b) hereof, Consummate the
Exchange Offer. The Exchange Offer shall be on the appropriate form permitting
(i) registration of the Series B Notes to be offered in exchange for the Series
A Notes that are Transfer Restricted Securities and (ii) resales of Series B
Notes by Broker-Dealers that tendered into the Exchange Offer Series A Notes
that such Broker-Dealer acquired for its own account as a result of
market-making activities or other trading activities (other than Series A Notes
acquired directly from the Issuer or any of its Affiliates) as contemplated by
Section 3(c) hereof.
(b) The Issuer shall use its reasonable best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided that in no event shall such period be less than 20
Business Days. The Issuer shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Series B Notes shall be included in the Exchange Offer Registration Statement.
The Issuer shall use its reasonable best efforts to cause the Exchange Offer to
be Consummated within 30 Business Days after the Exchange Offer Registration
Statement has become effective, but in no event later than 40 Business Days
thereafter (such 40th day, the "Consummation Deadline").
(c) The Issuer shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Issuer or any Affiliate of the Issuer), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission.
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Issuer shall
permit the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery requirement
for a period of 90 days following the Consummation Date. To the extent necessary
to ensure that the prospectus contained in the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, the Issuer
agrees to use its reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented, amended and current
as required by and subject to the provisions of Sections 6(a) and (c) hereof and
in conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of 90 days from the Consummation Date or such shorter period as will
terminate when no Transfer Restricted Securities are outstanding. The Issuer
shall provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Issuer has complied with the procedures set forth in
Section 6(a)(i) hereof) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Issuer in writing within 20 Business Days following the
Consummation Deadline that (A) based on an opinion of counsel, such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder is a Broker-Dealer and holds Series A Notes acquired directly
from the Issuer or any of its Affiliates, then the Issuer shall:
(x) cause to be filed, on or prior to 90 days after the
earlier of (i) the date on which the Issuer determines that the
Exchange Offer Registration Statement cannot be filed as a result of
Section 4(a)(i) hereof and (ii) the date on which the Issuer receives
the notice specified in Section 4(a)(ii) hereof (such earlier date, the
"Filing Deadline"), a shelf registration statement (the "Shelf
Registration Statement") pursuant to Rule 415 under the Act (which may
be an amendment to the Exchange Offer Registration Statement) relating
to (1) all Transfer Restricted Securities in the case of clause (a)(i)
above or (2) the Transfer Restricted Securities specified in any notice
in the case of clause (a)(ii) above; and
(y) shall use its reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 180 days
after the Filing Deadline for the Shelf Registration Statement (such
180th day, the "Effectiveness Deadline").
If, after the Issuer has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) hereof, the Issuer is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., Section
4(a)(i) hereof), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; provided that,
in such event, the Issuer shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement
is available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Issuer shall
use its reasonable best efforts to keep any Shelf Registration Statement
required by this Section 4(a) continuously effective, supplemented, amended and
current as required by and subject to the provisions of Sections 6(b) and (c)
hereof and in conformity with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, until the later of (a) the date on which no Initial Purchaser is deemed to
be an Affiliate of the Issuer, and (b) the earlier of the second anniversary of
the Closing Date (as such date may be extended pursuant to Section 6(d) hereof)
and such earlier date when no Transfer Restricted Securities covered by such
Shelf Registration Statement remain outstanding.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuer in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Issuer by such Holder not materially misleading.
(c) Holders of Transfer Restricted Securities that do not give the
written notice within the 20 Business Day period set forth in Section 4(a)
hereof, if required to be given, will no longer have any registration rights
pursuant to this Section 4 and will not be entitled to any Liquidated Damages
pursuant to Section 5 hereof in respect of the Issuer's obligations with respect
to the Shelf Registration Statement. Notwithstanding the foregoing, no Affiliate
of the Company shall be required to give such written notice or deliver an
opinion in order to maintain its registration rights pursuant to this Section 4.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within ten Business Days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself declared effective within ten Business Days of filing
such post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "Registration Default"), then the
Issuer hereby agrees to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.25 per week
per $1,000 in principal amount of Transfer Restricted Securities; provided that
the Issuer shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, or (5)
if sooner, upon the first date on which no Transfer Restricted Securities remain
outstanding, in the case of clauses (i) through (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Issuer to pay liquidated damages with respect to securities that accrued prior
to the time such securities ceased to be Transfer Restricted Securities shall
survive until such time as such obligations with respect to such securities
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Issuer shall (x) comply with all applicable provisions of
Section 6(c) hereof, (y) use its reasonable best efforts to effect such exchange
and to permit the resale of Series B Notes by Broker-Dealers that tendered in
the Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market-making activities or other trading activities
(other than Series A Notes acquired directly from the Issuer or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers, such as
the Exchange Offer, that, in the opinion of counsel to the Issuer,
raises a substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Issuer hereby agrees to seek a
no-action letter or other favorable decision from the Commission
allowing the Issuer to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Issuer hereby agrees to use its reasonable
best efforts in pursuing the issuance of such a decision to the
Commission staff level.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker-Dealer) shall furnish,
upon the request of the Issuer, prior to the Consummation of the
Exchange Offer, a written representation to the Issuer (which may be
contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that, at the time of
Consummation of the Exchange Offer, (A) any Series B Notes received by
such Holder will be acquired in the ordinary course of its business,
(B) such Holder will have no arrangement or understanding with any
person to participate in the distribution of the Series A Notes or the
Series B Notes within the meaning of the Act, (C) if the Holder is not
a Broker-Dealer or is a Broker-Dealer but will not receive Series B
Notes for its own account in exchange for Series A Notes, neither the
Holder nor any such other Person is engaged in or intends to
participate in a distribution of the Series B Notes, and (D) that such
Holder is not an Affiliate of the Issuer. If the Holder is a
Broker-Dealer that will receive Series B Notes for its own account in
exchange for Series A Notes, it will represent that the Notes to be
exchanged for the Series B Notes were acquired by it as a result of
market-making activities or other trading activities, and will
acknowledge that it will deliver a prospectus meeting the requirements
of the Act in connection with any resale of such Series B Notes. It is
understood that, by acknowledging that it will deliver, and by
delivering, a prospectus meeting the requirements of the Act in
connection with any resale of such Series B Notes, the Holder is not
admitting that it is an "underwriter" within the meaning of the Act.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Issuer shall provide a supplemental letter
to the Commission (A) stating that the Issuer is registering the
Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988) and
Morgan Stanley and Co., Inc. (available June 5, 1991), as interpreted
in the Commission's letter to Shearman & Sterling dated July 2, 1993,
and, if applicable, any no-action letter obtained pursuant to clause
(i) above, (B) including a representation that the Issuer has not
entered into any arrangement or understanding with any Person to
distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Issuer's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B
Notes received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Issuer shall:
(i) comply with all the provisions of Section 6(c) hereof and
use its reasonable best efforts to effect such registration to permit
the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Issuer pursuant to
Section 4(b) hereof), and pursuant thereto the Issuer will prepare and
file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof
within the time periods and otherwise in accordance with the provisions
hereof, and
(ii) issue, upon the request of any Holder or purchaser of
Series A Notes covered by any Shelf Registration Statement contemplated
by this Agreement, Series B Notes having an aggregate principal amount
equal to the aggregate principal amount of Series A Notes sold pursuant
to the Shelf Registration Statement and surrendered to the Issuer for
cancellation; the Issuer shall register Series B Notes on the Shelf
Registration Statement for this purpose and issue the Series B Notes to
the purchaser(s) of securities subject to the Shelf Registration
Statement in the names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Issuer shall, during
the periods specified in Sections 3 and 4 hereof, as applicable:
(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Issuer shall file promptly an appropriate amendment to such
Registration Statement or a supplement to the Prospectus, as
applicable, curing such defect, and, in the case of an amendment, use
its reasonable best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise each Holder whose Transfer Restricted Securities
have been included in a Shelf Registration Statement (in the case of
the Shelf Registration Statement) and Affiliated Market Maker promptly
and, if requested by such Person, confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any applicable
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, and (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made
in the Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Issuer shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) hereof shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each Holder whose Transfer Restricted
Securities have been included in a Shelf Registration Statement (in the
case of the Shelf Registration Statement) and each Affiliated Market
Maker in connection with such sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such Persons, if any, for a period of at least five Business Days,
and the Issuer will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which such Persons shall reasonably object within five
Business Days after the receipt thereof. Such Persons shall be deemed
to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or fails to comply with the applicable requirements of
the Act;
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to each Holder whose
Transfer Restricted Securities have been included in a Shelf
Registration Statement (in the case of the Shelf Registration
Statement) and each Affiliated Market Maker in connection with such
sale or exchange, if any, make the Issuer's representatives available
for discussion of such document and other customary due diligence
matters, and include such information in such document prior to the
filing thereof as such Persons may reasonably request;
(vii) make available, at reasonable times, for inspection by
each Holder whose Transfer Restricted Securities have been included in
a Shelf Registration Statement (in the case of the Shelf Registration
Statement) and each Affiliated Market Maker and any attorney or
accountant retained by such Persons, all financial and other records,
pertinent corporate documents of the Issuer and cause the Issuer's
officers, directors and employees to supply all information reasonably
requested by any such Persons, attorney or accountant in connection
with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its
effectiveness;
(viii) if requested by any Holders whose Transfer Restricted
Securities have been included in a Shelf Registration Statement (in the
case of the Shelf Registration Statement) or any Affiliated Market
Maker, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Persons may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities and the
use of the Registration Statement or Prospectus for market-making
activities; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as practicable after the Issuer is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(ix) furnish to each Holder whose Transfer Restricted
Securities have been included in a Shelf Registration Statement (in the
case of the Shelf Registration Statement) in connection with such
exchange or sale and each Affiliated Market Maker, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(x) deliver to each Holder whose Transfer Restricted
Securities have been included in a Shelf Registration Statement and
each Affiliated Market Maker without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Issuer
hereby consents to the use (in accordance with law and subject to
Section 6(d) hereof) of the Prospectus and any amendment or supplement
thereto by each selling Person in connection with the offering and the
sale of the Transfer Restricted Securities covered by the Prospectus or
any amendment or supplement thereto and all market-making activities of
such Affiliated Market Maker, as the case may be;
(xi) upon the request of any Holder whose Transfer Restricted
Securities have been included in a Shelf Registration Statement (in the
case of the Shelf Registration Statement) or the Initial Purchasers,
enter into such agreements (including underwriting agreements) and make
such representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by such Person in connection with any sale or
resale pursuant to any applicable Registration Statement. In such
connection, and also in connection with market making activities by any
Affiliated Market Maker, the Issuer shall:
(A) upon request of any such Person, furnish (or in the case
of paragraphs (2) and (3), use its reasonable best efforts to cause to
be furnished) to each Holder (in the case of the Shelf Registration
Statement) and the Initial Purchasers, upon Consummation of the
Exchange Offer or upon the effectiveness of the Shelf Registration
Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf
of the Issuer by (x) the President or any Vice President and
(y) a principal financial or accounting officer of the Issuer,
confirming, as of the date thereof, the matters set forth in
Sections 6(y), 9(a) and 9(b) of the Purchase Agreement and
such other similar matters as such Person may reasonably
request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Issuer covering matters similar to those set forth in Sections
9(e) and (f) of the Purchase Agreement and such other matters
as such Person may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Issuer and representatives of the
independent public accountants for the Issuer and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on the
basis of the foregoing (relying as to materiality to the
extent such counsel deems appropriate upon the statements of
officers and other representatives of the Issuer) and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer,
as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial data included in any Registration
Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Issuer's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 9(h) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by such Persons to evidence compliance with
the matters covered in clause (A) above and with any customary
conditions contained in any agreement entered into by the Issuer
pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided that the Issuer shall
not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it
to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at
least two Business Days prior to such sale of Transfer Restricted
Securities;
(xiv) use its reasonable best efforts to cause the disposition
of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvi) otherwise use their reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to their security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in Rule 158(c) under the Act);
(xvii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its reasonable best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner; and
(xviii) provide promptly to each Holder and Affiliated Market
Maker, upon request, each document filed with the Commission pursuant
to the requirements of Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security and each Affiliated Market Maker agrees that, upon
receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the
Issuer of the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such Person will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until (i) such Person has received copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(iv)
hereof, or (ii) such Person is advised in writing by the Issuer that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus (in
each case, the "Recommencement Date"). Each Person receiving a Suspension Notice
hereby agrees that it will either (i) destroy any Prospectuses, other than
permanent file copies, then in such Person's possession which have been replaced
by the Issuer with more recently dated Prospectuses or (ii) deliver to the
Issuer (at the Issuer's expense) all copies, other than permanent file copies,
then in such Person's possession of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of the Suspension
Notice. The time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by a number of days equal to the number of days in the period from and including
the date of delivery of the Suspension Notice to the date of delivery of the
Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuer's performance of or compliance
with this Agreement will be borne by the Issuer, regardless of whether a
Registration Statement becomes effective, including, without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B Notes
to be issued in the Exchange Offer and printing of Prospectuses (whether for
exchanges, sales, market-making or otherwise), messenger and delivery services
and telephone; (iv) all fees and disbursements of counsel for the Issuer; (v)
all application and filing fees in connection with listing the Series B Notes on
a national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Issuer (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Issuer will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Issuer.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuer will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities who are
tendering Series A Notes in the Exchange Offer and/or selling or reselling
Series A Notes or Series B Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuer agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Issuer to any Holder or
any prospective purchaser of Series B Notes or registered Series A Notes, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Issuer by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Issuer, its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Issuer, to the same extent
as the foregoing indemnity from the Issuer set forth in Section 8(a) hereof, but
only with reference to information relating to such Holder furnished in writing
to the Issuer by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in
writing, and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that, in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required
to assume the defense of such action pursuant to this Section 8(c), but may
employ separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party,
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by a majority of the Holders, in the case of the parties indemnified
pursuant to Section 8(a), and by the Issuer, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty Business Days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuer, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) hereof but also the relative
fault of the Issuer, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Issuer, on the one hand, and
of the Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Issuer, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments.
The Issuer and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8, no Holder, its directors, its
officers or any Person, if any, who controls such Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder hereunder
and not joint.
(e) The Issuer agrees that the indemnity and contribution provisions of
this Section 8 shall apply to the Affiliated Market Makers to the same extent
and on the same conditions, as it applies to Holders.
SECTION 9. RULE 144A and RULE 144
The Issuer agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Issuer (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Issuer acknowledges and agrees that any failure by
the Issuer to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
or Affiliated Market Makers for which there is no adequate remedy at law, that
it will not be possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Initial Purchasers or any Holder or
Affiliated Market Makers may obtain such relief as may be required to
specifically enforce the Issuer's obligations under Sections 3 and 4 hereof. The
Issuer further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuer will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Issuer has not previously
entered into any agreement that will remain in effect after the issuance of the
Notes granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Issuer's securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Issuer has obtained the written consent of
Holders of all outstanding Transfer Restricted Securities, and (ii) in the case
of all other provisions hereof, the Issuer has obtained the written consent of
Holders of a majority of the outstanding principal amount of Transfer Restricted
Securities (excluding Transfer Restricted Securities held by the Issuer or its
Affiliates). Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights of Holders
whose Transfer Restricted Securities are being tendered pursuant to the Exchange
Offer, and that does not affect directly or indirectly the rights of other
Holders whose Transfer Restricted Securities are not being tendered pursuant to
such Exchange Offer, may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities subject to such
Exchange Offer.
(d) Third Party Beneficiary. The Holders and Affiliated Market Makers
shall be third party beneficiaries to the agreements made hereunder between the
Issuer, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier, or air courier
guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
(ii) if to the Issuer:
Formica Corporation
15 Independence Boulevard
Warren, New Jersey 07059
Telecopier No.: 908-647-8944
Attention: General Counsel
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier No.: 212-450-4000
Attention: Richard D. Truesdell, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Donaldson, Lufkin &
Jenrette Securities Corporation (in the form attached hereto as Exhibit A) and
shall be addressed to: Attention: Louise Guarneri (Compliance Department), 277
Park Avenue, New York, New York 10172.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without limitation, and without the need for an express assignment,
subsequent Holders; provided that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FORMICA CORPORATION
By:
--------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
--------------------------------------
Name:
Title:
BT ALEX. BROWN INCORPORATED
By:
--------------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON
By:
--------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: 212-892-7272
From: Formica Corporation
15 Independence Boulevard
Warren, New Jersey 07059
Attention: General Counsel
Fax: 908-647-8944
10-7/8% Senior Subordinated Notes due 2009
Date: ___________, 1999
For your information only (NO ACTION REQUIRED):
Today, ___________, 1999, we filed [an A/B Exchange Registration
Statement/a Shelf Registration Statement] with the Securities and Exchange
Commission.
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
FORMICA CORPORATION
(A Delaware Corporation)
FORMICA CORPORATION, a corporation organized and existing under the laws
of the State of Delaware (hereinafter called the "Corporation"), hereby
certifies as follows:
1. The name of the Corporation is FORMICA CORPORATION, that the
Corporation was initially incorporated under the name of I R C FIBERS CO. and
that the date of filing of its original Certificate of Incorporation with the
Secretary of State of Delaware was December 8, 1969;
2. The Board of Directors of the Corporation has duly adopted this
amendment and restatement of the Corporation of Incorporation in accordance
with the provisions of Sections 242 and 245 of the Delaware General
Corporation Law;
3. The stockholders of the Corporation have duly adopted this amendment
and restatement of the Certificate of Incorporation in accordance with the
provisions of Sections 228, 242 and 245 of the Delaware General Corporation
Law;
4. Upon the effectiveness of this amendment and restatement of the
Certificate of Incorporation, and without any further act of the Corporation or
the holders of any of its capital stock, (i) each share of Class A Common Stock
shall be converted into a share of Common Stock, par value $.0l per share, of
the Corporation having the rights, privileges, powers and preferences set forth
in Article FOURTH of the Certificate of Incorporation, as so amended and
restated and (ii) each share of Class B Common Stock and Class C Common Stock
shall be converted into a share of Class B Common Stock, par value $.01 per
share, of the Corporation having the rights, privileges, powers and preferences
set forth in Article FOURTH of the Certificate of Incorporation as so amended
and restated;
<PAGE>
5. The text of the Restated Certificate of Incorporation is hereby amended
and restated to read as herein set forth in full:
FIRST: Name. The name of the Corporation is FORMICA CORPORATION.
SECOND: Delaware Office and Registered Agent. The address of the
Corporation's registered office in the State of Delaware is Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD: Purpose. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: Capitalization. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 46,200,000 shares,
consisting of (a) 200,000 shares of Preferred Stock, par value $100.00 per
share (the "Preferred Stock") and (b) 46,000,000 shares of Common Stock, par
value $.0l per share, of which 40,000,000 shares shall be Common Stock (the
"Common Stock") and 6,000,000 shares shall be Class B Common Stock (the "Class
B Common Stock"). All cross references in each Part of this Article FOURTH
refer to other paragraphs in such Part unless otherwise indicated, and terms
defined in any Part of this Article FOURTH shall have the meaning therein given
only when used within such Part or when used together with specific reference
to such meaning.
The following is a statement of the powers, designations, preferences and
rights, and the qualifications, limitations and restrictions thereof, of each
class of stock of the Corporation:
PART I
Preferred Stock
1. Rights. All shares of Preferred Stock shall be identical with each
other in all respects. The Preferred Stock shall rank senior to all other
classes of capital stock of the Corporation as to dividends and upon the
liquidation, dissolution and winding up of the Corporation.
2
<PAGE>
2. Dividends. The holders of record of shares of Preferred Stock shall be
entitled to receive cumulative preferential cash dividends when and as declared
by the Board of Directors at the following annual rates of the liquidation
value of each share of Preferred Stock, and no more:
7% during the period commencing
May 30, 1985 and ending
July 15, 1986;
8% during the period commencing
July 16, 1986 and ending
July 15, 1987;
9% during the period commencing
July 16, 1987 and ending
July 15, 1988;
10% thereafter.
Dividends on shares of Preferred Stock when and as so declared shall be
payable quarterly on January 15, April 15, July 15 and October 15 in each year,
commencing July is, 1985, to holders of record on dates (not exceeding 30 days
preceding the dividend payment dames) fixed by the Board of Directors.
Dividends on the Preferred Stock shall accrue daily and shall be cumulative
from May 30, 1985. The amount of any dividends "accrued" on any share of the
Preferred Stock at any dividend date shall be deemed to be the amount of any
unpaid dividends accumulated thereon to and including such dividend date,
whether or not earned or declared, and the amount of dividends "accrued" on any
share of Preferred Stock at any date other than a dividend date shall be
calculated as the amount of any unpaid dividends accumulated to and including
the last preceding dividend date, whether or not earned or declared, plus an
amount calculated on the basis of the annual dividend rate for the period after
such last preceding dividend date to and including the date as of which the
calculation is made. So long as any of the shares of Preferred Stock are
outstanding, no dividend shall be paid or declared, nor any distribution be
made, on any other capital stock of the Corporation junior to the Preferred
Stock, other than dividends payable in shares of capital stock of the
Corporation other than Preferred Stock, nor shall any shares of capital stock
of the Corporation, or any other security junior to the Preferred Stock, be
acquired for consideration by the Corporation unless all required redemptions
of the Preferred Stock relating to all past redemption dates shall have been
made, all dividends on the Preferred Stock for all past dividend dates shall
have been
3
<PAGE>
paid and the full dividends thereon for the most recent dividend date shall have
been paid or declared and a sum sufficient for the payment thereof set apart.
Subject to the foregoing provisions, dividends on the capital stock of the
Corporation (payable in cash, stock or otherwise) as may be determined by the
Board of Directors may be declared and paid from time to time out of the
remaining funds legally available for the payment of dividends, and the
Preferred Stock shall not be entitled to participate in any such dividends,
whether payable in cash, stock or otherwise.
3. Preference upon Liquidation, etc. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
from capital, surplus or earnings) shall be made to or set apart for the
holders of shares of any capital stock other than Preferred Stock, the holders
of shares of Preferred Stock shall be entitled to receive out of the assets of
the Corporation a preferential payment equal to the sum of the aggregate
liquidation value of such shares plus an amount equal to all dividends (whether
or not declared) accrued to the date of final distribution with respect to such
shares. The liquidation value of each share is $100. If upon the liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
shall be insufficient to pay in full the amounts of the aforesaid preferential
payment, such assets shall be distributed ratably on such shares, first in
respect of liquidation value and second in respect of dividends
accrued, in accordance with the respective amounts which would have been
payable on such shares if such preferential payment had been paid in full.
4. Voting Rights. The holders of the Preferred Stock shall not be entitled
to vote except as otherwise provided in this paragraph or under Section 242 of
the Delaware General Corporation Law. The holders of Preferred Stock shall be
entitled to vote as a class upon (A) any proposed amendment to the
Corporation's Certificate of Incorporation which would authorize, or any merger
or consolidation of the Corporation which would result in there being
authorized, a class or series of preferred stock senior to, or pari passu with,
or which would in any way modify the rights of, the Preferred Stock, or (B) any
proposed merger or consolidation of the Corporation pursuant to which the
holders of Common Stock and Class B Common Stock would be entitled to cash or
to any bonds, notes, debentures or capital stock other than common stock of the
surviving or resulting corporation or warrants or options therefor, or to any
other assets, or (C) any proposed sale
4
<PAGE>
or exchange of all or substantially all of its property and assets, or (D) the
proposed dissolution of the Company unless in the case of any transaction
described in clause (B), (C) or (D) above, provision shall have been made for
the redemption of all shares of Preferred Stock then outstanding and the
Corporation shall have deposited as a trust fund with a bank or trust company
doing business in the City of New York, State of New York, as Paying Agent,
moneys sufficient in amount to pay at the office of such Paying Agent, on the
business day immediately following the stockholders' vote on such transaction
(hereinafter, in this Section 4, the "redemption date"), the redemption price
(as defined in the third paragraph of Section 5) of all then outstanding
Preferred Stock, together with accrued and unpaid dividends to the date of
redemption (provided the notice of redemption shall state the name and address
of such Paying Agent and the intention of the Corporation to deposit such moneys
on or before the date of redemption with such Paying Agent), in which event all
dividends on the Preferred Stock so called for redemption shall cease to accrue,
and all rights of the holders thereof as stockholders of the Corporation (except
the right to receive the redemption price and accrued and unpaid dividends to
date of redemption) shall cease and terminate upon the redemption date, and all
moneys so deposited with the Paying Agent which shall remain unclaimed by the
holders of shares of Preferred Stock so called for redemption at the end of the
full calendar years after the redemption date, shall be paid by said Paying
Agent to the Corporation, and thereafter the holders of the Preferred Stock
called for redemption shall look only to the Corporation for payment. In the
event that six (6) consecutive dividend payments on the Preferred Stock are in
arrears, the holders of the Preferred Stock, voting as a class, will be entitled
to elect one (1) director of the Corporation at the next annual meeting of
stockholders of the Company or at a special meeting of the stockholders, which
the President of the Corporation will call at the request of the holders of
Preferred Stock for such purpose. At such time as the Company pays all dividends
in arrears in respect of the Preferred Stock, the director elected by the
holders of the Preferred Stock shall submit his resignation and the Preferred
Stock shall be divested of the right to elect a director until such time as such
arrearage again occurs.
On any matter to be voted on as a class by holders of Preferred Stock,
such holders shall be entitled to one vote for each share held of record and,
except as otherwise provided by law, such matter shall be decided by vote of
the holders of record, present in person or by proxy, of a majority of the
Corporation's issued and outstanding Preferred Stock.
5
<PAGE>
5. Redemption. The Corporation may redeem shares of Preferred Stock (A) at
any time commencing July 15, 1987, either in whole or in such portions as from
time to time the Board of Directors may determine, or (B) at any time in whole
as contemplated by Section 4, by giving at least five (5) business days' notice
in writing to record holders of Preferred Stock at the addresses shown on the
Corporation's records.
The Corporation shall redeem 20,000 shares of Preferred Stock on or before
July 15, 1993 and annually on or before July 15 of each year thereafter to and
including July 15, 1999 and 60,000 shares of Preferred Stock on or before July
15, 2000, provided that if on any date set for the redemption of such shares a
default or an event of default with respect to the Bank Credit Agreement, the
Senior Note Agreements or the Purchase Agreements shall have occurred and shall
be continuing and shall not have been waived or the redemption of such shares
would result in the existence of a default or an event of default with respect
to any such agreement the Corporation shall not redeem such shares on such date
but shall redeem such shares on the date which is ten days after the date on
which the default or event of default shall have been cured or waived or shall
otherwise cease to exist and the redemption of such shares would not result in
the existence of such a default or an event of default. Dividends at the rate
otherwise provided herein shall continue to accrue during the period such
redemption is postponed on the shares of Preferred Stock scheduled for
redemption. The number of shares to be redeemed hereunder in any one year shall
not be reduced by the number of shares redeemed by the Corporation in such year
in accordance with the preceding paragraph. The Corporation shall redeem shares
under this paragraph by giving at least five (5) business days' notice in
writing to the record holders of the Preferred Stock at their respective
addresses shown on the Corporation's records.
The redemption price for each share of Preferred Stock shall be the
liquidation value thereof, plus an amount equal to all dividends (whether or not
declared) accrued to the date of redemption with respect to such share, which
shall be paid on such date as the Board of Directors shall specify (subject to
the provisions of Section 4), which date shall be not less than five (5) nor
more than thirty (30) days after the determination by the Board of Directors to
redeem Preferred Stock, or, in the case of a mandatory redemption pursuant to
the immediately preceding paragraph of this Section 5, on the date required by
such paragraph. If on any date on which any redemption is demanded to be made
the aggregate of the funds of the Corporation legally
6
<PAGE>
available for the redemption of shares is insufficient to redeem the entire
number of shares to be redeemed on such date, such aggregate funds shall be used
to redeem the maximum possible number of shares. Thereafter, any additional such
funds shall immediately be used by the Corporation to redeem the balance of the
shares of Preferred Stock that the Corporation shall have become obligated to
redeem but which it shall not have redeemed.
Any shares of Preferred Stock redeemed or otherwise acquired by the
Corporation in any manner whatsoever shall be cancelled and shall not under any
circumstances be reissued, sold or transferred, and the Corporation shall from
time to time take such appropriate action as may be necessary to reduce the
authorized number of shares of Preferred Stock accordingly.
In the event that the Corporation desires or is required to effect a
partial redemption, the number of shares to be redeemed from each holder thereof
shall be the number of whole shares, as nearly as practicable to the nearest
share, determined by multiplying the total number of shares to be redeemed times
a fraction, the numerator of which shall be the total number of shares then held
by such holder and the denominator of which shall be the total number of shares
then outstanding.
6. Definitions. As used in this Part I, the following terms shall have the
following respective meanings:
"Bank Credit Agreement" shall have the meaning set forth in the Purchase
Agreements.
"Purchase Agreements" shall mean the separate Note and Stock Purchase
Agreements, dated as of May 20, 1985, between the Corporation and each of the
purchasers named in the schedule of purchasers attached thereto, respectively,
as in effect on the date hereof.
"Senior Note Agreements" shall have the meaning set forth in the Purchase
Agreements.
PART II
Common Stock and
Class B Common Stock
1. Rights. Except as otherwise provided in this Part II of Article FOURTH,
all shares of Common Stock and
7
<PAGE>
Class B Common Stock shall be identical and shall entitle the holders thereof to
the same rights and privileges.
2. Dividends. When and as dividends are declared on the Common Stock and
Class B Common Stock, whether payable in cash, in property or in securities of
the Corporation, the holders of the Common Stock and Class B Common Stock shall
be entitled to share equally, share for share, in such dividends, except that if
dividends are declared which are payable in shares of Common Stock and Class B
Common Stock, dividends shall be declared which are payable at the same rate on
each class of stock, but such dividends shall be payable only in shares of
Common Stock to holders of Common Stock and in shares of Class B Common Stock to
holders of Class B Common Stock.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the payment in full of all
amounts to which the holders of the Preferred Stock shall be entitled, the
remaining assets of the Corporation to be distributed to the holders of the
capital stock of the Corporation shall be distributed ratably among the holders
of the shares of Common Stock and Class B Common Stock.
4. Subdivision and Combination. If the Corporation shall in any manner
subdivide (by stock split, stock dividend or otherwise) or combine (by reverse
stock split or otherwise) the outstanding shares of Common Stock or Class B
Common Stock, the outstanding shares of Class B Common Stock or Common Stock, as
the case may be, shall be proportionately subdivided or combined.
5. Conversion. At any time and from time to time, each record holder of
Class B Common Stock shall be entitled to convert any or all of the shares of
such holder's Class B Common Stock, into the same number of shares of Common
Stock.
Each conversion of shares of Class B Common Stock into shares of Common
Stock will be effected by the surrender of the certificate or certificates
representing the shares to be converted at the principal office of the
Corporation at any time during normal business hours, together with a written
notice by the holder of such Class B Common Stock stating that such holder
desires to convert the shares, or a stated number of the shares, of Class B
Common Stock represented by such certificate or certificates into Common Stock.
Such conversion will be deemed to have been effected as of the close of business
on the date on which such certificate or certificates have been surrendered and
8
<PAGE>
such notice has been received, and at such time the rights of the holder of the
converted Class B Common Stock as such holder will cease and the person or
persons in whose name or names the certificate or certificates for shares of
Common Stock are to be issued upon such conversion will be deemed to have become
the holder or holders of record of the shares of Common Stock represented
thereby.
Promptly after such surrender and the receipt of such written notice, the
Corporation will issue and deliver in accordance with the surrendering holder's
instructions (A) the certificate or certificates for the Common Stock issuable
upon such conversion and (B) a certificate representing any Class B Common Stock
which was represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which was not converted.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of issue
upon conversion as herein provided, such number of shares of Common Stock as are
then issuable upon the conversion of all outstanding shares of Class B Common
Stock. The Corporation covenants that all shares of Common Stock so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all liens and charges. The Corporation shall use its best efforts to
assure that all such shares of Common Stock may be so issued without violation
of any law or any regulation, rule or other requirement of any governmental
authority applicable to the Corporation or any requirement of any domestic
securities exchange upon which shares of Common Stock may be listed.
If any shares of Common Stock required to be reserved for purposes of
conversion hereunder require, before such shares may be issued upon conversion,
registration with or approval of any governmental authority under any Federal or
state law (other than any registration under the Securities Act of 1933, as then
in effect, or any similar federal statute then in force, or any state securities
law, required by reason of any transfer involved in such conversion), or listing
on any domestic securities exchange, the Corporation shall, at its expense and
as promptly as possible, use its best efforts to cause such shares to be duly
registered or approved or listed.
The issue of certificates for shares of Common Stock upon conversion of
shares of Class B Common Stock shall be made without charge to the holders of
such shares for any issue tax in respect thereof or other cost incurred
9
<PAGE>
by the Corporation in connection with such conversion provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the holder (or its nominee) of the Class B Common Stock
converted.
6. Voting Rights. The holders of the shares of Common Stock and Class B
Common Stock shall be entitled to one vote per share, voting together as a
single class, on all matters to be voted on by the stockholders of the
Corporation; provided that the holders of the shares of Class B Common Stock
shall have no right to vote in the election or removal of directors.
FIFTH: Directors. A. Number. The number of the directors of the Corporation
shall be fixed from time to time by the Board of Directors pursuant to a
resolution adopted by a majority of the entire Board of Directors.
B. Newly Created Directorships And Vacancies. Newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors.
C. Meetings of the Board. The Board of Directors shall have the power to
hold its meetings within or outside the State of Delaware, at such place as from
time to time may be designated by the by-laws or by resolution of the Board.
SIXTH. Adoption, Amendment and Repeal of By-Laws. The Board of Directors
shall have power to adopt, amend and repeal the by-laws of the Corporation. Any
by-laws adopted by the directors under the powers conferred hereby may be
amended or repealed by the directors or by the stockholders.
SEVENTH: Indemnification. The Corporation shall indemnify its officers and
directors to the fullest extent permitted by law.
EIGHTH: Limitation of Directors' Liability. No director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director; provided, however, that the
foregoing clause shall not apply to any liability of a director (i) for any
breach of the director's duty of
10
<PAGE>
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. This Article shall not eliminate or limit the
liability of a director for any act or omission occurring prior to the time this
Article became effective.
IN WITNESS WHEREOF, the undersigned have signed this Restated Certificate
of Incorporation on June 30, 1987.
/s/ Vincent P. Langone
---------------------------
Vincent P. Langone,
President
Attest:
/s/ Charles A. Brooks
- -----------------------
Charles A. Brooks,
Secretary
11
FORMICA CORPORATION
BY-LAWS
ARTICLE I
OFFICES
SECTION 1. Registered Office and Registered Agent. The registered
office of Formica Corporation, a Delaware corporation (the "Corporation"),
shall be located at Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle, and the name of the registered agent at
that address shall be The Corporation Trust Company.
SECTION 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place and Date of Annual Meeting. The annual meeting of
the stockholders of the Corporation shall be held at such place, within or
without the State of Delaware, at such time and on such day as may be
determined by the Board of Directors and as such shall be designated in the
notice of said meeting, for the purposes of electing directors and for the
transaction of such other business as may properly be brought before the
meeting. If for any reason the annual meeting shall not be held during the
<PAGE>
period designated herein, the Board of Directors shall cause the annual
meeting to be held as soon thereafter as may be convenient.
SECTION 2. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be held at any place, within or without the
State of Delaware, and may be called by resolution of the Board of Directors,
by the president or by the holders of not less than a majority of all the
shares entitled to vote at the meeting.
SECTION 3. Quorum. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote, represented in person or by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If a quorum is present or represented, the
affirmative vote of a majority of the shares of stock present or represented
at the meeting shall be the act of the stockholders unless the vote of a
greater number of shares of stock is required by law or by a Certificate of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders present in person or
represented by proxy shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting, at which a quorum
shall be present or represented, any
2
<PAGE>
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 4. Action Without Meeting. Any action required to be taken at
a meeting of the stockholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
stockholders entitled to vote with respect to the subject matter thereof.
SECTION 5. Stockholders List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholders,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 6. Voting. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power
3
<PAGE>
held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
ARTICLE III
DIRECTORS
SECTION 1. Number, Election, Term. The Board of Directors shall
initially consist of seven directors. However, at any time and from time to
time, the number of directors which shall constitute the whole Board may be
increased to not more than 12 or decreased to not less than one, by resolution
of the Board of Directors, provided that no decrease in the number of
directorships shall shorten the term of any incumbent director. Any change in
the number of directorships must be authorized by a majority of the whole
board, as constituted immediately prior to such change. The directors shall be
elected annually, either at the annual meeting of the stockholders or by
written consent of all the stockholders entitled to vote in lieu of the annual
meeting, except as provided in Section 2 of this Article, and each director
elected shall hold office until the next annual meeting of stockholders and
until his successor is elected and qualified or until his earlier death or
resignation. Directors need not be stockholders.
SECTION 2. Vacancies. Any vacancies and newly created directorships
may be filled by a majority of the directors then in office, though less than
a quorum, and the directors so chosen shall hold office until the next annual
election and until their
4
<PAGE>
successors are duly elected and shall qualify. A vacancy created by the
removal of a director by the stockholders may be filled by the stockholders.
SECTION 3. Powers. The business of the Corporation shall be managed
by or under the direction of its Board of Directors which may exercise all
such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these by-laws
directed or required to be exercised or done by the stockholders.
SECTION 4. First Meeting. The first meeting of each newly elected
Board of Directors shall be held at such time and place as shall be announced
at the annual meeting of stockholders and no other notice of such meeting
shall be necessary to the newly elected directors in order to legally
constitute the meeting, provided a quorum shall be present, or in the event
such meeting is not held at the time and place so fixed by the stockholders,
the meeting may be held at such time and place as shall be specified in a
notice given as hereinafter provided for special meetings of the Board of
Directors, or as shall be specified in a written waiver signed by all of the
directors.
SECTION 5. Regular Meetings. Regular meetings of the Board
of Directors may be held upon such notice, or without notice, and
at such time and at such place as shall from time to time be
determined by the Board
SECTION 6. Special Meetings. Special meetings of the Board
of Directors may be called by the president on two days' notice to
5
<PAGE>
each director, either personally or by mail or by telegram. Special meetings
shall be called by the president or secretary in like manner and on like
notice on the written request of two directors.
SECTION 7. Waiver. Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 8. Quorum. At all meetings of the Board of Directors a
majority of the total number of directors then constituting the whole Board
shall constitute a quorum for the transaction of business, and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation or by
these by-laws. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 9. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these by-laws,
6
<PAGE>
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if prior
to such action a written consent thereto is signed by all members of the Board
or of such committee, as the case may be, and such written consent is filed
with the minutes of proceedings of the Board or committee.
SECTION 10. Telephonic Communications. Unless otherwise restricted by
the Certificate of Incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may participate in a meeting of the Board or any committee,
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
such participation shall constitute presence in person at the meeting.
SECTION 11. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of two or more of the directors of the Corporation,
which, to the extent provided in the resolution, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require it. Each committee shall have such
names, powers and duties as may be determined from time to time by resolution
adopted by the Board of Directors.
7
<PAGE>
SECTION 12. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or these by-laws, any director or the entire
Board of Directors may be removed, with or without cause, by the holders of a
majority of shares entitled to vote at an election of directors.
ARTICLE IV
OFFICERS
SECTION 1. Election and Office. The officers of the Corporation shall
be chosen by the Board of Directors and shall be a president, one or more vice
presidents, a treasurer and a secretary. The Board of Directors may also elect
such additional officers as may, from time to time, be deemed desirable. Any
number of offices may be held by the same person.
SECTION 2. Term, Powers and Duties. The term of office, powers and
duties of each officer shall be as specified by the Board of Directors.
SECTION 3. Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
SECTION 4. Removal and Vacancies. The officers of the Corporation
shall hold office until their successors are chosen and qualify. Any officer
elected or appointed by the Board of Directors may be removed at any time,
with or without cause, by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors.
8
<PAGE>
ARTICLE V
CAPITAL STOCK
SECTION 1. Certificates of Shares. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates in such
form as the Board of Directors shall prescribe certifying the number of shares
of stock owned by him, except as provided below. The certificates shall be
signed by hand or by facsimile in the name of the Corporation by such officer
or officers as the Board shall appoint. The Board of Directors may provide by
resolution that the stock of the Corporation shall be uncertificated shares.
Notwithstanding the adoption of such a resolution by the Board, every holder
of uncertificated shares shall, upon request, be entitled to receive a
certificate, signed by such officers designated by the Corporation and
complying with the statute, representing the number of shares in registered
certificate form. A record shall be kept of the names of the persons owning
any such stock, whether certificated or uncertificated, and the number of
shares owned by each such person.
SECTION 2. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors, in its discretion and as a condition precedent to the
issuance thereof, may prescribe such terms and conditions as it deems
expedient, and
9
<PAGE>
may require such indemnities as it deems adequate to protect the Corporation
from any claim that may be raised against it with respect to any such
certificate alleged to have been lost, stolen or destroyed.
SECTION 3. Transfer of Shares. Upon surrender to the secretary of the
Corporation, or, if a transfer agent for the Corporation has been named by the
Board of Directors, to the transfer agent, of a certificate representing
shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, a new certificate shall be issued to the
person entitled thereto, and the old certificate canceled and the transaction
recorded upon the books of the Corporation.
SECTION 4. Fixing Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of any
stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty and not
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however,
10
<PAGE>
that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 5. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of Delaware.
SECTION 6. Signing Authority. Except as provided below, all
contracts, agreements, assignments, transfers, deeds, stock powers or other
instruments of the Corporation may be executed and delivered by the president
or any vice-president or by such other officer or officers, or agent or
agents, of the Corporation as shall be thereunto authorized from time to time
either by the Board of Directors or by power of attorney executed by any
person pursuant to authority granted by the Board of Directors, and the
secretary or any assistant secretary, the treasurer or any assistant treasurer
may affix the seal of the Corporation thereto and attest same. Certificates
issued upon request to holders of uncertificated stock shall be signed by (i)
the president or vice-president and (ii) the secretary, the treasurer, an
assistant secretary or an assistant treasurer.
ARTICLE VI
11
<PAGE>
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock of the Corporation, subject to the provisions of
the Certificate of Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve for such purpose as the directors shall think conducive to
the interests of the Corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
SECTION 3. Notices. Whenever, under the provisions of statute, the
Certificate of Incorporation or of these by-laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed
to such director or stockholder, at his address as it appears on the records
of the Corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram.
12
<PAGE>
Whenever any notice is required to be given under the provisions of
statute, the Certificate of Incorporation or of these by-laws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 5. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or in any manner reproduced.
SECTION 6. Indemnification. The Corporation shall indemnify its
officers, directors, employees and agents to the fullest extent permitted by
the law of Delaware.
SECTION 7. Amendments. These by-laws may be altered, amended or
repealed or new by-laws may be adopted (a) at any regular or special meeting
of stockholders at which a quorum is present or represented, by the
affirmative vote of a majority of the shares entitled to vote, provided notice
of the proposed alteration, amendment or repeal be contained in the notice of
such meeting; or (b) by the affirmative vote of a majority of the Board of
Directors at any regular or special meeting of the Board. The stockholders
shall have authority to change or repeal any by-laws adopted by the directors.
13
<PAGE>
SCHEDULE 5.4
1. Amended and Restated Credit Agreement dated as of March 15, 1988
among Formica Corporation, Formica Limited, the Banks named therein and Irving
Trust Company, as agent.
2. Note Exchange and Purchase Agreement dated as of June 24, 1987
among Formica Corporation and the Purchasers of the 8 1/2% and 9% Convertible
Subordinated Notes.
14
EXHIBIT 4.1
==============================================================================
FORMICA CORPORATION
10-7/8% SENIOR SUBORDINATED NOTES DUE 2009
---------------------------
INDENTURE
Dated as of February 22, 1999
---------------------------
SUMMIT BANK
TRUSTEE
------------------------------------
==============================================================================
<PAGE>
CROSS-REFERENCE TABLE*
------------------------
Trust Indenture Act Section Indenture Section
310 (a)(1)..............................................................7.10
(a)(2) .................................................................7.10
(a)(3)..................................................................N.A.
(a)(4)..................................................................N.A.
(a)(5)..................................................................7.10
(b).....................................................................7.10
(c).....................................................................N.A.
311(a)..................................................................7.11
(b).....................................................................7.11
(c).....................................................................N.A.
312(a)..................................................................2.05
(b).....................................................................11.03
(c).....................................................................10.03
313(a)..................................................................7.06
(b)(1)..................................................................N.A.
(b)(2)..................................................................7.06;
7.07
(c).....................................................................7.06;
11.02
(d).....................................................................7.06
314(a)..................................................................11.05
(b).....................................................................N.A.
(c)(1)..................................................................11.04
(c)(2)..................................................................11.04
(c)(3)..................................................................N.A.
(d).....................................................................N.A.
(e).....................................................................11.05
(f).....................................................................N.A.
315(a)..................................................................7.01
(b).....................................................................7.05;
10.02
(c).....................................................................7.01
(d).....................................................................7.01
(e).....................................................................6.11
316(a)(last sentence)...................................................2.09
(a)(1)(A)...............................................................6.05
(a)(1)(B)...............................................................6.04
(a)(2)..................................................................N.A.
(b).....................................................................6.07
(c).....................................................................2.12
317(a)(1)...............................................................6.08
(a)(2)..................................................................6.09
(b).....................................................................2.04
318(a)..................................................................10.01
(b).....................................................................N.A.
(c).....................................................................10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................1
Section 1.01. Definitions..................................................1
Section 1.02. Other Definitions...........................................15
Section 1.03. Incorporation of TIA Provisions.............................16
Section 1.04. Rules of Construction.......................................16
ARTICLE 2. THE NOTES........................................................17
Section 2.01. Form and Dating.............................................17
Section 2.02. Execution and Authentication................................18
Section 2.03. Registrar and Paying Agent..................................18
Section 2.04. Paying Agent to Hold Money in Trust.........................19
Section 2.05. Holder Lists................................................19
Section 2.06. Transfer and Exchange.......................................19
Section 2.07. Replacement Notes...........................................31
Section 2.08. Outstanding Notes...........................................31
Section 2.09. Treasury Notes..............................................31
Section 2.10. Temporary Notes.............................................31
Section 2.11. Cancellation................................................32
Section 2.12. Defaulted Interest..........................................32
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................32
Section 3.01. Notices to Trustee..........................................32
Section 3.02. Selection of Notes to Be Redeemed...........................32
Section 3.03. Notice of Redemption........................................33
Section 3.04. Effect of Notice of Redemption..............................33
Section 3.05. Deposit of Redemption Price.................................33
Section 3.06. Notes Redeemed in Part......................................34
Section 3.07. Optional Redemption.........................................34
Section 3.08. Mandatory Redemption........................................35
Section 3.09. Offer to Purchase by Application of Excess Proceeds.........35
ARTICLE 4. COVENANTS........................................................36
Section 4.01. Payment of Notes............................................36
Section 4.02. Maintenance of Office or Agency.............................36
Section 4.03. Reports.....................................................37
Section 4.04. Compliance Certificate......................................37
Section 4.05. Taxes.......................................................38
Section 4.06. Stay, Extension and Usury Laws..............................38
Section 4.07. Restricted Payments.........................................38
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries................................................42
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock.............................................43
Section 4.10. Asset Sales.................................................45
Section 4.11. Transactions with Affiliates................................46
Section 4.12. Liens.......................................................47
Section 4.13. Corporate Existence.........................................47
Section 4.14. Offer to Repurchase Upon Change of Control..................48
Section 4.15. No Senior Subordinated Indebtedness.........................48
Section 4.16. Limitation on Sale and Leaseback Transactions...............48
ARTICLE 5. SUCCESSORS.......................................................49
Section 5.01. Merger, Consolidation, or Sale of Assets....................49
Section 5.02. Successor Corporation Substituted...........................49
ARTICLE 6. DEFAULTS AND REMEDIES............................................50
Section 6.01. Events of Default...........................................50
Section 6.02. Acceleration................................................51
Section 6.03. Other Remedies..............................................52
Section 6.04. Waiver of Past Defaults.....................................52
Section 6.05. Control by Majority.........................................52
Section 6.06. Limitation on Suits.........................................52
Section 6.07. Rights of Holders of Notes to Receive Payment...............53
Section 6.08. Collection Suit by Trustee..................................53
Section 6.09. Trustee May File Proofs of Claim............................53
Section 6.10. Priorities..................................................53
Section 6.11. Undertaking for Costs.......................................54
ARTICLE 7. TRUSTEE..........................................................54
Section 7.01. Duties of Trustee...........................................54
Section 7.02. Rights of Trustee...........................................55
Section 7.03. Individual Rights of Trustee................................56
Section 7.04. Trustee's Disclaimer........................................56
Section 7.05. Notice of Defaults..........................................56
Section 7.06. Reports by Trustee to Holders of the Notes..................56
Section 7.07. Compensation and Indemnity..................................57
Section 7.08. Replacement of Trustee......................................57
Section 7.09. Successor Trustee by Merger, etc............................58
Section 7.10. Eligibility; Disqualification...............................58
Section 7.11. Preferential Collection of Claims Against Company...........59
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................59
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance....59
Section 8.02. Legal Defeasance and Discharge..............................59
Section 8.03. Covenant Defeasance.........................................59
Section 8.04. Conditions to Legal or Covenant Defeasance..................60
Section 8.05. Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions....................61
Section 8.06. Repayment to Company........................................61
Section 8.07. Reinstatement...............................................62
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................62
Section 9.01. Without Consent of Holders of Notes.........................62
Section 9.02. With Consent of Holders of Notes............................63
Section 9.03. Compliance with Trust Indenture Act.........................64
Section 9.04. Revocation and Effect of Consents...........................64
Section 9.05. Notation on or Exchange of Notes............................64
Section 9.06. Trustee to Sign Amendments, etc.............................64
ARTICLE 10. SUBORDINATION...................................................65
Section 10.01. Agreement to Subordinate...................................65
Section 10.02. Certain Definitions........................................65
Section 10.03. Liquidation; Dissolution; Bankruptcy.......................66
Section 10.04. Default on Designated Senior Indebtedness..................66
Section 10.05. Acceleration of Securities.................................67
Section 10.06. When Distribution Must Be Paid Over........................67
Section 10.07. Notice by Company..........................................67
Section 10.08. Subrogation................................................67
Section 10.09. Relative Rights............................................67
Section 10.10. Subordination May Not Be Impaired by Company...............68
Section 10.11. Distribution or Notice to Representative...................68
Section 10.12. Rights of Trustee and Paying Agent.........................68
Section 10.13. Authorization to Effect Subordination......................69
Section 10.14. No Waiver of Subordination Provisions......................69
Section 10.15. Amendments.................................................69
ARTICLE 11. MISCELLANEOUS...................................................69
Section 11.01. Trust Indenture Act Controls...............................69
Section 11.02. Notices....................................................69
Section 11.03. Communication by Holders of Notes with Other Holders
of Notes...................................................71
Section 11.04. Certificate and Opinion as to Conditions Precedent.........71
Section 11.05. Statements Required in Certificate or Opinion..............71
Section 11.06. Rules by Trustee and Agents................................71
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.................................71
Section 11.08. Governing Law..............................................72
Section 11.09. No Adverse Interpretation of Other Agreements..............72
Section 11.10. Successors.................................................72
Section 11.11. Severability...............................................72
Section 11.12. Counterpart Originals......................................72
Section 11.13. Table of Contents, Headings, etc...........................72
EXHIBITS
Exhibit A: FORM OF NOTE
Exhibit B: FORM OF CERTIFICATE OF TRANSFER
Exhibit C: FORM OF CERTIFICATE OF EXCHANGE
Exhibit D: FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
INDENTURE dated as of February 22, 1999, by and among Formica
Corporation, a Delaware corporation (the "Company"), and Summit Bank, as trustee
(the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10-7/8% Senior
Subordinated Notes due 2009 (the "Notes").
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means the form of the Notes initially sold to QIBs.
"Accounts Receivable Subsidiary" means an Unrestricted Subsidiary of
the Company to which the Company or any of its Restricted Subsidiaries sells any
of its accounts receivable pursuant to a Receivables Facility.
"Acquired Indebtedness" means, with respect to any specified Person,
(a) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (b) Indebtedness secured by a Lien
encumbering an asset acquired by such specified Person at the time such asset is
acquired by such specified Person.
"Acquisition" means the acquisition of Holdings and certain affiliates
of Holdings by Laminates for consideration of $405.4 million (plus or minus any
subsequent purchase price adjustment), the merger of LMS I, a subsidiary of
Laminates, into Holdings, the merger of LMS II, a subsidiary of LMS I, into the
Company, the merger of LMS III, a subsidiary of LMS II, into Formica
International and the contribution by Laminates to the Company of the stock of
such affiliates of Holdings.
"Acquisition Financing" means (i) the issuance and sale by the Company
(or its predecessor, LMS II) of senior subordinated increasing rate notes, (ii)
the execution and delivery by the Company (or its predecessor) and certain of
its subsidiaries of the New Credit Facility and the borrowing of loans
thereunder, (iii) the issuance and sale by Laminates of common stock and
preferred stock for consideration, (iv) the issuance and sale by LMS I of its
preferred stock and warrants to purchase Laminates common stock, the proceeds of
each of which were used to fund the purchase price for the Acquisition and
related fees and expenses and (v) the issuance and sale by the Company of the
Notes and repayment of all amounts owed in connection with the senior
subordinated increasing rate notes.
"Additional Notes" means Notes (other than the Initial Notes) issued
under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part
of the same series as the Initial Notes.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means (a) the sale, lease, conveyance, disposition or
other transfer (a "disposition") of any properties, assets or rights (including,
without limitation, by way of a sale and leaseback) (provided that the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company and its Subsidiaries taken as a whole will be governed by the
Sections 4.14 and/or 5.01 and not by the provisions of Section 4.10), and (b)
the issuance, sale or transfer by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (a) or (b), whether in a single
transaction or a series of related transactions (i) that have a fair market
value in excess of $5.0 million or (ii) for net proceeds in excess of $5.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (a) dispositions in the ordinary course of business; (b) a
disposition of assets by the Company to a Restricted Subsidiary or by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary; (c) a
disposition of Equity Interests by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary; (d) the sale and leaseback of any assets within
90 days of the acquisition thereof; (e) foreclosures on assets; (f) any exchange
of like property pursuant to Section 1031 of the Internal Revenue Code of 1986,
as amended, for use in a Permitted Business; (g) any sale of Equity Interests
in, or Indebtedness or other securities of, an Unrestricted Subsidiary; (h) a
Permitted Investment or a Restricted Payment that is permitted by Section 4.07
hereof; and (i) sales of accounts receivable, or participations therein, in
connection with any Receivables Facility.
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Expenditure Indebtedness" means Indebtedness incurred by any
Person to finance the purchase or construction or any property or assets
acquired or constructed by such Person which have a useful life of more than one
year so long as (a) the purchase or construction price for such property or
assets is included in "addition to property, plant or equipment" in accordance
with GAAP, (b) the acquisition or construction of such property or assets is not
part of any acquisition of a Person or line of business and (c) such
Indebtedness is incurred within 90 days of the acquisition or completion of
construction of such property or assets.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (a) in the case of a corporation, corporate
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (i) Government Securities, (ii) any
certificate of deposit maturing not more than 365 days after the date of
acquisition issued by, or demand deposit or time deposit of, an Eligible
Institution or any lender under the New Credit Facility, (iii) commercial paper
maturing not more than 365 days after the date of acquisition of an issuer
(other than an Affiliate of the Company) with a rating, at the time as of which
any investment therein is made, of "A-3" (or higher) according to S&P or "P-2"
(or higher) according to Moody's or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments, (iv) any bankers acceptances or money
market deposit accounts issued by an Eligible Institution, (v) any fund
investing exclusively in investments of the types described in clauses (i)
through (iv) above and (vi) in the case of any Subsidiary organized or having
its principal place of business outside the United States, investments
denominated in the currency of the jurisdiction in which such Subsidiary is
organized or has its principal place of business which are similar to the items
specified in clauses (i) through (v) above (including without limitation any
deposit with a bank that is a lender to any Restricted Subsidiary).
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following: (a)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, to any "person" or "group" (as such terms are used in Section 13(d) of
the Exchange Act), other than the Principals and their Related Parties; (b) the
adoption of a plan for the liquidation or dissolution of the Company; (c) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" or "group" (as such
terms are used in Section 13(d) of the Exchange Act), other than the Principals
and their Related Parties, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, of 50% or more of the voting
power of the outstanding voting equity interests of the Company; or (d) the
first day on which a majority of the members of the board of directors of the
Company are not Continuing Members.
"Commission" means the Securities and Exchange Commission.
"Company" means Formica Corporation.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period plus, to the extent deducted in computing
Consolidated Net Income, (a) an amount equal to any extraordinary or
non-recurring loss plus any net loss realized in connection with an Asset Sale,
(b) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (c) Fixed Charges of such Person for
such period, (d) depreciation, amortization (including amortization of goodwill
and other intangibles) and all other non-cash charges (excluding any such
non-cash charge, other than the 1998 Charges, to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period, (e) net periodic post-retirement
benefits, (f) other income or expense net as set forth on the face of such
Person's statement of operations, (g) expenses and charges of the Company
related to the Acquisition and Acquisition Financing, the New Credit Facility
and the application of the proceeds thereof which are paid, taken or otherwise
accounted for within 180 days of the consummation of the Acquisition and the
Acquisition Financing, and (h) any non-capitalized transaction costs incurred in
connection with actual, proposed or abandoned financings, acquisitions or
divestitures (including, but not limited to, financing and refinancing fees and
costs incurred in connection with the Acquisition and Acquisition Financing), in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, the Fixed Charges of, and the depreciation and amortization and
other non-cash charges of, a Restricted Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that Net Income of such Restricted Subsidiary was
included in calculating the Consolidated Net Income of such Person.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum of, without duplication, (a) the interest expense of such
Person and its Restricted Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount, non-cash interest payments, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Indebtedness, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments, if any, pursuant to Hedging Obligations; provided that in no event
shall any amortization of deferred financing costs be included in Consolidated
Interest Expense); and (b) the consolidated capitalized interest of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued;
provided, however, that Receivables Fees shall be deemed not to constitute
Consolidated Interest Expense. Notwithstanding the foregoing, the Consolidated
Interest Expense with respect to any Restricted Subsidiary that is not a Wholly
Owned Restricted Subsidiary shall be included only to the extent (and in the
same proportion) that the net income of such Restricted Subsidiary was included
in calculating Consolidated Net Income.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (a) the Net Income (or loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (b) the Net Income (or loss) of any Restricted Subsidiary other than a
Subsidiary organized or having its principal place of business outside the
United States shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income (or loss) is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary, (c) the Net Income (or loss) of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (d) the cumulative effect of a change in
accounting principles shall be excluded.
"Continuing Members" means, as of any date of determination, any member
of the board of directors of the Company who (a) was a member of such board of
directors immediately after consummation of the Acquisition and the Acquisition
Financing or (b) was nominated for election or elected to such board of
directors with the approval of, or whose election to the board of directors was
ratified by, at least a majority of the Continuing Members who were members of
such board of directors at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"CVC" means CVC European Equity Partners, L.P. and CVC European Equity
Partners (Jersey) L.P., and their respective Affiliates.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means The Depository Trust Company.
"Designated Noncash Consideration" means the fair market value of
non-cash consideration received by the Company or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, executed by the principal executive officer
and the principal financial officer of the Company, less the amount of cash or
Cash Equivalents received in connection with a sale of such Designated Noncash
Consideration.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable), or upon the happening of any event (other than any event solely
within the control of the issuer thereof), matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, is exchangeable for
Indebtedness (except to the extent exchangeable at the option of such Person
subject to the terms of any debt instrument to which such Person is a party) or
redeemable at the option of the Holder thereof, in whole or in part, on or prior
to the date on which the Notes mature; provided that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 4.07 hereof; and
provided further that, if such Capital Stock is issued to any plan for the
benefit of employees of the Company or its Subsidiaries or by any such plan to
such employees, such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by the Company in order to
satisfy applicable statutory or regulatory obligations.
"DLJMB" means DLJ Merchant Banking Partners II, L.P. and its
Affiliates.
"Domestic Subsidiary" means a Subsidiary that is organized under the
laws of the United States or any State, district or territory thereof.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus not less than $100.0 million or its equivalent in
foreign currency, whose short-term debt is rated "A-3" or higher according to
Standard & Poor's Ratings Group ("S&P") or "P-2" or higher according to Moody's
Investor Services, Inc. ("Moody's") or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the New Credit Facility)
in existence on the date of this Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (a) the Consolidated Interest Expense of such
Person for such period and (b) all dividend payments on any series of preferred
stock of such Person (other than dividends payable solely in Equity Interests
that are not Disqualified Stock), in each case, on a consolidated basis and in
accordance with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
(exclusive of amounts attributable to discontinued operations, as determined in
accordance with GAAP, or operations and businesses disposed of prior to the
Calculation Date (as defined)) to the Fixed Charges of such Person for such
period (exclusive of amounts attributable to discontinued operations, as
determined in accordance with GAAP, or operations and businesses disposed of
prior to the Calculation Date). In the event that the referent Person or any of
its Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other
than revolving credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock and the use of the proceeds therefrom,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, the Acquisition and acquisitions that have been made by the Company or
any of its Subsidiaries, including all mergers or consolidations and any related
financing transactions, during the four-quarter reference period or subsequent
to such reference period and on or prior to the Calculation Date shall be deemed
to have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated to include
the Consolidated Cash Flow of the acquired entities on a pro forma basis after
giving effect to cost savings reasonably expected to be realized in connection
with such acquisition, as determined in good faith by an officer of the Company
(regardless of whether such cost savings could then be reflected in pro forma
financial statements under GAAP, Regulation S-X promulgated by the Commission or
any other regulation or policy of the Commission) and without giving effect to
clause (c) of the proviso set forth in the definition of Consolidated Net
Income.
"Foreign Credit Facilities" means any Indebtedness of a Restricted
Subsidiary organized or having its principal place of business outside the
United States. Indebtedness under the Foreign Credit Facilities outstanding on
the date on which the Notes are first issued and authenticated under this
Indenture shall be deemed to have been incurred on such date in reliance on the
first paragraph of Section 4.09 hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit or
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (b) other agreements
or arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means FM Holdings, Inc., a Delaware corporation, the
corporate parent of the Company, or its successors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing Indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any Indebtedness of any other Person, provided that
Indebtedness shall not include the pledge by the Company of the Capital Stock of
an Unrestricted Subsidiary of the Company to secure Non-Recourse Debt of such
Unrestricted Subsidiary. The amount of any Indebtedness outstanding as of any
date shall be (a) the accreted value thereof (together with any interest thereon
that is more than 30 days past due), in the case of any Indebtedness that does
not require current payments of interest, and (b) the principal amount thereof,
in the case of any other Indebtedness provided that the principal amount of any
Indebtedness that is denominated in any currency other than United States
dollars shall be the amount thereof, as determined pursuant to the foregoing
provision, converted into United States dollars at the Spot Rate in effect on
the date that such Indebtedness was incurred (or, if such indebtedness was
incurred prior to the date of this Indenture, the Spot Rate in effect on the
date of this Indenture).
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means the first $215,000,000 aggregate principal amount
of Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Intercompany Note" means the note (and all obligations, including
interest, with respect thereto) issued by Holdings to the Company on the date of
the consummation of the Acquisition to evidence the loan by the Company to
Holdings of certain proceeds of the offering of bridge notes and borrowings
under the New Credit Facility, which proceeds partially funded the merger
consideration and costs and expenses in connection therewith.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees by the referent Person of, and Liens on any
assets of the referent Person securing, Indebtedness or other obligations of
other Persons), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP, provided that an investment by the Company for consideration consisting of
common equity securities of the Company shall not be deemed to be an Investment.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of Section 4.07 hereof.
"Laminates" means Laminates Acquisition Co., a Delaware corporation,
the corporate parent of Holdings, or its successors.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or the city in which the principal
corporate trust office of the Trustee is located, or at a place of payment, are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Management Loans" means one or more loans by the Company, Laminates or
Holdings to officers and/or directors of the Company and any of its Restricted
Subsidiaries to finance the purchase by such officers and directors of common
stock of Holdings or Laminates; provided, however, that the aggregate principal
amount of all such Management Loans outstanding at any time shall not exceed
$5.0 million.
"MMI" means MMI Products, L.L.C. and its Affiliates.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (a) any gain (or
loss), together with any related provision for taxes on such gain (or loss),
realized in connection with (i) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (ii) the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (b) any extraordinary or nonrecurring gain (or loss), together
with any related provision for taxes on such extraordinary or nonrecurring gain
(or loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of,
without duplication, (a) the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees,
and sales commissions, recording fees, title transfer fees and appraiser fees
and cost of preparation of assets for sale) and any relocation expenses incurred
as a result thereof, (b) taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), (c) amounts required to be applied to the repayment of
Indebtedness (other than revolving credit Indebtedness incurred pursuant to the
New Credit Facility) secured by a Lien on the asset or assets that were the
subject of such Asset Sale and (d) any reserve established in accordance with
GAAP or any amount placed in escrow, in either case for adjustment in respect of
the sale price of such asset or assets until such time as such reserve is
reversed or such escrow arrangement is terminated, in which case Net Proceeds
shall include only the amount of the reserve so reversed or the amount returned
to the Company or its Restricted Subsidiaries from such escrow arrangement, as
the case may be.
"New Credit Facility" means that certain Credit Agreement, dated as of
May 1, 1998 among the Company (formerly LMS II, Co.), certain of its foreign
subsidiaries, various financial institutions party thereto, DLJ Capital Funding,
Inc., as syndication agent, Bankers Trust Company as administrative agent and
Credit Suisse First Boston, as documentation agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and, in each case, as amended, modified, renewed,
refunded, replaced or refinanced from time to time, including any agreement (i)
extending or shortening the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, (iii) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder, provided that on the date such Indebtedness
is incurred it would not be prohibited by clause (i) of Section 4.09 hereof or
(iv) otherwise altering the terms and conditions thereof. Indebtedness under the
New Credit Facility outstanding on the date on which the Notes are first issued
and authenticated under this Indenture shall be deemed to have been incurred on
such date in reliance on the first paragraph of Section 4.09 hereof.
"1998 Charges" means the $13.5 million of charges resulting from
changes in accounting estimates in the four months ended April 30, 1998 and the
five months ended September 30, 1998.
"Non-Recourse Debt" means Indebtedness (i) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (ii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock (other than the stock
of an Unrestricted Subsidiary pledged by the Company to secure debt of such
Unrestricted Subsidiary) or assets of the Company or any of its Restricted
Subsidiaries; provided that in no event shall Indebtedness of any Unrestricted
Subsidiary fail to be Non-Recourse Debt solely as a result of any default
provisions contained in a guarantee thereof by the Company or any of its
Restricted Subsidiaries if the Company or such Restricted Subsidiary was
otherwise permitted to incur such guarantee pursuant to this Indenture.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Sections 11.04 and 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
11.04 and 11.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Pari Passu Indebtedness" means Indebtedness of the Company that ranks
pari passu in right of payment to the Notes.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means the building products and furnishings
industry and any business in which the Company and its Restricted Subsidiaries
are engaged on the date of this Indenture or any business reasonably related,
incidental or ancillary thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company, (b) any Investment in cash or Cash
Equivalents, (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly Owned
Restricted Subsidiary of the Company, (d) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.10 hereof, (e) any Investment acquired solely
in exchange for Equity Interests (other than Disqualified Stock) of the Company,
(f) any Investment in a Person engaged in a Permitted Business (other than an
Investment in an Unrestricted Subsidiary) having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (f) that
are at that time outstanding, not to exceed 15% of Total Assets at the time of
such Investment (with the fair market value of each Investment being measured at
the time made and without giving effect to subsequent changes in value), (g)
Investments relating to any special purpose Wholly Owned Subsidiary of the
Company organized in connection with a Receivables Facility that, in the good
faith determination of the board of directors of the Company, are necessary or
advisable to effect such Receivables Facility and (h) the Management Loans.
"Permitted Liens" means: (i) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary, provided that such Liens were not incurred in
contemplation of such merger or consolidation and do not secure any property or
assets of the Company or any Restricted Subsidiary other than the property or
assets subject to the Liens prior to such merger or consolidation; (ii) Liens
existing on the date of this Indenture; (iii) Liens securing Indebtedness
consisting of Capitalized Lease Obligations, purchase money Indebtedness,
mortgage financings, industrial revenue bonds or other monetary obligations, in
each case incurred solely for the purpose of financing all or any part of the
purchase price or cost of construction or installation of assets used in the
business of the Company or its Restricted Subsidiaries, or repairs, additions or
improvements to such assets, provided that (A) such Liens secure Indebtedness in
an amount not in excess of the original purchase price or the original cost of
any such assets or repair, additional or improvement thereto (plus an amount
equal to the reasonable fees and expenses in connection with the incurrence of
such Indebtedness), (B) such Liens do not extend to any other assets of the
Company or its Restricted Subsidiaries (and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets (and
improvements thereto or thereon) repaired, added to or improved), (C) the
Incurrence of such Indebtedness is permitted by Section 4.09 hereof and (D) such
Liens attach within 365 days of such purchase, construction, installation,
repair, addition or improvement; (iv) Liens to secure any refinancings,
renewals, extensions, modification or replacements (collectively, "refinancing")
(or successive refinancings), in whole or in part, of any Indebtedness secured
by Liens referred to in the clauses above so long as such Lien does not extend
to any other property (other than improvements thereto); (v) Liens securing
letters of credit entered into in the ordinary course of business and consistent
with past business practice; (vi) Liens on and pledges of the capital stock of
any Unrestricted Subsidiary securing Non-Recourse Debt of such Unrestricted
Subsidiary; (vii) Liens securing Indebtedness (including all Obligations) under
the New Credit Facility or any Foreign Credit Facility; and (viii) other Liens
securing Indebtedness that is permitted by the terms of this Indenture to be
outstanding having an aggregate principal amount at any one time outstanding not
to exceed $75.0 million.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued within 60 days after
repayment of, in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the Company
or any of its Restricted Subsidiaries; provided that (a) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
premium, if any, and accrued interest on the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith), (b) such Permitted
Refinancing Indebtedness has a final maturity date no earlier than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, and (c) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to, the Notes on terms at least
as favorable, taken as a whole, to the Holders of Notes as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Principals" means DLJMB, CVC and MMI.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means any issuance of common stock by the
Company (other than to Holdings and other than Disqualified Stock) or common
stock or preferred stock by Holdings or Laminates (other than Disqualified
Stock) that is registered pursuant to the Securities Act, other than issuances
registered on Form S-8 and issuances registered on Form S-4, excluding issuances
of common stock pursuant to employee benefit plans of Laminates, Holdings or the
Company or otherwise as compensation to employees of the Company, Laminates or
Holdings.
"Qualified Proceeds" means any of the following or any combination of
the following: (i) cash; (ii) Cash Equivalents; (iii) assets that are used or
useful in a Permitted Business; and (iv) the Capital Stock of any Person engaged
in a Permitted Business if, in connection with the receipt by the Company or any
Restricted Subsidiary of the Company of such Capital Stock, (A) such Person
becomes a Restricted Subsidiary of the Company or any Restricted Subsidiary of
the Company or (B) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Restricted Subsidiary of the Company.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Receivables Facility" means one or more receivables financing
facilities, as amended from time to time, pursuant to which the Company or any
of its Restricted Subsidiaries sells its accounts receivable to an Accounts
Receivable Subsidiary.
"Receivables Fees" means distributions or payments made directly or by
means of discounts with respect to any participation interests issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of February 22, 1999, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time, and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend, if applicable, and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Note upon expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Notes initially sold in reliance on Rule 903
of Regulation S.
"Related Party" means, with respect to any Principal, (i) any
controlling stockholder or partner of such Principal on the date of this
Indenture, or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding
(directly or through one or more Subsidiaries) a 51% or more controlling
interest of which consist of the Principals and/or such other Persons referred
to in the immediately preceding clauses (i) or (ii).
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day distribution compliance period as
defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Spot Rate" means, for any currency, the spot rate at which such
currency is offered for sale against United States dollars as determined by
reference to the New York foreign exchange selling rates, as published in The
Wall Street Journal on such date of determination for the immediately preceding
business day or, if such rate is not available, as determined in any publicly
available source of similar market data.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (b) any partnership or limited liability company (i) the sole
general partner or the managing general partner or managing member of which is
such Person or a Subsidiary of such Person or (ii) the only general partners or
managing members of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
"Tax Sharing Agreement" means any tax sharing agreement or arrangement
between the Company and Laminates and/or Holdings, as the same may be amended
from time to time; provided that in no event shall the amount permitted to be
paid pursuant to all such agreements and/or arrangements exceed the amount the
Company would be required to pay for income taxes were it to file a consolidated
tax return for itself and its consolidated Restricted Subsidiaries as if it were
a corporation that was a parent of a consolidated group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Total Assets" means the total consolidated assets of the Company and
its Restricted Subsidiaries, as shown on the most recent balance sheet
(excluding the footnotes thereto) of the Company.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form of
Exhibit A-1 attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the board of directors as an Unrestricted Subsidiary pursuant to a board
resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (i) to subscribe for additional Equity Interests (other than
Investments described in clause (g) of the definition of Permitted Investments)
or (ii) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels, of operating results; and (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the board of directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the board resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as a Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.09 hereof, the Company
shall be in default of such covenant). The board of directors of the Company may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof and
(ii) no Default or Event of Default would be in existence following such
designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares) shall at the time
be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries
of such Person or by such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"............................................4.11
"Asset Sale".......................................................4.10
"Asset Sale Offer".................................................3.09
"Authentication Order".............................................2.02
"Bankruptcy Law"...................................................4.01
"Change of Control Offer"..........................................4.15
"Change of Control Payment"........................................4.15
"Change of Control Payment Date" ..................................4.15
"Covenant Defeasance"..............................................8.03
"Designated Senior Indebtedness"...................................10.02
"Event of Default".................................................6.01
"Excess Proceeds"..................................................4.10
"incur"............................................................4.09
"Legal Defeasance" ................................................8.02
"Offer Amount".....................................................3.09
"Offer Period".....................................................3.09
"Paying Agent".....................................................2.03
"Permitted Indebtedness"...........................................4.09
"Permitted Junior Securities"......................................10.02
"Purchase Date"....................................................3.09
"Registrar"........................................................2.03
"Representative"...................................................10.02
"Restricted Payments"..............................................4.07
"Senior Indebtedness"..............................................10.02
SECTION 1.03. INCORPORATION OF TIA PROVISIONS.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and
in the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute,
replacement of successor sections or rules adopted by
the Commission from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof, except that Notes
used to pay Liquidated Damages may be in other denominations.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibit A-1 attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of Exhibit A-2 attached
hereto, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedel Bank certifying
that they have received certification of non-United States beneficial ownership
of 100% of the aggregate principal amount of the Regulation S Temporary Global
Note (except to the extent of any beneficial owners thereof who acquired an
interest therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note, all as contemplated by Section 2.06
(a) (ii) hereof), and (ii) an Officers' Certificate from the Company. Following
the termination of the Restricted Period, beneficial interests in the Regulation
S Temporary Global Note shall be exchanged for beneficial interests in
Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal may be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by one
Officer (an "Authentication Order"), authenticate Notes for original issue up to
the aggregate principal amount stated in paragraph 4 of the Notes, plus
Additional Notes issued pursuant to this Section 2.02 and Section 4.09 hereof.
The aggregate principal amount of Notes outstanding at any time may not exceed
such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Notes will be exchanged by the
Company for Definitive Notes if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 90 days after the date of such notice from the Depositary, (ii)
the Company in its sole discretion determines that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and delivers a written
notice to such effect to the Trustee or (iii) there shall have occurred and be
continuing to occur a Default or Event of Default with respect to the Notes;
provided that in no event shall the Regulation S Temporary Global Note be
exchanged by the Company for Definitive Notes prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the
occurrence of any of the preceding events in (i), (ii) or (iii) above,
Definitive Notes shall be issued in such names as the Depositary shall instruct
the Trustee. In addition, beneficial interests in a Global Note may be exchanged
for certificated Notes upon request but only upon at least 20 days' prior
written notice given to the Trustee by or on behalf of DTC in accordance with
customary procedures. Global Notes also may be exchanged or replaced, in whole
or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof,
shall be authenticated and delivered in the form of, and shall be, a Global
Note, except as provided in this Section 2.06. A Global Note may not be
exchanged for another Note other than as provided in this Section 2.06(a),
however, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in
accordance with the transfer restrictions set forth in the Private
Placement Legend; provided, however, that prior to the expiration
of the Restricted Period, a beneficial interest in the Regulation
S Global Note may be transferred to a person who takes delivery in
the form of an interest in the corresponding 144A Global Note only
upon receipt by the Trustee of a written certification from the
transferor to the effect that such transfer is being made (i)(a)
to a person whom the transferor reasonably believes is a Qualified
Institutional Buyer in a transaction meeting the requirements of
Rule 144A or (b) pursuant to another exemption from the
registration requirements under the Securities Act which is
accompanied by an opinion of counsel regarding the availability of
such exemption and (ii) in accordance with all applicable
securities laws of any state of the United States or any other
jurisdiction. Beneficial interests in any Unrestricted Global Note
may be transferred to Persons who take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note. No
written orders or instructions shall be required to be delivered
to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i)
above, the transferor of such beneficial interest must deliver to
the Registrar either (A) (1) a written order from a Participant or
an Indirect Participant given to the Depositary in accordance with
the Applicable Procedures directing the Depositary to credit or
cause to be credited a beneficial interest in another Global Note
in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the
Participant account to be credited with such increase or (B) (1) a
written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures
directing the Depositary to cause to be issued a Definitive Note
in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the
transfer or exchange referred to in (1) above; provided that in no
event shall Definitive Notes be issued upon the transfer or
exchange of beneficial interests in the Regulation S Temporary
Global Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates required
pursuant to Rule 903 under the Securities Act. Upon consummation
of an Exchange Offer by the Company in accordance with Section
2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall
be deemed to have been satisfied upon receipt by the Registrar of
the instructions contained in the Letter of Transmittal delivered
by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable
under the Securities Act, the Trustee shall adjust the principal
amount of the relevant Global Note(s) pursuant to Section 2.06(h)
hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note
may be transferred to a Person who takes delivery thereof in the
form of a beneficial interest in another Restricted Global Note if
the transfer complies with the requirements of Section 2.06(b)(ii)
above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note
or the Regulation S Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof and, if the
transfer occurs prior to the expiration of the Restricted
Period, the interest transferred shall be held immediately
thereafter through Euroclear or Cedel Bank.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the
Unrestricted Global Note. A beneficial interest in any Restricted
Global Note may be exchanged by any holder thereof for a
beneficial interest in an Unrestricted Global Note or transferred
to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii)
above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such
beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder
in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the
certifications in item (4) thereof,
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require,
an Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note or to
transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to
the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein. In addition, any Definitive Note issued
in exchange for a beneficial interest in a Restricted Global in an
offshore transaction in accordance with Rule 903 or Rule 904 under the
Securities Act, shall bear the Private Placement Legend.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may
not be exchanged for a Definitive Note or transferred to a Person
who takes delivery thereof in the form of a Definitive Note prior
to (x) the expiration of the Restricted Period and (y) the receipt
by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule
904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest
in a Restricted Global Note may exchange such beneficial interest
for an Unrestricted Definitive Note or may transfer such
beneficial interest to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such
beneficial interest for a Definitive Note that does not
bear the Private Placement Legend, a certificate from
such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a Definitive Note that does not
bear the Private Placement Legend, a certificate from
such holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof,
and, in each such case set forth in this subparagraph (D),
if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial
interest in an Unrestricted Global Note proposes to exchange such
beneficial interest for a Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the
form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee
shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal
amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered
in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such
Notes are so registered. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive
Note proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive
Notes to a Person who takes delivery thereof in the form of a
beneficial interest in a Restricted Global Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, and in the case of clause
(c) above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Restricted Definitive
Note to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof,
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note at any time. Upon receipt
of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or
cause to be increased the aggregate principal amount of one of the
Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the
Holder thereof for an Unrestricted Definitive Note or transferred
to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an
Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who
shall take delivery thereof in the form of an
Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to
register such a transfer, the Registrar shall register the
Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the
legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER
THE SECURITIES ACT (AN "IAI")), (2) AGREES THAT IT WILL NOT RESELL
OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF
RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E)
TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF
AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(iii), c(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE
TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF
THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE
AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF FORMICA CORPORATION."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE
PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global
Notes and Definitive Notes upon the Company's order or at the
Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a
Definitive Note for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to
Sections 3.06, 3.09, 4.10 and 4.14 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole
or in part, except the unredeemed portion of any Note being
redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this
Indenture, as the Global Notes or Definitive Notes surrendered
upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and
ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part or (c) to register the transfer of
or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving
payment of principal of and interest and Liquidated Damages, if
any, on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to
the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may
be submitted by facsimile.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section 3.07
hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, selection
of Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest and Liquidated
Damages, if any, not paid on such unpaid principal, in each case at the rate
provided in the Notes and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as provided below, the Notes will not be redeemable at the
Company's option prior to, 2004. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, in cash at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on March 1
of the years indicated below:
Year Percentage
---- ----------
2004..................................................105.438%
2005..................................................103.625%
2006..................................................101.813%
2007 and thereafter...................................100.000%
Notwithstanding the foregoing, on or prior to March 1, 2002, the
Company may redeem up to 35% of the aggregate principal amount of Notes ever
issued under this Indenture in cash at a redemption price of 110.875% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings; provided that at least 65% of the aggregate
principal amount of Notes ever issued under this Indenture remains outstanding
immediately after the occurrence of any such redemption; and provided further
that such redemption shall occur within 90 days of the date of the closing of
any such Public Equity Offering.
(b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption of, or sinking
fund payments with respect to, the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; and shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03
hereof.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company will furnish to
the Holders of Notes (a) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants, provided that the Company
may deliver financial information with respect to its (direct or indirect)
parent if the Company delivers to the Trustee an Officer's Certificate
certifying that such financial information is substantially equivalent to the
financial information with respect to the Company and (b) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports, in each case, within the time
periods specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Notes remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
have been made under the supervision of the signing Officers with a view to
determining whether the Company have kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or propose to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest or Liquidated Damages, if
any, on the Notes is prohibited or if such event has occurred, a description of
the event and what action the Company is taking or proposes to take with respect
thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (which shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants that (to the extent permitted by law) it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law wherever enacted,
now or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Company hereby expressly waives (to the
extent permitted by law) all benefit or advantage of any such law, and covenants
that (to the extent permitted by law) it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company or
dividends or distributions payable to the Company or any Wholly Owned Restricted
Subsidiary of the Company); (b) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of the Company, any of its Restricted
Subsidiaries or any other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the Company); (c)
make any principal payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value, any Indebtedness of the Company that
is subordinated in right of payment to the Notes, except in accordance with the
mandatory redemption or repayment provisions set forth in the original
documentation governing such Indebtedness (but not pursuant to any mandatory
offer to repurchase upon the occurrence of any event); or (d) make any
Restricted Investment (all such payments and other actions set forth in clauses
(a) through (d) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(ii) the Company would, immediately after giving pro forma
effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof; and
(iii) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after the date of this Indenture
(excluding Restricted Payments permitted by clauses (a) (to the
extent that the declaration of any dividend referred to therein
reduces amounts available for Restricted Payments pursuant to this
clause (iii)), (b) through (i), (k), (l), (n), (p), (q) and (s) of
the next succeeding paragraph), is less than the sum, without
duplication, of (A) 50% of the Consolidated Net Income of the
Company for the period (taken as one accounting period) commencing
April 1, 1999 to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (B) 100% of the Qualified Proceeds received by
the Company on or after the date of this Indenture from
contributions to the Company's capital or from the issue or sale
on or after the date of this Indenture of Equity Interests of the
Company or of Disqualified Stock or convertible debt securities of
the Company to the extent that they have been converted into such
Equity Interests (other than Equity Interests, Disqualified Stock
or convertible debt securities sold to a Subsidiary of the Company
and other than Disqualified Stock or convertible debt securities
that have been converted into Disqualified Stock), plus (C) the
amount equal to the net reduction in Investments in Persons after
the date of this Indenture who are not Restricted Subsidiaries
(other than Permitted Investments) resulting from (x) Qualified
Proceeds received as a dividend, repayment of a loan or advance or
other transfer of assets (valued at the fair market value thereof)
to the Company or any Restricted Subsidiary from such Persons, (y)
Qualified Proceeds received upon the sale or liquidation of such
Investment and (z) the redesignation of Unrestricted Subsidiaries
(excluding any increase in the amount available for Restricted
Payments pursuant to clause (j) or (o) below arising from the
redesignation of such Unrestricted Subsidiary) whose assets are
used or useful in, or which is engaged in, one or more Permitted
Business as Restricted Subsidiaries (valued (proportionate to the
Company's equity interest in such Subsidiary) at the fair market
value of the net assets of such Subsidiary at the time of such
redesignation), plus (D) cash payments received by the Company on
the Intercompany Note.
The foregoing provisions will not prohibit:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(b) (i) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
(the "Retired Capital Stock") in exchange for, or out of the net cash proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of, other Equity Interests of the Company (other than any Disqualified Stock)
(the "Refunding Capital Stock"), provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (iii)(B) of the
preceding paragraph;
(c) the defeasance, redemption, repurchase, retirement or other
acquisition of subordinated Indebtedness of the Company with the net cash
proceeds from an incurrence of, or in exchange for, Permitted Refinancing
Indebtedness;
(d) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company, Laminates, or Holdings held by any
member of Laminates', Holdings' or the Company's (or any of its Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement and any dividend to Laminates or Holdings to
fund any such repurchase, redemption, acquisition or retirement, provided that
the aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed (x) $7.5 million in any calendar year (with
unused amounts in any calendar year being carried over to succeeding calendar
years subject to a maximum (without giving effect to the following clause (y))
of $15.0 million in any calendar year), plus (y) the aggregate cash proceeds
received by the Company during such calendar year from any reissuance of Equity
Interests by the Company, Laminates, or Holdings to members of management of the
Company and its Restricted Subsidiaries and (ii) no Default or Event of Default
shall have occurred and be continuing immediately after such transaction;
(e) payments and transactions in connection with the Acquisition
(including any purchase price adjustment), the Acquisition Financing, the
Offering, the New Credit Facility (including commitment, syndication and
arrangement fees payable thereunder) and the application of the proceeds
thereof, and the payment of fees and expenses with respect thereto;
(f) the payment of dividends or the making of loans or advances by the
Company to Holdings not to exceed $5.0 million in any fiscal year for costs and
expenses incurred by Holdings or Laminates in its capacity as a holding company
or for services rendered by Holdings or Laminates on behalf of the Company;
(g) payments or distributions to Holdings or Laminates pursuant to any
Tax Sharing Agreement;
(h) the payment of dividends by a Restricted Subsidiary on any class
of common stock of such Restricted Subsidiary if (i) such dividend is paid pro
rata to all holders of such class of common stock and (ii) at least 51% of such
class of common stock is held by the Company or one or more of its Restricted
Subsidiaries;
(i) the repurchase of any class of common stock of a Restricted
Subsidiary if (i) such repurchase is made pro rata with respect to such class of
common stock and (ii) at least 51% of such class of common stock is held by the
Company or one or more of its Restricted Subsidiaries;
(j) any other Restricted Investment made in a Permitted Business
which, together with all other Restricted Investments made pursuant to this
clause (j) since the date of this Indenture, does not exceed $25.0 million (in
each case, after giving effect to all subsequent reductions in the amount of any
Restricted Investment made pursuant to this clause (j), either as a result of
(i) the repayment or disposition thereof for cash or (ii) the redesignation of
an Unrestricted Subsidiary as a Restricted Subsidiary (valued proportionate to
the Company's equity interest in such Subsidiary at the time of such
redesignation) at the fair market value of the net assets of such Subsidiary at
the time of such redesignation), in the case of clause (i) and (ii), not to
exceed the amount of such Restricted Investment previously made pursuant to this
clause (j); provided that no Default or Event of Default shall have occurred and
be continuing immediately after making such Restricted Investment;
(k) the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of the Company or any Restricted Subsidiary
issued on or after the date of this Indenture in accordance with Section 4.09
hereof; provided that no Default or Event of Default shall have occurred and be
continuing immediately after making such Restricted Payment;
(l) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise price
of such options;
(m) the payment of dividends or distributions on the Company's common
stock, following the first public offering of the Company's common stock or
Holdings' or Laminates' common stock after the date of this Indenture, of up to
6.0% per annum of (i) the net proceeds received by the Company from such public
offering of its common stock or (ii) the net proceeds received by the Company
from such public offering of Holdings' or Laminates' common stock as common
equity or preferred equity (other than Disqualified Stock), other than, in each
case, with respect to public offerings with respect to the Company's common
stock or Holdings' or Laminates' common stock registered on Form S-8; provided
that no Default or Event of Default shall have occurred and be continuing
immediately after any such payment of dividends or distributions;
(n) the cancellation or forgiveness (in whole or in part) or any
amendment to or refinancing of the Intercompany Note;
(o) any other Restricted Payment which, together with all other
Restricted Payments made pursuant to this clause (o) since the date of this
Indenture, does not exceed $25.0 million (in each case, after giving effect to
all subsequent reductions in the amount of any Restricted Investment made
pursuant to this clause (o) either as a result of (i) the repayment or
disposition thereof for cash or (ii) the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary (valued proportionate to the Company's
equity interest in such Subsidiary at the time of such redesignation) at the
fair market value of the net assets of such Subsidiary at the time of such
redesignation), in the case of clause (i) and (ii), not to exceed the amount of
such Restricted Investment previously made pursuant to this clause (o); provided
that no Default or Event of Default shall have occurred and be continuing
immediately after making such Restricted Payment;
(p) the pledge by the Company of the Capital Stock of an Unrestricted
Subsidiary of the Company to secure Non-Recourse Debt of such Unrestricted
Subsidiary;
(q) the purchase, redemption or other acquisition or retirement for
value of any Equity Interests of any Restricted Subsidiary issued after the date
of this Indenture, provided that the aggregate price paid for any such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed the
sum of (i) the amount of cash and Cash Equivalents received by such Restricted
Subsidiary from the issue or sale thereof and (ii) any accrued dividends thereon
the payment of which would be permitted pursuant to clause (k) above;
(r) any Investment in an Unrestricted Subsidiary that is funded by
Qualified Proceeds received by the Company on or after the date of this
Indenture from contributions to the Company's capital or from the issue and sale
on or after the date of this Indenture of Equity Interests of the Company or of
Disqualified Stock or convertible debt securities to the extent they have been
converted into such Equity Interests (other than Equity Interests, Disqualified
Stock or convertible debt securities sold to a Subsidiary of the Company and
other than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock) in an amount (measured at the time such
Investment is made and without giving effect to subsequent changes in value)
that does not exceed the amount of such Qualified Proceeds; and
(s) distributions or payments of Receivables Fees.
The board of directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such designation, all outstanding Investments
by the Company and its Restricted Subsidiaries (except to the extent repaid in
cash) in the Subsidiary so designated will be deemed to be Restricted Payments
at the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this Section 4.07. All such
outstanding Investments will be deemed to constitute Restricted Investments in
an amount equal to the greater of (i) the net book value of such Investments at
the time of such designation and (ii) the fair market value of such Investments
at the time of such designation. Such designation will only be permitted if such
Restricted Investment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of (i) all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment
and (ii) Qualified Proceeds (other than cash) shall be the fair market value on
the date of receipt thereof by the Company of such Qualified Proceeds. The fair
market value of any non-cash Restricted Payment shall be determined by the board
of directors of the Company whose resolution with respect thereto shall be
delivered to the Trustee. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.07 were computed.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances to the Company or any of its
Restricted Subsidiaries or (c) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of this Indenture,
(b) the New Credit Facility as in effect as of the date of this Indenture, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, (c) this Indenture and the
Notes, (d) applicable law and any applicable rule, regulation or order, (e) any
agreement or instrument of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent created in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Indenture to be incurred, (f) customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (e) above on the property so acquired, (h)
contracts for the sale of assets, including, without limitation, customary
restrictions with respect to a Subsidiary pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary, (i) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are, in the good faith
judgment of the Company's board of directors, not materially less favorable,
taken as a whole, to the Holders of the Notes than those contained in the
agreements governing the Indebtedness being refinanced, (j) secured Indebtedness
otherwise permitted to be incurred pursuant to Sections 4.09 and 4.12 hereof
that limit the right of the debtor to dispose of the assets securing such
Indebtedness, (k) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business, (l)
other Indebtedness or Disqualified Stock of Restricted Subsidiaries permitted to
be incurred subsequent to the Issuance Date pursuant to the provisions of
Section 4.09 hereof, (m) customary provisions in joint venture agreements and
other similar agreements entered into in the ordinary course of business, and
(n) restrictions created in connection with any Receivables Facility that, in
the good faith determination of the board of directors of the Company, are
necessary or advisable to effect such Receivables Facility.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Indebtedness), (b) the Company will not, and will not permit any of its
Restricted Subsidiaries to, issue any shares of Disqualified Stock and (c) the
Company will not permit any of its Restricted Subsidiaries to issue any shares
of preferred stock; provided that the Company or any Restricted Subsidiary may
incur Indebtedness (including Acquired Indebtedness) or issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a consolidated pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this Section 4.09 will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Indebtedness"):
(i) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness under the New Credit Facility and the Foreign Credit Facilities;
provided that the aggregate principal amount of all Indebtedness (with letters
of credit being deemed to have a principal amount equal to the maximum potential
liability of the Company and such Restricted Subsidiaries thereunder) then
classified as having been incurred in reliance upon this clause (i) that remains
outstanding under the New Credit Facility and the Foreign Credit Facilities
after giving effect to such incurrence does not exceed an amount equal to $280.0
million;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes and this Indenture;
(iv) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness denominated in Spanish pesetas (or a European common currency as a
result of the implementation of European Monetary Union and the cessation of use
of Spanish pesetas as the lawful currency of the Republic of Spain) in an
aggregate principal amount (or accreted value, as applicable) not to exceed
$10.0 million outstanding after giving effect to such incurrence;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Expenditure Indebtedness,
Capital Lease Obligations or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment (including
acquisitions of Capital Stock of a Person that becomes a Restricted Subsidiary
to the extent of the fair market value of the property, plant or equipment so
acquired) used in the business of the Company or such Restricted Subsidiary, in
an aggregate principal amount (or accreted value, as applicable) not to exceed
$30.0 million outstanding after giving effect to such incurrence;
(vi) Indebtedness arising from agreements of the Company or any
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in connection
with the disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary for the purpose of financing
such acquisition; provided that (A) such Indebtedness is not reflected on the
balance sheet of the Company or any Restricted Subsidiary (contingent
obligations referred to in a footnote or footnotes to financial statements and
not otherwise reflected on the balance sheet will not be deemed to be reflected
on such balance sheet for purposes of this clause (A)) and (B) the maximum
assumable liability in respect of such Indebtedness shall at no time exceed the
gross proceeds including non-cash proceeds (the fair market value of such
non-cash proceeds being measured at the time received and without giving effect
to any subsequent changes in value) actually received by the Company and/or such
Restricted Subsidiary in connection with such disposition;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted by this Indenture to be
incurred;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and/or
any of its Restricted Subsidiaries; provided that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary, as the case may
be, that was not permitted by this clause (viii);
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing
or hedging (A) interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding and (B)
exchange rate risk with respect to agreements or Indebtedness of such Person
payable denominated in a currency other than U.S. dollars, provided that such
agreements do not increase the Indebtedness of the obligor outstanding at any
time other than as a result of fluctuations in foreign currency exchange rates
or interest rates or by reason of fees, indemnities and compensation payable
thereunder;
(x) the guarantee by the Company or any of its Restricted Subsidiaries
of Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this Section 4.09;
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with an acquisition in an aggregate
principal amount (or accreted value, as applicable) not to exceed $50.0 million
outstanding after giving effect to such incurrence;
(xii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary in
the ordinary course of business; and
(xiii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) outstanding after giving effect to such
incurrence, including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (xiii),
not to exceed $40.0 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (i) through (xiii)
above or is entitled to be incurred pursuant to the first paragraph of this
Section 4.09, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this Section 4.09 and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such clauses or pursuant to the first paragraph hereof of this Section 4.09. In
addition, the Company may, at any time, change the classification of an item of
Indebtedness (or any portion thereof) to any other clause or to the first
paragraph hereof provided that the Company would be permitted to incur such item
of Indebtedness (or such portion thereof) pursuant to such other clause or the
first paragraph hereof of this Section 4.09, as the case may be, at such time of
reclassification. Accrual of interest, accretion or amortization of original
issue discount will not be deemed to be an incurrence of Indebtedness for
purposes of this Section 4.09.
All Indebtedness under the New Credit Facility and the Foreign Credit
Facilities outstanding on the date on which Notes are first issued and
authenticated under this Indenture shall be deemed to have been incurred on such
date in reliance on the first paragraph of this Section 4.09.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (a) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the board of directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (b) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of (i) cash
or Cash Equivalents or (ii) property or assets that are used or useful in a
Permitted Business, or the Capital Stock of any Person engaged in a Permitted
Business if, as a result of the acquisition by the Company or any Restricted
Subsidiary thereof, such Person becomes a Restricted Subsidiary; provided that
the amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability,
(y) any securities, notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Company or such
Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash
or Cash Equivalents received), and (z) any Designated Noncash Consideration
received by the Company or any of its Restricted Subsidiaries in such Asset Sale
having an aggregate fair market value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (z) that is at that time
outstanding, not to exceed 15% of Total Assets at the time of the receipt of
such Designated Noncash Consideration (with the fair market value of each item
of Designated Noncash Consideration being measured at the time received and
without giving effect to subsequent changes in value), shall be deemed to be
cash for purposes of this Section 4.10; and provided further that the 75%
limitation referred to in clause (b) above will not apply to any Asset Sale in
which the cash or Cash Equivalents portion of the consideration received
therefrom, determined in accordance with the foregoing proviso, is equal to or
greater than what the after-tax proceeds would have been had such Asset Sale
complied with the aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or any such Restricted Subsidiary shall apply such Net
Proceeds, at its option (or to the extent the Company is required to apply such
Net Proceeds pursuant to the terms of the New Credit Facility), to (a) repay or
purchase Senior Indebtedness or Pari Passu Indebtedness of the Company or any
Indebtedness of any Restricted Subsidiary, provided that, if the Company shall
so repay or purchase Pari Passu Indebtedness of the Company, it will equally and
ratably reduce Indebtedness under the Notes if the Notes are then redeemable,
or, if the Notes may not then be redeemed, the Company shall make an offer (in
accordance with the procedures set forth below for an Asset Sale Offer) to all
Holders of Notes to purchase at a purchase price equal to 100% of the principal
amount of the Notes, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the date of purchase, the Notes that would otherwise be
redeemed, or (b) an investment in property, the making of a capital expenditure
or the acquisition of assets that are used or useful in a Permitted Business, or
Capital Stock of any Person primarily engaged in a Permitted Business if (i) as
a result of the acquisition by the Company or any Restricted Subsidiary thereof,
such Person becomes a Restricted Subsidiary or (ii) the Investment in such
Capital Stock is permitted by clause (f) of the definition of Permitted
Investments. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce Indebtedness or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $15.0 million, the Company will be required to
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, in accordance with the procedures set forth in
this Indenture. To the extent that any Excess Proceeds remain after consummation
of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes surrendered by Holders thereof in connection with an Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased as set forth under Sections 3.02 and 3.03 hereof. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Indenture relating to such Asset Sale Offer, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of the Company (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or such Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (b) the Company delivers to
the Trustee, with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $7.5
million, either (i) a resolution of the board of directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the board of directors or (ii) an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing.
Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (a) customary directors' fees, indemnification or
similar arrangements or any employment agreement or other compensation plan or
arrangement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business (including ordinary course loans to employees
not to exceed (i) $5.0 million outstanding in the aggregate at any time and (ii)
$2.0 million to any one employee) and consistent with the past practice of the
Company or such Restricted Subsidiary; (b) transactions between or among the
Company and/or its Restricted Subsidiaries; (c) payments of customary fees by
the Company or any of its Restricted Subsidiaries to DLJMB and its Affiliates
made for any financial advisory, financing, underwriting or placement services
or in respect of other investment banking activities, including, without
limitation, in connection with acquisitions or divestitures which are approved
by a majority of the board of directors in good faith; (d) any agreement as in
effect on the date of this Indenture or any amendment thereto (so long as such
amendment is not disadvantageous to the Holders of the Notes in any material
respect) or any transaction contemplated thereby; (e) payments and transactions
in connection with the Acquisition and the Acquisition Financing, the New Credit
Facility (including commitment, syndication and arrangement fees payable
thereunder) and the Offering (including underwriting discounts and commissions
in connection therewith) and the application of the proceeds thereof, and the
payment of the fees and expenses with respect thereto; (f) Restricted Payments
that are permitted by Section 4.07 hereof and any Permitted Investments; (g)
sales of accounts receivable, or participations therein, in connection with any
Receivables Facility; and (h) transactions pursuant to the Intercompany Note,
and any amendment or refinancing thereof.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien, other than a Permitted Lien, that secures obligations under any
Pari Passu Indebtedness or subordinated Indebtedness of the Company on any asset
or property now owned or hereafter acquired by the Company or any of its
Restricted Subsidiaries, or any income or profits therefrom or assign or convey
any right to receive income therefrom, unless the Notes are equally and ratably
secured with the obligations so secured until such time as such obligations are
no longer secured by a Lien; provided that, in any case involving a Lien
securing subordinated Indebtedness of the Company, such Lien is subordinated to
the Lien securing the Notes to the same extent that such subordinated
Indebtedness is subordinated to the Notes.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) the
corporate, partnership or other existence of itself and each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of itself and any of its Subsidiaries, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Subsidiaries, taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders of the Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase (the "Change of Control Payment"). Within 60 days following any
Change of Control, the Company will (or will cause the Trustee to) mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by this Indenture and described in such
notice. The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Indenture relating to such Change of Control Offer, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in this Indenture
by virtue thereof.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (b) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (c) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book-entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. Prior to complying with the
provisions of this Section 4.14, but in any event within 90 days following a
Change of Control, the Company shall either repay all outstanding Senior
Indebtedness or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Indebtedness to permit the repurchase of Notes
required by this Section 4.14. The Company shall publicly announce the results
of the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(b) Notwithstanding anything to the contrary in this Section 4.14, the
Company will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.15. NO SENIOR SUBORDINATED INDEBTEDNESS.
The Company shall not Incur any Indebtedness that is subordinate or
junior in right of payment to any Senior Indebtedness and senior in right of
payment to the Notes.
SECTION 4.16. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company or any Restricted Subsidiary may enter into a sale and leaseback
transaction if (a) the Company or such Restricted Subsidiary, as the case may
be, could have (i) incurred Indebtedness in an amount equal to the Attributable
Indebtedness relating to such sale and leaseback transaction pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof and (ii) incurred a Lien to secure such Indebtedness pursuant to
Section 4.12 hereof, (b) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the board of directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (c) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, Section 4.10 hereof.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another Person unless (a) the Company is the
surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United States, any state
thereof or the District of Columbia, (b) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or the Person to which
such sale, assignment, transfer, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Registration Rights
Agreement, the Notes and this Indenture pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee, (c) immediately after such
transaction no Default or Event of Default exists and (d) the Company or the
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made (i) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09 hereof or (ii) would
(together with its Restricted Subsidiaries) have a higher Fixed Charge Coverage
Ratio immediately after such transaction (after giving pro forma effect thereto
as if such transaction had occurred at the beginning of the applicable
four-quarter period) than the Fixed Charge Coverage Ratio of the Company and its
Restricted Subsidiaries immediately prior to such transaction. The foregoing
clause (d) will not prohibit (a) a merger between the Company and a Wholly Owned
Subsidiary of Holdings created for the purpose of holding the Capital Stock of
the Company, (b) a merger between the Company and a Wholly Owned Restricted
Subsidiary or (c) a merger between the Company and an Affiliate incorporated
solely for the purpose of reincorporating the Company in another State of the
United States so long as, in each case, the amount of Indebtedness of the
Company and its Restricted Subsidiaries is not increased thereby. The Company
shall not lease all or substantially all of its assets to any Person.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest or Liquidated Damages, if any, on the Notes except in
the case of a sale of all or substantially all of the Company's assets that
meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an Event of Default:
(a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
Article 10 hereof);
(b) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by Article 10 hereof);
(c) failure by the Company or any of its Restricted Subsidiaries for
30 days after receipt of notice from the Trustee or Holders of at least 25% in
principal amount of the Notes then outstanding to comply with Sections 4.07,
4.09, 4.10, 4.14 or Article 5 hereof;
(d) failure by the Company for 60 days after notice from the Trustee
or the Holders of at least 25% in principal amount of the Notes then outstanding
to comply with any of its other agreements in this Indenture or the Notes;
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default (i) is caused by a
failure to pay Indebtedness at its stated final maturity (after giving effect to
any applicable grace period provided in such Indebtedness) (a "Payment Default")
or (ii) results in the acceleration of such Indebtedness prior to its stated
final maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(f) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $10.0 million (net of any amounts
with respect to which a reputable and creditworthy insurance company has
acknowledged liability in writing), which judgments are not paid, discharged or
stayed for a period of 60 days;
(g) the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary pursuant to or within the
meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any
group of Restricted Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially
all of the property of the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any
group of Restricted Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Restricted Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately; provided, that so long as any Indebtedness
permitted to be incurred pursuant to the New Credit Facility shall be
outstanding, such acceleration shall not be effective until the earlier of (i)
an acceleration under any such Indebtedness under the New Credit Facility or
(ii) five Business Days after receipt by the Company and the administrative
agent under the New Credit Facility of written notice of such acceleration. Upon
any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any of its
Restricted Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium or
Liquidated Damages, if any, that has become due solely because of the
acceleration) have been cured or waived, provided that, in the event of a
declaration of acceleration of the Notes because an Event of Default has
occurred and is continuing as a result of the acceleration of any Indebtedness
described in clause (e) of Section 6.01 hereof, the declaration of acceleration
of the Notes shall be automatically annulled if the holders of any Indebtedness
described in clause (e) of Section 6.01 hereof have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of such
declaration and if (i) the annulment of the acceleration of the Notes would not
conflict with any judgment or decree of a court of competent jurisdiction and
(ii) all existing Events of Default, except non-payment of principal or interest
on the Notes that became due solely because of the acceleration of the Notes,
have been cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest and Liquidated Damages, if any, on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to holders of Senior Indebtedness to the extent required by
Article 10 or Section 11.02 hereof;
Third: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine
the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c), (e) and (f) of this Section 7.01 and Section 7.02 hereof.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.01 hereof, the Trustee shall have
no duty to inquire as to the performance of the Company's covenants in Article 4
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring pursuant
to Sections 6.01(a), 6.01(b) and 4.01 or (ii) any Default or Event of Default of
which the Trustee shall have received written notification or obtained actual
knowledge.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the Trustee
may, in its discretion, make such further inquiry or investigation into such
facts or matters as it may see fit and if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company personally or by agent or attorney.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the Commission
for permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest or Liquidated Damages, if any, on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each January 1 beginning with the January 1
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA section 313(a) (but if no
event described in TIA section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA section (b)(2). The Trustee shall also transmit by mail
all reports as required by TIA section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Notes are listed in accordance with TIA section
313(d). The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA section 313(b)(2)
to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA section 310(a)(1), (2) and (5). The Trustee is subject to
TIA section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA section 311(a), excluding any creditor
relationship listed in TIA section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA section 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder:
(a) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on such Notes when such payments are due from the trust
referred to below,
(b) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust,
(c) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection therewith and
(d) the Legal Defeasance provisions of this Indenture.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.14, 4.15, 4.16 and 4.17 hereof with respect to the outstanding
Notes on and after the date the conditions set forth in Section 8.04 are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03 hereof, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through
6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance,
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that (i) the Company 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 applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, subject to customary assumptions and exclusions, the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions and
exclusions, the Holders of the outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or, insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 123rd day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company must have delivered to the Trustee an Opinion of
Counsel to the effect that, subject to customary assumptions and exclusions,
after the 123rd day following the deposit, the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or any
analogous New York State law provision or any other applicable federal or New
York bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally;
(g) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company with the
intent of defeating, hindering, delaying or defrauding creditors of the Company
or others; and
(h) the Company must deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel (which opinion may be subject to customary assumptions
and exclusions), each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest and
Liquidated Damages, if any, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest or Liquidated Damages, if any, on any Note and remaining unclaimed
for two years after such principal, and premium, if any, or interest or
Liquidated Damages, if any, has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustees thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest or Liquidated Damages, if
any, on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 or
Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not materially adversely
affect the legal rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with
the limitations set forth in this Indenture as of the date hereof; or
(g) to provide for guarantees of the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and
4.14 hereof) and the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest or Liquidated
Damages, if any, on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
(including Additional Notes, if any) voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes). Notwithstanding the foregoing, any (i) amendment to or
waiver of Sections 4.10 and 4.14 hereof, and (ii) amendment to Article 10 herein
will require the consent of the Holders of at least two-thirds in aggregate
principal amount of the Notes then outstanding if such amendment would
materially adversely affect the rights of Holders of Notes. Section 2.08 hereof
shall determine which Notes are considered to be "outstanding" for purposes of
this Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver under this Section 9.02 may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver,
(b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
Sections 4.10 and 4.14 hereof),
(c) reduce the rate of or extend the time for payment of interest on
any Note,
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest or Liquidated Damages, if any, on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration),
(e) make any Note payable in money other than that stated in the
Notes,
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults,
(g) waive a redemption payment with respect to any Note (other than
Sections 4.10 and 4.14 hereof), or
(h) make any change in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until its Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the payment of Subordinated Note Obligations are subordinated in right of
payment, to the extent and in the manner set forth in this Article 10, to the
prior payment in full in cash or cash equivalents of all Senior Indebtedness,
whether outstanding on the date of this Indenture or thereafter incurred and
that the subordination is for the benefit of the holders of Senior Indebtedness.
The provisions of this Article 10 shall constitute a continuing offer to all
Persons that, in reliance upon such provisions, become holders of, or continue
to hold Senior Indebtedness, and they or each of them may enforce the rights of
holders of Senior Indebtedness hereunder, subject to the terms and provisions
hereof.
SECTION 10.02. CERTAIN DEFINITIONS.
"cash equivalents" means Cash Equivalents of the type described in
clause (i) of the definition thereof maturing not more than 90 days after the
date of the acquisition thereof.
"Designated Senior Indebtedness" means (a) any Indebtedness outstanding
under the New Credit Facility and (b) any other Senior Indebtedness permitted
under this Indenture the principal amount of which is $25.0 million or more and
that has been designated by the Company in writing to the Trustee as "Designated
Senior Indebtedness."
"Permitted Junior Securities" means Equity Interests in the Company or
debt securities of the Company that are subordinated to all Senior Indebtedness
(and any debt securities issued in exchange for Senior Indebtedness) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Indebtedness.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Indebtedness.
"Senior Indebtedness" means, with respect to any Person, (a) all
Obligations of such Person outstanding under the New Credit Facility and all
Hedging Obligations payable to a lender or an Affiliate thereof or to a Person
that was a lender or an Affiliate thereof at the time the contract was entered
into under the New Credit Facility or any of its Affiliates, including, without
limitation, interest accruing subsequent to the filing of, or which would have
accrued but for the filing of, a petition for bankruptcy, whether or not such
interest is an allowable claim in such bankruptcy proceeding, (b) any other
Indebtedness, unless the instrument under which such Indebtedness is incurred
expressly provides that it is subordinated in right of payment to any other
Senior Indebtedness of such Person and (c) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (i) any liability for federal, state, local or
other taxes, (ii) any Indebtedness of such Person (other than pursuant to the
New Credit Facility) to any of its Subsidiaries or other Affiliates, (iii) any
trade payables or (iv) any Indebtedness that is incurred in violation of this
Indenture.
"Subordinated Note Obligations" means all Obligations with respect to
the Notes, including, without limitation, principal, premium, if any, interest
and Liquidated Damages, if any, payable pursuant to the terms of the Notes
(including upon the acceleration or redemption thereof), together with and
including any amounts received or receivable upon the exercise of rights of
rescission or other rights of action (including claims for damages) or
otherwise.
A "distribution" or "payment" may consist of a distribution, payment or
other transfer of assets by or on behalf of the Company (including, without
limitation, a redemption, repurchase or other acquisition of the Notes) from any
source, of any kind or character, whether in cash, securities or other property,
by set-off or otherwise.
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, (a) the holders of Senior Indebtedness will be entitled
to receive payment in full in cash or cash equivalents of all Obligations due in
respect of such Senior Indebtedness (including interest after the commencement
of any such proceeding at the rate specified in the applicable Senior
Indebtedness) before the Holders of Notes will be entitled to receive any
payment with respect to the Subordinated Note Obligations (except that Holders
of Notes may receive and retain Permitted Junior Securities and payments and
other distributions made from the trust described in Section 8.04 hereof), and
(b) until all Obligations with respect to Senior Indebtedness are paid in full
in cash or cash equivalents, any distribution to which the Holders of Notes
would be entitled but for this Article 10 shall be made to the holders of Senior
Indebtedness (except that Holders of Notes may receive and retain Permitted
Junior Securities and payments and other distributions made from the trust
described Section 8.04 hereof) as their interests appear.
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not make any payment or distribution to the Trustee or
any Holder upon or in respect of the Subordinated Note Obligations (except in
Permitted Junior Securities or from the trust described in Section 8.04 hereof)
until all principal and other obligations with respect to Senior Indebtedness
have been paid in full in cash or cash equivalents, if
(a) a default in the payment of the principal (including reimbursement
obligations in respect of letters of credit) of, premium, if any, or interest on
or commitment fees relating to, Designated Senior Indebtedness occurs and is
continuing beyond any applicable period of grace in the agreement, indenture or
other document governing such Designated Senior Indebtedness or
(b) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its maturity and the
Trustee receives a notice of such default (a "Payment Blockage Notice") from the
Company or the holders of any Designated Senior Indebtedness (or their
Representative).
Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and (b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Indebtedness has been accelerated. No new period of payment
blockage may be commenced unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such default shall have been waived or cured for
a period of not less than 90 days.
SECTION 10.05. ACCELERATION OF SECURITIES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Subordinated Note Obligations at a time when the Trustee or such Holder, as
applicable, has actual knowledge that such payment is prohibited by Section
10.03 or 10.04 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Indebtedness as their interests
may appear or their Representative under the indenture or other agreement (if
any) pursuant to which Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Indebtedness remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
10, except if such payment is made as a result of the willful misconduct or
gross negligence of the Trustee.
SECTION 10.07. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article 10.
SECTION 10.08. SUBROGATION.
After all Senior Indebtedness is paid in full in cash or cash
equivalents and until the Notes are paid in full, Holders of Notes shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the
Notes) to the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to the Holders of Notes have been applied to the payment of Senior
Indebtedness. A distribution made under this Article 10 to holders of Senior
Indebtedness that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
SECTION 10.09. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the obligation
of the Company, which is absolute and unconditional, to pay principal of and
interest and Liquidated Damages, if any, on the Notes in accordance with their
terms;
(2) affect the relative rights of Holders of Notes and creditors of the
Company other than their rights in relation to holders of Senior Indebtedness;
or
(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Indebtedness to receive distributions and payments
otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of or
interest or Liquidated Damages, if any, on a Note on the due date, the failure
is still a Default or Event of Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other Indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article 10.
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representative is hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes.
SECTION 10.14. NO WAIVER OF SUBORDINATION PROVISIONS.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act by any such
holder.
(b) Without in any way limiting the generality of paragraph (a) of
this Section 10.14, the holders of Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or any Holder,
without incurring responsibility to any Holder and without impairing or
releasing the subordination provided in this Article 10 or the obligations
hereunder of the Holders to the holders of Senior Indebtedness, do any one or
more of the following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, any Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any
Person liable in any manner for the collection of Senior Indebtedness; and (iv)
exercise or refrain from exercising any rights against either Company or any
other Person.
SECTION 10.15. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Indebtedness.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA section 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the others
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address.
If to the Company:
15 Independence Boulevard
Warren, New Jersey 07059
Telecopier No.: 908-647-8944
Attention: General Counsel
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 450-4800
Attention: Richard Truesdell, Esq.
If to the Trustee:
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
Telecopier No.: 201-646-0087
Attention: H. Lewis Stone
With a copy to:
Shanley & Fisher, P.C.
131 Madison Avenue
Morristown, New Jersey 07962-1979
Telecopier No.: 973-285-1625
Attention: James F. Freis, Esq.
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA section 314(a)(4)) shall comply with the provisions of TIA
section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS.
No member, director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES 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 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of February 22, 1999
FORMICA CORPORATION
BY:
-----------------------------
Name:
Title:
SUMMIT BANK
BY:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT A-1
(Face of Global Note)
==============================================================================
CUSIP/CINS ________
10-7/8% Senior Subordinated Notes due 2009
No. ___ $___________
FORMICA CORPORATION
promises to pay to _______________, or registered assigns, the principal
sum of Dollars on March 1, 2009.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
DATED:
FORMICA CORPORATION
BY:
-------------------------
Name:
Title:
This is one of the Global Notes referred to in the within-mentioned Indenture:
SUMMIT BANK,
as Trustee
By:
-------------------------
Name:
==============================================================================
<PAGE>
(Back of Note)
10-7/8% [Series A] [Series B] Senior Subordinated Notes due 2009
[Insert the following if the Note is issued in global form.]
[Unless and until it is exchanged in whole or in part for Notes in definitive
form, this Note may not be transferred except as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Unless this
certificate is presented by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as may be
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Formica Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10-7/8% per annum from February 22, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on March 1 and September 1 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each, an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; and provided further
that the first Interest Payment Date shall be September 1, 1999. The Company
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the February 15 or
August 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office of the Paying Agent and Registrar.
Holders of Notes must surrender their Notes to the Paying Agent to collect
principal payments, and the Company may pay principal and interest and
Liquidated Damages, if any, by check and may mail checks to a Holder's
registered address; provided that all payments with respect to Global Notes and
Definitive Notes, the Holders of which have given wire transfer instructions to
the Company, will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Summit Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of February 22, 1999 ("Indenture"), between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company initially limited to $215
million in aggregate principal amount. Additional Notes may be issued pursuant
to Sections 2.02 and 4.09 of the Indenture and, if issued, will be treated as a
single class for all purposes under the Indenture.
5. OPTIONAL REDEMPTION.
(a) Except as provided in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option prior to March 1, 2004.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, in cash at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on March 1 of the years indicated below:
Year Percentage
---- ----------
2004....................................................105.438%
2005....................................................103.625%
2006....................................................101.813%
2007 and thereafter.....................................100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, on or prior to March 1, 2002, the Company may redeem up to 35% of
the aggregate principal amount of Notes ever issued under the Indenture in cash
at a redemption price of 110.875% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the redemption
date, with the net cash proceeds of one or more Public Equity Offerings;
provided that at least 65% of the aggregate principal amount of Notes ever
issued under the Indenture remains outstanding immediately after the occurrence
of any such redemption; and provided further that such redemption shall occur
within 90 days of the date of the closing of any such Public Equity Offering.
(c) Any redemption pursuant to this subparagraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described in Section 4.14 of the Indenture (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (the "Change of Control Payment"). Within 60
days following any Change of Control, the Company will (or will cause the
Trustee to) mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed, pursuant
to the procedures required by the Indenture and described in such notice.
(b) Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or any such Restricted Subsidiary shall apply such Net
Proceeds, at its option (or to the extent the Company is required to apply such
Net Proceeds pursuant to the terms of the New Credit Facility), to (a) repay or
purchase Senior Indebtedness or Pari Passu Indebtedness of the Company or any
Indebtedness of any Restricted Subsidiary, provided that, if the Company shall
so repay or purchase Pari Passu Indebtedness of the Company, it will equally and
ratably reduce Indebtedness under the Notes if the Notes are then redeemable,
or, if the Notes may not then be redeemed, the Company shall make an offer (in
accordance with the procedures set forth in the Indenture) to all Holders of
Notes to purchase at a purchase price equal to 100% of the principal amount of
the Notes, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, the Notes that would otherwise be redeemed, or
(b) an investment in property, the making of a capital expenditure or the
acquisition of assets that are used or useful in a Permitted Business, or
Capital Stock of any Person primarily engaged in a Permitted Business if (i) as
a result of the acquisition by the Company or any Restricted Subsidiary thereof,
such Person becomes a Restricted Subsidiary or (ii) the Investment in such
Capital Stock is permitted by clause (f) of the definition of Permitted
Investments. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce Indebtedness or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $15.0 million, the Company will be required to
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, in accordance with the procedures set forth in
this Indenture. To the extent that any Excess Proceeds remain after consummation
of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes surrendered by Holders thereof in connection with an Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased as set forth under Sections 3.02 and 3.03 of the Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero. Holders of Notes that are the subject of an offer to purchase may
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes (and Additional Notes, if any) and any existing Default or compliance with
any provision of the Indenture or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes (and
Additional Notes, if any). Without the consent of any Holder of a Note, the
Indenture or the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
obligations to Holders of the Notes in case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not materially adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, to provide for the Issuance of Additional Notes
in accordance with the limitations set forth in the Indenture, or to allow any
Person to execute a supplemental indenture to the Indenture and/or to provide
for guarantees with respect to the Notes.
12. DEFAULTS AND REMEDIES. Each of the following constitutes an "Event
of Default": (a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
Article 10 of the Indenture); (b) default in payment when due of the principal
of or premium, if any, on the Notes (whether or not prohibited by Article 10 of
the Indenture); (c) failure by the Company or any of its Restricted Subsidiaries
for 30 days after receipt of notice from the Trustee or Holders of at least 25%
in principal amount of the Notes (including Additional Notes, if any) then
outstanding to comply with Sections 4.07, 4.09, 4.10, 4.14 or Article 5 hereof;
(d) failure by the Company for 60 days after notice from the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding to
comply with any of its other agreements in this Indenture or the Notes; (e)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted Subsidiaries),
whether such Indebtedness or guarantee now exists, or is created after the date
of this Indenture, which default (i) is caused by a failure to pay Indebtedness
at its stated final maturity (after giving effect to any applicable grace period
provided in such Indebtedness) (a "Payment Default") or (ii) results in the
acceleration of such Indebtedness prior to its stated final maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10.0 million or more; (f) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $10.0 million (net
of any amounts with respect to which a reputable and creditworthy insurance
company has acknowledged liability in writing), which judgments are not paid,
discharged or stayed for a period of 60 days; and (g) certain events of
bankruptcy or insolvency as described in the Indenture.
If any Event of Default (other than certain events of bankruptcy or
insolvency) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately; provided, that so long as any Indebtedness
permitted to be incurred pursuant to the New Credit Facility shall be
outstanding, such acceleration shall not be effective until the earlier of (i)
an acceleration under any such Indebtedness under the New Credit Facility or
(ii) five Business Days after receipt by the Company and the administrative
agent under the New Credit Facility of written notice of such acceleration. Upon
any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived provided that, in the event of a declaration of
acceleration of the Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness described in
clause (e) of Section 12 above, the declaration of acceleration of the Notes
shall be automatically annulled if the holders of any Indebtedness described in
clause (e) of Section 12 above have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration and
if (i) the annulment of the acceleration of the Notes would not conflict with
any judgment or decree of a court of competent jurisdiction and (ii) all
existing Events of Default, except non-payment of principal or interest on the
Notes that became due solely because of the acceleration of the Notes, have been
cured or waived, provided that, in the event of a declaration of acceleration of
the Notes because an Event of Default has occurred and is continuing as a result
of the acceleration of any Indebtedness described in clause (e) of this Section
12, the declaration of acceleration of the Notes shall be automatically annulled
if the holders of any Indebtedness described in clause (e) of this Section 12
have rescinded the declaration of acceleration in respect of such Indebtedness
within 30 days of the date of such declaration and if (i) the annulment of the
acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction and (ii) all existing Events of Default, except
non-payment of principal or interest on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. SUBORDINATION. The payment of Subordinated Note Obligations will be
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash or cash equivalents of all Senior Indebtedness, whether
outstanding on the date of the Indenture or thereafter incurred. The Company
agrees, and each Holder by accepting a Note agrees, that the payment of
principal of, premium and interest and Liquidated Damages, if any, on the Notes
is subordinated in right of payment, to the extent and in the manner provided in
the Indenture, to the prior payment in full in cash or cash equivalents of all
Senior Indebtedness (whether outstanding on the date hereof or thereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Indebtedness.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of February 22, 1999, between the Company and the parties
named on the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Formica Corporation
15 Independence Boulevard
Warren, New Jersey 07059
Telecopier No.: 908-647-8944
Attention: General Counsel
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
-------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No:
------------------------
Signature Guarantee.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:
------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No:
-----------------------
Signature Guarantee.
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a
part of another Global Note or Definitive Note for an interest in this
Global Note, have been made:
<TABLE>
Principal Amount
Amount of decrease in Amount of increase in of this Global Signature of
Principal Amount Principal Amount Note following such authorized officer of
of this of this decrease Trustee or Note
Date of Exchange Global Note Global Note (or increase) Custodian
---------------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
- ------------
(1) This should be included only if the Note is issued in global form.
</TABLE>
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
==============================================================================
CUSIP/CINS ________
10-7/8% Senior Subordinated Notes due 2009
No. ___ $___________
FORMICA CORPORATION
promises to pay to _______________, or registered assigns, the principal
sum of Dollars on March 1, 2009.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
DATED:
FORMICA CORPORATION
BY:
-------------------------
Name:
Title:
This is one of the Global Notes referred to in the within-mentioned Indenture:
SUMMIT BANK,
as Trustee
By:
------------------------------
Name:
===============================================================================
<PAGE>
(Back of Regulation S Temporary Global Note)
10-7/8% [Series A] [Series B] Senior Subordinated Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A OR REGULATION S THEREUNDER. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE
FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN
OPINION OF COUNSEL THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT
OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE."
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Formica Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10-7/8% per annum from February 22, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on March 1 and September 1 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each, an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; and provided further
that the first Interest Payment Date shall be September 1, 1999. The Company
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the February 15 or
August 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office of the Paying Agent and Registrar.
Holders of Notes must surrender their Notes to the Paying Agent to collect
principal payments, and the Company may pay principal and interest and
Liquidated Damages, if any, by check and may mail checks to a Holder's
registered address; provided that all payments with respect to Global Notes and
Definitive Notes, the Holders of which have given wire transfer instructions to
the Company, will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Summit Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of February 22, 1999 ("Indenture"), between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company initially limited to $215
million in aggregate principal amount. Additional Notes may be issued pursuant
to Sections 2.02 and 4.09 of the Indenture and, if issued, will be treated as a
single class for all purposes under the Indenture.
5. OPTIONAL REDEMPTION.
(a) Except as provided in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option prior to March 1, 2004.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, in cash at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on March 1 of the years indicated below:
Year Percentage
---- ----------
2004....................................................105.438%
2005....................................................103.625%
2006....................................................101.813%
2007 and thereafter.....................................100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, on or prior to March 1, 2002, the Company may redeem up to 35% of
the aggregate principal amount of Notes ever issued under the Indenture in cash
at a redemption price of 110.875% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the redemption
date, with the net cash proceeds of one or more Public Equity Offerings;
provided that at least 65% of the aggregate principal amount of Notes ever
issued under the Indenture remains outstanding immediately after the occurrence
of any such redemption; and provided further that such redemption shall occur
within 90 days of the date of the closing of any such Public Equity Offering.
(c) Any redemption pursuant to this subparagraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described in Section 4.14 of the Indenture (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (the "Change of Control Payment"). Within 60
days following any Change of Control, the Company will (or will cause the
Trustee to) mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed, pursuant
to the procedures required by the Indenture and described in such notice.
(b) Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or any such Restricted Subsidiary shall apply such Net
Proceeds, at its option (or to the extent the Company is required to apply such
Net Proceeds pursuant to the terms of the New Credit Facility), to (a) repay or
purchase Senior Indebtedness or Pari Passu Indebtedness of the Company or any
Indebtedness of any Restricted Subsidiary, provided that, if the Company shall
so repay or purchase Pari Passu Indebtedness of the Company, it will equally and
ratably reduce Indebtedness under the Notes if the Notes are then redeemable,
or, if the Notes may not then be redeemed, the Company shall make an offer (in
accordance with the procedures set forth in the Indenture) to all Holders of
Notes to purchase at a purchase price equal to 100% of the principal amount of
the Notes, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, the Notes that would otherwise be redeemed, or
(b) an investment in property, the making of a capital expenditure or the
acquisition of assets that are used or useful in a Permitted Business, or
Capital Stock of any Person primarily engaged in a Permitted Business if (i) as
a result of the acquisition by the Company or any Restricted Subsidiary thereof,
such Person becomes a Restricted Subsidiary or (ii) the Investment in such
Capital Stock is permitted by clause (f) of the definition of Permitted
Investments. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce Indebtedness or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $15.0 million, the Company will be required to
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, in accordance with the procedures set forth in
this Indenture. To the extent that any Excess Proceeds remain after consummation
of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes surrendered by Holders thereof in connection with an Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased as set forth under Sections 3.02 and 3.03 of the Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero. Holders of Notes that are the subject of an offer to purchase may
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes (and Additional Notes, if any) and any existing Default or compliance with
any provision of the Indenture or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes (and
Additional Notes, if any). Without the consent of any Holder of a Note, the
Indenture or the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
obligations to Holders of the Notes in case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not materially adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, to provide for the Issuance of Additional Notes
in accordance with the limitations set forth in the Indenture, or to allow any
Person to execute a supplemental indenture to the Indenture and/or to provide
for guarantees with respect to the Notes.
12. DEFAULTS AND REMEDIES. Each of the following constitutes an "Event
of Default": (a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
Article 10 of the Indenture); (b) default in payment when due of the principal
of or premium, if any, on the Notes (whether or not prohibited by Article 10 of
the Indenture); (c) failure by the Company or any of its Restricted Subsidiaries
for 30 days after receipt of notice from the Trustee or Holders of at least 25%
in principal amount of the Notes (including Additional Notes, if any) then
outstanding to comply with Sections 4.07, 4.09, 4.10, 4.14 or Article 5 hereof;
(d) failure by the Company for 60 days after notice from the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding to
comply with any of its other agreements in this Indenture or the Notes; (e)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted Subsidiaries),
whether such Indebtedness or guarantee now exists, or is created after the date
of this Indenture, which default (i) is caused by a failure to pay Indebtedness
at its stated final maturity (after giving effect to any applicable grace period
provided in such Indebtedness) (a "Payment Default") or (ii) results in the
acceleration of such Indebtedness prior to its stated final maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10.0 million or more; (f) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $10.0 million (net
of any amounts with respect to which a reputable and creditworthy insurance
company has acknowledged liability in writing), which judgments are not paid,
discharged or stayed for a period of 60 days; and (g) certain events of
bankruptcy or insolvency as described in the Indenture.
If any Event of Default (other than certain events of bankruptcy or
insolvency) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately; provided, that so long as any Indebtedness
permitted to be incurred pursuant to the New Credit Facility shall be
outstanding, such acceleration shall not be effective until the earlier of (i)
an acceleration under any such Indebtedness under the New Credit Facility or
(ii) five Business Days after receipt by the Company and the administrative
agent under the New Credit Facility of written notice of such acceleration. Upon
any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived, provided that, in the event of a declaration of
acceleration of the Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness described in
clause (e) of this Section 12, the declaration of acceleration of the Notes
shall be automatically annulled if the holders of any Indebtedness described in
clause (e) of this Section 12 have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration and
if (i) the annulment of the acceleration of the Notes would not conflict with
any judgment or decree of a court of competent jurisdiction and (ii) all
existing Events of Default, except non-payment of principal or interest on the
Notes that became due solely because of the acceleration of the Notes, have been
cured or waived. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default or Event of Default to deliver to the Trustee
a statement specifying such Default or Event of Default.
13. SUBORDINATION. The payment of Subordinated Note Obligations will be
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash or cash equivalents of all Senior Indebtedness, whether
outstanding on the date of the Indenture or thereafter incurred. The Company
agrees, and each Holder by accepting a Note agrees, that the payment of
principal of, premium and interest and Liquidated Damages, if any, on the Notes
is subordinated in right of payment, to the extent and in the manner provided in
the Indenture, to the prior payment in full in cash or cash equivalents of all
Senior Indebtedness (whether outstanding on the date hereof or thereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Indebtedness.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of February 22, 1999, between the Company and the parties
named on the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Formica Corporation
15 Independence Boulevard
Warren, New Jersey 07059
Telecopier No.: 908-647-8944
Attention: General Counsel
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
--------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No:
-------------------------
Signature Guarantee.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:
-----------------------
(Sign exactly as your name appears
on the Note)
Tax Identification No:
----------------
Signature Guarantee.
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note, or of other Restricted Global Notes
for an interest in this Regulation S Temporary Global Note, have been made:
<TABLE>
Principal Amount
Amount of decrease in Amount of increase in of this Global Signature of
Principal Amount Principal Amount Note following such authorized officer of
of this of this decrease Trustee or Note
Date of Exchange Global Note Global Note (or increase) Custodian
---------------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Formica Corporation
15 Independence Boulevard
Warren, New Jersey 07059
Telecopier No.: 908-647-8944
Attention: General Counsel
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
Telecopier No.: 201-646-0087
Attention: H. Lewis Stone
Re: 10-7/8% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of February 22,
1999 (the "Indenture"), between Formica Corporation (the "Company"), as issuer,
and Summit Bank, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ]Check if Transferee will take delivery of a beneficial interest in
the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Note is being transferred to a Person
that the Transferor reasonably believed and believes is purchasing the
beneficial interest or Definitive Note for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A and such Transfer is in compliance
with any applicable blue sky securities laws of any state of the United
States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the 144A Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
2. [ ] Check if Transferee will take delivery of a beneficial interest in
the Temporary Regulation S Global Note, the Regulation S Global Note or a
Definitive Note pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies
that (i) the Transfer is not being made to a Person in the United States
and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction
was prearranged with a buyer in the United States, (ii) no directed selling
efforts have been made in contravention of the requirements of Rule 903(b)
or Rule 904(b) of Regulation S under the Securities Act and (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions
on Transfer enumerated in the Private Placement Legend printed on the
Regulation S Global Note , the Temporary Regulation S Global Note and/or
the Definitive Note and in the Indenture and the Securities Act.
3. [ ] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of
the United States, and accordingly the Transferor hereby further certifies
that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144
or Rule 904, and the Transferor hereby further certifies that it
has not engaged in any general solicitation within the meaning of
Regulation D under the Securities Act and the Transfer complies
with the transfer restrictions applicable to beneficial interests
in a Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is
supported by (1) a certificate executed by the Transferee in the
form of Exhibit D to the Indenture and (2) if such Transfer is in
respect of a principal amount of Notes at the time of transfer of
less than $250,000, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that such Transfer
is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the IAI Global Note and/or the
Definitive Notes and in the Indenture and the Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] Check if Transfer is pursuant to Rule 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144
under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of
any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i)
The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other
than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not
be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
-------------------------------------
[Insert Name of Transferor]
BY:
--------------------------------
Name:
Title:
Dated: ,
------------ -----
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP________), or
(ii) [ ] Regulation S Global Note (CUSIP________), or
(iii) [ ] IAI Global Note (CUSIP________), or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP________), or
(ii) [ ] Regulation S Global Note (CUSIP________), or
(iii) [ ] IAI Global Note (CUSIP________), or
(iv) [ ] Unrestricted Global Note (CUSIP________), or
(b) [ ] a Restricted Definitive Note, or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Formica Corporation
15 Independence Boulevard
Warren, New Jersey 07059
Telecopier No.: 908-647-8944
Attention: General Counsel
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
Telecopier No.: 201-646-0087
Attention: H. Lewis Stone
Re: 10-7/8% Senior Subordinated Notes Due 2009
Reference is hereby made to the Indenture, dated as of February 22,
1999 (the "Indenture"), between Formica Corporation (the "Company"), as issuer,
and Summit Bank, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) [ ] Check if Exchange is from beneficial interest in a
Restricted Global Note to beneficial interest in an Unrestricted Global
Note. In connection with the Exchange of the Owner's beneficial interest
in a Restricted Global Note for a beneficial interest in an Unrestricted
Global Note in an equal principal amount, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with
the transfer restrictions applicable to the Global Notes and pursuant to
and in accordance with the United States Securities Act of 1933, as amended
(the "Securities Act"), (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United
States.
(b) [ ] Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note
for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Definitive Note is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and
pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United
States.
(c) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest
in an Unrestricted Global Note, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(d) [ ] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Note is being acquired in compliance with any applicable blue
sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial
Interests in Restricted Global Notes
(a) [ ] Check if Exchange is from beneficial interest in a
Restricted Global Note to Restricted Definitive Note. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a Restricted Definitive Note with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Note is being acquired for
the Owner's own account without transfer. Upon consummation of the
proposed Exchange in accordance with the terms of the Indenture, the
Restricted Definitive Note issued will continue to be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Definitive Note and in the Indenture and the Securities
Act.
(b) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial
interest in the [CHECK ONE] [ ] "144A Global Note", [ ] "Regulation S
Global Note", [ ] "IAI Global Note" with an equal principal amount, the
Owner hereby certifies (i) the beneficial interest is being acquired for
the Owner's own account without transfer and (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the
Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial
interest issued will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the relevant Restricted Global
Note and in the Indenture and the Securities Act.
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-------------------------------------
[Insert Name of Owner]
BY:
------------------------------
Name:
Title:
Dated: ,
------------ -----
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Formica Corporation
15 Independence Boulevard
Warren, New Jersey 07059
Telecopier No.: 908-647-8944
Attention: General Counsel
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
Telecopier No.: 201-646-0087
Attention: H. Lewis Stone
Re: 10-7/8% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of February 22,
1999 (the "Indenture"), among Formica Corporation (the "Company"), as issuer,
and Summit Bank, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes or any interest therein
except in compliance with, such restrictions and conditions and the
United States Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we
should sell the Notes or any interest therein, we will do so only (A)
to the Company or any subsidiary thereof, (B) in accordance with Rule
144A under the Securities Act to a "qualified institutional buyer" (as
defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and,
if such transfer is in respect of a principal amount of Notes, at the
time of transfer of less than $250,000, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer
is in compliance with the Securities Act, (D) outside the United States
in accordance with Rule 904 of Regulation S under the Securities Act,
(E) pursuant to the provisions of Rule 144(k) under the Securities Act
or (F) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person
purchasing the Definitive Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A)
through (E) of this paragraph a notice advising such purchaser that
resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as you and
the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that
the Notes purchased by us will bear a legend to the foregoing effect.
We further understand that any subsequent transfer by us of the Notes
or beneficial interest therein acquired by us must be effected through
one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment.
5. We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
---------------------------------------
[Insert Name of Accredited Investor]
By:
------------------------------
Name:
Title:
Dated: ,
------------ -----
EXHIBIT 5.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
212-450-4000
April 21, 1999
Formica Corporation
15 Independence Boulevard
Warren, NJ 07059
Ladies and Gentlemen:
We have acted as special counsel to Formica Corporation, a Delaware
corporation (the "Company"), in connection with the Company's offer (the
"Exchange Offer") to exchange its 10 7/8% Series B Senior Subordinated Notes due
2009 (the "New Notes") for any and all of its outstanding 10 7/8% Series A
Senior Subordinated Notes due 2009 (the "Old Notes").
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments as we have deemed necessary or advisable
for the purpose of rendering this opinion.
Upon the basis of the foregoing and assuming the due execution and
delivery of the New Notes, we are of the opinion that the New Notes, when
executed, authenticated and delivered in exchange for the Old Notes in
accordance with the Exchange Offer will be valid and binding obligations of the
Company enforceable in accordance with their terms, except (x) as such
enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, (y) as such enforcement may
be limited by general principles of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity and (z) to the extent that a waiver
of rights under any usury or stay law may be unenforceable.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
<PAGE>
United States of America and the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Exchange Offer. We also consent to the
reference to us under the caption "Legal Matters" in the Prospectus contained in
such Registration Statement.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by or furnished to any other person without our prior written
consent except that Summit Bank, N.A., as Exchange Agent for the Exchange Offer,
may rely upon this opinion as if it were addressed directly to it.
Very truly yours,
/s/ DAVIS POLK & WARDWELL
EXHIBIT 10.1
EXECUTION COPY
INVESTORS' AGREEMENT
dated as of
April 30, 1998
among
LAMINATES ACQUISITION CO.,
LMS I, CO.,
DLJ MERCHANT BANKING PARTNERS II, L.P.,
DLJ MERCHANT BANKING PARTNERS II - A, L.P.,
DLJ OFFSHORE PARTNERS II, C.V.,
DLJ DIVERSIFIED PARTNERS, L.P.,
DLJ DIVERSIFIED PARTNERS - A, L.P.,
DLJ MILLENNIUM PARTNERS, L.P.,
DLJ MILLENNIUM PARTNERS - A, L.P.,
DLJMB FUNDING II, INC.,
UK INVESTMENT PLAN 1997 PARTNERS,
DLJ EAB PARTNERS, L.P.,
DLJ FIRST ESC L.P.,
DLJ ESC II L.P.,
CVC EUROPEAN EQUITY PARTNERS L.P.,
CVC EUROPEAN EQUITY PARTNERS (JERSEY) L.P.,
MMI PRODUCTS, L.L.C.
AND
CERTAIN OTHER PERSONS NAMED HEREIN
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions....................................................2
ARTICLE 2
CORPORATE GOVERNANCE AND MANAGEMENT
SECTION 2.01. Composition of the Board; Committees..........................10
SECTION 2.02. Removal.......................................................11
SECTION 2.03. Vacancies.....................................................11
SECTION 2.04. Action by the Board...........................................11
SECTION 2.05. Action by the Shareholders....................................14
SECTION 2.06. Conflicting Charter or Bylaw Provision........................15
SECTION 2.07. Subsidiary Governance.........................................15
SECTION 2.08. Notice of Meeting; Participation..............................15
SECTION 2.09. Voting of Common Stock Owned by Management
Stockholders..................................................15
ARTICLE 3
RESTRICTIONS ON TRANSFER
SECTION 3.01. General.......................................................16
SECTION 3.02. Legends.......................................................16
SECTION 3.03. Permitted Transferees.........................................17
SECTION 3.04. Restrictions on Transfers by Shareholders.....................17
SECTION 3.05. Restrictions on Transfers of After Acquired Securities by
Management Shareholders.......................................18
ARTICLE 4
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS; PREEMPTIVE RIGHTS;
RIGHTS OF FIRST OFFER
SECTION 4.01. Rights to Participate in Transfer..............................19
SECTION 4.02. Right to Compel Participation in Certain Transfers.............21
SECTION 4.03. Preemptive Rights..............................................23
SECTION 4.04. Rights of First Offer..........................................25
SECTION 4.05. Certain Rights.................................................27
<PAGE>
PAGE
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Demand Registration...........................................28
SECTION 5.02. Piggyback Registration........................................31
SECTION 5.03. Holdback Agreements...........................................32
SECTION 5.04. Registration Procedures.......................................32
SECTION 5.05. Indemnification by the Issuer.................................35
SECTION 5.06. Indemnification by Participating Shareholders.................36
SECTION 5.07. Conduct of Indemnification Proceedings........................37
SECTION 5.08. Contribution..................................................38
SECTION 5.09. Participation in Public Offering..............................40
SECTION 5.10. Cooperation by the Issuer.....................................40
SECTION 5.11. No Transfer of Registration Rights............................40
ARTICLE 6
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.01. Confidentiality...............................................40
SECTION 6.02. Reports.......................................................41
SECTION 6.03. Limitations on Subsequent Registration........................41
SECTION 6.04. Exclusive Financial Advisor and Investment Banking
Advisor.......................................................42
SECTION 6.05. Regulatory Co-operation.......................................42
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Entire Agreement..............................................43
SECTION 7.02. Binding Effect; Benefit.......................................43
SECTION 7.03. Assignability.................................................43
SECTION 7.04. Amendment; Waiver; Termination................................44
SECTION 7.05. Notices.......................................................45
SECTION 7.06. Headings......................................................46
SECTION 7.07. Counterparts..................................................46
SECTION 7.08. Applicable Law................................................46
SECTION 7.09. Specific Enforcement..........................................46
SECTION 7.10. Consent to Jurisdiction; Expenses.............................46
SECTION 7.11. Severability..................................................47
ii
<PAGE>
INVESTORS' AGREEMENT
AGREEMENT dated as of April 30, 1998 among (i) Laminates Acquisition Co.
(the "Company"), (ii) LMS I, Co., a wholly-owned subsidiary of the Company
(together with any successor, "LMS"), (iii) DLJ Merchant Banking Partners II,
L.P. ("DLJMB"), DLJ Offshore Partners II, C.V., DLJ Diversified Partners, L.P.,
DLJMB Funding II, Inc., DLJ Merchant Banking Partners II - A, L.P., DLJ
Diversified Partners - A., L.P., DLJ Millennium Partners, L.P., DLJ Millennium
Partners - A, L.P., UK Investment Plan 1997 Partners, DLJ EAB Partners, L.P.,
DLJ ESC II L.P. and DLJ First ESC L.P. (each a "DLJ Entity" and a "Shareholder"
and, collectively, the "DLJ Entities"), (iv) MMI Products, L.L.C., a Delaware
limited liability company ("MMI"), CVC European Equity Partners L.P. ("CVC")
and CVC European Equity Partners (Jersey) L.P. ("CVC Jersey" and each a
"Shareholder" and, collectively, the Shareholders listed in clauses (iii) and
(iv) are referred to as the "Institutional Shareholders") and (v) certain other
Persons listed on the signature pages hereof or who upon acquiring securities
of the Company after the date hereof become parties hereto (each a
"Shareholder" and, collectively, the "Management Shareholders").
W I T N E S S E T H :
WHEREAS, pursuant to the Subscription Agreement (as defined below) certain
parties hereto are or will be acquiring securities of the Company and LMS; and
WHEREAS, pursuant to the terms of the Share Purchase Agreement (as defined
below), the Company will acquire all of the outstanding capital stock of FM
Holdings, Inc. ("FM Holdings");
WHEREAS, simultaneously with the acquisition of FM Holdings by the
Company, LMS will be merged (the "FM Merger") with and into FM Holdings in
accordance with Delaware law with FM Holdings being the surviving corporation;
WHEREAS, the parties hereto desire to enter into this Agreement to govern
certain of their rights, duties and obligations after consummation of the
transactions contemplated by the Share Purchase Agreement and the Subscription
Agreement;
The parties hereto agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Adverse Person" means any Person whom the Board determines is a
competitor or a potential competitor of the Company or its Subsidiaries.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person, provided that no securityholder of the Company shall be deemed an
Affiliate of any other securityholder solely by reason of any investment in the
Company. For the purpose of this definition, the term "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Affiliated Employee Benefit Trust" means any trust that is a successor to
the assets held by a trust established under an employee benefit plan subject
to ERISA or any other trust established directly or indirectly under such plan
or any other such plan having the same sponsor.
"After Acquired Shares" means any shares of Common Stock or Preferred
Stock acquired by a Management Shareholder that are not Purchased Shares.
"beneficially own" has the meaning set forth in Rule 13d-3 of the Exchange
Act.
"Board" means the board of directors of the Company.
"Bridge Notes" means the unsecured increasing rate notes to be issued by
LMS II, Co. on the Closing Date.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"Change of Control" means such time as (a) the Institutional Shareholders
and their Permitted Transferees shall own less than 10% of the
2
<PAGE>
outstanding shares of Common Stock on a Fully Diluted Basis, (b) the transfer
of all or substantially all of the assets of the Company to any Person or group
shall have been consummated, (c) the Company shall have been liquidated, or (d)
any Person, other than an Institutional Shareholder or its Permitted
Transferees, shall beneficially own more Company Equity Securities than the
Institutional Shareholder and its Permitted Transferees owning, in the
aggregate, the greatest amount of Company Equity Securities.
"Closing Date" means May 1, 1998.
"Common Stock" shall mean the Class A common stock and Class B non-voting
common stock, each with par value $.01 per share, of the Company and any stock
into which such Common Stock may thereafter be converted or changed. For
purposes of this Agreement the Class A and Class B Common Stock shall be
considered one class of Equity Securities.
"Company Equity Securities" means the Company Stock, the Derivatives,
securities convertible into or exchangeable for Common Stock and any other
equity security issued by the Company.
"Company Stock" means the Common Stock and the Preferred Stock.
"CVC Entities" means CVC, CVC Jersey and their respective Permitted
Transferees.
"Derivatives" means options, warrants (including the Warrants) or other
rights to acquire any Company Equity Securities.
"Drag-Along Portion" means, with respect to any class of Equity
Securities, the number of shares of such class beneficially owned by a
Shareholder multiplied by a fraction, the numerator of which is the number of
shares of such class proposed to be sold by the Institutional Shareholders or
the DLJ Entities, as the case may be, pursuant to Section 4.02 and the
denominator of which is the total number of shares of such class on a Fully
Diluted basis beneficially owned by the Institutional Shareholders or the DLJ
Entities, as the case may be.
"Equity Securities" means the Company Equity Securities and the LMS
Preferred Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Formica" means Formica Corporation, a Delaware corporation.
3
<PAGE>
"Fountainhead Acquisition" means the purchase by the Company from
International Paper of all of the assets exclusively relating to International
Paper's Fountainhead solid surfacing operations.
"Fully Diluted" means, with respect to any class of Equity Securities and
without duplication, all outstanding shares of such class and all shares
issuable in respect of securities convertible into or exchangeable for such
class, stock appreciation rights or options, warrants and other irrevocable
rights to purchase or subscribe for such class or securities convertible into
or exchangeable for such class; provided that no Person shall be deemed to own
such number of Fully Diluted shares of such class as such Person has the right
to acquire from any Person other than the Company or LMS.
"Initial Ownership" means, with respect to any class of Equity Securities,
the number of shares of a class of Equity Securities beneficially owned (and
(without duplication) which such Persons have the right to acquire from any
Person) as of the date hereof, or in the case of any Person that shall become a
party to this Agreement on a later date, as of such date, taking into account
any stock split, stock dividend, reverse stock split or similar event.
"Initial Public Offering" means the initial sale after the date hereof of
Common Stock pursuant to an effective registration statement under the
Securities Act (other than a registration statement on Form S-8 or any
successor form).
"Issuer" means the Company as the issuer of the Company Equity Securities
and/or LMS as the issuer of the LMS Preferred Stock, as the context requires.
"LMS Board" means the board of directors of LMS.
"LMS Preferred Stock" means the 15% Senior Exchangeable Preferred Stock of
LMS which following the FM Merger will constitute 15% Senior Exchangeable
Preferred Stock of FM Holdings.
"MMI Entities" means MMI and its Permitted Transferees.
"Percentage Ownership" means, with respect to any Shareholder at any time,
(i) the number of shares of Fully Diluted Common Stock that such Shareholder
beneficially owns (and (without duplication) has the right to acquire from any
Person) at such time, divided by (ii) the total number of shares of Fully
Diluted Common Stock at such time.
4
<PAGE>
"Permitted Transferee" means (i) in the case of an Institutional
Shareholder other than a DLJ Entity (a) any nominee or trustee for or any
general or limited partner or shareholder of such Shareholder, and any
corporation, partnership or other entity that is an Affiliate of such
Shareholder (collectively, "Shareholder Affiliates"), (b) any general partner,
limited partner, employee, officer or director of such Shareholder or a
Shareholder Affiliate, or any spouse, lineal descendant, sibling, parent, heir,
executor, administrator, testamentary trustee, legatee or beneficiary of any of
the foregoing persons described in this clause (b) (collectively, "Shareholder
Associates"), (c) to a "Co-Investment Scheme" being a scheme under which
certain officers, employees or partners of a Shareholder or of its adviser or
manager are entitled (as individuals or through a body corporate or any other
vehicle) to acquire shares which such Shareholder would otherwise acquire and a
Co-Investment Scheme which holds shares for a body corporate or other vehicle
may transfer their shares to another body corporate or another vehicle which
holds or is to hold shares for the Co-Investment Scheme or the officers,
employees or partners entitled to the shares under the Co-Investment Scheme and
(d) any trust, the beneficiaries of which, or any corporation, limited
liability company or partnership, stockholders, members or general or limited
partners of which include only such Shareholder, such Shareholder Affiliates or
Shareholder Associates, provided, in the case of a transfer to any limited
partner, such transfer to such limited partner is not one whose primary purpose
is an evasion of the transfer restrictions set forth in Section 3.04;
(ii) in the case of a Management Shareholder (a) a spouse or lineal
descendant (whether natural or adopted), sibling, parent, heir, executor,
administrator, testamentary trustee, legatee or beneficiary of any of such
Management Shareholder, (b) any trust, the beneficiaries of which, or any
corporation, limited liability company or partnership, stockholders, members or
general or limited partners of which include only the Persons named in clause
(a) or (c) any charitable remainder trust; or
(iii) in the case of any DLJ Entity (a) any other DLJ Entity, (b) any
general or limited partner of any such entity (a "DLJ Partner"), and any
corporation, partnership, Affiliated Employee Benefit Trust or other entity
which is an Affiliate of any DLJ Partner (collectively, the "DLJ Affiliates"),
(c) any managing director, general partner, director, limited partner, officer
or employee of such DLJ Entity or a DLJ Affiliate, or the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any of the
foregoing Persons referred to in this clause (c) (collectively, "DLJ
Associates"), and (d) any trust, the beneficiaries of which, or any
corporation, limited liability company or partnership, the stockholders,
members or general or limited partners of which, include only such DLJ Entity,
DLJ Affiliates, DLJ Associates, their spouses or
5
<PAGE>
their lineal descendants, provided, in the case of a transfer to any limited
partner, such transfer to such limited partner is not one whose primary purpose
is an evasion of the transfer restrictions set forth in Section 3.04. The term
"DLJ Entities", to the extent such entities shall have transferred any of their
Shares to "Permitted Transferees", shall mean the DLJ Entities and the
Permitted Transferees of the DLJ Entities, taken together, and any right or
action that may be exercised or taken at the election of the DLJ Entities may
be exercised or taken at the election of the DLJ Entities and such Permitted
Transferees.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the 8% Preferred Stock of the Company.
"Pro Rata Portion" means the number of shares of After Acquired Securities
a Management Shareholder holds multiplied by a fraction, the numerator of which
is the number of shares of Company Equity Securities to be sold by the
Institutional Shareholders and their Permitted Transferees in a Public Offering
and the denominator of which is the total number of Company Equity Securities,
on a Fully Diluted basis, held in the aggregate by the Institutional
Shareholders and their Permitted Transferees prior to such Public Offering.
"Public Offering" means any primary or secondary public offering of
Company Equity Securities pursuant to an effective registration statement under
the Securities Act other than pursuant to a registration statement filed in
connection with a transaction of the type described in Rule 145 of the
Securities Act or for the purpose of issuing securities pursuant to an employee
benefit plan.
"Purchased Shares" means those shares of Common Stock and Preferred Stock
purchased by a Management Shareholder on the Closing Date for cash taking into
account any stock split, stock dividend, reverse stock split or similar event.
"Registrable Securities" means at any time, with respect to any
Shareholder or its Permitted Transferees, any shares of Common Stock, LMS
Preferred Stock, Preferred Stock or Warrants or Warrant Shares then owned by
such Shareholder or its Permitted Transferees until (i) a registration
statement covering such securities has been declared effective by the SEC and
such securities have been disposed of pursuant to such effective registration
statement, (ii) such securities are sold under circumstances in which all of
the applicable conditions of Rule 144 (or any similar provisions then in force)
under the Securities Act are met or (iii) such securities are otherwise
transferred, the
6
<PAGE>
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing the legend required pursuant to this Agreement and such
securities may be resold without subsequent registration under the Securities
Act.
"Registration Expenses" means (i) all registration and filing fees, (ii)
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the securities registered), (iii) printing expenses, (iv)
internal expenses of the Company (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), (v) reasonable fees and disbursements of counsel for the Company and
customary fees and expenses for independent certified public accountants
retained by the Company (including expenses relating to any comfort letters or
costs associated with the delivery by independent certified public accountants
of a comfort letter or comfort letters requested pursuant to Section 5.04(g)
hereof), (vi) the reasonable fees and expenses of any special experts retained
by the Company in connection with such registration, (vii) reasonable fees and
expenses of up to one counsel for the Shareholders participating in the
offering, (viii) fees and expenses in connection with any review of
underwriting arrangements by the National Association of Securities Dealers,
Inc. (the "NASD") including fees and expenses of any "qualified independent
underwriter" and (ix) fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but shall not include any underwriting
fees, discounts or commissions attributable to the sale of Registrable
Securities, or any out-of-pocket expenses (except as set forth in clause (vii)
above) of the Shareholders or any fees and expenses of underwriter's counsel.
"Section 4.03 Portion" means the pro rata portion of any Company Equity
Securities proposed to be issued by the Company with respect to which
Shareholders shall be entitled to exercise their rights under Section 4.03
based upon such Shareholder's Initial Ownership as a percentage of the Initial
Ownership of all Shareholders.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Purchase Agreement" means the Share Sale and Purchase Agreement
dated as of March 16, 1998, between the Company and BTR Australia Ltd.
"Shareholder" means each Person (other than the Company and LMS) who shall
be a party to or bound by this Agreement, whether in connection with
7
<PAGE>
the execution and delivery hereof as of the date hereof, pursuant to Section
7.03 or otherwise, so long as such Person shall beneficially own any Equity
Securities.
"Shares" means shares of Common Stock, Preferred Stock or LMS Preferred
Stock, as the context requires, held by the Shareholders.
"Subject Securities" means the class or classes of Equity Securities
beneficially owned by a Shareholder to be transferred in a Section 4.02 Sale.
"Subscription Agreement" means the Subscription Agreement dated as of
March 15, 1998 among the Company, LMS and the Institutional Shareholders, as
amended from time to time.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Tag-Along Portion" means (i) where the Selling Person is selling a class
of Company Stock, the number of shares of such class held (or, without
duplication, that such Shareholder has the right to acquire from any Person) by
the Tagging Person or the Selling Person, as the case may be, multiplied by a
fraction, the numerator of which is the maximum number of shares of such class
proposed to be sold in the Tag-Along Offer, and the denominator of which is the
aggregate number of shares of such class on a Fully Diluted basis owned by all
Shareholders; and
(ii) where the Selling Person is selling Warrants, the number of shares of
Common Stock held (or, without duplication, acquirable under the Warrants) by
the Tagging Person or the Selling Person, as the case may be, multiplied by a
fraction the numerator of which is the number of shares of Common Stock for
which the Warrants proposed to be sold in the Tag-Along Offer are exercisable,
and the denominator of which is the aggregate number of shares of Common Stock
on a Fully Diluted basis owned by all Shareholders.
"Third Party" means a prospective purchaser of Equity Securities in an
arm's-length transaction from a Shareholder where such purchaser is not a
Permitted Transferee of such Shareholder.
"Underwritten Public Offering" means a firmly underwritten public offering
of Registrable Securities of the Company pursuant to an effective registration
statement under the Securities Act.
8
<PAGE>
"Warrants" means the warrants issued to the Shareholders by the Company
for the purchase of an aggregate of 100,000 shares of Common Stock (subject to
adjustment as provided therein).
"Warrant Shares" means the shares of Common Stock issuable by the Company
upon exercise of the Warrants.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Applicable Holdback Period 5.03
Bridge Equity Holder 7.03(d)
Bridge Warrant Agreement 7.03(d)
Cause 2.02
Confidential Information 6.01(b)
Demand Registration 5.01(a)
Drag-Along Rights 4.02(a)
Holders 5.01(a)(ii)
Incidental Registration 5.02(a)
Indemnified Party 5.07
Indemnifying Party 5.07
independent director 2.01(a)
Initial Order Period 4.04(a)
Initial Section 4.04 Offer 4.04(a)
Initial Section 4.04 Offer Notice 4.04
Inspectors 5.04(g)
Maximum Offering Size 5.01(e)
Nominee 2.01(a)
Piggyback Registration 5.02(a)
Public Offering Limitations 3.05(a)
Records 5.04(g)
Representatives 6.01(b)
Second Order Period 4.04
Second Section 4.04 Offer 4.04
Section 4.01 Response Notice 4.01(a)
Section 4.02 Notice 4.02(a)
Section 4.02 Notice 4.02(a)
Section 4.02 Sale 4.02(a)
Section 4.02 Sale Price 4.02(a)
Section 4.03 Notice 4.03
Section 4.03 Portion 4.03
9
<PAGE>
Term Section
Section 4.04 Sale 4.04
Section 4.04 Sale Price 4.04
Section 4.04 Seller 4.04
Selling Person 4.01(a)
Selling Shareholder 5.01(a)
Shareholder 7.03
Tag-Along Notice 4.01(a)
Tag-Along Notice Period 4.01(a)
Tag-Along Offer 4.01(a)
Tag-Along Right 4.01(a)
Tag-Along Sale 4.01(a)
Tagging Person 4.01(a)
Transfer 3.01(a)
ARTICLE 2
CORPORATE GOVERNANCE AND MANAGEMENT
SECTION 2.01. Composition of the Board; Committees. (a) The Board shall
consist of seven members, of whom two shall be nominated by DLJMB, one shall be
nominated by each of CVC, MMI and the Management Shareholders, and two shall be
selected with the unanimous approval of the Institutional Shareholders and
nominated by such Institutional Shareholders and shall be individuals which are
not "Affiliates" or "Associates" (as those terms are used within the meaning of
Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of any
Shareholder or its Affiliates (each, an "independent director"). Each
Shareholder entitled to vote for the election of directors to the Board agrees
that it will vote its shares of Common Stock or execute consents, as the case
may be, and take all other necessary action (including causing the Company to
call a special meeting of shareholders) in order to ensure that the composition
of the Board is as set forth in this Section 2.01; provided that no Shareholder
shall be required to vote for another Shareholder's nominee(s) if the number of
shares of Common Stock held by the Shareholder or group of Shareholders, as
applicable, making the nomination (or, in the case of a nomination by DLJMB or
CVC, of the DLJ Entities or the CVC Entities, respectively) is, at the close of
business on the day preceding such vote or execution of consents, less than 10%
of such Shareholder's or group of Shareholders' (or the DLJ Entities' or the
CVC Entities'), as applicable, Initial Ownership of Common Stock on a Fully
Diluted basis.
10
<PAGE>
(b) Each committee of the Board shall consist of at least four members, of
whom one shall be a DLJMB representative, one shall be the CVC representative,
one shall be the MMI representative, and one shall be the representative of the
Management Shareholders (except (i) no such representative shall serve on the
Audit Committee and (ii) any such representative to the Compensation Committee
shall recuse himself as appropriate).
(c) The Board shall meet at least four times in any year.
SECTION 2.02. Removal. Each Shareholder agrees that if, at any time, it is
then entitled to vote for the removal of directors of the Company, it will not
vote any of its shares of Common Stock in favor of the removal of any director
who shall have been designated or nominated pursuant to Section 2.01 unless
such removal shall be for Cause or the Person(s) entitled to designate or
nominate such director shall have consented to such removal in writing;
provided that if the Persons entitled to designate or nominate any director
pursuant to Section 2.01 shall request the removal, with or without Cause, of
such director in writing, such Shareholder shall vote its shares of Common
Stock in favor of such removal. Removal for "Cause" shall mean removal of a
director because of such director's (a) willful and continued failure
substantially to perform his duties with the Company in his established
position, (b) willful conduct which is injurious to the Company or any of its
Subsidiaries, monetarily or otherwise, (c) conviction for, or guilty plea to, a
felony or a crime involving moral turpitude, or (d) abuse of illegal drugs or
other controlled substances or habitual intoxication.
SECTION 2.03. Vacancies. If, as a result of death, disability, retirement,
resignation, removal (with or without Cause) or otherwise, there shall exist or
occur any vacancy on the Board:
(a) the Shareholder(s) entitled under Section 2.01 to nominate such
director whose death, disability, retirement, resignation or removal resulted
in such vacancy, may, subject to the provisions of Section 2.01, nominate
another individual (the "Nominee") to fill such vacancy and serve as a director
of the Company; and
(b) subject to Section 2.01, each Shareholder then entitled to vote for
the election of the Nominee as a director of the Company agrees that it will
vote its shares of Common Stock, or execute a written consent, as the case may
be, in order to ensure that the Nominee be elected to the Board.
SECTION 2.04. Action by the Board. (a) A quorum of the Board shall consist
initially of three directors of which at least (i) one shall be a DLJMB
11
<PAGE>
representative and (ii) one shall be either the CVC representative or the MMI
representative.
(b) All actions of the Board shall require the affirmative vote of at
least a majority of the directors at a duly convened meeting of the Board at
which a quorum is present or the unanimous written consent of the Board;
provided that, in the event there is a vacancy on the Board and an individual
has been nominated to fill such vacancy, the first order of business shall be
to fill such vacancy.
(c) No action by the Company (including but not limited to any action by
the Board or any committee thereof) shall be taken after the date hereof with
respect to any of the following matters without the affirmative approval of the
Board, including, (I) by at least one DLJMB representative for so long as the
Percentage Ownership of the DLJ Entities equals or exceeds 331/3% of their
Initial Ownership of Common Stock on a Fully Diluted basis and (II) by at least
one of (A) the CVC representative for so long as the Percentage Ownership of
the CVC Entities equals or exceeds 331/3% of their Initial Ownership of Common
Stock on a Fully Diluted basis or (B) the MMI representative for so long as the
Percentage Ownership of the MMI Entities equals or exceeds 331/3% of their
Initial Ownership of Common Stock on a Fully Diluted basis:
(i) (x) any merger or consolidation of the Company with or into any
Person, other than a wholly owned Subsidiary, or of any Subsidiary
with or into any Person other than the Company or any other
wholly-owned Subsidiary (other than the merger of LMS II, Co. with and
into Formica Corporation and the merger of LMS III, Co. with and into
Formica International Corporation); or (y) any acquisition in excess
of $10,000,000 (other than the Fountainhead Acquisition) or any sale
of any Subsidiary or any significant operations of the Company or any
Subsidiary or any disposition or distribution in excess of $5,000,000
of assets, businesses or operations by the Company or any Subsidiary
(in a single transaction or a series of related transactions), other
than products or supplies acquired, disposed of or distributed in the
ordinary course of business;
(ii) any liquidation, dissolution, commencement of bankruptcy,
liquidation or similar proceedings with respect to the Company or any
Subsidiary;
(iii) any incurrence, refinancing or alteration of material terms by
the Company or any Subsidiary of indebtedness for borrowed money in
excess of $5,000,000 in the aggregate (or the guaranty by the Company
or any Subsidiary of any such indebtedness), or the issuance of any
security
12
<PAGE>
by the Company or any Subsidiary (not including issuances of such
securities in connection with employee or stock option plans
previously approved by the Board pursuant to clause (vi) below), in
each case other than as specifically contemplated by this Agreement,
the Warrants or the LMS Preferred Stock;
(iv) any capital expenditure in excess of $5,000,000, which is not
specifically contemplated by the annual business plan of the Company
or any Subsidiary;
(v) any entering into, amending or modifying in any material respect
any agreements of the Company or any Subsidiary providing for payments
by or to the Company or such Subsidiary in excess of $5,000,000 per
annum;
(vi) any determination of compensation, benefits, perquisites and
other incentives for senior management of the Company or any
Subsidiary and the approval or amendment of any plans or contracts in
connection therewith, including the award of any option or similar
rights to subscribe for shares (excluding grants to Vincent Langone
and David Schneider on the Closing Date);
(vii) any transaction between the Company or any Subsidiary, on the one
hand, and any stockholder or Affiliate of the Company or any
Subsidiary, on the other hand, other than transactions involving an
amount less than $25,000;
(viii) any appointment or removal of any of the Chairman of the Board,
Chief Executive Officer, President, Chief Financial Officer or Chief
Operating Officer or any other executive officer in any similar
capacity of the Company, FM Holdings or Formica;
(ix) any change in accounting or tax principles, policies with respect
to the financial statements, records or affairs of the Company or any
Subsidiary, except as required by generally accepted accounting
principles or by law or any other matters which could affect any
regulatory status or tax liability of the Company or any Subsidiary,
or any Shareholder with respect to the investment by such Shareholder
in the Company;
(x) any appointment or removal of the auditors, regular legal
counsel, financial advisors, underwriters, investment bankers or
company-wide insurance providers of the Company, FM Holdings or
Formica;
13
<PAGE>
(xi) any approval of the annual business plan, budget and long term
strategic plan of the Company, FM Holdings or Formica;
(xii) any modification of the long-term business strategy or scope of
the business of the Company, FM Holdings or Formica or any material
customer relationships thereof;
(xiii) the commencement of any litigation with claims in excess of
$10,000,000 or the settlement of litigation or arbitration proceedings
with damages in excess of $5,000,000;
(xiv) any delegation by the Board or the board of directors of FM
Holdings or Formica of any of its respective powers to a committee; or
(xv) the determination of "Fair Market Value" for purposes of Section
4.05.
(d) Notwithstanding Section 2.04(c), if any action set forth therein
arises in connection with the Company's exercise of its rights pursuant to
Section 4.04, such action shall not require the approval of the Section 4.04
Seller's representative to the Board.
SECTION 2.05. Action by the Shareholders. Notwithstanding Section 2.04(c),
the following matters will require the affirmative approval of each of (i) the
DLJMB Entities for so long as the Percentage Ownership of the DLJMB Entities
equals or exceeds 331/3% of their Initial Ownership of Common Stock on a Fully
Diluted Basis (ii) the CVC Entities for so long as the Percentage Ownership of
the CVC Entities equals 331/3% of their Initial Ownership of Common Stock on a
Fully Diluted Basis and (iii) the MMI Entities for so long as the Percentage
Ownership of the MMI Entities equals or exceeds 331/3% of their Initial
Ownership of Common Stock on a Fully Diluted Basis:
(i) any issuance of any equity security by, or the reduction of
capital of, the Company or FM Holdings;
(ii) any material change in the nature of the business of the Company
and its Subsidiaries;
(iii) any amendment to the certificate of incorporation or bylaws of
the Company or any adoption of or amendment to the certificate of
incorporation or bylaws of any Subsidiary;
14
<PAGE>
(iv) any liquidation, dissolution, commencement of bankruptcy,
liquidation or similar proceedings with respect to the Company or any
Subsidiary;
(v) except as provided in Section 4.04, any purchase, disposal or
distribution of assets having a value in excess of $50,000,000
provided that the approval of the CVC Entities shall not be required
for any transaction involving the acquisition of Laminex (Australia)
Pty. Ltd. or any assets related to the Laminex business; or
(vi) except as provided in Section 4.04, any material transaction
between the Company, on the one hand, and any Institutional
Shareholder or its Affiliates, on the other hand, that is not on an
arms-length basis, it being understood that ordinary course investment
banking transactions that are on terms not in excess of market terms
and that are not objected to by any Institutional Shareholder shall be
considered on an arms-length basis.
SECTION 2.06. Conflicting Charter or Bylaw Provision. Each Shareholder
shall vote its shares of Common Stock, and shall take all other actions
reasonably necessary, to ensure that the Company's and LMS' respective
certificate of incorporation and bylaws (copies of which are attached hereto as
Exhibits A, B, C and D) facilitate and do not at any time conflict with any
provision of this Agreement.
SECTION 2.07. Subsidiary Governance. Each of the Company and each
Shareholder agrees that the board of directors of FM Holdings and Formica shall
be comprised of the individuals who are serving as directors on the Board in
accordance with Section 2.01. Each Shareholder agrees to vote its shares of
Common Stock and to cause its representatives on the Board, subject to their
fiduciary duties, to vote and take other appropriate action to effectuate the
agreements in this Section 2.07 in respect of each such Subsidiary.
SECTION 2.08. Notice of Meeting; Participation. (a) Each director will
receive notice and the agenda of each meeting of the Board of Directors or any
committee thereof at least 5 days prior to such meeting.
(b) Each DLJMB, CVC and MMI representative will be permitted to invite
alternates to participate in the meetings, provided such alternates will not be
permitted to vote at such meeting.
SECTION 2.09. Voting of Common Stock Owned by Management Stockholders.
Until the occurrence of a Change in Control, each of the
15
<PAGE>
Management Shareholders agrees, with respect to any issue presented for a vote
(or consent) of Shareholders, to vote (or execute consents with respect to) its
shares of Common Stock in the same proportions as those shares owned by
Institutional Shareholders are voted (or consented).
ARTICLE 3
RESTRICTIONS ON TRANSFER
SECTION 3.01. General. (a) Each Shareholder understands and agrees that
the Equity Securities purchased pursuant to the Subscription Agreement have not
been registered under the Securities Act and are restricted securities. Each
Shareholder agrees that it will not, directly or indirectly, sell, assign,
transfer, grant a participation in, pledge or otherwise dispose of ("transfer")
any Equity Securities (or solicit any offers to buy or otherwise acquire, or
take a pledge of any Equity Securities) except in compliance with the
Securities Act and the terms and conditions of this Agreement.
(b) Any attempt to transfer any Equity Securities not in compliance with
this Agreement shall be null and void and the Company or LMS, as the case may
be, shall not, and shall cause any transfer agent not to, give any effect in
the Company's or LMS's stock records to such attempted transfer.
(c) Notwithstanding anything in this Agreement to the contrary, neither
the Company nor LMS, as the case may be, shall redeem or exchange any Equity
Securities (other than pursuant to the FM Merger) unless the Institutional
Shareholders obtain an opinion of counsel recognized as an expert in federal
income tax matters to the effect that the redemption or exchange will not
result in any Institutional Shareholder recognizing, for federal income tax
purposes, an amount of dividend income in excess of the amount of accrued and
unpaid dividends on the Equity Securities subject to the redemption or
exchange.
SECTION 3.02. Legends. (a) In addition to any other legend that may be
required, each certificate for Equity Securities that is issued to any
Shareholder shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE INVESTORS'
16
<PAGE>
AGREEMENT DATED AS OF MAY 1, 1998, COPIES OF WHICH MAY BE
OBTAINED UPON REQUEST FROM [LAMINATES ACQUISITION CO.]
[LMSI, CO.] OR ANY SUCCESSOR THERETO."
(b) If any Equity Securities shall cease to be Registrable Securities
under clause (i) or clause (ii) of the definition thereof, the Company or LMS,
as the case may be, shall, upon the written request of the holder thereof,
issue to such holder a new certificate evidencing such Equity Securities
without the first sentence of the legend required by Section 3.02(a) endorsed
thereon. If any Equity Securities cease to be subject to any and all
restrictions on transfer set forth in this Agreement, the Company or LMS, as
the case may be, shall, upon the written request of the holder thereof, issue
to such holder a new certificate evidencing such Equity Securities without the
second sentence of the legend required by Section 3.02(a) endorsed thereon.
SECTION 3.03. Permitted Transferees. Notwithstanding anything in this
Agreement to the contrary, any Shareholder may at any time transfer any or all
of its Equity Securities to one or more of its Permitted Transferees without
the consent of any Person, so long as (a) such Permitted Transferee shall have
agreed in writing to be bound by the terms of this Agreement and (b) the
transfer to such Permitted Transferee is not in violation of applicable federal
or state securities laws.
SECTION 3.04. Restrictions on Transfers by Shareholders. (a) Except as
provided in Section 3.03, each Shareholder and each Permitted Transferee of
such Shareholder may transfer its Company Equity Securities (other than, in the
case of the Management Shareholders, After Acquired Securities) only as
follows:
(i) following the third anniversary of the Closing Date, in a
transfer to any Third Party other than an Adverse Person for
consideration consisting solely of cash made in compliance with
Section 4.01;
(ii) in a transfer made after a Public Offering in compliance with
Rule 144 under the Securities Act;
(iii) in a Public Offering in connection with the exercise of its
rights under Article 5;
(iv) following a Change of Control, in a transfer to any Third Party;
or
17
<PAGE>
(v) (A) in the case of any Tagging Person, as permitted by Section
4.01 or (B) in the case of the Institutional Shareholders or any
Management Shareholders, as permitted or required by Section 4.02;
provided that, notwithstanding the foregoing, (i) except as set forth in
(ii) below no Warrants may be transferred or exercised by any Shareholder or
its Permitted Transferees until such time as all of the Institutional
Shareholders and their respective Permitted Transferees have transferred 100%
of their LMS Preferred Stock to Third Parties other than Adverse Persons and
(ii) in connection with any such transfer of LMS Preferred Stock, each
Institutional Shareholder and its Permitted Transferees may (and shall be
required to) transfer such amount of their respective Warrants as is required
in connection with such transfer of LMS Preferred Stock.
(b) Except as provided in Section 3.03, each Shareholder and each
Permitted Transferee of such Shareholder may, at any time, only transfer its
LMS Preferred Stock in a transfer to any Third Party other than an Adverse
Person in a transfer for consideration consisting solely of cash made in
compliance with or required by Section 4.02.
SECTION 3.05. Restrictions on Transfers of After Acquired Securities by
Management Shareholders. (a) Each Management Shareholder and each Permitted
Transferee of such Management Shareholder may transfer any After Acquired
Securities only as follows:
(i) in a transfer made in compliance with Section 4.01 or 4.02, or in
a transfer to the Company required or permitted by an employment
agreement between such Management Shareholder and the Company or any
Subsidiary or by any stock purchase, option, stock option or other
compensation plan of the Company or any Subsidiary.
(ii) subject to the Public Offering Limitations (as defined below), in
a Public Offering in connection with the exercise of its rights under
Article 5 hereof ; or
(iii) in a transfer made at the conclusion of the Applicable Holdback
Period (as defined in Section 5.03) following a Public Offering, in
compliance with Rule 144 promulgated under the Securities Act;
provided that the number of shares of any class of After Acquired
Securities transferred by such Management Shareholder pursuant to this
Section 3.05(a)(iii) in any twelve-month period shall not exceed 20%
of such Management Shareholder's Percentage Ownership of such class on
the date of this Agreement, it being understood that the foregoing
proviso
18
<PAGE>
shall cease to have effect after the earlier of (A) the fourth
anniversary of this Agreement and (B) the second anniversary of an
Initial Pubic Offering.
For purposes of this Agreement, "Public Offering Limitations" means (A) no
Management Shareholder shall be permitted to exercise its rights under Section
5.02 hereof (x) with respect to the Initial Public Offering and (y) until such
time as the Percentage Ownership of the Institutional Shareholders and their
Permitted Transferees shall be less than 50% of their aggregate Initial
Ownership of Company Equity Securities and (B) in each Public Offering
following the Initial Public Offering, such Management Shareholder shall be
entitled to transfer a number of shares of After Acquired Securities not
exceeding such Management Shareholder's Pro Rata Portion of After Acquired
Securities.
(b) The provisions of Section 3.05(a) shall terminate upon a Change of
Control.
ARTICLE 4
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS; PREEMPTIVE RIGHTS;
RIGHTS OF FIRST OFFER
SECTION 4.01. Rights to Participate in Transfer. (a) Subject to and after
compliance with Section 4.04, if any Institutional Shareholder (the "Selling
Person") proposes to transfer any shares (or securities) of a class of Company
Equity Securities (other than transfers of shares (or securities)) of such
class (i) in a Public Offering or pursuant to Rule 144 after an Initial Public
Offering, (ii) to any Permitted Transferee of such Shareholder or (iii) up to
2.5% in the aggregate of such Institutional Shareholder's Initial Ownership of
such class (such percentage, the "Free Percentage")), in a transaction
otherwise permitted by Article 3 hereof, (a "Tag-Along Sale"), the other
Shareholders may, at their option, elect to exercise their rights under this
Section 4.01 (each such Shareholder, a "Tagging Person"). In the event of such
a proposed transfer, the Selling Person shall provide each other Shareholder
written notice of the terms and conditions of such proposed transfer
("Tag-Along Notice") and offer each Tagging Person the opportunity to
participate in such sale. The Tag-Along Notice shall identify the number of
shares (or securities) of such class of Company Equity Securities subject to
the offer ("Tag-Along Offer"), the cash price at which the transfer is proposed
to be made, and all other material terms and conditions of the Tag-Along Offer,
including the form of the proposed agreement, if any. From the date of the
Tag-Along Notice, each Tagging Person shall have
19
<PAGE>
the right (a "Tag-Along Right"), exercisable by written notice ("Section 4.01
Response Notice") given to the Selling Person within 15 days (the "Tag-Along
Notice Period"), to request that the Selling Person include in the proposed
transfer the number shares (or securities) of such class of Company Equity
Securities held by such Tagging Person as is specified in such notice; provided
that if the aggregate number of shares (or securities) of such class of Company
Equity Securities proposed to be sold by the Selling Person and all Tagging
Persons in such transaction exceeds the number of shares (or securities) of
such class of Company Equity Securities which can be sold on the terms and
conditions set forth in the Tag-Along Notice, then only the Tag-Along Portion
of Company Equity Securities of the Selling Person and each Tagging Person
shall be sold pursuant to the Tag-Along Offer. In the event the Selling Person
shall propose to transfer a number of shares (or securities) of such class in
excess of the Free Percentage, the Tag-Along Portion shall be calculated with
respect to all of the shares (or securities) of such class proposed to be
transferred by the Selling Person. If the Tagging Persons exercise their
Tag-Along Rights hereunder, each Tagging Person shall deliver to the Selling
Person, together with its Section 4.01 Response Notice, the certificate or
certificates representing the shares (or securities) of such class of Company
Equity Securities such Tagging Person to be included in the transfer, together
with a limited power-of-attorney authorizing the Selling Person to transfer
such shares (or securities) on the terms set forth in the Tag-Along Notice.
Delivery of such certificate or certificates representing the shares (or
securities) of such class of Company Equity Securities to be transferred and
the limited power-of-attorney authorizing the Selling Person to transfer such
shares (or securities) shall constitute an irrevocable acceptance of the
Tag-Along Offer by such Tagging Persons. If, at the end of a 120-day period
after such delivery, the Selling Person has not completed the transfer of all
such shares (or securities) for at least 95% of the cash price set forth in the
Tag-Along Offer and otherwise on substantially the same terms and conditions
set forth in the Tag- Along Notice, the Selling Person shall return to each
Tagging Person the limited power-of-attorney (and all copies thereof) together
with all certificates representing the shares (or securities) which such
Tagging Person delivered for transfer pursuant to this Section 4.01.
(b) Concurrently with the consummation of the Tag-Along Sale, the Selling
Person shall notify the Tagging Persons thereof, shall remit to the Tagging
Persons the total consideration (by bank or certified check or wire transfer)
for the shares (or securities) of the class of Company Equity Securities of the
Tagging Persons transferred pursuant thereto, and shall, promptly after the
consummation of such Tag-Along Sale furnish such other evidence of the
completion and time of completion of such transfer and the terms thereof as may
be reasonably requested by the Tagging Persons.
20
<PAGE>
(c) If at the termination of the Tag-Along Notice Period any Tagging
Person shall not have elected to participate in the Tag-Along Sale, such
Tagging Person will be deemed to have waived its rights under Section 4.01(a)
with respect to the transfer of its securities pursuant to such Tag-Along Sale.
(d) If any Tagging Person declines to exercise its Tag-Along Rights or
elects to exercise its Tag-Along Rights with respect to less than such Tagging
Person's Tag-Along Portion, the Selling Person shall be entitled to transfer,
pursuant to the Tag-Along Offer, a number of shares (or securities) of such
class of Company Equity Securities held by the Selling Person equal to the
number of such shares (or securities) constituting the portion of such Tagging
Person's Tag- Along Portion with respect to which Tag-Along Rights were not
exercised.
(e) The Selling Person may sell, on behalf of itself and any Tagging
Person who exercises the Tag-Along Rights pursuant to this Section 4.01, the
shares (or securities) of such class of Company Equity Securities subject to
the Tag-Along Offer on the terms and conditions set forth in the Tag-Along
Notice (provided that the cash price payable in any such sale may exceed the
cash price specified in the Tag-Along Notice by up to 10%) within 120 days of
the date on which Tag-Along Rights shall have been waived, exercised or expire.
(f) The provisions of this Section 4.01 shall terminate upon one or more
Public Offerings of Common Stock yielding aggregate gross proceeds to the
Company of at least $75,000,000.
SECTION 4.02. Right to Compel Participation in Certain Transfers. (a) If
(i) all the Institutional Shareholders acting together propose to transfer not
less than 50% of their Initial Ownership of a class of Company Equity
Securities to a Third Party in a bona fide sale or (ii) all the Institutional
Shareholders acting together propose a transfer in which the shares (or
securities) of the class of Company Equity Securities to be transferred by the
Institutional Shareholders and their Permitted Transferees constitute more than
50% of the outstanding shares (or securities) of such class or (iii) (x) either
the CVC Entities or the MMI Entities and (y) the DLJMB Entities, acting
together, propose to transfer 100% of their LMS Preferred Stock at a price
equal to or greater than the par value plus accrued by unpaid dividends (a
"Section 4.02 Sale"), such Institutional Shareholders, as the case be, may at
their option require (or in the case of a Section 4.02 Sale of LMS Preferred
Stock, shall require) all other Shareholders (w) to sell the Subject Securities
("Drag-Along Rights") then held by every other Shareholder, and (x) in the case
of a Section 4.02 Sale of LMS Preferred Stock, to sell such number of Warrants
as the DLJMB Entities deem necessary to sell the LMS Preferred Stock or (y)
(subject to and at the closing of the Section 4.02 Sale) to exercise all, but
not less than all, of the Derivatives held by every other Shareholder and to
sell all
21
<PAGE>
of the shares of Common Stock received upon such exercise to such Third Party,
for the same consideration per share and otherwise on the same terms and
conditions as such Institutional Shareholders; provided that any other
Shareholder who holds Derivatives the exercise price per share of which is
greater than the per share price at which the shares of Common Stock are to be
sold to the Third Party may, if required by the relevant Institutional
Shareholders to exercise such Derivatives, in place of such exercise, submit to
irrevocable cancellation thereof without any liability for payment of any
exercise price with respect thereto. In the event the Section 4.02 Sale is not
consummated with respect to any shares acquired upon exercise of such
Derivatives, or the Section 4.02 Sale is not consummated, such Derivatives
shall be deemed not to have been exercised or canceled, as applicable. The
relevant Institutional Shareholders shall provide written notice of such
Section 4.02 Sale to the other Shareholders (a "Section 4.02 Notice") not later
than the 15th day prior to the proposed Section 4.02 Sale. The Section 4.02
Notice shall identify the transferee, the number of shares of the Subject
Securities, the consideration for which a transfer is proposed to be made (the
"Section 4.02 Sale Price") and all other material terms and conditions of the
Section 4.02 Sale. The number of shares of such class of Company Equity
Securities and/or LMS Preferred Stock to be sold by each other Shareholder will
be the Drag-Along Portion of the shares of such class of Company Equity
Securities and/or LMS Preferred Stock that such other Shareholder owns. Each
other Shareholder shall be required to participate in the Section 4.02 Sale on
the terms and conditions set forth in the Section 4.02 Notice and to tender all
its Subject Securities as set forth below. The price payable in such transfer
shall be the Section 4.02 Sale Price. Not later than the 10th day following the
date of the Section 4.02 Notice (the "Section 4.02 Notice Period"), each of the
other Shareholders shall deliver to a representative of the Company designated
in the Section 4.02 Notice certificates, and in the case of Warrants, the
applicable instrument, representing all Subject Securities held by such other
Shareholder, duly endorsed, together with all other documents required to be
executed in connection with such Section 4.02 Sale or, if such delivery is not
permitted by applicable law, an unconditional agreement to deliver such Subject
Securities pursuant to this Section 4.02 at the closing for such Section 4.02
Sale against delivery to such other Shareholder of the consideration therefor.
If an other Shareholder should fail to deliver such certificates to the
Company, the Company shall cause the books and records of the Company or LMS,
as the case may be, to show that such Subject Securities are bound by the
provisions of this Section 4.02 and that such Subject Securities shall be
transferred to the purchaser of the Subject Securities immediately upon
surrender for transfer by the holder thereof.
(b) The relevant Institutional Shareholders shall have a period of 90 days
from the date of receipt of the Section 4.02 Notice to consummate the Section
4.02 Sale on the terms and conditions set forth in such Section 4.02 Sale
Notice.
22
<PAGE>
If the Section 4.02 Sale shall not have been consummated during such period,
the Company shall return to each of the other Shareholders all certificates or
other applicable instruments representing the relevant Equity Securities that
such other Shareholder delivered for transfer pursuant hereto, together with
any documents in the possession of the Company executed by the other
Shareholder in connection with such proposed transfer, and all the restrictions
on transfer contained in this Agreement or otherwise applicable at such time
with respect to such Equity Securities owned by the other Shareholders shall
again be in effect.
(c) Concurrently with the consummation of the transfer of the relevant
Equity Securities pursuant to this Section 4.02, the Company shall give notice
thereof to all Shareholders, shall remit to each of the Shareholders who have
surrendered their certificates the total consideration (by bank or certified
check) for such Equity Securities transferred pursuant hereto and shall furnish
such other evidence of the completion and time of completion of such transfer
and the terms thereof as may be reasonably requested by such Shareholders.
SECTION 4.03. Preemptive Rights. (a) The Company shall provide each
Shareholder with a written notice (a "Section 4.03 Notice") of any proposed
issuance by the Company of Company Equity Securities at least 10 Business Days
prior to the proposed issuance date. Such notice shall specify the price at
which the Company Equity Securities are to be issued and the other material
terms of the issuance. Each Shareholder shall be entitled to purchase such
Shareholder's Section 4.03 Portion of the Company Equity Securities proposed to
be issued (which, in the case of a purchase by Management Shareholders of
Common Stock, shall be non-voting Class B Common Stock). A Shareholder may
exercise its rights under this Section 4.03 by delivering written notice of its
election to purchase Company Equity Securities to the Company and each other
Shareholder within 5 Business Days of receipt of the Section 4.03 Notice. A
delivery of such a written notice (which notice shall specify the number of
shares (or amount) of Company Equity Securities to be purchased by the
Shareholder submitting such notice) by such Shareholder shall constitute a
binding agreement of such Shareholder to purchase at the price and on the terms
specified in the Section 4.03 Notice, the number of shares (or amount) of
Company Equity Securities specified in such Shareholder's written notice. In
the event the Company Equity Securities proposed to be issued by the Company
are not Common Stock, Preferred Stock or Warrants, it shall be a condition to
the consummation of the purchase of such Company Equity Securities pursuant to
this Section 4.03 by any Shareholder that such Shareholder shall execute an
amendment of this Agreement on the terms consistent with this Agreement
reasonably satisfactory to the Company and the other Shareholders.
23
<PAGE>
(b) In the event any Shareholder declines to exercise its preemptive
rights under this Section 4.03 or elects to exercise such rights with respect
to less than such Shareholder's Section 4.03 Portion, each other Shareholder
shall be entitled to purchase from the Company its pro rata portion of equity
securities constituting the Section 4.03 Portion with respect to which such
Shareholder shall not have exercised its preemptive rights.
(c) In the case of any issuance of Company Equity Securities, the Company
shall have 90 days from the date of the Section 4.03 Notice to consummate the
proposed issuance of any or all of such securities which the Shareholders have
not elected to purchase at the price and upon terms that are not materially
less favorable to the Company than those specified in the Section 4.03 Notice.
At the consummation of such issuance, the Company shall issue certificates
representing the securities to be purchased by each Shareholder exercising
preemptive rights pursuant to this Section 4.03 registered in the name of such
Shareholder, against payment by such Shareholder of the purchase price for such
securities. If the Company proposes to issue securities after such 90-day
period, it shall again comply with the procedures set forth in this Section.
(d) Notwithstanding the foregoing, no Shareholder shall be entitled to
purchase Company Equity Securities as contemplated by this Section 4.03 in
connection with issuances of Company Equity Securities (i) to employees of the
Company or any Subsidiary pursuant to employee benefit plans or arrangements
approved by the Board (including upon the exercise of employee stock options),
(ii) in connection with any bona fide, arm's-length restructuring of
outstanding debt of the Company or any Subsidiary, (iii) in connection with any
bona fide, arm's-length direct or indirect merger, acquisition or similar
transaction or (iv) pursuant to a Public Offering. The Company shall not be
under any obligation to consummate any proposed issuance of Company Equity
Securities, regardless of whether it shall have delivered a Section 4.03 Notice
in respect of such proposed issuance.
(e) The Company will use its reasonable best efforts to provide the
Section 4.03 Notice at least 15 Business Days prior to any proposed issuance of
Company Equity Securities. In the event it is impracticable to provide the
Section 4.03 Notice at least 15 Business Days prior to such issuance, any
Shareholder may offer to finance or arrange to finance the purchase by any
other Shareholder of such other Shareholder's Section 4.03 Portion and such
financing or arranging Shareholder shall be entitled to receive as compensation
for such services reasonable and customary fees and expenses. No Shareholder
shall be under any obligation to provide or arrange such financing for any
other Shareholder.
24
<PAGE>
(f) Any Institutional Shareholder may assign to any of its Permitted
Transferees its rights under this Section 4.03 provided that (i) such Permitted
Transferee grants to such Institutional Shareholder an irrevocable power of
attorney and proxy authorizing such Institutional Shareholder to act for all
purposes on behalf of such Permitted Transferee in connection with any matters
relating to the Company and (ii) the exercise of the rights under this Section
4.03 by such Permitted Transferee is permitted under applicable law.
SECTION 4.04. Rights of First Offer. If any Shareholder desires to
transfer any Company Equity Securities to any Third Party as permitted by
Section 3.04(a)(i), such Shareholder (the "Section 4.04 Seller") shall give
written notice (an "Initial Section 4.04 Offer Notice") to the Company and the
non- transferring Shareholders that such Section 4.04 Seller desires to effect
such a transfer (a "Section 4.04 Sale") and setting forth the number of Company
Equity Securities proposed to be transferred by the Section 4.04 Seller, the
consideration per share or Warrant that such Section 4.04 Seller proposes to be
paid for such Company Equity Securities (the "Section 4.04 Sale Price") and any
other material terms sought by the Section 4.04 Seller.
(a) The giving (pursuant to Section 7.05) of an Initial Section 4.04 Offer
Notice to the Company and each non-transferring Shareholder shall constitute an
offer (the "Initial Section 4.04 Offer") by such Section 4.04 Seller to sell to
each non-transferring Shareholder for cash on the terms set forth in the
Initial Section 4.04 Offer Notice the Company Equity Securities subject to the
Section 4.04 Sale at the Section 4.04 Sale Price. Each Shareholder receiving an
Initial Section 4.04 Offer shall have a 30-day period (the "Initial Order
Period") in which to accept such offer as to all of such Shareholder's Pro Rata
Portion by giving a written notice of acceptance to such Section 4.04 Seller
(together with a copy thereof to the Company) prior to the expiration of such
30-day period.
If every Shareholder receiving an Initial Section 4.04 Offer Notice does
not elect to purchase Company Equity Securities in such Initial Section 4.04
Offer, the Section 4.04 Seller shall not be required to sell any Company Equity
Securities accepted pursuant to the Initial Section 4.04 Offer, but shall,
within 5 days of the expiration of the Initial Order Period, provide written
notice to all Shareholders that did accept the Initial Section 4.04 Offer,
informing them that they have the right to increase the number of Company
Equity Securities that they accepted pursuant to the Initial Section 4.04 Offer
(the "Second Section 4.04 Offer"). Each such Shareholder will then have a 5-day
period (the "Second Order Period") in which to accept such offer as to all of
such Shareholder's portion of the Company Equity Securities not accepted
pursuant to the Initial Section 4.04 Offer (on the basis of such Shareholder's
Pro Rata Portion (as defined below) compared to the Pro Rata Portion of all
other Shareholders
25
<PAGE>
receiving the Second Section 4.04 Offer) plus any additional portion not
accepted by any other Shareholder during the Second Order Period by giving
written notice of acceptance to the Section 4.04 Seller prior to the expiration
of such 5-day period.
If any Shareholder fails to notify the Section 4.04 Seller or the Company
prior to the expiration of the Initial Order Period or the Second Order Period,
as applicable, referred to above, it will be deemed to have declined the
Section 4.04 Offer or Second Section 4.04 Offer, as applicable.
For purposes of this Section 4.04 only, "Pro Rata Portion" means that
fraction that results from dividing (i) the number of relevant Company Equity
Securities, on a Fully Diluted basis, that such non-transferring Shareholder
beneficially owns (or, without duplication, has the right to acquire) by (ii)
that number of shares of such Company Equity Securities, on a Fully Diluted
basis, owned by all non-transferring Shareholders (or which, without
duplication, they have the right to acquire).
In the event any Shareholder declines (or is deemed to decline) to
exercise its right of first offer with respect to the Company Equity Securities
it is entitled to purchase under this Section 4.04, the Section 4.04 Seller
shall immediately notify the Company thereof and the Company may, upon receipt
of such notice, following the expiration of the Second Order Period, by giving
notice of acceptance to such Section 4.04 Seller within five days of the
expiration of the Second Order Period, exercise the right of first offer with
respect to the number of shares of Company Equity Securities, which such
Shareholder has not elected to purchase.
(b) If Shareholders and/or the Company elect to purchase of all the
Company Equity Securities subject to the Section 4.04 offer, the Shareholders
and/or the Company, as the case may be, exercising their rights of first offer
as to such shares shall purchase and pay, by bank or certified check, for all
Company Equity Securities subject to the 4.04 Offer within a 10-day period of
the date on which all Company Equity Securities subject to the right of first
offer having been accepted; provided that if the purchase and sale of such
Company Equity Securities is subject to any prior regulatory approval, subject
to Section 4.04(d)(iv) the time period during which such purchase and sale may
be consummated shall be extended until the expiration of five Business Days
after all such approvals shall have been received.
(c) Upon the earlier to occur of (i) full rejection of any Section 4.04
Offer by all recipients thereof, (ii) the expiration of any Order Period
without Shareholders and/or the Company electing to purchase all the Company
Equity
26
<PAGE>
Securities subject to the Section 4.04 Offer, (iii) the deemed rejection of
rights of first offer pursuant to Section 4.04(b) or (iv) the failure to obtain
any required consent or regulatory approval for the purchase of the Company
Equity Securities subject thereto within 45 days of full acceptance of any
Section 4.04 Offer, the Section 4.04 Seller shall have a 45-day period during
which to effect a transfer of any or all of the Company Equity Securities
subject to the Section 4.04 Sale on substantially the same or more favorable
(as to the Section 4.04 Seller) terms and conditions as were set forth in the
Section 4.04 Offer Notice at a price in cash; provided that if the transfer is
subject to regulatory approval, the 45-day period in which it may be
consummated shall be extended until the expiration of five Business Days after
all such approvals shall have been received. If the Section 4.04 Seller does
not consummate the sale of the Company Equity Securities subject to the Section
4.04 Offer in accordance with the foregoing time limitations, such Shareholder
may not prior to the third anniversary of the Closing Date sell any Company
Equity Securities in accordance with Section 3.04(a)(i) without repeating the
foregoing procedures.
SECTION 4.05. Certain Rights.
(a) Notwithstanding anything to the contrary set forth in the charter
documents of LMS, LMS may, at its option, to the extent it shall have funds
legally available for such payment, repurchase from the Institutional
Shareholders, in whole but not in part, all shares of LMS Preferred Stock at
any time at a repurchase price of 115.00% of the Liquidation Value (as defined
in the Certificate of Designations of the LMS Preferred Stock) as of the date
of repurchase thereof in cash, together with accrued and unpaid cash dividends
thereon to the date fixed for such repurchase, without interest and such
Institutional Shareholders agree to sell their shares of LMS Preferred Stock to
LMS.
(b) It is understood and agreed that the employment agreements or
associated restricted stock purchase agreements between one or more Management
Shareholders and the Company or any Subsidiary may contain provisions
permitting or requiring, under certain circumstances, such Management
Shareholders to sell to the Company or a Subsidiary, and permitting or
requiring, under certain circumstances, the Company or such Subsidiary to
purchase from such Management Shareholder, Company Equity Securities. Such
provisions may, by the terms of such agreements, remain effective
notwithstanding that the employment relationship created by such employment
agreements has been terminated, in which event such provisions are deemed to be
incorporated herein and made a part hereof, to the extent appropriate.
27
<PAGE>
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Demand Registration. (a) If the Issuer shall receive a
written request by the DLJ Entities, the CVC Entities, or the MMI Entities or
their respective Permitted Transferees (any such requesting Person, a "Selling
Shareholder") that the Issuer effect the registration under the Securities Act
of all or a portion of such Selling Shareholder's Registrable Securities, and
specifying the intended method of disposition thereof, (x) in the case of a
request with respect to Registrable Securities other than the LMS Preferred
Stock following the earlier to occur of (i) the third anniversary of the
Closing Date and (ii) the Initial Public Offering or (y) in the case of a
request with respect to the LMS Preferred Stock (and, if applicable in
connection therewith, Warrants, to the extent permitted in Section 5.01(f)), at
any time following the Closing Date, then the Issuer shall promptly give
written notice of such requested registration (a "Demand Registration") at
least 10 days prior to the anticipated filing date of the registration
statement relating to such Demand Registration to the other Shareholders and
thereupon will use its best efforts to effect, as expeditiously as possible,
the registration under the Securities Act of:
(i) the Registrable Securities which the Issuer has been so requested
to register by the Selling Shareholders, then held by the Selling
Shareholders; and
(ii) subject to the restrictions set forth in Section 5.02, all other
Registrable Securities of the same type as that to which the request
by the Selling Shareholders relates which any other Shareholder
entitled to request the Issuer a Piggyback Registration (as such term
is defined in Section 5.02) pursuant to Section 5.02 (all such
Shareholders, together with the Selling Shareholders, the "Holders")
has requested the Issuer to register by written request received by
the Issuer within 5 days (one of which shall be a Business Day) after
the receipt by such Holders of such written notice given by the
Issuer,
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that, subject to Section 5.01(d) hereof, the Issuer shall
not be obligated to effect more than (A) two Demand Registrations for the DLJ
Entities, (B) one Demand Registration for each of (I) the CVC Entities and (II)
the MMI Entities and (C) one Demand Registration for the DLJ Entities and the
CVC Entities or the MMI Entities acting together with respect to Registrable
Securities which consist only of LMS Preferred Stock (and, if applicable in
connection
28
<PAGE>
therewith, Warrants to the extent permitted by Section 5.01(f)) and provided
further that the Issuer shall not be obligated to effect a Demand Registration
unless the aggregate proceeds expected to be received from the sale of the
Registrable Securities requested to be included in such Demand Registration, in
the reasonable opinion of the Board exercised in good faith, equals or exceeds
(x) $25,000,000 if such Demand Registration would constitute the Initial Public
Offering, or (y) $25,000,000 in all other cases provided that if the
Registrable Securities required to be registered have a fair market value of
less than $25,000,000, the Issuer will be required to register such additional
securities as necessary to meet the $25,000,000 minimum. In no event will the
Issuer be required to effect more than one Demand Registration within any
four-month period. In addition to the foregoing, with respect to the LMS
Preferred Stock (and Warrants, to the extent permitted in Section 5.01(f)), the
Issuer shall undertake to effect a Demand Registration at a later date on
behalf of those Persons who purchase LMS Preferred Stock and Warrants pursuant
to Rule 144A in lieu of the Demand Registration referred to in clause (C)
above.
(b) Promptly after the expiration of the 5-day period referred to in
Section 5.01(a)(ii) hereof, the Issuer will notify all the Holders to be
included in the Demand Registration of the other Holders and the number of
Registrable Securities requested to be included therein. The Selling
Shareholders requesting a registration under Section 5.01(a) may, at any time
prior to the effective date of the registration statement relating to such
registration, revoke such request, without liability to any of the other
Holders, by providing a written notice to the Issuer revoking such request, in
which case such request, so revoked, shall be considered a Demand Registration
unless such revocation arose out of the fault of the Issuer or unless the
participating Shareholders reimburse the Issuer for all costs incurred by the
Issuer in connection with such registration, in which case such request shall
not be considered a Demand Registration.
(c) The Issuer will pay all Registration Expenses in connection with any
Demand Registration.
(d) A registration requested pursuant to this Section 5.01 shall not be
deemed to have been effected (i) unless the registration statement relating
thereto (A) has become effective under the Securities Act and (B) has remained
effective for a period of at least 180 days (or such shorter period in which
all Registrable Securities of the Holders included in such registration have
actually been sold thereunder); provided that if after any registration
statement requested pursuant to this Section 5.01 becomes effective (x) such
registration statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental agency or court and
(y) less than 75% of the Registrable Securities included in such registration
statement has been sold thereunder, (ii) if
29
<PAGE>
the Maximum Offering Size (as defined below) is reduced in accordance with
Section 5.01(e) such that less than 66 2/3% of the Registrable Securities of
the Selling Shareholders sought to be included in such registration are
included or (iii) if as a result of other Shareholders effecting a Piggyback
Registration, the Selling Shareholder is able to register less than 75% of the
Registrable Securities it requested to be registered pursuant to its Demand
Registration, such registration statement shall not be considered a Demand
Registration.
(e) If a Demand Registration involves an Underwritten Public Offering and
the managing underwriter shall advise the Issuer and the Selling Shareholders
that, in its view, (i) the number of shares of Registrable Securities requested
to be included in such registration (including any securities which the Issuer
proposes to be included which are not Registrable Securities) or (ii) the
inclusion of some or all of the shares of Registrable Securities owned by the
Holders, in any such case, exceeds the largest number of shares which can be
sold without having an adverse effect on such offering, including the price at
which such shares can be sold (the "Maximum Offering Size"), the Issuer will
include in such registration, in the priority listed below, up to the Maximum
Offering Size:
(A) first, all Registrable Securities requested to be
registered by the parties requesting such Demand Registration
and all Registrable Securities requested to be included in
such registration by any other Holder (allocated, if
necessary for the offering not to exceed the Maximum Offering
Size, pro rata among such Holders on the basis of the
relative number of Registrable Securities so requested to be
included in such registration); and
(B) second, any securities proposed to be registered by
the Issuer.
(f) If, in connection with any Demand Registration pursuant to Section
5.01 with respect to the LMS Preferred Stock, any Selling Shareholder shall
seek to transfer any Warrants together with shares of LMS Preferred Stock, the
Issuer shall at the request of any such Shareholder effect a registration of
such Warrants to which the provisions of this Article 5 shall apply mutatis
mutandis and a registration, pursuant to a shelf registration statement, so as
to permit the resale of the shares of Common Stock for which any Warrants so
transferred may be exercisable. The Issuer shall maintain effective any such
shelf registration statement for so long as any Warrants remain outstanding,
and take all actions necessary to permit resale of such Common Stock as may be
required by applicable state securities laws.
30
<PAGE>
(g) Upon written notice to each Selling Shareholder, the Issuer may
postpone effecting a registration pursuant to this Section 5.01 on one occasion
during any period of six consecutive months for a reasonable time specified in
the notice but not exceeding 90 days (which period may not be extended or
renewed), if (1) an investment banking firm of recognized national standing
shall advise the Issuer and the Selling Shareholders in writing that effecting
the registration would materially and adversely affect an offering of
securities of such Issuer the preparation of which had then been commenced or
(2) the Issuer is in possession of material non-public information the
disclosure of which during the period specified in such notice the Issuer
believes, in its reasonable judgment, would not be in the best interests of the
Issuer.
SECTION 5.02. Piggyback Registration. (a) If the Company proposes to
register any of its Registrable Securities under the Securities Act (including
pursuant to a Demand Registration), whether or not for sale for its own
account, it will each such time, subject to the provisions of Section 5.02(b)
hereof, give prompt written notice at least 5 days prior to the anticipated
filing date of the registration statement relating to such registration to all
Shareholders and their respective Permitted Transferees (or, in the case of a
Demand Registration, to all other Shareholders), which notice shall set forth
such Shareholders' rights under this Section 5.02 and shall offer all
Shareholders the opportunity to include in such registration statement such
number of shares of the relevant Registrable Securities as each such
Shareholder may request (a "Piggyback Registration"). Upon the written request
of any such Shareholder made within 2 days (one of which shall be a Business
Day) after the receipt of notice from the Company (which request shall specify
the number of shares of Registrable Securities intended to be disposed of by
such Shareholder), the Company will use its reasonable best efforts to effect
the registration under the Securities Act of all shares of Registrable
Securities which the Company has been so requested to register by such
Shareholders, to the extent requisite to permit the disposition of the shares
of Registrable Securities so to be registered; provided that (i) if such
registration involves an Underwritten Public Offering, all such Shareholders
requesting to be included in the Company's registration must sell their
Registrable Securities to the underwriters selected as provided in Section
5.04(f) on the same terms and conditions as apply to the Company, or the
Selling Shareholder, as applicable, and (ii) if, at any time after giving
written notice of its intention to register any stock pursuant to this Section
5.02(a) and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register such stock, the Company shall give written notice to all such
Shareholders and, thereupon, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration. No
registration effected under this Section 5.02 shall relieve the Company of its
obligations to effect a Demand Registration to the extent required
31
<PAGE>
by Section 5.01 hereof. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 5.02.
(b) If a registration pursuant to this Section 5.02 involves an
Underwritten Public Offering (other than in the case of an Underwritten Public
Offering requested by a Selling Shareholder in a Demand Registration, in which
case the provisions with respect to priority of inclusion in such offering set
forth in Section 5.01(e) shall apply) and the managing underwriter advises the
Company that, in its view, the number of shares of Registrable Securities which
the Company and the selling Shareholders intend to include in such registration
exceeds the Maximum Offering Size, the Company will include in such
registration, in the following priority, up to the Maximum Offering Size:
(i) first, so much of the Registrable Securities proposed to be
registered for the account of the Company as would not cause the
offering to exceed the Maximum Offering Size; and
(ii) second, all Registrable Securities requested to be included in
such registration by any Shareholder pursuant to Section 5.02
(allocated, if necessary for the offering not to exceed the Maximum
Offering Size, pro rata among such Shareholders on the basis of the
relative number of shares of Registrable Securities so requested to be
included in such registration).
SECTION 5.03. Holdback Agreements. With respect to each and every firmly
underwritten Public Offering, each Shareholder agrees and their Permitted
Transferees will agree not to offer or sell any shares of Registrable
Securities (except for shares of Registrable Securities, if any, sold in that
Public Offering) during the 14 days prior to the effective date of the
applicable registration statement for a public offering of shares of
Registrable Securities (except as part of such registration) and during the
period after such effective date equal to the lesser of: (i) 180 days or (ii)
any such shorter period as the Company and the lead managing underwriter of an
Underwritten Public Offering agree (such lesser period, the "Applicable
Holdback Period").
SECTION 5.04. Registration Procedures. Whenever Shareholders request that
any Registrable Securities be registered pursuant to Section 5.01 or 5.02
hereof, the Issuer will, subject to the provisions of such Sections, use its
reasonable best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such request:
32
<PAGE>
(a) The Issuer will as expeditiously as possible prepare and file with the
SEC a registration statement on any form selected by counsel for the Company or
LMS and which form shall be available for the sale of the Registrable
Securities to be registered thereunder in accordance with the intended method
of distribution thereof, and use its reasonable best efforts to cause such
filed registration statement to become and remain effective for a period of not
less than 180 days (or such shorter period in which all of the Registrable
Securities of the Holders included in such registration statement shall have
actually been sold thereunder).
(b) The Issuer will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to each
Shareholder and each underwriter, if any, of the Registrable Securities covered
by such registration statement copies of such registration statement as
proposed to be filed, and thereafter the Issuer will furnish to such
Shareholder and underwriter, if any, such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein), the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such Shareholder or underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Shareholder. Each Shareholder shall have the right to
request that the Issuer modify any information contained in such registration
statement, amendment and supplement thereto pertaining to such Shareholder and
the Issuer shall use its reasonable best efforts to comply with such request,
provided that the Issuer shall not have any obligation to so modify any
information if so doing would cause the prospectus to contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(c) After the filing of the registration statement, the Issuer will (i)
cause the related prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, (ii) comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement or supplement to such prospectus and (iii) promptly
notify each Shareholder holding Registrable Securities covered by such
registration statement of any stop order issued or threatened by the SEC or any
state securities commission under state blue sky laws and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered.
(d) The Issuer will use its reasonable best efforts to (i) register
or qualify the Registrable Securities covered by such registration statement
under such other
33
<PAGE>
securities or blue sky laws of such jurisdictions in the United States as any
Shareholder holding such Registrable Securities reasonably (in light of such
Shareholder's intended plan of distribution) requests and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Issuer and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Shareholder to
consummate the disposition of the Registrable Securities owned by such
Shareholder; provided that the Issuer will not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (d), (B) subject itself to taxation
in any such jurisdiction or (C) consent to general service of process in any
such jurisdiction.
(e) The Issuer will immediately notify each Shareholder holding such
Registrable Securities covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
promptly prepare and make available to each such Shareholder and file with the
SEC any such supplement or amendment.
(f) In connection with any Demand Registration the Issuer shall appoint
the underwriter or underwriters chosen by the Institutional Shareholder making
the Demand Registration. The Issuer will enter into customary agreements
(including an underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities, including the engagement of a
"qualified independent underwriter" in connection with the qualification of the
underwriting arrangements with the NASD.
(g) Upon execution of confidentiality agreements in form and substance
reasonably satisfactory to the Issuer, the Issuer will make available for
inspection by any Shareholder and any underwriter participating in any
disposition pursuant to a registration statement being filed by the Issuer
pursuant to this Section 5.04 and any attorney, accountant or other
professional retained by any such Shareholder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Issuer (collectively, the "Records") as shall be
reasonably requested by any such Person, and cause the Issuer's officers,
directors and employees to supply all information reasonably requested by any
Inspectors in connection with such registration statement.
34
<PAGE>
(h) The Issuer will furnish to each such Shareholder and to each such
underwriter, if any, a signed counterpart, addressed to such underwriter and
the participating Shareholders, of (i) an opinion or opinions of counsel to the
Issuer and (ii) a comfort letter or comfort letters from the independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as a
majority of such Shareholders or the managing underwriter therefor reasonably
requests.
(i) The Issuer will otherwise use its reasonable best efforts to
comply all applicable rules and regulations of the SEC and the relevant
state sky commissions, and make available to its securityholders, as soon
as reasonably practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(j) The Issuer may require each such Shareholder to promptly furnish
in writing to the Issuer information regarding the distribution of the
Registrable Securities as the Issuer may from time to time reasonably
request and such other information as may be legally required in connection
with such registration.
(k) Each such Shareholder agrees that, upon receipt of any notice
from the Issuer of the happening of any event of the kind described in
Section 5.04(e) hereof, such Shareholder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Shareholder's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5.04(e) hereof, and, if so directed by the Issuer,
such Shareholder will deliver to the Issuer all copies, other than any
permanent file copies then in such Shareholder's possession, of the most
recent prospectus covering such Registrable Securities at the time of
receipt of such notice. In the event that the Issuer shall give such
notice, the Issuer shall extend the period during which such registration
statement shall be maintained effective (including the period referred to
in Section 5.04(a) hereof) by the number of days during the period from
and including the date of the giving of notice pursuant to Section 5.04(e)
hereof to the date when the Issuer shall make available to such
Shareholder a prospectus supplemented or amended to conform with the
requirements of Section 5.04(e) hereof.
SECTION 5.05. Indemnification by the Issuer. The Issuer agrees to
indemnify and hold harmless each Shareholder holding Registrable Securities
covered by a registration statement, its officers, directors, employees,
partners and
35
<PAGE>
agents, and each Person, if any, who controls such Shareholder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(and officers, directors, employees, partners and agents of such controlling
Persons) from and against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Securities (as amended or supplemented if the Issuer shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission so made in strict conformity with information furnished in writing to
the Issuer by such Shareholder or on such Shareholder's behalf expressly for
use therein; provided that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, or in
any prospectus, as the case may be, the indemnity agreement contained in this
paragraph shall not apply to the extent that any such loss, claim, damage,
liability or expense results from the fact that a current copy of the
prospectus (or, in the case of a prospectus, the prospectus as amended or
supplemented) was not sent or given to the Person asserting any such loss,
claim, damage, liability or expense at or prior to the written confirmation of
the sale of the Registrable Securities concerned to such Person if it is
determined that the Issuer has provided such current copy of such prospectus
(or such amended or supplemented prospectus, as the case may be) to such
Shareholder in a timely manner prior to such sale and it was the responsibility
of such Shareholder under the Securities Act to provide such Person with a
current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) and such current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The Issuer also agrees
to indemnify any underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Shareholders provided in this
Section 5.05.
SECTION 5.06. Indemnification by Participating Shareholders. Each
Shareholder holding Registrable Securities included in any registration
statement agrees, severally but not jointly, to indemnify and hold harmless the
Issuer, officers, directors and agents and each Person (other than such
Shareholder) if any, who controls the Issuer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Issuer to such Shareholder, but only
(i) with respect to information furnished in writing by such Shareholder or on
such Shareholder's
36
<PAGE>
behalf expressly for use in any registration statement or prospectus relating
to the Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus or (ii) to the extent that any loss, claim, damage,
liability or expense described in Section 5.05 results from the fact that a
current copy of the prospectus (or, in the case of a prospectus, the prospectus
as amended or supplemented) was not sent or given to the Person asserting any
such loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registrable Securities concerned to such Person
if it is determined that it was the responsibility of such Shareholder to
provide such Person with a current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) and such current copy of the
prospectus (or such amended or supplemented prospectus, as the case may be)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. Each such Shareholder shall be prepared, if required by the
underwriting agreement, to indemnify and hold harmless underwriters of the
Registrable Securities, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Issuer provided in this Section 5.06. As a condition to
including Registrable Securities in any registration statement filed in
accordance with Article 5 hereof, the Issuer or LMS, as the case may be, may
require that it shall have received an undertaking reasonably satisfactory to
it from any underwriter to indemnify and hold it harmless to the extent
customarily provided by underwriters with respect to similar securities.
No Shareholder shall be liable under Section 5.06 for any damage
thereunder in excess of the net proceeds realized by such Shareholder in the
sale of the Registrable Securities of such Shareholder.
SECTION 5.07. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
this Article 5, such Person (an "Indemnified Party") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Party,
and shall assume the payment of all fees and expenses; provided that the
failure of any Indemnified Party so to notify the Indemnifying Party shall not
relieve the Indemnifying Party of its obligations hereunder except to the
extent that the Indemnifying Party is materially prejudiced by such failure to
notify. In any such proceeding, any Indemnified Party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel
or (ii) in the reasonable judgment of such Indemnified Party representation of
both parties by
37
<PAGE>
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the
Indemnified Parties. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any and all losses, claims, damages, liabilities and
expenses or liability (to the extent stated above) by reason of such settlement
or judgment. No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such proceeding.
SECTION 5.08. Contribution. If the indemnification provided for in this
Article 5 is held by a court of competent jurisdiction to be unavailable to the
Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities
(i) as between the Issuer and the Shareholders holding Registrable Securities
covered by a registration statement and their related Indemnified Parties on
the one hand and the underwriters and their related Indemnified Parties on the
other, in such proportion as is appropriate to reflect the relative benefits
received by the Issuer and such Shareholders on the one hand and the
underwriters on the other, from the offering of the Shareholders' Registrable
Securities, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits but also
the relative fault of the Issuer and such Shareholders on the one hand and of
such underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations and (ii) as between the Issuer and
their related Indemnified Parties on the one hand and each such Shareholder and
their related Indemnified Parties on the other, in such proportion as is
appropriate to reflect the relative fault of the Issuer and of each such
Shareholder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Issuer and such Shareholders on the one hand and such underwriters on the other
38
<PAGE>
shall be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Issuer and such Shareholders bear to the total
underwriting discounts and commissions received by such underwriters, in each
case as set forth in the table on the cover page of the prospectus. The
relative fault of the Issuer and such Shareholders on the one hand and of such
underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Issuer and such Shareholders or by such
underwriters. The relative fault of the Issuer on the one hand and of each such
Shareholder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuer and the Shareholders agree that it would not be just and
equitable if contribution pursuant to this Section 5.08 were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages or liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5.08 no
underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to securities purchased by such underwriter in
such offering, less the aggregate amount of any damages which such underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no Shareholder shall be required
to contribute any amount in excess of the amount by which the net proceeds
realized on the sale of the Registrable Securities of such Shareholder exceeds
the amount of any damages which such Shareholder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Each
Shareholder's obligation to contribute pursuant to this Section 5.08 is several
in the proportion that the proceeds of the offering received by such
Shareholder bears to the total proceeds of the offering received by all such
Shareholders and not joint.
39
<PAGE>
SECTION 5.09. Participation in Public Offering. No Person may participate
in any Underwritten Public Offering hereunder unless such Person (a) agrees to
sell such Person's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and the provisions
of this Agreement in respect of registration rights.
SECTION 5.10. Cooperation by the Issuer. In the event any Shareholder
shall transfer any Registrable Securities pursuant to Rule 144A under the
Securities Act, the Issuer shall cooperate, to the extent commercially
reasonable, with such Shareholder and shall provide to such Shareholder such
information as such Shareholder shall reasonably request.
SECTION 5.11. No Transfer of Registration Rights. None of the rights of
Shareholders under this Article 5 shall be assignable by any Shareholder to any
Person acquiring securities of such Shareholder in any Public Offering or
pursuant to Rule 144A of the Securities Act.
ARTICLE 6
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.01. Confidentiality. (a) Each Shareholder hereby agrees that
Confidential Information (as defined below) furnished and to be furnished to it
was and will be made available in connection with such Shareholder's investment
in the Issuer. Each Shareholder acknowledges and agrees that it will not
disclose any Confidential Information to any Person; provided that Confidential
Information may be disclosed (i) to such Shareholder's Representatives (as
defined below) in the normal course of the performance of their duties or to
any financial institution providing credit to such Shareholder, (ii) to the
extent required by applicable law, rule or regulation (including complying with
any oral or written questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process to which a
Shareholder is subject; provided that such Shareholder gives the Issuer prompt
notice of such request(s), to the extent practicable, so that the Issuer may
seek an appropriate protective order or similar relief), (iii) to any Person to
whom such Shareholder is contemplating a transfer of its Equity Securities
(provided that such transfer would not be in violation of the provisions of
this Agreement and as long as such potential transferee is advised of the
confidential nature of such information and
40
<PAGE>
agrees to be bound by a confidentiality agreement in form and substance
satisfactory to the Issuer (it being understood that a confidentiality
agreement consistent with the provisions hereof shall be satisfactory to the
Issuer)) or (iv) to any regulatory authority to which the shareholder or any of
its affiliates is subject of with which it has regular dealings if the prior
written consent of the Board shall have been obtained. Nothing contained herein
shall prevent the use (subject, to the extent possible, to a protective order)
of Confidential Information in connection with the assertion or defense of any
claim by or against the Issuer or any Shareholder. The Company will furnish to
directors of the Company, as soon as they become prepared on a regular basis,
monthly management accounts in such form and containing such information as the
Board shall specify.
(b) "Confidential Information" means any information concerning the Issuer
and Persons which are or become its subsidiaries or the financial condition,
business, operations or prospects of the Issuer and Persons which are or become
its subsidiaries in the possession of or furnished to any Shareholder
(including, without limitation by virtue of its present or former right to
designate a director of the Issuer); provided that the term "Confidential
Information" does not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by a Shareholder
or its partners, directors, officers, employees, agents, counsel, investment
advisers or representatives (all such persons being collectively referred to as
"Representatives") in violation of the Subscription Agreement or this
Agreement, (ii) is or was available to such Shareholder on a nonconfidential
basis prior to its disclosure to such Shareholder or its Representatives by the
Issuer or (iii) was or becomes available to such Shareholder on a
non-confidential basis from a source other than the Issuer, provided that such
source is or was at the time of receipt of the relevant information not, to the
best of such Shareholder's knowledge, bound by a confidentiality agreement with
the Issuer or another Person.
SECTION 6.02. Reports. The Issuer will furnish the Institutional
Shareholders with the quarterly and annual financial reports that the Company
is required to file with the Securities and Exchange Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act promptly after the filing
thereof or, in the event the Company is not required to file such reports,
quarterly and annual reports containing the same information as would be
required in such reports on the date that such reports would otherwise be
filed.
SECTION 6.03. Limitations on Subsequent Registration. The Issuer shall not
enter into any agreement with any holder or prospective holder of any
securities of the Issuer (a) that would allow such holder or prospective holder
to include such securities in any registration filed pursuant to Section 5.01
or 5.02 hereof, unless under the terms of such agreement, such holder or
prospective
41
<PAGE>
holder may include such securities in any such registration only to the extent
that the inclusion of such securities would not reduce the amount of the
Registrable Securities of the Shareholders included therein or (b) on terms
otherwise more favorable than this Agreement.
SECTION 6.04. Exclusive Financial Advisor and Investment Banking Advisor.
As set forth in the Engagement Letter between Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC") and the Company dated March 5, 1998 (the
"Engagement Letter"), during the period from and including the date hereof
through and including the date on which the Bridge Notes held by affiliates of
DLJ Bridge Finance, Inc. are no longer outstanding DLJSC or any Affiliate that
DLJMB may choose in its sole discretion, shall be engaged as the exclusive
financial advisor and investment banker for the Issuer on financial and other
terms customary in the industry to be agreed between the Issuer and DLJSC. Any
amendment to the terms of the Engagement Letter will be subject to Section
2.05(vi) herein.
SECTION 6.05. Regulatory Co-operation. In the event that MMI determines
that it has a Regulatory Problem (as defined below), the Company shall take all
such actions as are reasonably requested by MMI in order to (a) effectuate and
facilitate any transfer by MMI of any securities of the Company then held by
MMI to (x) any Affiliate designated by MMI or (y) any single Person other than
an Adverse Person with the consent of the other Institutional Shareholders
provided any transferee shall have agreed in writing to be bound by the terms
of this Agreement and any transfer pursuant to clause (y) shall be subject to
Section 4.04, (b) permit MMI (or any of its affiliates) to exchange all or any
portion of any voting security then held by it on a share-for-share basis for
shares of a nonvoting security of the Company, which nonvoting security shall
be identical in all respects to the voting security exchanged for it, except
that it shall be nonvoting and shall be convertible into a voting security on
such terms as are requested by MMI in light of regulatory consideration then
prevailing (so long as no such terms change the economic or voting relations
contemplated on the date of this Investors Agreement) and (c) amend this
Agreement, the Company's articles of incorporation, bylaws and any other
related documents to effectuate and reflect the foregoing. For purposes of this
Section, a "Regulatory Problem" means any set of facts or circumstances wherein
it has been asserted by any Governmental Body (or MMI believes that there is a
substantial risk of such assertion) that MMI is not entitled to hold, or
exercise any significant right with respect to, the securities of the Company
then held by MMI.
42
<PAGE>
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Entire Agreement. This Agreement, the Subscription Agreement
and any employment agreement between the Company or any Subsidiary and a
Management Shareholder constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements and understandings, both oral and written, between
the parties with respect to the subject matter hereof and thereof.
SECTION 7.02. Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto, and their respective heirs, successors, legal
representatives and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement. Persons who acquire shares of
Common Stock pursuant to the exercise of an option pursuant to the Laminates
Acquisition Co. Management Incentive Plan shall become parties hereto and be
bound by the provisions hereof and the addition of such parties to this
Agreement shall not constitute an amendment or modification of this Agreement.
SECTION 7.03. Assignability. (a) Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or any Shareholder; provided that any Person
acquiring shares of Equity Securities who is required by the terms of this
Agreement, the Bridge Warrant Agreement or any employment agreement or stock
purchase, option, stock option or other compensation plan of the Company or any
Subsidiary to become a party hereto shall (unless already bound hereby) execute
and deliver to the Company an agreement to be bound by this Agreement and shall
thenceforth be a "Shareholder".
(b) Any Permitted Transferee of a Management Shareholder who shall become
a party hereto shall be deemed a "Management Shareholder".
(c) Any Permitted Transferee of an Institutional Shareholder who shall
become a party to this Agreement shall be deemed an "Institutional
Shareholder".
(d) If, and to the extent that, the warrants to acquire Common Stock
issued pursuant to that Warrant Agreement dated May 1, 1998 (the "Bridge
Warrant Agreement") among Laminates Funding Inc., Credit Suisse First
43
<PAGE>
Boston, Bankers Trust Company (together with their respective transferees, the
"Bridge Fund Equity Holders") and the Company are released from escrow to the
Bridge Fund Equity Holders, then, until an Initial Public Offering shall have
occurred, each Bridge Fund Equity Holder shall be bound by, and have the
benefits of, Sections 3.01(a) and 3.01(b) (insofar as each Section relates to
the Securities Act), 3.02, 4.01 and 4.02 hereof, and
(x) for purposes of Section 4.01 each Bridge Fund Equity
Holder shall be considered an "Institutional Shareholder",
but this Section 7.03(d)(x) shall apply to a Bridge Fund
Equity Holder only as a Tagging Person and shall not be
construed to permit other Shareholders to participate in
transfers by such Bridge Fund Equity Holder, and
(y) for purposes of Section 4.02 (but not 4.02 (iii)) each
Bridge Fund Equity Holder shall be considered to be a
"Management Shareholder" for purposes of the obligations to
sell Company Equity Securities thereunder and the warrants
issued under the Bridge Warrant Agreement shall be treated as
though they were "Warrants" hereunder.
Upon the occurrence of an Initial Public Offering, the rights and
obligations of the Bridge Fund Equity Holders under this Section 7.03(d) shall
terminate.
SECTION 7.04. Amendment; Waiver; Termination. (a) No provision of this
Agreement may be waived except by an instrument in writing executed by the
party against whom the waiver is to be effective. No provision of this
Agreement may be amended or otherwise modified except by an instrument in
writing executed by the Company with approval of the Board of Directors and
holders of at least 75% of the Shares held by the parties to this Agreement at
the time of such proposed amendment or modification.
(b) In addition, any amendment or modification of any provision of this
Agreement that would adversely affect any (i) Institutional Shareholder may be
effected only with the consent of 100% of the affected Institutional
Shareholders or (ii) Management Shareholder may be effected only with the
consent of Management Shareholders holding at least 50% of the shares held by
the Management Shareholders. Any amendment of Sections 3.01(a), 3.01(b), 3.02.
4.01, 4.02 and 7.03(d) in a manner adverse to any Bridge Fund Equity Holder
shall require the consent of 100% of the affected Bridge Fund Equity Holders.
44
<PAGE>
(c) This Agreement shall terminate on the tenth anniversary of the date
hereof unless earlier terminated.
SECTION 7.05. Notices. (a) All notices and other communications given or
made pursuant hereto or pursuant to any other agreement among the parties,
unless otherwise specified, shall be in writing and shall be deemed to have
been duly given and received when sent by fax (with confirmation in writing via
first class U.S. mail) or delivered personally or on the third Business Day
after being sent by registered or certified U.S. mail (postage prepaid, return
receipt requested) to the parties at the fax number or address set forth below
or at such other addresses as shall be furnished by the parties by like notice:
if to the Company to:
Laminates Acquisition Co.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7551
if to any Shareholder, to such Shareholder at the address
specified by such Shareholder on the signature pages of this
Agreement or in a notice given by such Shareholder to the
Company for such purpose
Any Person who becomes a Shareholder shall provide its address and fax
number to the Company, which shall promptly provide such information to each
other Shareholder.
(b) Notices required to be given pursuant to Sections 5.01(a) and 5.01(b)
and Section 5.02 by the Company shall be deemed given only if such notices are
also be given telephonically and by fax to the following persons (or any other
individual the respective entities may designate in writing to the Company to
replace such person):
(i) for the benefit of the Management Shareholders, to Vincent
Langone at 908-832-0550 and fax 908-832-0650;
(ii) for the benefit of the MMI Entities, to: David Howe at 212-
559-1133, fax: 212-888-2940, with a copy to Kirk Radke at
212-446-4940, fax: 212-838-4223;
45
<PAGE>
(iii) for the benefit of the CVC Entities, to: Michael Smith or Donald
MacKenzie at fax: 011-44-171-420-4231; and
(iv) for the benefit of the DLJ Entities, to Thompson Dean, at
212-892-4460, fax: 212-892-7552, with a copy to George R. Bason, Jr.,
at 212-450-4340, fax: 212-450-4800.
SECTION 7.06. Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
SECTION 7.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
SECTION 7.08. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the conflicts of laws rules of such state.
SECTION 7.09. Specific Enforcement. Each party hereto acknowledges that
the remedies at law of the other parties for a breach or threatened breach of
this Agreement would be inadequate and, in recognition of this fact, any party
to this Agreement, without posting any bond, and in addition to all other
remedies which may be available, shall be entitled to obtain equitable relief
in the form of specific performance, a temporary restraining order, a temporary
or permanent injunction or any other equitable remedy which may then be
available.
SECTION 7.10. Consent to Jurisdiction; Expenses. (a) Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions contemplated
hereby shall be brought in any Federal Court sitting in New York, New York, or
any New York State court sitting in New York, New York, and each of the parties
hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party by any method provided in Section
7.05 shall be deemed effective service of process on such
46
<PAGE>
party and consents to the personal jurisdiction of any Federal Court sitting in
New York, New York, or any New York State court sitting in New York, New York.
(b) In any dispute arising under this Agreement among any of the parties
hereto, the costs and expenses (including, without limitation, the reasonable
fees and expenses of counsel) incurred by the prevailing party shall be paid by
the party that does not prevail.
SECTION 7.11. Severability. If one or more provisions of this Agreement
are held to be unenforceable to any extent under applicable law, such provision
shall be interpreted as if it were written so as to be enforceable to the
maximum possible extent so as to effectuate the parties' intent to the maximum
possible extent, and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the maximum extent permitted by law.
47
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
LAMINATES ACQUISITION CO.
By:
--------------------------------------
Name:
Title:
LMS I, CO.
By:
--------------------------------------
Name:
Title:
DLJ MERCHANT BANKING PARTNERS
II, L.P., a Delaware Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
with a copy of notice to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attn; George R. Bason, Jr.
48
<PAGE>
DLJ MERCHANT BANKING PARTNERS
II-A, L.P., a Delaware Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ OFFSHORE PARTNERS II, C.V., a
Netherlands Antilles Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as advisory general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
49
<PAGE>
DLJ DIVERSIFIED PARTNERS, L.P., a
Delaware Limited Partnership
By: DLJ Diversified Partners, Inc.,
as managing general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ DIVERSIFIED PARTNERS-A, L.P., a
Delaware Limited Partnership
By: DLJ Diversified Partners, Inc.,
as managing general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
50
<PAGE>
DLJ MILLENNIUM PARTNERS, L.P., a
Delaware Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ MILLENNIUM PARTNERS-A, L.P.,
a Delaware Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
51
<PAGE>
DLJMB FUNDING II, INC., a Delaware
corporation
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ FIRST ESC L.P.
By: DLJ LBO Plans Management Corporation,
as general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
52
<PAGE>
UK INVESTMENT PLAN 1997
PARTNERS, INC.
By: UK Investment Plan 1997 Partners,
Inc., as general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ EAB PARTNERS, L.P.
By: DLJ LBO Plans Management
Corporation, as general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
53
<PAGE>
DLJ ESC II L.P.
By: DLJ LBO Plans Management
Corporation, as general partner
By:
--------------------------------------
Name:
Title:
Address:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
CVC EUROPEAN EQUITY PARTNERS L.P.
By:
--------------------------------------
Name:
Title:
Address:
CVC EUROPEAN EQUITY PARTNERS
(JERSEY) L.P.
By:
--------------------------------------
Name:
Title:
Address:
54
<PAGE>
MMI PRODUCTS, L.L.C.
By:
--------------------------------------
Name:
Title:
Address:
55
<PAGE>
By:
--------------------------------------
Vincent Langone
Address:
By:
--------------------------------------
David Schneider
Address:
56
EXHIBIT 10.2
EXECUTION COPY
LAMINATES ACQUISITION CO.
Management Restricted Stock Program
SECTION 1. Purpose. The purposes of the Laminates Acquisition Co.
Management Restricted Stock Program are to promote the interests of Laminates
Acquisition Co. (the "Company") and its stockholders by (i) attracting and
retaining exceptional executive personnel and other key employees of the
Company and its Subsidiaries, as defined below; (ii) motivating such employees
by means of an equity-based incentive to achieve longer-range performance
goals; and (iii) enabling such employees to participate in the long-term growth
and financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" means, with respect to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control with
such Person and any entity that is, directly or indirectly, controlled by the
Company and (ii) any other entity in which such Person has a significant equity
interest or which has a significant equity interest in such Person, in either
case as determined by the Committee. For purposes of this definition, the terms
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") when used with respect to any
Person, means the possession, directly or indirectly of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Board" means the Board of Directors of the Company.
"Change of Control" shall, unless otherwise provided, have the meaning
assigned to such term in the Investors' Agreement.
"Closing Date" shall have the meaning assigned to such term in the
Investors' Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of the Board designated by the Board to
administer the Plan and composed of not less than the minimum number of
<PAGE>
persons from time to time required by Rule 16b-3 and Section 162(m) each of
whom, to the extent necessary to comply with Rule 16b-3 and Section 162(m)
only, is a "Non-Employee Director" and an "Outside Director" within the meaning
of Rule 16b-3 and Section 162(m), respectively. Until otherwise determined by
the Board, the full Board shall be the Committee under the Plan.
"Common Stock" shall have the meaning assigned to such term in the
Investors' Agreement.
"Employee" means an employee of the Company or any Subsidiary.
"Employment Agreement" means an employment agreement entered into between
the Company or any Subsidiary and a Participant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means with respect to the Shares, as of the Closing
Date (as defined in the Investors' Agreement), $1.00 per share, and as of any
other given date or dates, the average reported closing price of a share of
such class of Common Stock on such exchange or market as is the principal
trading market for such class of Common Stock for the three trading days
immediately preceding such date or dates. If such class of Common Stock is not
traded on an exchange or principal trading market on such date, the Fair Market
Value of a Share shall be as determined by the Committee; provided, that if
such Fair Market Value is to be determined in connection with the full or
partial exercise by the Company or a Management Shareholder of a right under
the Investors' Agreement or a Purchase Agreement to purchase, or cause to be
purchased by the Company, Shares, and the aggregate amount of the Shares
subject to such purchase is equal to or greater than 9,000, the Fair Market
Value of a Share shall be determined by an independent, nationally recognized
investment bank or other financial institution with expertise in the valuation
of equity securities which is selected by the Committee, subject to the
reasonable approval of the holder of such Restricted Shares. Any determination
by a financial institution in accordance with the preceding sentence shall take
into account, as appropriate, recent sales of the Shares, recent valuations of
the Shares and such other factors as such institution shall in its discretion
deem relevant or appropriate. Notwithstanding the foregoing, (i) the use of an
independent financial advisor as described in the second preceding sentence
shall not be required to determine Fair Market Value with respect to less than
9,000 shares and (ii) in connection with the exercise of any such right under
the Investors' Agreement or a Purchase Agreement to purchase, or cause to be
purchased by the Company, any Shares (whether or not 9,000 or more Shares),
Fair Market Value of a Share as of any date prior to January 1, 2000 shall be
deemed to be the Fair Market Value of a Share as of December 31, 1999.
2
<PAGE>
"Institutional Shareholder" shall have the meaning assigned to such term
in the Investors' Agreement.
"Investors' Agreement" means the Investors' Agreement dated as of April
30, 1998 among the Company, LMS I, Co., DLJ Merchant Banking Partners II, L.P.,
DLJ Merchant Banking Partners II-A, L.P., DLJ Offshore Partners II, C.V., DLJ
Diversified Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ Millennium
Partners, L.P., DLJ Millennium Partners-A, L.P., DLJMB Funding II, Inc., UK
Investment Plan 1997 Partners, DLJ EAB Partners, L.P., DLJ First ESC, L.P., DLJ
ESC II L.P., CVC European Equity Partners L.P., CVC European Equity Partners
(Jersey) L.P., MMI Products, L.L.C. and certain other Persons listed on the
signature pages thereto.
"Management Shareholder" shall have the meaning assigned to such term in
the Investors' Agreement.
"Participant" means any Employee selected by the Committee to become an
investor under the Plan (and to the extent applicable, any heirs or legal
representatives thereof).
"Permitted Transferee" shall have the meaning assigned to such term in the
Investors' Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, government or political subdivision thereof or other entity.
"Plan" means this Laminates Acquisition Co. Restricted Stock Program.
"Purchase Agreement" means an agreement to be executed by the Company and
a Participant as a condition to the acquisition of Restricted Shares under the
Plan by such Participant.
"Purchase Price" shall have the meaning set forth in Section 6(b).
"Restricted Shares" means the Shares which may be purchased by the
Participants pursuant to this Plan.
"Rule 16b-3" means Rule 16b-3 as promulgated and interpreted by the SEC
under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SEC" means the Securities and Exchange Commission or any successor
thereto.
3
<PAGE>
"Shares" means shares of Common Stock or such other securities as may be
designated by the Committee from time to time.
"Subsidiary" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Company.
SECTION 3. Administration.
(a) Authority of Committee. The Plan shall be administered by the
Committee. Subject to the terms of the Plan, applicable law and contractual
restrictions affecting the Company, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the
number of Shares to be covered by Purchase Agreements; (iii) determine the
terms and conditions of any Purchase Agreement; (iv) determine whether, to what
extent, and under what circumstances Purchase Agreements may be amended or
terminated and Restricted Shares acquired thereunder may be reacquired or
transferred; (v) interpret and administer the Plan and any Purchase Agreement
or other instrument or agreement relating to, or made under, the Plan; (vi)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (vii) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
(b) Committee Discretion Binding. Unless otherwise expressly provided in
the Plan or a Purchase Agreement, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any
Purchase Agreement shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon all Persons,
including the Company, any Subsidiary, any Participant, any shareholder and any
Employee.
(c) Intent to Distribute all Authorized Shares. The Committee shall use
its best efforts to make available for purchase under the Plan all of the
Shares authorized for issuance under Section 4 hereof. Without limiting the
preceding sentence, as far in advance as practicable of any Change of Control
or sale of substantially all the interests of the Institutional Shareholders,
the Committee shall make the available for purchase, on a pro rata basis among
all Employees then holding Restricted Shares, all remaining authorized Shares
under the Plan which have not then been purchased hereunder.
SECTION 4. Shares Available.
4
<PAGE>
(a) Shares Available. Subject to adjustment as provided in Section 4(b)
and 4(c), the number of Shares which may be issued under the Plan shall be
157,153.
(b) Increase in Shares Available Upon Issuance of Additional Common Stock.
Upon the issuance of additional equity securities by the Company, the number of
Shares available for purchase under the Plan shall be increased in accordance
with the following table:
Additional Issuances
of Equity by the Additional Shares
Company Following Available Under the
the Closing Date Plan
-------------------- -------------------
Issuance of a first 12.5% of the
additional $100 additional Common
million of equity Stock issued
Issuance of a second 8.125% of the
additional $100 additional Common
million of equity Stock issued
Any additional 5.5% of the additional
issuances thereafter Common Stock
issued
The Company intends that additional issuances of equity securities of the
Company will be in the form of Common Stock and junior preferred stock in the
same proportion as the original ratio of 1:84. If additional equity securities
of the Company are issued in classes and proportions that are not consistent
with the 1:84 ratio of Common Stock to junior preferred stock of the Company
that obtains as of the effective date of this Plan, the number of additional
Shares which will be available pursuant to this Section 4(b) will be a number
with the same economic benefit, and same cost, as set forth above assuming the
capital structure of the Company had remained unchanged from such effective
date. Notwithstanding the foregoing, future issuances of equity securities by
the Company in response to "liquidity difficulties" will not give rise to the
rights to Additional Shares described in this Section 4(b). "Liquidity
difficulties" shall not be deemed to exist if external debt financing is
available to the Company from banks and similar sources or the public capital
markets at market rates on an unsecured basis.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization,
reclassification,
5
<PAGE>
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, issuance of warrants or other
rights to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits of a Participant's investment in Shares under the Plan, then
the Committee shall make such adjustments, if any, to the number and kind of
Shares (or number and kind of other securities or property) with respect to
which Purchase Agreements have been or may thereafter be entered into hereunder
as are necessary to prevent such dilution or enlargement.
(d) Sources of Shares. Any Restricted Shares delivered pursuant to a
Purchase Agreement may consist, in whole or in part, of authorized and unissued
Shares or of treasury Shares.
SECTION 5. Eligibility. Any Employee, including any officer or
employee-director of the Company or any Subsidiary, shall be eligible to be
designated a Participant.
SECTION 6. Share Purchases.
(a) Purchase. Subject to the provisions of the Plan and contractual
restrictions affecting the Company, the Committee shall have sole and complete
authority to determine the Employees eligible to purchase Restricted Shares
hereunder, the number of Restricted Shares available for purchase by each such
Participant, the Purchase Price therefor and the conditions and limitations
applicable to such purchase, the duration of the period during which, and the
conditions under which, such Restricted Shares may be repurchased by the
Company, and the other terms and conditions of the related Purchase Agreements.
(b) Purchase Price. Unless otherwise determined by the Committee, the
price at which each Restricted Share under the Plan may be purchased (the
"Purchase Price") shall be the Fair Market Value on the date of purchase.
(c) Payment. No Restricted Shares shall be delivered hereunder until
payment in full of the Purchase Price therefor is received by the Company. Such
payment may be made in cash or its equivalent.
(d) Terms. Restricted Shares shall vest in accordance with the terms set
forth in the applicable Purchase Agreement.
SECTION 7. Termination or Suspension of Employment or Service. Restricted
Shares purchased hereunder shall be subject to such provisions concerning the
effect of termination or suspension of employment as may be
6
<PAGE>
provided by the Committee, in its discretion, in the applicable Purchase
Agreement.
SECTION 8. Change of Control. The Committee, in its sole discretion, may
provide in a Purchase Agreement for the accelerated vesting of Restricted
Shares in the event of a Change of Control, as defined herein or as otherwise
provided in a Purchase Agreement or Employment Agreement.
SECTION 9. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement for which or with which the Board
deems it necessary or desirable to qualify or comply. Notwithstanding anything
to the contrary herein, the Committee may amend the Plan in such manner as may
be necessary so as to have the Plan conform with local rules and regulations in
any jurisdiction outside the United States.
(b) Amendments to Purchase Agreements. Subject to the terms of the Plan
and applicable law, the Committee may waive any conditions or rights under,
amend any terms of, or alter, suspend, discontinue, cancel or terminate, any
Purchase Agreement, prospectively or retroactively; provided that any such
waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would adversely affect the rights of a Participant under any
Purchase Agreement theretofore granted shall not to that extent be effective
without the consent of the affected Participant.
7
<PAGE>
SECTION 10. General Provisions.
(a) No Rights to Purchase Shares. No Employee, Participant or other Person
shall have any claim to be granted the opportunity to purchase any Shares
hereunder, and there is no obligation for uniformity of treatment of Employees,
Participants, or holders or beneficiaries of Purchase Agreements. The terms and
conditions of Purchase Agreements need not be the same with respect to each
Participant.
(b) Share Certificates. Certificates issued in respect of Shares shall,
unless the Committee otherwise determines, be registered in the name of the
Participant or his or her Permitted Transferees and shall be deposited by such
Participant or Permitted Transferee, together with a stock power endorsed in
blank, with the Company. When the Participant ceases to be bound by any
transfer restrictions set forth herein, the Purchase Agreement or the
Investors' Agreement, the Company shall deliver such certificates to the
Participant upon request. Such stock certificate shall carry such appropriate
legends, and such written instructions shall be given to the Company's transfer
agent, as may be deemed necessary or advisable by counsel to the Company in
order to comply with (i) the requirements of the Securities Act of 1933, any
state securities laws or any other applicable laws and (ii) the Investors'
Agreement. Subject to the provisions of the Investors' Agreement, all
certificates for Restricted Shares or other securities of the Company or any
Subsidiary delivered under the Plan pursuant to any Purchase Agreement or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations and other requirements of the Securities and Exchange Commission or
any stock exchange upon which such Shares or other securities are then listed
and any applicable laws or rules or regulations, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(c) Execution of Purchase Agreement: Disposition of Shares. No Shares
shall be issued hereunder unless and until a Purchase Agreement shall be
executed by the Company and the Participant.
(d) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Subsidiary from adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for
the grant of options, restricted stock, Shares and other types of awards
provided for hereunder (subject to shareholder approval if such approval is
required), and such arrangements may be either generally applicable or
applicable only in specific cases.
8
<PAGE>
(e) No Right to Employment. Nothing in this Plan or any Purchase Agreement
shall be construed as giving a Participant the right to be retained in the
employ or service of the Company or any Subsidiary. Further, the Company or an
Subsidiary may at any time dismiss a Participant from employment or service,
free from any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan, a Purchase Agreement or an Employment Agreement.
(f) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Purchase Agreement shall
be determined in accordance with the laws of the State of New York.
(g) Severability. If any provision of the Plan or any Purchase Agreement
is or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Purchase Agreement, or would disqualify the
Plan or any Purchase Agreement under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
the applicable laws, or if it cannot be construed or deemed amended without, in
the determination of the Committee, materially altering the intent of the Plan
or the Purchase Agreement, such provision shall be stricken as to such
jurisdiction, Person or Purchase Agreement and the remainder of the Plan and
any such Purchase Agreement shall remain in full force and effect.
(h) Other Laws. The Committee may refuse to issue or transfer any Shares
under a Purchase Agreement if the issuance or transfer of such Shares or such
other consideration violates any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant in connection therewith shall
be promptly refunded to the relevant Participant, holder or beneficiary.
Without limiting the generality of the foregoing, no Purchase Agreement shall
be construed as an offer to sell securities of the Company, and no such offer
shall be outstanding, unless and until such offer, if made, would be in
compliance with all applicable requirements of the U.S. federal securities laws
and any other laws to which such offer, if made, would be subject.
(i) No Trust or Fund Created. Neither the Plan nor any Purchase Agreement
shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Company or any Subsidiary and a
Participant or any other Person. To the extent that any Person acquires a right
to receive payments from the Company or any Subsidiary pursuant to a Purchase
Agreement, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Subsidiary.
(j) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Purchase Agreement, and the Committee
9
<PAGE>
shall determine whether cash or other securities or other property shall be
paid or transferred in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.
(k) Transfer Restrictions. Shares acquired hereunder may not be sold,
assigned, transferred, pledged or otherwise disposed of, except as provided in
the Plan, the applicable Purchase Agreement and the Investors' Agreement.
(l) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof.
(m) Investors' Agreement. A Participant shall, as a condition precedent to
the purchase of Restricted Shares, execute an instrument agreeing to be bound
by the terms of the Investors' Agreement or, at the election of the Company, a
counterpart of the Investors' Agreement. In any event, any Restricted Shares
shall be subject to the applicable provisions in the Investors' Agreement
regarding restrictions on transfer and the Company's rights to compel sales and
repurchase Shares.
SECTION 11. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of April 30, 1998.
10
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of April 30, 1998, is made between Laminates
Acquisition Co. (the "Company"), and Vincent Langone ("Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") believes
that the services of Executive would be of great value to the Company and its
subsidiaries and is desirous of retaining his services for a number of years;
and
WHEREAS, Executive is willing to accept employment by the Company upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing premises,
the mutual agreements and covenants herein contained, the mutual benefits herein
provided, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Executive hereby agree as
follows:
ARTICLE I.
TERM OF EMPLOYMENT
Subject to termination as provided in Article VI hereof, the Company
shall employ Executive, and Executive accepts employment by the Company, on the
terms and conditions herein contained, for a period commencing as of May 1, 1998
(the "Effective Date") and ending on the third anniversary thereof, except that
the term of employment shall be automatically extended for successive periods of
one year each at the second anniversary of the Effective Date and each
subsequent such anniversary unless, prior to 30 days before any such
anniversary, either party notifies the other of its intention not to renew the
employment period (the period from the date hereof through the earlier of (i)
such third anniversary, together with any successive yearly renewal periods, or
(ii) the date of such termination, as the case may be, being hereinafter
referred to as the "Employment Period").
ARTICLE II.
DUTIES
SECTION 2.01 General Duties. During the Employment Period, Executive
shall serve as Chairman of the Board and President and Chief Executive Officer
of the Company, with the customary duties and responsibilities accorded chairmen
of the board, presidents and chief executive officers of companies of comparable
size, type and nature, and shall report to the Board. Executive shall serve as a
member of all committees of the Board except the Audit Committee; however,
Executive shall recuse himself as appropriate from considerations by the
<PAGE>
Compensation Committee. Except upon the prior written consent of the Board,
Executive will not during the Employment Period (i) accept any other employment
or (ii) engage, directly or indirectly, in any other business activity (whether
or not pursued for pecuniary advantage) that is or may be competitive with, or
that might place him in a competing position to that of the Company or any
subsidiary thereof. Nothing in this Agreement shall preclude Executive from (i)
engaging, consistent with his duties and responsibilities hereunder, in
charitable and community affairs, (ii) managing his personal investments
(including acquiring or retaining securities of other companies and entities,
provided such securities are publicly traded or such investments are passive),
(iii) continuing to serve on the boards of directors on which he presently
serves (to the extent such service is not precluded by federal or state law or
by conflict of interest by reason of his positions with the Company), or (iv)
subject to approval of the Board, serving as a member of boards of directors of
other companies or entities, or engaging in other activities that do not
otherwise conflict with the provisions of this Agreement.
SECTION 2.02 Primary Activity. During the Employment Period, Executive
shall devote substantially all of his working time and energy to the interests
and business of the Company and its subsidiaries; provided, however, that
Executive shall be excused from performing any services for the Company and its
subsidiaries hereunder during periods of temporary illness or incapacity and
during reasonable vacations. During the Employment Period, Executive shall, to
the best of his skill and ability, use his best efforts and endeavors to the
extension and promotion of the business of the Company and its subsidiaries.
ARTICLE III.
COMPENSATION
As full compensation to Executive for performance of his services
hereunder, the Company agrees to pay or provide to Executive and Executive
agrees to accept the salary and other compensation and benefits specified in
this Article and in Article IV during the Employment Period.
SECTION 3.01 Salary. The Company shall pay Executive a base salary at
the annual rate of $600,000 or at such higher rate as may be fixed by the
Compensation Committee of the Board from time to time during the Employment
Period (the "Base Salary"). Base Salary shall be payable in accordance with the
ordinary payroll practices of the Company, but not less frequently than monthly.
SECTION 3.02 Bonus. Executive shall also be entitled to an annual cash
bonus (the "Bonus") calculated as set forth in Exhibit A hereto, payable on or
before March 31st of the fiscal year immediately succeeding the fiscal year in
respect of which such Bonus was so calculated. Executive shall also be entitled
to the transaction fees specified in Exhibit A.
<PAGE>
ARTICLE IV.
EMPLOYEE BENEFITS; REIMBURSEMENTS
SECTION 4.01 Employee Benefit Plans and Programs. The Company shall
provide Executive during the Employment Period full and immediate coverage under
any employee benefit and incentive compensation programs, plans and practices
(commensurate with his position in the Company), other than an annual bonus
plan, which the Company currently makes available generally to its senior
executive officers, or which the Company, with Board approval, elects to make
available generally to its senior executive officers hereinafter, including, but
not limited to those providing (a) retirement, pension and profit-sharing
benefits, including supplemental benefits above those afforded under qualified
plans; and (b) medical, dental, hospitalization, split-dollar life insurance,
supplemental term life insurance, short and long-term disability, supplemental
disability, accidental death and dismemberment and travel accident coverage
benefits and payments to Executive and his eligible dependents. In addition, the
Company will continue to provide Executive with the split dollar life insurance,
supplemental term life insurance and supplemental disability insurance benefits
and payments currently provided to Executive by Formica Corp.
SECTION 4.02 Vacation, Fringe and Other Benefits. Executive shall be
entitled to the number of vacation days and paid holidays customarily accorded
senior executives of the Company. In addition, during the Employment Period, the
Company shall supply Executive with a reasonable automobile commensurate with
his status, and shall pay for all maintenance, repair, fuel and insurance
thereon. The Company shall also reimburse Executive, on an after-tax basis, for
(a) tax, financial planning, and related legal services; (b) all reasonable
legal expenses incurred by Executive in connection with the negotiation of this
Agreement (and any related agreements and documents); (c) the expense of a
comprehensive annual physical examination; and (d) the membership fees and
periodic dues payable to one club of Executive's choice.
SECTION 4.03 Reimbursement of Expenses. The Company shall reimburse
Executive for all reasonable expenses properly incurred by him in the
performance of his duties hereunder, including, without limitation, expenses for
travel, entertainment and similar items.
ARTICLE V.
CERTAIN COVENANTS
In order to induce the Company to enter into this Agreement, Executive
hereby acknowledges and agrees as follows:
SECTION 5.01 Proprietary Information. As used in this Agreement,
"Proprietary Information" shall mean information relating to the business and
operations of the Company that has not previously been publicly released by duly
authorized representatives of the Company and shall include Company information
encompassed in all research, drawings, designs, plans, proposals, marketing and
sales plans, financial information, costs, pricing information, customer
<PAGE>
and supplier information, trade secrets, proprietary processes, specifications,
inventions and all proprietary methods, concepts, or ideas in or reasonably
related to the business of the Company. Notwithstanding the foregoing,
Proprietary Information does not include information which is or becomes
publicly released by duly authorized representatives of the Company (except as
may be disclosed by Executive in violation of this Agreement).
Executive agrees to regard and preserve as confidential all
Proprietary Information pertaining to the Company's or any of its subsidiaries'
business that has been or may be obtained by Executive in the course of his
employment with the Company, whether he has such information in his memory or in
writing or other physical form. Executive will not, without written authority
from the Company to do so, use for his benefit or purposes, or disclose to
others, either during the Employment Period or thereafter, except as required by
the conditions of his employment hereunder, or as required in any judicial
proceeding or to his attorney, any Proprietary Information connected with the
business or development of the Company or any of its subsidiaries.
SECTION 5.02 Competition: Nonsolicitation. (a) Executive agrees that
during his employment by the Company and the two-year period commencing upon
termination of his employment in circumstances to which Section 6.01 applies
(the "Restriction Period"), Executive will not directly or indirectly own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, director or
otherwise with, or have any financial interest in, any high-pressure laminate
business or other business that (i) is significant to the Company and its
subsidiaries as a whole and (ii) was initiated during Executive's employment
hereunder, which is in competition with the business conducted by the Company or
any of its subsidiaries in any geographic area where such business is being
conducted during such Restriction Period; provided, that ownership, for personal
investment purposes only, of no more than 5% of the voting stock of any publicly
held corporation shall not constitute a violation hereof.
(b) During the Restriction Period, Executive will not, directly or
indirectly, solicit for employment by other than the Company or any of its
subsidiaries any person then employed by the Company or any of its subsidiaries.
(c) Executive acknowledges that a violation on his part of any of the
covenants contained in this Section 5.02 would cause immeasurable and
irreparable damage to the Company. Accordingly, Executive agrees that the
Company shall be entitled to injunctive relief in any court of competent
jurisdiction for any actual or threatened violation of any such covenant in
addition to any other remedies it may have. Executive agrees that in the event
that any court of competent jurisdiction shall finally hold that any provision
of this Section 5.02 is void or constitutes an unreasonable restriction against
Executive, the provisions of Section 5.02 shall not be rendered void but shall
apply to such extent as such court may determine constitutes a reasonable
restriction under the circumstances.
<PAGE>
SECTION 5.03 Corporate Opportunities. Executive agrees that during the
Employment Period he will not take any action which might divert from the
Company or any of its subsidiaries any opportunity which would be within the
scope of any of the present businesses thereof or any of the businesses thereof
engaged in, or proposed to be engaged in, during the Employment Period.
ARTICLE VI.
TERMINATION OF EMPLOYMENT
SECTION 6.01 Termination Not for Cause or For Good Reason. The Company
may terminate Executive's employment at any time, and Executive may terminate
his employment at any time. If Executive's employment is terminated by the
Company other than for Cause (as hereinafter defined), if Executive terminates
his employment for Good Reason (as hereinafter defined), or if the Company ever
notifies Executive of its intention not to renew the employment period or fails
to renew this Agreement, then Executive shall be entitled to receive:
(a) in cash, in substantially equal monthly installments payable over a 24
month period, commencing on the date of any such termination, the sum of:
(i) the unpaid portion of his Base Salary accrued to the date his
accrued vacation time (as of the date of termination) runs out,
assuming such vacation commenced on the date of termination; plus
(ii) two times the sum of Executive's then-current annual Base
Salary and the higher of (A) the Bonus payable by the Company pursuant
to Section 3.02 hereunder to Executive in respect of the Company's
fiscal year in which the Employment Period terminates, based on the
assumption that the Company attains all of its budgeted performance
goals for such fiscal year; or (B) the Bonus payable for the prior
fiscal year; provided that if the termination should occur prior to
December 31, 1998, the Bonus used in this calculation shall be equal
to Executive's then-current annual Base Salary;
provided, however, that if any such termination should occur on or after a
Change of Control (as hereinafter defined), such sum shall be payable in cash in
one lump sum within five business days after such termination;
(b) on or before the Payment Date (as hereinafter defined), in cash, all
unpaid amounts, as of the date of such termination, in respect of any Bonus for
any fiscal year of the Company ending before the fiscal year in which such
termination occurs, which would have been payable had Executive remained in
employment until the date (the "Payment Date") such Bonus would otherwise have
been paid;
<PAGE>
(c) for 36 months from the date of termination (or, if earlier, until the
date of his death), continued coverage (at the Company's expense) for Executive
and his eligible dependents under all of the Company's welfare benefit and
insurance programs, plans and practices, as specified in Section 4.01(c), or
equivalent coverage; provided that if Executive is provided with comparable
coverage by a successor employer, any such coverage by the Company shall cease;
(d) all benefits and payments to which Executive has vested rights as of
the expiration of the Employment Period under disability, insurance and other
employee benefit plans which provide for payments beyond the Employment Period;
(e) a fully vested supplemental retirement benefit, paid in one lump sum
within five business days after such termination, calculated as provided in
Exhibit B hereto, but adding two years to the number of years of "Benefit
Accrual Service" and "Years of Service" actually credited pursuant to the
Supplemental Executive Retirement Plan attached hereto as Exhibit B-1 (the
"SERP") (for the purposes of the SERP, it shall be assumed that Executive's
"Earnings" during such two additional years would have been equal to the
projected Base Salary and Bonus for such years, based on the further assumption
that the Company attained all of its budgeted performance goals for such years)
(the provisions of this Section 6.01(e) shall take precedence over conflicting
provisions of the SERP and shall survive the termination of this Agreement), and
full acceleration of vesting and exercisability of any time-based stock options
and timevested equity-based awards granted to or purchased by Executive
(including without limitation all the "Time Vesting Restricted Shares" purchased
by Executive under the Laminates Acquisition Co. Management Restricted Stock
Program); and
(f) a Gross-Up Amount (as hereinafter defined), in accordance with the
provisions of Section 6.03.
SECTION 6.02 Good Reason. For purposes of this Agreement, "Good
Reason" shall mean any of the following (without Executive's express prior
written consent):
(a) The assignment to Executive by the Company of duties materially
inconsistent with Executive's positions, duties, responsibilities, titles or
offices as set forth in Article II hereof, or any material reduction by the
Company of his duties or responsibilities or any removal of Executive from or
any failure to elect or reelect Executive to the position of President and Chief
Executive Officer and Chairman of the Board, except in connection with the
termination of Executive's employment for Cause or Permanent Disability (as
hereinafter defined), or as a result of Executive's death, or the termination of
Executive's employment by Executive other than for Good Reason;
(b) A reduction by the Company in Executive's Base Salary, Bonus
opportunity or benefits (except as provided herein), as in effect at the
commencement of employment hereunder or as the same may be increased from time
to time during the Employment Period; provided, that a reduction in the level of
benefits described in Section 4.01 (other than the last sentence thereof) which
is generally applicable to employees of the Company shall not constitute "Good
Reason";
<PAGE>
(c) The failure by the Company to obtain the specific assumption of this
Agreement by any successor or assigns of the Company or any person acquiring
substantially all of the Company's assets prior to the closing of the
acquisition or the event resulting in such succession or assignment;
(d) Failure by the Company to perform in any material respect its stated
duties under this Agreement, where such failure shall not have been remedied
within 30 days after Executive shall have notified the Company thereof;
(e) Movement of the Company's principal offices to a location more than 35
miles from Newark, New Jersey;
(f) A "Change of Control" shall occur (for this purpose, "Change of
Control" shall have the meaning set forth in the investors' agreement dated as
of April 30, 1998 among the Company, LMS I, Co., DLJ Merchant Banking Partners
II, L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ Offshore Partners II,
C.V., DLJ Diversified Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ
Millenium Partners, L.P., DLJ Millenium Partners-A, L.P., DLJMB Funding II,
Inc., UK Investment Plan 1997 Partners, DLJ EAB Partners, L.P., DLJ First ESC,
L.P., DLJ ESC II L.P., CVC European Equity Partners LP, CVC European Equity
Partners (Jersey) LP, MMI Products, L.L.C. and certain other Persons listed on
the signature pages thereto); or
(g) The Company shall cease to keep in effect the policy of directors' and
officers' liability insurance for Executive described in Section 4.03, where
such failure shall not have been remedied within 30 days after Executive shall
have notified the Company thereof.
SECTION 6.03 Excise Tax. If any amount payable to or other benefit
receivable by Executive pursuant to this Agreement, or any other agreement
referred to herein or other arrangement with the Company or any of its
subsidiaries, alone or when added to any other amount payable or paid to or
other benefit receivable or received by Executive (collectively, an "Excess
Parachute Payment"), would result in the imposition on Executive of an excise
tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), then, in addition to any other benefits to which Executive is entitled
under this Agreement, Executive shall be paid by the Company an amount (the
"Gross-Up Amount") in cash equal to the amount necessary to put Executive in the
same after-tax position as if no excise taxes, income taxes (with respect to the
Gross-Up Amount), interest and penalties had been imposed with respect to the
Excess Parachute Payment and the Gross-Up Amount. Whether a payment or benefit
results in the imposition of an excise tax and the amount of any payment under
this section shall be determined by a nationally recognized certified public
accounting firm designated by the Company. All fees and expenses of such
accounting firm shall be paid by the Company.
Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Amount. Such notification shall be given as soon as
practicable (but not later than 15 business
<PAGE>
days after Executive is informed in writing of such claim) and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the expiration
of the 30-day period following the date on which Executive gives such notice to
the Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies Executive in writing
prior to the expiration of such period that it desires to contest such claim,
Executive shall:
(a) provide the Company with any information reasonably requested by
it relating to such claim;
(b) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect so such claim by an attorney reasonably selected by the
Company;
(c) cooperate with the Company in good faith in order to effectively
contest such claim; and
(d ) permit the Company to participate in any proceedings relating to
such claim;
provided that the Company shall pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest.
SECTION 6.04 Permanent Disability. If, as a result of Executive's
incapacity due to physical or mental illness, Executive shall have been absent
from his duties with the Company on a full-time basis for six consecutive months
(either such situation, herein referred to as "Permanent Disability") during the
Employment Period, then Executive's employment shall terminate on the giving of
notice by the Company, and the compensation to which Executive is entitled
pursuant to Section 3.01 shall be paid up, in cash, through the last day of the
month in which the notice is given, within five business days of the date of
such notice. In addition, Executive shall be entitled to receive:
(a) on or before the Payment Date (as hereinafter defined), in cash, all
unpaid amounts, as of the date of such termination, in respect of any Bonus for
any fiscal year of the Company ending before the fiscal year in which such
termination occurs, which would have been payable had Executive remained in
employment until the date (the "Payment Date") such Bonus would otherwise have
been paid;
(b) for 18 months from the date of termination (or, if earlier, until the
date of his death), continued coverage (at the Company's expense) under the
Company's welfare benefit and insurance programs, plans and practices, as
provided in Section 4.01(c), or equivalent coverage; provided that if Executive
is provided with comparable coverage by a successor employer, any such coverage
by the Company shall cease;
<PAGE>
(c) all benefits and payments to which Executive has vested rights as
of the expiration of the Employment Period under disability, insurance and other
employee benefit plans which provide for payments beyond the Employment Period;
(d) a proportionate amount of Executive's then-current Base Salary to
compensate Executive for any accrued but unpaid vacation time as of the date of
the notice of termination, payable, in cash, within five business days of such
notice; and
(e) a fully vested supplemental retirement benefit, paid in one lump
sum within five business days after such termination, calculated as provided in
Exhibit B hereto, but adding two years to the number of years of "Benefit
Accrual Service" and "Years of Service" actually credited pursuant to the
Supplemental Executive Retirement Plan attached hereto as Exhibit B-1 (the
"SERP") (for the purposes of the SERP, it shall be assumed that Executive's
"Earnings" during such two additional years would have been equal to the
projected Base Salary and Bonus for such years, based on the further assumption
that the Company attained all of its budgeted performance goals for such years)
(the provisions of this Section 6.04(e) shall take precedence over conflicting
provisions of the SERP and shall survive the termination of this Agreement), and
full acceleration of vesting and exercisability of any time-based stock options
and timevested equity-based awards granted to or purchased by Executive
(including without limitation all the "Time Vesting Restricted Shares" purchased
by Executive under the Laminates Acquisition Co. Management Restricted Stock
Program).
SECTION 6.05 Death. In the event of Executive's death while employed
hereunder, the Employment Period shall thereupon automatically terminate and
Executive's estate or designated beneficiaries shall receive (i) any death
benefits provided under the Company's employee benefit programs, in accordance
with their terms; (ii) on or before the Payment Date (as hereinafter defined),
in cash, all unpaid amounts, as of the date of such termination, in respect of
any Bonus for any fiscal year of the Company ending before the fiscal year in
which such termination occurs, which would have been payable had Executive
remained in employment until the date (the "Payment Date") such Bonus would
otherwise have been paid; and (iii) full acceleration of vesting and
exercisability of any time-based stock options and timevested equity-based
awards granted to or purchased by Executive (including without limitation all
the "Time Vesting Restricted Shares" purchased by Executive under the Laminates
Acquisition Co. Management Restricted Stock Program).
SECTION 6.06 Voluntary Resignation; Discharge for Cause. If Executive
resigns voluntarily, other than for Good Reason or Permanent Disability, or the
Company terminates the employment of Executive at any time for Cause, the
Company's obligations under this Agreement to make any further payments to
Executive shall thereupon, to the extent permitted by law, cease and terminate
except with respect to all unpaid Bonus amounts, accrued as of the fiscal year
ending before the fiscal year in which such termination occurs, which would have
been payable had Executive remained in employment until the date such Bonus
would otherwise have been paid. For purposes of this Agreement, the term "Cause"
shall mean (i) Executive's conviction by a court of competent jurisdiction or
entry of a plea of nolo contendere
<PAGE>
for an act on Executive's part constituting a felony, which conviction or plea
causes damage to the reputation or financial position of the Company or which
undermines Executive's authority as Chairman, President and Chief Executive
Officer of the Company or (ii) a willful and gross breach of a substantial and
material obligation of Executive under this Agreement; provided, that no action
shall give rise to Cause if undertaken in the good faith belief that such action
was in the best interest of the Company or its subsidiaries. Any termination of
Executive's employment by the Company for any reason other than Cause (including
any breach of duty by Executive not specified above), or for no reason, shall be
deemed to be a termination without Cause for all purposes of this Agreement,
unless Executive's termination arises from death or Permanent Disability.
ARTICLE VII.
NO MITIGATION OF DAMAGES; EXPENSES
Executive shall not be required to mitigate damages or the amount of
any payments provided for under this Agreement by seeking other employment or
otherwise. Except as provided in Sections 6.01(b) or 6.04(a), no amounts paid to
or earned by Executive following his termination of employment shall reduce or
be set off against any amounts payable to Executive under this Agreement, nor
will any payments otherwise due to Executive hereunder be subject to offset in
respect of any claims that the Company may have against Executive. The Company
agrees to pay all reasonable out-of-pocket costs and expenses of Executive
(including attorney's fees and disbursements) as incurred by Executive in
connection with any actions taken in good faith in connection with the
enforcement of Executive's rights hereunder or the interpretation of any
provision(s) of this Agreement.
ARTICLE VIII.
ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
heirs and representatives of Executive and to any person who succeeds to all or
substantially all of the business of the Company, but neither this Agreement nor
any rights hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or the Company.
<PAGE>
ARTICLE IX.
NOTICES
All notices, requests, demands and other communications hereunder must
be in writing and shall be deemed to have been given if delivered by hand or
mailed by first class, registered mail, return receipt requested, postage and
registry fees prepaid and addressed as follows:
(a) If to the Company: 277 Park Avenue
New York, NY 10172
Fax: (212) 892-7551
with a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: George R. Bason, Jr.
Fax: (212) 450-4800
(b) If to Executive: 62 Philhower Road
Lebanon, New Jersey 08833
with a copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: David Chapnick
Fax: (212) 455-2502
Addresses may be changed by notice in writing signed by the addressee.
ARTICLE X.
MISCELLANEOUS
SECTION 10.01 Entire Agreement. This Agreement supersedes any prior
agreements and embodies the entire understanding between the parties hereto
respecting the subject matter hereof and no change, alteration or modification
hereof may be made except in a subsequent writing signed by both parties hereto.
SECTION 10.02 Headings. The headings in this Agreement are for
convenience of reference only and shall not be considered as part of this
Agreement or to limit or otherwise affect the meaning hereof.
<PAGE>
SECTION 10.03 Severability. If any provision of this Agreement shall
be held invalid, illegal or unenforceable in whole or in part, neither the
validity of the remaining part of such provision nor the validity of any other
provision of this Agreement shall in any way be affected thereby.
SECTION 10.04 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of New Jersey
without regard to principles of conflicts of laws.
SECTION 10.05 Additional Assurances. Each party shall execute,
acknowledge and deliver such additional documents, writing or assurances as the
other may periodically require so as to give full force and effect to the terms
and provisions of this Agreement.
SECTION 10.06 Withholding. The Company will be entitled to withhold
from any payment hereunder the amount of withholding required by law.
SECTION 10.07 Liability Insurance and Indemnification. The Company
shall keep in effect during the Employment Period a standard policy of
directors' and officers' liability insurance for officers and directors of the
Company, to the extent available, at such reasonable levels of coverage as are
agreed to by Executive and the Board from time to time, but not less than the
levels in effect on the business day immediately preceding the date on which
Executive most recently, but prior to the Effective Date, terminated employment
with Formica Corp. In addition, the Company shall indemnify Executive for any
amounts Executive must pay (which are not covered by insurance) which in any way
relate to actions taken or omitted in his capacity as an officer and/or director
of the Company and/or its subsidiaries, and shall provide expense advances to
Executive in connection therewith to the maximum extent permitted by law. This
obligation shall survive this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LAMINATES ACQUISITION CO.
By:
------------------------------------
David Schneider, Chief Financial
Officer
Title:
---------------------------------
By:
------------------------------------
VINCENT LANGONE
<PAGE>
Exhibit A
Bonus Formulation
A) Annual Cash Bonus Plan:
Upon completion of the acquisition of the Company and annually prior to
the commencement of the Company's fiscal year, the Board and Executive
will agree to the annual operating plan (the "Plan"). After the
completion of the fiscal year of the Plan and based upon audited
financial results, Executive will be paid a cash bonus based on the
Company and its subsidiaries achieving levels of earnings before
interest, taxes, depreciation and amortization ("EBITDA") as follows:
Bonus Matrix
------------
of Plan EBITDA 80% 100% 120% 140%
of Annual Base Salary 50% 100% 150% 200%
Below 80% of Plan EBITDA, no cash bonuses will be paid. Above 140% of
Plan EBITDA, the Compensation Committee of the Board may recommend a
special bonus for extraordinary performance. Performance between the
key benchmarks above will be calculated on a pro rata basis (i.e. 90%
of Plan EBITDA results in a bonus of 75% of Annual Base Salary). For
the purpose of calculating actual EBITDA for cash bonus purposes,
salaries will be charged against EBITDA, bonuses will not be charged to
EBITDA (i.e. charged below the EBITDA line). Equitable adjustments to
the Plan, agreed to between the Board and Executive, shall be made to
reflect the impact of any subsequent divestitures or acquisitions which
are not already incorporated in the Plan.
B) Transaction Fees:
In the event transaction fees are realized on acquisitions and/or
divestitures, Executive will be paid a transaction fee equivalent to
25% of any advisory fee paid to the combination of DLJMBII, CVC Capital
Partners, Citicorp Venture Capital Ltd. and any of their respective
affiliates; provided, Executive shall receive a $500,000 fee in respect
of the transactions completed in connection with the execution of this
Agreement. The transaction fee paid to Executive can be shared by other
members of management at the discretion of Executive.
<PAGE>
Exhibit B
SERP Payment Calculation
The steps to be followed in calculating the lump sum payable are:
a) Calculate the Monthly Benefit Payable pursuant to the
Supplemental Executive Retirement Plan attached hereto as
Exhibit B-1, without reducing the Monthly Benefit Payable for
any payments made pursuant to any Company qualified pension
plan;
b) Determine the present value of a lifetime annuity of the
Monthly Benefit Payable, using a 6.5% interest rate, and the
1971 Towers Perrin Mortality Table, set back 1 year; and
c) Subtract from the sum calculated in b) the present value of
that portion of all payments to be made pursuant to Company
qualified pension plans which constitutes the benefit accrual
attributable to Executive's employment with the Company after
1997.
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of April 30, 1998, is made between Laminates
Acquisition Co. (the "Company"), and David Schneider ("Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") believes
that the services of Executive would be of great value to the Company and its
subsidiaries and is desirous of retaining his services for a number of years;
and
WHEREAS, Executive is willing to accept employment by the Company upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing premises,
the mutual agreements and covenants herein contained, the mutual benefits herein
provided, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Executive hereby agree as
follows:
ARTICLE I.
TERM OF EMPLOYMENT
Subject to termination as provided in Article VI hereof, the Company
shall employ Executive, and Executive accepts employment by the Company, on the
terms and conditions herein contained, for a period commencing as of May 1, 1998
(the "Effective Date") and ending on the third anniversary thereof, except that
the term of employment shall be automatically extended for successive periods of
one year each at the second anniversary of the Effective Date and each
subsequent such anniversary unless, prior to 30 days before any such
anniversary, either party notifies the other of its intention not to renew the
employment period (the period from the date hereof through the earlier of (i)
such third anniversary, together with any successive yearly renewal periods, or
(ii) the date of such termination, as the case may be, being hereinafter
referred to as the "Employment Period").
ARTICLE II.
DUTIES
SECTION 2.01 General Duties. During the Employment Period, Executive
shall serve as Vice President and Chief Financial Officer of the Company, with
the customary duties and responsibilities accorded vice presidents and chief
financial officers of companies of comparable size, type and nature, and shall
report to the President of the Company. Except upon the prior written consent of
the Board, Executive will not during the Employment Period (i) accept any other
employment or (ii) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage) that is or may be
competitive with, or that
<PAGE>
might place him in a competing position to that of the Company or any subsidiary
thereof. Nothing in this Agreement shall preclude Executive from (i) engaging,
consistent with his duties and responsibilities hereunder, in charitable and
community affairs, (ii) managing his personal investments (including acquiring
or retaining securities of other companies and entities, provided such
securities are publicly traded or such investments are passive), (iii)
continuing to serve on the boards of directors on which he presently serves (to
the extent such service is not precluded by federal or state law or by conflict
of interest by reason of his positions with the Company), or (iv) subject to
approval of the Board, serving as a member of boards of directors of other
companies or entities, or engaging in other activities that do not otherwise
conflict with the provisions of this Agreement.
SECTION 2.02 Primary Activity. During the Employment Period, Executive
shall devote substantially all of his working time and energy to the interests
and business of the Company and its subsidiaries; provided, however, that
Executive shall be excused from performing any services for the Company and its
subsidiaries hereunder during periods of temporary illness or incapacity and
during reasonable vacations. During the Employment Period, Executive shall, to
the best of his skill and ability, use his best efforts and endeavors to the
extension and promotion of the business of the Company and its subsidiaries.
ARTICLE III.
COMPENSATION
As full compensation to Executive for performance of his services
hereunder, the Company agrees to pay or provide to Executive and Executive
agrees to accept the salary and other compensation and benefits specified in
this Article and in Article IV during the Employment Period.
SECTION 3.01 Salary. The Company shall pay Executive a base salary at
the annual rate of $300,000 or at such higher rate as may be fixed by the
Compensation Committee of the Board from time to time during the Employment
Period (the "Base Salary"). Base Salary shall be payable in accordance with the
ordinary payroll practices of the Company, but not less frequently than monthly.
SECTION 3.02 Bonus. Executive shall also be entitled to an annual cash
bonus (the "Bonus") calculated as set forth in Exhibit A hereto, payable on or
before March 31st of the fiscal year immediately succeeding the fiscal year in
respect of which such Bonus was so calculated.
<PAGE>
ARTICLE IV.
EMPLOYEE BENEFITS; REIMBURSEMENTS
SECTION 4.01 Employee Benefit Plans and Programs. The Company shall
provide Executive during the Employment Period full and immediate coverage under
any employee benefit and incentive compensation programs, plans and practices
(commensurate with his position in the Company), other than an annual bonus
plan, which the Company currently makes available generally to its senior
executive officers, or which the Company, with Board approval, elects to make
available generally to its senior executive officers hereinafter, including, but
not limited to those providing (a) retirement, pension and profit-sharing
benefits, including supplemental benefits above those afforded under qualified
plans; and (b) medical, dental, hospitalization, split-dollar life insurance,
supplemental term life insurance, short and long-term disability, supplemental
disability, accidental death and dismemberment and travel accident coverage
benefits and payments to Executive and his eligible dependents. In addition, the
Company will continue to provide Executive with the split dollar life insurance,
supplemental term life insurance and supplemental disability insurance benefits
and payments currently provided to Executive by Formica Corp.
SECTION 4.02 Vacation, Fringe and Other Benefits. Executive shall be
entitled to the number of vacation days and paid holidays customarily accorded
senior executives of the Company. In addition, during the Employment Period, the
Company shall supply Executive with a reasonable automobile commensurate with
his status, and shall pay for all maintenance, repair, fuel and insurance
thereon. The Company shall also reimburse Executive, on an after-tax basis, for
(a) tax, financial planning, and related legal services; (b) all reasonable
legal expenses incurred by Executive in connection with the negotiation of this
Agreement (and any related agreements and documents); (c) the expense of a
comprehensive annual physical examination; and (d) the membership fees and
periodic dues payable to one club of Executive's choice.
SECTION 4.03 Reimbursement of Expenses. The Company shall reimburse
Executive for all reasonable expenses properly incurred by him in the
performance of his duties hereunder, including, without limitation, expenses for
travel, entertainment and similar items.
ARTICLE V.
CERTAIN COVENANTS
In order to induce the Company to enter into this Agreement, Executive
hereby acknowledges and agrees as follows:
SECTION 5.01 Proprietary Information. As used in this Agreement,
"Proprietary Information" shall mean information relating to the business and
operations of the Company that has not previously been publicly released by duly
authorized representatives of the Company and shall include Company information
encompassed in all research, drawings, designs, plans, proposals, marketing and
sales plans, financial information, costs, pricing information, customer and
supplier information, trade secrets, proprietary processes, specifications,
inventions and all proprietary methods, concepts, or ideas in or reasonably
related to the business of the Company.
<PAGE>
Notwithstanding the foregoing, Proprietary Information does not include
information which is or becomes publicly released by duly authorized
representatives of the Company (except as may be disclosed by Executive in
violation of this Agreement).
Executive agrees to regard and preserve as confidential all
Proprietary Information pertaining to the Company's or any of its subsidiaries'
business that has been or may be obtained by Executive in the course of his
employment with the Company, whether he has such information in his memory or in
writing or other physical form. Executive will not, without written authority
from the Company to do so, use for his benefit or purposes, or disclose to
others, either during the Employment Period or thereafter, except as required by
the conditions of his employment hereunder, or as required in any judicial
proceeding or to his attorney, any Proprietary Information connected with the
business or development of the Company or any of its subsidiaries.
SECTION 5.02 Competition: Nonsolicitation. (a) Executive agrees that
during his employment by the Company and the two-year period commencing upon
termination of his employment in circumstances to which Section 6.01 applies
(the "Restriction Period"), Executive will not directly or indirectly own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, director or
otherwise with, or have any financial interest in, any high-pressure laminate
business or other business that (i) is significant to the Company and its
subsidiaries as a whole and (ii) was initiated during Executive's employment
hereunder, which is in competition with the business conducted by the Company or
any of its subsidiaries in any geographic area where such business is being
conducted during such Restriction Period; provided, that ownership, for personal
investment purposes only, of no more than 5% of the voting stock of any publicly
held corporation shall not constitute a violation hereof.
(b) During the Restriction Period, Executive will not, directly or
indirectly, solicit for employment by other than the Company or any of its
subsidiaries any person then employed by the Company or any of its subsidiaries.
(c) Executive acknowledges that a violation on his part of any of the
covenants contained in this Section 5.02 would cause immeasurable and
irreparable damage to the Company. Accordingly, Executive agrees that the
Company shall be entitled to injunctive relief in any court of competent
jurisdiction for any actual or threatened violation of any such covenant in
addition to any other remedies it may have. Executive agrees that in the event
that any court of competent jurisdiction shall finally hold that any provision
of this Section 5.02 is void or constitutes an unreasonable restriction against
Executive, the provisions of Section 5.02 shall not be rendered void but shall
apply to such extent as such court may determine constitutes a reasonable
restriction under the circumstances.
SECTION 5.03 Corporate Opportunities. Executive agrees that during the
Employment Period he will not take any action which might divert from the
Company or any of its subsidiaries any opportunity which would be within the
scope of any of the present businesses thereof or any of the businesses thereof
engaged in, or proposed to be engaged in, during the Employment Period.
<PAGE>
ARTICLE VI.
TERMINATION OF EMPLOYMENT
SECTION 6.01 Termination Not for Cause or For Good Reason. The Company
may terminate Executive's employment at any time, and Executive may terminate
his employment at any time. If Executive's employment is terminated by the
Company other than for Cause (as hereinafter defined), if Executive terminates
his employment for Good Reason (as hereinafter defined), or if the Company ever
notifies Executive of its intention not to renew the employment period or fails
to renew this Agreement, then Executive shall be entitled to receive:
(a) in cash, in substantially equal monthly installments payable over
a 24 month period, commencing on the date of any such termination, the sum of:
(i) the unpaid portion of his Base Salary accrued to the date his
accrued vacation time (as of the date of termination) runs out,
assuming such vacation commenced on the date of termination; plus
(ii) two times the sum of Executive's then-current annual Base
Salary and the higher of (A) the Bonus payable by the Company pursuant
to Section 3.02 hereunder to Executive in respect of the Company's
fiscal year in which the Employment Period terminates, based on the
assumption that the Company attains all of its budgeted performance
goals for such fiscal year; or (B) the Bonus payable for the prior
fiscal year; provided that if the termination should occur prior to
December 31, 1998, the Bonus used in this calculation shall be equal
to Executive's then-current annual Base Salary;
provided, however, that if any such termination should occur on or after a
Change of Control (as hereinafter defined), such sum shall be payable in cash in
one lump sum within five business days after such termination;
(b) on or before the Payment Date (as hereinafter defined), in cash,
all unpaid amounts, as of the date of such termination, in respect of any Bonus
for any fiscal year of the Company ending before the fiscal year in which such
termination occurs, which would have been payable had Executive remained in
employment until the date (the "Payment Date") such Bonus would otherwise have
been paid;
(c) for 36 months from the date of termination (or, if earlier, until
the date of his death), continued coverage (at the Company's expense) for
Executive and his eligible dependents under all of the Company's welfare benefit
and insurance programs, plans and practices, as specified in Section 4.01(c), or
equivalent coverage; provided that if Executive is provided with comparable
coverage by a successor employer, any such coverage by the Company shall cease;
(d) all benefits and payments to which Executive has vested rights as
of the expiration of the Employment Period under disability, insurance and other
employee benefit plans which provide for payments beyond the Employment Period;
<PAGE>
(e) a fully vested supplemental retirement benefit, paid in one lump
sum within five business days after such termination, calculated as provided in
Exhibit B hereto, but adding two years to the number of years of "Benefit
Accrual Service" and "Years of Service" actually credited pursuant to the
Supplemental Executive Retirement Plan attached hereto as Exhibit B-1 (the
"SERP") (for the purposes of the SERP, it shall be assumed that Executive's
"Earnings" during such two additional years would have been equal to the
projected Base Salary and Bonus for such years, based on the further assumption
that the Company attained all of its budgeted performance goals for such years)
(the provisions of this Section 6.01(e) shall take precedence over conflicting
provisions of the SERP and shall survive the termination of this Agreement), and
full acceleration of vesting and exercisability of any time-based stock options
and time-vested equity-based awards granted to or purchased by Executive
(including without limitation all the "Time Vesting Restricted Shares" purchased
by Executive under the Laminates Acquisition Co. Management Restricted Stock
Program); and
(f) a Gross-Up Amount (as hereinafter defined), in accordance with the
provisions of Section 6.03.
SECTION 6.02 Good Reason. For purposes of this Agreement, "Good
Reason" shall mean any of the following (without Executive's express prior
written consent):
(a) The assignment to Executive by the Company of duties
materially inconsistent with Executive's positions, duties,
responsibilities, titles or offices as set forth in Article II
hereof, or any material reduction by the Company of his duties
or responsibilities or any removal of Executive from or any
failure to elect or reelect Executive to the position of
President and Chief Executive Officer and Chairman of the
Board, except in connection with the termination of
Executive's employment for Cause or Permanent Disability (as
hereinafter defined), or as a result of Executive's death, or
the termination of Executive's employment by Executive other
than for Good Reason;
(b) A reduction by the Company in Executive's Base Salary,
Bonus opportunity or benefits (except as provided herein), as
in effect at the commencement of employment hereunder or as
the same may be increased from time to time during the
Employment Period; provided, that a reduction in the level of
benefits described in Section 4.01 (other than the last
sentence thereof) which is generally applicable to employees
of the Company shall not constitute "Good Reason";
(c) The failure by the Company to obtain the specific
assumption of this Agreement by any successor or assigns of
the Company or any person acquiring substantially all of the
Company's assets prior to the closing of the acquisition or
the event resulting in such succession or assignment;
(d) Failure by the Company to perform in any material respect
its stated duties under this Agreement, where such failure
shall not have been remedied within 30 days after Executive
shall have notified the Company thereof;
<PAGE>
(e) Movement of the Company's principal offices to a location
more than 35 miles from Newark, New Jersey;
(f) A "Change of Control" shall occur (for this purpose,
"Change of Control" shall have the meaning set forth in the
investors' agreement dated as of April 30, 1998 among the
Company, LMS I, Co., DLJ Merchant Banking Partners II, L.P.,
DLJ Merchant Banking Partners II-A, L.P., DLJ Offshore
Partners II, C.V., DLJ Diversified Partners, L.P., DLJ
Diversified Partners-A, L.P., DLJ Millenium Partners, L.P.,
DLJ Millenium Partners-A, L.P., DLJMB Funding II, Inc., UK
Investment Plan 1997 Partners, DLJ EAB Partners, L.P., DLJ
First ESC, L.P., DLJ ESC II L.P., CVC European Equity Partners
LP, CVC European Equity Partners (Jersey) LP, MMI Products,
L.L.C. and certain other Persons listed on the signature pages
thereto); or
(g) The Company shall cease to keep in effect the policy of
directors' and officers' liability insurance for Executive
described in Section 4.03, where such failure shall not have
been remedied within 30 days after Executive shall have
notified the Company thereof.
SECTION 6.03 Excise Tax. If any amount payable to or other benefit
receivable by Executive pursuant to this Agreement, or any other agreement
referred to herein or other arrangement with the Company or any of its
subsidiaries, alone or when added to any other amount payable or paid to or
other benefit receivable or received by Executive (collectively, an "Excess
Parachute Payment"), would result in the imposition on Executive of an excise
tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), then, in addition to any other benefits to which Executive is entitled
under this Agreement, Executive shall be paid by the Company an amount (the
"Gross-Up Amount") in cash equal to the amount necessary to put Executive in the
same after-tax position as if no excise taxes, income taxes (with respect to the
Gross-Up Amount), interest and penalties had been imposed with respect to the
Excess Parachute Payment and the Gross-Up Amount. Whether a payment or benefit
results in the imposition of an excise tax and the amount of any payment under
this section shall be determined by a nationally recognized certified public
accounting firm designated by the Company. All fees and expenses of such
accounting firm shall be paid by the Company.
Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Amount. Such notification shall be given as soon as
practicable (but not later than 15 business days after Executive is informed in
writing of such claim) and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. Executive shall not
pay such claim prior to the expiration of the 30-day period following the date
on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall:
(a) provide the Company with any information reasonably requested by
it relating to such claim;
<PAGE>
(b) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect so such claim by an attorney reasonably selected by the
Company;
(c) cooperate with the Company in good faith in order to effectively
contest such claim; and
(d ) permit the Company to participate in any proceedings relating to
such claim;
provided that the Company shall pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest.
SECTION 6.04 Permanent Disability. If, as a result of Executive's
incapacity due to physical or mental illness, Executive shall have been absent
from his duties with the Company on a full-time basis for six consecutive months
(either such situation, herein referred to as "Permanent Disability") during the
Employment Period, then Executive's employment shall terminate on the giving of
notice by the Company, and the compensation to which Executive is entitled
pursuant to Section 3.01 shall be paid up, in cash, through the last day of the
month in which the notice is given, within five business days of the date of
such notice. In addition, Executive shall be entitled to receive:
(a) on or before the Payment Date (as hereinafter defined), in cash, all
unpaid amounts, as of the date of such termination, in respect of any Bonus for
any fiscal year of the Company ending before the fiscal year in which such
termination occurs, which would have been payable had Executive remained in
employment until the date (the "Payment Date") such Bonus would otherwise have
been paid;
(b) for 18 months from the date of termination (or, if earlier, until the
date of his death), continued coverage (at the Company's expense) under the
Company's welfare benefit and insurance programs, plans and practices, as
provided in Section 4.01(c), or equivalent coverage; provided that if Executive
is provided with comparable coverage by a successor employer, any such coverage
by the Company shall cease;
(c) all benefits and payments to which Executive has vested rights as of
the expiration of the Employment Period under disability, insurance and other
employee benefit plans which provide for payments beyond the Employment Period;
(d) a proportionate amount of Executive's then-current Base Salary to
compensate Executive for any accrued but unpaid vacation time as of the date of
the notice of termination, payable, in cash, within five business days of such
notice; and
(e) a fully vested supplemental retirement benefit, paid in one lump sum
within five business days after such termination, calculated as provided in
Exhibit B hereto, but adding two years to the number of years of "Benefit
Accrual Service" and "Years of Service" actually
<PAGE>
credited pursuant to the Supplemental Executive Retirement Plan attached hereto
as Exhibit B-1 (the "SERP") (for the purposes of the SERP, it shall be assumed
that Executive's "Earnings" during such two additional years would have been
equal to the projected Base Salary and Bonus for such years, based on the
further assumption that the Company attained all of its budgeted performance
goals for such years) (the provisions of this Section 6.04(e) shall take
precedence over conflicting provisions of the SERP and shall survive the
termination of this Agreement), and full acceleration of vesting and
exercisability of any time-based stock options and time-vested equity-based
awards granted to or purchased by Executive (including without limitation all
the "Time Vesting Restricted Shares" purchased by Executive under the Laminates
Acquisition Co. Management Restricted Stock Program).
SECTION 6.05 Death. In the event of Executive's death while employed
hereunder, the Employment Period shall thereupon automatically terminate and
Executive's estate or designated beneficiaries shall receive (i) any death
benefits provided under the Company's employee benefit programs, in accordance
with their terms; (ii) on or before the Payment Date (as hereinafter defined),
in cash, all unpaid amounts, as of the date of such termination, in respect of
any Bonus for any fiscal year of the Company ending before the fiscal year in
which such termination occurs, which would have been payable had Executive
remained in employment until the date (the "Payment Date") such Bonus would
otherwise have been paid; and (iii) full acceleration of vesting and
exercisability of any time-based stock options and time-vested equity-based
awards granted to or purchased by Executive (including without limitation all
the "Time Vesting Restricted Shares" purchased by Executive under the Laminates
Acquisition Co. Management Restricted Stock Program).
SECTION 6.06 Voluntary Resignation; Discharge for Cause. If Executive
resigns voluntarily, other than for Good Reason or Permanent Disability, or the
Company terminates the employment of Executive at any time for Cause, the
Company's obligations under this Agreement to make any further payments to
Executive shall thereupon, to the extent permitted by law, cease and terminate
except with respect to all unpaid Bonus amounts, accrued as of the fiscal year
ending before the fiscal year in which such termination occurs, which would have
been payable had Executive remained in employment until the date such Bonus
would otherwise have been paid. For purposes of this Agreement, the term "Cause"
shall mean (i) Executive's conviction by a court of competent jurisdiction or
entry of a plea of nolo contendere for an act on Executive's part constituting a
felony, which conviction or plea causes damage to the reputation or financial
position of the Company or which undermines Executive's authority as Vice
President and Chief Financial Officer of the Company or (ii) a willful and gross
breach of a substantial and material obligation of Executive under this
Agreement; provided, that no action shall give rise to Cause if undertaken in
the good faith belief that such action was in the best interest of the Company
or its subsidiaries. Any termination of Executive's employment by the Company
for any reason other than Cause (including any breach of duty by Executive not
specified above), or for no reason, shall be deemed to be a termination without
Cause for all purposes of this Agreement, unless Executive's termination arises
from death or Permanent Disability.
<PAGE>
ARTICLE VII.
NO MITIGATION OF DAMAGES; EXPENSES
Executive shall not be required to mitigate damages or the amount of
any payments provided for under this Agreement by seeking other employment or
otherwise. Except as provided in Sections 6.01(b) or 6.04(a), no amounts paid to
or earned by Executive following his termination of employment shall reduce or
be set off against any amounts payable to Executive under this Agreement, nor
will any payments otherwise due to Executive hereunder be subject to offset in
respect of any claims that the Company may have against Executive. The Company
agrees to pay all reasonable out-of-pocket costs and expenses of Executive
(including attorney's fees and disbursements) as incurred by Executive in
connection with any actions taken in good faith in connection with the
enforcement of Executive's rights hereunder or the interpretation of any
provision(s) of this Agreement.
ARTICLE VIII.
ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
heirs and representatives of Executive and to any person who succeeds to all or
substantially all of the business of the Company, but neither this Agreement nor
any rights hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or the Company.
<PAGE>
ARTICLE IX.
NOTICES
All notices, requests, demands and other communications hereunder must
be in writing and shall be deemed to have been given if delivered by hand or
mailed by first class, registered mail, return receipt requested, postage and
registry fees prepaid and addressed as follows:
(a) If to the Company: 277 Park Avenue
New York, NY 10172
Fax: (212) 892-7551
with a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: George R. Bason, Jr.
Fax: (212) 450-4800
(b) If to Executive: 71 Woodmont Drive
Woodcliff Lake, New Jersey 07675
with a copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: David Chapnick
Fax: (212) 455-2502
Addresses may be changed by notice in writing signed by the addressee.
ARTICLE X.
MISCELLANEOUS
SECTION 10.01 Entire Agreement. This Agreement supersedes any prior
agreements and embodies the entire understanding between the parties hereto
respecting the subject matter hereof and no change, alteration or modification
hereof may be made except in a subsequent writing signed by both parties hereto.
SECTION 10.02 Headings. The headings in this Agreement are for
convenience of reference only and shall not be considered as part of this
Agreement or to limit or otherwise affect the meaning hereof.
SECTION 10.03 Severability. If any provision of this Agreement shall
be held invalid, illegal or unenforceable in whole or in part, neither the
validity of the remaining part of such provision nor the validity of any other
provision of this Agreement shall in any way be affected thereby.
<PAGE>
SECTION 10.04 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of New Jersey
without regard to principles of conflicts of laws.
SECTION 10.05 Additional Assurances. Each party shall execute,
acknowledge and deliver such additional documents, writing or assurances as the
other may periodically require so as to give full force and effect to the terms
and provisions of this Agreement.
SECTION 10.06 Withholding. The Company will be entitled to withhold
from any payment hereunder the amount of withholding required by law.
SECTION 10.07 Liability Insurance and Indemnification. The Company
shall keep in effect during the Employment Period a standard policy of
directors' and officers' liability insurance for officers and directors of the
Company, to the extent available, at such reasonable levels of coverage as are
agreed to by Executive and the Board from time to time, but not less than the
levels in effect on the business day immediately preceding the date on which
Executive most recently, but prior to the Effective Date, terminated employment
with Formica Corp. In addition, the Company shall indemnify Executive for any
amounts Executive must pay (which are not covered by insurance) which in any way
relate to actions taken or omitted in his capacity as an officer and/or director
of the Company and/or its subsidiaries, and shall provide expense advances to
Executive in connection therewith to the maximum extent permitted by law. This
obligation shall survive this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LAMINATES ACQUISITION CO.
By:
------------------------------------
Vincent Langone, President and Chief
Executive Officer
Title:
---------------------------------
By:
------------------------------------
DAVID SCHNEIDER
<PAGE>
Exhibit A
Annual Cash Bonus Formulation
Upon completion of the acquisition of the Company and annually prior to
the commencement of the Company's fiscal year, the Board and Executive
will agree to the annual operating plan (the "Plan"). After the
completion of the fiscal year of the Plan and based upon audited
financial results, Executive will be paid a cash bonus based on the
Company and its subsidiaries achieving levels of earnings before
interest, taxes, depreciation and amortization ("EBITDA") as follows:
Bonus Matrix
------------
of Plan EBITDA 80% 100% 120% 140%
of Annual Base Salary 50% 100% 150% 200%
Below 80% of Plan EBITDA, no cash bonuses will be paid. Above 140% of
Plan EBITDA, the Compensation Committee of the Board may recommend a
special bonus for extraordinary performance. Performance between the
key benchmarks above will be calculated on a pro rata basis (i.e. 90%
of Plan EBITDA results in a bonus of 75% of Annual Base Salary). For
the purpose of calculating actual EBITDA for cash bonus purposes,
salaries will be charged against EBITDA, bonuses will not be charged to
EBITDA (i.e. charged below the EBITDA line). Equitable adjustments to
the Plan, agreed to between the Board and Executive, shall be made to
reflect the impact of any subsequent divestitures or acquisitions which
are not already incorporated in the Plan.
<PAGE>
Exhibit B
SERP Payment Calculation
The steps to be followed in calculating the lump sum payable are:
a) Calculate the Monthly Benefit Payable pursuant to the Supplemental
Executive Retirement Plan attached hereto as Exhibit B-1, without
reducing the Monthly Benefit Payable for any payments made pursuant to
any Company qualified pension plan;
b) Determine the present value of a lifetime annuity of the Monthly Benefit
Payable, using a 6.5% interest rate, and the 1971 Towers Perrin
Mortality Table, set back 1 year; and
c) Subtract from the sum calculated in b) the present value of that portion
of all payments to be made pursuant to Company qualified pension plans
which constitutes the benefit accrual attributable to Executive's
employment with the Company after 1997.
EXHIBIT 10.5
U.S. $205,000,000
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of July 20, 1998
(amending and restating the Credit Agreement,
dated as of May 1, 1998),
among
FORMICA CORPORATION
FORMICA LIMITED
FORMICA HOLDCO (UK) LIMITED
FORMICA CANADA, INC.
FORMICA S.A.
FORMICA ESPANOLA S.A.
as the Borrowers,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent for the Lenders,
BANKERS TRUST COMPANY,
as the Administrative Agent for the Lenders,
and
CREDIT SUISSE FIRST BOSTON, as the
Documentation Agent for the Lenders.
-----------------------------------------
ARRANGED BY
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 20, 1998,
is among Formica Corporation, a Delaware corporation (the "Company"), Formica
Limited, a company organized and existing under the laws of the United Kingdom
of Great Britain and Northern Ireland (the "U.K. Revolver Borrower"), Formica
Holdco (UK) Limited, a company organized and existing under the laws of the
United Kingdom of Great Britain and Northern Ireland (the "U.K. Term Borrower"),
Formica Canada, Inc., a corporation organized and existing under the laws of
British Columbia, Canada (the "Canadian Borrower"), Formica S.A., a societe
anonyme organized and existing under the laws of the French Republic (the
"French Revolver Borrower"), Formica Espanola S.A., a sociedad anonima organized
and existing under the laws of the Kingdom of Spain (the "Spanish Revolver
Borrower") and the other Foreign Borrowers that may become parties hereto
(collectively with the Company, the U.K. Revolver Borrower, the U.K. Term
Borrower, the Canadian Borrower, the French Revolver Borrower and the Spanish
Revolver Borrower, the "Borrowers"), the various financial institutions as are
or may become parties hereto (collectively, the "Lenders"), DLJ Capital Funding,
Inc. ("DLJ"), as syndication agent (the "Syndication Agent") for the Lenders,
Bankers Trust Company ("BTCo"), as administrative agent (the "Administrative
Agent") for the Lenders, and Credit Suisse First Boston ("CSFB"), as
documentation agent (the "Documentation Agent") for the Lenders (the Syndication
Agent, the Administrative Agent and the Documentation Agent are sometimes
referred to herein individually as an "Agent" and collectively as the "Agents").
W I T N E S S E T H:
WHEREAS pursuant to the Credit Agreement, dated as of May 1, 1998 (as
amended, supplemented, or otherwise modified prior to the date hereof, the
"Existing Credit Agreement"), among the Company (as survivor of the merger with
LMS II, Co.), each of the Foreign Borrowers named therein (together with the
Company, the "Existing Borrowers"), the various financial institutions party
thereto (the "Existing Lenders") and the Agents named therein, the Existing
Lenders and the Issuers extended Commitments to make Credit Extensions to the
Existing Borrowers on the terms and conditions set forth therein;
WHEREAS, the Borrowers have requested that the Existing Credit
Agreement be amended and restated in its entirety to become effective and
binding on the Borrowers pursuant to the terms of this Agreement, and the
Lenders (including the Existing Lenders) have agreed (subject to the terms of
this Agreement) to amend and restate the Existing Credit Agreement in its
entirety to read as set forth in this Agreement, and it has been agreed by the
parties to the Existing Credit Agreement that (a) the Commitments of the
Existing Lenders under the Existing
<PAGE>
Credit Agreement shall be extended or advanced upon the amended and restated
terms and conditions contained in this Agreement, and (b) any outstanding Credit
Extensions made and other Obligations outstanding under the Existing Credit
Agreement shall be governed by and deemed to be outstanding under the amended
and restated terms and conditions contained in this Agreement, with the intent
that the terms of this Agreement shall supersede the terms of the Existing
Credit Agreement (which shall hereafter have no further effect upon the parties
thereto, other than for accrued fees and expenses, and indemnification
provisions, accrued and owing under the terms of the Existing Credit Agreement
on or prior to the date hereof or arising under the terms of the Existing Credit
Agreement); provided, that any Rate Protection Agreements with any one or more
Existing Lenders (or their respective Affiliates) shall continue unamended and
in full force and effect;
WHEREAS, Laminates Acquisition Co., a Delaware corporation
("Holdings"), owns all of the issued and outstanding Voting Stock of FM
Holdings, Inc., a Delaware corporation ("FMH"), and FMH owns all of the issued
and outstanding Capital Stock of the Company;
WHEREAS, in connection with amending and restating the Existing Credit
Agreement and at the time of the effectiveness of such amendment and
restatement, Credit Extensions from this Agreement shall be used, in part, to
repay in full the principal amount of all term loans and revolving loans
outstanding under the Existing Credit Agreement, and each of the Borrowers
desires to obtain, pursuant to this Agreement, the following financing
facilities from the Lenders:
(a) a Term Loan Commitment pursuant to which (i) Borrowings of
U.S. Term Loans will be made to the Company, (ii) Borrowings of U.K.
Term Loans will be made to the U.K. Term Borrower and (iii) Borrowings
of Canadian Term Loans will be made to the Canadian Borrower, in each
case on the Closing Date, in a maximum aggregate principal amount
(calculated, in the case of U.K. Term Loans and Canadian Term Loans, at
the U.S. Dollar Equivalent thereof) not to exceed $85,000,000;
(b) a Revolving Loan Commitment (to include availability for
Revolving Loans, Swing Line Loans and Letters of Credit) pursuant to
which (i) Borrowings of U.S. Revolving Loans will be made to the
Company and (ii) Borrowings of Foreign Currency Revolving Loans will be
made to the Foreign Revolver Borrowers, in each case from time to time
on and subsequent to the Closing Date but prior to the Revolving Loan
Commitment Termination Date, in a maximum aggregate principal amount
(together with (x) the U.S. Dollar Equivalent of the Foreign Currency
Letter of Credit Outstandings, (y) the U.S. Letter of Credit
Outstandings and (z) all Swing Line Loans) not to exceed, subject to
the terms and conditions hereof, the then existing Total Revolving Loan
Commitment Amount;
-2-
<PAGE>
(c) a Letter of Credit Commitment pursuant to which the
Issuers will issue (i) U.S. Letters of Credit for the account of the
Company and its Subsidiaries and (ii) Foreign Currency Letters of
Credit for the account of the Foreign Borrowers and their respective
Subsidiaries, in each case from time to time on and subsequent to the
Closing Date but prior to the Revolving Loan Commitment Termination
Date, in a maximum aggregate Stated Amount at any one time outstanding
(with Foreign Currency Letter of Credit Outstandings calculated at the
U.S. Dollar Equivalent thereof) not to exceed, subject to the terms and
conditions hereof, $75,000,000 (provided, that the aggregate
outstanding principal amount of (v) all U.S. Revolving Loans, (w) all
Swing Line Loans, (x) the U.S. Dollar Equivalent of all Foreign
Currency Revolving Loans, (y) the U.S. Letter of Credit Outstandings
and (z) the U.S. Dollar Equivalent of the Foreign Currency Letter of
Credit Outstandings shall not, subject to the terms and provisions
hereof, at any time exceed the then existing Total Revolving Loan
Commitment Amount); and
(d) a Swing Line Loan Commitment pursuant to which Borrowings
of Swing Line Loans (which shall be denominated solely in U.S. Dollars)
will be made to the Company from time to time on and subsequent to the
Closing Date but prior to the Revolving Loan Commitment Termination
Date, in a maximum aggregate outstanding principal amount not to exceed
$10,000,000 (provided, that the aggregate outstanding principal amount
of all such Swing Line Loans, together with (w) all U.S. Revolving
Loans, (x) the U.S. Dollar Equivalent of all Foreign Currency Revolving
Loans, (y) the U.S. Letter of Credit Outstandings and (z) the U.S.
Dollar Equivalent of the Foreign Currency Letter of Credit Outstandings
shall not, subject to the terms and provisions hereof, at any time
exceed the then existing Total Revolving Loan Commitment Amount);
WHEREAS, following the Closing Date, the Company desires to obtain a
Spanish Term Loan Commitment, and whereas, for the convenience of the parties
hereto, provisions with respect to such Commitment have been included herein in
anticipation that such Commitment may be provided in the future;
WHEREAS, all Loans and other Obligations shall continue to be and shall
be fully guaranteed pursuant to the Subsidiary Guaranty, the FMH Guaranty and
Pledge Agreement and the Holdings Guaranty and Pledge Agreement and fully
secured by, among other things, each Security Agreement and Pledge Agreement;
and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to so amend and restate
the Existing Credit Agreement and to extend the U.S. Term Loan Commitment, the
U.S. Revolving Loan Commitment, the U.K. Term Loan Commitment, the U.K.
Revolving Loan Commitment, the Canadian Term Loan Commitment, the Canadian
Revolving Loan Commitment, the French Revolving Loan
-3-
<PAGE>
Commitment and the Spanish Revolving Loan Commitment, make the Loans available
thereunder and described herein to the Borrowers and issue (or participate in)
Letters of Credit for the account of the Company and its Subsidiaries;
NOW, THEREFORE, the parties hereto hereby agree to amend and restate
the Existing Credit Agreement, and the Existing Credit Agreement is hereby
amended and restated, as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Absolute Rate Auction" means a solicitation of Uncommitted Interest
Quotes setting forth Uncommitted Absolute Interest Rates pursuant to Section
2.4.
"Acceptance Note" is defined in clause (b) of Section 2.11.4.
"Acquisition Transactions" means the transactions in which the Equity
Investors, in part indirectly through Holdings, acquired all of the Capital
Stock of FMH and the Purchased Foreign Subsidiaries, certain Subsidiaries of
Holdings merged into FMH and certain of its Subsidiaries and the Capital Stock
of the Purchased Foreign Subsidiaries was contributed, directly or indirectly,
to the Company.
"Additional Cost" means, with respect to any U.K. Loan, for any
Interest Period, the cost as calculated by the Administrative Agent in
accordance with Schedule IV hereto imputed to each applicable Lender of
compliance with the mandatory liquid assets requirements of the Bank of England
during that Interest Period, expressed as a percentage.
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.
"Administrative Agent's Fee Letter" means the confidential fee letter
entered into on May 1, 1998 between the Company and the Administrative Agent
with respect to certain fees to be paid hereunder.
-4-
<PAGE>
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power (i)
to vote 10% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managing general partners, or (ii)
to direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Affirmation and Consent" means the Affirmation and Consent to be
executed and delivered by each Obligor pursuant to Section 5.1.4, in form and
substance reasonably satisfactory to the Agents, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Agents" is defined in the preamble.
"Agreement" means, on any date, the Existing Credit Agreement, as
amended and restated hereby and as from time to time further amended,
supplemented, amended and restated, or otherwise modified.
"Alternate Base Rate" means, for any day and with respect to all Base
Rate Loans, the higher of: (a) 0.50% per annum above the latest Federal Funds
Rate; and (b) the rate of interest in effect for such day as most recently
publicly announced or established by the Administrative Agent in New York, New
York, as its "prime rate." The prime rate is not necessarily intended to be the
lowest rate of interest determined by the Administrative Agent in connection
with extensions of credit. Any change in the prime rate established or announced
by the Administrative Agent shall take effect at the opening of business on the
day of such establishment or announcement.
"Annualized" means (i) with respect to the end of the first Fiscal
Quarter of the Company ending after the Original Closing Date, the applicable
amount for such Fiscal Quarter multiplied by four, (ii) with respect to the
second Fiscal Quarter of the Company ending after the Original Closing Date, the
applicable amount for such Fiscal Quarter and the immediately preceding Fiscal
Quarter multiplied by two, and (iii) with respect to the third Fiscal Quarter of
the Company ending after the Original Closing Date, the applicable amount for
such Fiscal Quarter and the immediately preceding two Fiscal Quarters multiplied
by one and one-third.
"Applicable Canadian BA Stamping Fee" means, with respect to Canadian
Loans maintained as Canadian BAs, the applicable percentage set forth under the
column entitled "Applicable Canadian BA Stamping Fee" with respect thereto
within the definition of Applicable Margin set forth below.
-5-
<PAGE>
"Applicable Commitment Fee" means, (i) for each day from the Original
Closing Date through (but excluding) the date upon which the Compliance
Certificate for the second full Fiscal Quarter ending after the Original Closing
Date is delivered or required to be delivered by the Company to the
Administrative Agent pursuant to clause (c) of Section 7.1.1, a fee which shall
accrue at a rate of 1/2 of 1% per annum, and (ii) for each day thereafter, a fee
which shall accrue at the applicable rate per annum set forth below under the
column entitled "Applicable Commitment Fee", determined by reference to the
applicable Leverage Ratio referred to below:
Leverage Applicable
Ratio Commitment Fee
----------------------- ------------------
greater than or equal
to 5.0:1 0.500%
greater than or equal
to 4.0:1 and less than
5.0:1 0.375%
greater than or equal
to 3.0:1 and less than
4.0:1 0.300%
less than 3.0:1 0.250%
The Leverage Ratio used to compute the Applicable Commitment Fee for
any day referred to in clause (ii) above shall be the Leverage Ratio set forth
in the Compliance Certificate most recently delivered by the Company to the
Administrative Agent on or prior to such day pursuant to clause (c) of Section
7.1.1. Changes in the Applicable Commitment Fee resulting from a change in the
Leverage Ratio shall become effective on the first day following delivery by the
Company to the Administrative Agent of a new Compliance Certificate pursuant to
clause (c) of Section 7.1.1. If the Company shall fail to deliver a Compliance
Certificate within the number of days after the end of any Fiscal Quarter as
required pursuant to clause (c) of Section 7.1.1 (without giving effect to any
grace period), the Applicable Commitment Fee from and including the first day
after the date on which such Compliance Certificate was required to be delivered
to but not including the date the Company delivers to the Administrative Agent a
Compliance Certificate shall conclusively equal the highest Applicable
Commitment Fee set forth above. Notwithstanding the foregoing, the Company may,
in its sole discretion, within ten Business Days following the end of any Fiscal
Quarter, deliver to the Administrative Agent a written estimate (the "Leverage
Ratio Estimate") setting forth the Company's good faith estimate of the Leverage
Ratio (based on calculations contained in a Compliance Certificate) that will be
set forth in the next Compliance Certificate required to be delivered by the
Company to the
-6-
<PAGE>
Administrative Agent pursuant to clause (c) of Section 7.1.1. In the event that
the Leverage Ratio Estimate indicates that there would be a change in the
Applicable Commitment Fee resulting from a change in the Leverage Ratio, such
change will become effective on the first day following delivery of the Leverage
Ratio Estimate. In the event that, once the next Compliance Certificate is
delivered, the Leverage Ratio as set forth in such Compliance Certificate
differs from that calculated in the Leverage Ratio Estimate delivered for the
Fiscal Quarter with respect to which such Compliance Certificate has been
delivered, and such difference results in an Applicable Commitment Fee which is
greater or lesser than the Applicable Commitment Fee theretofore in effect, then
(A) such greater or lesser Applicable Commitment Fee shall be deemed to be in
effect for all purposes of this Agreement from the first day following the
delivery of the Leverage Ratio Estimate and (B) if any Borrower shall have
theretofore made any payment of Commitment Fees in respect of the period from
the first day following the delivery of the Leverage Ratio Estimate to the
actual date of delivery of the Compliance Certificate, then, on the next
Quarterly Payment Date, either (x) if the new Applicable Commitment Fee is
greater than the Applicable Commitment Fee theretofore in effect, such Borrower
shall pay as a supplemental payment of Commitment Fees, an amount which equals
the difference between the amount of Commitment Fees that would otherwise have
been paid based on such new Leverage Ratio and the amount of such Commitment
Fees actually so paid, or (y) if the new Applicable Commitment Fee is less than
the Applicable Commitment Fee theretofore in effect, an amount shall be deducted
from the interest on Committed Revolving Loans and Commitment Fees and Letter of
Credit Fees under the first sentence of Section 3.3.3 then otherwise payable in
an amount which equals the difference between the amount of Commitment Fees so
paid and the amount of Commitment Fees that would otherwise have been paid based
on such new Leverage Ratio (or, if no such payment is owed by the Borrowers to
the applicable Lenders on such next Quarterly Payment Date, or if such amount
owed by the Borrowers is less than such difference, the applicable Lenders shall
pay to the Borrowers on such next Quarterly Payment Date the amount of such
difference less the amount, if any, owed by the Borrowers to such Lenders on
such Quarterly Payment Date).
"Applicable Margin" means at all times during the applicable periods
set forth below,
(a) from the Original Closing Date through (but excluding) the
date upon which the Compliance Certificate for the second full Fiscal
Quarter ending after the Original Closing Date is delivered by the
Company to the Administrative Agent pursuant to clause (c) of Section
7.1.1, with respect to the unpaid principal amount of each (i) Swing
Line Loan (which shall be borrowed and maintained only as a U.S. Dollar
denominated Base Rate Loan) and each Committed Revolving Loan and Term
Loan maintained as a Base Rate Loan, 1.00% per annum, and (ii)
Committed Revolving Loan and Term Loan maintained as a LIBO Rate Loan,
2.25% per annum;
-7-
<PAGE>
(b) at all times after the date of delivery of the Compliance
Certificate described in clause (a) above, with respect to the unpaid
principal amount of each Swing Line Loan (which shall be borrowed and
maintained only as a U.S. Dollar denominated Base Rate Loan) and each
Committed Revolving Loan and Term Loan, the rate determined by
reference to the applicable Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Base Rate Loans", in the case of Base Rate
Loans, or by reference to the applicable Leverage Ratio and at the
applicable percentage per annum set forth below under the column
entitled "Applicable Margin for LIBO Rate Loans", in the case of LIBO
Rate Loans:
Applicable Margin For Committed Revolving Loans, Swing Line Loans
and Term Loans
Applicable Applicable
Margin For Base Margin-For-LIBO
Leverage Ratio Rate Loans Rate Loans
- -------------------------------- ------------------- -------------------
greater than or equal to 5.0:1 1.00% 2.25%
greater than or equal to
4.0:1 and less than 5.0:1 0.75% 2.00%
greater than or equal to
3.0:1 and less than 4.0:1 0.25% 1.50%
less than 3.0:1 0.00% 1.00%;
(c) at all times after the date of delivery of the Compliance
Certificate described in clause (a) above, with respect to the unpaid
principal amount of each Canadian Loan, the rate determined by
reference to the applicable Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Base Rate Loans", in the case of Base Rate
Loans, or by reference to the applicable Leverage Ratio and at the
applicable percentage per annum set forth below under the column
entitled "Applicable Canadian BA Stamping Fee", in the case of Canadian
BAs:
-8-
<PAGE>
Applicable Margin For Canadian Loans
Applicable Applicable
Margin For Base Canadian BA
Leverage Ratio Rate Loans Stamping Fee
- -------------------------------- ------------------- -----------------
greater than or equal to 5.0:1 1.00% 2.25%
greater than or equal to
4.0:1 and less than 5.0:1 0.75% 2.00%
greater than or equal to
3.0:1 and less than 4.0:1 0.25% 1.50%
less than 3.0:1 0.00% 1.00%.
The Leverage Ratio used to compute the Applicable Margin for Swing Line
Loans, Committed Revolving Loans and Term Loans and the Applicable Canadian BA
Stamping Fee for Canadian BAs for any day referred to in clauses (b) or (c)
above shall be the Leverage Ratio set forth in the Compliance Certificate most
recently delivered by the Company to the Administrative Agent on or prior to
such day pursuant to clause (c) of Section 7.1.1. Changes in the Applicable
Margin for Swing Line Loans, Committed Revolving Loans and Term Loans and the
Applicable Canadian BA Stamping Fee for Canadian BAs resulting from a change in
the Leverage Ratio shall become effective on the first day following delivery by
the Company to the Administrative Agent of a new Compliance Certificate pursuant
to clause (c) of Section 7.1.1. If the Company shall fail to deliver a
Compliance Certificate within the number of days after the end of any Fiscal
Quarter as required pursuant to clause (c) of Section 7.1.1 (without giving
effect to any grace period), the Applicable Margin for Swing Line Loans,
Committed Revolving Loans and Term Loans and the Applicable Canadian BA Stamping
Fee for Canadian BAs from and including the first day after the date on which
such Compliance Certificate was required to be delivered to but not including
the date the Company delivers to the Administrative Agent a Compliance
Certificate shall conclusively equal the highest Applicable Margin for Swing
Line Loans, Committed Revolving Loans and Term Loans and the Applicable Canadian
BA Stamping Fee for Canadian BAs set forth above. Notwithstanding the foregoing,
the Company may, in its sole discretion, within ten Business Days following the
end of any Fiscal Quarter, deliver to the Administrative Agent a Leverage Ratio
Estimate setting forth the Company's good faith estimate of the Leverage Ratio
(based on calculations set forth in a Compliance Certificate) that will be set
forth in the next Compliance Certificate required to be delivered by the Company
to the Administrative Agent pursuant to clause (c) of Section 7.1.1. In the
event that the Leverage Ratio Estimate indicates that there would be a change in
the Applicable Margin and the Applicable Canadian BA Stamping Fee resulting from
a change in the Leverage Ratio, such
-9-
<PAGE>
change will become effective on the first day following delivery of the Leverage
Ratio Estimate. In the event that, once the next Compliance Certificate is
delivered, the Leverage Ratio as set forth in such Compliance Certificate
differs from that calculated in the Leverage Ratio Estimate delivered for the
Fiscal Quarter with respect to which such Compliance Certificate has been
delivered, and such difference results in an Applicable Margin or Applicable
Canadian BA Stamping Fee, as the case may be, which is greater or lesser than
the Applicable Margin or Applicable Canadian BA Stamping Fee theretofore in
effect, then (A) such greater or lesser Applicable Margin or Applicable Canadian
BA Stamping Fee shall be deemed to be in effect for all purposes of this
Agreement from the first day following the delivery of the Leverage Ratio
Estimate and (B) if any Borrower shall have theretofore made any payment of
interest in respect of Swing Line Loans, Committed Revolving Loans or Term
Loans, or of Letter of Credit Fees pursuant to the first sentence of Section
3.3.3, in any such case in respect of the period from the first day following
the delivery of the Leverage Ratio Estimate to the actual date of delivery of
the Compliance Certificate, then, on the next Quarterly Payment Date, either (x)
if the new Applicable Margin or Canadian BA Stamping Fee is greater than the
Applicable Margin or Canadian BA Stamping Fee theretofore in effect, such
Borrower shall pay as a supplemental payment of interest and/or Letter of Credit
Fees, an amount which equals the difference between the amount of interest and
Letter of Credit Fees that would otherwise have been paid based on such new
Leverage Ratio and the amount of such interest and Letter of Credit Fees
actually so paid, or (y) if the new Applicable Margin or Canadian BA Stamping
Fee is less than the Applicable Margin or Canadian BA Stamping Fee theretofore
in effect, an amount shall be deducted from the interest on Committed Revolving
Loans, Commitment Fees and Letter of Credit Fees (in the case of differences in
respect of interest on Committed Revolving Loans and Letter of Credit Fees) or
from the interest on Term Loans (in the case of differences in respect of
interest on Term Loans) thereafter payable by such Borrower in an amount which
equals the difference between the amount of interest and Letter of Credit Fees
so paid and the amount of interest and Letter of Credit Fees that would
otherwise have been paid based on such new Leverage Ratio (or, if no such
payment by such Borrower to the applicable Lenders will thereafter accrue
hereunder, or if the amount that so accrues is less than such difference, the
applicable Lenders will promptly pay to such Borrower an amount equal to such
difference less the amount, if any, of such accrued and unpaid payments).
"Arranger" means Donaldson, Lufkin & Jenrette Securities Corporation,
a Delaware corporation.
"Assignee Lender" is defined in Section 11.11.1.
"Assignor Lender" is defined in Section 11.11.1.
"Assumed Indebtedness" means Indebtedness of a Person which is (i) in
existence at the time such Person becomes a Restricted Subsidiary of the Company
or (ii) assumed in connection
-10-
<PAGE>
with an Investment in or acquisition of such Person, and has not been incurred
or created by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary of the Company.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to Section 5.1.1.
"Base Financial Statements" is defined in Section 6.5.
"Base Rate Loan" means a Committed Loan bearing interest at a
fluctuating rate determined by reference to either the Alternate Base Rate or,
in the case of Canadian Loans, the Canadian Prime Rate.
"Borrowers" is defined in the preamble.
"Borrowing" means, as the context may require, Loans of the same type,
made to the same Borrower and in the same Currency (and, in the case of Fixed
Rate Loans, having the same Interest Period) made by the relevant Lenders on the
same Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1 (in the case of Committed Loans) or Section 2.4 (in the case of
Uncommitted Revolving Loans).
"Borrowing Request" means (i) in the case of Committed Loans, a
Committed Loan Borrowing Request and (ii) in the case of Uncommitted Revolving
Loans, an Uncommitted Revolving Loan Borrowing Request.
"British Pounds" means the lawful currency of the United Kingdom of
Great Britain and Northern Ireland.
"BTCo" is defined in the preamble.
"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in New
York City and, (i) with respect to Borrowings of, Interest Periods with respect
to, payments of principal and interest in respect of, and conversions of Base
Rate Loans into, Fixed Rate Loans, on which dealings in the applicable Currency
are carried on in the London interbank market and (ii) with respect to any
Borrowings of, Interest Periods with respect to, and payments of principal and
interest in respect of, Foreign Currency Loans or Reimbursement Obligations in
respect of Foreign Currency Letters of Credit, on which banks are generally open
for business in the principal financial center of the jurisdiction of such
Foreign Currency.
-11-
<PAGE>
"Canadian BA" means a bill of exchange drawn by the Canadian Borrower
and accepted by a Lender that is denominated in Canadian Dollars with a term of
30, 60, 90 or 180 days, issued and payable only in Canada and having a face
amount of an integral multiple of Cdn $100,000; provided, however, that,
(a) to the extent the context shall require, each Acceptance
Note shall be deemed to be a Canadian BA; and
(b) references to outstanding principal amounts relating to
Canadian BAs shall refer to the stated amount of unmatured Canadian BAs
which have not been collateralized pursuant to, and in accordance with,
the terms of clause (i) of Section 3.1.1.
"Canadian BA Rate" means, for a particular term, the discount rate per
annum, calculated on the basis of a year of 365 days or 366 days, as the case
may be, equal to the average rate per annum for Canadian Dollar bankers'
acceptances having such term that appears on the Reuters Screen CDOR Page (or
any successor page) as of 11:00 a.m., Toronto time, on the first day of such
term as determined by the Administrative Agent or, if such rate is not available
at such time, the average discount rate for bankers acceptances (accepted by
Canadian chartered banks agreed to by the Administrative Agent and the Canadian
Borrower) having such term as calculated by the Administrative Agent in
accordance with normal market practice on such day.
"Canadian Borrower" is defined in the preamble.
"Canadian Dollar" and "Cdn $" each mean the lawful currency of Canada.
"Canadian Loan" means, as the context may require, a Committed Canadian
Revolving Loan or Canadian Term Loan.
"Canadian Prime Rate" means, on any date and relative to Canadian
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently established by the
Administrative Agent at its Domestic Office as its prime rate for
Canadian Dollar loans in Canada; and
(b) the Canadian BA Rate most recently determined by the
Administrative Agent for 30-days bankers' acceptances plus the lesser
of (i) 3/4 of 1% and (ii) the Applicable Canadian BA Stamping Fee.
The Canadian Prime Rate is not necessarily intended to be the lowest rate of
interest determined by the Administrative Agent in connection with extensions of
credit. Changes in the rate of interest on that portion of any Canadian Loans
maintained at the Canadian Prime Rate will take
-12-
<PAGE>
effect simultaneously with each change in the Canadian Prime Rate. The
Administrative Agent will give notice promptly to the Canadian Borrower and the
applicable Lenders of changes in the Canadian Prime Rate.
"Canadian Revolving Loan Commitment" is defined in clause (e) of
Section 2.1.2.
"Canadian Revolving Loan Commitment Amount" means $5,000,000 (with
Canadian Revolving Loans to be denominated in Canadian Dollars), as such amount
may be modified pursuant to the terms hereof.
"Canadian Term Loan Commitment" is defined in clause (c) of Section
2.1.1.
"Canadian Term Loan Commitment Amount" means $10,000,000 (with Canadian
Term Loans to be denominated in Canadian Dollars).
"Canadian Term Loans" is defined in clause (c) of Section 2.1.1.
"Capital Expenditures" means, for any period, the sum, without
duplication, of (i) the aggregate amount of all expenditures of the Company and
its Restricted Subsidiaries for fixed or capital assets made during such period
which, in accordance with GAAP, would be classified as capital expenditures, and
(ii) the aggregate amount of the principal component of all Capitalized Lease
Liabilities incurred during such period by the Company and its Restricted
Subsidiaries; provided that Capital Expenditures shall not include (i) any such
expenditures or any such principal component funded with (x) any Casualty
Proceeds, as permitted under Section 3.1.1, or (y) any Net Disposition Proceeds
of any Asset Sale permitted under clause (c) of Section 7.2.9 or any Asset Sale
of obsolete or worn out equipment permitted under subclause (a)(i) of Section
7.2.9 or (ii) any Investment made pursuant to Section 7.2.5 (other than pursuant
to clause (d) thereof).
"Capital Stock" means (i) in the case of a corporation, any and all
capital or corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or other
equivalents (however designated) in the nature of corporate stock, (iii) in the
case of a partnership or limited liability company, any and all partnership or
membership interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Capital Transactions" means the Senior Subordinated Bridge Note
Issuance, the Holdings Equity Issuance and the FMH Preferred Stock Issuance.
-13-
<PAGE>
"Capitalized Lease Liabilities" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness issued directly by the United
States of America or any agency thereof or guaranteed by the United
States of America or any agency thereof;
(b) commercial paper, maturing not more than nine months from
the date of issue, which is issued by (i) a corporation (other than an
Affiliate of any Obligor) organized under the laws of any state of the
United States or of the District of Columbia and rated at least A-l by
S&P or P-l by Moody's, or (ii) any Lender (or its holding company);
(c) any time deposit, certificate of deposit or bankers'
acceptance, maturing not more than one year after such time, maintained
with or issued by either (i) a commercial banking institution
(including U.S. branches of foreign banking institutions) that is a
member of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $500,000,000, or (ii)
any Lender;
(d) short-term tax-exempt securities rated not lower than
MIG-1/1+ by either Moody's or S&P with provisions for liquidity or
maturity accommodations of 183 days or less;
(e) repurchase agreements which (i) are entered into with any
entity referred to in clause (b) or (c) above or any other financial
institution whose unsecured long-term debt (or the unsecured long-term
debt of whose holding company) is rated at least A- or better by S&P or
A3 or better by Moody's and maturing not more than one year after such
time and (ii) are secured by a fully perfected security interest in
securities of the type referred to in clause (a) above which have a
market value at the time such repurchase agreement is entered into of
not less than 100% of the repurchase obligation of such counterparty
entity with whom such repurchase agreement has been entered into;
(f) any money market or similar fund not less than 95% of the
assets of which are comprised of the items specified in clauses (a)
through (e) above and as to which withdrawals are permitted at least
every 90 days; or
(g) in the case of any Subsidiary of the Company organized or
having its principal place of business outside the United States,
investments denominated in the
-14-
<PAGE>
Currency of the jurisdiction in which such Subsidiary is organized or
has its principal place of business which are similar to the items
specified in clauses (a) through (f) above.
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of any property of the Company or any of its Subsidiaries.
"Casualty Proceeds" means, with respect to any Casualty Event, the
amount of any insurance proceeds or condemnation awards received by the Company
or any of its Subsidiaries in connection therewith, but excluding any proceeds
or awards required to be paid to a creditor (other than the Lenders) which holds
a Lien on the property which is the subject of such Casualty Event which Lien is
(i) permitted by Section 7.2.3 and (ii) is prior to the Liens of the Lenders, if
any, on such property.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Information System List.
"Change in Control" means, at any time after the Closing Date, (i) the
failure of Holdings to own, free and clear of all Liens and encumbrances (other
than Liens of the type permitted to exist under clauses (b), (d) and (g) of
Section 7.2.3), all right, title and interest in 100% of the Voting Stock of
FMH; (ii) the failure of FMH to own, free and clear of all Liens and
encumbrances (other than Liens of the type permitted to exist under clauses (b),
(d) and (g) of Section 7.2.3), all right, title and interest in 100% of the
Capital Stock of the Company (other than directors' qualifying shares); (iii)
the failure of the Equity Investors to own at least 51% (on a fully diluted
basis) of the economic and voting interest in the Voting Stock of Holdings; or
(iv) the failure of the Equity Investors and their Affiliates to have the right
to designate or nominate, directly or indirectly, no less than 51% of the
Directors of Holdings, FMH and the Company; provided that (a) no Change of
Control shall result from a holding company owning 100% of the Voting Stock of
Holdings so long as (x) such holding company shall have entered into an
agreement with the Administrative Agent for the benefit of the Secured Parties
substantially similar to the Holdings Guaranty and Pledge Agreement whereby such
holding company guarantees the Obligations and pledges the Voting Stock of
Holdings to secure the Obligations and (y) neither of the conditions set forth
in clauses (iii) or (iv) above shall exist with respect to such holding company
(deeming, for purposes of this clause (y), all references to Holdings in such
clauses (iii) and (iv) and elsewhere in this Agreement (including the definition
of Net Equity Proceeds) other than Article V to be references to such holding
company) and (b) this proviso shall apply to any such holding company as if
references to Holdings in clause (a) of this proviso were references to such
holding company.
-15-
<PAGE>
"Charter Document" means, relative to any Obligor, its certificate of
incorporation (or similar charter document), its by-laws and all shareholder
agreements, voting trusts and similar arrangements to which such Obligor is a
party applicable to any of its authorized shares of Capital Stock.
"Closing Date" means the date all conditions set forth in Section 5.1
are satisfied, not to be later than July 31, 1998.
"Closing Date Certificate" means a certificate of an Authorized Officer
of the Company substantially in the form of Exhibit D hereto, delivered pursuant
to Section 5.1.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, as the context may require, (i) a Lender's Term
Loan Commitment, Revolving Loan Commitment or Letter of Credit Commitment or
(ii) the Swing Line Lender's Swing Line Loan Commitment.
"Commitment Amount" means, as the context may require, a Term Loan
Commitment Amount, a Revolving Loan Commitment Amount, a Letter of Credit
Commitment Amount or the Swing Line Loan Commitment Amount.
"Commitment Letter" means the commitment letter, dated April 25, 1998,
among the Institutional Investors, the Arranger and the Syndication Agent,
including all annexes and exhibits thereto.
"Commitment Termination Date" means, as the context may require, the
Revolving Loan Commitment Termination Date or the Term Loan Commitment
Termination Date.
"Commitment Termination Event" means (i) the occurrence of any Event of
Default described in clauses (b) through (d) of Section 8.1.9 or (ii) the
occurrence and continuance of any other Event of Default and either (x) the
declaration of the Loans or other Obligations to be due and payable pursuant to
Section 8.3, or (y) in the absence of such declaration, the giving of notice to
the Company by the Administrative Agent, acting at the direction of the Required
Lenders, that the Commitments have been terminated.
"Committed Borrowing" means a Borrowing comprised of Committed Loans.
"Committed Canadian Revolving Loans" is defined in clause (e) of
Section 2.1.2.
"Committed Foreign Currency Loan" means a Committed Foreign Currency
Revolving Loan or a Foreign Currency Term Loan.
-16-
<PAGE>
"Committed Foreign Currency Revolving Loan" means a Committed Canadian
Revolving Loan, a Committed French Revolving Loan, a Committed Spanish Revolving
Loan, a Committed U.K. Revolving Loan or any other Loan made pursuant to a
Foreign Currency Revolving Loan Commitment.
"Committed French Revolving Loans" is defined in clause (d) of Section
2.1.2.
"Committed Loan" means a Term Loan, a Committed Revolving Loan or a
Swing Line Loan.
"Committed Loan Borrowing Request" means a loan request and certificate
executed by an Authorized Officer of the applicable Borrower, substantially in
the form of Exhibit B-1.
"Committed Revolving Loan" means a Committed Foreign Currency Revolving
Loan or a U.S. Revolving Loan.
"Committed Spanish Revolving Loans" is defined in clause (c) of Section
2.1.2.
"Committed U.K. Revolving Loans" is defined in clause (b) of Section
2.1.2.
"Company" is defined in the preamble.
"Company Intercompany Loan" means the intercompany loan made by the
Company to FMH, evidenced by the Company Intercompany Note.
"Company Intercompany Note" means the promissory note issued by FMH to
the Company on the Original Closing Date.
"Company Pledge Agreement" means the Pledge Agreement, dated as of May
1, 1998, executed and delivered by an Authorized Officer of the Company pursuant
to the Existing Credit Agreement, as amended, supplemented, amended and restated
or otherwise modified from time to time.
"Company Security Agreement" means the Security Agreement, dated as of
May 1, 1998, executed and delivered by an Authorized Officer of the Company
pursuant to the Existing Credit Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"Compliance Certificate" means a certificate duly completed and
executed by the president, chief executive officer, treasurer, assistant
treasurer, controller or chief financial Authorized Officer of the Company,
substantially in the form of Exhibit E-1 hereto.
-17-
<PAGE>
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount of the debt, obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
applicable Borrower, substantially in the form of Exhibit C hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of the
Code, or for purposes of Section 412 of the Code, Section 414(m) or Section
414(o) of the Code.
"Credit Extension" means, as the context may require, (i) the making of
a Loan by a Lender or (ii) the issuance of any Letter of Credit, or the
extension of any Stated Expiry Date of any previously issued Letter of Credit,
by an Issuer. A continuation or conversion of a Canadian BA as set forth in
Sections 2.6.1 and 2.6.2 shall not constitute a Credit Extension.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
"CSFB" is defined in the preamble.
"Currency" means, as the context may require, U.S. Dollars or any
Foreign Currency.
"Current Assets" means, on any date, without duplication, all assets
which, in accordance with GAAP, would be included as current assets on a
consolidated balance sheet of the Company and its Restricted Subsidiaries at
such date as current assets (excluding, however, amounts due and to become due
from Affiliates of the Company which have arisen from transactions which are
other than arm's-length and in the ordinary course of its business).
"Current Liabilities" means, on any date, without duplication, all
amounts which, in accordance with GAAP, would be included as current liabilities
on a consolidated balance sheet
-18-
<PAGE>
of the Company and its Restricted Subsidiaries at such date, excluding current
maturities of Debt.
"CVC Entities" means CVC European Equity Partners, L.P., CVC European
Equity Partners (Jersey) L.P. and MMI Products, L.L.C.
"Debt" means, without duplication, the outstanding principal amount of
all Indebtedness of the Company and its Restricted Subsidiaries that (i) is of
the type referred to in clause (a) or (c) of the definition of "Indebtedness",
(ii) is of the type referred to in clause (b) of the definition of
"Indebtedness" (exclusive, however, of any such Indebtedness in respect of (x)
undrawn commercial letters of credit supporting Debt of the type described in
clause (i) above and undrawn trade letters of credit and (y) undrawn letters of
credit in respect of workers' compensation, insurance, performance and surety
bonds and similar obligations, in each case incurred in the ordinary course of
business) and (iii) any Contingent Liability in respect of any of the foregoing
types of Indebtedness.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would, unless cured or
waived, constitute an Event of Default.
"Disbursement" is defined in Section 2.8.2.
"Disbursement Date" is defined in Section 2.8.2.
"Disbursement Due Date" is defined in Section 2.8.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Company with the written consent of the Required Lenders.
"DLJ" is defined in the preamble.
"DLJMB Entities" means DLJ Merchant Banking Partners II, L.P., DLJ
Offshore Partners II, C.V., DLJ Diversified Partners, L.P., DLJMB Funding II,
Inc., DLJ EAB Partners, L.P., UK Investment Plan 1997 Partners, DLJ Diversified
Partners-A, L.P., DLJ ESC II, L.P., DLJ First ESC, L.P., DLJ Millennium
Partners, L.P., DLJ Millennium Partners-A, L.P. and DLJ Merchant Banking
Partners II-A, L.P.
"Documentation Agent" is defined in the preamble.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such Lender's "Domestic Office" on Schedule II hereto or in
a Lender Assignment Agreement,
-19-
<PAGE>
or such other office of a Lender (or any successor or assign of such Lender) as
may be designated from time to time by notice from such Lender, as the case may
be, to the Administrative Agent.
"EBITDA" means, for any applicable period, subject to clause (b) of
Section 1.4, the sum (without duplication) for the Company and its Restricted
Subsidiaries on a consolidated basis of
(a) Net Income,
plus
(b) the amount deducted in determining Net Income representing
non-cash charges or expenses, including depreciation and amortization
(excluding any non-cash charges representing (i) an accrual of or
reserve for cash charges in any future period or (ii) amortization of a
prepaid cash expense paid in a prior period),
plus
(c) the amount deducted in determining Net Income representing
income taxes (whether paid or deferred),
plus
(d) the amount deducted in determining Net Income representing
Interest Expense and fees, expenses and management bonuses (to the
extent, in the case of management bonuses, paid at or prior to the
Original Closing Date) incurred in connection with the Transaction or
any acquisition, and financing costs,
plus
(e) the amount deducted in determining Net Income representing
any net loss realized in connection with any sale, lease, conveyance or
other disposition of any asset (other than in the ordinary course of
business or from the Company or any of its Restricted Subsidiaries to
the Company or any of its Restricted Subsidiaries) or any extraordinary
or non-recurring loss,
minus
(f) Restricted Payments of the type referred to in clause
(c)(i) of Section 7.2.6 made during such period.
"EMU" is defined in Section 2.10.
-20-
<PAGE>
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules and regulations (including consent
decrees and administrative orders) relating to the protection of the environment
or the effect of the environment on human health or safety.
"Equity Investors" means the Institutional Investors and the Management
Investors.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euro" is defined in Section 2.10.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any applicable period, the excess (if
any), of
(a) EBITDA for such applicable period;
over
(b) the sum, without duplication (for such applicable period) of
(i) the cash portion of Interest Expense for such
applicable period;
plus
(ii) scheduled payments and mandatory prepayments, to the
extent actually made, of the principal amount of the Term Loans
or any other funded Debt (including Capitalized Lease
Liabilities), and mandatory prepayments of the principal amount
of the Revolving Loans pursuant to clause (g) of Section 3.1.1 in
connection with a reduction of any Revolving Loan Commitment
Amount, in each case for such applicable period;
plus
(iii) all federal, state and foreign income taxes actually
(without duplication) paid or payable in cash by the Company and
its Subsidiaries for such applicable period;
-21-
<PAGE>
plus
(iv) Capital Expenditures actually made during such
applicable period pursuant to clause (a) of Section 7.2.7
(excluding Capital Expenditures constituting Capitalized Lease
Liabilities and by way of the incurrence of Indebtedness
permitted pursuant to clause (c) of Section 7.2.2 to a vendor of
any assets permitted to be acquired pursuant to Section 7.2.7 to
finance the acquisition of such assets);
plus
(v) the amount of the net increase (if any) of Current
Assets, other than cash and Cash Equivalent Investments, over
Current Liabilities of the Company and its Subsidiaries for such
applicable period;
plus
(vi) Investments permitted and actually made, in cash,
pursuant to clause (k) of Section 7.2.5 during such applicable
period;
plus
(viii) Restricted Payments of the type described in
clauses (c)(ii) and (c)(iii) of Section 7.2.6 made during such
period;
plus
(ix) gains on sales of assets (other than sales permitted
under clause (a) of Section 7.2.9).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Equivalent" means, on any date of determination, with (a)
respect to any Foreign Currency, the equivalent amount in U.S. Dollars of such
Foreign Currency, and (b) with respect to U.S. Dollars, the equivalent amount in
the applicable Foreign Currency of U.S. Dollars, in each case as determined by
reference to the New York foreign exchange selling rates, as determined by the
Administrative Agent (in accordance with its standard practices).
"Existing Borrowers" is defined in the first recital.
"Existing Credit Agreement" is defined in the first recital.
-22-
<PAGE>
"Existing Lenders" is defined in the first recital.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to (i) the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or (ii) if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.
"Fee Letter" means the confidential fee letter, dated as of April 25,
1998, among the Institutional Investors, the Arranger and the Syndication Agent.
"Fiscal Quarter" means any fiscal quarter of a Fiscal Year.
"Fiscal Year" means any twelve-month period ending on December 31 of
any calendar year.
"Fixed Charge Coverage Ratio" means, at the end of any Fiscal Quarter,
subject to clause (b) of Section 1.4, the ratio computed for the period
consisting of such Fiscal Quarter and each of the three immediately prior Fiscal
Quarters of
(a) EBITDA for all such Fiscal Quarters
to
(b) the sum (without duplication) of
(i) Capital Expenditures actually made during all
such Fiscal Quarters pursuant to clause (a) of Section 7.2.7
(excluding (x) Capital Expenditures constituting Capitalized
Lease Liabilities and (y) the principal component of any
funded Debt incurred pursuant to clause (c) of Section 7.2.2
to finance such Capital Expenditures);
plus
(ii) the cash portion of Interest Expense for all
such Fiscal Quarters, provided that for the first three Fiscal
Quarters ending after the Original Closing Date, Interest
Expense shall be determined on an Annualized basis;
-23-
<PAGE>
plus
(iii) all scheduled payments of principal of the Term
Loans and other funded Debt (including the principal portion
of any Capitalized Lease Liabilities and any funded Debt of
the type described in clause (i)(y) above) during all such
Fiscal Quarters, provided that for the first three Fiscal
Quarters ending after the Original Closing Date, such payments
shall be determined on an Annualized basis;
plus
(iv) Restricted Payments permitted pursuant to clause
(d) of Section 7.2.6 made during such period;
plus
(v) all federal, state and foreign income taxes
actually (without duplication) paid or payable in cash by the
Company and its Restricted Subsidiaries and Restricted
Payments made by the Company pursuant to clause (c)(ii) of
Section 7.2.6 during such period.
"Fixed Rate Loan" means a LIBO Rate Loan or a Canadian BA.
"FMH" is defined in the third recital.
"FMH Guaranty and Pledge Agreement" means the Guaranty and Pledge
Agreement, dated as of May 1, 1998, executed and delivered by an Authorized
Officer of FMH pursuant to the Existing Credit Agreement, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"FMH Intercompany Loan" means the intercompany loan made by FMH to
Holdings, and evidenced by the FMH Intercompany Note.
"FMH Intercompany Note" means the promissory note issued by Holdings to
FMH on the Original Closing Date.
"FMH Preferred Stock" means the preferred stock of FMH.
"FMH Preferred Stock Issuance" means the issuance on the Original
Closing Date by FMH to the Equity Investors of FMH Preferred Stock for cash
proceeds of approximately $50,000,000.
-24-
<PAGE>
"Foreign Borrowers" means, collectively, the Foreign Term Borrowers and
the Foreign Revolver Borrowers.
"Foreign Currency" means any currency other than U.S. Dollars.
"Foreign Currency Equivalent" means the Exchange Equivalent in the
applicable Foreign Currency of any amount of U.S. Dollars.
"Foreign Currency Issuer" means any Lender as may be designated by the
Company (and consented to by the Agents and such Lender, such consent by the
Agents not to be unreasonably withheld) in its capacity as issuer of Foreign
Currency Letters of Credit; provided that such Lender shall undertake to perform
certain administrative functions (including, without limitation, the calculation
of relevant fees and the forwarding of notices) in connection with the issuance
of Foreign Currency Letters of Credit as considered necessary by the
Administrative Agent.
"Foreign Currency Letter of Credit" means a Letter of Credit
denominated in a Foreign Currency.
"Foreign Currency Letter of Credit Commitment" means a Letter of Credit
Commitment in respect of Foreign Currency Letters of Credit.
"Foreign Currency Letter of Credit Commitment Amount" means, on any
date in respect of any Foreign Borrower, the aggregate amount of the Commitments
of all applicable Issuers to issue Foreign Currency Letters of Credit to such
Foreign Borrower denominated in a Foreign Currency; provided, that the Foreign
Currency Letter of Credit Commitment Amount in respect of each Foreign Borrower
shall not exceed the then applicable Foreign Currency Revolving Loan Commitment
Amount for such Borrower, as such amount may be reduced pursuant to Section 2.2
or increased pursuant to Section 2.5.
"Foreign Currency Letter of Credit Outstandings" means, on any date,
an amount equal to the sum of
(a) the then aggregate outstanding amount which is undrawn and
available under all issued and outstanding Foreign Currency Letters of
Credit,
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of Foreign Currency Letters of
Credit.
-25-
<PAGE>
"Foreign Currency Loan" means, as the context may require, a Foreign
Currency Revolving Loan or a Foreign Currency Term Loan.
"Foreign Currency Revolving Loan" means, as the context may require, a
Committed Foreign Currency Revolving Loan or an Uncommitted Revolving Loan.
"Foreign Currency Revolving Loan Commitment" means, as the context may
require, a Lender's U.K. Revolving Loan Commitment, Spanish Revolving Loan
Commitment, French Revolving Loan Commitment, Canadian Revolving Loan Commitment
or any other commitment of a Lender to make Committed Foreign Currency Revolving
Loans to a Foreign Borrower pursuant to Section 2.5 hereof.
"Foreign Currency Revolving Loan Commitment Addendum" means an addendum
to this Agreement among one or more Lenders, the Company and a Foreign Borrower,
substantially in the form of Exhibit G-1 hereto, setting forth, among other
things, the commitment of such Lender or Lenders to make, and the obligation of
such Foreign Borrower to repay, Committed Foreign Currency Revolving Loans, and,
in certain cases, issue and/or participate in Foreign Currency Letters of
Credit, in accordance with this Agreement.
"Foreign Currency Revolving Loan Commitment Amount" means, as the
context may require, the U.K. Revolving Loan Commitment Amount, the Spanish
Revolving Loan Commitment Amount, the French Revolving Loan Commitment Amount,
the Canadian Revolving Loan Commitment Amount or, with respect to any other
Foreign Currency Revolving Loan Commitment, the amount (expressed in U.S.
Dollars) set forth as the committed amount for such Commitment in the Foreign
Currency Revolving Loan Commitment Addendum with respect to such Foreign
Currency Revolving Loan Commitment.
"Foreign Currency Revolving Loan Limit" means $60,000,000.
"Foreign Currency Term Loan" means, as the context may require, a
Canadian Term Loan, a U.K. Term Loan or a Spanish Term Loan.
"Foreign Currency Term Loan Commitment" means, as the context may
require, a Lender's Canadian Term Loan Commitment, U.K. Term Loan Commitment or
Spanish Term
Loan Commitment.
"Foreign Currency Term Loan Commitment Addendum" means an addendum to
this Agreement among one or more Lenders, the Company and the Spanish Term
Borrower, substantially in the form of Exhibit G-2 hereto, setting forth, among
other things, the commitment of such Lender or Lenders to make, and the
obligation of the Spanish Term Borrower to repay, Spanish Term Loans in
accordance with this Agreement.
-26-
<PAGE>
"Foreign Currency Term Loan Commitment Amount" means, as the context
may require, the Canadian Term Loan Commitment Amount, the U.K. Term Loan
Commitment Amount or the Spanish Term Loan Commitment Amount.
"Foreign Revolver Borrowers" means, collectively, the U.K. Revolver
Borrower, the Spanish Revolver Borrower, the French Revolver Borrower, the
Canadian Borrower and any other Non-U.S. Subsidiary of the Company that shall
have satisfied all of the conditions set forth in Section 5.3.
"Foreign Subsidiary Pledge Supplement" means any supplement to a Pledge
Agreement in respect of Subsidiaries of the Company incorporated outside of the
United States of America, in form and substance reasonably satisfactory to the
Administrative Agent, as the same may be amended, supplemented, amended and
restated or otherwise modified from time to time.
"Foreign Term Borrowers" means, collectively, the Canadian Borrower,
the U.K. Term Borrower and the Spanish Term Borrower.
"Formica Business" is defined in Section 7.2.1.
"Formica International" means Formica International Corporation, a New
Jersey corporation.
"Fountainhead Acquisition" means the purchase by Holdings from
International Paper Company and its Subsidiaries ("International Paper") of all
of the assets exclusively relating to International Paper's Fountainhead solid
surfacing operations, such purchase to be on terms reasonably satisfactory to
the Agents.
"French Francs" means the lawful currency of the French Republic.
"French Revolver Borrower" is defined in the preamble.
"French Revolving Loan Commitment" is defined in clause (d) of Section
2.1.2.
"French Revolving Loan Commitment Amount" means $5,000,000 (with French
Revolving Loans to be denominated in French Francs), as such amount may be
modified pursuant to the terms hereof.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
-27-
<PAGE>
"Hazardous Material" means (i) any "hazardous substance", as defined by
CERCLA, (ii) any "hazardous waste", as defined by the Resource Conservation and
Recovery Act, as amended, (iii) any petroleum product, or (iv) any pollutant or
contaminant or hazardous, dangerous or toxic chemical, material or substance
within the meaning of any other applicable Environmental Law.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate or currency swap agreements,
interest or currency exchange rate cap agreements and interest or currency
exchange rate collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Holdings" is defined in the third recital.
"Holdings Equity Issuance" means the issuance on the Original Closing
Date by Holdings to the Equity Investors of common stock and preferred stock of
Holdings (and warrants to purchase common stock and/or preferred stock of
Holdings) for cash proceeds of approximately $85,000,000.
"Holdings Guaranty and Pledge Agreement" means the Guaranty and Pledge
Agreement, dated as of May 1, 1998, executed and delivered by an Authorized
Officer of Holdings pursuant to the Existing Credit Agreement, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Immaterial Subsidiary" means each Subsidiary of the Company that (a)
accounted for no more than 1% of the consolidated gross revenues of the Company
and its Subsidiaries for the most recently completed Fiscal Quarter with respect
to which, pursuant to Section 7.1.1(a) or 7.1.1(b), financial statements have
been, or are required to have been, delivered by the Company on or before the
date as of which any such determination is made, as reflected in such financial
statements; and (b) has assets which represent no more than 1% of the
consolidated gross assets of the Company and its Subsidiaries as of the last day
of the most recently completed Fiscal Quarter with respect to which, pursuant to
Section 7.1.1(a) or 7.1.1(b), financial statements have been, or are required to
have been, delivered by the Company on or before the date as of which any such
determination is made, as reflected in such financial statements.
-28-
<PAGE>
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of any Obligor, any qualification or exception to such opinion or certification
(i) which is of a "going concern" or similar nature, (ii) which relates to the
limited scope of examination of matters relevant to such financial statement
(except, in the case of matters relating to any acquired business or assets, in
respect of the period prior to the acquisition by such Obligor of such business
or assets), or (iii) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause the
Company to be in default of any of its obligations under Section 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or for
the deferred purchase price of property or services (exclusive of
deferred purchase price arrangements in the nature of open or other
accounts payable owed to suppliers on normal terms in connection with
the purchase of goods and services in the ordinary course of business)
and all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities;
(d) net liabilities of such Person under all Hedging
Obligations;
(e) whether or not so included as liabilities in accordance
with GAAP, all Indebtedness of the types referred to in clauses (a)
through (d) above (excluding prepaid interest thereon) secured by a
Lien (other than a Lien on the Capital Stock of an Unrestricted
Subsidiary) on property owned or being purchased by such Person
(including Indebtedness arising under conditional sales or other title
retention agreements), whether or not such Indebtedness shall have been
assumed by such Person or is limited in recourse; provided, however,
that, to the extent such Indebtedness is
-29-
<PAGE>
limited in recourse to the assets securing such Indebtedness, the
amount of such Indebtedness shall be limited to the fair market value
of such assets; and
(f) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer (to the extent such Person is liable for
such Indebtedness).
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Institutional Investors" means the CVC Entities and the DLJMB
Entities.
"Intercompany Loans" means, collectively, the Company Intercompany Loan
and the FMH Intercompany Loan.
"Intercompany Notes" means, collectively, the Company Intercompany Note
and the FMH Intercompany Note.
"Interest Coverage Ratio" means, at the end of any Fiscal Quarter,
subject to clause (b) of Section 1.4, the ratio computed for the period
consisting of such Fiscal Quarter and each of the three immediately prior Fiscal
Quarters of:
(a) EBITDA (for all such Fiscal Quarters)
to
(b) the cash portion of Interest Expense (for all such Fiscal
Quarters; provided that for the first three Fiscal Quarters ending
after the Original Closing Date, Interest Expense shall be determined
on an Annualized basis).
"Interest Expense" means, for any applicable period, the aggregate
consolidated interest expense of the Company and its Restricted Subsidiaries for
such applicable period, as determined in accordance with GAAP, including the
portion of any payments made in respect of Capitalized Lease Liabilities
allocable to interest expense, but excluding (to the extent included in interest
expense) up-front fees and expenses and the amortization of all deferred
financing costs.
"Interest Period" means, (a) as to any LIBO Rate Loan that is a
Committed Loan, the period commencing on the Borrowing date of such Loan or on
the date on which the Loan is
-30-
<PAGE>
converted into or continued as a LIBO Rate Loan, and ending on the date one,
two, three, six or, if available to the applicable Lenders, nine or twelve
months thereafter as selected by the applicable Borrower in its Borrowing
Request or its Conversion/Continuation Notice, (b) as to any Uncommitted LIBO
Revolving Loan, the period commencing on the Borrowing date of such Loan and
ending on the date such integral number of weeks or months thereafter as
selected by the applicable Foreign Borrower in its Uncommitted Revolving Loan
Borrowing Request, and (c) as to any Canadian BA or Acceptance Note, the period
beginning on (and including) the date on which such Canadian BA is accepted or
rolled over pursuant to Section 2.3 or 2.6 or such Acceptance Note is issued
pursuant to Section 2.11.4 and continuing to (but excluding) the date which is
30, 60, 90 or 180 days thereafter as the Canadian Borrower may select in its
relevant notice pursuant to Section 2.3 or 2.6; provided however that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period;
(iii) no Interest Period for any Loan shall extend beyond the
Stated Maturity Date for such Loan or the Revolving Loan Commitment
Termination Date, as applicable;
(iv) no Interest Period applicable to a Term Loan or portion
thereof shall extend beyond any date upon which is due any scheduled
principal payment in respect of the Term Loans unless the aggregate
principal amount of Term Loans represented by Base Rate Loans, or by
LIBO Rate Loans having Interest Periods that will expire on or before
such date, equals or exceeds the amount of such principal payment; and
(v) there shall be no more than 20 Interest Periods in respect
of Committed Loans in effect at any one time;
provided that with respect to each Borrowing of Term Loans made on the Closing
Date, Interest Period (other than any Interest Period with respect to any
Uncommitted LIBO Loan with a duration of less than one month) means the period
commencing on the Business Day on which such Borrowing is made and ending on the
last Business Day of the month following the month in which such Borrowing is
made (or 30 days following such Business Day, as the case may be).
-31-
<PAGE>
"Investment" means, relative to any Person, (i) any loan or advance
made by such Person to any other Person (excluding commission, travel,
relocation and similar advances to officers, directors and employees (or
individuals acting in similar capacities) made in the ordinary course of
business), or (ii) any investment, contribution or similar transfer made by such
Person for purposes of acquiring or maintaining any ownership or similar
interest in another Person or a business of another Person (whether through the
ownership or acquisition of Capital Stock, assets or otherwise, including by way
of merger, consolidation or otherwise). The amount of any Investment shall be
the original principal or capital amount thereof less all returns of principal
or equity thereon (and without adjustment by reason of the financial condition
of such other Person) and shall, if made by the transfer or exchange of property
other than cash, be deemed to have been made in an original principal or capital
amount equal to the fair market value of such property at the time of such
transfer or exchange.
"Investors' Agreement" means the Agreement, dated as of May 1, 1998,
among Holdings, FMH and certain other shareholders (as amended or otherwise
modified from time to time in accordance with Section 7.2.10).
"Invitation for Uncommitted Interest Quotes" means an invitation to the
Lenders having a Percentage of any Revolving Loan Commitment of greater than
zero, substantially in the form of Exhibit G-4 hereto, sent to such Lenders by
the Administrative Agent on behalf of the applicable Foreign Borrower pursuant
to Section 2.4, inviting the Lenders to submit Uncommitted Interest Quotes in
accordance with Section 2.4.3.
"Issuance Request" means a Letter of Credit request and certificate
duly executed by an Authorized Officer of the applicable Borrower, substantially
in the form of Exhibit B-3 hereto.
"Issuer" means a U.S. Issuer or a Foreign Currency Issuer.
"Lender Assignment Agreement" means a Lender Assignment Agreement,
substantially in the form of Exhibit F hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 2.1.3.
"Letter of Credit Commitment" means, with respect to any Issuer in
respect of any Currency, such Issuer's obligation to issue Letters of Credit
denominated in such Currency pursuant to Section 2.1.3 and, with respect to each
of the other Lenders that has a Revolving Loan Commitment in respect of such
Currency, the obligation of each such Lender to participate in such Letters of
Credit pursuant to Section 2.6.1.
-32-
<PAGE>
"Letter of Credit Commitment Amount" means, on any date, with respect
to U.S. Letters of Credit and Foreign Currency Letters of Credit, a maximum
amount of $75,000,000, as such amount may be reduced from time to time pursuant
to Section 2.2.
"Letter of Credit Fee" is defined in Section 3.3.3.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of
(a) the U.S. Letter of Credit Outstandings on such date,
plus
(b) the U.S. Dollar Equivalent of the Foreign Currency Letter
of Credit Outstandings on such date.
"Letter of Credit Reimbursement Obligation Rate" means, in the case of
Foreign Currency Letters of Credit denominated in Canadian Dollars, French
Francs, Spanish Pesetas or British Pounds, the LIBO Rate or the Canadian BA
Rate, as applicable to Committed Canadian Revolving Loans, Committed French
Revolving Loans, Committed Spanish Revolving Loans or Committed U.K. Revolving
Loans, as the case may be, in each case made as Fixed Rate Loans in a principal
amount approximately equal to the amount of the applicable Reimbursement
Obligation and having an Interest Period of one month (or 30 days as
applicable), and in the case of Foreign Currency Letters of Credit denominated
in any other Foreign Currency, the rate set forth in the applicable Foreign
Currency Revolving Loan Commitment Addendum.
"Leverage Ratio" means, at the end of any Fiscal Quarter, subject to
clause (b) of Section 1.4, the ratio of
(a) total Debt less cash and Cash Equivalent Investments of
the Company and its Restricted Subsidiaries on a consolidated basis
outstanding at such time;
to
(b) EBITDA for the period of four consecutive Fiscal Quarters
ended on such date.
"Leverage Ratio Estimate" is defined in the definition of Applicable
Commitment Fee.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans
in any Currency, the rate of interest per annum determined by the Administrative
Agent to be the arithmetic mean (rounded upward to the next 1/100th of 1%) of
the rates of interest per annum at
-33-
<PAGE>
which deposits in such Currency in the approximate amount of the Loan to be made
or continued as, or converted into, a LIBO Rate Loan by the Administrative Agent
(or, in the case of any LIBO Rate in respect of any LIBO Rate Loans in which the
Administrative Agent will not participate, $1,000,000 or the Foreign Currency
Equivalent thereof) and having a maturity comparable to such Interest Period
would be offered to the Administrative Agent in the London interbank market at
its request (i) in the case of LIBO Rate Loans denominated in any Currency other
than British Pounds, at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period, or (ii) in the case of LIBO
Rate Loans denominated in British Pounds, at approximately 11:00 a.m., London
time, on the day such Interest Period commences.
"LIBO Rate (Additional Cost Adjusted)" means, relative to any Loan
denominated in British Pounds for any Interest Period, the LIBO Rate in respect
of such Loan for such Interest Period, adjusted for any Additional Costs.
"LIBO Rate Auction" means a solicitation of Uncommitted Interest Quotes
setting forth Uncommitted Interest Margins based on the LIBO Rate pursuant to
Section 2.4.
"LIBO Rate Loan" means a Loan in any Currency bearing interest, at all
times during an Interest Period applicable to such Loan, at a fixed rate of
interest determined by reference to the LIBO Rate for such Currency.
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan denominated
in U.S. Dollars to be made, continued or maintained as, or converted into, a
LIBO Rate Loan for any Interest Period, the rate of interest per annum (rounded
upwards to the next 1/100th of 1%) determined by the Administrative Agent as
follows:
LIBO Rate
LIBO Rate = -------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be adjusted automatically as to all LIBO Rate Loans then outstanding
as of the effective date of any change in the LIBOR Reserve Percentage.
"LIBOR Office" means, relative to any Lender, (i) in the case of Term
Loans or Committed Revolving Loans denominated in U.S. Dollars, British Pounds,
Canadian Dollars, French Francs or Spanish Pesetas, the office of such Lender
designated as such for such Currency on Schedule II hereto or designated in the
Lender Assignment Agreement pursuant to which such Lender became a Lender
hereunder, (ii) in the case of LIBO Rate Loans that are Committed Foreign
Currency Revolving Loans denominated in any other Foreign Currency, the office
of such Lender designated as such in the applicable Foreign Currency Revolving
Loan
-34-
<PAGE>
Commitment Addendum or (iii) in either case, such other office of a Lender as
shall be so designated from time to time by notice from such Lender to the
Company and the Administrative Agent, which shall be making or maintaining LIBO
Rate Loans of such Lender in such Currency hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans denominated in U.S. Dollars, the percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect on such day
(whether or not applicable to any Lender) under regulations issued from time to
time by the F.R.S. Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the F.R.S. Board).
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or any filing or recording of any
instrument or document in respect of the foregoing, to secure payment of a debt
or performance of an obligation or any other priority or preferential treatment
of any kind or nature whatsoever that has the practical effect of creating a
security interest in property.
"Loan" means, as the context may require, a Revolving Loan, a Term Loan
or a Swing Line Loan, of any type and in any available Currency and shall
include without limitation the face amount of all Canadian BAs in respect of
which any Lender has not received payout in full. References herein to the
"principal amount" of a Loan shall, when referring to a Canadian BA, mean the
face amount thereof.
"Loan Document" means this Agreement, the Notes, the Letters of Credit,
each Foreign Currency Revolving Loan Commitment Addendum, each Foreign Currency
Term Loan Commitment Addendum, each Rate Protection Agreement relating to
Hedging Obligations of the Company or any of its Subsidiaries, each Uncommitted
Revolving Borrowing Addendum, each Borrowing Request, each Issuance Request, the
Fee Letter, the Administrative Agent's Fee Letter, each Pledge Agreement, the
Subsidiary Guaranty, each Mortgage (upon execution and delivery thereof), each
Security Agreement, the Affirmation and Consent and each other agreement,
document or instrument delivered in connection with this Agreement or any other
Loan Document, whether or not specifically mentioned herein or therein.
"Management Investors" mean certain current members of the management
of FMH and the Company that purchased or were granted equity interests in
Holdings on the Original Closing Date.
-35-
<PAGE>
"Material Adverse Effect" means (a) a material adverse effect on the
financial condition, operations, assets, business or properties of the Company
and its Restricted Subsidiaries, taken as a whole, (b) a material impairment of
the ability of the Company or any other Obligor to perform its respective
material obligations under the Loan Documents to which it is or will be a party,
or (c) an impairment of the validity or enforceability of, or a material
impairment of the rights, remedies or benefits available to the Issuers, the
Agents, the Arranger or the Lenders under, this Agreement or any other Loan
Document.
"Material Documents" means the Stock Purchase Agreement, the Investors'
Agreement and the Senior Subordinated Debt Documents, each as amended or
otherwise modified from time to time as permitted in accordance with the terms
hereof or of any other Loan Document.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means, collectively, each mortgage or deed of trust executed
and delivered pursuant to the terms of this Agreement, including clause (b) of
Section 7.1.8 or 7.1.12, in form and substance reasonably satisfactory to the
Agents.
"Net Debt Proceeds" means, with respect to the incurrence, sale or
issuance by the Company or any of its Restricted Subsidiaries of any Debt (other
than Debt permitted by Section 7.2.2 as in effect on the date hereof), the
excess of
(a) the gross cash proceeds received by the Company or any of
its Restricted Subsidiaries from such incurrence, sale or issuance,
over
(b) the sum, without duplication, of (i) all reasonable and
customary underwriting commissions and legal, investment banking,
brokerage, accounting and other professional fees, sales commissions
and disbursements and all other reasonable fees, expenses and charges,
in each case actually incurred in connection with such incurrence, sale
or issuance, (ii) in the case of any Debt incurred, sold or issued by
any Restricted Subsidiary that is a Non-U.S. Subsidiary, any taxes or
other costs or expenses resulting from repatriating any such proceeds
to the United States, and (iii) to the extent used to refinance the
Senior Subordinated Bridge Notes, cash proceeds of the Permanent
Financing.
"Net Disposition Proceeds" means, with respect to any sale, transfer or
other disposition of any assets of the Company or any of its Restricted
Subsidiaries (other than sales permitted pursuant to clause (a) or clause (b) of
Section 7.2.9, but including any sales or issuances of Capital Stock or other
equity interests of or by any Subsidiary of the Company), the excess of
-36-
<PAGE>
(a) the gross cash proceeds received by the Company or any of
its Restricted Subsidiaries from any such sale, transfer or other
disposition and any cash payments received in respect of promissory
notes or other non-cash consideration delivered to the Company or such
Restricted Subsidiary in respect thereof,
over
(b) the sum (without duplication) of (i) all reasonable and
customary fees and expenses with respect to legal, investment banking,
brokerage, accounting and other professional fees, sales commissions
and disbursements and all other reasonable fees, expenses and charges,
in each case actually incurred in connection with such sale, transfer
or other disposition, (ii) all taxes and other governmental costs and
expenses actually paid or estimated by the Company (in good faith) to
be payable in cash in connection with such sale, transfer or other
disposition (including, in the case of a transfer, sale or other
disposition of non-U.S. assets, any such taxes or other costs or
expenses resulting from repatriating any such proceeds to the United
States), (iii) payments made by the Company or any of its Restricted
Subsidiaries to retire Indebtedness (other than the Loans) of the
Company or any of its Restricted Subsidiaries where payment of such
Indebtedness is required in connection with such sale, transfer or
other disposition and (iv) reserves for purchase price adjustments
reasonably expected to be payable by the Company and its Restricted
Subsidiaries in cash in connection therewith;
provided, however, that if, after the payment of all taxes and purchase price
adjustments with respect to such sale, transfer or other disposition, the amount
of estimated taxes or purchase price adjustments, if any, pursuant to clause
(b)(ii) or (b)(iv) above exceeded the tax or purchase price adjustment amount
actually paid in cash in respect of such sale, transfer or other disposition,
the aggregate amount of such excess shall, at such time, constitute Net
Disposition Proceeds.
"Net Equity Proceeds" means with respect to the sale or issuance by the
Company, FMH or Holdings to any Person of any of its Capital Stock or any
warrants or options with respect to its Capital Stock or the exercise of any
such warrants or options after the Original Closing Date (other than pursuant to
(i) capital contributions or Capital Stock issuances (from other than a Public
Offering), (ii) any subscription agreement, incentive plan or similar
arrangement with any officer, employee or director of Holdings, FMH, the Company
or any Subsidiary of the Company, (iii) any loan by the Company, FMH or
Holdings, to such officer, employee or director solely for the purpose of
purchasing such shares pursuant to clause (h) of Section 7.2.5, (iv) proceeds
from the sale of any Capital Stock of Holdings to any officer, director or
employee of Holdings, FMH, the Company or any Subsidiary of the Company in an
aggregate amount not to exceed $15,000,000 after the Original Closing Date or
(vi) proceeds from the exercise of any options or warrants issued to any Equity
Investor or any officer, employee or director of Holdings, FMH, the Company or
any Subsidiary of the Company), the excess of
-37-
<PAGE>
(a) the gross cash proceeds received by Holdings and its
Subsidiaries from such sale or issuance,
over
(b) the sum, without duplication, of (i) all reasonable and
customary underwriting commissions and legal, investment banking,
brokerage, accounting and other professional fees, sales commissions
and disbursements and all other reasonable fees, expenses and charges,
in each case actually incurred in connection with such sale or
issuance, and (ii) to the extent used to refinance the Senior
Subordinated Bridge Notes, cash proceeds of the Permanent Financing.
"Net Income" means, for any period, the net income of the Company and
its Subsidiaries for such period on a consolidated basis, excluding
extraordinary or non-recurring gains; provided, however, that the Net Income of
any Person that is, during such period, not a Restricted Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid to the Company or a
Restricted Subsidiary in cash during such period.
"Non-Recourse Debt" means Indebtedness (i) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against the issuer of such Indebtedness) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity, and (ii) as to which the Persons to whom such Indebtedness
is owed have acknowledged and consented, in writing, that they do not have any
recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries (other than stock of Unrestricted Subsidiaries pledged by the
Company or any Restricted Subsidiary to secure Debt of an Unrestricted
Subsidiary); provided, however, that in no event shall Indebtedness of any
Unrestricted Subsidiary fail to be Non-Recourse Debt solely as a result of any
default provisions contained in a guarantee thereof by the Company or any of its
Restricted Subsidiaries if the Company or such Restricted Subsidiary was
otherwise permitted to provide such guarantee pursuant to clause (i) of Section
7.2.2 or clause (j) of Section 7.2.5.
"Non-U.S. Lender" means any Lender (including each Assignee Lender)
that is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any state thereof, or (iii) an estate or trust that is subject
to U.S. Federal income taxation regardless of the source of its income.
"Non-U.S. Subsidiary" means a Subsidiary of the Company that is not a
U.S. Subsidiary, including without limitation any Foreign Borrower.
-38-
<PAGE>
"Note" means, as the context may require, a Revolving Note, a Term Note
or a Swing Line Note.
"Notice of Uncommitted Revolving Borrowing" is defined in clause (a) of
Section 2.4.4.
"Notional BA Proceeds" means, with respect to any Canadian BA, the face
amount of such Canadian BA less the aggregate of:
(a) a discount from the face amount determined in accordance
with the normal market practice based on either (i) on any day, with
respect to any Canadian BA accepted by a Lender that is listed on
Schedule I to the Bank Act (Canada), the bankers' acceptance rate for
bankers' acceptances having a maturity comparable to that of such
Canadian BA as quoted on the Reuters Screen CDOR (Canadian Deposit
Offered Rate) Page (or any successor page) as of 10:00 a.m., Toronto
time, on the date of issuance of such Canadian BA or, if such rate is
not available at such time, the bankers' acceptance rate for bankers'
acceptances having a maturity comparable to those of such Canadian BA
as calculated by the Administrative Agent in accordance with normal
market practice on such day (the "CDOR Rate") or (ii) on any day, with
respect to any Canadian BA accepted by a Lender that is listed on
Schedule II to the Bank Act (Canada), the lesser of (x) the CDOR Rate
on such day plus .07% per annum and (y) the arithmetic average,
determined by the Administrative Agent, of the bankers' acceptance
rates quoted to the Administrative Agent by two Lenders selected and
agreed to by the Company and the Administrative Agent which are listed
on Schedule II to the Bank Act (Canada) as the rate at which such
Lenders would purchase at 10:00 a.m., Toronto time, on such date
bankers' acceptances having a maturity comparable to those of such
Canadian BA; and
(b) an acceptance fee calculated at the rate per annum, on the
basis of a year of 365 days or 366 days, as the case may be, equal to
the Applicable Canadian BA Stamping Fee on the face amount of such
Canadian BA for its term, being the actual number of days in the period
commencing on the date of acceptance by such Lender of such Canadian BA
and continuing to (but excluding) the maturity date of such Canadian
BA, such acceptance fee to be non-refundable and fully earned when due.
"Obligations" means all obligations (monetary or otherwise) of the
Borrowers and the other Obligors arising under or in connection with this
Agreement and each other Loan Document.
"Obligor" means any Borrower or any other Person (other than any Agent,
the Arranger, the Issuers, the Swing Line Lender or any Lender) obligated under
any Loan Document.
"Original Closing Date" means May 1, 1998.
-39-
<PAGE>
"Participant" is defined in Section 11.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
entity.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Company or any corporation, trade or business that is, along with the Company, a
member of a Controlled Group, has or within the prior six years has had any
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five, or by reason of being deemed to be a contributing sponsor under
section 4069 of ERISA.
"Percentage" means, relative to any Lender, (i) the applicable
percentage relating to U.S. Term Loans, U.K. Term Loans or Canadian Term Loans
or Committed Revolving Loans denominated in U.S. Dollars, British Pounds,
Canadian Dollars, French Francs or Spanish Pesetas, as the case may be, as set
forth opposite its name on Schedule II hereto under the applicable column
heading or set forth in Lender Assignment Agreement(s) under the applicable
column heading or (ii) the applicable percentage relating to Spanish Term Loans
or Committed Foreign Currency Revolving Loans in any other Foreign Currency as
set forth opposite its name in a Foreign Currency Term Loan Commitment Addendum
or a Foreign Currency Revolving Loan Commitment Addendum, as applicable, or
Lender Assignment Agreement(s) under the applicable heading, in each case, as
such percentage may be adjusted from time to time pursuant to Lender Assignment
Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered
pursuant to Section 11.11 or, in the case of a Lender's Percentage relating to
Committed Revolving Loans, pursuant to clause (h) of Section 2.1.2. A Lender
shall not have any Commitment to make Committed Revolving Loans in any Currency,
U.S. Term Loans, U.K. Term Loans, Canadian Term Loans or Spanish Term Loans (as
the case may be) if its percentage under the applicable column heading or in the
applicable Foreign Currency Revolving Loan Commitment Addendum, Foreign Currency
Term Loan Commitment Addendum or Lender Assignment Agreement is zero.
"Permanent Financing" has the meaning set forth in the Securities
Purchase Agreement dated as of the Original Closing Date in respect of the
Senior Subordinated Bridge Notes.
"Permitted Refinancing" means, relative to any Indebtedness, any other
Indebtedness which is incurred to repay and retire in full such refinanced
Indebtedness and all other monetary obligations in respect of such refinanced
Indebtedness; provided, however, that (a) the weighted average life of such
refinancing Indebtedness shall not be less than the weighted average life on the
date of such refinancing of such refinanced Indebtedness; and (b) the
refinancing Indebtedness shall not contain terms and conditions that, taken as a
whole, make the refinancing Indebtedness materially more burdensome to the
Company or Restricted Subsidiaries, or
-40-
<PAGE>
materially more detrimental to the Lenders (including without limitation with
respect to the subordination provisions contained therein) than the terms in
effect on the date of such refinancing of the refinanced Indebtedness.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means, as the context may require, the Company
Pledge Agreement, the FMH Guaranty and Pledge Agreement, the Holdings Guaranty
and Pledge Agreement, the Subsidiary Pledge Agreement or any Foreign Subsidiary
Pledge Supplement.
"Pro Forma Balance Sheet" is defined in Section 5.1.8.
"Public Offering" means with respect to any Person, any sale after the
Closing Date of the Capital Stock of such Person to the public pursuant to any
primary offering registered under the Securities Act of 1933.
"Purchased Foreign Subsidiaries" means Formica Nederland BV, Formica
Italia SRL and Formica (Schweitz) AG.
"Quarterly Payment Date" means the last day of each of March, June,
September and December, or, if any such day is not a Business Day, the next
succeeding Business Day, commencing with June 30, 1998.
"Rate Protection Agreement" means, collectively, any interest rate or
currency swap agreements and interest or currency exchange rate cap, collar or
similar agreement entered into by the Company pursuant to the terms of this
Agreement under which the counterparty to such agreement is (or, at the time
such Rate Protection Agreement was entered into, was) a Lender or an Affiliate
of a Lender.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
"Register" is defined in clause (b) of Section 2.9.
"Reimbursement Obligation" is defined in Section 2.8.3.
"Release" means a "release", as such term is defined in CERCLA.
-41-
<PAGE>
"Replacement Lender" is defined in Section 4.11.
"Replacement Notice" is defined in Section 4.11.
"Required Lenders" means, at any time, (i) prior to the Closing Date,
Lenders having at least 51% of the sum of the Revolving Loan Commitments and
Term Loan Commitments, and (ii) on and after the Closing Date, Lenders holding
at least 51% of the Total Exposure Amount.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Restricted Agreements" is defined in Section 7.2.10.
"Restricted Payments" is defined in Section 7.2.6.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Revolving Loan" means a U.S. Revolving Loan or a Foreign Currency
Revolving Loan.
"Revolving Loan Commitment" means a U.S. Revolving Loan Commitment or a
Foreign Currency Revolving Loan Commitment.
"Revolving Loan Commitment Amount" means the U.S. Revolving Loan
Commitment Amount or a Foreign Currency Revolving Loan Commitment Amount.
"Revolving Loan Commitment Termination Date" means the earliest of (i)
July 31, 1998, if the Term Loans have not been made on or prior to such date,
(ii) the sixth anniversary of the Original Closing Date, (iii) the date on which
any Revolving Loan Commitment Amount is terminated in full or reduced to zero
pursuant to Section 2.2, and (iv) the date on which any Commitment Termination
Event occurs.
"Revolving Note" means a promissory note of any Borrower payable to any
Lender, substantially in the form of Exhibit A-1 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of such Borrower to such Lender resulting from
outstanding Revolving Loans in the applicable Currency, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.
-42-
<PAGE>
"Secured Parties" means, collectively, the Lenders, the Issuers, the
Agents and all Affiliates of the Lenders which may be party to any Loan Document
(including any Rate Protection Agreement).
"Security Agreement" means, as the context may require, the Company
Security Agreement or the Subsidiary Security Agreement.
"Senior Subordinated Bridge Notes" means the $200,000,000 senior
subordinated bridge notes issued by the Borrower on the Original Closing Date.
"Senior Subordinated Bridge Note Issuance" means the issuance by the
Company of the Senior Subordinated Bridge Notes on May 1, 1998.
"Senior Subordinated Debt" means (i) the Senior Subordinated Bridge
Notes, (ii) any Permitted Refinancing thereof and (iii) up to an aggregate
principal amount of $15,000,000 of additional Indebtedness with terms and
conditions substantially similar to the Senior Subordinated Bridge Notes or any
Permitted Refinancing thereof.
"Senior Subordinated Debt Document" means all instruments, agreements
or other documents evidencing or governing any Senior Subordinated Debt or
pursuant to which any Senior Subordinated Debt has been issued.
"Solvent" means, with respect to any Person on a particular date, that
on such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature, and
(d) such Person is not engaged in business or a transaction, and such Person is
not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in
light of all the facts and circumstances existing at such time, can reasonably
be expected to become an actual or matured liability.
"Spanish Loan" means, as the context may require, a Committed Spanish
Revolving Loan or a Spanish Term Loan.
"Spanish Pesetas" means the lawful currency of the Kingdom of Spain.
"Spanish Revolver Borrower" is defined in the preamble.
-43-
<PAGE>
"Spanish Revolving Loan Commitment" is defined in clause (c) of Section
2.1.2.
"Spanish Revolving Loan Commitment Amount" means $5,000,000 (with
Spanish Revolving Loans to be denominated in Spanish Pesetas), as such amount
may be modified pursuant to the terms hereof.
"Spanish Term Borrower" means, in the event a Spanish Term Loan
Commitment is provided, a wholly-owned Subsidiary of the Company organized under
the laws of the Kingdom of Spain that is so designated by the Company.
"Spanish Term Loan Commitment" is defined in clause (d) of Section
2.1.1.
"Spanish Term Loan Commitment Amount" means, in the event a Spanish
Term Loan Commitment is provided, the amount (expressed in U.S. Dollars) set
forth as the committed amount in the Foreign Currency Term Loan Commitment
Addendum in respect of such Spanish Term Loan Commitment (representing a
commitment to make Term Loans denominated in Spanish Pesetas), as such amount
may be modified pursuant to the terms hereof.
"Spanish Term Loans" is defined in clause (d) of Section 2.1.1.
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.8.
"Stated Maturity Date" means (i) in the case of any Committed Loan, the
sixth anniversary of the Original Closing Date and (ii) in the case of any
Uncommitted Revolving Loan, the earlier of (x) the Stated Maturity Date for
Committed Revolving Loans and (y) the maturity date that shall have been agreed
between the applicable Foreign Borrower and the Lender or Lenders that shall
have made, or offered or agreed to make, such Uncommitted Revolving Loan, or, in
the case of any such day that is not a Business Day, the first Business Day
following such day.
"Stock Purchase Agreement" means the Share Sale and Purchase Agreement,
dated March 16, 1998 (as amended or otherwise modified from time to time in
accordance with Section 7.2.10) among BTR Australia Ltd. and Holdings.
"Subordination Provisions" is defined in Section 8.1.1.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which more than 50% of the outstanding
Capital Stock (or other ownership
-44-
<PAGE>
interests) having ordinary voting power to elect a majority of the board of
directors, managers or other voting members of the governing body of such entity
(irrespective of whether at the time Capital Stock (or other ownership
interests) of any other class or classes of such entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such Person, by such Person and one or more other
Subsidiaries of such Person, or by one or more other Subsidiaries of such
Person.
"Subsidiary Guarantor" means, on the Original Closing Date, each U.S.
Subsidiary of the Company (other than the Trademark Subsidiary and any
Unrestricted Subsidiary) and, thereafter, each U.S. Subsidiary of the Company
that is required, pursuant to clause (b) of Section 7.1.7, to execute and
deliver a Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guaranty, dated as of May 1, 1998,
executed and delivered by an Authorized Officer of each Subsidiary Guarantor
pursuant to the Existing Credit Agreement, as such Guaranty may be supplemented
from time to time by each future Subsidiary Guarantor pursuant to Section 7.1.7,
as amended, supplemented, amended and restated or otherwise modified from time
to time.
"Subsidiary Pledge Agreement" means the Pledge Agreement, dated as of
May 1, 1998, executed and delivered by an Authorized Officer of certain U.S.
Subsidiaries of the Company signatory thereto pursuant to the Existing Credit
Agreement, as such Pledge Agreement may be supplemented from time to time by
each future U.S. Subsidiary of the Company pursuant to Section 7.1.7, as
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Subsidiary Security Agreement" means the Security Agreement, dated as
of May 1, 1998, executed and delivered by an Authorized Officer of the U.S.
Subsidiaries of the Company (other than the Trademark Subsidiary and any
Unrestricted Subsidiary) pursuant to the Existing Credit Agreement, as such
Security Agreement may be supplemented from time to time by each future U.S.
Subsidiary of the Company pursuant to Section 7.1.7, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Swing Line Lender" means the Administrative Agent in its capacity as
Swing Line Lender hereunder.
"Swing Line Loan" is defined in clause (g) of Section 2.1.2.
"Swing Line Loan Commitment" is defined in clause (g) of Section 2.1.2.
"Swing Line Loan Commitment Amount" means, on any date, $10,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
-45-
<PAGE>
"Swing Line Note" means a promissory note of the Company payable to the
Swing Line Lender, in the form of Exhibit A-3 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Company to the Swing Line Lender resulting
from outstanding Swing Line Loans, and also means all other promissory notes
accepted from time to time in substitution therefor or renewal thereof.
"Syndication Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Syndication
Agent pursuant to Section 9.4.
"Taxes" is defined in Section 4.6.
"Term Loan" means a U.S. Term Loan or a Foreign Currency Term Loan.
"Term Loan Commitment" means, as the context may require, a U.S. Term
Loan Commitment or a Foreign Currency Term Loan Commitment.
"Term Loan Commitment Amount" means the U.S. Term Loan Commitment
Amount or a Foreign Currency Term Loan Commitment Amount.
"Term Loan Commitment Termination Date" means the earliest of (i) July
31, 1998, if the Term Loans have not been made on or prior to such date, (ii)
the Closing Date (immediately after the making of the Term Loans on such date),
and (iii) the date on which any Commitment Termination Event occurs.
"Term Note" means a promissory note of any Borrower payable to the
order of any Lender, in the form of Exhibit A-2 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of such Borrower to such Lender resulting from
outstanding Term Loans in the applicable Currency, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Total Exposure Amount" means, at any time,
(a) with respect to any provision of this Agreement other than
the declaration of the acceleration of the maturity of all or any
portion of the outstanding principal amount of the Loans and other
Obligations to be due and payable pursuant to Section 8.3, the sum of
(i) the aggregate principal amount of all Term Loans outstanding at
such time (included, in the case of any Foreign Currency Term Loan, at
the U.S. Dollar Equivalent thereof) and (ii) (x) the Total Revolving
Loan Commitment Amount if there are any Revolving Loan Commitments then
outstanding or (y) if all Revolving Loan Commitments shall have expired
or been terminated, the sum of (1) the aggregate
-46-
<PAGE>
principal amount of all Revolving Loans and Swing Line Loans
outstanding at such time (included, in the case of any Foreign Currency
Revolving Loan, at the U.S. Dollar Equivalent thereof) and (2) the
Letter of Credit Outstandings at such time; and
(b) with respect to the declaration of the acceleration of the
maturity of all or any portion of the outstanding principal amount of
the Loans and other Obligations to be due and payable pursuant to
Section 8.3, the sum of (i) the aggregate principal amount of all Loans
outstanding at such time (included, in the case of any Foreign Currency
Loan, at the U.S. Dollar Equivalent thereof) and (y) the Letter of
Credit Outstandings at such time.
"Total Foreign Currency Revolving Loan Commitment Amount" means, at any
time, the aggregate of all Foreign Currency Revolving Loan Commitment Amounts at
such time.
"Total Revolving Loan Commitment Amount" means, with respect to the
U.S. Revolving Loan Commitments and all Foreign Currency Revolving Loan
Commitments, on any date, $120,000,000, as such amount may be increased from
time to time pursuant to clause (h) of Section 2.1.2 or reduced from time to
time pursuant to Section 2.2.
"Trademark Subsidiary" means a wholly-owned Restricted Subsidiary of
the Company that is designated as such by the Company and that conducts no
business activity other than that directly connected with the ownership or
licensing of trademarks, trade names, trade secrets, trade dress, service marks,
patents, copyrights, mask works and other intellectual property associated with
the Formica Business and the licensing of such trademarks, trade names, trade
secrets, trade dress, service marks, patents, copyrights, mask works and other
intellectual property associated with the Formica Business to the Company and
its Restricted Subsidiaries and the lending of the proceeds thereof to the
Company and its Restricted Subsidiaries.
"Tranche" means, as the context may require, the Loans constituting
U.S. Term Loans, U.K. Term Loans, Canadian Term Loans, Spanish Term Loans, U.S.
Revolving Loans, Committed Canadian Revolving Loans, Committed French Revolving
Loans, Committed Spanish Revolving Loans, Committed U.K. Revolving Loans, other
Committed Foreign Currency Revolving Loans in a particular Currency, Uncommitted
Revolving Loans of a particular Borrowing or Swing Line Loans.
"Transaction" means the Capital Transactions and the Acquisition
Transactions.
"Transaction Documents" means each of the Material Documents and all
other agreements, documents, instruments, certificates, filings, consents,
approvals, board of directors resolutions and opinions furnished pursuant to or
in connection with the Transaction or any other transaction contemplated hereby
or thereby, each as amended, supplemented, amended and
-47-
<PAGE>
restated or otherwise modified from time to time as permitted in accordance with
the terms hereof or of any other Loan Document.
"type" means, (i) relative to any Loan, the portion thereof, if any,
being maintained as a Base Rate Loan or a Fixed Rate Loan, and, (ii) relative to
any Uncommitted Revolving Loan, whether such Uncommitted Revolving Loan is an
Uncommitted Absolute Rate Revolving Loan or an Uncommitted LIBO Revolving Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"U.K. Loan" means, as the context may require, a Committed U.K.
Revolving Loan or a U.K. Term Loan.
"U.K. Revolver Borrower" is defined in the preamble.
"U.K. Revolving Loan Commitment" is defined in clause (b) of Section
2.1.2.
"U.K. Revolving Loan Commitment Amount" means $5,000,000 (with U.K.
Revolving Loans to be denominated in British Pounds), as such amount may be
modified pursuant to the terms hereof.
"U.K. Term Borrower" is defined in the preamble.
"U.K. Term Loan Commitment" is defined in clause (b) of Section 2.1.1.
"U.K. Term Loan Commitment Amount" means $40,000,000 (with U.K. Term
Loans to be denominated in British Pounds).
"U.K. Term Loans" is defined in clause (b) of Section 2.1.1.
"Uncommitted Absolute Interest Rate" is defined in clause (b)(v) of
Section 2.4.3.
"Uncommitted Absolute Rate Revolving Loan" means a loan made or to be
made by a Lender pursuant to an Absolute Rate Auction.
"Uncommitted Interest Margin" is defined in clause (b)(iv) of Section
2.4.3.
"Uncommitted Interest Quote" means an offer by a Lender to make an
Uncommitted Revolving Loan in accordance with Section 2.4.
-48-
<PAGE>
"Uncommitted Interest Rate" means, with respect to any Uncommitted
Revolving Loan, the interest rate per annum for such Uncommitted Revolving Loan,
as agreed to and accepted by the applicable Foreign Borrower and the Lender that
shall have made or offered or agreed to make such Uncommitted Revolving Loan,
pursuant to Section 2.4.
"Uncommitted LIBO Revolving Loans" means a loan made or to be made by a
Lender pursuant to a LIBO Rate Auction.
"Uncommitted Revolving Borrowing Addendum" shall mean an addendum to
this Agreement executed by the Administrative Agent and a Non-U.S. Subsidiary,
substantially in the form of Exhibit G-3 hereto, delivered pursuant to clause
(c) of Section 5.3.
"Uncommitted Revolving Loan" means an Uncommitted Absolute Rate
Revolving Loan or an Uncommitted LIBO Revolving Loan.
"Uncommitted Revolving Loan Borrowing" shall mean a Borrowing of
Uncommitted Revolving Loans made by each of the Lenders whose offer to make such
Uncommitted Revolving Loans as part of such Borrowing has been accepted by the
applicable Foreign Borrower pursuant to Section 2.4.4.
"Uncommitted Revolving Loan Borrowing Request" shall mean a loan
request and certificate requesting Uncommitted Revolving Loans, duly executed by
an Authorized Officer of the applicable Foreign Borrower, substantially in the
form of Exhibit B-2 hereto, delivered pursuant to Section 2.4.1.
"United States" or "U.S." means the United States of America, its fifty
states and the District of Columbia.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by a resolution of the Board of Directors of the Company as an
Unrestricted Subsidiary, but only to the extent that such Subsidiary: (i) has no
Indebtedness other than Non-Recourse Debt; (ii) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (iii) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe for additional Capital Stock or warrants,
options or other rights to acquire Capital Stock or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and (iv) has no Indebtedness which has
been guaranteed by, or otherwise directly or indirectly received any credit
support for any such Indebtedness from, the Company
-49-
<PAGE>
or any of its Restricted Subsidiaries. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes hereof. The Board of Directors of the Company may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if no Default or Event
of Default would be in existence following such designation.
"U.S. Dollar" and the sign "$" mean the lawful currency of the United
States.
"U.S. Dollar Equivalent" means the Exchange Equivalent in U.S. Dollars
of any amount of the applicable Foreign Currency.
"U.S. Issuer" means (i) Bankers Trust Company, in its capacity as
issuer of U.S. Letters of Credit, and (ii) any Lender as may be designated by
the Company (and consented to by the Agents and such Lender, such consent by the
Agents not to be unreasonably withheld) in its capacity as issuer of U.S.
Letters of Credit.
"U.S. Letter of Credit" means a Letter of Credit denominated in U.S.
Dollars.
"U.S. Letter of Credit Commitment" means a Letter of Credit Commitment
in respect of U.S. Letters of Credit.
"U.S. Letter of Credit Commitment Amount" means, on any date the Letter
of Credit Commitment Amount on such date less the aggregate Foreign Currency
Letter of Credit Commitment Amount on such date.
"U.S. Letter of Credit Outstandings" means, on any date, an amount
equal to the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding U.S. Letters of Credit,
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of U.S. Letters of Credit.
"U.S. Loan" means, as the context may require, a U.S. Revolving Loan or
a U.S. Term Loan.
-50-
<PAGE>
"U.S. Subsidiary" means any Subsidiary of the Company that is
incorporated or organized in or under the laws of the United States or any state
thereof.
"U.S. Revolving Loans" is defined in clause (a) of Section 2.1.2.
"U.S. Revolving Loan Commitment" is defined in clause (a) of Section
2.1.2.
"U.S. Revolving Loan Commitment Amount" means, on any date, the Total
Revolving Loan Commitment Amount on such date less the Total Foreign Currency
Revolving Loan
Commitment Amount on such date.
"U.S. Term Loans" is defined in clause (a) of Section 2.1.1.
"U.S. Term Loan Commitment" is defined in clause (a) of Section 2.1.1.
"U.S. Term Loan Commitment Amount" means $35,000,000.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Waiver" means an agreement in favor of the Agents for the benefit of
the Lenders in form and substance reasonably satisfactory to the Agents.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA, and to which the Company has any liability.
"wholly-owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the Capital Stock (and all rights and options
to purchase such Capital Stock) of which, other than directors' qualifying
shares, are owned, beneficially and of record, by such Person and/or one or more
wholly-owned Subsidiaries of such Person.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each other Loan Document, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.
-51-
<PAGE>
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations.
(a) Unless otherwise specified, all accounting terms used herein or in
any other Loan Document shall be interpreted, all accounting determinations and
computations hereunder or thereunder (including under Section 7.2.4) shall be
made, and all financial statements required to be delivered hereunder or
thereunder shall be prepared, in accordance with those generally accepted
accounting principles ("GAAP") as in effect in the United States on December 31,
1997 and, unless otherwise expressly provided herein, shall be computed or
determined on a consolidated basis and without duplication.
(b) For purposes of computing the Fixed Charge Coverage Ratio, Interest
Coverage Ratio and Leverage Ratio (and any financial calculations required to be
made or included within such ratios) as of the end of any Fiscal Quarter, all
components of such ratios (other than Capital Expenditures) for the period of
four Fiscal Quarters ending at the end of such Fiscal Quarter shall include,
without duplication, such components of such ratios attributable to any business
or assets that have been acquired or disposed of by the Company or any of its
Subsidiaries (including through mergers or consolidations) after the first day
of such period of four Fiscal Quarters and prior to the end of such period, as
determined in good faith by the Company on a pro forma basis for such period of
four Fiscal Quarters as if such acquisition had occurred on such first day of
such period (including, whether or not such inclusion would be permitted under
GAAP or Regulation S-X of the Securities and Exchange Commission, cost savings
that would have been realized had such acquisition occurred on such day).
(c) Unless the context otherwise requires, for purposes of determining
the outstanding principal amount of Loans or Letter of Credit Outstandings
denominated in a Foreign Currency (including without limitation pursuant to
Section 3.1.2), the term "pro rata" as used in this Agreement shall be based
upon the U.S. Dollar Equivalent of the particular Foreign Currency at the time
of determination.
-52-
<PAGE>
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Sections 2.1.4, 2.1.5 and Article V),
(a) each Lender severally agrees to make Loans (other than
Swing Line Loans) pursuant to each of its Commitments, and the Swing
Line Lender agrees to make Swing Line Loans (to be denominated in U.S.
Dollars only) pursuant to the Swing Line Loan Commitment, in each case
as described in this Section 2.1 and each applicable Lender agrees to
accept Canadian BAs in accordance with the terms hereof; and
(b) each Issuer that has a Letter of Credit Commitment in
respect of any Currency severally agrees that it will issue Letters of
Credit denominated in such Currency pursuant to Section 2.1.3, and each
other Lender that has a Revolving Loan Commitment in respect of such
Currency severally agrees that it will purchase participation interests
in such Letters of Credit pursuant to Section 2.8.1.
Any term or provision of this Agreement or any other Loan Document (including
this Article II or Article III hereof) to the contrary notwithstanding, (i) all
Foreign Currency Loans shall be made in the applicable Foreign Currency and
shall be repaid in the same Foreign Currency in which such Loans were made and
(ii) all Foreign Currency Letters of Credit shall be issued, and all
Reimbursement Obligations in respect of Foreign Currency Letters of Credit shall
be paid, in the applicable Foreign Currency.
SECTION 2.1.1. Term Loan Commitments. Subject to compliance by the
Company with the terms of Sections 2.1.4, 5.1 and 5.2.1, and compliance by the
applicable Borrower with the terms of Section 5.2.2,
(a) on (but solely on) the Closing Date (which shall be a
Business Day), each Lender having a Percentage of the U.S. Term Loan
Commitment in excess of zero will make loans denominated in U.S.
Dollars (relative to such Lender, its "U.S. Term Loans") to the Company
equal to such Lender's Percentage, if any, of the aggregate amount of
the Borrowing or Borrowings of U.S. Term Loans requested by the Company
to be made on the Closing Date (with the commitment of each such Lender
described in this clause (a) herein referred to as its "U.S. Term Loan
Commitment");
(b) on (but solely on) the Closing Date (which shall be a
Business Day), each Lender having a Percentage of the U.K. Term Loan
Commitment in excess of zero will
-53-
<PAGE>
make loans denominated in British Pounds (relative to such Lender, its
"U.K. Term Loans") to the U.K. Term Borrower, equal to such Lender's
Percentage, if any, of the aggregate amount of the Borrowing or
Borrowings of U.K. Term Loans requested by the U.K. Term Borrower to be
made on the Closing Date (with the commitment of each such Lender
described in this clause (b) herein referred to as its "U.K. Term Loan
Commitment");
(c) on (but solely on) the Closing Date (which shall be a
Business Day), each Lender having a Percentage of the Canadian Term
Loan Commitment in excess of zero will make loans (or accept Canadian
BAs) denominated in Canadian Dollars (relative to such Lender, its
"Canadian Term Loans") to the Canadian Borrower, equal to such Lender's
Percentage, if any, of the aggregate amount of the Borrowing or
Borrowings of Canadian Term Loans requested by the Canadian Borrower to
be made on the Closing Date (with the commitment of each such Lender
described in this clause (c) herein referred to as its "Canadian Term
Loan Commitment"); and
(d) in the event the Administrative Agent has received a
Foreign Currency Term Loan Commitment Addendum in respect of a Spanish
Term Loan Commitment, each Lender having a Percentage of the Spanish
Term Loan Commitment in excess of zero will, subject to satisfaction of
the conditions set forth in Section 5.3, make loans denominated in
Spanish Pesetas (relative to such Lender, its "Spanish Term Loans") to
the Spanish Term Borrower equal to such Lender's Percentage, if any, of
the aggregate amount of the Borrowing or Borrowings of Spanish Term
Loans requested by the Spanish Term Borrower to be made on the Closing
Date (with the commitment of each such Lender described in this clause
(d) herein referred to as its "Spanish Term Loan Commitment").
No amounts paid or prepaid with respect to Term Loans may be reborrowed.
SECTION 2.1.2. Revolving Loan Commitments and Swing Line Loan
Commitment. Subject to compliance by the Company with the terms of Sections
2.1.4, 5.1 and Section 5.2.1, and compliance by the applicable Borrower with the
terms of Section 5.2.2 (and, in the case of any Foreign Borrower other than the
U.K. Revolver Borrower, the Canadian Borrower, the French Revolver Borrower or
the Spanish Revolver Borrower, compliance by the applicable Foreign Borrower
with the terms of Section 5.3), from time to time on any Business Day occurring
concurrently with (or after) the making of the Term Loans but prior to the
Revolving Loan Commitment Termination Date,
(a) each Lender that has a Percentage of the U.S. Revolving
Loan Commitment in excess of zero will make loans denominated in U.S.
Dollars (relative to such Lender, its "U.S. Revolving Loans") to the
Company equal to such Lender's Percentage, if any, of
-54-
<PAGE>
the aggregate amount of the Borrowing or Borrowings of U.S. Revolving
Loans requested by the Company to be made on such day (with the
commitment of each such Lender described in this clause (a) herein
referred to as its "U.S. Revolving Loan Commitment"). On the terms and
subject to the conditions hereof, the Company may from time to time
borrow, prepay and reborrow U.S. Revolving Loans;
(b) each Lender that has a Percentage of the U.K. Revolving
Loan Commitment in excess of zero will make loans denominated in
British Pounds (relative to such Lender, its "Committed U.K. Revolving
Loans") to the U.K. Revolver Borrower equal to such Lender's
Percentage, if any, of the aggregate amount of the Borrowing or
Borrowings of Committed U.K. Revolving Loans requested by the U.K.
Revolver Borrower to be made on such day (with the commitment of each
such Lender described in this clause (b) herein referred to as its
"U.K. Revolving Loan Commitment"). On the terms and subject to the
conditions hereof, the U.K. Revolver Borrower may from time to time
borrow, prepay and reborrow Committed U.K. Revolving Loans;
(c) each Lender that has a Percentage of the Spanish Revolving
Loan Commitment in excess of zero will make loans denominated in
Spanish Pesetas (relative to such Lender, its "Committed Spanish
Revolving Loans") to the Spanish Revolver Borrower equal to such
Lender's Percentage, if any, of the aggregate amount of the Borrowing
or Borrowings of Committed Spanish Revolving Loans requested by the
Spanish Revolver Borrower to be made on such day (with the commitment
of each such Lender described in this clause (c) herein referred to as
its "Spanish Revolving Loan Commitment"). On the terms and subject to
the conditions hereof, the Spanish Revolver Borrower may from time to
time borrow, prepay and reborrow Committed Spanish Revolving Loans;
(d) each Lender that has a Percentage of the French Revolving
Loan Commitment in excess of zero will make loans denominated in French
Francs (relative to such Lender, its "Committed French Revolving
Loans") to the French Revolver Borrower equal to such Lender's
Percentage, if any, of the aggregate amount of the Borrowing or
Borrowings of Committed French Revolving Loans requested by the French
Revolver Borrower to be made on such day (with the commitment of each
such Lender described in this clause (d) herein referred to as its
"French Revolving Loan Commitment"). On the terms and subject to the
conditions hereof, the French Revolver Borrower may from time to time
borrow, prepay and reborrow Committed French Revolving Loans;
(e) each Lender that has a Percentage of the Canadian
Revolving Loan Commitment in excess of zero will make loans (or accept
Canadian BAs) denominated in Canadian Dollars (such loans and Canadian
BAs relative to such Lender, its "Committed Canadian Revolving Loans")
to the Canadian Borrower equal to such Lender's
-55-
<PAGE>
Percentage, if any, of the aggregate amount of the Borrowing or
Borrowings of Committed Canadian Revolving Loans requested by the
Canadian Borrower to be made on such day (with the commitment of each
such Lender described in this clause (e) herein referred to as its
"Canadian Revolving Loan Commitment"). On the terms and subject to the
conditions hereof, the Canadian Borrower may from time to time borrow,
prepay (or, in the case of Canadian BA's, cash collateralize) and
reborrow Committed Canadian Revolving Loans;
(f) in the event any other Foreign Currency Revolving Loan
Commitment is created pursuant to Section 2.5, each Lender having a
Percentage of such Foreign Currency Revolving Loan Commitment in excess
of zero will make Committed Foreign Currency Revolving Loans
denominated in the applicable Foreign Currency to the applicable
Foreign Borrower equal to such Lender's Percentage of the aggregate
amount of the Borrowing or Borrowings of Committed Foreign Currency
Revolving Loans requested by such Foreign Borrower under such Foreign
Currency Revolving Loan Commitment to be made on such day. On the terms
and subject to the conditions hereof and of the applicable Foreign
Currency Revolving Loan Commitment Addendum, the applicable Foreign
Borrower may from time to time borrow, prepay and reborrow Committed
Foreign Currency Revolving Loans under such Foreign Currency Revolving
Loan Commitment;
(g) the Swing Line Lender will make loans denominated in U.S.
Dollars ("Swing Line Loans") to the Company equal to the principal
amount of Swing Line Loans requested by the Company to be made on such
day (with the commitment of the Swing Line Lender described in this
clause (g) herein referred to as its "Swing Line Loan Commitment"). On
the terms and subject to the conditions hereof, the Company may from
time to time borrow, prepay and reborrow Swing Line Loans; and
(h) at any time that no Default has occurred and is
continuing, the Company may, by notice to the Agents, request that, on
the terms and subject to the conditions contained in this Agreement,
the Lenders and/or other financial institutions not then a party to
this Agreement provide up to an aggregate amount of $25,000,000 in
additional Revolving Loan Commitments denominated in any Currency or
Currencies. Upon receipt of such notice, the Syndication Agent shall
use its best commercially reasonable efforts to arrange for the Lenders
or other financial institutions to provide such additional Revolving
Loan Commitments; provided that the Syndication Agent will first offer
each of the Lenders that then has a Percentage of any Revolving Loan
Commitments a pro rata portion (based upon the Total Revolving Loan
Commitment Amount at such time) of any such additional Revolving Loan
Commitment. Alternatively, any Lender may commit to provide the full
amount of the requested additional Revolving Loan Commitment and then
offer portions of such additional Revolving Loan Commitment to the
other Lenders
-56-
<PAGE>
or other financial institutions, subject to the proviso in the
immediately preceding sentence. Nothing contained in this clause (h) or
otherwise in this Agreement is intended to commit any Lender or any
Agent to provide any portion of any such additional Revolving Loan
Commitments. If and to the extent that any Lenders and/or other
financial institutions agree, in their sole discretion, to provide any
such additional Revolving Loan Commitments, (i) the Total Revolving
Loan Commitment Amount and the U.S. Revolving Loan Commitment Amount or
the Foreign Currency Revolving Loan Commitment Amount, as the case may
be, shall be increased by the amount of the additional U.S. Revolving
Loan Commitments or Foreign Currency Revolving Loan Commitments, as the
case may be, agreed to be so provided, (ii) the Percentages of the
respective Lenders in respect of the U.S. Revolving Loan Commitment
and/or Foreign Currency Revolving Loan Commitments, as the case may be,
shall be proportionally adjusted, as applicable, (iii) at such time and
in such manner as the Company and the Syndication Agent shall agree (it
being understood that the Company and the Agents will use their best
commercially reasonable efforts to avoid the prepayment or assignment
of any Fixed Rate Loan on a day other than the last day of the Interest
Period applicable thereto), the Lenders shall assign and assume
outstanding Committed Revolving Loans and participations in outstanding
Letters of Credit so as to cause the amount of such Committed Revolving
Loans and participations in Letters of Credit held by each Lender to
conform to the respective percentages of the applicable Revolving Loan
Commitments of the Lenders and (iv) the Company shall execute and
deliver any additional Notes or other amendments or modifications to
this Agreement or any other Loan Document as the Agents may reasonably
request.
SECTION 2.1.3. Letter of Credit Commitment. Subject to compliance by
the Company with the terms of Sections 2.1.5, 5.1 and 5.2.1 and compliance by
the applicable Borrower with Section 5.2.2 (and, in the case of any Foreign
Borrower other than the U.K. Revolver Borrower, the Canadian Borrower, the
French Revolver Borrower or the Spanish Revolver Borrower, compliance by the
applicable Foreign Borrower with the terms of Section 5.3), from time to time on
any Business Day occurring concurrently with (or after) the Closing Date but
prior to the Revolving Loan Commitment Termination Date, the applicable Issuer
will (i) issue one or more standby or commercial letters of credit on a sight
basis and denominated in the applicable Currency (each referred to as a "Letter
of Credit") for the account of the Company or any of its Subsidiaries in the
Stated Amount requested by the applicable Borrower on such day, to expire, in
the case of standby Letters of Credit on a date not later than the date that is
five Business Days prior to the sixth anniversary of the Original Closing Date
and not later than one year from the date of such issuance, and, in the case of
commercial Letters of Credit, on a date not later than the date that is thirty
Business Days prior to the sixth anniversary of the Original Closing Date and
not later than 180 days from the date of such issuance, or (ii) extend the
Stated Expiry Date of an existing standby or commercial Letter of Credit
previously issued hereunder, in the case of standby Letters of Credit, to a date
not later than the date that is five Business Days prior to the
-57-
<PAGE>
sixth anniversary of the Original Closing Date and not later than one year from
the date of the Stated Expiry Date, and, in the case of commercial Letters of
Credit, to a date not later than the date that is thirty Business Days prior to
the sixth anniversary of the Original Closing Date and not later than 180 days
from the Stated Expiry Date; provided that a standby Letter of Credit may, if
required by the beneficiary thereof, contain "evergreen" provisions pursuant to
which the Stated Expiry Date shall be automatically extended, unless notice to
the contrary shall have been given to the beneficiary by the applicable Issuer
of such Letter of Credit more than a specified period prior to the then existing
Stated Expiry Date.
SECTION 2.1.4. Lenders Not Permitted or Required to Make the Loans. No
Lender shall be permitted or required to, and the applicable Borrower shall not
request any Lender to, make
(a) any U.S. Term Loan, U.K. Term Loan, Canadian Term Loan or
Spanish Term Loan if, after giving effect thereto, the aggregate
original principal amount (calculated at the U.S. Dollar Equivalent
thereof in the case of any Foreign Currency Term Loans) of all such
Term Loans of such Lender would exceed such Lender's Percentage of the
applicable Term Loan Commitment Amount;
(b) any U.S. Revolving Loan, Committed U.K. Revolving Loan,
Committed Spanish Revolving Loan, Committed French Revolving Loan,
Committed Canadian Revolving Loan or other Committed Foreign Currency
Revolving Loan if, after giving effect thereto, the aggregate
outstanding principal amount (calculated at the U.S. Dollar Equivalent
thereof in the case of any Foreign Currency Revolving Loans) of all of
such Lender's Committed Revolving Loans of such Tranche, together with
such Lender's Percentage of the aggregate amount of all Letter of
Credit Outstandings of such Tranche and, in the case of U.S. Revolving
Loans, such Lender's Percentage of the outstanding principal amount of
all Swing Line Loans, would exceed such Lender's applicable Percentage
of the then existing Revolving Loan Commitment Amount in respect of
such Tranche; or
(c) in the case of the Swing Line Lender, any Swing Line Loan
if, after giving effect thereto, the aggregate outstanding principal
amount of all Swing Line Loans would exceed the lesser of (x) the then
existing Swing Line Loan Commitment Amount and (y) an amount equal to
(i) the then existing U.S. Revolving Loan Commitment Amount less (ii)
the sum of the aggregate outstanding principal amount of all U.S.
Revolving Loans and U.S. Letter of Credit Outstandings.
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of
Credit. No Issuer shall be permitted or required to issue, extend or renew any
Letter of Credit if, after giving effect thereto, (a) the Letter of Credit
Outstandings would exceed the then existing Letter of Credit
-58-
<PAGE>
Commitment Amount or (b) the aggregate amount of all Letter of Credit
Outstandings in respect of the applicable Tranche (plus, in the case of U.S.
Dollar Letters of Credit only, the aggregate principal amount of all Swing Line
Loans then outstanding) would exceed (x) the then existing Revolving Loan
Commitment Amount in respect of such Tranche less (y) the sum of the aggregate
amount of all Committed Revolving Loans in such Currency.
SECTION 2.2. Optional Reduction of the Revolving Loan Commitment
Amounts. The Company may, from time to time on any Business Day occurring after
the Closing Date, voluntarily reduce any Revolving Loan Commitment Amount;
provided, however, that all such reductions shall require at least three
Business Days' prior notice to the Administrative Agent and be permanent, and
any partial reduction of any Revolving Loan Commitment Amount shall be in a
minimum amount of $500,000 or any larger integral multiple of $100,000. Any such
reduction of any Revolving Loan Commitment Amount which reduces such Revolving
Loan Commitment Amount below the Letter of Credit Commitment Amount with respect
to the same Currency, if applicable, (or, in the case of the U.S. Revolving Loan
Commitment only, the Swing Line Loan Commitment Amount) shall result in an
automatic and corresponding reduction of such Letter of Credit Commitment Amount
(or the Swing Line Loan Commitment Amount, as the case may be) to an aggregate
amount not in excess of the applicable Revolving Loan Commitment Amount, as so
reduced, without any further action on the part of the applicable Issuer (or the
Swing Line Lender, if applicable); provided that any such reduction in any such
Letter of Credit Commitment Amount or the Swing Line Loan Commitment Amount
shall be reinstated to the extent that, whether pursuant to clause (h) of
Section 2.1.2, Section 2.5 or otherwise, the corresponding Revolving Loan
Commitment Amount is thereafter increased.
SECTION 2.3. Borrowing Procedures and Funding Maintenance. Committed
Loans (other than Swing Line Loans) shall be made by the Lenders in accordance
with Section 2.3.1, and Swing Line Loans shall be made by the Swing Line Lender
in accordance with Section 2.3.2.
SECTION 2.3.1. Term Loans and Revolving Loans. By delivering the
appropriate Committed Loan Borrowing Request to the Administrative Agent on or
before 12:00 noon, New York time (in the case of U.S. Loans or Canadian Loans)
or 11:00 a.m., London time (in the case of any Foreign Currency Loans other than
Canadian Loans), on a Business Day, a Borrower may from time to time irrevocably
request, on not less than one Business Day's notice (in the case of Base Rate
Loans) or three Business Days' notice (in the case of Fixed Rate Loans) nor more
than five Business Days' notice (in the case of any Committed Loans), that a
Committed Borrowing be made in a minimum amount of $500,000 (or, in the case of
Foreign Currency Revolving Loans, the multiple of 100,000 units of the Currency
of such Loans the U.S. Dollar Equivalent of which is nearest to $500,000) or any
larger integral multiple of $100,000 (or, in the case of Foreign Currency
Revolving Loans, the multiple of 50,000 units of the Currency of such Loans the
U.S. Dollar Equivalent of which is nearest to $100,000) or in the unused amount
of the applicable Commitment. No Committed Loan Borrowing Request shall be
required, and the
-59-
<PAGE>
minimum aggregate amounts specified under this Section 2.3.1 shall not apply, in
the case of U.S. Revolving Loans made under clause (b) of Section 2.3.2 to
refund Refunded Swing Line Loans or Committed Revolving Loans deemed made under
Section 2.8.2 in respect of unreimbursed Disbursements. On the terms and subject
to the conditions of this Agreement, each Committed Borrowing shall be comprised
of the type of Committed Loans, shall be made in the Currency and shall be made
on the Business Day, specified in such Committed Loan Borrowing Request. On or
before 11:00 a.m., New York time (11:00 a.m., London time, in the case of
Foreign Currency Loans other than Canadian Loans), on such Business Day, each
Lender shall deposit with the Administrative Agent same day funds in the
applicable Currency in an amount equal to such Lender's Percentage of the
requested Borrowing. Such deposit will be made to an account which the
Administrative Agent shall specify from time to time by notice to the Lenders.
To the extent funds are received from the Lenders, the Administrative Agent
shall make such funds available to the applicable Borrower by wire transfer to
the accounts such Borrower shall have specified in its Committed Loan Borrowing
Request. No Lender's obligation to make any Committed Loan shall be affected by
any other Lender's failure to make any Committed Loan.
SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice, promptly
followed (within one Business Day) by the delivery of a confirming Committed
Loan Borrowing Request, to the Swing Line Lender on or before 1:00 p.m., New
York time, on the Business Day the proposed Swing Line Loan is to be made, the
Company may from time to time irrevocably request that a Swing Line Loan be made
by the Swing Line Lender in a minimum principal amount of $50,000 or any larger
integral multiple of $10,000. All Swing Line Loans shall be made in U.S. Dollars
as Base Rate Loans and shall not be entitled to be converted into LIBO Rate
Loans. The proceeds of each Swing Line Loan shall be made available by the Swing
Line Lender, by 2:00 p.m., New York time, on the Business Day telephonic notice
is received by it as provided in this clause (a), to the Company by wire
transfer to the account the Company shall have specified in its notice therefor.
(b) If (i) any Swing Line Loan shall be outstanding for more than three
Business Days or (ii) any Default shall occur and be continuing, each Lender
with a U.S. Revolving Loan Commitment (other than the Swing Line Lender)
irrevocably agrees that it will, at the request of the Swing Line Lender and
upon notice from the Administrative Agent, unless such Swing Line Loan shall
have been earlier repaid in full, make a U.S. Revolving Loan (which shall
initially be funded as a Base Rate Loan) in an amount equal to such Lender's
Percentage in respect of the U.S. Revolving Loan Commitments of the aggregate
principal amount of all such Swing Line Loans then outstanding (such outstanding
Swing Line Loans hereinafter referred to as the "Refunded Swing Line Loans");
provided, that the Swing Line Lender shall not request, and no Lender with a
U.S. Revolving Loan Commitment shall make, any Refunded Swing Line Loan if,
after giving effect to the making of such Refunded Swing Line Loan, the sum of
all Swing Line Loans and U.S. Revolving Loans made by such Lender, plus such
Lender's Percentage in respect
-60-
<PAGE>
of the U.S. Revolving Loan Commitment of the U.S. Letter of Credit Outstandings,
would exceed such Lender's Percentage of the then existing U.S. Revolving Loan
Commitment Amount. On or before 12:00 noon, New York time, on the first Business
Day following receipt by each Lender of a request to make U.S. Revolving Loans
as provided in the preceding sentence, each such Lender with a U.S. Revolving
Loan Commitment shall deposit in an account specified by the Swing Line Lender
the amount so requested in same day funds and such funds shall be applied by the
Swing Line Lender to repay the Refunded Swing Line Loans. At the time the
aforementioned Lenders make the above referenced U.S. Revolving Loans, the Swing
Line Lender shall be deemed to have made, in consideration of the making of the
Refunded Swing Line Loans, a U.S. Revolving Loan in an amount equal to the Swing
Line Lender's Percentage in respect of the U.S. Revolving Loan Commitment of the
aggregate principal amount of the Refunded Swing Line Loans. Upon the making (or
deemed making, in the case of the Swing Line Lender) of any U.S. Revolving Loans
pursuant to this clause (b), the amount so funded shall become outstanding as a
U.S. Revolving Loan of such Lender and shall no longer be a Swing Line Loan. All
interest payable with respect to any U.S. Revolving Loans made (or deemed made,
in the case of the Swing Line Lender) pursuant to this clause (b) shall be
appropriately adjusted to reflect the period of time during which the Swing Line
Lender had outstanding Swing Line Loans in respect of which such U.S. Revolving
Loans were made. Each Lender's obligation (in the case of Lenders with a U.S.
Revolving Loan Commitment) to make the U.S. Revolving Loans referred to in this
clause (b) shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the Swing
Line Lender, the Company or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of any Default; (iii) any adverse change in the
condition (financial or otherwise) of the Company or any other Obligor; (iv) the
acceleration or maturity of any Loans or the termination of any Commitment after
the making of any Swing Line Loan; (v) any breach of this Agreement or any other
Loan Document by any Borrower or any Lender; or (vi) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
SECTION 2.4. Uncommitted Revolving Loans. Subject to compliance by the
Company with the terms of Section 2.1.4, Section 5.1 and Section 5.2.1, and
compliance by the applicable Foreign Borrower with the terms of Section 5.2.2
(and, in the case of any Foreign Borrower other than the U.K. Term Borrower, the
U.K. Revolver Borrower, the Canadian Borrower, the French Revolver Borrower and
the Spanish Revolver Borrower, compliance by the applicable Foreign Borrower
with the terms of Section 5.3), each Lender severally agrees that any Foreign
Borrower may request that Uncommitted Revolving Loan Borrowings be made to it
pursuant to this Section 2.4 from time to time on any Business Day prior to the
Revolving Loan Commitment Termination Date.
SECTION 2.4.1. Uncommitted Revolving Loan Borrowing Request. (a) A
Foreign Borrower may request that a Borrowing of Uncommitted Revolving Loans be
made to it in any
-61-
<PAGE>
Foreign Currency by delivering to the Administrative Agent an Uncommitted
Revolving Loan Borrowing Request, which shall specify:
(i) the Foreign Currency in which each such Loan is requested
to be made (provided, that such Foreign Borrower may only request and
receive Uncommitted Revolving Loans denominated in the Foreign Currency
of the country in which such Foreign Borrower's principal business
operations are located);
(ii) the principal amount of the Uncommitted Revolving Loan
Borrowing requested to be made to such Foreign Borrower (which shall be
in an aggregate principal amount the U.S. Dollar Equivalent of which is
not less than $500,000) and that, after giving effect to such
Uncommitted Revolving Loan Borrowing, the conditions set forth in
Section 5.2.1 applicable thereto shall have been satisfied;
(iii) the proposed date of each such proposed Uncommitted
Revolving Loan Borrowing, which shall be a Business Day;
(iv) in the case of a proposed Borrowing of Uncommitted
Revolving Loans that are to be Fixed Rate Loans, the proposed Interest
Period for each such proposed Borrowing, subject to the provisions of
the definition of Interest Period;
(v) the proposed Stated Maturity Date for the Uncommitted
Revolving Loans to be made pursuant to each such Uncommitted Revolving
Loan Borrowing; and
(vi) whether the Uncommitted Interest Quotes requested are to
set forth an Uncommitted Interest Margin or an Uncommitted Absolute
Interest Rate.
(b) Each Uncommitted Revolving Loan Borrowing Request shall be
transmitted to the Administrative Agent by telex or facsimile so as to be
received by the Administrative Agent (i) no later than 10:30 a.m., New York time
(10:30 a.m., London time, in the case of Foreign Currency Loans other than
Canadian Loans), on the fourth Business Day before the date of the Borrowing
proposed therein, in the case of a LIBO Rate Auction, or (ii) not later than
10:30 a.m., New York time, on the Business Day next preceding the date of the
Borrowing proposed therein, in the case of an Absolute Rate Auction, or, in any
such case, such other time or date as the Company and the Administrative Agent
shall have mutually agreed and shall have notified to the Lenders having a
Percentage of any Revolving Loan Commitment of greater than zero no later than
the date of the Uncommitted Revolving Loan Borrowing Request for the first LIBO
Rate Auction or Absolute Rate Auction for which such change is to be effective.
-62-
<PAGE>
(c) No Foreign Borrower shall deliver to the Administrative Agent any
Uncommitted Revolving Loan Borrowing Request within five Business Days after the
delivery by such Foreign Borrower of any other Uncommitted Revolving Loan
Borrowing Request.
SECTION 2.4.2. Invitation for Uncommitted Interest Quotes. Promptly
upon receipt of an Uncommitted Revolving Loan Borrowing Request delivered
pursuant to Section 2.4.1, but in no event later than the Business Day following
such receipt, the Administrative Agent shall send to each of the Lenders having
a Percentage of any Revolving Loan Commitment of greater than zero (by telecopy)
an Invitation for Uncommitted Interest Quotes (which shall include a copy of
each Uncommitted Revolving Loan Borrowing Request delivered pursuant to Section
2.4.1), which shall constitute an invitation on behalf of the relevant Foreign
Borrower to each such Lender to submit Uncommitted Interest Quotes offering to
make all or a portion of the Uncommitted Revolving Loan Borrowing requested by
such Foreign Borrower pursuant to Section 2.4.1. The Lenders may, but shall have
no obligation to, make such offers and such Foreign Borrower may, but shall have
no obligation to, accept any such offers in the manner set forth herein.
SECTION 2.4.3. Submission and Contents of Uncommitted Interest Quotes.
(a) Each Lender having a Percentage of any Revolving Loan Commitment of greater
than zero may submit an Uncommitted Interest Quote containing an offer or offers
to make Uncommitted Revolving Loans in response to any Invitation for
Uncommitted Interest Quotes. Each Uncommitted Interest Quote must comply with
the requirements of this Section 2.4.3 and must be submitted to the
Administrative Agent (by telecopy) (i) not later than 2:00 p.m., New York time,
on the fourth Business Day before the proposed date of the Borrowing, in the
case of a LIBO Rate Auction, or (ii) not later than 9:30 a.m., New York time, on
the proposed date of the Borrowing, in the case of an Absolute Rate Auction, or,
in any such case, such other time or date as the Company and the Administrative
Agent shall have mutually agreed and shall have notified to the Lenders having a
Percentage of any Revolving Loan Commitment of greater than zero not later than
the date of the Uncommitted Revolving Loan Borrowing Request for the first LIBO
Rate Auction or Absolute Rate Auction for which such change is to be effective;
provided, however, that Uncommitted Interest Quotes submitted by the
Administrative Agent (or any affiliate of the Administrative Agent) in the
capacity of a Lender may be submitted, and may only be submitted, if the
Administrative Agent or such affiliate notifies the relevant Foreign Borrower of
the terms of the offer or offers contained therein not later than (x) one hour
before the deadline for the other Lenders, in the case of a LIBO Rate Auction or
(y) 15 minutes before the deadline for the other Lenders, in the case of an
Absolute Rate Auction.
(b) Each Uncommitted Interest Quote shall be substantially in the form
of Exhibit G-5 hereto, shall comply with the provisions of this Section 2.4.3,
and shall in any case specify the following:
-63-
<PAGE>
(i) the proposed date of Borrowing,
(ii) each Foreign Borrower to which the Lender would be
willing to make its Uncommitted Revolving Loans,
(iii) the principal amount (stated in the applicable Foreign
Currency) of the Uncommitted Revolving Loan for which each such offer
is being made, which principal amount (x) may be greater than or less
than the Revolving Loan Commitments of the quoting Lender, (y) shall be
in an amount the U.S. Dollar Equivalent of which is at least $500,000
and (z) may not exceed the principal amount of Uncommitted Revolving
Loans for which offers were requested,
(iv) in the case of a LIBO Rate Auction, the margin above the
applicable LIBO Rate (the "Uncommitted Interest Margin") offered for
each such Uncommitted Revolving Loan, expressed as a percentage
(specified to the nearest 1/10,000 of 1%) to be added to or subtracted
from such LIBO Rate,
(v) in the case of an Absolute Rate Auction, the rate of
interest per annum (specified to the nearest 1/10,000 of 1%) (the
"Uncommitted Absolute Interest Rate") offered for each such Uncommitted
Revolving Loan, and
(vi) the identity of the quoting Lender;
provided, however, that any Uncommitted Interest Quote submitted by a Lender
pursuant to this Section 2.4.3 shall be irrevocable (subject to Articles V and
VIII hereof), unless otherwise consented to in writing by the Administrative
Agent acting upon the instructions of the applicable Foreign Borrower.
(c) Any Uncommitted Interest Quote that: (i) is not substantially in
the form of Exhibit G-5 hereto, as determined by the Administrative Agent in its
sole discretion, or does not specify all of the information required in clause
(b) above; (ii) contains qualifying, conditional or similar language; or (iii)
arrives after the time set forth in clause (a) above, may be disregarded by the
applicable Foreign Borrower and the Administrative Agent.
(d) The Administrative Agent (by telephone, promptly confirmed in
writing) shall promptly notify the relevant Foreign Borrower of the terms of all
Uncommitted Interest Quotes submitted by the Lenders in accordance with this
Section 2.4.3, as well as the identity of any such Lender.
SECTION 2.4.4. Uncommitted Revolving Loan Acceptance. (a) The relevant
Foreign Borrower shall notify the Administrative Agent of its acceptance or
non-acceptance of the offers
-64-
<PAGE>
notified to it pursuant to clause (d) of Section 2.4.3 (x) not later than 4:00
p.m., New York time, on the fourth Business Day before the proposed date of
Borrowing, in the case of a LIBO Rate Auction, or (y) not later than 10:30 a.m.,
New York time, on the proposed date of Borrowing, in the case of an Absolute
Rate Auction, or, in any such case, such other time or date as the Company and
the Administrative Agent shall have mutually agreed and shall have given notice
thereof to each Lender having a Percentage of any Revolving Loan Commitment of
greater than zero not later than the date of the Uncommitted Revolving Loan
Borrowing Request for the first LIBO Rate Auction or Absolute Rate Auction for
which such change is to be effective. In the case of acceptance, such notice (a
"Notice of Uncommitted Revolving Borrowing") shall specify the aggregate
principal amount of offers for each requested maturity date and, in the case of
LIBO Rate Loans, Interest Period that are accepted.
(b) The relevant Foreign Borrower may accept any Uncommitted Interest
Quote in whole or in part; provided, however, that:
(i) the aggregate principal amount of each Uncommitted
Revolving Loan Borrowing may not exceed the applicable amount set forth
in the related Uncommitted Revolving Loan Borrowing Request;
(ii) the aggregate principal amount (calculated at the U.S.
Dollar Equivalent thereof) of each Uncommitted Revolving Loan Borrowing
must not be less than $500,000;
(iii) acceptance of offers may only be made on the basis of
ascending Uncommitted Interest Margins or Uncommitted Absolute Interest
Rates, as the case may be;
(iv) the relevant Foreign Borrower may not accept any offer
that fails to comply with the requirements of this Agreement; and
(v) the conditions set forth in Section 5.2.1 applicable to
such Uncommitted Revolving Loan Borrowing shall have been satisfied.
(c) Not later than 12:00 noon, New York time, on the date specified for
each Uncommitted Revolving Loan Borrowing hereunder, each Lender participating
therein shall, by wire transfer in same day funds, deposit to an account of the
applicable Foreign Borrower specified by such Foreign Borrower the amount of the
Uncommitted Revolving Loans to be made by it on such date in the applicable
Foreign Currency.
(d) As soon as practicable after the Uncommitted Revolving Loan
Borrowing is made, the Administrative Agent shall notify each Lender having a
Percentage of any Revolving Loan
-65-
<PAGE>
Commitment greater than zero of (i) the amount of the Uncommitted Revolving Loan
Borrowing, (ii) the U.S. Dollar Equivalent of the outstanding principal amount
of all Foreign Currency Revolving Loans (in the aggregate and for each Foreign
Borrower) immediately after giving effect to such Borrowing and (iii) the date
on which such Uncommitted Revolving Loan Borrowing was made.
SECTION 2.5. Committed Foreign Currency Revolving Loans; Spanish Term
Loans. (a) At any time that no Event of Default has occurred and is continuing,
one or more Foreign Borrowers from time to time may enter into one or more
Foreign Currency Revolving Loan Commitment Addenda, each with one or more
Lenders that have, immediately prior to the effectiveness of such Foreign
Currency Revolving Loan Commitment Addendum, Percentages in respect of the U.S.
Revolving Loan Commitments of greater than zero, whereby such Lenders commit to
make, from time to time on and subsequent to the Closing Date but prior to the
Revolving Loan Commitment Termination Date, Committed Foreign Currency Revolving
Loans denominated in the Foreign Currency of the country in which such Foreign
Borrower's principal business operations are located, provided, however, that
after giving effect to any Foreign Currency Revolving Loan Commitment created
pursuant to this Section 2.5, the Total Foreign Currency Revolving Loan
Commitment Amount shall not exceed the Foreign Currency Revolving Loan Limit.
Any Foreign Currency Revolving Loan Commitment Addendum entered into pursuant to
this Section 2.5 shall become effective upon (and subject to) the Company's
delivery of a duly executed copy thereof to the Administrative Agent pursuant to
Section 11.2 hereof.
(b) Any Foreign Currency Revolving Loan Commitment Addendum entered
into pursuant to this Section 2.5 may, but need not, include a commitment (a
"Foreign Currency Letter of Credit Commitment") by an Issuer party thereto to
issue, and a commitment by the Lenders party thereto to participate in, from
time to time on and subsequent to the Closing Date but prior to the Revolving
Loan Commitment Termination Date, Foreign Currency Letters of Credit denominated
in the Foreign Currency of the country in which such Foreign Borrower's
principal business operations are located for the account of the Foreign
Borrower or Foreign Borrowers party thereto and their respective Subsidiaries;
provided, however, that in respect of any Foreign Currency Letter of Credit
Commitment so created under this Section 2.5, the Foreign Currency Letter of
Credit Commitment Amount shall not exceed the Foreign Currency Revolving Loan
Commitment Amount set forth in the applicable Foreign Currency Revolving Loan
Commitment Addendum;
(c) Each Foreign Currency Revolving Loan Commitment Addendum shall set
forth:
(i) the Foreign Borrowers eligible to make Borrowings of
Committed Foreign Currency Revolving Loans (and, if Foreign Currency
Letters of Credit are therein contemplated, request the issuance of
Foreign Currency Letters of Credit) thereunder;
-66-
<PAGE>
(ii) the Foreign Currency in which Committed Foreign Currency
Revolving Loans are to be made (and, if applicable, Foreign Currency
Letters of Credit are to be issued) thereunder;
(iii) the Foreign Currency Revolving Loan Commitment Amount
under such Foreign Currency Revolving Loan Commitment Addendum, which
shall be stated in U.S. Dollars;
(iv) the Percentage of each Lender party to such Foreign
Currency Revolving Loan Commitment Addendum in respect of such Foreign
Currency Revolving Loan Commitment Amount; and
(v) if such Foreign Currency Revolving Loan Commitment
Addendum includes Foreign Currency Letter of Credit Commitments,
(A) the Issuer in respect of the Foreign Currency Letters of
Credit to be issued thereunder;
(B) the Foreign Currency Letter of Credit Commitment Amount
under such Foreign Currency Revolving Loan Commitment Addendum, which
shall be stated in U.S. Dollars and shall not exceed the Foreign
Currency Revolving Loan Commitment Amount set forth in such Foreign
Currency Revolving Loan Commitment Addendum; and
(C) the Letter of Credit Reimbursement Obligation Rate in
respect of Foreign Currency Letters of Credit issued thereunder.
(d) Upon the effectiveness of any Foreign Currency Revolving Loan
Commitment Addendum pursuant to clause (a) of Section 2.5 or any reduction in
any Foreign Currency Revolving Loan Commitment pursuant to Section 2.2, the
Percentages of each Lender with a Percentage in respect of the applicable
Foreign Currency Revolving Loan Commitments or the U.S. Revolving Loan
Commitments in excess of zero shall be automatically adjusted so that, after
giving effect to such adjustment, the aggregate amount of the respective
Percentages of each Lender in respect of such Revolving Loan Commitments
multiplied by the respective Revolving Loan Commitment Amounts shall, before and
after giving effect to such Foreign Currency Revolving Loan Commitment Addendum
or reduction and such adjustment, be equal. Schedule III hereto sets forth an
illustration of the operation of this Section 2.5(d).
(e) If and when any adjustment is made to any Percentage of any Lender
pursuant to clause (d) at any time when any Committed Revolving Loans or Letters
of Credit are outstanding, at such time and in such manner as the Company and
the Syndication Agent shall agree (it being understood that the Company and the
Agents will use all commercially reasonable
-67-
<PAGE>
efforts to avoid prepayment or assignment of any Fixed Rate Loan on a day other
than the last day of the Interest Period applicable thereto), the Lenders shall
assign and assume outstanding Committed Revolving Loans and participations in
outstanding Letters of Credit held by each Lender to conform to the respective
Percentages of the respective Revolving Loan Commitments of the Lenders.
(f) At any time that no Event of Default has occurred and is
continuing, the Spanish Term Borrower may enter into a Foreign Currency Term
Loan Commitment Addendum with one or more Lenders or other financial
institutions, whereby such Lenders or other financial institutions commit to
make Spanish Term Loans denominated in Spanish Pesetas (and, in the case of any
such financial institution that is not theretofore a Lender, to be a Lender
hereunder). Any Foreign Currency Term Loan Commitment Addendum entered into
pursuant to this Section 2.5 shall become effective upon (and subject to) the
Company's delivery of a duly executed copy thereof to the Administrative Agent
pursuant to Section 11.2 hereof.
(g) A Foreign Currency Term Loan Commitment Addendum shall set forth:
(i) the Spanish Term Borrower eligible to make Borrowings of
Spanish Term Loans thereunder;
(ii) the Spanish Term Loan Commitment Amount under such
Foreign Currency Term Loan Commitment Addendum, which shall be stated
in U.S. Dollars and shall not exceed the aggregate principal amount of
the then outstanding Term Loans; and
(iii) the Percentage of each Lender party to such Foreign
Currency Term Loan Commitment Addendum in respect of such Foreign
Currency Term Loan Commitment Amount.
SECTION 2.6. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
noon, New York time (in the case of U.S. Loans or Canadian Loans) or 11:00 a.m.,
London time (in the case of any Foreign Currency Loans other than Canadian
Loans), on a Business Day, a Borrower may from time to time irrevocably elect,
on not less than one Business Day's notice (in the case of a conversion of Fixed
Rate Loans into Base Rate Loans) or three Business Days' notice (in the case of
a continuation of Fixed Rate Loans or a conversion of Base Rate Loans into Fixed
Rate Loans) nor more than five Business Days' notice (in the case of any Loans)
that all, or any portion in a minimum amount of $500,000 (or, in the case of
Foreign Currency Loans, the multiple of 100,000 units of the Currency of such
Loans the U.S. Dollar Equivalent of which is nearest to $500,000) or any larger
integral multiple of $100,000 (or, in the case of Foreign Currency Loans, the
multiple of 50,000 units of the Currency of such Loans the U.S. Dollar
Equivalent of which is nearest to $100,000), of any Borrowing of Committed Loans
be, in the
-68-
<PAGE>
case of Base Rate Loans, converted into Fixed Rate Loans or, in the case of
Fixed Rate Loans, continued as Fixed Rate Loans or, in the case of U.S. Loans or
Canadian Loans only, converted to Base Rate Loans; provided, however, that, in
the absence of delivery of a Continuation/Conversion Notice with respect to any
Committed Loan that is a Fixed Rate Loan at least three Business Days before the
last day of the then current Interest Period with respect thereto, such Fixed
Rate Loan shall, (A) in the case of a Fixed Rate Loan that is a Foreign Currency
Loan (other than a Canadian Loan), automatically be continued as a Fixed Rate
Loan with an Interest Period of one month and (B) in the case of a Fixed Rate
Loan that is a U.S. Loan or a Canadian Loan, automatically convert to a Base
Rate Loan, in each case on such last day; provided, further, however, that (x)
each such conversion or continuation shall be pro rated among the applicable
outstanding Loans of the relevant Lenders, and (y) no portion of the outstanding
principal amount of any Loans may be continued as, or be converted into, Fixed
Rate Loans when any Default has occurred and is continuing.
SECTION 2.6.1. Converting Canadian Prime Rate Loans to, or Continuing
Canadian BAs as, Canadian BAs. Provided that the Canadian Borrower has, by
giving notice to the Administrative Agent in accordance with Section 2.6,
requested the Lenders to accept its drafts to replace all or a portion of an
outstanding Canadian Loan, then each Lender shall, on the date of conversion or
continuation, as applicable, and concurrent with the payment by the Canadian
Borrower to the Administrative Agent on behalf of the Lenders of an amount equal
to the difference between the principal or face amount of such outstanding
Canadian Loan or the portion thereof which is being converted or continued and
the aggregate Notional BA Proceeds with respect to the drafts to be accepted by
the Lenders, accept the Canadian Borrower's draft or drafts having an aggregate
face amount equal to its Percentage of the aggregate principal or face amount of
such Canadian Loan or the portion thereof which is being converted or continued,
such acceptance to be in accordance with Section 2.11.
SECTION 2.6.2. Converting Canadian BAs to Canadian Prime Rate Loans.
Each applicable Lender shall, at the end of an Interest Period with respect to
Canadian BAs which such Lender has accepted, pay to the holder thereof the face
amount of such Canadian BA. Provided that the Canadian Borrower has, by giving
notice to the Administrative Agent in accordance with Section 2.6, requested a
Lender to convert all or a portion of outstanding maturing Canadian BAs into a
Canadian Prime Rate Loan, such Lender shall, upon the end of the current
Interest Period with respect to such Canadian BAs and the payment by such Lender
to the holders of such Canadian BAs of the aggregate face amount thereof, be
deemed to have made to the Canadian Borrower the Canadian Prime Rate Loan into
which the matured Canadian BAs or a portion thereof are converted in the
aggregate principal amount equal to its Percentage of the aggregate face amount
of the matured Canadian BAs or the portion thereof which are being converted.
-69-
<PAGE>
SECTION 2.7. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan, so long as such
action does not result in increased costs to the applicable Borrower; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the applicable Borrower to
repay such LIBO Rate Loan shall nevertheless be to such Lender for the account
of such foreign branch, Affiliate or international banking facility; provided,
further, however, that, except for purposes of determining whether any such
increased costs are payable by the applicable Borrower, such Lender shall cause
such foreign branch, Affiliate or international banking facility to comply with
the applicable provisions of clause (b) of Section 4.6 with respect to such LIBO
Rate Loan. In addition, each Borrower hereby consents and agrees that, for
purposes of any determination to be made for purposes of Section 4.1, 4.2, 4.3
or 4.4, it shall be conclusively assumed that each Lender elected to fund all
LIBO Rate Loans by purchasing deposits in the relevant Currency in its LIBOR
Office's interbank Eurodollar market.
SECTION 2.8. Issuance Procedures. By delivering to the applicable
Issuer and the Administrative Agent an Issuance Request on or before 12:00 noon,
New York time, on a Business Day, any Borrower as to which any Issuer has a
Letter of Credit Commitment may, from time to time irrevocably request, on not
less than three nor more than ten Business Days' notice (or such shorter or
longer notice as may be acceptable to such Issuer), in the case of an initial
issuance of a Letter of Credit, and not less than three nor more than ten
Business Days' notice (unless a shorter or longer notice period is acceptable to
such Issuer) prior to the then existing Stated Expiry Date of a Letter of
Credit, in the case of a request for the extension of the Stated Expiry Date of
a Letter of Credit, that such Issuer issue, or extend the Stated Expiry Date of,
as the case may be, an irrevocable Letter of Credit on behalf of such Borrower
denominated in the applicable Currency (whether issued for the account of or on
behalf of such Borrower or any of its Subsidiaries) in such form as may be
requested by such Borrower and approved by such Issuer, for the purposes
described in Section 7.1.9. Notwithstanding anything to the contrary contained
herein or in any separate application for any Letter of Credit, each Borrower
hereby acknowledges and agrees that it shall be obligated to reimburse the
applicable Issuer upon each Disbursement paid under a Letter of Credit, and it
shall be deemed to be the obligor for purposes of each such Letter of Credit
issued hereunder by such Issuer at the request of such Borrower (whether the
account party on such Letter of Credit is such Borrower or a Subsidiary of such
Borrower). Upon receipt of an Issuance Request, the Administrative Agent shall,
in accordance with its usual business practices, notify the applicable Issuer
and each Lender that has a Percentage of more than zero in respect of the
relevant Revolving Loan Commitments thereof. Each Letter of Credit shall by its
terms be stated to expire on a date (its "Stated Expiry Date"), in the case of
standby Letters of Credit, not later than the date that is five Business Days
prior to the sixth anniversary of the Original Closing Date and not later than
one year from the date of such issuance, and, in the case of commercial Letters
of Credit, not later than the date that is thirty
-70-
<PAGE>
Business Days prior to the sixth anniversary of the Original Closing Date and
not later than 180 days from the date of such issuance; provided, that,
notwithstanding the terms of clause (ii) above, a Letter of Credit may, if
required by the beneficiary thereof, contain "evergreen" provisions pursuant to
which the Stated Expiry Date shall be automatically extended, unless notice to
the contrary shall have been given to the beneficiary by the applicable Issuer
or the account party more than a specified period prior to the then existing
Stated Expiry Date. The applicable Issuer will make available to the beneficiary
thereof the original of each Letter of Credit which it issues hereunder. In the
event that the Issuer is other than the Administrative Agent, such Issuer will
send by facsimile transmission to the Administrative Agent, promptly on the
first Business Day of each week, its daily maximum amount available to be drawn
under the Letters of Credit issued by such Issuer for the previous week. The
Administrative Agent shall deliver to each Lender upon each calendar month end,
and upon each Letter of Credit Fee payment, a report (which may be received from
the applicable Issuer in respect of Foreign Currency Letters of Credit) setting
forth the daily maximum amount available to be drawn for all Issuers during such
period.
SECTION 2.8.1. Other Lenders' Participation. Upon the issuance (or
deemed issuance) of each Letter of Credit issued by an Issuer pursuant hereto,
and without further action, each Lender (other than such Issuer) that has a
Percentage of more than zero in respect of the relevant Revolving Loan
Commitments shall be deemed to have irrevocably purchased from such Issuer, to
the extent of its Percentage in respect of the applicable Revolving Loan
Commitments and such Issuer shall be deemed to have irrevocably granted and sold
to such Lender a participation interest in such Letter of Credit (including the
Contingent Liability and any Reimbursement Obligation and all rights with
respect thereto), and such Lender shall, to the extent of its Percentage in
respect of the applicable Revolving Loan Commitments be responsible for
reimbursing promptly (and in any event within one Business Day) the applicable
Issuer for Reimbursement Obligations which have not been reimbursed by the
applicable Borrower in accordance with this Section 2.8. In addition, such
Lender shall, to the extent of its Percentage in respect of the applicable
Revolving Loan Commitments, be entitled to receive from the Administrative Agent
a ratable portion of the Letter of Credit Fees payable pursuant to Section 3.3.3
with respect to each Letter of Credit and of interest payable pursuant to
Section 3.2 with respect to any Reimbursement Obligation. To the extent that any
Lender has reimbursed an Issuer for a Disbursement as required by this Section,
such Lender shall be entitled to receive from the Administrative Agent its
ratable portion of any amounts subsequently received (from the applicable
Borrower or otherwise) in respect of such Disbursement.
SECTION 2.8.2. Disbursements; Conversion to Revolving Loans. Each
Issuer will notify the applicable Borrower and the Administrative Agent promptly
of the presentment for payment of any drawing under any Letter of Credit issued
by such Issuer, together with notice of the date (the "Disbursement Date") such
payment shall be made (each such payment, a "Disbursement"). Subject to the
terms and provisions of such Letter of Credit and this
-71-
<PAGE>
Agreement, such Issuer shall make such payment to the beneficiary (or its
designee) of such Letter of Credit. Prior to 12:30 p.m., New York time, on the
first Business Day following the Disbursement Date (the "Disbursement Due
Date"), the applicable Borrower will reimburse the Administrative Agent, for the
account of such Issuer, for all amounts which such Issuer has disbursed under
such Letter of Credit, together with interest thereon at the rate per annum
otherwise applicable to U.S. Revolving Loans made as Base Rate Loans (in the
case of U.S. Letters of Credit) or at the Letter of Credit Reimbursement
Obligation Rate in respect of such Letter of Credit (in the case of any other
Letter of Credit) from and including the Disbursement Date to but excluding the
Disbursement Due Date and, thereafter (unless such Disbursement is converted
into a Committed Revolving Loan on the Disbursement Due Date), at a rate per
annum equal to the rate per annum then in effect with respect to overdue U.S.
Revolving Loans made as Base Rate Loans pursuant to Section 3.2.2 (in the case
of U.S. Letters of Credit) or at a rate per annum equal to the Letter of Credit
Reimbursement Obligation Rate in respect of such Letter of Credit plus 2% (in
the case of any other Letter of Credit) for the period from the Disbursement Due
Date through the date of such reimbursement; provided, however, that, if no
Default shall have then occurred and be continuing, unless the applicable
Borrower has notified the Administrative Agent no later than one Business Day
prior to the Disbursement Due Date that it will reimburse such Issuer for the
applicable Disbursement, then the amount of the Disbursement shall be deemed to
be a Borrowing of Committed Revolving Loans in the applicable Currency which, in
the case of U.S. Dollars, shall constitute Base Rate Loans and, in the case of
any Foreign Currency, shall bear interest at the Letter of Credit Reimbursement
Obligation Rate in respect of such Letter of Credit, and following the giving of
notice thereof by the Administrative Agent to the applicable Lenders, each
Lender with a Percentage of greater than zero in respect of the applicable
Revolving Loan Commitments (other than such Issuer) will deliver to such Issuer
on the Disbursement Due Date immediately available funds in the applicable
Currency in an amount equal to such Lender's applicable Percentage of such
Borrowing. Each conversion of Disbursement amounts into Committed Revolving
Loans shall constitute a representation and warranty by the applicable Borrower
that on the date of the making of such Committed Revolving Loans all of the
statements set forth in Section 5.2.1 are true and correct.
SECTION 2.8.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of a Borrower under Section 2.8.2 to reimburse an Issuer with
respect to each Disbursement (including interest thereon) not converted into a
Committed Revolving Loan pursuant to Section 2.8.2, and, upon the failure of any
Borrower to reimburse an Issuer and the giving of notice thereof by the
Administrative Agent to the applicable Lenders, each Lender's (to the extent it
has a Percentage of greater than zero in respect of the applicable Revolving
Loan Commitment Amount) obligation under Section 2.8.1 to reimburse such Issuer
or fund its Percentage of any Disbursement converted into a Committed Revolving
Loan, shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which such
Borrower or such Lender, as the case may be, may have or have had against such
Issuer or any such Lender, including any defense based upon the failure of any
-72-
<PAGE>
Disbursement to conform to the terms of the applicable Letter of Credit (if, in
the applicable Issuer's good faith opinion, such Disbursement is determined to
be appropriate) or any non-application or misapplication by the beneficiary of
the proceeds of such Letter of Credit; provided, however, that after paying in
full its Reimbursement Obligation hereunder, nothing herein shall adversely
affect the right of such Borrower or such Lender, as the case may be, to
commence any proceeding against the applicable Issuer for any wrongful
Disbursement made by such Issuer under a Letter of Credit as a result of acts or
omissions constituting gross negligence or willful misconduct on the part of
such Issuer determined by a court of competent jurisdiction.
SECTION 2.8.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Event of Default of the type described in clauses (b)
through (d) of Section 8.1.9 or, with notice from the Administrative Agent
acting at the direction of the Required Lenders, upon the occurrence and during
the continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn
and available under all Letters of Credit issued at the request of any
Borrower and outstanding shall, without demand upon or notice to such
Borrower or any other Person, be deemed to have been paid or disbursed
by the applicable Issuer under such Letters of Credit (notwithstanding
that such amount may not in fact have been so paid or disbursed); and
(b) upon notification by the Administrative Agent to the
applicable Borrower of its obligations under this Section, such
Borrower shall be immediately obligated to reimburse the applicable
Issuer for the amount deemed to have been so paid or disbursed by the
applicable Issuer.
Any amounts so payable by any Borrower pursuant to this Section shall be
deposited in cash in the applicable Currency with the Administrative Agent and
held as collateral security for the Obligations in connection with the Letters
of Credit issued at the request of such Borrower by the applicable Issuer. At
such time as the Events of Default giving rise to the deemed disbursements
hereunder shall have been cured or waived, the Administrative Agent shall return
to the applicable Borrower all amounts then on deposit with the Administrative
Agent pursuant to this Section, together with accrued interest at the Federal
Funds Rate, which have not been applied to the satisfaction of such Obligations.
SECTION 2.8.5. Nature of Reimbursement Obligations. Each Borrower and,
to the extent set forth in Section 2.8.1, each Lender with an applicable
Revolving Loan Commitment, shall assume all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof. No Issuer (except to
the extent of its own gross negligence or willful misconduct determined by a
court of competent jurisdiction) shall be responsible for:
-73-
<PAGE>
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to any Issuer or any Lender with an applicable
Revolving Loan Commitment hereunder. In furtherance and extension and not in
limitation or derogation of any of the foregoing, any action taken or omitted to
be taken by any Issuer in good faith (and not constituting gross negligence or
willful misconduct determined by a court of competent jurisdiction) shall be
binding upon the applicable Borrower, each Obligor and each such Lender, and
shall not put such Issuer under any resulting liability to such Borrower, any
Obligor or any such Lender, as the case may be.
SECTION 2.8.6. Deemed Issuance of Existing Letters of Credit. All
Letters of Credit outstanding under the Existing Credit Agreement on the Closing
Date shall, for all purposes hereof, be deemed to be Letters of Credit issued
hereunder on the Closing Date.
SECTION 2.9. Register; Notes.
(a) Each Lender may maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of each
Borrower to such Lender resulting from each Loan made by such Lender to
such Borrower, including the amounts of principal and interest payable
and paid to such Lender from time to time hereunder. In the case of a
Lender that does not request, pursuant to clause (b)(ii) below,
execution and delivery of a Note or Notes evidencing the Loans made by
such Lender to a Borrower, such account or accounts shall, to the
extent not inconsistent with the notations made by the
-74-
<PAGE>
Administrative Agent in the Register, be conclusive and binding on such
Borrower absent manifest error; provided, however, that the failure of
any Lender to maintain such account or accounts shall not limit or
otherwise affect any Obligations of any Borrower or any other Obligor.
(b)(i) Each Borrower hereby designates the Administrative
Agent to serve as its agent, solely for the purpose of this clause (b),
to maintain a register (the "Register") on which the Administrative
Agent will record each Lender's Commitments, the Loans made by each
Lender to each Borrower and each repayment in respect of the principal
amount of the Loans of each Lender to each Borrower and together with
which the Administrative Agent shall retain a copy of each Foreign
Currency Revolving Loan Commitment Addendum delivered to the
Administrative Agent pursuant to Section 2.5 and each Lender Assignment
Agreement delivered to the Administrative Agent pursuant to Section
11.11.1. Failure to make any recordation, or any error in such
recordation, shall not affect the Borrowers' obligations in respect of
such Loans. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrowers, the Administrative Agent
and the Lenders shall treat each Person in whose name a Loan (and, as
provided in clause (ii), the Note evidencing such Loan, if any) is
registered as the owner thereof for all purposes of this Agreement,
notwithstanding notice or any provision herein to the contrary. Any
Commitment of any Lender and the Loans made pursuant thereto may be
assigned or otherwise transferred in whole or in part only by
registration of such assignment or transfer in the Register. Any
assignment or transfer of any Commitment of any Lender or the Loans
made pursuant thereto shall be registered in the Register only upon
delivery to the Administrative Agent of a Lender Assignment Agreement
duly executed by the assignor thereof. No assignment or transfer of any
Commitment of any Lender or the Loans made pursuant thereto shall be
effective unless such assignment or transfer shall have been recorded
in the Register by the Administrative Agent as provided in this
Section.
(ii) Each Borrower agrees that, upon the request by any Lender
to the Administrative Agent, such Borrower will execute and deliver to
such Lender, as applicable, an applicable Revolving Note, Term Note and
Swing Line Note evidencing the Loans made by such Lender to such
Borrower. Each Borrower hereby irrevocably authorizes each Lender to
make (or cause to be made) appropriate notations on the grid attached
to such Lender's Notes of such Borrower (or on any continuation of such
grid), which notations, if made, shall evidence, inter alia, the date
of, the outstanding principal amount of, and the interest rate and
Interest Period applicable to the Loans evidenced thereby. Such
notations shall, to the extent not inconsistent with the notations made
by the Administrative Agent in the Register, be conclusive and binding
on the Borrower that shall have issued such Note absent manifest error;
provided, however, that the failure of any Lender to make any such
notations shall not limit or otherwise affect any Obligations
-75-
<PAGE>
of the Borrowers or any other Obligor. The Loans evidenced by any such
Note and interest thereon shall at all times (including after
assignment pursuant to Section 11.11.1) be represented by one or more
Notes payable to the order of the payee named therein and its
registered assigns. A Note and the obligation evidenced thereby may be
assigned or otherwise transferred in whole or in part only by
registration of such assignment or transfer of such Note and the
obligation evidenced thereby in the Register (and each Note shall
expressly so provide). Any assignment or transfer of all or part of an
obligation evidenced by a Note shall be registered in the Register only
upon surrender for registration of assignment or transfer of the Note
evidencing such obligation, accompanied by a Lender Assignment
Agreement duly executed by the assignor thereof, and thereupon, if
requested by the assignee, one or more new Notes shall be issued by the
applicable Borrower to the designated assignee and the old Note shall
be returned by the Administrative Agent to the applicable Borrower
marked "exchanged". No assignment of a Note and the obligation
evidenced thereby shall be effective unless it shall have been recorded
in the Register by the Administrative Agent as provided in this
Section.
SECTION 2.10. European Monetary Union. If, as a result of the
implementation of the European Monetary Union (the "EMU"), (a) any Foreign
Currency ceases to be lawful currency of the nation issuing the same and is
replaced by a European common currency (the "Euro"), then any amount payable
hereunder in such replaced Foreign Currency by any Lender or any Borrower in
respect of a Credit Extension shall instead be payable in Euros and the amount
so payable shall be determined by translating the amount payable in such Foreign
Currency to Euros at the exchange rate recognized by the European Central Bank
for the purpose of implementing the EMU; and (b) any nation issuing a Foreign
Currency also issues or recognizes both the Foreign Currency and the Euro as the
national currency, any amounts payable hereunder by any Lender or any Borrower
in respect of a Credit Extension in such Foreign Currency shall be payable
either in such Foreign Currency or the Euro (determined in accordance with the
method described in the foregoing clause (a)), upon notice delivered to the
applicable Lender. Prior to the applicability of clause (a) or (b) of the
preceding sentence, each amount payable hereunder in any Foreign Currency will
continue to be payable only in such Foreign Currency. Each of the Borrowers and
the Lenders agree, at the request of any such party at the time of, or at any
time following, the implementation of the EMU, to enter into good faith
negotiations concerning an agreement to amend this Agreement in such manner as
any such party shall reasonably request in order to reflect the implementation
of the EMU and to place the parties hereto in the position they would have been
in had the EMU not been implemented. Notwithstanding anything to the contrary in
Section 11.1, in the event that the Borrowers and the Lenders are able to agree
to an amendment of this Agreement, which amendment solely addresses issues
raised by the EMU, this Agreement, as of such amendment's effective date, shall
be deemed to be amended by such amendment without the requirement of any further
action hereunder by the Lenders or the Required Lenders, as the case may be.
-76-
<PAGE>
SECTION 2.11. Canadian BAs. Not in limitation of any other provision of
this Agreement, but in furtherance thereof, the provisions of this Section 2.11
shall further apply to the acceptance, rolling over and conversion of Canadian
BAs.
SECTION 2.11.1. Funding of Canadian BAs. If the Administrative Agent
receives a Borrowing Request or a Continuation/Conversion Notice from the
Canadian Borrower requesting a Borrowing or a rollover of or a conversion into a
Canadian Loan by way of Canadian BAs, the Administrative Agent shall notify each
of the applicable Lenders, prior to 11:00 a.m., Toronto time, on the second
Business Day prior to the date of such Credit Extension, of such request and of
each such Lender's Percentage of such Canadian Loan. Each applicable Lender
shall, not later than 11:00 a.m., Toronto time, on the date of each Canadian
Loan by way of Canadian BAs (whether in respect of the Credit Extension or
pursuant to a rollover or conversion), accept drafts of the Canadian Borrower
which are presented to it for acceptance and which have an aggregate face amount
equal to such Lender's Percentage of the total Credit Extension being made
available by way of Canadian BAs on such date. With respect to each drawdown of,
rollover of or conversion into Canadian BAs, each such Lender shall not be
required to accept any draft which has a face amount which is not in an integral
multiple of Cdn $100,000. Concurrent with the acceptance of drafts of the
Canadian Borrower as aforesaid, each applicable Lender shall make available to
the Administrative Agent the aggregate Notional BA Proceeds with respect to the
Canadian BAs being purchased by such Lender (net of the aggregate amount
required to repay such Lender's outstanding Canadian BAs that are maturing on
such date and/or Canadian Prime Rate Loans of such Lender that are being
converted on such date). The Administrative Agent shall, upon fulfillment by the
Canadian Borrower of the terms and conditions set forth in Article V, make such
amount, if any, received from the applicable Lenders available to the Canadian
Borrower on the date of such Credit Extension by crediting the designated
account of the Canadian Borrower. Each Canadian BA to be accepted by any Lender
shall be accepted by such Lender at its Domestic Office located in Canada.
SECTION 2.11.2. Presigned Draft Forms. To enable the applicable Lenders
to accept Canadian BAs, the Canadian Borrower shall supply each such Lender with
such number of drafts as such Lender may reasonably request, duly endorsed and
executed on behalf of the Canadian Borrower. Each Lender agrees that, in respect
of the safekeeping of executed drafts of the Canadian Borrower which are
delivered to it for acceptance hereunder, it will exercise the same degree of
care which it gives to its own negotiable instruments; provided that such Lender
shall not be deemed to be an insurer thereof. Such Lender will, upon request by
the Canadian Borrower, promptly advise the Canadian Borrower of the number and
designations, if any, of the uncompleted drafts then held by it. The signature
of any duly authorized officer of the Canadian Borrower on a draft may be
mechanically reproduced in facsimile and drafts and Canadian BAs bearing such
facsimile signature shall be binding upon the Canadian Borrower as if they had
been manually signed by such officer. Notwithstanding that any of the
individuals whose manual or facsimile signature appears on any draft as one of
such officers may no longer hold
-77-
<PAGE>
office at the date thereof or at the date of its acceptance by such Lender
hereunder or at any time thereafter, any draft or Canadian BA so signed shall be
valid and binding upon the Canadian Borrower. The receipt by the Administrative
Agent of a request for a Borrowing by way of Canadian BAs shall be each
applicable Lender's sufficient authority to complete, and each applicable Lender
shall, subject to the terms and conditions of this Agreement, complete the
pre-signed forms of drafts in accordance with such request and the advice of the
Administrative Agent as to the amount of the Canadian BAs to be accepted by such
Lender, and the drafts so completed shall thereupon be deemed to have been
presented for acceptance. Except as set forth in the immediately preceding
sentence, no Lender shall complete any pre-signed forms of drafts.
SECTION 2.11.3. Depository Bills and Notes Act. It is the intention of
the parties that all Canadian BAs accepted by Lenders under this Agreement after
clearing services acceptable to the Canadian Borrower, the applicable Lenders
and the Administrative Agent are available, shall be issued in the form of a
"depository bill" and deposited with a "clearing house," as those terms are
defined in the Depository Bills and Notes Act, S.C. 1998, c. 13 (the "Act"). At
that time, the Administrative Agent shall, in consultation with the Canadian
Borrower and the applicable Lenders, establish and notify the Canadian Borrower
and the applicable Lenders of such procedures, consistent with the terms of this
Agreement and the requirements of the Act, as are reasonably necessary to
accomplish the parties' intention. The Lenders are also authorized at that time
to issue Canadian BAs in the form of depository bills as replacements for
previously issued Canadian BAs (on the same terms as those being replaced) and
deposit them with a clearing house against cancellation of the previously issued
Canadian BAs. All such depository bills so issued shall be governed by the
provisions of Article II. On and after the establishment of such clearing
services, any request by the Canadian Borrower for the acceptance of Canadian
BAs shall, notwithstanding anything herein to the contrary, be deemed to be a
request for the issuance of a Canadian BA in the form of a depository bill and
the deposit thereof with a clearing house, in each case as referred to in the
Act.
SECTION 2.11.4. Special Provisions Relating to Acceptance Notes. (a)
The Canadian Borrower and each applicable Lender hereby acknowledge and agree
that from time to time certain Lenders which are not Canadian chartered banks or
which are Canadian chartered banks listed on Schedule II of the Bank Act
(Canada) may not be authorized to or may, as a matter of general corporate
policy, elect not to accept Canadian BA drafts, and the Canadian Borrower and
each applicable Lender agrees that any such Lender may purchase Acceptance Notes
of the Canadian Borrower in accordance with the provisions of Section 2.11.4(b)
in lieu of accepting Canadian BAs for its account.
(b) In the event that any Lender described in Section 2.11.4(a) above
is unable to, or elects as a matter of general corporate policy not to, accept
Canadian BAs hereunder, such Lender shall not accept Canadian BAs hereunder, but
rather, if the Canadian Borrower requests the acceptance of such Canadian BAs,
the Canadian Borrower shall deliver to such Lender non-
-78-
<PAGE>
interest bearing promissory notes (each, an "Acceptance Note") of the Canadian
Borrower, substantially in the form of Exhibit A-4 hereto, having the same
maturity as the Canadian BAs that would otherwise be accepted by such Lender and
in an aggregate principal amount equal to the undiscounted face amount of such
Canadian BAs. Each such Lender hereby agrees to purchase each Acceptance Note
from the Canadian Borrower at a purchase price equal to the Notional BA Proceeds
for a Lender listed on Schedule II to the Bank Act (Canada) which would have
been applicable if a Canadian BA draft had been accepted by such bank and such
Acceptance Notes shall be governed by the provisions of this Article II as if
they were Canadian BAs.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. Each Borrower shall repay in
full the unpaid principal amount of each Loan made to it upon the Stated
Maturity Date therefor. Prior thereto, payments and prepayments of Loans shall
or may be made as set forth below.
(a) From time to time on any Business Day, the Company or a
Foreign Borrower, as the case may be, may make a voluntary prepayment,
in whole or in part, of the outstanding principal amount of any
(i) Loans (other than Swing Line Loans and Canadian
BAs); provided, however, that
(A) any such prepayment of the Loans of any
Tranche shall be made pro rata among Loans of such
Tranche of the same type and, if applicable, having
the same Interest Period of all Lenders that have
made such Loans;
(B) each Borrower shall comply with Section
4.4 in the event that any LIBO Rate Loan is prepaid
on any day other than the last day of the Interest
Period for such Loan;
(C) all such voluntary prepayments shall
require at least one Business Day's notice in the
case of Base Rate Loans and three Business Days'
notice in the case of LIBO Rate Loans, but no more
than five
-79-
<PAGE>
Business Days' notice in the case of any Loans, in
each case in writing to the Administrative Agent; and
(D) all such voluntary partial prepayments
shall be in a minimum aggregate amount of $500,000
(or, in the case of Foreign Currency Loans, the
multiple of 100,000 units of the Currency of such
Loans the U.S. Dollar Equivalent of which is nearest
to $500,000) or any larger integral multiple of
$100,000 (or, in the case of Foreign Currency Loans,
the multiple of 50,000 units of the Currency of such
Loans the U.S. Dollar Equivalent of which is nearest
to $100,000) , or in the aggregate principal amount
of all Loans of the applicable Tranche and type then
outstanding; or
(ii) Swing Line Loans, provided that
(A) all such voluntary prepayments shall
require prior telephonic notice to the Swing Line
Lender on or before 1:00 p.m., New York time, on the
day of such prepayment (such notice to be confirmed
in writing by the Company within 24 hours
thereafter); and
(B) all such voluntary partial prepayments
shall be in a minimum aggregate amount of $50,000 or
any larger integral multiple of $10,000, or in the
aggregate principal amount of all Swing Line Loans
then outstanding.
In addition, from time to time on any Business Day, the Company or any
Foreign Borrower may, upon not less than one Business Day's notice to
the Administrative Agent, elect to deposit with the Administrative
Agent Canadian Dollars in immediately available funds to be held by the
Administrative Agent, pursuant to collateral arrangements satisfactory
to it, for application to the payment of Canadian BAs designated by
such Borrower in such notice (provided that any such designation shall
be made pro rata among the Lenders on the basis of the aggregate face
amount of Canadian BAs then outstanding). If such a deposit is made,
then such Canadian BAs shall (to the extent of such deposit) be deemed
no longer outstanding for purposes of this Agreement.
(b) No later than five Business Days following the delivery by
the Company of its annual audited financial reports required pursuant
to clause (b) of Section 7.1.1 (beginning with the financial reports
delivered in respect of the 1998 Fiscal Year), the Company shall
deliver to the Administrative Agent a calculation of the Excess Cash
Flow for the Fiscal Year last ended (or, in the case of the 1998 Fiscal
Year, from the Original Closing Date through December 31, 1998) and, no
later than five Business Days
-80-
<PAGE>
following the delivery of such calculation, make or caused to be made a
mandatory prepayment of the Term Loans in an amount equal to (i) 50% of
the Excess Cash Flow (if any) for such Fiscal Year (or period) less
(ii) the aggregate amount of all voluntary prepayments of the principal
of the Term Loans actually made in such Fiscal Year pursuant to clause
(a) of Section 3.1.1, to be applied as set forth in Section 3.1.2;
provided, however, that no such prepayment shall be required to be made
beyond the extent that the amount of Debt as reduced by giving effect
to such prepayment would result, on a pro forma basis, in a Leverage
Ratio of 3.50:1 or less as of the end of the immediately preceding
Fiscal Quarter.
(c) No later than one Business Day (in the case of Net Debt
Proceeds) or 30 calendar days (in the case of Net Disposition Proceeds)
following the receipt of any Net Disposition Proceeds or Net Debt
Proceeds by the Company or any of its Restricted Subsidiaries, the
Company shall deliver to the Administrative Agent a calculation of the
amount of such Net Disposition Proceeds or Net Debt Proceeds, as the
case may be, and, to the extent the amount of such Net Disposition
Proceeds or Net Debt Proceeds, as the case may be, with respect to any
single transaction or series of related transactions, exceeds
$2,500,000, make or cause to be made a mandatory prepayment of (or
shall cash collateralize, in the case of Canadian BAs) the Term Loans
in an amount equal to 100% of such Net Disposition Proceeds or Net Debt
Proceeds, as the case may be, to be applied as set forth in Section
3.1.2; provided, that no mandatory prepayment (or cash
collateralization in the case of Canadian BAs) on account of such Net
Disposition Proceeds shall be required under this clause if the Company
informs the Agents no later than 30 days following the receipt of any
Net Disposition Proceeds of its or its Restricted Subsidiary's good
faith intention to apply such Net Disposition Proceeds to the
acquisition of other assets or property consistent with the Formica
Business (including by way of merger or Investment) within 365 days
following the receipt of such Net Disposition Proceeds, with the amount
of such Net Disposition Proceeds unused after such 365-day period being
applied to the Loans as set forth in Section 3.1.2.
(d) Concurrently with the consummation of any transaction
giving rise to any Net Equity Proceeds, the Company shall deliver to
the Administrative Agent a calculation of the amount of such Net Equity
Proceeds, and no later than five Business Days following the delivery
of such calculation, and, to the extent that the amount of such Net
Equity Proceeds with respect to any single transaction or series of
related transactions exceeds $2,500,000, make or cause to be made a
mandatory prepayment of the Term Loans (or shall cash collateralize, in
the case of Canadian BAs) in an amount equal to 50% of such Net Equity
Proceeds to be applied as set forth in Section 3.1.2; provided,
however, that no such prepayment (or cash collateralization in the case
of Canadian BAs) shall be required to be made beyond the extent that
the amount of Debt as reduced by giving
-81-
<PAGE>
effect to such prepayment would result, on a pro forma basis, in a
Leverage Ratio of 3.50:1 or less as of the end of the immediately
preceding Fiscal Quarter.
(e) Concurrently with the receipt by the Company or any of its
Restricted Subsidiaries of any Casualty Proceeds in excess of
$2,500,000 (individually or in the aggregate over the course of a
Fiscal Year), the Company shall deposit or cause to be deposited such
Casualty Proceeds in an account maintained with the Administrative
Agent and, within 60 days following the receipt by the Company or any
of its Restricted Subsidiaries of such Casualty Proceeds, direct the
Administrative Agent to apply such Casualty Proceeds to prepay the Term
Loans (or cash collateralize in the case of Canadian BAs) in an amount
equal to 100% of such Casualty Proceeds, to be applied as set forth in
Section 3.1.2; provided, however, that no mandatory prepayment (or cash
collateralization, in the case of Canadian BAs) on account of Casualty
Proceeds shall be required hereunder if the Company informs the Agents
no later than 60 days following the occurrence of the Casualty Event
resulting in such Casualty Proceeds of its or its Restricted
Subsidiary's good faith intention to apply such Casualty Proceeds to
the rebuilding or replacement (including through the acquisition or
construction of facilities providing equivalent capacity) of the assets
or property subject to such Casualty Event or the acquisition of other
assets or property consistent with the Formica Business (including by
way of merger or investment) and in fact uses such Casualty Proceeds to
rebuild or replace the assets or property subject to such Casualty
Event or to acquire such other assets or property within 365 days
following the receipt of such Casualty Proceeds, with the amount of
such Casualty Proceeds unused after such 365-day period being applied
to the Loans pursuant to Section 3.1.2.
(f) On each date when any reduction in any Revolving Loan
Commitment Amount shall become effective in respect of any Revolving
Loan Commitment, including pursuant to Section 2.2, the Company or a
Foreign Borrower, as the case may be, shall make a mandatory prepayment
of Revolving Loans or shall cash collateralize Canadian BAs, if
applicable, (in the relevant Currency) and (if applicable and
necessary) Swing Line Loans, and (if necessary) deposit with the
Administrative Agent cash collateral for Letter of Credit Outstandings
(in the relevant Currency) in an aggregate amount equal to the excess,
if any, of the sum of (i) the aggregate outstanding principal amount of
all Revolving Loans (in the relevant Currency) and, with respect only
to the U.S. Revolving Loan Commitment, Swing Line Loans and (ii) the
aggregate amount of all Letter of Credit Outstandings (in the relevant
Currency), in each case under such Revolving Loan Commitment, over the
applicable Revolving Loan Commitment Amount in respect of such
Revolving Loan Commitment, in each case as so reduced.
(g) On each date when any reduction in the Total Revolving
Loan Commitment Amount shall become effective, including pursuant to
Section 2.2, the Company or a
-82-
<PAGE>
Foreign Borrower, as the case may be, shall make a mandatory prepayment
of Revolving Loans or cash collateralize Canadian BAs, if applicable,
and (if necessary) Swing Line Loans and (if necessary) deposit with the
Administrative Agent cash collateral for Letter of Credit Outstandings
in an aggregate amount equal to the excess, if any, of the sum of (i)
the aggregate outstanding principal amount of all Revolving Loans
(included, in the case of Foreign Currency Revolving Loans, at the U.S.
Dollar Equivalent thereof) and Swing Line Loans and (ii) the Letter of
Credit Outstandings, over the Total Revolving Loan Commitment Amount as
so reduced.
(h) On the Stated Maturity Date and on each Quarterly Payment
Date occurring during any period set forth below, the Company or a
Foreign Borrower, as the case may be, shall make a scheduled repayment
of the outstanding principal amount, if any, of its Term Loans, applied
as set forth in Section 3.1.2, so that the aggregate amount of such
repayments shall equal the amount set forth below opposite such Stated
Maturity Date or period, as applicable (as such amounts may have
otherwise been reduced pursuant to this Agreement); provided that, with
respect to repayments of Foreign Currency Term Loans made pursuant to
this clause such repayments shall be made in the applicable Foreign
Currency in an amount equal to the Foreign Currency Equivalent thereof
determined by reference to exchange rates applied in respect of such
Foreign Currency Term Loans on the date such Foreign Currency Term
Loans were made:
Scheduled
Principal
Period Repayment
------ ---------
6/15/99 to 6/15/00 $531,250
6/16/00 to 6/15/01 $2,125,000
6/16/01 to 6/15/02 $4,250,000
6/16/02 to 6/15/03 $5,312,500
6/15/03 to Stated
Maturity Date $9,031,250
(i) On the Business Day following the date upon which the
Company shall have delivered a certificate required to be delivered
pursuant to clause (h) of Section 7.1.1, the Company or a Foreign
Borrower, as the case may be, shall,
(i) if the U.S. Dollar Equivalent of the aggregate
outstanding principal amount of all Committed Foreign Currency
Revolving Loans and Committed Foreign Currency Letter of
Credit Outstandings in any Foreign Currency is equal to or
greater than 105% of the applicable Foreign Currency Revolving
Loan
-83-
<PAGE>
Commitment Amount with respect to such Foreign Currency, make
a prepayment of its Committed Foreign Currency Revolving Loans
in such Foreign Currency (or cash collateralize Canadian BAs,
if applicable) and (if necessary) deposit with the
Administrative Agent cash collateral for the Foreign Currency
Letter of Credit Outstandings in respect of such Foreign
Currency in an amount equal to such excess over the applicable
Foreign Currency Revolving Loan Commitment Amount; and
(ii) if the U.S. Dollar Equivalent of the sum of the
aggregate outstanding principal amount of all Foreign Currency
Revolving Loans and all Foreign Currency Letter of Credit
Outstandings is equal to or greater than 105% of the Foreign
Currency Revolving Loan Limit, make a prepayment of its
Foreign Currency Revolving Loans (or cash collateralize
Canadian BAs, if applicable) and (if necessary) deposit with
the Administrative Agent cash collateral for the Foreign
Currency Letter of Credit Outstandings (in the applicable
Foreign Currency) in an amount equal to such excess over the
Foreign Currency Revolving Loan Limit.
(j) Following the prepayment in full of the Term Loans, on the
date the Term Loans would otherwise have been required to be prepaid on
account of any Net Disposition Proceeds, Net Debt Proceeds, Excess Cash
Flow, Net Equity Proceeds or Casualty Proceeds, the Company or a
Foreign Borrower, as the case may be, shall first, prepay such Tranche
or Tranches of Revolving Loans and Swing Line Loans, to the extent then
outstanding (or cash collateralize Canadian BAs, if applicable), as the
Company shall elect, and, second, deposit with the Administrative Agent
cash collateral for Letter of Credit Outstandings, in an aggregate
amount equal to the amount by which the Term Loans would otherwise have
been required to be prepaid if Term Loans had been outstanding.
(k) Immediately upon any acceleration of the Stated Maturity
Date of any Loans or Obligations pursuant to Section 8.2 or Section
8.3, the Company or a Foreign Borrower, as the case may be, shall repay
all outstanding Loans and other Obligations, and cash collateralize all
outstanding Canadian BAs unless, pursuant to Section 8.3, only a
portion of all Loans and other Obligations are so accelerated (in which
case the portion so accelerated shall be so prepaid).
(l) Immediately upon the receipt by the Spanish Term Borrower
of the proceeds of any Spanish Term Loan, the Company or a Foreign
Borrower, as the case may be, shall prepay U.S. Term Loans, U.K. Term
Loans or Canadian Term Loans (as elected by the Company) in an amount
equal to such proceeds.
-84-
<PAGE>
Each prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by Section 4.4. If any
such prepayment or repayments described above relate to Canadian BAs which have
not matured, the Canadian Borrower shall at such time deposit in a cash
collateral account opened and maintained by the Administrative Agent, an amount
equal to the aggregate undiscounted face amount (or the portion thereof relating
to the portion of all Canadian Loans so accelerated, in the case of clause (i)
of this Section 3.1.1) of all such unmatured Canadian BAs to be so repaid or
prepaid and such amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of such maturing Canadian BAs. No
prepayment of principal of any Revolving Loans or Swing Line Loans pursuant to
clause (a), (i) or (j) of this Section 3.1.1 shall cause a reduction in any
Revolving Loan Commitment Amount or the Swing Line Loan Commitment Amount, as
the case may be. Any Letter of Credit outstanding that is cash collateralized
pursuant to clause (f), (g) or (i) of this Section 3.1.1 shall not thereafter,
so long as, and to the extent that, such Letter of Credit remains so cash
collateralized, be considered to be outstanding for purposes of such clauses
(f), (g) or (i) of this Section 3.1.1.
SECTION 3.1.2. Application. (a) Subject to clause (b) below, each
prepayment or repayment of principal of the Loans of any Tranche shall be
applied, to the extent of such prepayment or repayment, first, to the principal
amount thereof being maintained as Base Rate Loans, and second, to the principal
amount thereof being maintained as Fixed Rate Loans.
(b) Each prepayment of Term Loans made pursuant to clauses (a), (b),
(c), (d), (e), (h) and (l) of Section 3.1.1 shall be applied, (i) on a pro rata
basis, to the outstanding principal amount of all Tranches of Term Loans and
(ii) except in the case of prepayments pursuant to clause (h) of Section 3.1.1,
in direct order of maturity of the remaining scheduled quarterly amortization
payments under clause (h) of Section 3.1.1; provided that the Company may make,
or cause other Borrowers to make, any such prepayments to any Lender of Term
Loans of such Tranches as the Company shall elect so long as the aggregate
amount of all such prepayments made to each Lender is equal to its pro rata
portion of the aggregate prepayments made to all Lenders; provided, further,
that if the Company at any time elects in writing, in its sole discretion, to
permit any Lender of Term Loans to decline to have such Term Loans prepaid, then
any Lender with Term Loans outstanding may, by delivering a notice to the Agents
at least one Business Day prior to the date that such prepayment is to be made,
decline to have its pro rata portion of such Term Loans prepaid with the amounts
set forth above.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of the Loans (other than interest payable with respect to Canadian BAs)
shall accrue and be payable in accordance with this Section 3.2.
-85-
<PAGE>
SECTION 3.2.1. Rates.
(a) Each Base Rate Loan shall accrue interest on the unpaid principal
amount thereof for each day from and including the day upon which such Loan was
made or converted to a Base Rate Loan to but excluding the date such Loan is
repaid or converted to a Fixed Rate Loan at a rate per annum equal to the sum of
the Alternate Base Rate (if such Loan is not a Canadian Loan) or Canadian Prime
Rate (if such loan is a Canadian Loan), as applicable, for such day plus the
Applicable Margin for such Loan on such day.
(b) Each Committed LIBO Rate Loan in any Currency shall accrue interest
on the unpaid principal amount thereof for each day during each Interest Period
applicable thereto at a rate per annum equal to the sum of the LIBO Rate (or
(i), in the case of U.S. Loans, LIBO Rate (Reserve Adjusted) and (ii) in the
case of U.K. Loans, LIBO Rate (Additional Cost Adjusted)) for such Currency and
Interest Period plus the Applicable Margin for such Loan on such day.
(c) Each Uncommitted Revolving Loan shall accrue interest on the unpaid
principal amount thereof for each day from and including the day upon which such
Loan was made to but excluding the date such Loan is repaid at a rate per annum
equal to the Uncommitted Interest Rate for such Loan.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount
of any Loan shall have become due and payable (whether on the applicable Stated
Maturity Date, upon acceleration or otherwise), or any other monetary Obligation
(other than overdue Reimbursement Obligations which shall bear interest as
provided in Section 2.8.2) of any Borrower shall have become due and payable,
such Borrower shall pay, but only to the extent permitted by law, interest
(after, as well as before, judgment) on such amounts at a rate per annum equal
to (i) in the case of any overdue principal of Loans, overdue interest thereon,
overdue commitment fees or other overdue amounts in respect of Loans or other
obligations (or the related Commitments) under a particular Tranche,(x) in the
case of Loans other than Foreign Currency Loans, the rate that would otherwise
be applicable to Base Rate Loans under such Tranche pursuant to clause (a) of
Section 3.2.1 plus 2%, (y) in the case of Committed Foreign Currency Loans, the
rate that would otherwise be applicable to such Loans under clause (b) of
Section 3.2.1 plus 2%, and (z) in the case of Uncommitted Revolving Loans, the
rate that would otherwise be applicable to such Loans pursuant to clause (c) of
Section 3.2.1 plus 2%, and (ii) in the case of other overdue monetary
Obligations, the rate that would otherwise be applicable to Committed Revolving
Loans that were Base Rate Loans plus 2%.
-86-
<PAGE>
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) in the case of a LIBO Rate Loan or an Uncommitted Absolute
Rate Revolving Loan, on the date of any payment or prepayment, in whole
or in part, of principal outstanding on such Loan, to the extent of the
unpaid interest accrued through such date on the principal so paid or
prepaid;
(c) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the Closing Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, at intervals of three months after the first day of such
Interest Period);
(e) with respect to the principal amount of any Base Rate
Loans converted into Fixed Rate Loans on a day when interest would not
otherwise have been payable pursuant to clause (c) above, on the date
of such conversion; and
(f) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
Interest accrued on Loans, Reimbursement Obligations or other monetary
Obligations arising under this Agreement or any other Loan Document after the
date such amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Borrowers agree to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. Each Borrower agrees to pay to the
Administrative Agent for the account of each Lender that has a Revolving Loan
Commitment to such Borrower, for each day during the period (including any
portion thereof when any of the Lenders' applicable Revolving Loan Commitments
are suspended by reason of the Company's inability to satisfy any condition of
Article V) commencing on the Original Closing Date and continuing to but
excluding the Revolving Loan Commitment Termination Date, a commitment fee on
such Lender's Percentage of the unused portion, whether or not then available,
of the Revolving Loan Commitment Amount with respect to such Revolving Loan
Commitment (net of Letter of Credit Outstandings in respect of the related
Letter of Credit Commitment) for such day at a rate per
-87-
<PAGE>
annum equal to the Applicable Commitment Fee for such day. Such commitment fees
shall be payable by the applicable Borrower in arrears on each Quarterly Payment
Date, commencing with the first such day following the Original Closing Date,
and on the Revolving Loan Commitment Termination Date. The making of Swing Line
Loans and Uncommitted Revolving Loans shall not constitute usage of the
applicable Revolving Loan Commitment with respect to the calculation of
commitment fees to be paid by the Borrowers to the applicable Lenders however,
the acceptance of Canadian BAs shall constitute usage of the Canadian Revolving
Loan Commitment with respect to the calculation of such commitment fee. Any term
or provision hereof to the contrary notwithstanding, commitment fees payable for
any period prior to the Original Closing Date shall be payable in accordance
with the Fee Letter. Payments by the Company to the Swing Line Lender in respect
of accrued interest on Swing Line Loans shall be net of the commitment fee
payable in respect of the Swing Line Lender's Revolving Loan Commitment.
SECTION 3.3.2. Administrative Agent Fee. The Company agrees to pay an
annual administration fee to the Administrative Agent, for its own account, in
the amount set forth in the Administrative Agent's Fee Letter, payable in
advance on the Original Closing Date and quarterly thereafter.
SECTION 3.3.3. Letter of Credit Fee. Each Borrower agrees to pay to the
Administrative Agent, for the pro rata account of the applicable Issuer and each
other Lender that has a Percentage greater than zero in respect of the
applicable Revolving Loan Commitment Amount, a Letter of Credit fee (the "Letter
of Credit Fee") for each day on which there shall be any Letters of Credit
outstanding under any Letter of Credit Commitment to such Borrower, at a rate
per annum equal to (i) with respect to each standby Letter of Credit, the then
Applicable Margin for Revolving Loans maintained as LIBO Rate Loans, multiplied
by the Stated Amount of each such Letter of Credit; and (ii) with respect to
each commercial Letter of Credit, 1.25% multiplied by the Stated Amount of each
such Letter of Credit, such fees being payable in U.S. Dollars quarterly in
arrears on each Quarterly Payment Date. Each Borrower further agrees to pay to
the applicable Issuer quarterly in arrears on each Quarterly Payment Date, an
issuance fee in an amount equal to .125% (or, if the Company and the applicable
Issuer shall have agreed to another percentage, such other percentage),
multiplied by the Stated Amount of each such Letter of Credit, such fees being
payable quarterly in arrears on each Quarterly Payment Date.
ARTICLE IV
CERTAIN LIBO RATE, CANADIAN BA AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Company and the Lenders,
be conclusive and
-88-
<PAGE>
binding on the Borrowers) that the introduction of or any change in or in the
interpretation of any law, in each case after (i) in the case of any such
introduction or change with respect to Committed Loans, the date upon which such
Lender shall have become a Lender hereunder, and (ii) in the case of any such
introduction or change with respect to Uncommitted Revolving Loans, the date on
which such Lender submitted an Uncommitted Interest Quote in respect of such
Uncommitted Revolving Loan pursuant to Section 2.4, makes it unlawful, or any
central bank or other governmental authority asserts, after such date, that it
is unlawful, for such Lender to make, continue or maintain any Loan as, or to
convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make,
continue, maintain or convert any Loans as or to LIBO Rate Loans shall, upon
such determination, forthwith be suspended until such Lender shall notify the
Administrative Agent that the circumstances causing such suspension no longer
exist (with the date of such notice being the "Reinstatement Date"), and (i) all
LIBO Rate Loans previously made by such Lender shall (A) in the case of U.S.
Loans, automatically convert into Base Rate Loans and (B) in the case of Foreign
Currency Loans, accrue interest at each applicable Lender's cost of funds, as
reasonably determined and as notified by such Lender to the Administrative Agent
and the Company, plus the Applicable Margin in respect of such Foreign Currency
Loans, in each case at the end of the then current Interest Periods with respect
thereto or sooner, if required by such law or assertion, and (ii) all Loans
thereafter to be made by such Lender and outstanding prior to the Reinstatement
Date shall (A) in the case of U.S. Loans, be made as Base Rate Loans, with
interest thereon being payable on the same date that interest is payable with
respect to the corresponding Borrowing of LIBO Rate Loans made by Lenders not so
affected, and (B) in the case of Foreign Currency Loans, accrue interest at each
applicable Lender's cost of funds, as reasonably determined and as notified by
such Lender to the Administrative Agent and the Company, plus the Applicable
Margin in respect of such Foreign Currency Loans.
SECTION 4.2. Deposits Unavailable; Circumstances Making Canadian BAs
Unavailable. (a) If the Administrative Agent shall have determined that (i)
deposits in the relevant Currency and amount and for the relevant Interest
Period are not available to the Administrative Agent in its relevant market, or
(ii) by reason of circumstances affecting the Administrative Agent's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans in a particular Currency, then, upon
notice from the Administrative Agent to the Company and the Lenders, the
obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue
any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be
suspended and, in the case of U.S. Loans, such Loans shall accrue interest at
the Base Rate plus the Applicable Margin in respect of such Loans and, in the
case of Foreign Currency Loans, such Loans shall accrue interest at each
applicable Lender's cost of funds, as reasonably determined and as notified by
such Lender to the Administrative Agent and the Company, plus the Applicable
Margin in respect of such Loans, in each case from the end of the then current
Interest Period applicable thereto, until the Administrative Agent shall notify
the Company and the Lenders that the circumstances causing such suspension no
longer exist, and subsequent LIBO Rate Loans in respect of such Currency shall
be made at an interest
-89-
<PAGE>
rate equal to, in the case of U.S. Loans, the Base Rate plus the Applicable
Margin in respect of such Loans and, in the case of Foreign Currency Loans, each
applicable Lender's cost of funds, as reasonably determined and as notified by
such Lender to the Administrative Agent and the Company, plus the Applicable
Margin in respect of such Loans.
(b) If the Administrative Agent shall have determined that by reason of
circumstances affecting the Canadian money market, there is no market for
Canadian BAs, then the right of the Canadian Borrower to request the acceptance
of Canadian BAs and the acceptance thereof shall be suspended until the
Administrative Agent determines that the circumstances causing such suspension
no longer exist and the Administrative Agent so notifies the Canadian Borrower
and any Committed Loan Borrowing Request or Continuation/Conversion Notice
requesting the acceptance of Canadian BAs shall be canceled and the Loans
requested therein shall be made as, continued as or converted into Canadian
Prime Rate Loans or, in the case of a Credit Extension, if requested by the
Canadian Borrower at least one Business Day prior to the scheduled date of the
Credit Extension, not be made.
SECTION 4.3. Increased Fixed Rate Loan Costs, etc. The applicable
Borrower agrees to reimburse each Lender for any increase in the cost to such
Lender of, or any reduction in the amount of any sum receivable by such Lender
in respect of, making, continuing or maintaining (or of its obligation to make,
continue or maintain) any Loans as, or of converting (or of its obligation to
convert) any Loans into, Fixed Rate Loans (excluding any amounts, whether or not
constituting Taxes, referred to in Section 4.6) arising as a result of any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority that occurs after (i) in
the case of any such increased costs or reduced return in respect of Committed
Loans, the date upon which such Lender became a Lender hereunder and (ii) in the
case of any such increased costs or reduced return in respect of Uncommitted
Revolving Loans, the date on which such Lender submitted an Uncommitted Interest
Quote with respect to such Uncommitted Revolving Loan pursuant to Section 2.4.
Such Lender shall promptly notify the Administrative Agent and the Company in
writing of the occurrence of any such event, and such notice shall state, in
reasonable detail, the reasons therefor and the additional amount required fully
to compensate such Lender for such increased cost or reduced amount. Such
additional amounts shall be payable by the applicable Borrower directly to such
Lender within five days of its receipt of such notice, and such notice shall, in
the absence of manifest error, be conclusive and binding on the Borrowers.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan
-90-
<PAGE>
into, a Fixed Rate Loan, but excluding any loss of margin after the date of any
such conversion, repayment, prepayment or failure to borrow, continue or
convert) as a result of (i) any conversion or repayment or prepayment of the
principal amount of any Fixed Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to Section 3.1
or otherwise, (ii) any Loans not being borrowed as Fixed Rate Loans in
accordance with the Borrowing Request therefor, or (iii) any Loans not being
continued as, or converted into, Fixed Rate Loans in accordance with the
Continuation/Conversion Notice therefor, then, upon the written notice of such
Lender to the applicable Borrower (with a copy to the Administrative Agent),
such Borrower shall, within five days of its receipt thereof, pay directly to
such Lender such amount as will (in the reasonable determination of such Lender)
reimburse such Lender for such loss or expense. Such written notice (which shall
include calculations in reasonable detail) shall, in the absence of manifest
error, be conclusive and binding on such Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority, in each case occurring after (i) in the case of
any such change, introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in in respect of Committed Loans, the applicable
Lender becomes a Lender hereunder, and (ii) in the case of any such change,
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in in respect of Uncommitted Revolving Loans, the date upon which such
Lender submitted an Uncommitted Interest Quote in respect of such Uncommitted
Revolving Loan pursuant to Section 2.4, affects or would affect the amount of
capital required or expected to be maintained by any Lender or any Person
controlling such Lender, and such Lender determines (in its sole and absolute
discretion) that the rate of return on its or such controlling Person's capital
as a consequence of its Commitments, participation in Letters of Credit,
acceptance of or funding of Canadian BAs or the Loans made by such Lender is
reduced to a level below that which such Lender or such controlling Person could
have achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by such Lender to the Company, the applicable
Borrower shall immediately pay directly to such Lender additional amounts
sufficient to compensate such Lender or such controlling Person for such
reduction in rate of return. A statement of such Lender as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrowers. In determining such amount, such Lender may use any method of
averaging and attribution that it (in its sole and absolute discretion) shall
deem applicable; provided, that such Lender may not impose materially greater
costs on the Borrowers than on other similarly situated borrowers by virtue of
any such averaging or attribution method.
SECTION 4.6. Taxes. (a) All payments by the Borrowers of principal of,
and interest on, the Loans and all other amounts payable hereunder (including
Reimbursement Obligations, fees and expenses) shall be made free and clear of
and without deduction for any present or
-91-
<PAGE>
future income, excise, stamp or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding (i) any income, excise, stamp or franchise taxes and
other similar taxes, fees, duties, withholdings or other charges imposed on any
of the Agents as a result of a present or former connection between the
applicable lending office (or office through which it performs any of its
actions as Agent) of such Agent, and any income, excise, stamp or franchise
taxes and other similar taxes, fees, duties, withholdings or other charges
imposed on any Lender as a result of a present or former connection between the
applicable lending office of such Lender, in each case, and the jurisdiction of
the governmental authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from such Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or taken any action to enforce,
this Agreement or any Note) or (ii) any income, excise, stamp or franchise taxes
and other similar taxes, fees, duties, withholdings or other charges to the
extent that they are in effect and would apply (x) as of the date any Person
becomes a Lender or Assignee Lender to the extent such taxes, fees, duties,
withholdings or other charges relate to payments other than payments in respect
of Uncommitted Revolving Loans, (y) as of the date on which such Lender
submitted an Uncommitted Interest Quote with respect to such Uncommitted
Revolving Loans pursuant to Section 2.4, to the extent such taxes, fees, duties,
withholdings or other charges become applicable as a result of or in connection
with the Uncommitted Revolving Loans, or (z) in either case, as of the date that
any Lender changes its applicable lending office, to the extent such taxes
become applicable as a result of such change (other than a change in an
applicable lending office made pursuant to Section 4.10 below) (such
non-excluded items being called "Taxes"). In the event that any withholding or
deduction from any payment to be made by any Borrower hereunder is required in
respect of any Taxes pursuant to any applicable law, rule or regulation, then
such Borrower will 1) pay directly to the relevant taxing authority the full
amount required to be so withheld or deducted, 2) promptly forward to the
Administrative Agent an official receipt or other documentation available to
such Borrower reasonably satisfactory to the Administrative Agent evidencing
such payment to such authority, and 3) pay to the Administrative Agent for the
account of the applicable Lenders such additional amount or amounts as is
necessary to ensure that the net amount actually received by each Lender will
equal the full amount such applicable Lender would have received had no such
withholding or deduction been required; provided, however, that the Company
shall not be required to pay any such additional amounts in respect of amounts
payable to any Lender or Agent that is not organized under the laws of the
United States or a state thereof if such Lender or Agent fails to comply with
the requirements of clause (b) of Section 4.6.
Moreover, if any Taxes are directly asserted against any of the Agents
or any Lender with respect to any payment received by such Agents or such Lender
hereunder, such Agents or such Lender may pay such Taxes and the applicable
Borrower will promptly pay to such Person such additional amount (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such Person (including any Taxes on such additional amount) shall
equal
-92-
<PAGE>
the amount of such Taxes paid by such Person; provided, however, that the
applicable Borrower shall not be obligated to make payment to the Lenders or the
Agents (as the case may be) pursuant to this sentence in respect of penalties or
interest attributable to any Taxes, if written demand therefor has not been made
by such Lenders or the Agents within 60 days from the date on which such Lenders
or the Agents knew of the imposition of Taxes by the relevant taxing authority
or for any additional imposition which may arise from the failure of the Lenders
or the Agents to apply payments in accordance with the applicable tax law after
any Borrower has made the payments required hereunder; provided, further, that
the Company shall not be required to pay any such additional amounts in respect
of any amounts payable to any Lender or Agent (as the case may be) that is not
organized under the laws of the United States or a state thereof to the extent
the related Tax is imposed as a result of such Lender or Agent failing to comply
with the requirements of clause (b) of Section 4.6. After a Lender or an Agent
(as the case may be) learns of the imposition of Taxes, such Lender or Agent
will act in good faith to notify the Borrowers of their obligations hereunder as
soon as reasonably possible.
If any Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Lenders, the required receipts or other required documentary
evidence, such Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure.
(b) Each Non-U.S. Lender shall, (i) on or prior to the date of the
execution and delivery of this Agreement, in the case of each Lender listed on
the signature pages hereof, or, in the case of an Assignee Lender, on or prior
to the date it becomes a Lender, execute and deliver to the Company and the
Administrative Agent, two or more (as the Company or the Agents may reasonably
request) United States Internal Revenue Service Forms 4224 or Forms 1001 (or
successor forms) or, solely if such Lender is claiming exemption from United
States withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest", United States Internal Revenue Service
Forms W-8 and a certificate signed by a duly authorized officer of such Lender
representing that such Lender is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code, or such other forms or documents (or successor forms
or documents), appropriately completed, establishing that payments to such
Lender are exempt from withholding or deduction of Taxes imposed by the United
States; and (ii) deliver to the Company and the Administrative Agent two further
copies of any such form or documents on or before the date that any such form or
document expires or becomes obsolete and after the occurrence of any event
requiring a change in the most recent such form or document previously delivered
by it to the Company.
(c) If the Company determines in good faith that a reasonable basis
exists for contesting the imposition of a Tax with respect to a Lender or any of
the Agents, the relevant Lender or Agent, as the case may be, shall cooperate
with the Borrowers in challenging such Tax at the
-93-
<PAGE>
Borrowers' expense if requested by the Company; provided, however, that nothing
in this Section 4.6 shall require any Lender to submit to the Company or any
other Person any tax returns or any part thereof, or to prepare or file any tax
returns other than as such Lender in its sole discretion shall determine.
(d) If a Lender or an Agent shall receive a refund (including any
offset or credits) from a taxing authority (as a result of any error in the
imposition of Taxes by such taxing authority) of any Taxes paid by any Borrower
pursuant to subsection 4.6(a) above, such Lender or the Agent (as the case may
be) shall promptly pay such Borrower the amount so received, together with any
interest from the taxing authority with respect to such refund, net of any tax
liability incurred by such Lender or Agent that is attributable to the receipt
of such refund and such interest.
(e) Each Lender and each Agent agrees, to the extent reasonable and
without material cost to it, to cooperate with the Borrowers to minimize any
amounts payable by the Borrowers under this Section 4.6.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by or on behalf of the Borrowers pursuant to this
Agreement or any other Loan Document shall be made by the Borrowers to the
Administrative Agent for the pro rata account of the Lenders, Agents or
Arranger, as applicable, entitled to receive such payment. All such payments
required to be made to the Administrative Agent shall be made, without setoff,
deduction or counterclaim, not later than 1:00 p.m., New York time (1:00 p.m.,
London time, in the case of Foreign Currency Loans other than Canadian Loans),
on the date due, in same day or immediately available funds, to such account as
the Administrative Agent shall specify from time to time by notice to the
Company and the applicable Borrower. Funds received after that time shall be
deemed to have been received by the Administrative Agent on the next succeeding
Business Day. The Administrative Agent shall promptly remit in same day funds to
each Lender (or, with respect to any LIBO Rate Loan made by any foreign branch
or Affiliate of any Lender, if requested by such Lender, directly to such
foreign branch or Affiliate), Agent or Arranger, as the case may be, its share,
if any, of such payments received by the Administrative Agent for the account of
such Lender, Agent or Arranger, as the case may be. All interest and fees shall
be computed on the basis of the actual number of days (including the first day
but excluding the last day) occurring during the period for which such interest
or fee is payable over a year comprised of 360 days (or, in the case of interest
on (i) a Base Rate Loan or (ii) a LIBO Rate Loan denominated in British Pounds,
365 days or, if appropriate, 366 days). Whenever any payment to be made shall
otherwise be due on a day which is not a Business Day, such payment shall
(except as otherwise required by clause (i) of the definition of the term
"Interest Period") be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and fees, if any, in
connection with such payment.
-94-
<PAGE>
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan or Reimbursement Obligations (other
than pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its pro
rata share of payments then or therewith obtained by all Lenders entitled
thereto, such Lender shall purchase from the other Lenders such participation in
the Credit Extensions made by them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase price
to the ratable extent of such recovery together with an amount equal to such
selling Lender's ratable share (according to the proportion of (i) the amount of
such selling Lender's required repayment to the purchasing Lender in respect of
such recovery, to (ii) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrowers agree that any Lender so
purchasing a participation from another Lender pursuant to this Section may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.9) with respect to such participation as fully
as if such Lender were the direct creditor of the applicable Borrower in the
amount of such participation. If under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section to share in the benefits
of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any
Event of Default described in clauses (b) through (d) of Section 8.1.9 with
respect to any Obligor (other than immaterial Subsidiaries) or, with the consent
of the Required Lenders, upon the occurrence of any other Event of Default, to
the fullest extent permitted by law, have the right to appropriate and apply to
the payment of the Obligations then due to it from such Borrower, and (as
security for such Obligations) each Borrower hereby grants to each Lender a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of such Borrower then or thereafter maintained with or
otherwise held by such Lender; provided, however, that any such appropriation
and application shall be subject to the provisions of Section 4.8. Each Lender
agrees promptly to notify the applicable Borrower and the Company and the
Administrative Agent after any such setoff and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff under applicable law or otherwise) which such Lender may have.
SECTION 4.10. Mitigation. Each Lender agrees that if it makes any
demand for payment under Sections 4.3, 4.4, 4.5 or 4.6, or if any adoption or
change of the type described in
-95-
<PAGE>
Section 4.1 shall occur with respect to it, it will use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be disadvantageous to it, as determined in its
sole discretion) to designate a different lending office if the making of such a
designation would reduce or obviate the need for a Borrower to make payments
under Section 4.3, 4.4, 4.5 or 4.6, or would eliminate or reduce the effect of
any adoption or change described in Section 4.1.
SECTION 4.11. Replacement of Lenders. Each Lender hereby severally
agrees as set forth in this Section. If any Lender (a "Subject Lender") makes
demand upon any Borrower for (or if any Borrower is otherwise required to pay)
amounts pursuant to Section 4.3, 4.5 or 4.6, or gives notice pursuant to Section
4.1 requiring a conversion of such Subject Lender's LIBO Rate Loans to Base Rate
Loans or any other change in the basis upon which interest is to accrue in
respect of such Subject Lender's Fixed Rate Loans or suspending such Lender's
obligation to make Loans as, or to convert Loans into, Fixed Rate Loans, the
Company may, within 90 days of receipt by such Borrower of such demand or notice
(or the occurrence of such other event causing any Borrower to be required to
pay such compensation), as the case may be, give notice (a "Replacement Notice")
in writing to the Agents and such Subject Lender of its intention to replace
such Subject Lender with a financial institution (a "Replacement Lender")
designated in such Replacement Notice. If the Agents shall, in the exercise of
their reasonable discretion and within 30 days of their receipt of such
Replacement Notice, notify the Company and such Subject Lender in writing that
the designated financial institution is satisfactory to the Agents (such consent
not being required where the Replacement Lender is already a Lender), then such
Subject Lender shall, subject to the payment of any amounts due pursuant to
Section 4.4, assign, in accordance with Section 11.11.1, all of its Commitments,
Loans and other rights and obligations under this Agreement and all other Loan
Documents (including, without limitation, Reimbursement Obligations) to such
designated financial institution; provided, however, that (i) such assignment
shall be without recourse, representation or warranty and shall be on terms and
conditions reasonably satisfactory to such Subject Lender and such designated
financial institution and (ii) the purchase price paid by such designated
financial institution shall be in the amount of such Subject Lender's Loans and
its Percentage in respect of any Revolving Loan Commitment under which there are
outstanding Reimbursement Obligations of such Reimbursement Obligation, together
with all accrued and unpaid interest and fees in respect thereof, plus all other
amounts (including the amounts demanded and unreimbursed under Sections 4.3, 4.5
and 4.6), owing to such Subject Lender hereunder. Upon the effective date of an
assignment described above, the assignee financial institution or Replacement
Lender shall become a "Lender" for all purposes under this Agreement and the
other Loan Documents.
-96-
<PAGE>
ARTICLE V
CONDITIONS TO EFFECTIVENESS
SECTION 5.1. Effectiveness. The amendment and restatement of the
Existing Credit Agreement shall be effective upon the satisfaction of each of
the conditions precedent set forth in this Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Agents shall have received from
each Obligor a certificate, dated either the Original Closing Date or the
Closing Date, of any of its Authorized Officers as to (i) resolutions of its
Board of Directors then in full force and effect authorizing the execution,
delivery and performance of each Loan Document to be executed by it, and (ii)
the incumbency and signatures of those of its officers authorized to act with
respect to each Loan Document executed by it, upon which certificate each Agent
and each Lender may conclusively rely until it shall have received a further
certificate of the Secretary or Assistant Secretary of such Obligor canceling or
amending such prior certificate.
SECTION 5.1.2. Closing Date Certificate. Each of the Agents shall have
received, with counterparts or copies for each Lender, the Closing Date
Certificate, dated the Closing Date and duly executed and delivered by the chief
executive financial or accounting (or equivalent) Authorized Officer of the
Company, in which certificate the Company shall agree and acknowledge that the
statements made therein shall be deemed to be true and correct representations
and warranties of the Company made as of such date under this Agreement, and, at
the time such certificate is delivered, such statements shall in fact be true
and correct.
SECTION 5.1.3. Delivery of Notes. The Agents shall have received, for
the account of each Lender that shall have requested a Note not less than two
Business Days prior to the Closing Date, a Note of each applicable Borrower in
respect of each applicable Tranche duly executed and delivered by such Borrower.
SECTION 5.1.4. Affirmation and Consent. The Agents shall have received
executed counterparts of the Affirmation and Consent, duly executed and
delivered by an Authorized Officer of each of the Obligors (other than the
Borrowers).
SECTION 5.1.5. Subsidiary Guaranty Supplement. The Agents shall have
received a supplement to the Subsidiary Guaranty, dated on or prior to the
Closing Date, duly executed and delivered by an Authorized Officer of the U.K.
Term Borrower.
SECTION 5.1.6. Pledge Agreements. The Agents shall have received
executed counterparts of
-97-
<PAGE>
(a) a supplement to the Subsidiary Pledge Agreement in form
and substance satisfactory to the Agents, dated on or prior to the
Closing Date, duly executed and delivered by an Authorized Officer of
Formica International, together with the certificates evidencing all of
the issued and outstanding shares of Capital Stock of the U.K. Term
Borrower not previously pledged pursuant to the Subsidiary Pledge
Agreement, which certificates shall in each case be accompanied by
undated stock powers duly executed in blank; and
(b) a pledge agreement in form and substance satisfactory to
the Agents, dated on or prior to the Closing Date, duly executed and
delivered by an Authorized Officer of the U.K. Term Borrower, together
with certificates evidencing 65% of the issued and outstanding shares
of Capital Stock of the U.K. Revolver Borrower, which certificates
shall in each case be accompanied by undated stock powers duly executed
in blank.
SECTION 5.1.7. Opinions of Counsel. The Agents shall have received
opinions, dated the Closing Date and addressed to the Agents and all Lenders
from
(a) Davis Polk & Wardwell, special New York counsel to the
Obligors, in form and substance satisfactory to the Agents;
(b) Baker & Botts, Texas counsel to the Obligors, in form and
substance satisfactory to the Agents;
(c) Solomon, Ward, Seidenworm & Smith, California counsel to
the Obligors, in form and substance satisfactory to the Agents;
(d) Vorys Sater Seymour & Pease LLP, Ohio counsel to the
Obligors, in form and substance satisfactory to the Agents;
(e) Lee & Li, Taiwanese counsel to the Obligors, in form and
substance satisfactory to the Agents;
(f) McMillan Binch, Canadian counsel to the Obligors, in form
and substance satisfactory to the Agents;
(g) Clifford Chance, French counsel to the Obligors, in form
and substance satisfactory to the Agents;
(h) Clifford Chance, Spanish counsel to the Obligors, in form
and substance satisfactory to the Agents; and
-98-
<PAGE>
(i) Mayer, Brown & Platt, U.K. counsel to the Lenders, in form
and substance satisfactory to the Agents.
SECTION 5.1.8. Financial Information. The Agents shall have received a
pro forma consolidated balance sheet of the Company, as at March 31, 1998 (the
"Pro Forma Balance Sheet"), certified by the chief financial or accounting
Authorized Officer of the Company and satisfactory in all respects to the
Arranger and the Syndication Agent.
SECTION 5.1.9. Insurance. The Agents shall have received satisfactory
evidence of the existence of insurance in compliance with Section 7.1.4
(including all endorsements included therein), and the Administrative Agent
shall be named additional insured or loss payee, on behalf of the Lenders,
pursuant to documentation reasonably satisfactory to the Agents.
SECTION 5.1.10. Purchase Price Adjustments. The Agents shall have
received an undertaking satisfactory to the Agents that in the event that
Holdings or any of its Subsidiaries receives any proceeds resulting from a
purchase price adjustment in connection with the Acquisition Transactions, such
proceeds shall be invested in the Company or any of its Subsidiaries that are
Subsidiary Guarantors.
SECTION 5.1.11. Closing Fees, Expenses, etc. The Agents and the
Arranger shall have received, each for its own respective account, or, in the
case of the Administrative Agent, for the account of each Lender, as the case
may be, all fees, costs and expenses due and payable pursuant to Sections 3.3
and 10.3, if then invoiced.
SECTION 5.1.12. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Company, any of its
Subsidiaries or any other Obligors shall be reasonably satisfactory in form and
substance to the Agents and their counsel; the Agents and their counsel shall
have received all information, approvals, opinions, documents or instruments as
the Agents or their counsel may reasonably request.
SECTION 5.2. All Credit Extensions. The obligation of each Lender and,
if applicable, each Issuer, to make any Credit Extension (including its initial
Credit Extension) shall be subject to the satisfaction of each of the conditions
precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension the following statements shall
be true and correct:
(a) the representations and warranties set forth in Article VI
and in each other Loan Document shall, in each case, be true and
correct in all material respects with the same effect as if then made
(unless stated to relate solely to an earlier date, in which case
-99-
<PAGE>
such representations and warranties shall be true and correct in all
material respects as of such earlier date);
(b) in the case of a Committed Revolving Loan or Letter of
Credit issuance, the sum of (i) the aggregate outstanding principal
amount of all Committed Revolving Loans and, if applicable, Swing Line
Loans under the applicable Revolving Loan Commitment plus (ii) the
aggregate amount of all Letter of Credit Outstandings under such
Revolving Loan Commitment does not exceed the then existing Revolving
Loan Commitment Amount in respect of such Revolving Loan Commitment;
(c) the sum of (i) the aggregate outstanding principal amount
of all Revolving Loans (included in the case of Foreign Currency
Revolving Loans at the U.S. Dollar Equivalent thereof) and Swing Line
Loans and (ii) the Letter of Credit Outstandings shall not exceed the
Total Revolving Loan Commitment Amount;
(d) the sum of (i) the aggregate outstanding principal amount
of all Foreign Currency Revolving Loans (included at the U.S. Dollar
Equivalent thereof) and (ii) the Foreign Currency Letter of Credit
Outstandings shall not exceed the Foreign Currency Revolving Loan
Limit; and
(e) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request. The Administrative Agent shall
have received a Borrowing Request if Loans are being requested, or (except in
the case of the deemed issuance hereunder on the Closing Date of Letters of
Credit then outstanding under the Existing Credit Agreement pursuant to Section
2.8.6) an Issuance Request if a Letter of Credit is being requested or extended.
Each of the delivery of a Borrowing Request or Issuance Request and the
acceptance by any Borrower of proceeds of any Credit Extension shall constitute
a representation and warranty by the Company that on the date of such Credit
Extension (both immediately before and after giving effect thereto and the
application of the proceeds thereof) the statements made in Section 5.2.1 are
true and correct.
SECTION 5.3. First Borrowing by Each Foreign Subsidiary. The obligation
of any Lender to make a Loan on the occasion of the first Borrowing by any
Foreign Borrower (other than the U.K. Revolver Borrower, the U.K. Term Borrower,
the Canadian Borrower, the French Revolver Borrower and the Spanish Revolver
Borrower) is subject to the satisfaction of the following further conditions:
(a) receipt by the Administrative Agent for the account of
each Lender with an applicable Foreign Currency Revolving Loan
Commitment that shall have requested a Note not less than two Business
Days prior to the date of such Borrowing of a duly
-100-
<PAGE>
executed Note of such Foreign Borrower, dated on or before the date of
such Borrowing, complying with the provisions of Section 2.9;
(b) receipt by the Administrative Agent of an opinion of
counsel for such Foreign Borrower acceptable to the Administrative
Agent, in form and substance satisfactory to the Agents and covering
such additional matters relating to the transactions contemplated
hereby as the Required Lenders may reasonably request; and
(c) receipt by the Administrative Agent of a duly executed
Foreign Currency Revolving Loan Commitment Addendum, Foreign Currency
Term Loan Commitment Addendum or Uncommitted Revolving Borrowing
Addendum, together with all documents which it may reasonably request
relating to the existence of such Foreign Borrower, its corporate
authority for and the validity of its entry into this Agreement and the
other Loan Documents to which it is a party, and any other matters
relevant thereto, all in form and substance satisfactory to the
Administrative Agent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuers and the Agents to enter
into this Agreement and to make Credit Extensions hereunder, the Company
represents and warrants unto the Agents, each Issuer and each Lender as set
forth in this Article VI.
SECTION 6.1. Organization, etc. The Company and each of its Restricted
Subsidiaries (a) is a corporation validly organized and existing and in good
standing to the extent required under the laws of the jurisdiction of its
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation to the extent required under the laws of each jurisdiction
where the nature of its business requires such qualification, except to the
extent that the failure to qualify would not reasonably be expected to result in
a Material Adverse Effect, and (b) has full power and authority and holds all
requisite governmental licenses, permits and other approvals to (i) enter into
and perform its Obligations under this Agreement and each other Loan Document to
which it is a party and (ii) own and hold under lease its property and to
conduct its business substantially as currently conducted by it except, in the
case of this clause (b)(ii), where the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Company of this Agreement and each other Loan
Document executed or to be executed by it, and the execution, delivery and
performance by each other Obligor of each Loan Document executed or to be
executed by it, are within the Company's and each such
-101-
<PAGE>
Obligor's corporate powers, have been duly authorized by all necessary corporate
action, and do not (i) contravene the Company's or any such Obligor's Charter
Documents, (ii) other than as set forth in Item 6.2 ("Contractual Restrictions")
of the Disclosure Schedule, contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or affecting the
Company or any such Obligor, where such contravention, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, or
(iii) result in, or require the creation or imposition of, any Lien on any of
the Company's or any other Obligor's properties, except pursuant to the terms of
a Loan Document.
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person, is required for the due execution,
delivery or performance by the Company or any other Obligor of this Agreement or
any other Loan Document to which it is a party, except as have been duly
obtained or made and are in full force and effect or those which the failure to
obtain or make could not reasonably be expected to have a Material Adverse
Effect. None of the Company or any other Obligor, or any of the Company's
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and each other
Loan Document executed by any Borrower will, on the due execution and delivery
thereof, constitute, the legal, valid and binding obligations of any Borrower
party thereto enforceable in accordance with their respective terms; and each
Loan Document executed pursuant hereto by each other Obligor will, on the due
execution and delivery thereof by such Obligor, be the legal, valid and binding
obligation of such Obligor enforceable in accordance with its terms, in each
case with respect to this Section 6.4 subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
SECTION 6.5. Financial Information. The Company has delivered to the
Agents and each Lender copies of audited consolidated balance sheets of FMH and
its Subsidiaries as at December 31, 1996 and December 31, 1997 and the related
audited consolidated statements of operations, cash flows and changes in
stockholders' equity for the period from January 27, 1995 through December 31,
1995 and the Fiscal Years ended December 31, 1996 and December 31, 1997
(collectively, the "Base Financial Statements"). The Base Financial Statements
have been prepared in accordance with GAAP consistently applied and present
fairly in all material respects the consolidated financial position of FMH and
its Subsidiaries as of the date thereof and their
-102-
<PAGE>
results of operations and cash flows for the periods then ended (except for
footnote 12 thereto in which certain asset amounts were transposed).
SECTION 6.6. No Material Adverse Change. Since December 31, 1997, there
has been no material adverse change in the financial condition, operations,
assets, business, properties or prospects of the Company and its Restricted
Subsidiaries, taken as a whole.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Company, threatened litigation, action, proceeding,
labor controversy, arbitration or governmental investigation affecting any
Obligor, or any of their respective properties, businesses, assets or revenues,
which could reasonably be expected to result in a Material Adverse Effect except
as disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule. No material
adverse development has occurred in any litigation, action, labor controversy,
arbitration or governmental investigation or other proceeding disclosed in Item
6.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.8. Subsidiaries. The Company has only those Subsidiaries (i)
which are identified in Item 6.8 ("Existing Subsidiaries") of the Disclosure
Schedule, or (ii) which are permitted to have been acquired in accordance with
Section 7.2.5 or 7.2.8.
SECTION 6.9. Ownership of Properties. Except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, the Company and each of its Restricted Subsidiaries owns good title to,
or leasehold interests in, all of its properties and assets (other than
insignificant properties and assets), real and personal, tangible and
intangible, of any nature whatsoever (including patents, trademarks, trade
names, service marks and copyrights), free and clear of all Liens or material
claims (including material infringement claims with respect to patents,
trademarks, copyrights and the like), except as permitted pursuant to Section
7.2.3.
SECTION 6.10. Taxes. Each of Holdings, FMH, the Company and each of the
Company's Subsidiaries has filed all Federal, State and other material tax
returns required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes or charges
which are being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 6.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the Original Closing Date, no steps
have been taken to terminate any Pension Plan under section 4041(c) or section
4042 of ERISA, and no contribution failure has occurred with respect to any
Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA,
which, singly or in the aggregate, is reasonably expected to lead to a liability
to such Pension Plan in excess of $5,000,000. Except as disclosed in Item 6.11
("Employee Benefit Plans") of
-103-
<PAGE>
the Disclosure Schedule, no condition exists or event or transaction has
occurred with respect to any Pension Plan which could reasonably be expected to
result in the incurrence by the Company or any member of the Controlled Group of
any material liability, fine or penalty other than such condition, event or
transaction which would not reasonably be expected to have a Material Adverse
Effect. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of the
Disclosure Schedule or otherwise approved by the Agents (such approval not to be
unreasonably withheld or delayed), since the date of the last financial
statement the Company has not increased any contingent liability with respect to
any post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Subtitle B of Title I of ERISA,
except as would not have a Material Adverse Effect.
SECTION 6.12. Environmental Warranties. Except as set forth in Item
6.12 ("Environmental Matters") of the Disclosure Schedule or as, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Company or any of its Subsidiaries
are, and continue to be, owned or leased by the Company and its
Subsidiaries in compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or
threatened (i) written claims, complaints, notices or requests for
information received by the Company or any of its Subsidiaries with
respect to any alleged violation of any Environmental Law, or (ii)
written complaints, notices or inquiries to the Company or any of its
Subsidiaries regarding potential liability under any Environmental Law;
(c) there have been no Releases of Hazardous Materials at, on
or under any property now or previously owned or leased by the Company
or any of its Subsidiaries;
(d) the Company and its Subsidiaries have been issued and are
in compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary
for their businesses;
(e) no property now owned or leased by the Company or any of
its Subsidiaries is listed or proposed for listing (with respect to
owned property only) on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Company or any of its
Subsidiaries;
-104-
<PAGE>
(g) the Company and its Subsidiaries have not directly
transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or to the knowledge
of the Company or any of its Subsidiaries, proposed for listing on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list;
(h) there are no polychlorinated biphenyls or friable asbestos
present in a manner or condition at any property now or previously
owned or leased by the Company or any Subsidiary of the Company; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Company or any of its Subsidiaries
which, with the passage of time, or the giving of notice or both, would
give rise to liability to the Company or any of its Subsidiaries under
any Environmental Law.
SECTION 6.13. Regulations U and X. Neither the Company nor FMH or
Holdings is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Credit Extension
will be used in violation of F.R.S. Board Regulation U or X. Terms for which
meanings are provided in F.R.S. Board Regulation U or X or any regulations
substituted therefor, as from time to time in effect, are used in this Section
with such meanings.
SECTION 6.14. Accuracy of Information. All material factual information
concerning the financial condition, operations or prospects of Holdings, FMH,
the Company, and the Company's Subsidiaries heretofore or contemporaneously
furnished by or on behalf of the Company in writing to the Agents, the Arranger,
any Issuer or any Lender for purposes of or in connection with this Agreement or
any transaction contemplated hereby, and all other such factual information
hereafter furnished by or on behalf of the Company, or any of its Subsidiaries
to the Agents, the Arranger, any Issuer or any Lender will be, taken as a whole,
true and accurate in every material respect on the date as of which such
information is dated or certified and such information is not, or shall not be,
taken as a whole, as the case may be, incomplete by omitting to state any fact
necessary to make such information not materially misleading; provided, that
this Section 6.14 shall only relate to information regarding Unrestricted
Subsidiaries to the extent such information was (i) required to be provided
hereunder or pursuant to any other Loan Document, or (ii) requested by the
Agents or the Lenders and was provided by Holdings, FMH, the Company or any of
its Subsidiaries, but shall not apply to any such information on Unrestricted
Subsidiaries which is otherwise received by the Agents or the Lenders or was
inadvertently provided to the Agents or the Lenders.
Any term or provision of this Section to the contrary notwithstanding,
insofar as any of the factual information described above includes assumptions,
estimates, projections or opinions,
-105-
<PAGE>
no representation or warranty is made herein with respect thereto; provided,
however, that to the extent any such assumptions, estimates, projections or
opinions are based on factual matters, the Company has reviewed such factual
matters and nothing has come to its attention in the context of such review
which would lead it to believe that such factual matters were not or are not
true and correct in all material respects or that such factual matters omit to
state any material fact necessary to make such assumptions, estimates,
projections or opinions not misleading in any material respect.
SECTION 6.15. Solvency. On the Original Closing Date, after giving
effect to the Transaction, the Company was Solvent.
SECTION 6.16. Year 2000 Compliance. As of the Closing Date, the Company
is reviewing the computer systems of the Company and its Restricted Subsidiaries
and is conducting an evaluation of the costs of upgrading such systems in
preparation for the year 2000. The Company has concluded that the costs of such
upgrading could not reasonably be expected to result in a Material Adverse
Effect.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Company agrees with the Agents,
each Issuer and each Lender that, until all Commitments have terminated and all
Obligations have been paid and performed in full, the Company will perform the
obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Company will furnish, or will cause to be furnished, to each Lender and each
Agent copies of the following financial statements, reports, notices and
information:
(a) as soon as available and in any event within 55 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
of the Company (or, if the Company is required to file such information
on a Form 10-Q with the Securities and Exchange Commission, promptly
following such filing), a consolidated balance sheet of the Company and
its Subsidiaries as of the end of such Fiscal Quarter, together with
the related consolidated statement of operations for such Fiscal
Quarter and for the period commencing at the end of the previous Fiscal
Year and ending with the end of such Fiscal Quarter and the related
consolidated statements of cash flows for such period (it being
understood that the foregoing requirement may be satisfied by delivery
of the Company's report to the Securities and Exchange Commission on
Form 10-Q, if any), certified by the
-106-
<PAGE>
president, chief executive officer, treasurer, assistant treasurer,
controller or chief financial Authorized Officer of the Company;
(b) as soon as available and in any event within 100 days
after the end of each Fiscal Year of the Company (or, if the Company is
required to file such information on a Form 10-K with the Securities
and Exchange Commission, promptly following such filing), a copy of the
annual audit report for such Fiscal Year for the Company and its
Subsidiaries, including therein a consolidated balance sheet for the
Company and its Subsidiaries as of the end of such Fiscal Year,
together with the related consolidated statements of operations and
cash flows for such Fiscal Year (it being understood that the foregoing
requirement may be satisfied by delivery of the Company's report to the
Securities and Exchange Commission on Form 10-K, if any), in each case
certified (without any Impermissible Qualification) by a "Big Six" firm
of independent public accountants, together with a certificate from
such accountants as to whether, in making the examination necessary for
the signing of such annual report by such accountants, they have become
aware of any Default that has occurred and is continuing and, if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof;
(c) together with the delivery of the financial information
required pursuant to clauses (a) and (b), a Compliance Certificate,
executed by the president, chief executive officer, treasurer,
assistant treasurer, controller or chief financial Authorized Officer
of the Company, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to the
Agents) compliance with the financial covenants set forth in Section
7.2.4;
(d) as soon as possible and in any event within five Business
Days after obtaining knowledge of the occurrence of any Default, if
such Default is then continuing, a statement of the president, chief
executive officer, treasurer, assistant treasurer, controller or chief
financial Authorized Officer of the Company setting forth details of
such Default and the action which the Company has taken or proposes to
take with respect thereto;
(e) as soon as possible and in any event within ten Business
Days after (x) the occurrence of any material adverse development with
respect to any litigation, action, proceeding or labor controversy
described in Section 6.7 or (y) the commencement of any labor
controversy, litigation, action or proceeding of the type described in
Section 6.7, notice thereof and of the action which the Company has
taken or proposes to take with respect thereto;
(f) promptly after the sending or filing thereof, copies of
all reports and registration statements (other than exhibits thereto
and any registration statement on
-107-
<PAGE>
Form S-8 or its equivalent) which the Company or any of its
Subsidiaries files with the Securities and Exchange Commission or any
national securities exchange;
(g) as soon as practicable after the chief financial officer
or the chief executive officer of the Company or a member of the
Company's Controlled Group becomes aware of (i) formal steps in writing
to terminate any Pension Plan or (ii) the occurrence of any event with
respect to a Pension Plan which, in the case of (i) or (ii), could
reasonably be expected to result in a contribution to such Pension Plan
by (or a liability to) the Company or a member of the Company's
Controlled Group in excess of $10,000,000, (iii) the failure to make a
required contribution to any Pension Plan if such failure is sufficient
to give rise to a Lien under section 302(f) of ERISA in an amount in
excess of $10,000,000, (iv) the taking of any action with respect to a
Pension Plan which could reasonably be expected to result in the
requirement that the Company furnish a bond to the PBGC or such Pension
Plan in an amount in excess of $10,000,000 or (v) any material increase
in the contingent liability of the Company with respect to any
post-retirement Welfare Plan benefit, notice thereof and copies of all
documentation relating thereto;
(h) within 20 days after the end of each calendar month, a
certificate, in substantially the form of Exhibit E-2, executed by the
president, chief executive officer, treasurer, controller or chief
financial Authorized Officer of the Company showing the U.S. Dollar
Equivalent of the aggregate outstanding principal amount of all Foreign
Currency Revolving Loans, as of the end of such month, for (i) all
Foreign Borrowers, taken as a whole, and (ii) each Foreign Borrower,
individually; and
(i) such other information respecting the condition or
operations, financial or otherwise, of the Company or any of its
Restricted Subsidiaries as any Lender through the Administrative Agent
may from time to time reasonably request.
SECTION 7.1.2. Compliance with Laws, etc. The Company will, and will
cause each of its Restricted Subsidiaries to, comply in all material respects
with all applicable laws, rules, regulations and orders, such compliance to
include (without limitation) (i) except as permitted under Section 7.2.8, the
maintenance and preservation of its corporate existence and qualification as a
foreign corporation, except where the failure to so qualify could not reasonably
be expected to have a Material Adverse Effect, and (ii) the payment, before the
same become delinquent, of all material taxes, assessments and governmental
charges imposed upon it or upon its property, except to the extent being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books.
SECTION 7.1.3. Maintenance of Properties. Except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, the Company will, and will
-108-
<PAGE>
cause each of its Restricted Subsidiaries to, maintain, preserve, protect and
keep its properties (other than insignificant properties) in good repair,
working order and condition (ordinary wear and tear excepted), and make
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times unless
the Company determines in good faith that the continued maintenance of any of
its properties is no longer economically desirable.
SECTION 7.1.4. Insurance. The Company will, and will cause each of its
Restricted Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
against such casualties and contingencies and of such types and in such amounts
as is customary in the case of similar businesses and with such provisions and
endorsements as the Agents may reasonably request and will, upon request of the
Agents, furnish to the Agents and each Lender a certificate of an Authorized
Officer of the Company setting forth the nature and extent of all insurance
maintained by the Company and its Restricted Subsidiaries in accordance with
this Section.
SECTION 7.1.5. Books and Records. The Company will, and will cause each
of its Restricted Subsidiaries to, keep books and records which accurately
reflect in all material respects all of its business affairs and transactions
and permit the Agents, each Issuer and each Lender or any of their respective
representatives, at reasonable times and intervals, and upon reasonable notice,
but, unless an Event of Default shall have occurred and be continuing, not more
frequently than once in each Fiscal Year, to visit its corporate offices, to
discuss its financial matters with its officers and, only in the presence of a
representative of the Company (whose attendance at such discussion cannot be
unreasonably refused), its independent public accountants (and the Company
hereby authorizes such independent public accountants to discuss the Company's
financial matters with each Issuer and each Lender or its representatives, so
long as a representative of the Company is present) and to examine any of its
books or other financial records. The cost and expense of each such visit shall
be borne by the applicable Agent or Lender.
SECTION 7.1.6. Environmental Covenant. The Company will and will cause
each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and
handle all Hazardous Materials in compliance with all applicable
Environmental Laws, in each case except where the failure to comply
with the terms of this clause could not reasonably be expected to have
a Material Adverse Effect;
-109-
<PAGE>
(b) promptly notify the Agents and provide copies of all
written claims, complaints, notices or inquiries relating to the
condition of its facilities and properties or compliance with
Environmental Laws which would have, or would reasonably be expected to
have, a Material Adverse Effect, and promptly cure and have dismissed
with prejudice any material actions and proceedings relating to
compliance with Environmental Laws, except to the extent being
diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP have been set aside on
its books; and
(c) provide such information and certifications which the
Agents may reasonably request from time to time to evidence compliance
with this Section 7.1.6.
SECTION 7.1.7. Future Subsidiaries. The Company hereby covenants and
agrees as follows:
(a) Upon any Person becoming, after the Closing Date, a
Subsidiary of the Company or (in the case of clause (a)(ii) below only)
upon the Company or any Subsidiary of the Company acquiring additional
Capital Stock of any existing Subsidiary other than an Unrestricted
Subsidiary, the Company shall notify the Agents thereof and:
(i) the Company shall promptly cause any such
Subsidiary that is a U.S. Subsidiary (unless such U.S.
Subsidiary is an Unrestricted Subsidiary or the Trademark
Subsidiary) to execute and deliver to the Administrative
Agent, with counterparts for each Lender, the Subsidiary
Security Agreement (or a supplement thereto) (and, if such
Subsidiary owns any real property, to the extent required by
clause (b) of Section 7.1.8, a Mortgage), together with
Uniform Commercial Code financing statements (Form UCC-1)
executed and delivered by such U.S. Subsidiary naming such
U.S. Subsidiary as the debtor and the Administrative Agent as
the secured party, or other similar instruments or documents,
in appropriate form for filing under the Uniform Commercial
Code and any other applicable recording statutes, in the case
of real property, of all jurisdictions as may be necessary or,
in the opinion of the Administrative Agent, desirable to
perfect the security interest of the Administrative Agent
pursuant to the Subsidiary Security Agreement or a Mortgage,
as the case may be (other than the perfection of security
interests in motor vehicles); and
(ii) the Company shall promptly deliver, or cause to
be delivered, to the Administrative Agent under a Pledge
Agreement (or a supplement thereto) certificates (if any)
representing all of the issued and outstanding shares of
Capital Stock of such Subsidiary (other than any Unrestricted
Subsidiary) owned by the Company or any Subsidiary of the
Company that is a U.S. Subsidiary or a
-110-
<PAGE>
Subsidiary Guarantor (other than any Unrestricted Subsidiary),
as the case may be, along with undated stock powers for such
certificates, executed in blank, or, if any securities subject
thereto are uncertificated securities, the Administrative
Agent shall have obtained "control" (as defined in the Uniform
Commercial Code applicable to the perfection of such
securities) over such securities, or other appropriate steps
shall have been taken under applicable law resulting in the
perfection of the security interest granted in such securities
in favor of the Administrative Agent pursuant to the terms of
such Pledge Agreement;
together, in each case, with such opinions, in form and substance and
from counsel satisfactory to the Agents, as the Agents may reasonably
require; provided, however, that notwithstanding the foregoing, no
Non-U.S. Subsidiary shall be required to execute and deliver a Mortgage
or a Subsidiary Security Agreement (or a supplement thereto), nor will
the Company or any Subsidiary of the Company be required to deliver in
pledge pursuant to a Pledge Agreement in excess of 65% of the total
combined voting power of all classes of Capital Stock of a Non-U.S.
Subsidiary entitled to vote.
(b) Upon any Person (other than the Trademark Subsidiary or
any Unrestricted Subsidiary) becoming, after the Closing Date, a U.S.
Subsidiary of the Company, the Company shall notify the Agents of such
event, and the Company shall promptly cause such Subsidiary to execute
and deliver to the Administrative Agent, with counterparts for each
Lender, a Subsidiary Guaranty, together with such opinions, in form and
substance and from counsel satisfactory to the Agents, as the Agents
may reasonably require.
(c) If the election is made to treat any Restricted Subsidiary
that is a Non-U.S. Subsidiary, whether existing on the date of this
Agreement or acquired or created hereafter, as a partnership or a
branch of the Company for United States federal income tax purposes,
within 60 days after the election is made, the Company shall notify the
Agents of such event, and the Company shall promptly cause such
Restricted Subsidiary to execute and deliver to the Administrative
Agent, with counterparts for each Lender, a Subsidiary Guaranty,
together with such opinions, in form and substance and from counsel
satisfactory to the Agents, as the Agents may reasonably require.
Notwithstanding the foregoing, if any such Restricted Subsidiary shall
cease to be treated as a partnership or branch of the Company, then, as
of the date of such status termination, such Restricted Subsidiary's
status as a Subsidiary Guarantor hereunder shall also cease.
-111-
<PAGE>
SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real
Property; Future Acquisition of Other Property.
(a) Prior to entering into any new lease of real property or
renewing any existing lease of real property following the Closing
Date, the Company shall, and shall cause each of its U.S. Subsidiaries
(other than the Trademark Subsidiary or any Unrestricted Subsidiary)
to, use its (and their) commercially reasonable efforts (which shall
not require the expenditure of cash or the making of any material
concessions under the relevant lease) to deliver to the Administrative
Agent a Waiver executed by the lessor of any real property that is to
be leased by the Company or such U.S. Subsidiary for a term in excess
of one year in any state which by statute grants such lessor a
"landlord's" (or similar) Lien which is superior to the Administrative
Agent's, to the extent the value of any personal property of the
Company or its U.S. Subsidiaries (other than the Trademark Subsidiary
or any Unrestricted Subsidiary) to be held at such leased property
exceeds (or it is anticipated that the value of such personal property
will, at any point in time during the term of such leasehold, exceed)
$5,000,000.
(b) In the event that the Company or any of its U.S.
Subsidiaries (other than any Unrestricted Subsidiary) shall acquire any
real property having a value as determined in good faith by the
Administrative Agent in excess of $3,000,000, the Company or the
applicable U.S. Subsidiary shall, promptly after such acquisition,
execute a Mortgage and provide the Administrative Agent with (i)
evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of such Mortgage as may be
necessary or, in the reasonable opinion of the Administrative Agent,
desirable effectively to create a valid, perfected, first priority
Lien, subject to the Liens permitted by Section 7.2.3, against the
properties purported to be covered thereby, (ii) mortgagee's title
insurance policies in favor of the Agents and the Lenders in amounts
and in form and substance and issued by insurers, reasonably
satisfactory to the Agents, with respect to the property purported to
be covered by such Mortgage, insuring that title to such property is
indefeasible and that the interests created by the Mortgage constitute
valid first Liens thereon free and clear of all defects and
encumbrances other than as approved by the Agents, and such policies
shall also include, to the extent available, a revolving credit
endorsement and such other endorsements as the Agents shall reasonably
request and shall be accompanied by evidence of the payment in full of
all premiums thereon, and (iii) such other approvals, opinions, or
documents as the Agents may reasonably request.
(c) In accordance with the terms and provisions of the Loan
Documents, the Company and each of its U.S. Subsidiaries (other than
any Unrestricted Subsidiary) shall provide the Agents with evidence of
all recordings and filings as may be necessary or, in the reasonable
opinion of the Administrative Agent, desirable to create a valid,
perfected, first priority Lien, subject to the Liens permitted by
Section 7.2.3, against all property
-112-
<PAGE>
acquired after the Closing Date (excluding motor vehicles and (except
to the extent required under clause (b) of this Section 7.1.8) leases
of and fee interests in real property).
SECTION 7.1.9. Use of Proceeds, etc. The Borrowers shall
(a) apply the proceeds of the Loans
(i) in the case of U.S. Term Loans, U.K. Term Loans,
Canadian Term Loans and certain of the Revolving Loans, to
refinance (either directly or indirectly through intervening
dividends) certain loans outstanding under the Existing
Credit Facility;
(ii) in the case of certain of the Revolving Loans
and Swing Line Loans, for working capital and general
corporate purposes of the Company and its Subsidiaries; and
(iii) in the case of Spanish Term Loans, if any, to
refinance certain other Term Loans then outstanding under this
Agreement; and
(b) use Letters of Credit only for purposes of supporting
working capital and general corporate purposes of the Company and its
Subsidiaries.
SECTION 7.1.10. Hedging Obligations. Within six months following the
Closing Date, the Administrative Agent shall have received evidence satisfactory
to it that the Borrowers have entered into Rate Protection Agreements which
shall protect the Borrowers against fluctuations in interest rates with respect
to at least 50% of the aggregate principal amount of the Term Loans and the
Senior Subordinated Debt for a period of at least three years from the Closing
Date, with terms reasonably satisfactory to the Company and the Agents.
SECTION 7.1.11. Mortgages. Within 60 days after the Closing Date, the
Company shall deliver to the Agents counterparts of a Mortgage relating to each
property listed on Item 7.1.11 ("Mortgaged Properties") of the Disclosure
Schedule, each dated as of the date of such delivery, duly executed by the
Company or the applicable U.S. Subsidiary, together with
(a) evidence of the completion (or satisfactory arrangements
for the completion) of all recordings and filings of such Mortgage as
may be necessary or, in the reasonable opinion of the Administrative
Agent, desirable effectively to create a valid, perfected, first
priority Lien, subject to the Liens permitted by Section 7.2.3, against
the properties purported to be covered thereby;
-113-
<PAGE>
(b) mortgagee's title insurance policies in favor of the
Agents and the Lenders in amounts and in form and substance and issued
by insurers, reasonably satisfactory to the Agents, with respect to the
property purported to be covered by such Mortgage, insuring that title
to such property is indefeasible and that the interests created by the
Mortgage constitute valid first Liens thereon free and clear of all
defects and encumbrances other than as approved by the Agents, and such
policies shall also include, to the extent available, a revolving
credit endorsement and such other endorsements as the Agents shall
request and shall be accompanied by evidence of the payment in full of
all premiums thereon; and
(c) such other approvals, opinions, or documents as the Agents
may reasonably request.
SECTION 7.1.12. Certain Indebtedness. The Company shall cause to be in
effect Letters of Credit or availability under the Foreign Currency Revolving
Loan Commitment in an aggregate principal amount equal to the outstanding
principal amount of all outstanding Indebtedness set forth in Item 6.2
("Contractual Restrictions") of the Disclosure Schedule as to which any default
or event of default exists on the Closing Date. If any such default or event of
default with respect to any such outstanding Indebtedness is not cured or waived
on or prior to the date occurring 60 days after the Closing Date, the Company
shall pay or cause to be paid, in full, the principal amount of such
Indebtedness outstanding on such 60th day.
SECTION 7.2. Negative Covenants. The Company agrees with the Agents and
each Lender that, from and after the Closing Date, until all Commitments have
terminated, and all Obligations have been paid and performed in full, the
Company will perform the obligations set forth in this Section 7.2.
SECTION 7.2.1. Business Activities. The Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in any business activity,
except business activities in the building products industry and any business
reasonably ancillary or related thereto (the "Formica Business"); provided,
however, that, any term or provision hereof (including this Section 7.2) to the
contrary notwithstanding, the Trademark Subsidiary shall conduct no business
activity other than that directly connected with the ownership or licensing of
trademarks, trade names, trade secrets, trade dress, service marks, patents,
copyrights, mask works and other intellectual property associated with the
Formica Business and the licensing of such trademarks, trade names, trade
secrets, trade dress, service marks, patents, copyrights, mask works and other
intellectual property associated with the Formica Business to Holdings and its
Restricted Subsidiaries and the lending of the proceeds thereof to the Company
and its Restricted Subsidiaries.
-114-
<PAGE>
SECTION 7.2.2. Indebtedness. The Company will not, and will not permit
any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist
or otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness outstanding on the Original Closing Date and
identified in Item 7.2.2(a) ("Ongoing Indebtedness") of the Disclosure
Schedule, and refinancings and replacements thereof in a principal
amount not exceeding the principal amount of the Indebtedness so
refinanced or replaced and with an average life to maturity of not less
than the then average life to maturity of the Indebtedness so
refinanced or replaced;
(b) Indebtedness in respect of the Credit Extensions and other
Obligations;
(c) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries that is represented by Capitalized Lease
Liabilities, mortgage financings or purchase money obligations (but
only to the extent otherwise permitted by Section 7.2.7); provided,
that the maximum aggregate amount of all Indebtedness permitted under
this clause (c) shall not at any time exceed $20,000,000;
(d) Hedging Obligations of the Company or any of its
Restricted Subsidiaries in respect of the Credit Extensions;
(e) intercompany Indebtedness of (x) any Restricted Subsidiary
of the Company owing to the Company or any of its other Restricted
Subsidiaries or (y) the Company to any of its Restricted Subsidiaries,
which Indebtedness (i) shall be evidenced by one or more promissory
notes in form and substance satisfactory to the Agents which (except in
the case of any such notes held by a non-U.S. Subsidiary or the
Trademark Subsidiary) have been duly executed and delivered to (and
indorsed to the order of) the Administrative Agent in pledge pursuant
to a Pledge Agreement, and (ii) shall not be forgiven or otherwise
discharged for any consideration other than payment (dollar for dollar
or, if denominated in a Foreign Currency, the applicable Currency) in
cash unless the Agents otherwise consent; provided, that intercompany
Indebtedness incurred pursuant to this clause (e) which is owed by a
Non-U.S. Subsidiary of the Company that is not a Subsidiary Guarantor
(other than any such intercompany Indebtedness incurred to finance any
acquisition permitted hereunder) to the Company or a U.S. Subsidiary or
other Subsidiary Guarantor shall not exceed, at any time outstanding,
an aggregate principal amount equal to (x) $25,000,000 plus (y) the
principal amount of any Indebtedness permitted pursuant to clause (a)
of this Section 7.2.2 which is refinanced or replaced (in accordance
with such clause (a)) with intercompany Indebtedness pursuant to this
clause (e) plus (z) the amount of such Indebtedness constituting an
Investment permitted under clause (f) of Section 7.2.5.
-115-
<PAGE>
(f) Senior Subordinated Debt and guarantees thereof in an
aggregate outstanding principal amount not to exceed $215,000,000;
(g) Assumed Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $25,000,000
at any time outstanding incurred as a result of an Investment permitted
pursuant to clause (k) of Section 7.2.5;
(h) Indebtedness of Non-U.S. Subsidiaries of the Company which
are Restricted Subsidiaries but not Subsidiary Guarantors owing to a
Person other than the Company or any of its Subsidiaries (other than
Unrestricted Subsidiaries) in an aggregate principal amount not to
exceed (except if such excess is caused by changes in exchange rates
and is eliminated within five Business Days) $10,000,000 at any time
outstanding;
(i) other unsecured Indebtedness of the Company and its U.S.
Subsidiaries and other Subsidiary Guarantors which are, in either case,
Restricted Subsidiaries in an aggregate amount at any time outstanding
not to exceed $25,000,000 plus the difference between the maximum
amount of additional Revolving Loan Commitments that have been or could
be provided under clause (h) of Section 2.1.2 and the then outstanding
principal amount of additional Revolving Loans made pursuant to clause
(h) of Section 2.1.2; and
(j) Indebtedness of a Spanish Subsidiary of the Company in an
aggregate principal amount the U.S. Dollar Equivalent of which
(determined as of the date such Indebtedness was incurred) does not
exceed $10,000,000 and the net proceeds of which are applied to prepay
Term Loans;
provided, however, that (i) no Indebtedness otherwise permitted hereunder (other
than Indebtedness permitted under clause (c)) may be incurred by the Trademark
Subsidiary and (ii) no Indebtedness otherwise permitted by clause (c), (e), (g),
(h) or (i) may be incurred if, after giving effect to the incurrence thereof,
any Default shall have occurred and be continuing.
SECTION 7.2.3. Liens. The Company will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of its property, revenues or assets, whether now owned or
hereafter acquired, except:
(a) Liens existing on the Original Closing Date and identified
in Item 7.2.2(b) ("Ongoing Liens") of the Disclosure Schedule and
extensions and renewals thereof; provided that no such extension or
renewal shall increase the obligations secured by such Lien, extend
such Lien to additional assets or otherwise result in a Default
hereunder;
-116-
<PAGE>
(b) Liens securing payment of the Obligations or any
obligation under any Rate Protection Agreement granted pursuant to any
Loan Document;
(c) Liens granted to secure payment of Indebtedness of the
type permitted and described in clause (c) of Section 7.2.2;
(d) Liens for taxes, assessments or other governmental charges
or levies, including Liens pursuant to Section 107(l) of CERCLA or
other similar law, not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics, repairmen,
materialmen, contractors, laborers and landlords or other like Liens
incurred in the ordinary course of business for sums not overdue for a
period of more than 30 days or being diligently contested in good faith
by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(f) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance
of tenders, bids, statutory or regulatory obligations, insurance
obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(g) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full by a bond or (subject to a
customary deductible) by insurance maintained with responsible
insurance companies;
(h) Liens with respect to minor imperfections of title and
easements, rights-of-way, restrictions, reservations, permits,
servitudes and other similar encumbrances on real property and fixtures
which do not materially detract from the value or materially impair the
use by the Company or any such Restricted Subsidiary in the ordinary
course of their business of the property subject thereto;
(i) licenses, leases or subleases granted by the Company or
any of its Restricted Subsidiaries to any other Person in the ordinary
course of business;
(j) Liens in the nature of trustees' Liens granted pursuant to
any indenture governing any Indebtedness permitted by Section 7.2.2, in
each case in favor of the
-117-
<PAGE>
trustee under such indenture and securing only obligations to pay
compensation to such trustee, to reimburse its expenses and to
indemnify it under the terms thereof;
(k) Liens of sellers of goods to the Company and its
Restricted Subsidiaries arising under Article 2 of the UCC or similar
provisions of applicable law in the ordinary course of business,
covering only the goods sold and securing only the unpaid purchase
price for such goods and related expenses;
(l) Liens securing Assumed Indebtedness of the Company and its
Subsidiaries permitted pursuant to clause (g) of Section 7.2.2;
provided, however, that such Liens shall only be permitted if (i) such
Indebtedness constitutes Non-Recourse Debt and (ii) the Assumed
Indebtedness and other secured Indebtedness of the Company and its
Subsidiaries secured by any such Lien shall not exceed 100% of the fair
market value of the assets being acquired in connection with such
Assumed Indebtedness;
(m) Liens on assets of Restricted Subsidiaries of the Company
securing Indebtedness permitted pursuant to clause (h) or (j) of
Section 7.2.2;
(n) Liens on the Capital Stock of Unrestricted Subsidiaries;
provided, however, that no Liens (other than Liens permitted pursuant to clauses
(a), (b), (d) and (g)) may be created, incurred, assumed or otherwise permitted
to exist upon any property, revenues or assets of the Trademark Subsidiary.
SECTION 7.2.4. Financial Covenants.
(a) EBITDA. The Company will not permit EBITDA for the period
of four consecutive Fiscal Quarters ending on the last day of any
Fiscal Quarter occurring after the Closing Date and during any period
set forth below to be less than the amount set forth opposite such
period:
Period EBITDA
------ ------
07/01/98 to 09/30/98 $40,000,000
10/01/98 to 12/31/98 $42,500,000
01/01/99 to 03/31/99 $45,000,000
04/01/99 to 06/30/99 $47,500,000
07/01/99 to 09/30/99 $50,000,000
-118-
<PAGE>
10/01/99 to 03/31/00 $55,000,000
04/01/00 to 09/30/00 $60,000,000
10/01/00 to 03/31/01 $65,000,000
04/01/01 to 09/30/01 $70,000,000
10/01/01 to 03/31/02 $75,000,000
04/01/02 to 09/30/02 $80,000,000
10/01/02 to 06/30/03 $85,000,000
07/01/03 and thereafter $90,000,000
(b) Leverage Ratio. The Company will not permit the Leverage
Ratio as of the end of any Fiscal Quarter occurring after the Closing
Date and during any period set forth below to be greater than the ratio
set forth opposite such period:
Period EBITDA
------ ------
04/01/99 to 06/30/99 6.75:1
07/01/99 to 09/30/99 6.50:1
10/01/99 to 03/31/00 6.00:1
04/01/00 to 09/30/00 5.50:1
10/01/00 to 03/31/01 5.25:1
04/01/01 to 06/30/01 5.00:1
07/01/01 to 09/30/01 4.75:1
10/01/01 to 03/31/02 4.5:1
04/01/02 to 09/30/02 4.25:1
10/01/02 to 03/31/03 4.00:1
04/01/03 to 09/30/03 3.75:1
10/01/03 and thereafter 3.5:1
(c) Interest Coverage Ratio. The Company will not permit the
Interest Coverage Ratio as of the end of any Fiscal Quarter ending
after the Closing Date
-119-
<PAGE>
and occurring during any period set forth below to be less than the
ratio set forth opposite such period:
Interest Coverage
Period Ratio
------ -----
07/01/98 to 12/31/98 1.20:1
01/01/99 to 06/30/99 1.30:1
07/01/99 to 09/30/99 1.50:1
10/01/99 to 03/31/00 1.75:1
04/01/00 to 03/31/01 2.00:1
04/01/01 to 09/30/01 2.25:1
10/01/01 to 03/31/02 2.50:1
04/01/02 to 09/30/02 2.75:1
10/01/02 to 06/30/03 3.00:1
07/01/03 and thereafter 3.50:1
(d) Fixed Charge Coverage Ratio. The Company will not permit
the Fixed Charge Coverage Ratio as of the end of any Fiscal Quarter
ending after the Closing Date and occurring during any period set forth
below to be less than the ratio set forth opposite such period:
Fixed Charge
Period Coverage Ratio
------ --------------
10/01/99 to 03/31/01 1.10:1
04/01/01 and thereafter 1.20:1
SECTION 7.2.5. Investments. The Company will not, and will not permit
any of its Restricted Subsidiaries to, make, incur, assume or suffer to exist
any Investment in any other Person, except:
(a) Investments existing on the Original Closing Date and
identified in Item 7.2.5(a) ("Ongoing Investments") of the Disclosure
Schedule and, with respect to any such Investments constituting
Indebtedness, extensions and renewals thereof, provided
-120-
<PAGE>
that no such extension or renewal shall increase the amount of such
Investment at the time of such extension or renewal;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as Indebtedness
pursuant to Section 7.2.2;
(d) without duplication, Investments permitted as Capital
Expenditures pursuant to Section 7.2.7;
(e) Investments by the Company in any of its Restricted
Subsidiaries, or by any such Restricted Subsidiary in any other
Restricted Subsidiary or the Company, by way of contributions to
capital, so long as, after giving effect to such Investment, the
Company and its Restricted Subsidiaries have maintained or increased
their equity ownership in the Restricted Subsidiary in which such
Investment was made; provided that Investments made pursuant to this
clause (e) in any Non-U.S. Subsidiaries of the Company that are not
Subsidiary Guarantors (exclusive of (i) any Investment permitted as
intercompany Indebtedness pursuant to clause (y) of the proviso to
clause (e) of Section 7.2.2 or (ii) any Investment made to finance any
acquisition permitted hereunder) shall not exceed $10,000,000 in the
aggregate;
(f) additional Investments by the Company or any of its
Restricted Subsidiaries made with the proceeds of cash capital
contributions by FMH to the Company, cash proceeds from sales of
Capital Stock by the Company to FMH or repayments in cash of the
Company Intercompany Loan by FMH to the Company, in each case after the
Original Closing Date for the purpose of making an Investment
identified in a written notice to the Agents on or prior to the date
that such contribution, sale or repayment is made (provided that in no
event shall such Investments be made with any portion of Net Equity
Proceeds required to be applied as a mandatory prepayment pursuant to
clause (d) of Section 3.1.1);
(g) Investments to the extent the consideration received
pursuant to clause (c)(i) of Section 7.2.9 is not all cash;
(h) Investments in the form of loans to officers, directors
and employees of the Company and its Restricted Subsidiaries for the
sole purpose of purchasing Holdings common stock (or purchases of such
loans made by others) in an aggregate amount at any time outstanding
not to exceed $5,000,000;
(i) the Company Intercompany Loan;
-121-
<PAGE>
(j) Investments in Unrestricted Subsidiaries of the Company
in an aggregate amount at any time outstanding not to exceed
$10,000,000; or
(k) other Investments (including Assumed Indebtedness) made by
the Company or any of its Restricted Subsidiaries in an aggregate
amount not to exceed (x) $25,000,000 in any single transaction or
series of related transactions or (y) $75,000,000 in the aggregate over
the term of this Agreement, which Investments shall result in the
Company or such Restricted Subsidiary acquiring (subject to Section
7.2.1) a majority controlling interest in the Person in which such
Investment was made or increasing any such controlling interest
maintained by it in such Person; provided that, (i) at all times when
the Leverage Ratio exceeds 6.00:1 (as set forth in the most recent
Compliance Certificate), the amount set forth in clause (x) above shall
be reduced to $10,000,000, and (ii) for purposes of determining
compliance with this clause (k), the aggregate amount of any Assumed
Indebtedness incurred pursuant to clause (g) of Section 7.2.2 by the
Company or any Restricted Subsidiary shall be included, dollar for
dollar, in computing the amount of any Investment made or to be made
pursuant to this clause (k);
(l) Investments in an aggregate amount not to exceed
$17,500,000 in connection with the Fountainhead Acquisition;
(m) extensions of trade credit in the ordinary course of
business;
(n) Investments in Hedging Obligations permitted hereunder;
and
(o) Investments (including debt obligations and Capital Stock)
received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of
and other disputes with customers and suppliers arising in the ordinary
course of business;
provided, however, that
(p) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment"
may continue to be held, notwithstanding that such Investment if made
thereafter would not comply with such requirements; and
(q) no Investment otherwise permitted by clause (c) (except to
the extent permitted under Section 7.2.2), (e), (f), (h), (j) or (k) of
this Section 7.2.5 shall be permitted to be made if, immediately before
or after giving effect thereto, any Default shall have occurred and be
continuing.
-122-
<PAGE>
SECTION 7.2.6. Restricted Payments, etc. On and at all times after
the date hereof:
(a) the Company will not, and will not permit any of its
Restricted Subsidiaries to, declare, pay or make any payment, dividend,
distribution or exchange (in cash, property or obligations) on or in
respect of any shares of any class of Capital Stock of the Company (now
or hereafter outstanding) or on any warrants, options or other rights
with respect to any shares of any class of Capital Stock of the Company
(now or hereafter outstanding) (other than (i) dividends or
distributions payable in its common stock or warrants to purchase its
common stock and (ii) splits or reclassifications of its stock into
additional or other shares of its common stock) or apply, or permit any
of its Restricted Subsidiaries to apply, any of its funds, property or
assets to the purchase, redemption, exchange, sinking fund or other
retirement of, or agree or permit any of its Restricted Subsidiaries to
purchase, redeem or exchange, any shares of any class of Capital Stock
of the Company (now or hereafter outstanding), or any warrants, options
or other rights with respect to any shares of any class of Capital
Stock of the Company (now or hereafter outstanding);
(b) other than pursuant to a Permitted Refinancing thereof,
the Company will not, and will not permit any of its Restricted
Subsidiaries to, (i) directly or indirectly make any payment or
prepayment of principal of, or make any payment of interest on, any
Senior Subordinated Debt on any day other than the stated, scheduled
date for such payment or prepayment set forth in the Senior
Subordinated Debt Documents (it being understood and agreed that for
purposes of this clause (b) the only stated, scheduled date for payment
of principal of the Senior Subordinated Bridge Notes shall be the
seventh anniversary of the date that the Senior Subordinated Bridge
Notes were issued), or which would violate the subordination provisions
of such Senior Subordinated Debt, or (ii) redeem, purchase or defease
any Senior Subordinated Debt (the foregoing prohibited acts referred to
in clauses (a) and (b) above are herein collectively referred to as
"Restricted Payments");
provided, however, that
(c) notwithstanding the provisions of clause (a) above, the
Company shall be permitted to make Restricted Payments to FMH to the
extent necessary to enable FMH and/or Holdings to:
(i) pay its overhead expenses in an amount not to
exceed $2,000,000 in the aggregate in any Fiscal Year
(exclusive of advisory fees in an amount not to exceed
$250,000 in the aggregate in any Fiscal Year);
(ii) pay taxes; and
-123-
<PAGE>
(iii) so long as (A) no Default shall have occurred
and be continuing on the date such Restricted Payment is
declared or to be made, nor would a Default result from the
making of such Restricted Payment, (B) after giving effect to
the making of such Restricted Payment, the Company shall be in
pro forma compliance with the covenant set forth in Section
7.2.4(b) for the most recent full Fiscal Quarter immediately
preceding the date of the making of such Restricted Payment
for which the relevant financial information has been
delivered pursuant to clause (a) or clause (b) of Section
7.1.1, and (C) an Authorized Officer of the Company shall have
delivered a certificate to the Administrative Agent in form
and substance satisfactory to the Administrative Agent
(including a calculation of the Company's pro forma compliance
with the covenant set forth in Section 7.2.4(b) in reasonable
detail) certifying as to the accuracy of clauses (c)(iii)(A)
and (c)(iii)(B) above, repurchase, redeem or otherwise acquire
or retire for value any Capital Stock of Holdings, or any
warrant, option or other right to acquire Capital Stock of
Holdings, held by any member of management of the Company or
any of its Subsidiaries (including Management Investors)
pursuant to any management equity subscription agreement or
stock option agreement; provided that the aggregate price paid
for all such repurchased, redeemed, acquired or retired
Capital Stock, warrants, options and other rights shall not
exceed (I) $7,500,000 over the life of this Agreement plus
(II) the aggregate cash proceeds received by the Company after
the Original Closing Date (net of any such proceeds
constituting Net Equity Proceeds required to be applied
pursuant to Section 3.1.1) from any issuance of Capital Stock
of Holdings, and warrants, options and other rights to acquire
Capital Stock of Holdings, by Holdings or the Company to
members of management of the Company and its Restricted
Subsidiaries;
(d) notwithstanding the provisions of clauses (a) and (b)
above, the Company and its Subsidiaries shall be permitted to make the
Restricted Payments included in the Transaction; and
(e) notwithstanding the provisions of clauses (a) and (b)
above, the Company may pay a non-cash dividend to FMH consisting solely
of a transfer of all or a portion of the Company Intercompany Loan.
SECTION 7.2.7. Capital Expenditures, etc. With respect to Capital
Expenditures, the parties covenant and agree as follows:
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, make or commit to make Capital Expenditures
in any Fiscal Year, except Capital
-124-
<PAGE>
Expenditures of the Company and its Restricted Subsidiaries which do
not aggregate in excess of (x) the amount set forth below opposite such
Fiscal Year:
Maximum Capital
Fiscal Year Expenditures
-------------------- ---------------
1998 $50,000,000
1999 $30,000,000
2000 and thereafter $20,000,000;
plus (y) an additional aggregate amount equal to $25,000,000 over the
term of this Agreement; provided, however, that, to the extent the
amount of Capital Expenditures permitted to be made in any Fiscal Year
pursuant to clause (x) of this Section exceeds the aggregate amount of
Capital Expenditures actually made during such Fiscal Year, such excess
amount (up to an aggregate of 50% of the amount of Capital Expenditures
permitted for such Fiscal Year, without giving effect to this proviso)
may be carried forward to (but only to) the next succeeding Fiscal Year
(any such amount to be certified by the Company to the Agents in the
Compliance Certificate delivered for the last Fiscal Quarter of such
Fiscal Year, and any such amount carried forward to a succeeding Fiscal
Year shall be deemed to be used prior to the Company and its Restricted
Subsidiaries using the amount of Capital Expenditures permitted by this
Section in such succeeding Fiscal Year, without giving effect to such
carry-forward).
(b) The parties acknowledge and agree that the permitted
Capital Expenditure level set forth in clause (a) above shall be
exclusive of the amount of Capital Expenditures actually made with cash
capital contributions (other than any portion of Net Equity Proceeds
required to be applied as a mandatory prepayment pursuant to clause (d)
of Section 3.1.1) made, directly or indirectly, to the Company or any
of its Restricted Subsidiaries by FMH or Holdings, the proceeds of
equity issuances made by the Company or any of its Restricted
Subsidiaries, directly or indirectly, to FMH or Holdings, and
repayments by FMH or Holdings of the Intercompany Loans, in each case
after the Original Closing Date and specifically identified in a
certificate delivered by an Authorized Officer of the Company to the
Agents on or before the time such capital contribution or equity
issuance is made; provided, that, to the extent any such cash capital
contributions constitute Net Equity Proceeds, only that portion of such
Net Equity Proceeds which are not required to be applied as a
prepayment pursuant to clause (d) of Section 3.1.1 may be used for
Capital Expenditures pursuant to this clause (b).
SECTION 7.2.8. Consolidation, Merger, etc. The Company will not, and
will not permit any of its Restricted Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into or
-125-
<PAGE>
with, any other corporation, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division thereof)
except:
(a) any such Restricted Subsidiary may liquidate or dissolve
voluntarily into, and may merge with and into, the Company (so long as
the Company is the surviving corporation of such combination or merger)
or any other Restricted Subsidiary, and the assets or stock of any
Restricted Subsidiary may be purchased or otherwise acquired by the
Company or any other Restricted Subsidiary; provided that,
notwithstanding the above, a Restricted Subsidiary may only liquidate
or dissolve into, or merge with and into, another Restricted Subsidiary
of the Company if, after giving effect to such combination or merger,
the Company continues to own (directly or indirectly), and the
Administrative Agent continues to have pledged to it pursuant to a
Pledge Agreement, a percentage of the issued and outstanding shares of
Capital Stock (on a fully diluted basis) of the Restricted Subsidiary
surviving such combination or merger that is equal to or in excess of
the percentage of the issued and outstanding shares of Capital Stock
(on a fully diluted basis) of the Restricted Subsidiary that does not
survive such combination or merger that was (immediately prior to the
combination or merger) owned by the Company or pledged to the
Administrative Agent; and
(b) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, the Company or any of its
Restricted Subsidiaries (other than the Trademark Subsidiary) may
purchase all or substantially all of the assets of any Person (or any
division thereof) not then a Subsidiary, or acquire such Person by
merger, if permitted (without duplication) pursuant to Section 7.2.7 or
clauses (f), (j), (k) or (l) of Section 7.2.5.
SECTION 7.2.9. Asset Dispositions, etc. The Company will not, and will
not permit any of its Restricted Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or other rights with
respect to, all or any part of its assets, whether now owned or hereafter
acquired (including accounts receivable and Capital Stock of Restricted
Subsidiaries) to any Person, unless:
(a) such sale, transfer, lease, contribution or conveyance of
such assets is (i) in the ordinary course of its business (and does not
constitute a sale, transfer, lease, contribution or other conveyance of
all or a substantial part of the Company's and its Restricted
Subsidiaries' assets, taken as a whole) or is of obsolete or worn-out
property, (ii) permitted by Section 7.2.8, or (iii) between the Company
and one of its Subsidiaries or between Subsidiaries of the Company;
-126-
<PAGE>
(b) such sale, transfer, lease, contribution or conveyance
constitutes (i) an Investment permitted under Section 7.2.5, (ii) a
Lien permitted under Section 7.2.3 or (iii) a Restricted Payment
permitted under Section 7.2.6; or
(c) (i) such sale, transfer, lease, contribution or conveyance
of such assets is for fair market value and the consideration consists
of no less than 75% in cash, (ii) the Net Disposition Proceeds received
from such assets, together with the Net Disposition Proceeds of all
other assets sold, transferred, leased, contributed or conveyed
pursuant to this clause (c) since the Closing Date, does not exceed
(individually or in the aggregate) $75,000,000 over the term of this
Agreement and (iii) an amount equal to the Net Disposition Proceeds
generated from such sale, transfer, lease, contribution or conveyance
is reinvested in the business of the Company and its Restricted
Subsidiaries, or, to the extent required thereunder, is applied to
prepay the Loans pursuant to the terms of Section 3.1.1 and Section
3.1.2.
SECTION 7.2.10. Modification of Certain Agreements. Without the prior
written consent of the Required Lenders, the Company will not, and will not
permit any of its Restricted Subsidiaries to, consent to any amendment,
supplement, amendment and restatement, waiver or other modification of any of
the terms or provisions contained in, or applicable to, any Senior Subordinated
Debt Document, any Material Document or any schedules, exhibits or agreements
related thereto (the "Restricted Agreements"), in each case which would (i)
materially adversely affect the rights or remedies of the Lenders, or materially
increase the obligations of the Company or any Restricted Subsidiary thereunder,
or the Company's or any other Obligor's ability to perform hereunder or under
any Loan Document, (ii) in the case of the Stock Purchase Agreement, which would
increase Holdings', FMH's, the Company's or any of the Company's Restricted
Subsidiaries' obligations or liabilities, contingent or otherwise, (iii)
increase the principal amount of, or increase the interest rate on, or add or
increase any fee with respect to such Senior Subordinated Debt or any such
Restricted Agreement, advance any dates upon which payments of principal or
interest are due thereon or change any of the covenants with respect thereto in
a manner which is more restrictive to the Company or any of its Restricted
Subsidiaries or (iv) change the subordination provisions thereof (including any
default or conditions to an event of default relating thereto), or change any
collateral therefor (other than to release such collateral), if (in the case of
this clause (iv)), the effect of such amendment or change, individually or
together with all other amendments or changes made, is to increase the
obligations of the obligor thereunder or to confer any additional rights on the
holders of such Senior Subordinated Debt, or any such Restricted Agreement (or a
trustee or other representative on their behalf).
SECTION 7.2.11. Transactions with Affiliates. The Company will not, and
will not permit any of its Restricted Subsidiaries to, enter into, or cause,
suffer or permit to exist any arrangement or contract with any of its other
Affiliates (other than any Obligor or any other
-127-
<PAGE>
Restricted Subsidiary of the Company) unless such arrangement or contract is
fair and equitable to the Company or such Restricted Subsidiary and is an
arrangement or contract of the kind which would be entered into by a prudent
Person in the position of the Company or such Subsidiary with a Person which is
not one of its Affiliates; provided, however, that the Company and its
Restricted Subsidiaries shall be permitted to (i) perform any covenants or
obligations (or receive any benefits), or take any other actions contemplated
under the Transaction Documents, (ii) make any Restricted Payment permitted
under Section 7.2.6 and (iii) enter into and perform their obligations under
arrangements with the Institutional Investors and their Affiliates for
underwriting, investment banking and advisory services on usual and customary
terms.
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
enter into any agreement prohibiting:
(a) (i) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter acquired
(other than, in the case of any assets acquired with the proceeds of
any Indebtedness permitted under clause (c) of Section 7.2.2, customary
limitations and prohibitions contained in such Indebtedness and in the
case of any Indebtedness permitted under clause (h) or (j) of Section
7.2.2, customary limitations in respect of the Non-U.S. Subsidiaries of
the Company that shall have incurred such Indebtedness and their
assets), or (ii) the ability of the Company or any other Obligor to
amend or otherwise modify this Agreement or any other Loan Document; or
(b) any Restricted Subsidiary from making any payments,
directly or indirectly, to the Company by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Restricted Subsidiary to make any payment, directly
or indirectly, to the Company (other than any limitations or
prohibitions existing in any Indebtedness permitted under clause (a) of
Section 7.2.2 or any Lien permitted under clause (a) of Section 7.2.3
or customary limitations and prohibitions in any Indebtedness permitted
under clause (h) or (j) of Section 7.2.2 that are applicable to the
Non-U.S. Subsidiaries of the Company that have incurred such
Indebtedness and their assets).
SECTION 7.2.13. Stock of Subsidiaries. The Company will not permit any
Restricted Subsidiary to issue any Capital Stock (whether for value or
otherwise) to any Person other than the Company or another wholly-owned
Subsidiary of the Company.
SECTION 7.2.14. Sale and Leaseback. The Company will not, and will not
permit any of its Restricted Subsidiaries to, enter into any agreement or
arrangement with any other Person
-128-
<PAGE>
providing for the leasing by the Company or any of its Restricted Subsidiaries
of real or personal property which has been or is to be sold or transferred by
the Company or any of its Restricted Subsidiaries to such other Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Company or any of its
Restricted Subsidiaries.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following events
or occurrences described in this Section 8.1 shall constitute an "Event of
Default".
SECTION 8.1.1. Non-Payment of Obligations. (a) Any Borrower shall
default in the payment or prepayment of any principal of any Loan when due or
any Reimbursement Obligations or any deposit of cash for collateral purposes
pursuant to Section 2.8.4, as the case may be, or (b) any Obligor (including any
Borrower) shall default (and such default shall continue unremedied for a period
of three Business Days) in the payment when due of any interest or commitment
fee with respect to the Loans or Commitments or of any other monetary
Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Company or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate
(including the Closing Date Certificate) furnished by or on behalf of the
Company or any other Obligor to the Agents, any Issuer, the Arranger or any
Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to Article V)
is or shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Company shall default in the due performance and observance of any of its
obligations under Sections 7.1.9, 7.1.10, 7.1.11, 7.1.12 or 7.2 (other than
Section 7.2.1).
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any
Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Company by the Administrative Agent at the
direction of the Required Lenders.
-129-
<PAGE>
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur (i)
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness, other than Indebtedness
described in Section 8.1.1, of the Company, any of its Restricted Subsidiaries,
FMH or Holdings having a principal amount, individually or in the aggregate, in
excess of $5,000,000, or (ii) a default shall occur in the performance or
observance of any obligation or condition with respect to such Indebtedness
having a principal amount, individually or in the aggregate, in excess of
$5,000,000 if the effect of such default is to accelerate the maturity of any
such Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause such Indebtedness to become
due and payable prior to its expressed maturity, in each case exclusive of any
such default in respect of any Indebtedness set forth in Item 6.2 ("Contractual
Restrictions") of the Disclosure Schedule during the period ending on the 60th
day following the Closing Date.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of $5,000,000 (not covered by insurance from a responsible
insurance company that is not denying its liability with respect thereto) shall
be rendered against the Company, any of its Restricted Subsidiaries, FMH or
Holdings and remain unvacated, unpaid and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order, or (ii)
there shall be any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan: (i) the termination of any Pension Plan if, as
a result of such termination, the Company would be required to make a
contribution to such Pension Plan, or would reasonably expect to incur a
liability or obligation to such Pension Plan, in excess of $5,000,000, or (ii) a
contribution failure occurs with respect to any Pension Plan sufficient to give
rise to a Lien under section 302(f) of ERISA in an amount in excess of
$5,000,000.
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Company or any of its
Restricted Subsidiaries (other than immaterial Subsidiaries) or any other
Obligor shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, its debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Company or
any of such Restricted Subsidiaries (other than immaterial
Subsidiaries) or any other Obligor or any property of any thereof, or
make a general assignment for the benefit of creditors;
-130-
<PAGE>
(c) in the absence of such application, consent, acquiescence
or assignment, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Company or any of its
Restricted Subsidiaries (other than immaterial Subsidiaries) or any
other Obligor or for a substantial part of the property of any thereof,
and such trustee, receiver, sequestrator or other custodian shall not
be discharged within 60 days, provided that the Company, each such
Restricted Subsidiary and each other Obligor hereby expressly
authorizes the Agents, each Issuer and each Lender to appear in any
court conducting any relevant proceeding during such 60-day period to
preserve, protect and defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Company or any
of its Restricted Subsidiaries (other than immaterial Subsidiaries) or
any other Obligor, and, if any such case or proceeding is not commenced
by the Company or such Restricted Subsidiary or such other Obligor,
such case or proceeding shall be consented to or acquiesced in by the
Company or such Restricted Subsidiary or such other Obligor or shall
result in the entry of an order for relief or shall remain for 60 days
undismissed, provided that the Company, each such Restricted Subsidiary
and each other Obligor hereby expressly authorizes the Agents, each
Issuer and each Lender to appear in any court conducting any such case
or proceeding during such 60-day period to preserve, protect and defend
their rights under the Loan Documents; or
(e) take any action (corporate or otherwise) authorizing, or
in furtherance of, any of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be in full force and effect or cease to be the
legally valid, binding and enforceable obligation of any Obligor party thereto;
the Company or any other Obligor shall, directly or indirectly, contest in any
manner the effectiveness, validity, binding nature or enforceability thereof; or
any Lien securing any Obligation shall, in whole or in part, cease to be a
perfected first priority Lien, subject only to those exceptions expressly
permitted by the Loan Documents, except to the extent any event referred to
above (a) relates to assets of the Company or any of its Subsidiaries which are
immaterial, (b) results from the failure of the Administrative Agent to maintain
possession of certificates representing securities pledged under any Pledge
Agreement or to file continuation statements under the Uniform Commercial Code
of any applicable jurisdiction or (c) is covered by a lender's title insurance
policy and the relevant insurer promptly after the occurrence thereof shall have
acknowledged in writing that the same is covered by such title insurance policy.
-131-
<PAGE>
SECTION 8.1.11. Senior Subordinated Debt. The subordination provisions
relating to the Senior Subordinated Debt (the "Subordination Provisions") shall
fail to be enforceable by the Lenders (which have not effectively waived the
benefits thereof) in accordance with the terms thereof, or the principal or
interest on any Loan, Reimbursement Obligation or other Obligations shall fail
to constitute "Senior Debt" (as defined in any Senior Subordinated Debt) or
"senior indebtedness" (or any other similar term)), or the Company or any of its
Subsidiaries shall, directly or indirectly, disavow or contest in any manner (i)
the effectiveness, validity or enforceability of any of the Subordination
Provisions, or (ii) that any of such Subordination Provisions exist for the
benefit of the Agents and the Lenders.
SECTION 8.1.12. Failure to Refinance or Extend Senior Subordinated
Bridge Notes. The Company shall have failed to consummate a Permitted
Refinancing of Indebtedness in respect of the Senior Subordinated Bridge Notes
prior to the Maturity Date (as defined in the Securities Purchase Agreement,
dated as of May 1, 1998, among the Company and the Guarantors and Purchasers
party thereto, pursuant to which the Senior Subordinated Bridge Notes were
issued) (the "Bridge Note Maturity Date") and the Administrative Agent shall not
have received, prior to the Bridge Loan Maturity Date, evidence satisfactory to
it that the maturity of the Senior Subordinated Bridge Notes will, effective on
the Bridge Note Maturity Date, be extended to the seventh anniversary of the
date of the Senior Subordinated Bridge Notes.
SECTION 8.2. Action if Bankruptcy, etc. If any Event of Default
described in clauses (b), (c) and (d) of Section 8.1.9 shall occur, the
Commitments (if not theretofore terminated) shall automatically terminate and
the outstanding principal amount of all outstanding Loans and all other
Obligations (including Reimbursement Obligations) shall automatically be and
become immediately due and payable, without notice or demand and the Company
shall automatically and immediately be obligated to deposit with the
Administrative Agent cash collateral in an amount equal to all Letter of Credit
Outstandings.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than an Event of Default described in clauses (b), (c) and (d) of Section
8.1.9) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Company declare all or any portion of the
outstanding principal amount of the Loans and other Obligations (including
Reimbursement Obligations) to be due and payable, require applicable Borrowers
to provide cash collateral (in the relevant Currency) to be deposited with the
Administrative Agent in an amount equal to the undrawn amount of all Letters of
Credit outstanding and/or declare the Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of such Loans and
other Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment,
and/or, as the case may be, the Commitments shall terminate and the applicable
Borrowers shall deposit with the Administrative
-132-
<PAGE>
Agent cash collateral (in the relevant Currency) in an amount equal to all
Letter of Credit Outstandings.
ARTICLE IX
THE AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints DLJ as its
Syndication Agent, BTCo as its Administrative Agent and CSFB as its
Documentation Agent under and for purposes of this Agreement and each other Loan
Document. Each Lender authorizes the Agents to act on behalf of such Lender
under this Agreement and each other Loan Document and, in the absence of other
written instructions from the Required Lenders received from time to time by the
Agents (with respect to which each of the Agents agrees that it will comply,
except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Agents by the terms hereof and thereof, together
with such powers as may be reasonably incidental thereto. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
the Agents, ratably in accordance with their respective Term Loans outstanding
and Commitments (or, if no Term Loans or Commitments are at the time outstanding
and in effect, then ratably in accordance with the principal amount of Term
Loans held by such Lender, and their respective Commitments as in effect in each
case on the date of the termination of this Agreement), from and against any and
all liabilities, obligations, losses, damages, claims, costs or expenses of any
kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against, any of the Agents in any way relating to or arising out of
this Agreement and any other Loan Document, including reasonable attorneys'
fees, and as to which any Agent is not reimbursed by the Company or any other
Obligor (and without limiting the obligation of the Company or any other Obligor
to do so); provided, however, that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, claims, costs or
expenses which are determined by a court of competent jurisdiction in a final
proceeding to have resulted solely from such Agent's gross negligence or willful
misconduct. The Agents shall not be required to take any action hereunder or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement or any other Loan Document, unless it is indemnified hereunder to
its satisfaction. If any indemnity in favor of any of the Agents shall be or
become, in such Agent's determination, inadequate, the Agent may call for
additional indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York time (5:00 p.m., London time, in the case of Foreign
Currency Loans other than Canadian Loans), on the day prior to a Borrowing or
Disbursement with respect to a Letter of Credit pursuant to Section 2.8.2 that
such Lender will not make available the amount which would constitute its
Percentage
-133-
<PAGE>
of such Borrowing on the date specified therefor, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent and, in reliance upon such assumption, make available to the applicable
Borrower a corresponding amount. If and to the extent that such Lender shall not
have made such amount available to the Administrative Agent, such Lender
severally agrees and the applicable Borrower agrees to repay the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date the Administrative Agent made such amount
available to such Borrower to the date such amount is repaid to the
Administrative Agent, at the interest rate applicable at the time to Loans
comprising such Borrowing.
SECTION 9.3. Exculpation. None of the Agents or the Arranger nor any of
their respective directors, officers, employees or agents shall be liable to any
Lender for any action taken or omitted to be taken by it under this Agreement or
any other Loan Document, or in connection herewith or therewith, except for its
own willful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document, nor for
the creation, perfection or priority of any Liens purported to be created by any
of the Loan Documents, or the validity, genuineness, enforceability, existence,
value or sufficiency of any collateral security, nor to make any inquiry
respecting the performance by any Borrower of its obligations hereunder or under
any other Loan Document. Any such inquiry which may be made by any Agent or any
Issuer shall not obligate it to make any further inquiry or to take any action.
The Agents and the Issuers shall be entitled to rely upon advice of counsel
concerning legal matters and upon any notice, consent, certificate, statement or
writing which the Agents or the Issuers, as applicable, believe to be genuine
and to have been presented by a proper Person.
SECTION 9.4. Successor. The Syndication Agent or the Documentation
Agent may resign as such upon one Business Day's notice to the Company and the
Administrative Agent. The Administrative Agent may resign as such at any time
upon at least 30 days' prior notice to the Company and all Lenders. If the
Administrative Agent at any time shall resign, the Required Lenders may, with
the prior consent of the Company (which consent shall not be unreasonably
withheld), appoint another Lender as a successor Administrative Agent which
shall thereupon become the Administrative Agent hereunder. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the United States or a United States
branch or agency of a commercial banking institution, and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall be entitled to receive from the
retiring Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may
-134-
<PAGE>
reasonably request, and shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of (i) this
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Administrative Agent under this Agreement, and (ii)
Section 11.3 and Section 11.4 shall continue to inure to its benefit.
SECTION 9.5. Credit Extensions by Each Agent and Issuer. Each Agent and
each Issuer shall have the same rights and powers with respect to (x) (i) in the
case of an Agent, the Credit Extensions made by it or any of its Affiliates and
(ii) in the case of an Issuer, the Loans made by it or any of its Affiliates,
and (y) the Notes, if any, held by it or any of its Affiliates as any other
Lender and may exercise the same as if it were not an Agent or an Issuer. Each
Agent, each Issuer and each of their respective Affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with the
Company or any Subsidiary or Affiliate of any Borrower as if such Agent or
Issuer were not an Agent or Issuer hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of each Agent, the Arranger, each Issuer and each other Lender,
and based on such Lender's review of the financial information of the Borrowers,
this Agreement, the other Loan Documents (the terms and provisions of which
being satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitments. Each Lender also acknowledges that it will,
independently of each Agent, the Arranger, each Issuer and each other Lender,
and based on such other documents, information and investigations as it shall
deem appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by any Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by such Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
received for such Lender's account and copies of all other communications
received by the Administrative Agent from any Borrower for distribution to the
Lenders by the Administrative Agent in accordance with the terms of this
Agreement.
SECTION 9.8. The Syndication Agent, the Administrative Agent and the
Documentation Agent. Notwithstanding anything else to the contrary contained in
this Agreement or any other Loan Document, the Agents, in their respective
capacities as such, shall have no duties or responsibilities under this
Agreement or any other Loan Document nor any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or
-135-
<PAGE>
liabilities shall be read into this Agreement or otherwise exist against any
Agent, in such capacity, except as are explicitly set forth herein or in the
other Loan Documents.
ARTICLE X
COMPANY GUARANTY
SECTION 10.1. Guaranty. The Company hereby absolutely, unconditionally
and irrevocably
(a) guarantees the full and punctual payment when due, whether
at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all Obligations of each Foreign Borrower and
each other Obligor now or hereafter existing under this Agreement and
each other Loan Document to which such Foreign Borrower and each other
Obligor is or may become a party, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which would
become due but for the operation of the automatic stay under Section
362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and
the operation of Sections 502(b) and 506(b) of the United States
Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Lender for any and all
costs and expenses (including reasonable attorney's fees and expenses)
incurred by such Lender or such holder, as the case may be, in
enforcing any rights under this Article X;
This Article X constitutes a guaranty of payment when due and not of collection,
and the Company specifically agrees that it shall not be necessary or required
that any Lender exercise any right, assert any claim or demand or enforce any
remedy whatsoever against any Foreign Borrower or any other Obligor (or any
other Person) before or as a condition to the obligations of the Company
hereunder.
SECTION 10.2. Acceleration of Obligations Hereunder. The Company agrees
that, in the event of the dissolution or insolvency of any Foreign Borrower or
any other Obligor, or the inability or failure of any Foreign Borrower or any
other Obligor to pay its debts as they become due, or an assignment by any
Foreign Borrower or any other Obligor for the benefit of creditors, or the
commencement of any case or proceeding in respect of any Foreign Borrower or any
other Obligor under any bankruptcy, insolvency or similar laws, and if such
event shall occur at a time when any of the Obligations of any Foreign Borrower
or any other Obligor may not then be due and payable, the Company agrees that it
will pay to the Lenders forthwith the full amount which would be payable
hereunder by such Foreign Borrower if all such Obligations were then due and
-136-
<PAGE>
payable. The foregoing provisions of this Section 10.2 shall not be applicable
if the dissolution, insolvency or other events described above relate to an
Immaterial Subsidiary.
SECTION 10.3. Obligations Hereunder Absolute, etc. The obligations of
the Company under this Article X shall in all respects be a continuing,
absolute, unconditional and irrevocable guaranty of payment, and shall remain in
full force and effect until all Obligations of all Foreign Borrowers and each
other Obligor have been paid in full and all Commitments shall have terminated.
The Company guarantees that the Obligations of the Foreign Borrowers and each
other Obligor will be paid strictly in accordance with the terms of this
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Lender or any holder of any
Note with respect thereto. The liability of the Company under this Article X
shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of other
provisions of this Agreement or any other Loan Document;
(b) the failure of any Lender
(i) to assert any claim or demand or to enforce any
right or remedy against any Foreign Borrower, any other
Obligor or any other Person (including any other guarantor)
under the provisions of this Agreement, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Obligations of
any Foreign Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of any Foreign
Borrower or any other Obligor, or any other extension, compromise or
renewal of any Obligation of any Foreign Borrower or any other Obligor;
(d) any reduction, limitation, impairment or termination of
any Obligation of any Foreign Borrower or any other Obligor for any
reason, including any claim of waiver, release, surrender, alteration
or compromise, and shall not be subject to (and the Company hereby
waives any right to or claim of) any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise, unenforceability
of, or any other event or occurrence affecting, any Obligation of any
Foreign Borrower, any other Obligor or otherwise;
-137-
<PAGE>
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the other
terms of this Agreement or any other Loan Document;
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Lender securing any of the Obligations of any
Foreign Borrower or any other Obligor; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, any Foreign
Borrower, any other Obligor, any surety or any guarantor.
SECTION 10.4. Reinstatement, etc. The Company agrees that this Article
X shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations of any Foreign
Borrower is rescinded or must otherwise be restored by any Lender upon the
insolvency, bankruptcy or reorganization of any Foreign Borrower or any other
Obligor or otherwise, all as though such payment had not been made.
SECTION 10.5. Waiver, etc. The Company hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Foreign Borrowers or any other Obligor and this Article X and
any requirement that the Administrative Agent and any other Lender protect,
secure or perfect or insure any security interest or Lien, or any property
subject thereto, or exhaust any right or take any action against any Foreign
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of the Foreign Borrowers or
any other Obligor, as the case may be.
SECTION 10.6. Postponement of Subrogation. The Company agrees that it
will not exercise any rights which it may acquire by way of subrogation under
this Article X, by any payment made hereunder or otherwise, until the prior
payment, in full and in cash, of all Obligations of the Foreign Borrowers and
each other Obligor. Any amount paid to the Company on account of any such
subrogation rights prior to the payment in full of all Obligations of the
Foreign Borrowers and each other Obligor shall be held in trust for the benefit
of the Lenders and shall immediately be paid to the Lenders and credited and
applied against the Obligations of the Foreign Borrowers and each other Obligor
whether matured or unmatured, in accordance with the terms of this Agreement;
provided, however, that if all Obligations of the Foreign Borrowers and each
other Obligor have been paid in full and all Commitments have been permanently
terminated, each Lender agrees that, at the Company's request, the Lenders will
execute and deliver to the Company appropriate documents (without recourse and
without representation or warranty) necessary to evidence the transfer by
subrogation to the Company of an interest in the
-138-
<PAGE>
Obligations of the Foreign Borrowers and each other Obligor resulting from such
payment by the Company. In furtherance of the foregoing, for so long as any
Obligations of any Foreign Borrowers or any Commitments remain outstanding, the
Company shall refrain from taking any action or commencing any proceeding
against any Foreign Borrower or any other Obligor (or its successors or
assigns), whether in connection with a bankruptcy proceeding or otherwise to
recover any amounts in respect of payments made under this Article X to any
Lender.
SECTION 10.7. Successors, Transferees and Assigns; Transfers of Notes,
etc. Without limiting the generality of Section 11.11, any Lender may assign or
otherwise transfer (in whole or in part) any Obligation of any Borrower held by
it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Article X) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Section 11.11 and Article IX of this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Company and each Obligor party thereto and by the Required
Lenders; provided, however, that no such amendment, modification or waiver which
would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 11.1, or clause (i) of Section 11.10,
change the definitions of "Required Lenders" or "Total Exposure
Amount", increase any Commitment Amount or the Percentage of any Lender
(other than pursuant to Section 2.5 or clause (h) of Section 2.1.2),
reduce any fees described in Section 3.3 (other than the administration
fee referred to in Section 3.3.2), release any material Subsidiary
Guarantor from its obligations under the Subsidiary Guaranty, if any,
release all or substantially all of the collateral security (except in
each case as otherwise specifically provided in this Agreement, the
Subsidiary Guaranty, a Security Agreement or a Pledge Agreement) or
extend any Commitment Termination Date, shall be made without the
consent of each Lender adversely affected thereby;
-139-
<PAGE>
(c) extend the due date for, or reduce the amount of, any
scheduled repayment of principal of or interest on or fees payable in
respect of any Loan or reduce the principal amount of or rate of
interest on or fees payable in respect of any Loan or any Reimbursement
Obligations (which shall in each case include the conversion of all or
any part of the Obligations into equity of any Obligor), shall be made
without the consent of the Lender which has made such Loan or, in the
case of a Reimbursement Obligation, the Issuer owed, and those Lenders
participating in, such Reimbursement Obligation;
(d) affect adversely the interests, rights or obligations of
any Agent, Issuer or Arranger (in its capacity as Agent, Issuer or
Arranger), shall be made unless consented to by such Agent, Issuer or
Arranger, as the case may be;
(e) have the effect (either immediately or at some later time)
of enabling any Borrower to satisfy a condition precedent to the making
of a Revolving Loan or the issuance of a Letter of Credit, shall be
made without the consent of Lenders holding at least 51% of the
Revolving Loan Commitments; or
(f) amend, modify or waive the provisions of clause (a)(i) of
Section 3.1.1 or clause (b) of Section 3.1.2 or effect any amendment,
modification or waiver that by its terms adversely affects the rights
of Lenders participating in any Tranche differently from those of
Lenders participating in other Tranches, shall be made without the
consent of the holders of at least 51% of the aggregate amount of Loans
outstanding under the Tranche or Tranches affected by such amendment,
modification or waiver, or, in the case of an amendment, modification
or waiver affecting any Tranche or Tranches of Revolving Credit
Commitments, the Lenders holding at least 51% of the Revolving Loan
Commitments in respect of such Tranche or Tranches.
No failure or delay on the part of any Agent, any Issuer or any Lender in
exercising any power or right under this Agreement or any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on any Borrower in
any case shall entitle it to any notice or demand in similar or other
circumstances. No waiver or approval by any Agent, any Issuer or any Lender
under this Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth on Schedule II hereto or, in the case
of a Lender that becomes a party hereto after the date hereof, as
-140-
<PAGE>
set forth in the Lender Assignment Agreement pursuant to which such Lender
becomes a Lender hereunder or at such other address or facsimile number as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid or if properly addressed and
sent by pre-paid courier service, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when transmitted (and
telephonic confirmation of receipt thereof has been received).
SECTION 11.3. Payment of Costs and Expenses. The Company agrees to pay
on demand all reasonable expenses of each of the Agents (including the
reasonable fees and out-of-pocket expenses of a single counsel to the Agents and
of local or foreign counsel, if any, who may be retained by counsel to the
Agents) in connection with
(a) the syndication by the Syndication Agent and the Arranger
of the Loans, the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of each
Mortgage, each Pledge Agreement and each Security Agreement and/or any
Uniform Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to any thereof and any and
all other documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms hereof or of
such Mortgage, Pledge Agreement or Security Agreement; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Company further agrees to pay, and to save the Agents, the Issuers and the
Lenders harmless from all liability for, any stamp or other similar taxes which
may be payable in connection with the execution or delivery of this Agreement,
the Credit Extensions made hereunder or the issuance of any Notes or Letters of
Credit or any other Loan Documents. The Company also agrees to reimburse each
Agent, each Issuer and each Lender upon demand for all reasonable out-of-pocket
expenses (including reasonable attorneys' fees and legal expenses) incurred by
such Agent, such Issuer or such Lender in connection with (x) the negotiation of
any restructuring or "work-out", whether or not consummated, of any Obligations
and (y) the enforcement of any Obligations.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Company hereby, to the
-141-
<PAGE>
fullest extent permitted under applicable law, indemnifies, exonerates and holds
each Agent, each Issuer, the Arranger and each Lender and each of their
respective Affiliates, and each of their respective partners, officers,
directors, employees and agents, and each other Person controlling any of the
foregoing within the meaning of either Section 15 of the Securities Act of 1933,
as amended, or Section 20 of the Securities Exchange Act of 1934, as amended
(collectively, the "Indemnified Parties"), free and harmless from and against
any and all actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses actually incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit
Extension;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (excluding
any successful action brought by or on behalf of any Borrower as the
result of any failure by any Lender to make any Credit Extension
hereunder);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Company or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not such Agent, such Issuer, such Arranger or such
Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the Company's or any of its Subsidiaries' compliance with or liability
under Environmental Law or the Release by the Company or any of its
Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission or release from, any real property owned
or operated by the Company or any Subsidiary thereof of any Hazardous
Material present on or under such property in a manner giving rise to
liability under any Environmental Law at or prior to the time the
Company or such Subsidiary owned or operated such property (including
any losses, liabilities, damages, injuries, costs, expenses or claims
asserted or arising under any Environmental Law), regardless of whether
caused by, or within the control of, the Company or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or willful misconduct or any
-142-
<PAGE>
Hazardous Materials that are first manufactured, emitted, generated, treated,
released, stored or disposed of on any real property of the Company or any of
its Subsidiaries or any violation of Environmental Law or any other condition
that gives rise to liability under any Environmental Law, to the extent that the
Company can demonstrate, to the reasonable satisfaction of the Agents, and that
such event first occurred on or with respect to any real property of the Company
or any of its Subsidiaries after such real property was transferred to any
Indemnified Person or its successor by foreclosure sale, deed in lieu of
foreclosure, or similar transfer and such manufacture, emission, release,
generation, treatment, storage, disposal, violation or condition was not
actually caused by Holdings, FMH, the Company or any of the Company's
Subsidiaries. The Company and its permitted successors and assigns hereby waive,
release and agree not to make any claim, or bring any cost recovery action
against, any Agent, any Issuer, the Arranger or any Lender under CERCLA or any
state equivalent, or any similar law now existing or hereafter enacted, except
to the extent arising out of the gross negligence or willful misconduct of any
Indemnified Party. It is expressly understood and agreed that to the extent that
any of such Persons is strictly liable under any Environmental Laws, the
Company's obligation to such Person under this indemnity shall likewise be
without regard to fault on the part of the Company, to the extent permitted
under applicable law, with respect to the violation or condition which results
in liability of such Person. Notwithstanding anything to the contrary herein,
each Agent, each Issuer, the Arranger and each Lender shall be responsible with
respect to any Hazardous Materials that are first manufactured, emitted,
generated, treated, released, stored or disposed of on any real property of the
Company or any of its Subsidiaries or any violation of Environmental Law or any
other condition that gives rise to liability under any Environmental Law that
first occurs on or with respect to any such real property after such real
property is transferred to any Agent, Issuer, Arranger or Lender or to its
successor by foreclosure sale, deed in lieu of foreclosure, or similar transfer,
except to the extent such manufacture, emission, release, generation, treatment,
storage, disposal, violation or condition is actually caused by Holdings, FMH,
the Company or any of the Company's Subsidiaries. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
SECTION 11.5. Survival. The obligations of the Company under Sections
4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, and the obligations of the Lenders under
Sections 4.8 and 9.1, shall in each case survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Commitments. The representations and warranties made by the Company and each
other Obligor in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan Document.
SECTION 11.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without
-143-
<PAGE>
invalidating the remaining provisions of this Agreement or such Loan Document or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 11.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 11.8. Execution in Counterparts. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement.
SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT AND,
EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED THEREIN, EACH OTHER LOAN
DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement and the other Loan
Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and supersede any prior agreements, written
or oral, with respect thereto. Upon the execution and delivery of this Agreement
by the parties hereto, all obligations and liabilities of the Institutional
Investors and any of their Affiliates under or relating or with respect to the
Commitment Letter shall be terminated and of no further force or effect.
SECTION 11.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that (i) no Borrower may assign or
transfer its rights or obligations hereunder without the prior written consent
of each of the Agents and all Lenders, and (ii) the rights of sale, assignment
and transfer of the Lenders are subject to Section 11.11.
SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons, on a non pro rata basis (except as
provided below), in accordance with this Section 11.11.
SECTION 11.11.1. Assignments. Any Lender (the "Assignor Lender"),
(a) with the written consents of the Company, the
Administrative Agent and (in the case of any assignment of
participations in Letters of Credit or Revolving Loan Commitments) the
applicable Issuer (which consents shall not be unreasonably delayed or
withheld and which consents of the Agents and the Issuers shall not be
required in the case of assignments made by the Agents or any of their
Affiliates), may at any time
-144-
<PAGE>
assign and delegate to one or more commercial banks or other financial
institutions or funds which are regularly engaged in making, purchasing
or investing in loans or securities, and
(b) with notice to the Company, the Administrative Agent, and
(in the case of any assignment of participations in Letters of Credit
or Revolving Loan Commitments) the applicable Issuer, but without the
consent of the Company, the Agents or any Issuer, may assign and
delegate to any of its Affiliates or to any other Lender
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Lender's Term Loans of any
Tranche, Uncommitted Revolving Loans of any Tranche or Committed Revolving
Loans, participations in Letters of Credit, Letter of Credit Outstandings with
respect thereto and related Commitment of any Tranche (which assignment and
delegation shall be, as among Revolving Loan Commitments, Committed Revolving
Loans and participations in Letters of Credit in any Currency, of a constant,
and not a varying, percentage) in a minimum aggregate amount of (i) $5,000,000
or, so long as after giving effect to such assignment and delegation the
aggregate amount of the Assignor Lender's outstanding Term Loans and Commitments
and the Assignee Lender's outstanding Term Loans and Commitments are each
greater than $5,000,000, $1,000,000 (or, in the case of Foreign Currency Loans,
the multiple of 100,000 units of the Currency of such Loans the U.S. Dollar
Equivalent of which is nearest to $5,000,000 or $1,000,000, as the case may be)
or (ii) with respect to the Tranche in which such assignment is to occur, the
then remaining amount of such Lender's Term Loans, Uncommitted Revolving Loans
or Committed Revolving Loans, participations in Letters of Credit and related
Commitment in any Currency, as the case may be; provided, however, that any such
Assignee Lender will comply, if applicable, with the provisions contained in
Section 4.6 and the Borrowers, each other Obligor and the Agents shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned and delegated to an Assignee Lender until
(i) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Company,
the applicable Borrower (if other than the Company) and the Agents by
such Lender and such Assignee Lender;
(ii) such Assignee Lender shall have executed and delivered to
the applicable Borrower and the Agents a Lender Assignment Agreement,
accepted by the Agents;
(iii) the processing fees described below shall have been
paid; and
-145-
<PAGE>
(iv) the Administrative Agent shall have registered such
assignment and delegation in the Register pursuant to clause (b) of
Section 2.9.
From and after the date that the Agents accept such Lender Assignment Agreement
and such assignment and delegation is registered in the Register pursuant to
clause (b) of Section 2.9, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Any Assignor Lender that shall have previously requested and
received any Note or Notes in respect of any Tranche to which any such
assignment applies shall, upon the acceptance by the Administrative Agent of the
applicable Lender Assignment Agreement, mark such Note or Notes "exchanged" and
deliver them to the applicable Borrower (against, if the Assignor Lender has
retained Loans or Commitments with respect to the applicable Tranche and has
requested replacement Notes pursuant to clause (b)(ii) of Section 2.9, its
receipt from the applicable Borrower of replacement Notes in the principal
amount of the Loans and Commitments of the applicable Tranche retained by it).
Such Assignor Lender or such Assignee Lender (unless the Assignor Lender or the
Assignee Lender is an Agent or one of its Affiliates) must also pay a processing
fee to the Administrative Agent upon delivery of any Lender Assignment Agreement
in the amount of $1,500, unless such assignment and delegation is by a Lender to
its Affiliate or if such assignment and delegation is by a Lender to a Federal
Reserve Bank, as provided below or is otherwise consented to by the
Administrative Agent. Any attempted assignment and delegation not made in
accordance with this Section 11.11.1 shall be, unless otherwise consented to by
the Administrative Agent and the Company, null and void. Nothing contained in
this Section 11.11.1 shall prevent or prohibit any Lender from pledging its
rights (but not its obligations to make Loans or participate in Letters of
Credit or Letter of Credit Outstandings) under this Agreement and/or its Loans
and/or its Notes hereunder (i) to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank, (ii) in the case
of a Lender that is an investment fund, to its trustee in support of its
obligations to its trustee, in either case without notice to or consent of the
Company or the Agents or (iii) in connection with the securitization of all or
any portion of its assets; provided, however, that (A) such Lender shall remain
a "Lender" under this Agreement and shall continue to be bound by the terms and
conditions set forth in, and shall continue to exercise all of its voting rights
under, this Agreement and the other Loan Documents, and (B) any assignment by
such trustee of its rights under this Agreement shall be subject to the
provisions of clause (a) of this Section 11.11.1. In the event that S&P, Moody's
or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of
Lenders that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated by Insurance Watch Ratings Service)) shall, after
the date that any Lender with a Commitment to make Revolving Loans or
participate
-146-
<PAGE>
in Letters of Credit becomes a Lender, downgrade the long-term certificate of
deposit rating or long-term senior unsecured debt rating of such Lender, and the
resulting rating shall be below BBB-, Baa3 or C (or BB, in the case of Lender
that is an insurance company (or B, in the case of an insurance company not
rated by InsuranceWatch Ratings Service)) respectively, then the Issuers or the
Company (with the consent of the Agents and the Issuers) shall have the right,
but not the obligation, upon notice to such Lender and the Agents, to replace
such Lender with an Assignee Lender in accordance with and subject to the
restrictions contained in this Section, and such Lender hereby agrees to
transfer and assign without recourse (in accordance with and subject to the
restrictions contained in this Section) all its interests, rights and
obligations in respect of its Revolving Loan Commitments under this Agreement to
such Assignee Lender; provided, however, that (i) no such assignment shall
conflict with any law, rule, regulation or order of any governmental authority
and (ii) such Assignee Lender shall pay to such Lender in immediately available
funds on the date of such assignment the principal of and interest and fees (if
any) accrued to the date of payment on the Loans made, and Letters of Credit
participated in, by such Lender hereunder and all other amounts accrued for such
Lender's account or owed to it hereunder.
SECTION 11.11.2. Participations. Any Lender may at any time sell to one
or more commercial banks or other Persons (each such commercial bank and other
Person being herein called a "Participant") participating interests in any of
the Loans, Commitments, participations in Letters of Credit and Letter of Credit
Outstandings or other interests of such Lender hereunder; provided, however,
that
(a) no participation contemplated in this Section shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Company and each other Obligor and the Agents shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and each
of the other Loan Documents;
(d) no Participant, unless such Participant is itself a
Lender, shall be entitled to require such Lender to take or refrain
from taking any action hereunder or under any other Loan Document,
except that such Lender may agree with any Participant that such Lender
will not, without such Participant's consent, agree to (i) any
reduction in the interest rate or amount of fees that such Participant
is otherwise entitled to, (ii) a decrease in the principal amount, or
an extension of the final Stated Maturity Date, of any Loan in which
such Participant has purchased a participating interest or (iii) a
release of all or substantially all of the collateral security under
the Loan Documents or Holdings, FMH
-147-
<PAGE>
or any material Subsidiary Guarantor under its guaranty hereunder, if
any, in each case except as otherwise specifically provided in a Loan
Document; and
(e) no Borrower shall be required to pay any amount under
Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4 that is greater than the
amount which it would have been required to pay had no participating
interest been sold.
The Borrowers acknowledge and agree, subject to clause (e) above, that, to the
fullest extent permitted under applicable law, each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 11.3 and 11.4, shall be considered a
Lender.
SECTION 11.12. Other Transactions. Nothing contained herein shall
preclude any Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with any Borrower or any of its Affiliates in which such Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 11.13. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE
LENDERS, THE ISSUERS OR THE BORROWERS RELATING THERETO SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY (TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) IN THE
COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY, OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWERS HEREBY
EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK, NEW YORK COUNTY, AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. THE BORROWERS IRREVOCABLY CONSENT TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWERS HEREBY EXPRESSLY AND
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
THEY MAY HAVE OR
-148-
<PAGE>
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWERS HAVE OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO THEMSELVES OR THEIR
PROPERTY, THE BORROWERS HEREBY IRREVOCABLY WAIVE (TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW) SUCH IMMUNITY IN RESPECT OF THEIR OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.14. Waiver of Jury Trial. THE AGENTS, THE ISSUERS, THE
LENDERS AND THE BORROWERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS OR THE BORROWERS
RELATING THERETO. THE BORROWERS ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION
OF EACH OTHER LOAN DOCUMENT TO WHICH THEY ARE A PARTY) AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE ISSUERS AND THE LENDERS ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 11.15. Judgment Currency. (a) If, for the purpose of obtaining
judgment in any court, it is necessary to convert a sum due hereunder, under any
Note or under any other Loan Document in another currency into U.S. Dollars or
into a Foreign Currency, as the case may be, the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which, in accordance with normal banking procedures, the
applicable Secured Party could purchase such other currency with U.S. Dollars or
with such Foreign Currency, as the case may be, in New York City, at the close
of business on the Business Day immediately preceding the day on which final
judgment is given, together with any premiums and costs of exchange payable in
connection with such purchase.
(b) The obligation of each of the Borrowers in respect of any sum due
from it to any Agent, any Lender or any other Secured Party hereunder, under any
Note or under any other Loan Document shall, notwithstanding any judgment in a
currency other than U.S. Dollars or a
-149-
<PAGE>
Foreign Currency, as the case may be, be discharged only to the extent that on
the Business Day next succeeding receipt by such Agent, such Lender or such
other Secured Party of any sum adjudged to be so due in such other currency,
such Agent, such Lender or such other Secured Party may, in accordance with
normal banking procedures, purchase U.S. Dollars or such Foreign Currency, as
the case may be, with such other currency. If the U.S. Dollars or such Foreign
Currency so purchased are less than the sum originally due to such Agent, such
Lender or such other Secured Party in U.S. Dollars or in such Foreign Currency,
each of the Borrowers agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Agent, such Lender or such other Secured Party
against such loss.
SECTION 11.16. Confidentiality. The Agents, the Issuers, the Arranger
and the Lenders shall hold all non-public information obtained pursuant to or in
connection with this Agreement or obtained by them based on a review of the
books and records of the Company or any of its Subsidiaries in accordance with
their customary procedures for handling confidential information of this nature,
but may make disclosure to any of their examiners, regulators (including,
without limitation, the National Association of Insurance Commissioners),
Affiliates, outside auditors, counsel and other professional advisors in
connection with this Agreement or as reasonably required by any potential bona
fide transferee, participant or assignee, or in connection with the exercise of
remedies under a Loan Document, or as requested by any governmental agency or
representative thereof or pursuant to legal process; provided, however, that
(a) unless specifically prohibited by applicable law or court
order, each Agent, each Issuer, the Arranger and each Lender shall
promptly notify the Company of any request by any governmental agency
or representative thereof (other than any such request in connection
with an examination of the financial condition of such Agent, Issuer,
Arranger or Lender by such governmental agency) for disclosure of any
such non-public information and, where practicable, prior to disclosure
of such information;
(b) prior to any such disclosure pursuant to this Section
11.16, each Agent, each Issuer, the Arranger and each Lender shall
require any such bona fide transferee, participant and assignee
receiving a disclosure of non-public information to agree in writing
(i) to be bound by this Section 11.16; and
(ii) to require such Person to require any other
Person to whom such Person discloses such non-public
information to be similarly bound by this Section 11.16;
(c) disclosure may, with the consent of the Agents and the
Company, be made by any Lender to any direct or indirect contractual
counterparties of such Lender in swap
-150-
<PAGE>
agreements or such contractual counterparties' professional advisors;
provided that such contractual counterparty or professional advisor
agrees in writing to keep such information confidential to the same
extent required of the Lenders hereunder; and
(d) except as may be required by an order of a court of
competent jurisdiction and to the extent set forth therein, no Lender
shall be obligated or required to return any materials furnished by the
Company or any Subsidiary.
-151-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
FORMICA CORPORATION
By:
---------------------------
Title:
FORMICA LIMITED
By:
---------------------------
Title:
FORMICA HOLDCO (UK) LIMITED
By:
---------------------------
Title:
FORMICA CANADA, INC.
By:
---------------------------
Title:
FORMICA S.A.
By:
---------------------------
Title:
<PAGE>
FORMICA ESPANOLA S.A..
By:
---------------------------
Title:
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent and as
Lender
By:
---------------------------
Title:
<PAGE>
BANKERS TRUST COMPANY,
as the Administrative Agent
and as Lender
By:
---------------------------
Title:
CREDIT SUISSE FIRST BOSTON,
as the Documentation Agent
and as Lender
By:
---------------------------
Title:
By:
---------------------------
Title:
<PAGE>
SCHEDULE I
to Credit Agreement
DISCLOSURE SCHEDULE
[TO COME]
<PAGE>
SCHEDULE II
to Credit Agreement
PERCENTAGES
[TO COME]
ADMINISTRATIVE INFORMATION
[TO COME]
<PAGE>
SCHEDULE III
to Credit Agreement
ILLUSTRATIONS WITH RESPECT TO SECTION 2.5(D)
I. Addition of Foreign Currency Revolving Loan Commitment as a Result of
Effectiveness of a Foreign Currency Revolving Loan Commitment Addendum
A. Assume:
1. U.S. Revolving Loan Commitment Amount equals
$100,000,000 with Lenders ("Lender A" and
"Lender B") having Commitments thereunder with
Percentages of 50% each
2. Lender A agrees to a Foreign Currency Revolving
Loan Commitment Addendum pursuant to which it
commits to provide 100% of a Foreign Currency
Revolving Loan Commitment in French Francs with
a U.S.
Dollar Equivalent of $10,000,000
B. Operation of Section 2.5(d)
1. Lender A's Commitment with respect to U.S.
Revolving Loans is decreased to equal:
(Prior U.S. Percentage x Prior minus (New Percentage for New Foreign
Aggregate U.S. Commitment) Commitment x New Aggregate
Foreign Commitment)
= (50% x $100,000,000) minus (100% x $10,000,000)
= $50,000,000 minus $10,000,000
= $40,000,000
2. Lender B's Commitment with respect to U.S.
Revolving Loans remains unchanged at $50,000,000
3. As a result of 1 and 2, the U.S. Revolving Loan
Commitment Amount adjusts to $90,000,000 (Lender A's
$40,000,000 plus Lender B's $50,000,000), and,
consequently, Lender A's Percentage with respect to
<PAGE>
the U.S. Revolving Loan Commitment is adjusted
to equal 44.444444444% (i.e., $40,000,000 /
$90,000,000) and Lender B's Percentage with
respect to the U.S. Revolving Loan Commitment
is adjusted to equal 55.555555555% (i.e.,
$50,000,000 / $90,000,000).
II. Optional Reduction of a Foreign Currency Revolving Loan Commitment
A. Assume:
1. U.S. Revolving Loan Commitment Amount equals
$90,000,000 with Lenders ("Lender A" and "Lender
B") having Commitments thereunder with
Percentages of 44.444444444% and 55.555555555%,
respectively
2. A French Franc Revolving Loan Commitment in an
amount equal to the U.S. Dollar Equivalent of
$10,000,000 is in effect with Lender A having a
Commitment thereunder with a Percentage of 100%
3. The Company elects to reduce the French Franc
Revolving Loan Commitment by an amount equal to
the U.S. Dollar Equivalent of $6,000,000;
accordingly, Lender A's Commitment with respect
to French Franc Revolving Loans is decreased
from a U.S. Dollar Equivalent of $10,000,000 to
$4,000,000
B. Operation of Section 2.5(d)
1. Lender A's Commitment with respect to U.S.
Revolving Loans is increased to equal:
(Prior U.S. Percentage x Prior plus (Percentage for Applicable Foreign
Aggregate U.S. Commitment) Commitment x Amount of Foreign
Commitment Reduction)
= (44.444444444% x $90,000,000) plus (100% x $6,000,000)
= $40,000,000 plus $6,000,000
= $46,000,000
2. Lender B's Commitment with respect to U.S.
Revolving Loans remains unchanged at $50,000,000
3. As a result of 1 and 2, the U.S. Revolving Loan
Commitment Amount adjusts to $96,000,000 (Lender
A's $46,000,000 plus Lender B's $50,000,000),
and, consequently, Lender A's Percentage with
respect to
<PAGE>
the U.S. Revolving Loan Commitment is adjusted
to equal 47.916666666% (i.e., $46,000,000 /
$96,000,000) and Lender B's Percentage with
respect to the U.S. Revolving Loan Commitment
is adjusted to equal 52.083333333% (i.e.,
$50,000,000 / $96,000,000).
<PAGE>
SCHEDULE IV
to Credit Agreement
ADDITIONAL COSTS RATE
1. Additional = BD + C (D - E) + A x .01
------------------------
Cost 100 - (B + C)
Rate
Where on the day upon which the calculation fails to be made
A is the rate payable by the Agent to the Financial Services
Authority pursuant to the Fees Regulations (but, for this
purpose, the figure at paragraph [2.02b]/[2.03b] of the Fees
Regulations shall be deemed to be zero) and expressed in
pounds per (pound)1,000,000 of the Fee Base of the Agent;
B is the percentage of eligible liabilities (assuming these to
be in excess of any stated minimum) which the Agent is from
time to time required to maintain as an interest free cash
ratio deposit with the Bank of England, to comply with cash
ratio requirements;
C is the percentage of eligible liabilities which the Agent is
required from time to time to maintain as interest-bearing
special deposits with the Bank of England;
D is the percentage rate per annum at which Sterling deposits
are offered by the Agent in accordance with its normal
practice, for a period equal to (a) the relevant Interest
Period (or, as the case may be, remainder of such Interest
Period) in respect of the relevant Credit Extension or (b)
three months, whichever is the shorter, to a leading bank in
the London Interbank Market at or about 11:00 a.m. in a sum
approximately equal to the amount of such Credit Extension;
E is the percentage rate per annum payable by the Bank of
England to the Agent on interest-bearing special deposits.
2. For the purposes of this Schedule:
(a) "eligible liabilities" and "special deposits" shall
bear the meanings ascribed to them from time to
time under or pursuant to the Bank of England
Act 1988 or (as appropriate) by the Bank of
England;
<PAGE>
(b) "Fee Regulations" means the Banking Supervision
(Fees) Regulations 1998 or such other
regulations as may be in force from time to time
in respect of the payment of fees for banking
supervision; and
(c) "Fee Base" shall bear the meaning ascribed to it,
and shall be calculated in accordance with, the
Fees Regulations.
3. The percentages used in B and C above shall be those required to be
maintained on the first day of the relevant period as determined in
accordance with D above.
4. In application of the above formula, B, C, D and E will be included
in the formula as figures and not as percentages e.g. if B is 0.5
per cent. and D is 12 per cent., BD will be calculated as 0.5 x 12
and not as 0.5 per cent. x 12 per cent.
5. Calculations will be made on the basis of a 365 day year (or, if market
practice differs, in accordance with market practice).
6. A negative result obtained by subtracting E from D shall be taken
as zero.
7. The resulting figures shall be rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-thirty-second of
one per cent. per annum.
8. Additional amounts calculated in accordance with this Schedule are
payable on the last day of the Interest Period to which they relate.
9. The determination of the Additional Costs Rate by the Agent in
relation to any period shall, in the absence of manifest error, be
conclusive and binding on all of the parties hereto.
10. The Agent may from time to time, after consultation with the Lenders
and the Borrowers, determine and notify to all the parties to this
Agreement any amendments or variations which are required to be
made to the formula set out above in order to comply with any
requirements from time to time imposed by the Bank of England or
the Financial Services Authority (or any other authority which
replaces all or any of their functions) in relation to any Credit
Extension (including, without limitation, any requirements
relating to Sterling primary liquidity) and any such determination
shall, in the absence of manifest error, be conclusive and binding
on all the parties to this Agreement.
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms........................................................4
1.2. Use of Defined Terms................................................48
1.3. Cross-References....................................................48
1.4. Accounting and Financial Determinations.............................48
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
2.1. Commitments.........................................................49
2.1.1. Term Loan Commitments...............................................50
2.1.2. Revolving Loan Commitments and Swing Line Loan Commitment...........51
2.1.3. Letter of Credit Commitment.........................................53
2.1.4. Lenders Not Permitted or Required to Make the Loans.................54
2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit.........55
2.2. Optional Reduction of the Revolving Loan Commitment Amounts.........55
2.3. Borrowing Procedures and Funding Maintenance........................55
2.3.1. Term Loans and Revolving Loans......................................55
2.3.2. Swing Line Loans....................................................56
2.4. Uncommitted Revolving Loans.........................................57
2.4.1. Uncommitted Revolving Loan Borrowing Request........................57
2.4.2. Invitation for Uncommitted Interest Quotes..........................58
2.4.3. Submission and Contents of Uncommitted Interest Quotes..............59
2.4.4. Uncommitted Revolving Loan Acceptance...............................60
2.5. Committed Foreign Currency Revolving Loans; Spanish Term Loans......61
2.6. Continuation and Conversion Elections...............................64
2.6.1. Converting Canadian Prime Rate Loans to Canadian BAs................64
2.6.2. Converting Canadian BAs to Canadian Prime Rate Loans................64
2.7. Funding.............................................................65
2.8. Issuance Procedures.................................................65
2.8.1. Other Lenders' Participation........................................66
2.8.2. Disbursements; Conversion to Revolving Loans........................66
-i-
<PAGE>
Section Page
2.8.3. Reimbursement.......................................................67
2.8.4. Deemed Disbursements................................................68
2.8.5. Nature of Reimbursement Obligations.................................68
2.8.6. Deemed Issuance of Existing Letters of Credit.......................69
2.9. Register; Notes.....................................................69
2.10. European Monetary Union.............................................71
2.11. Canadian BAs........................................................71
2.11.1. Funding of Canadian BAs.............................................71
2.11.2. Presigned Draft Forms...............................................72
2.11.3. Depository Bills and Notes Act......................................73
2.11.4. Special Provisions Relating to Acceptance Notes.....................73
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application.............................74
3.1.1. Repayments and Prepayments..........................................74
3.1.2. Application.........................................................79
3.2. Interest Provisions.................................................80
3.2.1. Rates...............................................................80
3.2.2. Post-Maturity Rates.................................................80
3.2.3. Payment Dates.......................................................81
3.3. Fees................................................................81
3.3.1. Commitment Fee......................................................82
3.3.2. Administrative Agent Fee............................................82
3.3.3. Letter of Credit Fee................................................82
ARTICLE IV
CERTAIN LIBO RATE, CANADIAN BA AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful..........................................83
4.2. Deposits Unavailable; Circumstances Making Canadian BAs Unavailable.83
4.3. Increased Fixed Rate Loan Costs, etc................................84
4.4. Funding Losses......................................................84
4.5. Increased Capital Costs.............................................85
4.6. Taxes...............................................................85
4.7. Payments, Computations, etc.........................................88
4.8. Sharing of Payments.................................................88
-ii-
<PAGE>
Section Page
4.9. Setoff..............................................................89
4.10. Mitigation..........................................................89
4.11. Replacement of Lenders..............................................89
ARTICLE V
CONDITIONS TO EFFECTIVENESS
5.1. Effectiveness.......................................................90
5.1.1. Resolutions, etc....................................................90
5.1.2. Closing Date Certificate............................................90
5.1.3. Delivery of Notes...................................................91
5.1.4. Affirmation and Consent.............................................91
5.1.5. Subsidiary Guaranty Supplement......................................91
5.1.6. Pledge Agreements...................................................91
5.1.7. Opinions of Counsel.................................................91
5.1.8. Financial Information...............................................92
5.1.9. Insurance...........................................................92
5.1.10. Purchase Price Adjustments..........................................92
5.1.11. Closing Fees, Expenses, etc.........................................92
5.1.12. Satisfactory Legal Form.............................................92
5.2. All Credit Extensions...............................................93
5.2.1. Compliance with Warranties, No Default, etc.........................93
5.2.2. Credit Extension Request............................................93
5.3. First Borrowing by Each Foreign Subsidiary..........................93
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc...................................................94
6.2. Due Authorization, Non-Contravention, etc...........................95
6.3. Government Approval, Regulation, etc................................95
6.4. Validity, etc.......................................................95
6.5. Financial Information...............................................95
6.6. No Material Adverse Change..........................................96
6.7. Litigation, Labor Controversies, etc................................96
6.8. Subsidiaries........................................................96
6.9. Ownership of Properties.............................................96
6.10. Taxes...............................................................96
6.11. Pension and Welfare Plans...........................................96
6.12. Environmental Warranties............................................97
-iii-
<PAGE>
Section Page
6.13. Regulations U and X.................................................98
6.14. Accuracy of Information.............................................98
6.15. Solvency............................................................99
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants...............................................99
7.1.1. Financial Information, Reports, Notices, etc........................99
7.1.2. Compliance with Laws, etc..........................................101
7.1.3. Maintenance of Properties..........................................101
7.1.4. Insurance..........................................................101
7.1.5. Books and Records..................................................101
7.1.6. Environmental Covenant.............................................102
7.1.7. Future Subsidiaries................................................102
7.1.8. Future Leased Property and Future Acquisitions of Real Property;
Future Acquisition of Other Property.............................104
7.1.9. Use of Proceeds, etc...............................................105
7.1.10. Hedging Obligations................................................105
7.1.11. Mortgages..........................................................105
7.1.12. Certain Indebtedness...............................................106
7.2. Negative Covenants.................................................106
7.2.1. Business Activities................................................106
7.2.2. Indebtedness.......................................................107
7.2.3. Liens..............................................................108
7.2.4. Financial Covenants................................................110
7.2.5. Investments........................................................112
7.2.6. Restricted Payments, etc...........................................114
7.2.7. Capital Expenditures, etc..........................................116
7.2.8. Consolidation, Merger, etc.........................................117
7.2.9. Asset Dispositions, etc............................................117
7.2.10. Modification of Certain Agreements.................................118
7.2.11. Transactions with Affiliates.......................................119
7.2.12. Negative Pledges, Restrictive Agreements, etc......................119
7.2.13. Stock of Subsidiaries..............................................120
7.2.14. Sale and Leaseback.................................................120
-iv-
<PAGE>
Section Page
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default.......................................120
8.1.1. Non-Payment of Obligations.........................................120
8.1.2. Breach of Warranty.................................................120
8.1.3. Non-Performance of Certain Covenants and Obligations...............120
8.1.4. Non-Performance of Other Covenants and Obligations.................120
8.1.5. Default on Other Indebtedness......................................121
8.1.6. Judgments..........................................................121
8.1.7. Pension Plans......................................................121
8.1.8. Change in Control..................................................121
8.1.9. Bankruptcy, Insolvency, etc........................................121
8.1.10. Impairment of Security, etc........................................122
8.1.11. Senior Subordinated Debt...........................................122
8.1.12. Failure to Refinance or Extend Senior Subordinated Bridge Notes....123
8.2. Action if Bankruptcy, etc..........................................123
8.3. Action if Other Event of Default...................................123
ARTICLE IX
THE AGENTS
9.1. Actions............................................................124
9.2. Funding Reliance, etc..............................................124
9.3. Exculpation........................................................125
9.4. Successor..........................................................125
9.5. Credit Extensions by Each Agent and Issuer.........................126
9.6. Credit Decisions...................................................126
9.7. Copies, etc........................................................126
9.8. The Syndication Agent, the Administrative Agent and the
Documentation Agent..............................................126
ARTICLE X
COMPANY GUARANTY
10.1. Guaranty...........................................................126
10.2. Acceleration of Obligations Hereunder..............................127
10.3. Obligations Hereunder Absolute, etc................................127
10.4. Reinstatement, etc.................................................128
-v-
<PAGE>
Section Page
10.5. Waiver, etc........................................................129
10.6. Postponement of Subrogation........................................129
10.7. Successors, Transferees and Assigns; Transfers of Notes, etc.......129
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc...........................................130
11.2. Notices............................................................131
11.3. Payment of Costs and Expenses......................................131
11.4. Indemnification....................................................132
11.5. Survival...........................................................134
11.6. Severability.......................................................134
11.7. Headings...........................................................134
11.8. Execution in Counterparts..........................................134
11.9. Governing Law; Entire Agreement....................................134
11.10. Successors and Assigns.............................................134
11.11. Sale and Transfer of Loans and Notes; Participations in Loans
and Notes........................................................134
11.11.1. Assignments........................................................135
11.11.2. Participations.....................................................137
11.12. Other Transactions.................................................138
11.13. Forum Selection and Consent to Jurisdiction........................138
11.14. Waiver of Jury Trial...............................................139
11.15. Judgment Currency..................................................139
11.16. Confidentiality....................................................140
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentages and Administrative Information
SCHEDULE III - Illustrations Relating to Section 2.5(d)
SCHEDULE IV - Additional Cost Determination
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Term Note
EXHIBIT A-3 - Form of Swing Line Note
EXHIBIT A-4 - Form of Acceptance Note
EXHIBIT B-1 - Form of Committed Loan Borrowing Request
EXHIBIT B-2 - Form of Uncommitted Revolving Loan Borrowing Request
EXHIBIT B-3 - Form of Issuance Request
EXHIBIT C - Form of Continuation/Conversion Notice
-vi-
<PAGE>
Section Page
EXHIBIT D - Form of Closing Date Certificate
EXHIBIT E-1 - Form of Compliance Certificate
EXHIBIT E-2 - Form of U.S. Dollar Equivalent Certificate
EXHIBIT F - Form of Lender Assignment Agreement
EXHIBIT G-1 - Form of Foreign Currency Revolving Loan Commitment
Addendum
EXHIBIT G-2 - Form of Foreign Currency Term Loan Commitment Addendum
EXHIBIT G-3 - Form of Uncommitted Revolving Borrowing Addendum
EXHIBIT G-4 - Form of Invitation for Uncommitted Interest Quotes
EXHIBIT G-5 - Form of Uncommitted Interest Quotes
-vii-
EXHIBIT 12.1
FORMICA CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions, except ratio data)
<TABLE>
Eleven Four Eight
Months Months Months
Ended Ended Ended
12/31/94 12/31/95 12/31/96 12/31/97 4/30/98 12/31/98
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Income (Loss) from continuing operations
before income taxes per statement of
operations $ 8.7 (32.3) (22.9) (504.6) (14.6) (19.5)
Add:
Portion of rents representative
of the interest factor 2.5 2.6 2.5 2.6 0.8 1.8
Interest on indebtedness and
amortization of debt expense 46.4 31.7 10.6 3.1 1.7 25.7
---- ---- ---- ----- ---- ----
Income as adjusted $ 57.6 2.0 (9.8) (498.9) (12.1) 8.0
==== ==== ==== ===== ==== ====
Fixed charges:
Interest on indebtedness and
amortization of debt expense (1) 46.4 31.7 10.6 3.1 1.7 25.7
---- ---- ---- ----- ---- ----
Capitalized interest (2) -- -- 0.2 1.3 -- --
---- ---- ---- ----- ---- ----
Rents 7.6 7.8 7.6 7.8 2.4 5.3
Portion of rents representative
of the interest factor (3) 2.5 2.6 2.5 2.6 0.8 1.8
---- ---- ---- ----- ---- ----
Fixed charges (1)+(2)+(3) $ 48.9 34.3 13.3 7.0 2.5 27.5
==== ==== ==== ===== ==== ====
Ratio of earnings to fixed charges 1.2 -- -- -- -- --
==== ==== ==== ===== ==== ====
</TABLE>
Exhibit 16.1
[LETTERHEAD OF ERNST & YOUNG LLP]
April 19, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the caption "Change in Independent Auditors" within Formica
Corporation's Registration Statement on form S-1 dated April 21, 1999, and are
in agreement with the statements contained in the first paragraph on page 105
therein. We have no basis to agree or disagree with other statements of
Formica Corporation contained therein.
/s/Ernst & Young LLP
White Plains, NY
April 19, 1999
EXHIBIT 21.1
FORMICA
- -------
Country Company Name
- ------- ------------
Austria Formica Gesellschaft mbH
Canada Formica Canada Inc.
Formica Financial Services Ltd.
France Formica S.A.
Gravure et Polissage de Surfaces
Metalliques (G.P.S.M.)
Germany Formica Vertriebs GmbH
Homapal Plattenwerk
Beteilgungsgesellschaft mbH
Homapal Plattenwerk GmbH and Co.
Hong Kong Formica (Asia) Limited
Italy Formica Italia SRL
Korea Formica Korea Corporation
Malaysia Formica (Malaysia) SDN, BHD.
Mexico Formica de Mexico S.A. de C.V.
Servicios Formica de Mexico S.A. de C.V.
Tenedoro Formica de Mexico S.A. de C.V.
Netherlands Formica (Nederland) B.V.
Tile International B.V.
P.R.C. Formica (Shanghai) Company Limited
Shanghai Formica Decorative Material
Company Limited (55% J.V.)
Shanghai Fulihua Decorative Laminate
Company Limited (51% J.V.)
Singapore Formica (Singapore) Pte. Limited
Spain Formica Espanola S.A.
Switzerland Formica (Schweiz) A.G.
Taiwan Formica Taiwan Corporation
Summit Architectural Supply Corporation
United Kingdom Consort Laminates Limited
Formica Holdings Limited
Formica Limited
United States Design Communications International Inc.
The Diller Corporation
FM Holdings Inc
Formica Corporation
Formica International Corporation
Wildon Corporation
Wildon Industries Inc.
<PAGE>
U.S. Subsidiaries State of Incorporation
The Diller Corporation Illinois
Wildon Corporation Pennsylvania
Wildon Industries Inc. Pennsylvania
Design Communications New York
International Inc.
Formica International Corporation New Jersey
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Roseland, New Jersey
April 19, 1999
Exhibit 23.3
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated May 7, 1998 (except for Note 3 - "Reclassifications" as
to which the date is March 3, 1999) with respect to the consolidated financial
statements as of December 31, 1997 and for each of the two years in the period
then ended and with respect to the Financial Statement Schedule as of December
31, 1997 and 1996 and for each of the two years in the period ended December 31,
1997 included in the Registration Statement (Form S-1) of Formica Corporation
dated April 21, 1999.
/s/ Ernst & Young, LLP
White Plains, NY
April 19, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 814241
<NAME> Formica Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 8-MOS 4-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> MAY-1-1998 JAN-1-1998 JAN-1-1997 JAN-1-1996
<PERIOD-END> DEC-31-1998 APR-30-1998 DEC-31-1997 DEC-31-1996
<EXCHANGE-RATE> 1 1 1 1
<CASH> 31,600 0 27,200 26,300
<SECURITIES> 0 0 0 0
<RECEIVABLES> 69,100 0 69,900 76,100
<ALLOWANCES> 4,200 0 1,500 1,400
<INVENTORY> 110,300 0 119,000 112,600
<CURRENT-ASSETS> 229,800 0 243,400 234,200
<PP&E> 305,900 0 333,200 289,100
<DEPRECIATION> 17,200 0 53,200 34,200
<TOTAL-ASSETS> 696,800 0 647,700 1,136,800
<CURRENT-LIABILITIES> 115,300 0 176,800 174,700
<BONDS> 295,900 0 11,400 3,100
0 0 0 0
0 0 0 0
<COMMON> 100 0 100 100
<OTHER-SE> 119,700 0 343,300 870,600
<TOTAL-LIABILITY-AND-EQUITY> 696,800 0 647,700 1,136,800
<SALES> 371,400 178,300 533,400 521,600
<TOTAL-REVENUES> 371,400 178,300 533,400 521,600
<CGS> 266,200 131,100 350,100 348,300
<TOTAL-COSTS> 266,200 131,100 350,100 348,300
<OTHER-EXPENSES> 103,500 60,900 686,600 186,700
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 25,700 1,700 3,100 10,600
<INCOME-PRETAX> (19,500) (14,600) (504,600) (22,900)
<INCOME-TAX> 2,800 0 200 5,000
<INCOME-CONTINUING> (22,300) (14,600) (504,800) (27,900)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (22,300) (14,600) (504,800) (27,900)
<EPS-PRIMARY> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
</TABLE>
