<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1998
REGISTRATION STATEMENT NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ATC GROUP SERVICES INC.*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 8734 46-0399408
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
----------------
104 EAST 25TH STREET, TENTH FLOOR
NEW YORK, NEW YORK 10010
(TELEPHONE: 212-353-8280)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
NICHOLAS J. MALINO
CHIEF EXECUTIVE OFFICER AND PRESIDENT
ATC GROUP SERVICES INC.
104 EAST 25TH STREET, TENTH FLOOR
NEW YORK, NEW YORK 10010
(TELEPHONE: 212-353-8280)
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES OF COMMUNICATIONS TO:
CLAUDE S. SERFILIPPI, ESQ.
CHADBOURNE & PARKE LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(TELEPHONE: 212-408-5100)
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
----------------
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE
WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [_]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE AGGREGATE PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12% Senior Subordinated
Notes
due 2008.............. $100,000,000 100.0% $100,000,000 $29,500
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933.
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
* TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
EXACT NAME OF REGISTRANT STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER
AS SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER
- --------------------------- ------------------------------ ---------------------
<S> <C> <C>
ATC Blattert Inc.......... South Dakota 46-0435981
ATC Construction Services
Inc. .................... Massachusetts 04-3353299
ATC Environmental Inc..... Delaware 43-1783470
ATC InSys Technology Inc.. Delaware 13-3889249
ATC Management Inc........ South Dakota 46-0430230
ATC New England Corp...... Delaware 04-3248424
Bing Yen & Associates,
Inc...................... California 33-0398574
Environmental Warranty,
Inc...................... Connecticut 06-1339917
Hygeia Laboratories Inc. . Delaware 04-3125670
</TABLE>
- --------
* The address of these additional registrants is 104 East 25th Street, Tenth
Floor, New York, New York, 10010. Their telephone number is (212) 353-8280
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 30 , 1998
PROSPECTUS
ATC GROUP SERVICES INC.
OFFER TO EXCHANGE
12% SENIOR SUBORDINATED NOTES DUE 2008 FOR ANY AND ALL OUTSTANDING 12% SENIOR
SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
1998 UNLESS EXTENDED.
ATC GROUP SERVICES INC., a Delaware corporation ("ATC" or the "Company"), is
hereby offering (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this prospectus (the "Prospectus") and in the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
its 12% Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a registration statement of which this Prospectus is a part
(together with all amendments and exhibits thereto, the "Registration
Statement"), for an equal principal amount of its outstanding 12% Senior
Subordinated Notes due 2008 (the "Private Notes"), of which $100 million
aggregate principal amount was issued on January 29, 1998 (the "Issue Date")
and is outstanding on the date hereof. The Private Notes were sold by
Acquisition Corp., a Delaware corporation, in an offering (the "Offering") by
Acquisition Corp. exempt from the registration requirements of the Securities
Act.
On February 5, 1998, pursuant to the terms of a Merger Agreement, dated as of
November 26, 1997 (the "Merger Agreement"), by and between the Company,
Acquisition Corp. and Acquisition Holdings, Inc., a Delaware corporation and
the parent of Acquisition Corp. ("Holdings"), Acquisition Corp. merged with and
into the Company, with the Company as the surviving corporation of the merger
(the "Merger"). At the time of the Merger, the Company, the Trustee (as defined
herein) and the subsidiary guarantors named therein (the "Subsidiary
Guarantors"), entered into a Supplemental Indenture, dated as of February 5,
1998 (the "Supplemental Indenture"), pursuant to which the Subsidiary
Guarantors agreed to guarantee the Notes on a senior subordinated basis and the
Company agreed to assume all of the rights and obligations of Acquisition Corp.
set forth in the Indenture, dated as of January 23, 1998 (the "Indenture")
between Acquisition Corp. and the Trustee pursuant to which the Notes were
originally issued. The Indenture and the Supplemental Indenture are referred to
herein as the "Supplemented Indenture." See "The Transactions."
The form and terms of the Exchange Notes are identical in all material
respects to those of the Private Notes, except for certain transfer
restrictions and registration rights relating to the Private Notes and except
for certain interest provisions related to such registration rights. The
Exchange Notes will evidence the same indebtedness as the Private Notes (which
they replace) and will be entitled to the benefits of the Supplemented
Indenture. The Exchange Notes will mature on January 15, 2008. Interest on the
Exchange Notes will accrue from the Issue Date and will be payable semi-
annually in arrears on each January 15 and July 15 of each year, commencing
July 15, 1998. The Private Notes and the Exchange Notes are sometimes
collectively referred to herein as the "Notes." See "The Exchange Offer" and
"Description of the Notes."
The Exchange Notes may be redeemed, at the option of the Company, in whole or
in part, at any time on or after January 15, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to January 15, 2001, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
with the net cash proceeds of one or more Public Equity Offerings (as defined
herein) at a redemption price equal to 112% of the principal amount thereof;
provided, that immediately following any such redemption at least 65.0% of the
aggregate principal amount of the Notes remains outstanding.
[continued on next page]
-----------
SEE "RISK FACTORS" COMMENCING ON PAGE 20 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE
EXCHANGE NOTES.
-----------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
<PAGE>
[continued from front cover]
The Exchange Notes are general unsecured obligations of the Company, and are
subordinated in right and payment to all existing and future Senior
Indebtedness (as defined herein) and to all existing and future indebtedness
of the Company's subsidiaries that are not Subsidiary Guarantors. The Exchange
Notes will rank pari passu in right of payment with any future senior
subordinated indebtedness of the Company and will rank senior in right of
payment to all other subordinated obligations of the Company. As of November
30, 1997, on a pro forma basis after giving effect to the consummation of the
Acquisitions and Transactions (each as defined herein), the Company would have
an aggregate of approximately $26.2 million of Senior Indebtedness (excluding
unused commitments of $28.4 million available under the Revolving Credit
Facility (as defined herein)) which would rank senior to the Notes. See
"Unaudited Pro Forma Combined Condensed Financial Data" and "Description of
the New Credit Facility."
The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended by the Company in its sole discretion
(the "Expiration Date"). Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date. Private Notes may be tendered only in integral
multiples of $1,000 principal amount. The Exchange Offer is subject to certain
customary conditions. See "The Exchange Offer."
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company and the Subsidiary Guarantors under the
Registration Rights Agreement, dated as of January 29, 1998 (the "Registration
Rights Agreement"), between Acquisition Corp., the Subsidiary Guarantors and
the Initial Purchaser (as defined herein). The Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Private Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than (i) a broker-dealer who purchased such Private
Notes directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company or the Subsidiary Guarantors within the meaning of
Rule 405 under the Securities Act), without compliance with the registration
and prospectus delivery requirements of the Securities Act; provided, that the
holder is acquiring Exchange Notes in the ordinary course of its business and
is not participating, does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of the
Exchange Notes. Holders of Private Notes wishing to accept the Exchange Offer
must represent to the Company that such conditions have been met. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Private Notes, where such Private Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes which
contains a plan of distribution with respect to such resale transactions. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with any resale of the Exchange Notes received for
Private Notes where such Private Notes were acquired by a broker-dealer as a
result of market-making or other trading activities (other than Private Notes
acquired directly from the Company). The Company has agreed that, for a period
of 45 days after the Registration Statement is declared effective, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resales. See "Plan of Distribution." The Company believes that none
of the registered holders of the Private Notes is an affiliate (as such term
is defined in Rule 405 under the Securities Act) of the Company.
Since their issuance, the Private Notes have traded on the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market of
the National Association of Securities Dealers, Inc. (the "NASD"). The Company
does not intend to apply for listing of the Exchange Notes on any securities
exchange or to seek approval through any automated quotation system. There can
be no assurance regarding the future development of a market for the Exchange
Notes, or the ability of the holders of the Exchange Notes to sell their
Exchange Notes or the price at which such holders may be able to sell their
Exchange Notes. If such a market were to develop, the Exchange Notes could
trade at prices that may be higher or lower than the initial public offering
price depending on many factors, including prevailing interest rates, the
Company's operating results and the market for similar securities. See "Risk
Factors--Lack of Public Market."
Holders of Private Notes whose Private Notes are not tendered and accepted
in the Exchange Offer will continue to hold such Private Notes and will be
entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the Supplemented Indenture. Following
consummation of the Exchange Offer, the holders of Private Notes will continue
to be subject to the existing restrictions upon transfer thereof and the
Company and the Subsidiary Guarantors will have no further obligation to such
holders to provide for the registration under the Securities Act of the
Private Notes held by them.
The Company and the Subsidiary Guarantors will not receive any proceeds
from, and the Company agreed to bear all registration expenses of, the
Exchange Offer. No underwriter is being used in connection with the Exchange
Offer. See "The Exchange Offer--Resale of the Exchange Notes."
This Prospectus is dated , 1998
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY SUBSIDIARY GUARANTOR. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY SUCH PROSPECTUS SUPPLEMENT NOR ANY RESALE MADE
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
THIS PROSPECTUS AND ANY SUCH RELATED PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
----------------
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE SECURITIES LAWS. ALL STATEMENTS REGARDING THE COMPANY'S AND ITS
SUBSIDIARIES' EXPECTED FINANCIAL POSITION, BUSINESS AND FINANCING PLANS ARE
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY AND ITS SUBSIDIARIES BELIEVE
THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO
HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM SUCH EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN
THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE INFORMATION UNDER "RISK
FACTORS," "MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS." ALL SUCH FORWARD-LOOKING STATEMENTS ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
----------------
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
AVAILABLE INFORMATION
This Prospectus constitutes a part of an exchange offer Registration
Statement on Form S-4 filed by the Company and the Subsidiary Guarantors with
the Securities and Exchange Commission (the "Commission") under the Securities
Act with respect to the Exchange Notes. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Reference is made to such Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the Subsidiary Guarantors and the Exchange Notes. Any statement contained
herein concerning the provisions of certain documents are not necessarily
complete, and in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement for a more complete
description of the matter involved. Each such statement is qualified in its
entirety by such reference.
3
<PAGE>
As a result of the filing of the Registration Statement with the Commission,
the Company will become subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith will be required to file with or furnish to the
Commission certain reports and other information. The Registration Statement,
the exhibits and schedules thereto, reports and other information filed with
or furnished to the Commission by the Company may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained by
mail from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Additionally, the
Commission maintains a Web site on the Internet (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that submit electronic filings to the Commission,
including the Company.
The Indenture requires the Company to deliver to the Trustee within 15 days
after filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or Section 15(d) of
Exchange Act, the Indenture requires the Company to file with the Commission
to the extent permitted, and provide the Trustee and holders with such annual
reports and such information, documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act.
4
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, appearing elsewhere in this
Prospectus. As used in this Prospectus, unless the context indicates otherwise,
all references to (i) "Acquisition Corp." are to Acquisition Corp. prior to the
Merger and to ATC Group Services Inc. after the Merger, as the context
requires, (ii) "ATC" or the "Company" are to ATC Group Services Inc. and its
consolidated subsidiaries, (iii) "Holdings" are to Acquisition Holdings, Inc.,
a Delaware corporation and the parent of the Company and (iv) a fiscal year are
to the Company's fiscal year ended the last day of February.
THE COMPANY
ATC is a leading national provider of professional consulting, engineering
and testing services within the environmental and construction materials
industries. Management believes the Company is also a leading provider of
integrated environmental information management technology services. The
Company provides a broad range of services to a diverse client base of over
8,000 customers, with domestic businesses and non-federal government entities
representing over 95.0% of the Company's gross revenues for the twelve months
ended November 30, 1997. No single customer represented more than 1.8% of the
Company's gross revenues during the twelve months ended November 30, 1997. In
addition, the Company's ten largest customers taken together accounted for less
than 13.6% of the Company's gross revenues during the twelve months ended
November 30, 1997. The Company provides its services through a network of 73
branch offices located in 34 states covering every major market of the United
States.
Asset preservation, liability and health related considerations have
increasingly driven demand in the environmental services industry, whereas
regulation has decreased as a driver over time. As a result of these market
dynamics, environmental administration has become an integral component of day-
to-day property management activities. Management believes that ATC is well-
positioned to take advantage of certain rapidly growing sectors of the
approximately $16.0 billion environmental services industry. In addition, the
industry is highly fragmented and management believes that the industry
presents many favorable opportunities for growth through acquisitions.
In 1993, the Company initiated a strategy of controlled growth through
acquisitions to build a national infrastructure and to broaden its range of
technical services. The Company has created a national infrastructure through
the completion of 12 acquisitions since May 1993. ATC has thereby also expanded
its service mix by adding construction materials testing and engineering, lead
risk management, indoor air quality management, water and wastewater management
and information management technology services. As a result of this growth and
diversification strategy, net revenues and EBITDA (as defined) increased to
fiscal 1997 levels of $95.9 million and $13.8 million, respectively, from $15.4
million and $1.4 million, respectively, in fiscal 1993.
Management believes that ATC is well-positioned to grow revenues and EBITDA
in the future. The key elements of its continuing strategy to achieve this
growth include (i) pursuing cross-selling opportunities presented by ATC's
recently diversified service mix and recently developed national
infrastructure, (ii) capitalizing on specific sectors which management believes
have high growth potential, including indoor air quality, risk assessment,
Brownfield development and environmental information management technology
services outsourcing, (iii) expanding its national programs, the first of which
was established in 1995, which emphasize expanding existing regional or local
customer relationships into national relationships and (iv) increasing
profitability by implementing tactical acquisitions. Management intends to
pursue companies that can be "tucked into" ATC's established infrastructure and
that provide opportunities for additional contribution from branch operations
without proportional increases to overhead or fixed costs.
5
<PAGE>
The following table describes services provided by the Company:
-----------------------------
ATC GROUP SERVICES INC.(1)(2)
-----------------------------
Pro Forma Gross Revenues:
$182.4 million for fiscal
1997 (3)
-----------------------------
- ----------------------- --------------------------- ------------------------
ENVIRONMENTAL CONSTRUCTION MATERIALS INFORMATION MANAGEMENT
SERVICES (4) TESTING AND ENGINEERING (5) TECHNOLOGY (6)
- ----------------------- --------------------------- ------------------------
79.9% of pro forma 14.5% of pro forma fiscal 5.6% of pro forma fiscal
fiscal 1997 gross 1997 gross revenues 1997 gross revenues
revenues
- ----------------------- --------------------------- ------------------------
. Environmental Engi- . Construction Materials . System Design
neering and Testing and Engineering . System Development
Consulting(7) . Geotechnical Engineering . Maintenance and
. Industrial Hygiene(8) and Consulting Management of Main-
. Water and Wastewater frame and Client-
Management(9) Server Environments
. Lead Risk Manage- . Environmental Info-
ment(10) rmation Management
. Health and Safety Technology
Training(11)
- -------
(1) While the Company's product and service offerings include minor
remediation projects such as groundwater recovery systems, they do not
include actual remediation of "Super Fund" sites, asbestos removal or
nuclear waste disposal, nor is the Company routinely involved in the
handling, transportation, storage or disposal of hazardous waste.
(2) Gross revenues include a negligible amount of gross revenues from non-core
businesses not described in this chart, such as environmental insurance
and building condition surveys. See "Business--Other ATC Products and
Services."
(3) The information set forth in this chart is pro forma to reflect the Merger
and the acquisitions of American Testing and Engineering Corp., 3D
Information Systems Inc., BCM Engineers, Inc., Environmental Warranty,
Inc. and Bing Yen & Associates, Inc. as if each acquisition occurred at
March 1, 1996. The difference between gross and net revenues is
reimbursable costs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(4) Environmental services include (a) environmental engineering, consulting
and testing services such as environmental audits (for example, Phase I
and Phase II reports), site assessments, remedial action planning and
design, and soil and groundwater remediation management, (b) industrial
hygiene consulting services, including asbestos management, indoor air
quality, occupational hazard assessments and other industrial hygiene
consulting services, (c) water and wastewater management including the
design of wastewater treatment facilities, (d) lead risk management and
(e) health and safety training which includes revenues generated by the
"Environmental Institute," the Company's environmental training facility.
(5) Construction materials testing engineering services include (a) systematic
testing and inspection of construction materials and (b) geotechnical
engineering and consulting services involving analysis of soil for
construction of structures supported on or within the earth.
(6) Information management technology services includes system design, system
development, maintenance and management of mainframe and client-server
environments and environmental information management technology.
Information management technology services can be provided in conjunction
with the Company's environmental services or can be provided as a separate
independent service to clients.
(7) 46.6% of pro forma fiscal 1997 gross revenues.
(8) 24.8% of pro forma fiscal 1997 gross revenues.
(9) 5.1% of pro forma fiscal 1997 gross revenues.
(10) 1.9% of pro forma fiscal 1997 gross revenues.
(11) 1.5% of pro forma fiscal 1997 gross revenues.
6
<PAGE>
COMPETITIVE STRENGTHS
Management believes the following competitive strengths contribute to the
Company's position as a market leader and to its growth in revenues and EBITDA:
. Strong Branch Operations and Low Overhead Costs. Management believes that
its operating structure results in higher profitability than most of its
competitors. During the nine months ended November 30, 1997, over 90.0%
of the Company's branches generated operating profit at the branch level
before allocation of interest, taxes and corporate overhead such as
corporate accounting, corporate marketing, corporate human resources,
corporate management salaries, goodwill, general legal expenses, external
accountants and public company expenses ("Branch Operating Profit").
Calculation of Branch Operating Profit includes such items as branch
employee payroll, rent, branch depreciation, regional administration and
accounting expenses, branch sales and marketing, branch employee
benefits, branch insurance and bad debt expenses. In addition, more than
32.0% of the branches generated greater than 20.0% of Branch Operating
Profit and more than 23.0% generated greater than 25.0% of Branch
Operating Profit. Strong Branch Operating Profit is attributable to
management's entrepreneurial model for branch operations. Branches are
operated as coordinated business units with financial incentives for
branch managers to meet certain financial and operating criteria set by
corporate management. In addition, ATC corporate overhead costs are low
as a result of this decentralized operating structure. For fiscal 1997
and the nine months ended November 30, 1997, overhead represented
approximately 6.0% and 9.3%, respectively, of net revenues compared to
the industry average of approximately 13.5%.
. High Utilization Rates. The Company's utilization rates, measured as a
percentage of hours billable, are believed to be among the highest in the
industry at approximately 70.6% for the nine months ended November 30,
1997. The Company's utilization rate, measured as a percentage of
billable hours to net hours recorded, is calculated by deducting employee
benefit hours from gross hours recorded on the time sheets. This net
billable utilization rate includes hours recorded for all branches,
including local administrative staff time, but excludes any corporate
staff at the Company's headquarters and two administrative offices.
Management believes its utilization rate is attributable to certain key
initiatives. ATC employs approximately 16.2% of its work force under its
flexible staff program. Flexible staff employees are employed only for
hours to be charged to client engagements, resulting in near 100.0%
utilization rates for such employees. The Company's breadth of services
has allowed management to implement cross-training initiatives to
increase employee proficiency in multiple consulting and engineering
service disciplines. As a result, ATC, unlike many of the Company's
competitors, maximizes the ability of its employees to work on multiple
types of projects and reduces non-billable time.
. Experienced Management Team and Significant Employee Involvement. The
Company has a highly experienced management team which is responsible for
the successful growth of the Company's businesses over the past five
years. Nicholas J. Malino and Christopher P. Vincze joined ATC in October
1992 and July 1991, respectively, and have led the Company's expansion
and service diversification strategy since May 1993. Following the
consummation of the Merger, Mr. Malino was appointed Chief Executive
Officer and President, and Mr. Vincze was appointed Chief Operating
Officer. In addition, ATC's key regional and branch managers have
substantial industry experience and have been and will continue to be
significant contributors to the implementation of ATC's growth strategy.
Furthermore, management has promoted company-wide employee involvement in
every phase of new business development.
. Nature of Revenues. The Company's revenues are derived from a diverse
client base of over 8,000 businesses and government agencies which range
from Fortune 500 companies to small and mid-size businesses and federal,
state and local governments. No single customer represented more than
1.8% of the Company's revenues for the twelve months ended November 30,
1997, with domestic businesses and non-federal entities representing over
95.0% of the Company's gross revenues. The Company's national
infrastructure allows ATC to service its diverse client base throughout
the United States. The
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Company's broad geographic coverage, wide range of high-quality service
offerings and strong and diversified customer relationships are key
contributors to ATC's stable and recurring revenue stream.
. Broad Service Offerings and National Branch Network. The Company benefits
from economies of scale, particularly in its ability to provide a broad
range of services through its national branch network. As a result, the
Company is well-positioned to take advantage of the increasing tendency
for clients to obtain environmental and consulting services from fewer
providers. Companies are seeking larger providers such as ATC that have a
national network of branch office locations, a broad range of service
capabilities, engineers and consultants with strong technical skills and
team mobilization capabilities and insurance coverage with higher limits
than that provided by smaller firms. In addition, the Company has an
advantage over its smaller competitors in its ability to leverage its
overhead costs by spreading corporate selling, general and administrative
costs over a larger number of branch office locations. As a result of
these economies of scale, the Company is well-positioned to continue to
achieve growth in both revenues and profitability.
BUSINESS STRATEGY
In 1993, the Company began the implementation of a strategy, the key
elements of which were designed to: (i) establish a national infrastructure of
branch office locations and (ii) diversify its service offerings. Management
believes that the Company has achieved these strategic, structural objectives
and now intends to focus on the following strategies to build on this
foundation to improve its market position and to grow operating earnings:
. Cross-Sell Services. As a result of its acquisition strategy, the Company
has expanded its service offerings and client portfolio. This has
resulted in many cross-selling successes for the Company because ATC has
been able to sell additional services to existing clients and newly
acquired clients. Management expects these cross-selling opportunities to
continue at an accelerated rate as a result of its acquired service
capabilities in the construction materials testing and engineering, lead
risk management, water and wastewater management and information
management technology services. Additionally, the Company's national
infrastructure provides opportunities for cross-selling expanded services
to existing customers that currently receive more limited services on a
local or regional basis.
. Focus on High-Growth Services and Sectors. The successful implementation
of strategies designed to increase service offerings has resulted in the
Company's ability to capitalize on many high-growth market opportunities.
ATC is well-positioned to take advantage of the niche markets of indoor
air quality management, water and wastewater management, risk assessment,
Brownfield development and environmental information management
technology services, each of which management believes has high growth
potential. In addition, management intends to take advantage of trends
such as the outsourcing of specialized technical services by national and
multi-national corporations.
. Expand National Sales Programs and Develop International
Opportunities. Since 1995, ATC has implemented six national programs
which have been highly successful in generating new business from
existing clients and from specific industries with growth potential.
Existing programs focus on incremental revenues from clients in the lead
risk management, hazardous waste/Brownfield development, PCS/wireless
communications industry, national commercial account management programs,
federal programs and petroleum markets. In the Asia-Pacific markets, the
Company is in the early stages of its long-term effort to take advantage
of a developing demand for environmental services. ATC is currently
providing asbestos management services to Mitsui Fudosan in Japan and is
providing design services for a wastewater treatment facility in China
for a multi-national corporation. The Company intends to use such
relationships to pursue other opportunities in these markets.
. Pursue Tactical Acquisitions. ATC has developed significant expertise in
identifying, completing and integrating acquisitions. ATC plans to apply
its expertise in assimilating acquired companies' personnel
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and branch operations into ATC's existing infrastructure and expanding
acquired companies' service and product offerings to existing clients.
Management intends to strengthen its position as a leading industry
consolidator through tactical acquisitions which meet operating,
financial and geographic criteria. Management believes that its existing
national infrastructure provides a platform for "tuck-in" acquisitions of
regional and local companies. According to management estimates, there
are 3,500 companies whose businesses are complementary to those of the
Company. Management believes that a significant number of those companies
could be operated more profitably as part of ATC's operations.
. Emphasis on Business Fundamentals. Management believes that industry
participants typically have management teams with predominantly technical
orientations. In contrast, ATC has distinguished itself by focusing on
business fundamentals to complement its technical expertise. ATC intends
to continue to emphasize a disciplined approach to such basic business
fundamentals as selling and marketing, customer service, cost management,
overtime minimization and collection of receivables.
THE TRANSACTIONS
The Company, Holdings and Acquisition Corp., a wholly-owned subsidiary of
Holdings, entered into the Merger Agreement pursuant to which Acquisition
Corp. offered to purchase all of the outstanding shares of common stock, par
value $ 0.01 per share (the "Common Stock"), of the Company in accordance with
the terms of an offer to purchase, dated December 4, 1997, as amended (the
"Offer to Purchase"), at a price of $12.00 per share, net to the seller in
cash (the "Tender Offer"). Holdings is a Delaware corporation owned by
affiliates of Weiss, Peck & Greer, L.L.C. ("Weiss Peck") and other investors,
including current ATC management and employees. Acquisition Corp. acquired
ownership in excess of 90% of the outstanding shares of Common Stock pursuant
to the Tender Offer, which expired on January 29, 1998, and the subsequent
purchase in the open market of approximately 15,000 shares of Common Stock.
On February 5, 1998, pursuant to the terms of the Merger Agreement and upon
the satisfaction of the other conditions set forth in the Merger Agreement and
in accordance with the requirements of the Delaware General Corporation Law
(the "DGCL"), Acquisition Corp. merged with and into the Company (the "Merger"
and, together with the Offering, the Tender Offer and the refinancing of
approximately $41.4 million aggregate principal amount of indebtedness of ATC
upon consummation of the Merger, the "Transactions") with the Company as the
surviving corporation of the Merger. As a result of the Merger, the Company
became a wholly-owned subsidiary of Holdings. At the time of the Merger, the
Company, the Subsidiary Guarantors and the Trustee entered into the
Supplemental Indenture pursuant to which the Company and the Subsidiary
Guarantors assumed all of the rights and obligations of Acquisition Corp. set
forth in the Indenture.
Acquisition Corp. used approximately $160.0 million to consummate the Tender
Offer, Merger and refinancing of approximately $41.4 million aggregate
principal amount of indebtedness of ATC. These funds were provided by (i) the
proceeds of a $20.0 million term loan (the "Term Loan") entered into by the
Company upon consummation of the Tender Offer and funded at the time of the
Merger, (ii) the sale of the Private Notes, (iii) a $32.5 million capital
contribution (the "Holdings Contribution") to Acquisition Corp. from Holdings
($30.0 million of which was contributed on the Issue Date), (iv) borrowings of
approximately $1.6 million under a revolving credit facility entered into upon
consummation of the Tender Offer and funded at the time of the Merger (the
"Revolving Credit Facility" and together with the Term Loan, the "New Credit
Facility") and (v) cash on hand of $5.8 million.
The Holdings Contribution was provided by (a) an equity investment of
approximately $19.9 million in the common stock of Holdings by affiliates of
Weiss Peck, (b) an equity investment of $0.5 million in the common stock of
Holdings by Jackson National Life Insurance Company together with its
affiliates ("JNL"), (c) the issuance to JNL of preferred stock of Holdings,
par value $0.01, redeemable 2009, having an original aggregate
9
<PAGE>
liquidation value of $10.0 million, and expected to accrue dividends through
the issuance of additional shares of preferred stock, at a compounded rate of
8.0% per annum (the "Holdings Preferred Stock") and warrants entitling JNL to
purchase 6.0% of the shares of common stock of Holdings on a fully diluted
basis (the "Warrants" and collectively with the offering of the Holdings
Preferred Stock, the "Preferred Stock Offering"), see "Description of Preferred
Stock," and (d) an equity investment of approximately $2.1 million in common
stock of Holdings by ATC management and employees (including the economic value
of Holdings employee stock options which replaced existing ATC options).
Weiss Peck is a private investment firm, founded in 1970, which manages in
excess of $14 billion in public equities and fixed-income securities for
institutional and individual clients worldwide. In addition to its money
management activities, the firm has a twenty-seven year history as an investor
of equity capital in over 200 venture capital and private equity transactions.
Investments of its Private Equity Group are made through affiliated funds with
$230 million of committed capital.
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RECENT DEVELOPMENTS
Acquisitions
On November 26, 1997, the Company completed the purchase of all of the
outstanding stock of Bing Yen & Associates, Inc. ("Bing Yen"). Bing Yen
provides geotechnical and structural forensic services to a wide variety of
clients in the western United States. The acquisition was accounted for as a
purchase. The purchase price totaled $4.3 million, consisting of $2.2 million
paid at closing, $0.6 million in the form of a short-term, interest bearing
promissory note, $1.2 million in unsecured, three-year, interest bearing notes
and the assumption of liabilities and transaction costs of $0.4 million. In
addition a maximum aggregate principal amount of $1.5 million in unsecured
contingent achievement promissory notes will be issued if certain minimum net
revenue levels are achieved resulting in a maximum purchase price of $5.4
million.
On November 4, 1997, the Company purchased 100% of the outstanding preferred
stock and 90.9% of the outstanding common stock of Environmental Warranty, Inc.
("EWI"), a property and casualty insurance brokerage firm specializing in
environmental insurance with property and casualty licenses, including excess
and surplus lines in 43 states and with license applications pending in an
additional five states. EWI sells insurance products covering environmental
liabilities to large property owners and municipal government clients. The
acquisition was accounted for as a purchase. The purchase price totaled
approximately $1.7 million, consisting of $218,750 (includes $68,750 for
partial payment of the assumed payments commitments totaling $275,000) in cash
at closing, $582,424 (net of imputed interest) in contingent three-year, non-
interest bearing notes (subject to certain set-offs), $206,250 of unconditional
payment commitments due in three annual installments, 33,000 shares of
unregistered Common Stock of the Company (valued at $11 1/16 per share) and the
assumption of liabilities and transaction costs of $339,811.
On August 20, 1997, the Company purchased certain assets and assumed certain
liabilities of the Engineering Division of Smith Technology Corporation ("Smith
Technology") which operated primarily as BCM Engineers, Inc. ("BCM"). BCM is a
leading environmental engineering and consulting firm that provides services in
water and wastewater treatment, natural resources management, environmental
compliance and site investigation, remedial design and engineering, asbestos
and air quality management. The acquisition of BCM was accounted for as a
purchase. The purchase price totaled $12.5 million consisting of $5.4 million
in cash, $2.8 million in short-term notes payable that are subject to set-offs
and assumed liabilities and transaction costs of $4.3 million, including
working capital liabilities.
The acquisitions of Bing Yen, EWI and BCM are collectively referred to herein
as the "Acquisitions." Each of the seller notes issued in connection with the
Acquisitions, including contingent notes, constitutes Senior Indebtedness.
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CORPORATE STRUCTURE
Affiliates of Weiss Peck, JNL and certain of its affiliates, and management
and employees of ATC own approximately 68.2%, 7.7% and 24.1%, respectively, of
the common stock of Holdings on a fully diluted basis. Management's and
employees' 24.1% fully diluted ownership is based on an equity investment of
$2.1 million and options to purchase 11.7% of the common stock of Holdings. JNL
owns 100.0% of the Holdings Preferred Stock. The following chart sets forth the
Company's corporate structure:
Acquisition Holdings, Inc. . $10.0 million of Preferred Stock and
Warrants (1)
. $22.5 million Equity Investment (1)
[DOWN ARROW] 100%
ATC Group Services Inc. (2) . Borrowings available under the
Revolving Credit Facility
. $20.0 million Term Loan (1)
. $100.0 million of Notes (1)
[DOWN ARROW] 100%
Subsidiary Guarantors (3)
- --------
(1) Acquisition Corp. used approximately $160.0 million to consummate the
Tender Offer, Merger and refinancing of approximately $41.4 million
aggregate principal amount of indebtedness of ATC (including related fees
and expenses). This sum was provided by (a) $20.0 million of borrowings
under the Term Loan, see "Description of New Credit Facility," (b) gross
proceeds of $100.0 million from the issuance of the Private Notes, see
"Description of the Notes," (c) the $32.5 million Holdings Contribution
(comprised of (i) the issuance of $10.0 million of Holdings Preferred Stock
and Warrants to JNL, see "Description of Preferred Stock," (ii) an equity
investment of $19.9 million by affiliates of Weiss Peck and $0.5 million by
JNL and (iii) an equity investment of approximately $2.1 million by ATC
management and employees (including the economic value of Holdings employee
stock options which replaced ATC options)) (d) borrowings of approximately
$1.6 million under the Revolving Credit Facility, see "Description of New
Credit Facility" and (e) cash on hand of $5.8 million.
(2) Pursuant to the terms of the Merger Agreement, Acquisition Corp. merged
with and into ATC on February 5, 1998, with ATC as the surviving
corporation.
(3) The Subsidiary Guarantors unconditionally guarantee all amounts owed under
the New Credit Facility on a senior basis and guarantee all amounts owing
under the Notes on a senior subordinated basis. ATC currently owns 100% of
the outstanding preferred stock and 90.9% of the outstanding common stock
of EWI.
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THE EXCHANGE OFFER
The Exchange Offer
The Exchange Offer.......... The Company and the Subsidiary Guarantors are
hereby offering to exchange Exchange Notes for an
equal principal amount of Private Notes that are
properly tendered and accepted. The Company and
the Subsidiary Guarantors will issue Exchange
Notes on or as promptly as practicable after the
Expiration Date. As of the date hereof, there is
$100.0 million aggregate principal amount of
Private Notes outstanding. See "The Exchange
Offer."
Based on interpretations by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company and the Subsidiary
Guarantors believe that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for
Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that the holder is acquiring
Exchange Notes in the ordinary course of its
business, is not participating, does not intend
to participate and has no arrangement or
understanding with any person to participate in
the distribution of the Exchange Notes and is not
an "affiliate" of the Company or the Subsidiary
Guarantors within the meaning of Rule 405 under
the Securities Act. Each broker-dealer who holds
Private Notes acquired for its own account as a
result of market-making or other trading
activities and who receives Exchange Notes
pursuant to the Exchange Offer for its own
account in exchange therefor must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
broker-dealer in connection with resales of
Exchange Notes received in exchange for Private
Notes acquired by such broker-dealer as a result
of market-making activities or other trading
activities. The Letter of Transmittal that
accompanies this Prospectus states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. Any holder of Private Notes who
tenders in the Exchange Offer with the intention
to participate in a distribution of the Exchange
Notes cannot rely on the above-referenced
position of the staff of the Commission and, in
the absence of an exemption under the Securities
Act, would have to comply with the registration
and prospectus delivery requirements therein in
connection with any resale transaction. Failure
to comply with such requirements in such instance
could result in such holder incurring liability
under the Securities Act for which the holder is
not indemnified by the Company. See "The Exchange
Offer--Resale of the Exchange Notes."
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<PAGE>
Registration Rights......... The Private Notes were sold by Acquisition Corp.
on January 29, 1998 to BT Alex. Brown (the
"Initial Purchaser") pursuant to a Purchase
Agreement, dated as of January 22, 1998 (the
"Purchase Agreement"), among Acquisition Corp.,
the Subsidiary Guarantors and the Initial
Purchaser. Pursuant to the Purchase Agreement,
Acquisition Corp. and the Subsidiary Guarantors
entered into the Registration Rights Agreement
with the Initial Purchaser, which agreement
grants the holders of Private Notes certain
exchange and registration rights. The Exchange
Offer is intended to satisfy, as to all Notes,
such rights. Except under certain limited
circumstances, the holders of the Exchange Notes
will not be entitled to any exchange or
registration rights with respect to the Exchange
Notes. Holders of Private Notes who do not
participate in the Exchange Offer may thereafter
hold a less liquid security. See "The Exchange
Offer--Termination of Certain Rights." The
Company will not receive any proceeds from and
has agreed to bear the expenses of the Exchange
Offer.
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998.
Procedures for Tendering Each holder of Private Notes wishing to accept
Private Notes.............. the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Private Notes
and any other required documentation to State
Street Bank and Trust Company, as Exchange Agent
(the "Exchange Agent"), at the address set forth
herein. By executing the Letter of Transmittal,
the holder will represent to and agree with the
Company and the Subsidiary Guarantors that, among
other things, (i) the Exchange Notes to be
acquired by such holder of Private Notes in
connection with the Exchange Offer are being
acquired by such holder in the ordinary course of
its business, (ii) such holder is not
participating, does not intend to participate and
has no arrangement or understanding with any
person to participate in a distribution of the
Exchange Notes, and (iii) such holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Company or the Subsidiary
Guarantors. If the holder is a broker-dealer that
will receive Exchange Notes for its own account
in exchange for Private Notes that were acquired
as a result of market-making or other trading
activities, such holder will be required to
acknowledge in the Letter of Transmittal that
such holder will deliver a prospectus in
connection with any resale of such Exchange
Notes; however, by so acknowledging and by
delivering a prospectus, such holder will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. See
"The Exchange Offer--Procedures for Tendering."
Special Procedures for
Beneficial Owners..........
Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
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<PAGE>
nominee and who wishes to tender such Private
Notes in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering such owner's
Private Notes, either make appropriate
arrangements to register ownership of the Private
Notes in such owner's name or obtain a properly
completed bond power from the registered holder.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Holders of Private Notes who wish to tender their
Procedures................. Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures
set forth under "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of the Private
Notes and Delivery of the
Exchange Notes.............
Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company and
the Subsidiary Guarantors will accept for
exchange any and all Private Notes that are
properly tendered in the Exchange Offer prior to
the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
on the earliest practicable date following the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
Withdrawal Rights........... Tenders of Private Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
Certain Tax Considerations.. For a discussion of certain tax considerations
relating to the Exchange Notes, see "Certain U.S.
Federal Income Tax Considerations."
Exchange Agent.............. State Street Bank and Trust Company is serving as
the Exchange Agent in connection with the
Exchange Offer. State Street Bank and Trust
Company also serves as trustee (the "Trustee")
under the Supplemented Indenture.
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<PAGE>
The Notes
The Exchange Offer applies to the $100 million aggregate principal amount of
Private Notes. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Private Notes except that the
Exchange Notes will not bear legends restricting the transfer thereof and
holders of the Exchange Notes will not be entitled to any of the registration
rights of holders of the Private Notes under the Registration Rights Agreement,
which rights will terminate, except under certain limited circumstances, upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Supplemented Indenture. For
further information and for definitions of certain capitalized terms, see
"Description of the Notes."
Acquisition Corp............ ATC Group Services Inc.
Notes....................... $100,000,000 aggregate principal amount of 12%
Senior Subordinated Notes due 2008.
Maturity Date............... January 15, 2008.
Interest Payment Dates...... Interest on the Notes will accrue from the Issue
Date and will be payable semi-annually in arrears
on each January 15 and July 15 of each year,
commencing July 15, 1998.
Optional Redemption......... The Notes will be redeemable, in whole or in
part, at the option of the Company on or after
January 15, 2003 at the redemption prices set
forth herein, plus accrued interest to the date
of redemption. The Notes are not otherwise
redeemable by the Company prior to January 15,
2003, except that, at any time on or prior to
January 15, 2001, the Company, at its option, may
redeem, with the net cash proceeds of one or more
Public Equity Offerings, up to 35.0% of the
aggregate principal amount of the Notes
originally issued, at a redemption price equal to
112% of the principal amount thereof, plus
accrued interest thereon, if any, to the date of
redemption; provided that at least 65.0% of the
aggregate principal amount of the Notes
originally issued remains outstanding immediately
following such redemption. See "Description of
the Notes--Redemption."
Change of Control........... Upon a Change of Control, each holder of Notes
will have the right, subject to certain
restrictions, to require the Company to
repurchase such holder's Notes at a price equal
to 101.0% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
repurchase date. See "Description of the Notes--
Change of Control."
Ranking..................... The Notes are general unsecured obligations of
the Company and are subordinated in right of
payment to all existing and future Senior
Indebtedness and to all existing and future
indebtedness of the Company's subsidiaries that
are not Subsidiary Guarantors. The Notes will
rank pari passu in right of payment with any
future senior subordinated indebtedness of the
Company and will rank senior in right of payment
to all other subordinated obligations of the
Company. As of November 30, 1997, on a pro forma
basis after
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<PAGE>
giving effect to the consummation of the
Acquisitions and Transactions, the Company would
have an aggregate of approximately $26.2 million
of Senior Indebtedness (excluding unused
commitments of $28.4 million available under the
Revolving Credit Facility) which would rank
senior to the Notes. See "Unaudited Pro Forma
Combined Condensed Financial Data" and
"Description of the New Credit Facility."
Guarantees.................. The Notes are unconditionally guaranteed on a
senior subordinated basis (the "Guarantees") by
the Subsidiary Guarantors. The Guarantees are
general unsecured obligations of the Subsidiary
Guarantors and are subordinated in right of
payment to all existing and future Guarantor
Senior Indebtedness (as defined herein). The
Guarantees rank pari passu with any future senior
subordinated indebtedness of the Subsidiary
Guarantors and rank senior in right of payment to
all other subordinated obligations of the
Subsidiary Guarantors. As of November 30, 1997,
on a pro forma basis after giving effect to the
consummation of the Acquisitions and the
Transactions, the Subsidiary Guarantors
collectively would have had no amount of
Guarantor Senior Indebtedness (excluding
guarantees of Senior Indebtedness of the
Company).
Certain Covenants........... The Supplemented Indenture contains certain
covenants with respect to the Company and its
subsidiaries that restrict, among other things,
(a) the incurrence of additional indebtedness,
(b) the payment of dividends and other restricted
payments, (c) the creation of certain liens, (d)
the use of proceeds from sales of assets and
subsidiary stock, (e) sale and leaseback
transactions, (f) transactions with affiliates,
and (g) conduct of business. The Supplemented
Indenture also restricts the Company's ability to
consolidate or merge with or into, or to transfer
all or substantially all of its assets to,
another person. In addition, under certain
circumstances, the Company will be required to
offer to purchase the Notes, in whole or in part,
at a purchase price equal to 100.0% of the
principal amount thereof plus accrued interest to
the date of repurchase, with the net cash
proceeds of certain Asset Sales. These
restrictions and requirements are subject to a
number of important qualifications and
exceptions. See "Description of the Notes--
Certain Covenants."
Book-Entry, Delivery and Exchange Notes issued in exchange for the Private
Form....................... Notes currently represented by one or more fully
registered global notes will be represented by
one or more fully registered global notes
(collectively, the "Global Notes") and will be
deposited upon issuance with The Depository Trust
Company ("DTC" or the "Depositary") and
registered in the name of a nominee of DTC.
Beneficial interests in Global Note(s)
representing the Notes will be shown on, and
transfers thereof will be effected through,
records maintained by DTC and its participants.
See "Book-Entry; Delivery and Form."
For additional information regarding the Notes, see "Description of the
Notes." and "Certain U.S. Federal Income Tax Considerations."
17
<PAGE>
NO CASH PROCEEDS TO THE COMPANY
This Exchange Offer is intended to satisfy certain obligations of the Company
and the Subsidiary Guarantors under the Registration Rights Agreement. None of
the Company or any Subsidiary Guarantors will receive any proceeds from the
issuance of the Exchange Notes offered hereby and the Company has agreed to pay
the expenses of the Exchange Offer. In consideration for issuing the Exchange
Notes as contemplated in this Prospectus, the Company will receive, in
exchange, the Private Notes representing an equal aggregate principal amount.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Private Notes, except as otherwise described
herein under "The Exchange Offer--Terms of the Exchange Offer." The Private
Notes surrendered in exchange for Exchange Notes will be retired and canceled
and cannot be reissued. Accordingly, issuance of the Exchange Notes will not
result in any increase in the outstanding indebtedness of the Company.
RISK FACTORS
See "Risk Factors," immediately following this Summary, for a discussion of
certain factors to be considered in evaluating the Company, its business and an
investment in the Exchange Notes.
----------------
The Company's principal executive office is located at 104 East 25th Street,
Tenth Floor, New York, New York 10010 and its telephone number is (212) 353-
8280.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary historical financial data of the
Company for fiscal years 1993 through 1997, for the nine month periods ended
November 30, 1996 and November 30, 1997 and as of November 30, 1997 and certain
unaudited pro forma financial data of the Company for fiscal year 1997, the
nine month period ended November 30, 1997 and as of November 30, 1997. The
summary historical financial data for the fiscal years 1993 through 1997 were
derived from audited financial statements of the Company. The summary
historical financial data as of November 30, 1997 and for the nine months ended
November 30, 1996 and November 30, 1997 were derived from the unaudited
historical financial statements of the Company for such periods, which, in the
opinion of management of the Company, reflect normal and recurring adjustments
necessary to present fairly the financial position and results of operations
for the periods presented. The information in this table should be read in
conjunction with "Selected Historical Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Unaudited Pro
Forma Combined Condensed Financial Data" and the Company's audited financial
statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED NOVEMBER 30,
------------------------------------------------------ -----------------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1996 1997 1997(1) 1996 1997 1997(2)
------- ------- ------- ------- ------- --------- --------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues........... $15,370 $24,380 $33,270 $40,114 $95,901 $148,912 $ 70,062 $ 88,389 $ 102,962
Gross profit........... 6,650 12,294 17,916 20,450 42,151 68,976 31,099 40,448 48,288
Operating income....... 728 3,227 5,625 5,795 11,711 15,508 9,514 7,984 6,088
Income (loss) before
income taxes.......... 653 3,077 5,301 5,671 10,398 (48) 8,691 6,030 (4,847)
Net income (loss)...... $ 353 $ 1,867 $ 3,257 $ 3,866 $ 6,308 $ (30) $ 5,326 $ 3,604 $ (2,981)
OTHER DATA:
EBITDA(3).............. $ 1,354 $ 3,913 $ 6,544 $ 7,010 $13,810 $ 21,852 $ 11,044 $ 10,265 $ 11,427
Capital expenditures... 567 731 756 946 1,286 1,713 1,123 1,503 1,564
Depreciation and
Amortization.......... 627 686 920 1,214 2,099 6,277 1,530 2,281 5,190
Ratio of earnings to
fixed charges(4)...... 3.1x 7.2x 9.0x 7.3x 4.8x -- 5.6x 2.8x --
</TABLE>
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- --------------
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Working capital...................................... $ 38,072 $ 32,874
Total assets......................................... 117,545 179,253
Short-term and long-term debt(5)..................... 45,946 126,163
Stockholders' equity(5).............................. 49,643 29,821
</TABLE>
- --------
(1) Gives pro forma effect to the Transactions and the following acquisitions:
(a) On November 26, 1997, ATC acquired substantially all of the assets of
Bing Yen for a purchase price of approximately $4.3 million.
(b) On November 4, 1997, ATC acquired substantially all of the assets of EWI
for a purchase price of $1.7 million.
(c) On August 20, 1997, ATC acquired certain assets and assumed certain
liabilities of BCM for a purchase price of $12.5 million.
(d) On May 28, 1996, ATC acquired certain assets and assumed certain
liabilities of 3D Information Services, Inc. for a purchase price of
$5.8 million, consisting of cash and notes payable.
(e) On May 24, 1996, ATC acquired certain assets and assumed certain
liabilities of American Testing and Engineering Corp. for an initial
purchase price of $41.6 million comprised of cash, payment obligations
and assumed liabilities. The total final purchase price, including
earned contingent purchase consideration, was $50.7 million.
(2) Gives pro forma effect to the Transactions and the Acquisitions.
(3) EBITDA represents the sum of net income before income taxes, interest
expense net of interest income and nonoperating items and depreciation and
amortization. EBITDA is not a measure of performance or financial condition
under generally accepted accounting principles but is presented to provide
additional information related to debt service capability. EBITDA should
not be considered in isolation or as a substitute for other measures of
financial performance or liquidity service requirements and it is not
necessarily comparable to other similarly titled captions of other
companies due to potential inconsistencies in the method of calculation.
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent net income before income taxes and fixed charges. Fixed
charges consist of (i) interest, whether expensed or capitalized; (ii)
amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized; and (iii) that portion of
rental expense considered to represent interest cost (assumed to be one-
third). There was a deficiency of earnings to fixed charges for the pro
forma nine months ended November 30, 1997 and for pro forma fiscal year
1997 of $4.8 million and $0.05 million, respectively, due to the additional
pro forma interest expense.
(5) As of January 19, 1998, capital stock had increased for the exercise of
certain stock options and long-term debt increased by $250,000 as compared
with amounts on the November 30, 1997 unaudited consolidated balance sheet
included herein.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the
Company and its business before deciding whether or not to tender Private
Notes in exchange for Exchange Notes pursuant to the Exchange Offer. This
Prospectus contains certain forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in such forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere herein.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company has significant indebtedness. At November 30, 1997, the
Company's total liabilities would have been $149.4 million and its
stockholders' equity would have been $29.8 million, in each case on a pro
forma basis after giving effect to the Transactions and Acquisitions. In
addition, subject to the restrictions in the New Credit Facility and the
Supplemented Indenture, the Company may incur additional indebtedness from
time to time to finance acquisitions or capital expenditures or for other
purposes. After giving pro forma effect to the Transactions and the
Acquisitions as if they had occurred at the beginning of the nine month period
ended November 30, 1997 the Company's earnings would have been insufficient to
cover fixed charges by approximately $4.8 million and after giving pro forma
effect to the Transactions and the Acquisitions as if they occurred at the
beginning of fiscal 1997 the Company's earnings would have been insufficient
to cover fixed charges by approximately $0.05 million.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from
operations must be dedicated to debt service and will not be available for
other purposes; (ii) the Company's future ability to obtain additional debt
financing for working capital, capital expenditures or acquisitions may be
limited; and (iii) the Company's level of indebtedness could limit its
flexibility in reacting to changes in the industry and general economic
conditions. Certain of the Company's competitors currently operate on a less
leveraged basis and have greater operating and financing flexibility than the
Company.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance including
its ability to implement its business strategy, which will be affected by the
factors described herein and by prevailing economic conditions and financial,
business, regulatory and other factors, many of which are beyond its control.
The Company currently anticipates that its operating cash flow, together with
borrowings under the New Credit Facility, will be sufficient to meet its
operating expenses and to service its debt requirements as they become due.
However, there can be no assurance that this will be the case and if the
Company is unable to service its indebtedness, it will be forced to adopt an
alternative strategy that may include actions such as reducing or delaying its
strategy of expanding through acquisitions, selling assets, restructuring or
refinancing its indebtedness or seeking additional capital. There can be no
assurance that any of these strategies could be effected on satisfactory
terms, if at all. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Supplemented Indenture and the New Credit Facility restrict, among other
things, the ability of the Company and its subsidiaries to: (i) incur
additional indebtedness; (ii) incur liens; (iii) pay dividends or make certain
other restricted payments; (iv) consummate certain asset sales; (v) enter into
certain transactions with affiliates; (vi) impose restrictions on the ability
of a subsidiary to pay dividends or make certain payments; (vii) merge or
consolidate with any other person; or (viii) sell, assign, transfer, lease,
convey or otherwise dispose of its assets. See "Description of the Notes--
Certain Covenants" and "Description of New Credit Facility." In addition, the
New Credit Facility contains other and more restrictive covenants and
prohibits the Company from prepaying certain of its indebtedness (including
the Notes) and from making any distribution or other payment on its capital
stock. The New Credit Facility also requires the Company to maintain specified
financial ratios and satisfy certain financial tests. The Company's ability to
maintain those financial ratios and satisfy those tests will be affected by
events
20
<PAGE>
beyond its control; there can be no assurance that the Company will be able to
meet such tests. A breach of any of those covenants could result in a default
under the New Credit Facility and/or the Supplemented Indenture. Upon the
occurrence of an event of default under the New Credit Facility, the lenders
could elect to declare all amounts outstanding under the New Credit Facility,
together with accrued interest, to be immediately due and payable.
Substantially all of the assets of the Company and its subsidiaries are
pledged as security under the New Credit Facility. If the Company were unable
to repay those amounts, the lenders could proceed against the collateral
granted to them to secure that indebtedness and any proceeds realized upon the
sale of such collateral would be used first to satisfy all amounts outstanding
under the New Credit Facility. If the indebtedness under the New Credit
Facility were to be accelerated, there can be no assurance that the assets of
the Company would be sufficient to repay in full that indebtedness and the
other indebtedness of the Company, including the Notes. See "Description of
New Credit Facility."
SUBORDINATION
The Notes are unsecured senior subordinated obligations of the Company and,
as such, are subordinated to all existing and future Senior Indebtedness of
the Company, including borrowings under the New Credit Facility. The Notes
will also be effectively subordinated to all secured indebtedness of the
Company to the extent of the assets secured by such indebtedness. As of
November 30, 1997, on a pro forma basis after giving effect to the
Transactions and the Acquisitions, the Company would have had approximately
$26.2 million of Senior Indebtedness.
The Company may not pay principal of, premium, if any, or interest on or
other amounts owing in respect of the Notes, make any deposit pursuant to any
defeasance provisions or repurchase, redeem or otherwise retire the Notes if
Senior Indebtedness is not paid when due or any other default on such Senior
Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, the default
has been cured or waived, any such acceleration has been rescinded or such
Senior Indebtedness has been paid in full. Moreover, under certain
circumstances, if any non-payment default exists with respect to certain
Senior Indebtedness, the Company may not make any payments on the Notes for a
specified time, unless such default is cured or waived, any acceleration of
such indebtedness has been rescinded or such indebtedness has been paid in
full. See "Description of the Notes--Subordination."
FRAUDULENT TRANSFER CONSIDERATIONS
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or void the Notes or
the Guarantees, in favor of other existing or future creditors of the Company
or the Subsidiary Guarantors.
The original incurrence by Acquisition Corp. of indebtedness, such as the
Notes, would be subject to review under relevant federal and state fraudulent
conveyance laws in a bankruptcy case or a lawsuit by or on behalf of unpaid
creditors of the Company or a representative of such creditors, such as a
trustee or the Company as debtor-in-possession. Under such laws, if a court
were to find that, at the time the Notes were issued, either (i) Acquisition
Corp. issued the Notes with the intent of hindering, delaying or defrauding
creditors, or (ii) Acquisition Corp. received less than a reasonably
equivalent value or fair consideration for incurring the indebtedness
represented by the Notes and Acquisition Corp. (a) was insolvent or was
rendered insolvent after giving effect to the incurrence of such indebtedness,
(b) left with an unreasonably small amount of capital or (c) intended to
incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, such court could void the Company's obligations under
the Notes and direct the repayment of any amount paid thereunder to the
Company or a fund for the benefit of the Company's creditors, or take other
action detrimental to the holder of the Notes.
The Company believes that Acquisition Corp. received fair consideration and
reasonably equivalent value for the Notes and that after giving effect to, the
incurrence of the indebtedness and obligations evidenced by the Notes,
Acquisition Corp. was (A) neither insolvent nor rendered insolvent thereby,
(B) had sufficient capital to operate its business effectively and (C)
incurring debts within its ability to pay as the same mature or become due. In
reaching
21
<PAGE>
the foregoing conclusions, the Company has relied upon, among other things,
its analysis of internal cash flow projections and estimated value of its
consolidated assets and liabilities. There can be no assurance, however, that
any such analysis will prove to be correct or that a court passing on such
questions would reach the same conclusions.
The Guarantees may be subject to review under relevant federal and state
fraudulent conveyance and similar statutes in a potential bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of any of the
Subsidiary Guarantors. In such a case, the analysis set forth above would
generally apply, except that the Guarantees could also be subject to the claim
that, since the Guarantees were incurred for the benefit of the Company (and
only indirectly for the benefit of the Subsidiary Guarantors), the obligations
of the Subsidiary Guarantors thereunder were incurred for less than reasonably
equivalent value or fair consideration. A court could void a Subsidiary
Guarantor's obligation under its Guarantee, subordinate the Guarantee to other
indebtedness of a Subsidiary Guarantor or take other action detrimental to the
holders of the Notes.
Additionally, under federal bankruptcy or applicable state insolvency law,
if a bankruptcy or insolvency were initiated by or against the Company within
90 days after any payment by the Company with respect to the Notes, or if the
Company anticipated becoming insolvent at the time of such payment, all or a
portion of the payment could be avoided as a preferential transfer and the
recipient of such payment could be required to return such payment.
LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control, each holder of Notes will have certain rights to
require the Company to repurchase all or a portion of such holder's Notes. See
"Description of the Notes." If a Change of Control were to occur, there can be
no assurance that the Company would have sufficient funds to pay the
repurchase price for all Notes tendered by the holders thereof and such
failure would result in an event of default under the Supplemented Indenture.
In addition, a Change of Control would constitute a default under the New
Credit Facility and is otherwise restricted by the New Credit Facility and may
be prohibited or limited by, or create an event of default under, the terms of
other agreements relating to borrowings which the Company may enter into from
time to time, including other agreements relating to secured indebtedness. If
the Company's obligations under the New Credit Facility were accelerated due
to a default thereunder, the lenders thereunder would have a priority claim on
the proceeds from the sale of the collateral securing the New Credit Facility.
See "Description of the Notes--Subordination."
HOLDING COMPANY STRUCTURE
The Company conducts part of its operations through its subsidiaries. As a
result, the Company relies, in part, upon payment from its subsidiaries for
the funds necessary to meet its obligations, including the payment of interest
on and principal of the Notes. The ability of the subsidiaries to make such
payments will be subject to, among other things, applicable state laws. Claims
of creditors of the Company's subsidiaries will generally have priority as to
the assets of such subsidiaries over the claims of the Company. At November
30, 1997, on a pro forma basis after giving effect to the Transactions and
Acquisitions, holders of the Notes would have been structurally subordinated
to no amount of indebtedness plus other liabilities (including trade payables)
of the Company's subsidiaries, which management believes were approximately
$5.0 million at November 30, 1997 on the same pro forma basis.
GROWTH AND ACQUISITION RISKS
One of the Company's primary strategies is to increase its revenues through
the acquisition of other companies. Although the Company has successfully
completed a number of acquisitions, there can be no assurance that the Company
will be able to successfully integrate any additional companies into ATC's
operations without substantial costs, delays or other problems. In addition,
there can be no assurance that any companies acquired will be profitable at
the time of their acquisition or will achieve sales and profitability that
justify the investment therein. Acquisitions may involve a number of special
risks, including adverse effects on the Company's reported operating results,
diversion of management's attention, dependence on retention and
22
<PAGE>
hiring of key personnel, risks associated with unanticipated problems or legal
liabilities, some or all of which could have a material adverse effect on the
Company's operations and financial performance. In addition, in connection
with an acquisition the Company may become responsible for liabilities that it
was unaware of at the time of the consummation of such acquisition. The
expansion of the Company's operations, whether through acquisitions or
internal growth, may place substantial burdens on the Company's management
resources and financial controls. There is no assurance that the increasing
burdens on the Company's management resources and financial controls will not
have an adverse effect on the Company's operations or that the restrictions
contained in the New Credit Facility or Supplemented Indenture will not have
an adverse effect on the Company's ability to consummate future acquisitions.
See "Business--Business Strategy."
COMPETITION
The environmental services, construction materials engineering and testing
and information management technology consulting industries in which the
Company operates are subject to intense competition. In addition to the
thousands of small environmental consulting and construction testing firms
operating in the United States, ATC competes with several national
environmental and construction materials engineering and consulting firms
including Law Companies Group, Inc., Dames & Moore, Inc. and Professional
Service Industries, Inc. In the information management technology consulting
market, ATC competes with many small and medium-sized information technology
firms as well as large temporary staffing companies, including The Olsten
Corporation, Corestaff, Inc. and Accustaff Incorporated among others and large
systems consulting firms.
Many of ATC's present and future competitors may have greater financial,
technical and personnel resources than ATC. It is not possible to predict the
extent of competition that ATC will encounter in the near future as the
environmental services, construction materials engineering and information
management technology consulting services industries continue to mature and
consolidate. Historically, competition has been based primarily on the
quality, timeliness and costs of services. The ability of ATC to compete
successfully will depend upon its marketing efforts, its ability to accurately
estimate costs, the quality of work it performs, its ability to hire and train
qualified personnel and the availability of insurance. There can be no
assurance that ATC will be able to compete successfully.
CHANGING TRENDS IN THE INDUSTRY
The current growth of the demand for environmental services is being driven
by economic and liability management considerations rather than regulation.
Although the Company believes that the demand for services in certain segments
of the industry will continue and increase over the next several years as
companies become more sensitive to the potential adverse consequences of
environmental issues and the potential impact of environmental liabilities,
there can be no assurance that such growth will continue or increase.
Moreover, there can be no assurance that demand for services in niche areas,
which is predicted to outpace demand in the industry, will grow or that the
Company's products and services will meet the demands of clients in such niche
market segments. Failure of the Company to anticipate future growth trends in
these market segments, or the industry generally, or client needs could have a
material adverse effect on the Company's business.
POTENTIAL LIABILITY
The Company is engaged in a wide range of advisory services. Due to the
nature of the Company's services, ATC is exposed to a significant risk of
professional liability for errors and omissions, environmental damage,
property damage, personal injury and economic loss which may substantially
exceed the fees derived from such services. ATC currently maintains a "claims
made" professional liability insurance policy, including contractor's
pollution liability coverage. The professional liability insurance policy has
a two-year term ending on May 23, 1998, which is subject to biennial renewal
(subject to the issuer's approval), with a per claim aggregate limit of $10.0
million and a deductible of $250,000 per claim, although increased limits have
been obtained on a specific endorsement basis to meet the needs of particular
clients or contracts. The Company's policy covers both errors and omissions. A
"claims made" policy only insures against claims filed during the
23
<PAGE>
period in which the policy is in effect. ATC also carries an occurrence form
general liability insurance in the amount of $1.0 million, with a $10.0
million umbrella. The general liability insurance policy has a one-year term,
ending on May 23, 1998, which is subject to annual renewal.
ATC also may be exposed to status liability under the federal Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA") and similar
state laws that impose joint and several liability for cleanup costs on
persons who conduct operations on or at contaminated facilities. In performing
environmental services at contaminated sites, ATC could theoretically be
considered an operator under CERCLA or similar state laws. While the Company
believes that it does not typically engage in the type of control over
facility operations that would result in status liability under such laws,
there can be no guarantee that such liability would never be asserted or
imposed. Moreover, the types of environmental services performed by ATC are
often subject to extensive federal, state and local regulations. Violations of
these requirements can result in significant penalties, including fines and
other sanctions. See "Business--Legal Proceedings."
Although the Company believes that its current level of insurance coverage
is adequate to protect it from the type and level of liability exposure that
it can reasonably expect to encounter during its ordinary course of business,
the coverage would most likely be inadequate if a significant event occurred
for which the Company was found to be liable. The possible future
unavailability or modification of this insurance or any significant increase
in insurance rates could have a material adverse effect on ATC's operations.
Further, because customers may require that ATC maintain liability insurance,
the possible future unavailability of such insurance could adversely affect
ATC's ability to compete effectively. In the event the Company expands its
services into new markets, no assurance can be given that the Company will be
able to obtain insurance coverage for such activities or, if insurance is
obtained, that the dollar amount of any liabilities incurred in connection
with the performance of such services will not exceed policy limits.
Furthermore, certain claims have been asserted against the Company under
federal, state and local statutes and regulations, contractual indemnification
agreements or otherwise, which are by their nature uninsurable. There can be
no assurance that the Company will not be subject to such claims which, if
determined adversely to the Company, would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Insurance" and "Business--Legal Proceedings."
RELIANCE ON KEY PERSONNEL
The Company's future success depends to a significant extent on the
continued services of Nicholas J. Malino and Christopher P. Vincze, each of
whom has entered into an employment agreement with the Company, which may be
terminated under certain circumstances by either the Company or Mr. Malino or
Mr. Vincze. See "Management--Employment Agreements." The loss of the services
of either Mr. Malino or Mr. Vincze could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the Company's future success depends to a certain extent upon the
continuing contributions of regional and branch managers and other key
personnel. Failure of the Company to attract and retain key personnel could
have a material adverse effect on the Company's business, financial condition
and results of operations.
FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY
The Company's operating results may vary from period to period due to a
variety of factors, including the size and timing of the Company's projects
and the impact of acquisitions. In addition, ATC typically experiences a slow
down in business activities during the winter months and an increase in
activities during summer months. This is due to the seasonal fluctuations in
construction and remediation activities. As a result, operating results may
vary from period to period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality."
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and
24
<PAGE>
other factors that may cause the actual results, performance or achievements
of the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following: (i)
general economic and business conditions, both domestic and foreign; (ii)
industry and market capacity; (iii) demographic changes; (iv) existing
government regulations and changes in, or the failure to comply with,
government regulations; (v) legislative proposals regarding environmental
regulation; (vi) liability and other claims asserted against the Company;
(vii) competition; (viii) the loss of any significant customers; (ix) changes
in operating strategy or development plans; (x) the ability to attract and
retain qualified personnel; (xi) the significant indebtedness of the Company;
(xii) the availability and terms of capital to fund the expansion of the
Company's business; and (xiii) other factors referenced in this Prospectus.
Certain of these factors are discussed in more detail elsewhere in this
Prospectus, including, without limitation, under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." Given these uncertainties, holders of
Private Notes are cautioned not to place undue reliance on such forward-
looking statements. The Company disclaims any obligation to update any such
factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
LACK OF PUBLIC MARKET
The Exchange Notes are new securities for which there is currently no
market. The Company does not intend to apply for listing of the Exchange Notes
on any securities exchange or for inclusion of the Exchange Notes in any
automated quotation system. As a result, there can be no assurance as to the
development or liquidity of any market that may develop for the Exchange
Notes. If a market for the Exchange Notes were to develop, the price of such
Exchange Notes may fluctuate and liquidity may be limited. If a market for the
Exchange Notes does not develop, the purchasers may be unable to resell such
Exchange Notes for an extended period of time, if at all. Historically, the
market for non-investment grade debt has been subject to disruptions that have
caused substantial volatility in the prices of securities similar to the
Exchange Notes. There can be no assurance that, if a market for the Exchange
Notes were to develop, such a market would not be subject to similar
disruptions.
FAILURE TO EXCHANGE PRIVATE NOTES
The Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. Therefore, holders of Private Notes desiring to tender such
Private Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor the Company are under
any duty to give notification of defects or irregularities with respect to
tenders of Private Notes for exchange. Private Notes that are not tendered or
are tendered but not accepted will, following consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer
thereof. In addition, any holder of Private Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer who holds Private Notes acquired for its own account as a
result of market making or other trading activities and who receives Exchange
Notes for its own account in exchange for such Private Notes pursuant to the
Exchange Offer, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. To the extent that Private
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Private Notes could be adversely
affected due to the limited amount, or "float," of the Private Notes that are
expected to remain outstanding following the Exchange Offer. Generally, a
lower "float" of a security could result in less demand to purchase such
security and could, therefore, result in lower prices for such security. For
the same reason, to the extent that a large amount of Private Notes are not
tendered or are tendered and not accepted in the Exchange Offer, the trading
market for the Exchange Notes could be adversely affected. See "Plan of
Distribution" and "The Exchange Offer."
25
<PAGE>
THE COMPANY
ATC is a leading national provider of professional consulting, engineering
and testing services within the environmental and construction materials
industries. Management believes the Company is also a leading provider of
integrated environmental information management technology services. The
Company provides a broad range of services to a diverse client base of over
8,000 customers, with domestic businesses and non-federal government entities
representing over 95.0% of the Company's gross revenues for the twelve months
ended November 30, 1997. No single customer represented more than 1.8% of the
Company's gross revenues during the twelve months ended November 30, 1997. In
addition, the Company's ten largest customers taken together accounted for
less than 13.6% of the Company's gross revenues during the twelve months ended
November 30, 1997. The Company provides its services through a network of 73
branch offices located in 34 states covering every major market of the United
States.
The following paragraphs provide a brief description of the acquisitions
consummated by the Company since 1993 and includes the purchase price paid by
ATC as of November 30, 1997:
Bing Yen & Associates, Inc. On November 26, 1997, the Company acquired all
of the stock of Bing Yen & Associates, Inc. ("Bing Yen"), a provider of
geotechnical and structural forensic services for approximately $4.3 million
plus a maximum aggregate principal amount of $1.5 million in unsecured
contingent achievement promissory notes which will be issued if certain
minimum net revenue levels are achieved, resulting in a maximum purchase price
of $5.8 million. The Bing Yen acquisition gave the Company capabilities in
forensic geotechnical consulting and access to its forensic network. The
acquisition will also allow ATC to consolidate its local office with Bing
Yen's facilities, resulting in overhead cost savings. In connection with the
acquisition of Bing Yen, the Company believes there may be a potential
underfunding liability of up to $60,000 with respect to a defined benefit plan
of Bing Yen (the "Bing Yen Plan"). The former shareholders of Bing Yen have
assumed all cost, expense and liability for correcting any potential
underfunding associated with this plan.
Environmental Warranty, Inc. On November 4, 1997, the Company purchased 100%
of the outstanding preferred stock and 90.9% of the outstanding common stock
of Environmental Warranty, Inc. ("EWI"), a property and casualty insurance
brokerage firm specializing in environmental insurance with property and
casualty licenses, including excess and surplus lines in 43 states and with
license applications pending in an additional five states. The EWI acquisition
allows ATC to offer the sale and limited underwriting of environmental
insurance products. ATC will also be able to take advantage of its
distribution channels for referrals to sell EWI's insurance products. The
purchase price totaled approximately $1.7 million.
BCM Engineers, Inc. On August 20, 1997, the Company acquired certain assets
and assumed certain liabilities of the Engineering Division of Smith
Technology Corporation ("Smith Technology") which operated primarily as BCM
Engineers, Inc. ("BCM"). BCM is a leading environmental engineering and
consulting firm providing services in water and wastewater treatment, natural
resources management, environmental compliance and site investigation,
remedial design and engineering and asbestos and air quality management. BCM
operated offices in nine states throughout the United States. The purchase
price totaled approximately $12.5 million.
Earth Technology, Inc. On August 5, 1996, the Company acquired certain
assets of Earth Technology, Inc. ("Earth Technology") consisting of Earth
Technology's operating assets of its Berkeley, California branch office for a
purchase price of approximately $189,000. Earth Technology is a provider of
environmental, engineering and construction consulting services.
3D Information Services Inc. On May 28, 1996, the Company acquired certain
assets and assumed certain liabilities of 3D Information Services Inc. ("3D"),
a New Jersey based information services company, providing technical
information system consulting services in all phases of information system
design, development, maintenance and management in client server and mainframe
based environments. Consideration paid for the 3D acquisition included cash
and notes payable in the amount of approximately $5.8 million.
26
<PAGE>
American Testing and Engineering Corporation. On May 24, 1996, the Company
acquired certain assets and assumed certain liabilities of American Testing
and Engineering Corporation ("ATEC"), a national environmental consulting firm
with a large network of branch and regional offices providing environmental
consulting and engineering services including site assessments, compliance
audits, environmental remediation consulting, geotechnical materials testing,
industrial hygiene and analytical services. The ATEC acquisition allowed the
Company to expand both its service offerings and geographical base,
particularly in the midwestern and southeastern United States. The initial
purchase price totaled approximately $41.6 million and was comprised of cash,
payment obligations and assumed liabilities. The final purchase price,
including earned contingent consideration, was $50.7 million, approximately
$4.6 million of which is due under a note to the seller. Such note is secured
by a security interest in certain assets of ATC including accounts, accounts
receivable and contract rights, deposit accounts, inventory, equipment,
documents, instruments, goods (including certificates of title), chattel
paper, general intangibles, fixtures and all proceeds of the foregoing
(including tort claims and insurance).
Applied Geosciences Inc. On February 29, 1996, the Company acquired certain
assets and certain liabilities of Applied Geosciences Inc. ("Applied"), a
California based consulting company providing services in environmental and
hazardous waste site assessments, remediation design, air quality management,
asbestos services, litigation support and engineering geology. The purchase
price paid for the acquisition was approximately $0.9 million, with a maximum
contingent payment up to $190,000 of which $22,324 was paid prior to February
28, 1997 in full satisfaction of this contingent obligation.
Hill International. On November 10, 1995, the Company acquired certain
assets and assumed certain liabilities of Hill International, Inc.'s ("Hill")
environmental consulting and laboratory operations (collectively, the "Hill
Assets"). The Hill Assets provided environmental consulting and engineering
services, including asbestos management, industrial hygiene and indoor air
quality consulting, environmental auditing and assessment and environmental
laboratory services. This acquisition significantly expanded ATC's operations
in the New York City area. The purchase price for the acquisition included
cash, a note, assumed liabilities and direct expenses totaling approximately
$5.3 million.
R. E. Blattert and Associates. On January 13, 1995, the Company acquired
substantially all of the assets and assumed certain liabilities of R.E.
Blattert and Associates ("R.E. Blattert"), an environmental consulting firm
having geologic, environmental management and water resource expertise with
offices in Indiana and Iowa. The purchase price paid for the acquisition was
approximately $1.2 million, including $0.2 million of contingent
consideration.
Microbial Environmental Services, Inc. On January 4, 1995, the Company
assumed the service performance obligations under certain contracts of
Microbial Environmental Services, Inc. ("Microbial") and purchased certain
assets of Microbial, which was engaged, principally in Iowa, Nebraska and
Wisconsin, in the business of remediation of contaminated soils and water
utilizing enhanced naturally occurring biological processes, including
services such as assessment of contaminated properties, design of bio-
remediation systems, management of bioremediation projects and monitoring of
compliance with clean-up standards. The consideration paid for the acquisition
was approximately $1.4 million.
Con-Test Inc. On October 1, 1994, the Company acquired substantially all of
the environmental consulting and laboratory assets and certain liabilities of
Con-Test Inc. ("Con-Test"), a Massachusetts-based environmental consulting and
field and laboratory testing company with branch offices in Massachusetts,
Connecticut, Vermont, Rhode Island, New York and Pennsylvania, whose primary
services included industrial hygiene, environmental and industrial health and
safety and lead risk management. In addition, Con-Test maintained an
analytical laboratory and had developed a line of environmental facilities
management software used by several industrial firms and federal government
agencies. The purchase price for the acquisition included cash and stock
consideration and assumed liabilities totaling approximately $7.9 million.
27
<PAGE>
BSE Management, Inc. On May 30, 1993, the Company acquired certain assets of
BSE Management Inc. ("BSE"), a California based environmental consulting
holding company and certain of its subsidiaries including Diagnostic
Environmental Inc., Hygeia Laboratories, Inc. and The Environmental Institute,
Inc. The BSE acquisition doubled the then number of ATC's offices and
significantly increased its presence in the western United States. The
acquisition also added building system evaluation services to ATC's service
offerings. The purchase agreement provided for total consideration equal to
$2.7 million, including approximately $1.4 million in contingent consideration
which has been paid in full.
NO CASH PROCEEDS TO THE COMPANY
This Exchange Offer is intended to satisfy certain obligations of the
Company and the Subsidiary Guarantors under the Registration Rights Agreement.
None of the Company or any of the Subsidiary Guarantors will receive any
proceeds from the issuance of the Exchange Notes offered hereby and the
Company has agreed to pay the expenses of the Exchange Offer. In consideration
for issuing the Exchange Notes as contemplated in this Prospectus, the Company
will receive, in exchange, Private Notes representing an equal aggregate
principal amount. The form and terms of the Exchange Notes are identical in
all material respects to the form and terms of the Private Notes, except as
otherwise described herein under "The Exchange Offer--Terms of the Exchange
Offer." The Private Notes surrendered in the exchange for Exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase in the outstanding debt of the
Company.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at November
30, 1997, and pro forma as adjusted, to reflect the Acquisitions and the
consummation of the Transactions. The following table should be read in
conjunction with the consolidated financial statements and notes thereto of
the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT NOVEMBER 30, 1997
----------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash.................................................... $ 5,840 $ 0
======= ========
Debt:
Existing Credit Facility.............................. $ 7,400 $ --
Term Loan............................................. -- 20,000
Notes................................................. -- 100,000
Revolving Credit Facility(2).......................... -- 1,649
8.18% Senior Secured Notes............................ 32,500 --
Seller Notes(3)....................................... 5,743 4,211
Other debt............................................ 303 303
------- --------
Total debt.......................................... 45,946 126,163
------- --------
Stockholders' equity:
Common Stock, Actual: par value $.01 per share;
20,000,000 shares authorized and 7,930,107 shares
issued and outstanding; Pro Forma As Adjusted: par
value $0.01 per share, 10,000 shares authorized and
1,000 shares issued and outstanding.................. 79 --
Additional paid-in capital............................ 29,595 29,821
Retained earnings..................................... 19,969 --
------- --------
Total stockholders' equity(4)....................... 49,643 29,821
------- --------
Total capitalization................................ $95,589 $155,984
======= ========
</TABLE>
- --------
(1) Assumes purchase of all outstanding shares of Common Stock pursuant to the
Tender Offer and the consummation of the Merger and other Transactions.
(2) Amounts outstanding under the Revolving Credit Facility increased by
approximately $0.8 million as a result of early prepayment of certain
accrued liabilities in connection with the consummation of the
Transactions.
(3) As of November 30, 1997, Seller notes include $0.3 million due to Hill,
which is overdue and payable upon settlement of disputed issues with Hill,
$2.95 million due to Smith Technology of which $1.6 million of offsets
have been reflected in the consolidated balance sheet as of November 30,
1997 and additional offsets through the note due date, March 30, 1998, are
anticipated, $25,000 due to SAS (a company acquired in May 1995) which is
payable in May 1998, $1.5 million due to 3D, $586,000 (net of imputed
interest) to EWI and $1.7 million due in connection with the acquisition
of Bing Yen. On a pro forma basis, total seller notes will be $4.2 million
as the 3D seller note of $1.5 million will be refinanced in the
transaction. Seller notes were issued in connection with the acquisition
of Bing Yen including (i) $0.4 million interest bearing notes with a
three-year amortization schedule, (ii) $0.8 million interest bearing notes
with a three-year amortization schedule and (iii) a $0.6 million short-
term promissory note payable in January 1998. EWI seller notes include a
$0.6 million non-interest bearing note with a three-year amortization
schedule and a $0.2 unconditional payment commitment due in three annual
installments on each November 4 beginning in 1998. On a pro forma basis
assuming the Smith Technology notes are fully offset and excluding the
note due Hill, amortization of seller notes will be $0.8 million in fiscal
1999, $0.6 million in fiscal 2000 and $0.6 million in fiscal 2001.
(4) Book value of pro forma stockholders' equity reflects a predecessor basis
adjustment of $2.7 million. Total equity invested was $32.5 million. See
"Unaudited Pro Forma Combined Condensed Financial Data."
29
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on the Closing Date to the
Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently sold the Private Notes to (i) "qualified institutional buyers"
("QIBs"), as defined in Rule 144A under the Securities Act ("Rule 144A"), in
reliance on Rule 144A and (ii) other investors in offshore transactions in
reliance on Regulation S under the Securities Act. As a condition to the sale
of the Private Notes, the Company, the Subsidiary Guarantors and the Initial
Purchaser entered into the Registration Rights Agreement. Pursuant to the
Registration Rights Agreement, the Company and the Subsidiary Guarantors
agreed that (i) within 60 days after the Issue Date, they would file the
Registration Statement with the Commission with respect to the Exchange Notes
and (ii) cause the Registration Statement to be declared effective under the
Securities Act within 130 days after the Issue Date (the "Effectiveness
Date"). Upon the Registration Statement being declared effective, the Company
and the Subsidiary Guarantors will offer to all holders of the Private Notes
an opportunity to exchange the Private Notes for a like principal amount of
Exchange Notes. The Company and the Subsidiary Guarantors agreed to use
commercially reasonable best efforts (i) to keep the Exchange Offer open for
acceptance for not less than 20 business days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holder and (ii) to consummate the Exchange Offer on or prior to the 45th day
following the date on which the Registration Statement is declared effective.
For each Private Note surrendered for exchange pursuant to the Exchange
Offer, the holder of such Private Note will receive an Exchange Note having a
principal amount equal to that of the surrendered Private Note. Interest on
each Exchange Note will accrue (A) from the later of (i) the last interest
payment date on which interest was paid on the Private Note surrendered in
exchange therefor or (ii) if the Private Note is surrendered for exchange on a
date in a period which includes the record date for an interest payment date
to occur on or after the date of such exchange and as to which interest will
be paid, the date of such interest payment date or (B) if no interest has been
paid on such Private Note, from the Issue Date. The Company and the Subsidiary
Guarantors agreed to issue and exchange Exchange Notes for all Private Notes
validly tendered and not withdrawn before the Expiration Date of the Exchange
Offer. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company and the Subsidiary Guarantors
will accept any and all Private Notes validly tendered and not withdrawn prior
to the Expiration Date.
The Company and the Subsidiary Guarantors will issue Exchange Notes in
exchange for an equal aggregate principal amount of outstanding Private Notes
validly tendered pursuant to the Exchange Offer and not withdrawn prior to the
Expiration Date. Private Notes may be tendered only in integral multiples of
$1,000 principal amount.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the Exchange Notes will be registered
under the Securities Act and, therefore, the Exchange Notes will not bear
legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to any of the registration rights of holders of
Private Notes under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same indebtedness as the Private Notes (which they replace) and
will be issued under, and be entitled to the benefits of, the Supplemented
Indenture, which also authorized the issuance of the Private Notes, such that
both series of Notes will be treated as a single class of debt securities
under the Supplemented Indenture.
As of the date of this Prospectus, $100.0 million in aggregate principal
amount of the Private Notes is outstanding. Only a registered holder of the
Private Notes (or such holder's legal representative or attorney-in-
30
<PAGE>
fact), as reflected on the records of the Trustee under the Supplemented
Indenture may participate in the Exchange Offer. Solely for reasons of
administration, the close of business on , 1998 has been fixed as the
record date for the Exchange Offer for purposes of determining the persons to
whom this Prospectus and the Letter of Transmittal will be mailed initially.
There will be no fixed record date for determining registered holders of the
Private Notes entitled to participate in the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters' rights
under the DGCL or the Supplemented Indenture in connection with the Exchange
Offer. The Company and the Subsidiary Guarantors intend to conduct the
Exchange Offer in accordance with the provisions of the Registration Rights
Agreement and the applicable requirements of the Securities Act and the rules
and regulations of the Commission thereunder.
The Company and the Subsidiary Guarantors shall be deemed to have accepted
validly tendered Private Notes when, and if, the Company and the Subsidiary
Guarantors have given oral or written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Private
Notes for the purposes of receiving the Exchange Notes from the Company and
the Subsidiary Guarantors.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998.
INTEREST ON THE EXCHANGE NOTES
Interest on each Exchange Note will accrue (A) from the later of (i) the
last interest payment date on which interest was paid on the Private Note
surrendered in exchange therefor or (ii) if the Private Note is surrendered
for exchange on a date in a period which includes the record date for an
interest payment date to occur on or after the date of such exchange and as to
which interest will be paid, the date of such interest payment date or (B) if
no interest has been paid on such Private Note, from the Issue Date. The
Company and the Subsidiary Guarantors agreed to issue and exchange Exchange
Notes for all Private Notes validly tendered and not withdrawn before the
Expiration Date of the Exchange Offer. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon interpretations by the staff
of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder who exchanges Private Notes for
Exchange Notes in the ordinary course of business, who is not participating,
does not intend to participate, and has no arrangement with any person to
participate in a distribution of the Exchange Notes, and who is not an
"affiliate" of the Company within the meaning of Rule 405 of the Securities
Act, will be allowed to resell Exchange Notes to the public without further
registration under the Securities Act and without delivering to the purchasers
of the Exchange Notes a prospectus that satisfies the requirements of Section
10 of the Securities Act. However, if any holder acquires Exchange Notes in
the Exchange Offer for the purpose of distributing or participating in the
distribution of the Exchange Notes, such holder cannot rely on the position of
the staff of the Commission enumerated in such no-action letters issued to
third parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Private Notes acquired by such broker-dealer as a result of market-making or
other trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of Exchange
31
<PAGE>
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of any Exchange Notes received in
exchange for Private Notes acquired by such broker-dealer as a result of
market-making or other trading activities. Pursuant to the Registration Rights
Agreement, the Company and the Subsidiary Guarantors have agreed to make this
Prospectus, as it may be amended or supplemented from time to time, available
to any such broker-dealer that requests copies of such Prospectus for use in
connection with any such resale for a period not to exceed 45 days after the
Registration Statement has been declared effective by the Commission. See
"Plan of Distribution."
PROCEDURES FOR TENDERING
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile
thereof, have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile to the Exchange Agent at the address set forth below under "Exchange
Agent" for receipt prior to the Expiration Date. In addition, either (i)
certificates for such Private Notes must be received by the Exchange Agent
along with the Letter of Transmittal, (ii) a timely confirmation of a book-
entry transfer (a "Book-Entry Confirmation") of such Private 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 (iii) the holder must comply
with the guaranteed delivery procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement among such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY
PRIVATE NOTES TO THE COMPANY OR THE SUBSIDIARY GUARANTORS. HOLDERS MAY REQUEST
THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wish(es) to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name
or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined herein) unless the Private Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box titled "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor institution" (within the meaning of Rule
32
<PAGE>
17Ad-15 under the Exchange Act) that is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder exactly as such registered holder's name appears on such
Private Notes.
If the Letter of Transmittal or any Private Notes are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's Automated Tender Offer
Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Private Notes not properly tendered or any Private Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Private Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Private Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Private Notes, neither
the Company, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Private Notes will not be
deemed to have been made until such defects or irregularities have been cured
or waived.
While neither the Company nor any of the Subsidiary Guarantors have a
present plan to acquire any Private Notes that are not tendered in the
Exchange Offer or to file a registration statement to permit resales of any
Private Notes that are not tendered pursuant to the Exchange Offer, the
Company and the Subsidiary Guarantors reserve the right in their sole
discretion to purchase or make offers for any Private Notes that remain
outstanding subsequent to the Expiration Date and, to the extent permitted by
applicable law, purchase Private Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or
offers could differ from the terms of the Exchange Offer.
By tendering, each holder of Private Notes will represent to the Company and
the Subsidiary Guarantors that, among other things, (i) the Exchange Notes to
be acquired by such holder of Private Notes in connection with the Exchange
Offer are being acquired by such holder in the ordinary course of business of
such holder, (ii) such holder has no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes, (iii) such
holder acknowledges and agrees that any person who is participating in the
Exchange Offer for the purposes of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction of the Exchange Notes
acquired by such person and cannot rely on the position of the staff of the
Commission set forth in certain no-action letters, (iv) such holder
understands that a secondary resale transaction described in clause (iii)
above and any resales of Exchange Notes obtained by such holder in exchange
for Private Notes acquired by such holder directly from the Company should be
covered by an effective registration statement containing the selling security
holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) such holder is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company or any of the
Subsidiary Guarantors. If the holder is a broker-dealer that will receive
Exchange Notes for such holder's own account in exchange for Private Notes
that were acquired as a result of market-making activities or other trading
activities, such holder will be required to acknowledge in the Letter of
Transmittal that such holder will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so
33
<PAGE>
acknowledging and by delivering a prospectus, such holder will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn, such unaccepted, withdrawn or non-exchanged Private Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Private Notes tendered by book-entry transfer into the Exchange Agent's
account at the Depositary pursuant to the book-entry transfer procedures
described below, such Private Notes will be credited to an account maintained
with the Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes with the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in
accordance with the Depositary's procedures for transfer. However, although
delivery of Private Notes may be effected through book-entry transfer at the
Depositary, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth
below under "--Exchange Agent" on or prior to the Expiration Date or pursuant
to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company and
the Subsidiary Guarantors (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder and the
certificate number(s) of such Private Notes, stating that the tender is
being made thereby and guaranteeing that, within three business days after
the Expiration Date, the Letter of Transmittal (or a facsimile thereof),
together with the certificate(s) representing the Private Notes in proper
form for transfer or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof)
as well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three business days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date. To withdraw a tender of
Private Notes in the Exchange Offer, a written notice of withdrawal by
telegram, telex, facsimile transmission or letter must be received by the
Exchange Agent at its address set forth
34
<PAGE>
herein prior to the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Private Notes to be
withdrawn, (ii) identify the Private Notes to be withdrawn (including the
certificate number or numbers) and the principal amount of the Private Notes
to be withdrawn and (iii) include a statement that such holder is withdrawing
its election to have such Private Notes exchanged and must be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal by which such Private Notes were tendered (including any required
signature guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Any Private Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer, and no Exchange Notes
will be issued with respect thereto unless the Private Notes so withdrawn are
validly retendered. Properly withdrawn Private Notes may be retendered by
following one of the procedures described above under "The Exchange Offer--
Procedures for Tendering" at any time prior to the Expiration Date.
TERMINATION OF CERTAIN RIGHTS
Other than the Company's obligations with respect to Private Exchange Notes
(as defined in the Registration Rights Agreement) and Exchange Notes that may
not be resold without restriction under federal and state securities laws
(other than solely as a result of such holders status as an affiliate of the
Company as defined in the Securities Act), all registration rights under the
Registration Rights Agreement accorded to holders of the Private Notes (and
all rights to receive additional interest on the Notes to the extent and in
the circumstances specified therein) will terminate upon consummation of the
Exchange Offer except with respect to the Company's duty to keep the
Registration Statement effective until the closing of the Exchange Offer, and,
for a period of 45 days after the Registration Statement has been declared
effective by the Commission, to provide copies of the latest version of the
Prospectus to any broker-dealer that requests copies of such Prospectus in the
Letter of Transmittal for use in connection with any resale by such broker-
dealer of Exchange Notes received for its own account pursuant to the Exchange
Offer in exchange for Private Notes acquired for its own account as a result
of market-making or other trading activities.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand/Overnight Delivery:
State Street Bank and Trust Company (For Eligible Institutions Only) State Street Bank and Trust Company
Goodwin Square (860) 244-1832 Goodwin Square
225 Asylum Street, 23rd Floor 225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103 Confirm by Telephone: Hartford, Connecticut 06103
Attention: Corporate Trust Administration (860) 244-1897 Attention: Corporate Trust Administration
</TABLE>
State Street Bank and Trust Company also serves as Trustee under the
Supplemented Indenture.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
officers and regular employees of the Company and their affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable, out-of-pocket expenses in connection
therewith.
35
<PAGE>
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax
is imposed for any reason other than the exchange of the Private Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their
own decisions on what action to take.
Private Notes that are not exchanged for the Exchange Notes pursuant to the
Exchange Offer will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) of the Securities Act. Accordingly, such Private Notes may not
be offered, sold, pledged or otherwise transferred except (i) to a person whom
the seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act purchasing for its own account
or for the account of a qualified institutional buyer in a transaction meeting
the requirements of Rule 144A, (ii) in an offshore transaction complying with
Rule 903 or Rule 904 of Regulation S under the Securities Act, (iii) pursuant
to an exemption from registration under the Securities Act provided by Rule
144 thereunder (if available), (iv) pursuant to an effective registration
statement under the Securities Act or (v) to institutional accredited
investors in a transaction exempt from the registration requirements of the
Securities Act, and, in each case, in accordance with all other applicable
securities laws and the transfer restrictions set forth in the Supplemented
Indenture.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the remaining term of the Exchange Notes.
36
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following unaudited pro forma combined condensed balance sheet of ATC
has been adjusted to give effect to the Merger, the Offering, the application
of proceeds therefrom and the Acquisitions as if such transactions occurred as
of November 30, 1997. The unaudited pro forma combined statements of
operations of the Company for the 1997 fiscal year and the nine month interim
period ended November 30, 1997 give effect to the Transactions as if such
Transactions occurred on March 1, 1996. For information regarding the Merger
and the Offering, see "Offering Summary--The Transactions."
The accompanying unaudited pro forma combined condensed financial data has
been prepared under guidelines established by Article 11 of Regulation S-X
under the Securities Act. Under those guidelines, there are limitations on the
adjustments that can be made in the presentation of pro forma financial
information. Accordingly, no pro forma adjustments have been applied to
reflect (i) elimination of corporate overhead charges of acquired companies,
(ii) reduction of certain administrative staff from acquired companies not
expected to be replaced and (iii) other operating efficiencies or cost savings
(other than those that are directly attributable to the Acquisitions and
contractually supportable). The pro forma adjustments made are based upon
currently available information as well as upon certain assumptions that
management believes are reasonable. Such pro forma adjustments for the
statement of operations shall include amortization of goodwill, depreciation
and other adjustments based on the allocated purchase price of net assets
acquired. Each of the Acquisitions was accounted for as a purchase with the
acquired assets and assumed liabilities recorded at their estimated fair
market values. Management believes that actual fair market value adjustments
will not differ materially from the preliminary allocation of the purchase
price contained in the pro forma adjustments reflected in the pro forma
financial information.
The unaudited pro forma combined financial statements are not necessarily
indicative of either future results of operations or results that might have
been achieved had the foregoing transactions been consummated as of the
indicated dates. The unaudited pro forma combined condensed financial
statements should be read in conjunction with the notes thereto, the
historical consolidated financial statements of the Company, together with the
related notes thereto, "The Company--Acquisitions" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," all
of which are presented elsewhere in this Prospectus.
37
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ATC PRO FORMA
ACTUAL TRANSACTION PRO FORMA
NOVEMBER 30, 1997 ADJUSTMENTS(C) NOVEMBER 30, 1997
----------------- -------------- -----------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents...... $ 5,839,819 $ (5,839,819) $ --
Trade accounts receivable
net...................... 42,507,431 -- 42,507,431
Cost in excess of billings
on uncompleted contracts. 9,291,883 -- 9,291,883
Prepaid expenses and other
assets................... 2,308,060 -- 2,308,060
Deferred income taxes..... 790,400 -- 790,400
------------ ------------ ------------
Total current assets..... 60,737,593 (5,839,819) 54,897,774
PROPERTY AND EQUIPMENT,
Net....................... 5,633,719 -- 5,633,719
GOODWILL, net of
accumulated amortization.. 48,340,578 59,406,795 107,747,373
COVENANTS NOT TO COMPETE,
net of accumulated
amortization.............. 622,750 4,112,580 4,735,330
OTHER ASSETS............... 2,210,275 4,100,000 6,238,797
600,000
(671,478)
------------ ------------ ------------
$117,544,915 $ 61,708,078 $179,252,993
============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt........... $ 2,449,748 $ -- $ 2,449,748
Current maturities of
long-term debt........... 1,343,007 (848,633) 494,374
Accounts payable.......... 7,355,315 -- 7,355,315
Income taxes payable...... 887,673 (659,288) 228,385
Accrued compensation...... 5,832,039 -- 5,832,039
Accrued payment
obligations--ATEC
acquisition.............. 1,748,500 -- 1,748,500
Other accrued expenses.... 3,049,780 (1,399,228) 3,915,301
2,264,749
------------ ------------ ------------
Total current
liabilities............. 22,666,062 (642,400) 22,023,662
------------ ------------ ------------
LONG-TERM DEBT, less
current maturities........ 42,153,196 120,000,000 123,218,976
(40,583,625)
1,649,405
OTHER LIABILITIES.......... 2,364,618 1,106,860 3,471,478
DEFERRED INCOME TAXES...... 717,900 -- 717,900
------------ ------------ ------------
Total liabilities........ 67,901,776 81,530,240 149,432,016
------------ ------------ ------------
STOCKHOLDERS' EQUITY:
Common stock at par value. 79,301 (79,301) --
Additional paid-in
capital.................. 29,595,099 225,878 29,820,977
Retained earnings
(deficit)................ 19,968,739 (19,968,739)
------------ ------------ ------------
Total stockholders'
equity.................. 49,643,139 (19,822,162) 29,820,977
------------ ------------ ------------
$117,544,915 $ 61,708,078 $179,252,993
============ ============ ============
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
38
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997
<TABLE>
<CAPTION>
ACQUIRED BUSINESSES(A)
----------------------------------------
PRO FORMA
ATC BCM RESULTS
YEAR ENDED ATEC YEAR ENDED PRO FORMA PRO FORMA YEAR ENDED
FEBRUARY 28, MARCH 1, 1996- FEBRUARY 28, 3D, EWI & ACQUISITION TRANSACTION FEBRUARY 28,
1997 MAY 24, 1996 1997 BING YEN(B) ADJUSTMENTS ADJUSTMENTS 1997
------------ -------------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES................ $113,855,364 $20,603,767 $ 45,661,968 $7,450,658 $(5,127,368)(d) $ -- $182,444,389
Reimbursable Costs..... 17,953,895 5,572,368 12,823,947 627,696 (2,725,860)(d) -- 34,252,046
------------ ----------- ------------ ---------- ----------- ----------- ------------
NET REVENUES............ 95,901,469 15,031,399 32,838,021 6,822,962 (2,401,508) -- 148,192,343
COST OF NET REVENUES.... 53,750,707 7,248,931 15,877,382 3,885,498 (1,546,199)(e) -- 79,216,319
------------ ----------- ------------ ---------- ----------- ----------- ------------
Gross profit........... 42,150,762 7,782,468 16,960,639 2,937,464 (855,309) -- 68,976,024
OPERATING EXPENSES:
Selling................ 3,118,926 606,026 79,604 211,587 (107,359)(d) -- 3,908,784
General and
administrative........ 26,299,172 7,352,001 14,846,418 1,793,777 (4,357,316)(f) 2,104,251 48,038,303
Provision for bad
debts................. 1,021,631 86,301 328,292 91,024 (6,012) -- 1,521,236
Impairment of goodwill
and intangibles....... -- -- 18,324,000 -- (18,324,000)(l) -- --
------------ ----------- ------------ ---------- ----------- ----------- ------------
30,439,729 8,044,328 33,578,314 2,096,388 (22,794,687) 2,104,251 53,468,323
------------ ----------- ------------ ---------- ----------- ----------- ------------
OPERATING INCOME (LOSS). 11,711,033 (261,860) (16,617,675) 841,076 21,939,378 (2,104,251) 15,507,701
NONOPERATING EXPENSE
(INCOME):
Interest expense....... 1,569,043 355,426 1,778,333 -- (1,156,230)(g) 12,794,152 15,340,724
Interest income........ (230,610) -- -- (29,768) -- -- (260,378)
Other, net............. (25,134) (22,024) 800,000 1,523 (278,769)(h) -- 475,596
------------ ----------- ------------ ---------- ----------- ----------- ------------
1,313,299 333,402 2,578,333 (28,245) (1,434,999) 12,794,152 15,555,942
------------ ----------- ------------ ---------- ----------- ----------- ------------
INCOME (LOSS) BEFORE
INCOME TAXES........... 10,397,734 (595,262) (19,196,008) 869,321 23,374,377 (14,898,403) (48,241)
INCOME TAX EXPENSE
(BENEFIT).............. 4,090,000 -- -- 16,525 1,759,587(i) (5,884,869) (18,757)
------------ ----------- ------------ ---------- ----------- ----------- ------------
INCOME (LOSS) BEFORE
MINORITY INTEREST...... 6,307,734 (595,262) (19,196,008) 852,796 22,005,540 (9,013,534) (29,484)
MINORITY INTEREST....... -- 449 -- -- -- -- 449
------------ ----------- ------------ ---------- ----------- ----------- ------------
NET INCOME.............. $ 6,307,734 $ (595,711) $(19,196,008) $ 852,796 $21,614,790 $(9,013,534) $ (29,933)
============ =========== ============ ========== =========== =========== ============
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
39
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ACQUIRED BUSINESSES(A)
-------------------------
NINE MONTHS PRO FORMA
ATC SIX MONTHS ENDED RESULTS
NINE MONTHS ENDED NOVEMBER 30, NINE MONTHS
ENDED AUGUST 20, 1997(A) PRO FORMA PRO FORMA ENDED
NOVEMBER 30, 1997(A) EWI & ACQUISITION TRANSACTION NOVEMBER 30,
1997 BCM BING YEN(B) ADJUSTMENTS ADJUSTMENT 1997
------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................ $104,263,345 $15,771,885 $3,420,366 $ -- $ -- $123,455,596
Reimbursable costs..... 15,874,338 4,352,935 265,998 -- -- 20,493,271
------------ ----------- ---------- ---------- ------------ ------------
NET REVENUES............ 88,389,007 11,418,950 3,154,368 -- -- 102,962,325
COST OF NET REVENUES.... 47,940,544 5,443,804 1,350,822 (60,517)(e) -- 54,674,653
------------ ----------- ---------- ---------- ------------ ------------
Gross profit........... 40,448,463 5,975,146 1,803,546 (60,517) -- 48,287,672
OPERATING EXPENSES:
Selling................ 3,226,393 17,713 169,623 -- -- 3,413,729
General and
administrative........ 28,077,190 6,879,052 1,019,002 (324,467)(f) 1,565,475 (j) 37,216,252
Provision for bad
debts................. 1,160,529 409,273 -- -- -- 1,569,802
------------ ----------- ---------- ---------- ------------ ------------
32,464,112 7,306,038 1,188,625 (324,467) 1,565,475 42,199,783
------------ ----------- ---------- ---------- ------------ ------------
OPERATING INCOME (LOSS). 7,984,351 (1,330,892) 614,921 384,984 (1,565,475) 6,087,889
NONOPERATING EXPENSE
(INCOME):
Interest expense....... 2,163,548 1,067,000 -- (768,210)(g) 8,694,032 (k) 11,156,371
Interest income........ (164,864) -- (8,086) -- -- (172,950)
Other, net............. (44,398) -- (4,185) -- -- (48,583)
------------ ----------- ---------- ---------- ------------ ------------
1,954,286 1,067,000 (12,271) (768,210) 8,694,032 10,934,838
------------ ----------- ---------- ---------- ------------ ------------
INCOME (LOSS) BEFORE
INCOMETAXES............ 6,030,065 (2,397,892) 627,192 1,153,194 (10,259,507) (4,846,949)
INCOME TAX EXPENSE...... 2,426,000 -- 13,240 (252,310)(i) (4,052,505)(i) (1,865,575)
------------ ----------- ---------- ---------- ------------ ------------
NET INCOME.............. $ 3,604,065 $(2,397,892) $ 613,952 $1,405,504 $ (6,207,002) $ (2,981,374)
============ =========== ========== ========== ============ ============
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
40
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(a) The following summarizes the companies acquired since March 1, 1996 and
the related acquisition dates that are reflected in the pro forma
financial statements:
<TABLE>
<S> <C>
American Testing and Engineering Corp. ("ATEC").......... May 24, 1996
3D Information Services, Inc. ("3D")..................... May 28, 1996
BCM Engineers, Inc. ("BCM").............................. August 20, 1997
Environmental Warranty, Inc. ("EWI")..................... November 4, 1997
Bing Yen & Associates, Inc. ("Bing Yen")................. November 26, 1997
</TABLE>
The unaudited pro forma combined balance sheet sets forth the combination
of the financial positions of ATC and Acquisition Corp. as if the Merger,
the Tender Offer and the Offering had occurred on November 30, 1997. The
unaudited pro forma combined statement of operations for the nine months
ended November 30, 1997 reflects the merger of ATC and Acquisition Corp.
and the acquisition of BCM, EWI and Bing Yen as if each had occurred on
March 1, 1997. The unaudited pro forma combined statement of operations for
the year ended February 28, 1997 reflects the merger of ATC and Acquisition
Corp. and the acquisitions of the companies listed above as if each had
occurred at March 1, 1996.
For the unaudited pro forma combined statements of operations, the
financial statements of the acquired businesses were adjusted to conform
with ATC's fiscal year end, except for Bing Yen for which December 31 was
used for the year ended February 28, 1997.
(b) The acquisitions of EWI and Bing Yen were accounted for as purchases,
applying the provisions of Accounting Principles Board Opinion No. 16. The
acquired assets and assumed liabilities were recorded at their estimated
fair market values with the cost in excess of the net assets acquired
recorded as goodwill. The pro forma acquisition adjustments reflect such
purchase accounting adjustments.
(c) Reflects the adjustments for the Merger, Tender Offer, the Offering and
debt payment (collectively, the "Transactions").
1. The pro forma balance sheet reflects the following approximate sources
and uses of funds for the Transactions:
<TABLE>
<S> <C>
Source of funds:
Notes..................................................... $100,000,000
Term loan................................................. 20,000,000
Equity Investment from Holdings........................... 32,500,000
Revolving Credit Facility................................. 1,649,405
------------
Total sources......................................... 154,149,405
------------
Use of funds:
Purchase common stock..................................... 104,057,738
Repay existing debt:......................................
Principal............................................... 41,432,258
Accrued interest........................................ 1,399,228
Prepayment penalty...................................... 3,900,000
Shareholder agreement payment............................. 3,100,000
Financing costs........................................... 4,100,000
Other expenses............................................ 2,000,000
------------
Total uses............................................ 159,989,224
------------
Existing Cash to be Used.............................. $ (5,839,819)
============
</TABLE>
41
<PAGE>
2. The pro forma balance sheet reflects the following purchase accounting
adjustments for the Transactions:
<TABLE>
<S> <C>
Purchase price:
Purchase of common stock and stock options................. $104,057,738
Required payments under shareholder agreement.............. 6,420,580
Direct expenses............................................ 5,900,000
------------
Total.................................................. 116,378,318
------------
Allocation of purchase price:
Net assets acquired........................................ 49,643,139
Fair value of adjustments:
Other assets............................................. (671,478)
Non-compete agreement.................................... 4,112,580
Consulting agreement..................................... 600,000
Other liabilities........................................ (51,029)
Tax benefit of shareholder agreement payment............... 659,288
------------
54,292,500
------------
Excess purchase price........................................ 62,085,818
Predecessor basis adjustment................................. (2,679,023)
------------
Goodwill..................................................... $ 59,406,795
============
</TABLE>
3. The pro forma balance sheet reflects the remaining liability under
certain shareholder agreements as other accrued expenses and other long-
term liabilities.
(d) Reflects adjustments to eliminate a subsidiary of ATEC not purchased and
branches discontinued by ATEC (revenues of $4,979,407, reimbursable costs
of $2,725,860 and selling expenses of $100,405) and results of operations
of 3D subsequent to May 28, 1996.
(e) Reflects adjustments to eliminate a subsidiary of ATEC not purchased and
branches discontinued by ATEC ($1,052,477 for the 12 months), the results
of operations of 3D subsequent to May 20, 1996, and a reduction of
depreciation expense ($383,066 and $85,695 for the 12 and nine months,
respectively) related to the acquisition of BCM.
(f) Reflects adjustments to eliminate a subsidiary of ATEC not purchased and
branches discontinued by ATEC ($1,070,827 for the 12 months), the
operations of 3D subsequent to May 28, 1996 ($11,835) and the following
purchase accounting adjustments for the 12 and nine months, respectively:
(i) goodwill amortized over 30 years ($363,618 and $112,171); (ii) non-
compete agreements amortized over two to ten years ($119,190 and $42,222);
(iii) net property depreciation decrease ($870,055 and $70,019); (iv)
elimination of expenses for facility, employee and legal obligations not
assumed by ATC ($2,770,837 and $832,327); (v) expense increase for revised
employment agreements ($389,400 and $479,550) which does not include
possible future bonuses ranging from zero to $500,000 per year (such
amount to be determined by the achievement of future EBITDA targets, which
targets are not determinable on a pro forma basis); (vi) elimination of
historical corporate goodwill amortization ($586,161 and $56,064); and
(vii) other ($80,191 and $0).
(g) Reflects an adjustment to eliminate a subsidiary of ATEC not purchased and
branches discontinued by ATEC ($90,030 for the 12 months) and for interest
expense on debt required to finance the Acquisitions ($967,711 and
$298,790 for the 12 and nine months, respectively) less interest expense
on debt not assumed ($2,033,911 and $1,077,000 for the 12 and nine months,
respectively).
(h) Reflects adjustment to remove charges by BCM's former parent for
litigation costs and legal issues not assumed by ATC.
(i) Represents the income tax impact on purchase accounting adjustments and
other pro forma adjustments.
42
<PAGE>
(j) Reflects the following purchase accounting adjustments for the 12 and nine
month period, respectively: (i) goodwill amortized over 30 years
($1,980,227 and $1,485,170); (ii) non-compete and consulting agreements
amortized over three to four years ($1,410,503 and $1,057,877); and (iii)
expense reduction for revised employment agreements ($1,286,479 and
$977,572).
(k) Increased interest expense related to the issuance of the Notes at an
interest rate of 12.0%, the Term Loan at an assumed interest rate of
7.88%, the Revolving Credit Agreement at an assumed interest rate of 7.88%
and the amortization of other financing costs.
(l) Reflects an adjustment to eliminate the write-off of goodwill by BCM
during the 1997 fiscal year.
43
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth historical financial data of the Company as
of and for each of the five fiscal years in the period ended February 28, 1997
and as of and for the nine month periods ended November 30, 1996 and November
30, 1997. The selected historical financial data as of the end of and for the
fiscal years 1993 through 1997 were derived from audited financial statements
of the Company. The selected historical financial data as of the end of and
for the nine months ended November 30, 1996 and November 30, 1997 were derived
from the unaudited historical financial statements of the Company for such
periods, which, in the opinion of management of the Company, reflect normal
and recurring adjustments necessary to present fairly the financial position
and results of operations for the periods presented. The information in this
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Unaudited Pro Forma
Combined Condensed Financial Data" and the Company's audited financial
statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHSENDED
FISCAL YEAR ENDED FEBRUARY 28(29), NOVEMBER 30,
-------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................ $16,539 $26,664 $36,272 $44,965 $113,855 $83,417 $104,263
Reimbursable costs.... 1,169 2,284 3,002 4,851 17,954 13,355 15,874
------- ------- ------- ------- -------- ------- --------
Net revenues............ 15,370 24,380 33,270 40,114 95,901 70,062 88,389
Cost of net revenues.... 8,720 12,085 15,354 19,664 53,751 38,963 47,941
------- ------- ------- ------- -------- ------- --------
Gross profit............ 6,650 12,294 17,916 20,450 42,151 31,100 40,448
Operating expenses:
Selling............... 686 785 1,106 1,513 3,119 2,181 3,226
General and
administrative....... 5,151 8,140 10,997 12,851 26,299 18,780 28,077
Provision for bad
debts................ 85 143 189 290 1,022 625 1,161
------- ------- ------- ------- -------- ------- --------
5,922 9,068 12,291 14,654 30,440 21,585 32,464
------- ------- ------- ------- -------- ------- --------
Operating income........ 728 3,227 5,625 5,795 11,711 9,514 7,984
Nonoperating expense
(income):
Interest expense...... 115 185 286 377 1,569 1,080 2,164
Interest income....... (50) (45) (34) (272) (231) (221) (165)
Other................. 9 9 73 20 (25) (36) (44)
------- ------- ------- ------- -------- ------- --------
Income before income
taxes.................. 653 3,077 5,301 5,671 10,398 8,691 6,030
Income tax expense...... 300 1,210 2,044 1,805 4,090 3,365 2,426
------- ------- ------- ------- -------- ------- --------
Net income.............. $ 353 $ 1,867 $ 3,257 $ 3,866 $ 6,308 $ 5,326 $ 3,604
======= ======= ======= ======= ======== ======= ========
OTHER FINANCIAL AND OPERATIONAL
DATA:
EBITDA................ $ 1,354 $ 3,913 $ 6,544 $ 7,010 $ 13,810 $11,044 $ 10,265
Depreciation and
Amortization......... 627 686 920 1,214 2,099 1,530 2,280
Capital expenditures.. 567 731 756 946 1,286 1,123 1,503
Ratio of earnings to
fixed charges........ 3.1x 7.2x 9.0x 7.3x 4.8x 5.6x 2.8x
SELECTED BALANCE SHEET
DATA:
Working capital....... $ 3,343 $ 6,049 $ 8,114 $24,977 $ 27,702 $19,614 $ 38,072
Total assets.......... 9,335 14,157 25,009 46,685 86,294 88,528 117,545
Short-term and long-
term debt............ 1,637 2,841 4,822 1,839 24,410 23,877 45,946
Stockholders' equity.. 5,813 7,659 13,813 39,192 45,439 44,480 49,643
</TABLE>
- -------
Note: Numbers may not add due to rounding.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Historical Financial Data" and the audited Consolidated Financial
Statements of the Company and the notes thereto appearing elsewhere in this
Prospectus.
OVERVIEW
General. ATC is a leading national provider of professional consulting,
engineering and testing services within the environmental and construction
materials industries. Management believes the Company is also a leading
provider of integrated environmental information management technology
services. The Company provides a broad range of services to a diverse client
base of over 8,000 customers, with domestic businesses and non-federal
government entities representing over 95.0% of the Company's gross revenues
for the twelve months ended November 30, 1997. No single customer represented
more than 1.8% of the Company's gross revenues during the twelve months ended
November 30, 1997. In addition, the Company's ten largest customers taken
together accounted for less than 13.6% of the Company's gross revenues during
the twelve months ended November 30, 1997. The Company provides its services
through a network of 73 branch offices located in 34 states covering every
major market of the United States.
In 1993, the Company initiated a strategy of controlled growth through
acquisitions to build a national infrastructure and to broaden its range of
technical services. The Company has created a national infrastructure through
the completion of 12 acquisitions since May 1993. ATC has thereby also
expanded its service mix by adding construction materials testing and
engineering, lead risk management, indoor air quality management, water and
wastewater management and information management technology services. As a
result of this growth and diversification strategy, net revenues and EBITDA
increased to fiscal 1997 levels of $95.9 million and $13.8 million,
respectively, from $15.4 million and $1.4 million, respectively, in fiscal
1993.
The Company's rapid growth is primarily attributable to the acquisition of
assets of ATEC in May 1996 and the acquisition of assets of BCM in August
1997. Management believes that at the time of the respective acquisitions,
each of the acquired companies was an underdeveloped operating asset with
strong client relationships in their respective markets. ATEC, with its large
network of regional and branch offices, positioned the Company as a national
provider of professional environmental consulting, testing and engineering
services. As a result of the BCM acquisition, ATC has become a high-quality
provider of consulting, engineering and design services in water supply and
treatment, wastewater systems, air quality management, traditional
environmental site investigations, site assessments and storage tank
management services. Subsequent to each acquisition that it has made, the
Company has implemented cost reduction measures, including integration of
offices, introduction of flexible staffing programs and reduction of
duplicative corporate overhead costs.
The Company has experienced substantial increases in net revenues and net
income over the past three fiscal years. ATC's net revenues were $33.3
million, $40.1 million, and $95.9 million, respectively, in fiscal 1995, 1996
and 1997, representing a compound annual growth rate ("CAGR") of 69.8% over
this period, principally attributable to acquisitions which were accounted for
on a purchase basis. ATC's net income was $3.3 million, $3.9 million, and $6.3
million, respectively, in such fiscal years, representing a CAGR of 39.2% over
such periods. Furthermore, ATC's EBITDA was $6.5 million, $7.0 million and
$13.8 million, respectively, in such fiscal years, representing a CAGR of
45.3% over such periods.
Operating margins were negatively impacted from the quarter ended August,
1996 through the quarter ended May, 1997 principally as a result of (i)
incorporation of ATEC offices into ATC, (ii) investment in national client
programs, (iii) cross-training of personnel and (iv) investment in management
information systems, including hardware, software and regional accounting
systems. Management believes that cost savings from typical acquisitions,
other than ATEC which was disproportionate to the size of the Company at the
acquisition date, are substantially realized at closing and fully realized
within 60 days of closing. Recent investments in the new
45
<PAGE>
information technology systems will be completed in the near term and are
expected to result in operating efficiencies. In addition, the salaries and
other expenses of George and Morry Rubin were eliminated in connection with
the Transactions. However, the Company entered into employment agreements with
each of Nicholas J. Malino and Christopher P. Vincze following the
consummation of the Transactions. See "Management--Employment Agreements."
The Company believes that, for the next few years, growth in demand from
private sector clients and in certain service areas will exceed the average
growth rate of the overall industry. These service areas include, according to
independent market assessments, indoor air quality consulting services, water
and wastewater management, risk assessment, Brownfield development and
environmental information management technology services. In addition, new
market sectors are constantly developing, which could provide new business
opportunities. The Company has established national technical and sales
programs to target customers with need of services in certain market sectors
such as real estate, lead risk management, hazardous waste
management/Brownfield development, PCS/wireless communications, petroleum and
international markets.
Recent Developments. The Company has acquired twelve businesses since 1993,
the three most recent of which have been acquired since August 1997: (i) the
Company purchased all of the stock of Bing Yen on November 26, 1997, a
provider of geotechnical and structural forensic services to a wide variety of
clients in the western United States; (ii) the Company purchased substantially
all of the stock of EWI on November 4, 1997, a property and casualty insurance
brokerage firm specializing in environmental insurance with property and
casualty licenses, including excess surplus lines in 43 states and with
license applications pending in an additional five states, which sells
insurance products covering environmental liabilities to large property owners
and municipal government clients; and (iii) the Company purchased certain
assets and assumed certain liabilities on August 20, 1997 of the Engineering
Division of Smith Technology Corporation which operated primarily as BCM and
provided engineering and consulting services in water and wastewater
treatment, natural resource management, environmental compliance and site
investigation, remedial design and engineering and asbestos and air quality
management.
Revenues. The Company derives its revenues primarily from specialized
environmental engineering and consulting services, including industrial
hygiene services and construction materials testing and engineering, and to a
lesser extent from environmental information management technology services.
The Company sets the pricing of the different components of its services and
products in accordance with its national and regional marketing strategies,
taking competitive factors into account.
Reimbursable Costs. Reimbursable costs associated with the Company's
environmental engineering and consulting services consist primarily of costs
associated with outside drilling, laboratory services, materials handling and
transportation, excavation and certain specialized technical services.
Generally, the costs associated with a particular project can be billed
directly to environmental engineering and consulting services clients.
Services that have a large component of subcontracted services have a larger
portion of reimbursable costs as a percentage of revenues.
Cost of Net Revenues. Cost of Net Revenues consists of professional field
staff costs, depreciation of field and laboratory equipment, contract
maintenance costs, and other project related costs. The Company's field labor
is generally fixed in the short-term, except for certain variable costs
relating to the Company's flexible staffing program. Typically, the Company
does not own large capital intensive equipment.
Operating Expenses. Operating expenses include selling expenses, general and
administrative expenses and provision for bad debts as described below:
Selling Expenses. Selling expenses consist of costs associated primarily
with (i) compensation and benefits for its sales and marketing professionals
throughout the Company's network of branch offices and (ii) advertising and
promotional efforts.
46
<PAGE>
General and Administrative Expenses. General and administrative expenses
consist primarily of: (i) employee compensation and benefit expenses, (ii)
travel and other administrative costs and (iii) general corporate overhead,
including rent for the Company's facilities, insurance, legal and accounting
and amortization of intangible assets.
Provision For Bad Debts. The Company maintains an allowance for bad debts
based on its past bad debt experience. It has been the Company's experience
that such allowance has been sufficient to cover the costs actually incurred
for bad debts.
Nonoperating Expense. Nonoperating expense consists of interest expense,
interest income and other similar expenses or income.
RESULTS OF OPERATIONS
The following table sets forth, net for the periods indicated, certain
statements of operations data of the Company expressed as a percentage of net
revenues.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED ENDED
FEBRUARY 28 (29), NOVEMBER 30,
------------------- --------------
1995 1996 1997 1996 1997
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues................................ 109.0% 112.1% 118.7% 119.1% 118.0%
Reimbursable costs.................... 9.0 12.1 18.7 19.1 18.0
----- ----- ----- ------ ------
Net revenues............................ 100.0 100.0 100.0 100.0 100.0
Cost of net revenues.................... 46.1 49.0 56.0 55.6 54.2
----- ----- ----- ------ ------
Gross profit.......................... 53.9 51.0 44.0 44.4 45.8
Operating expense:
Selling............................... 3.3 3.8 3.3 3.1 3.7
General and administration............ 33.1 32.0 27.4 26.8 31.8
Provision for bad debts............... 0.6 0.7 1.1 0.9 1.3
----- ----- ----- ------ ------
Operating income........................ 16.9 14.4 12.2 13.6 9.0
Nonoperating expense (income):
Interest expense...................... 0.9 0.9 1.6 1.5 2.4
Interest income....................... (0.1) (0.7) (0.2) (0.3) (0.2)
Other................................. 0.2 -- -- (0.1) (0.1)
----- ----- ----- ------ ------
Income loss before income taxes..... 15.9 14.1 10.8 12.4 6.8
Income tax expense...................... 6.1 4.5 4.3 4.8 2.7
----- ----- ----- ------ ------
Net income.............................. 9.8% 9.6% 6.6% 7.6% 4.1%
===== ===== ===== ====== ======
</TABLE>
- --------
Note: Numbers may not add due to rounding.
NINE MONTHS ENDED NOVEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED NOVEMBER 30,
1996
Revenues. Revenues in the nine months ended November 30, 1997 increased by
approximately $20.9 million, or 25.0%, to $104.3 million, compared with $83.4
million in the nine months ended November 30, 1996. This increase was
primarily attributable to revenues associated with the BCM acquisition, which
was effective August 20, 1997, and to a lesser degree, revenues from the ATEC
and 3D acquisitions, which were completed in May 1996. Revenues attributable
to the acquisition of certain assets of BCM totaled $6.1 million, or 5.8% of
revenues, for the nine months ended November 30, 1997. Revenues associated
with the ATEC and 3D acquisitions totaled $54.2 million and $6.2 million,
respectively, for the nine months ended November 30, 1997, compared to $40.7
million and $5.1 million, respectively, in the prior period.
47
<PAGE>
Revenues in the nine months ended November 30, 1997 from ATC's branch
offices having comparable operations in the nine months ended November 30,
1996 decreased 2.9% to $77.8 million, compared with $80.2 million in the nine
months ended November 30, 1996. Comparable revenues included revenues of ATEC
and 3D for the six months ended November 30, 1997 and 1996, respectively, but
excluded first quarter revenues as these acquisitions were made in the quarter
ended May 31, 1996. Comparable revenues decreased in part, due to a large
project representing $2.0 million in revenue for the prior fiscal period
during which time the project was completed.
Reimbursable Costs. For the nine months ended November 30, 1997,
reimbursable costs increased by approximately $2.5 million, or 18.9%, to $15.9
million compared with $13.4 million, in the nine months ended November 30,
1996. Reimbursable costs as a percentage of revenues decreased to 15.2% in the
nine months ended November 30, 1997 compared with 16.0% in the nine months
ended November 30, 1996. Reimbursable costs decreased in part due to lower
amounts of such costs related to the acquired BCM operations.
Cost of Net Revenues. Cost of net revenues in the nine months ended November
30, 1997 increased by approximately $9.0 million, or 23.0%, to $47.9 million
compared with $39.0 million in the nine months ended November 30, 1996.
Cost of net revenues as a percentage of net revenue decreased to 54.2% in
the nine months ended November 30, 1997 compared with 55.6% in the nine months
ended November 30, 1996. In the prior year, the Company benefited from higher
than normal productivity in the first quarter of fiscal 1997. Higher
productivity in the first quarter of fiscal 1997 is attributable to increased
workloads in that quarter, resulting from work which was delayed in the last
quarter of fiscal 1996 and carried over into the first quarter of fiscal 1997
due to adverse weather conditions primarily in the northeast, which at that
time constituted over 60.0% of ATC's revenue stream. During the third quarter
of fiscal 1997, the second complete quarter that the Company owned ATEC and
3D, cost of net revenues as a percentage of net revenues increased to 58.5%,
reflecting the impact of ATEC's service mix and initial labor utilization and
final project costs incurred to complete a fixed price contract which could
not be billed to the client. In addition, the Company has reduced cost of net
revenues as a percentage of net revenues due to improved labor utilization.
Gross Profit. For the reasons set forth above, gross profit in the nine
months ended November 30, 1997 increased by approximately $9.3 million, or
30.1%, to $40.4 million compared with $31.1 million in the nine months ended
November 30, 1996.
Operating Expenses. Operating expenses in the nine months ended November 30,
1997 increased by approximately $10.9 million, or 50.4%, to $32.5 million,
compared with $21.6 million in the nine months ended November 30, 1996.
Operating expenses increased as a percentage of net revenues to 36.7% in the
nine months ended November 30, 1997, compared with 30.8% in the nine months
ended November 30, 1996. The increase in operating expenses as a percentage of
net revenue for the nine month period ended November 30, 1997 fully reflects
the ATEC service mix and integration of its operations, including additional
labor and administrative costs. The increase was due primarily to structural
adjustments in ATC's operating infrastructure to accommodate the integration
of ATEC's operations. The structural adjustments consisted primarily of the
creation of a regional management infrastructure to manage the larger, more
geographically and technically diverse business resulting from the ATEC
acquisition. Such structural investments required the Company to add higher
level operations management employees, including regional management and
financial personnel and sales personnel for its corporate sales programs.
In addition, executive and employee compensation levels increased during the
latter part of fiscal 1997 and certain additional bonuses to branch personnel
were paid during the quarterly period ended November 30, 1997 in excess of
amounts previously accrued. Employee costs increased 64.9% to $14.6 million,
or 16.5% of net revenues, in the nine months ended November 30, 1997 compared
with $8.8 million, or 12.6% of net revenues,
48
<PAGE>
in the nine months ended November 30, 1996. These increases in total cost are
due to employees hired in connection with the expansion of ATC's operations.
Other increases in operating expenses resulted from legal expenses and
administrative expenses resulting from the growth in operations and increased
employee levels. Additionally, in the nine months ended November 30, 1997,
amortization of goodwill and intangibles increased to $1.4 million, compared
with $0.9 million in the nine months ended November 30, 1996 reflecting the
additional goodwill amortization resulting from acquisitions.
Operating Income. For the reasons set forth above, operating income in the
nine months ended November 30, 1997 decreased by approximately $1.5 million,
or 16.1%, to $8.0 million, compared with $9.5 million in the nine months ended
November 30, 1996. Operating income decreased as a percentage of net revenues
to 9.0% in the nine months ended November 30, 1997, compared with 13.6% in the
nine months ended November 30, 1996.
Nonoperating Expense. Nonoperating expense in the nine months ended November
30, 1997 increased by approximately $1.1 million to $2.0 million, compared
with $0.8 million in the nine months ended November 30, 1996. The increase in
nonoperating expense is primarily attributable to increased interest expense
due to increased bank debt outstanding since May 1996 when the ATEC and 3D
acquisitions were completed and as a result of the issuance of 8.18% Senior
Secured Notes due May 31, 2004 (the "8.18% Senior Secured Notes") in May 1997
(such notes were prepaid in connection with the consummation of the
Transactions).
Income Tax Expense. Income tax expense in the nine months ended November 30,
1997 was $2.4 million, compared with $3.4 million in the nine months ended
November 30, 1996. During the nine months ended November 30, 1997 and 1996,
the Company's effective tax rates were 40.2% and 38.7%, respectively.
Net Income. As a result of the foregoing, net income in the nine months
ended November 30, 1997 decreased by approximately $1.7 million, or 32.3%, to
$3.6 million, compared with $5.3 million in the nine months ended November 30,
1996. Net income decreased as a percentage of net revenues to 4.1% in the nine
months ended November 30, 1997, compared with 7.6% in the nine months ended
November 30, 1996.
FISCAL 1997 COMPARED WITH FISCAL 1996
Revenues. Revenues in fiscal 1997 increased by approximately $69.0 million,
or 153.2%, to $113.9 million compared with $45.0 million in fiscal 1996. This
increase was primarily attributable to $57.7 million and $7.2 million, of
revenues, associated with the acquisitions of ATEC and 3D, respectively in May
1996 and reflects a full year's revenue contribution from the acquisition of
the Hill Assets ($3.4 million) and Applied ($2.6 million) which were completed
in November 1995 and February 1996, respectively. Revenues attributable to the
acquisitions of certain assets of the ATEC, 3D, Hill Assets and Applied
totaled $70.9 million, or 62.3% of revenues, for fiscal 1997.
Revenues in fiscal 1997, from ATC's branch offices having comparable
operations in fiscal 1996, increased 3.6% to $42.9 million, compared with
$41.4 million in fiscal 1996.
Reimbursable Costs. For fiscal 1997, reimbursable costs increased by
approximately $13.1 million, or 270.1%, to $18.0 million, compared with $4.9
million in fiscal 1996. Reimbursable costs as a percentage of revenues
increased to 15.8% in fiscal 1997 compared with 10.8% in fiscal 1996. ATEC's
environmental and traditional consulting services, consisting of drilling,
laboratory services, materials testing and subcontracting services, utilize
higher amounts of outside services and direct project expenses compared to
those consulting services being provided prior to the ATEC acquisition. Higher
amounts of outside services and direct project expenses result in a higher
percentage of reimbursable costs. For the year ended December 31, 1995, ATEC's
reimbursable costs were approximately 21.0% of revenues.
Cost of Net Revenues. Cost of net revenues in fiscal 1997 increased by
approximately $34.1 million, or 173.3%, to $53.8 million, compared with $19.7
million in fiscal 1996. Cost of net revenues as a percentage of net revenues
increased to 56.0% in fiscal 1997 compared with 49.0% in fiscal 1996. The
increase is due to lower
49
<PAGE>
margins earned on certain of ATEC's geotechnical engineering services. In
addition, cost of net revenues increased because approximately $0.3 million of
final project costs incurred to complete a large fixed-price contract could
not be billed to a client. Cost of net revenues were also negatively impacted
because in certain price competitive regions where the Company experienced
lower net revenues, costs could not be reduced proportionately.
Gross Profit. For the reasons set forth above gross profit in fiscal 1997
increased by approximately $21.7 million, or 106.1%, to $42.2 million,
compared with $20.4 million in fiscal 1996. Gross profit as a percentage of
net revenues decreased to 44.0% in fiscal 1997, compared with 51.0% in fiscal
1996.
Operating Expenses. Operating expenses in fiscal 1997 increased by
approximately $15.8 million, or 107.7%, to $30.4 million, compared with $14.7
million in fiscal 1996. Operating expenses decreased as a percentage of net
revenues to 31.7% in fiscal 1997, compared with 36.5% in fiscal 1996. The
decrease in operating expenses as a percentage of net revenues is the result
of the additional net revenues from the ATEC and other acquisitions without
corresponding increases in general and administrative costs. Employee costs
increased 66.8% to $12.4 million, or 12.9% of net revenues in fiscal 1997,
compared with $7.4 million, or 18.5% of net revenues, in fiscal 1996. These
increases in total cost were due to employees hired in connection with the
expansion of ATC's operations. Other increases in operating expenses resulted
from higher facility costs and administrative expenses resulting from the
growth in operations and increased employee levels. Additionally, in fiscal
1997, amortization of goodwill and intangibles increased to $1.2 million,
compared with $0.4 million in fiscal 1996, reflecting the additional goodwill
amortization resulting from acquisitions.
Operating Income. For the reasons set forth above, operating income in
fiscal 1997 increased by approximately $5.9 million, or 102.1%, to $11.7
million, compared with $5.8 million in fiscal 1996. Operating income decreased
as a percentage of net revenues to 12.2% in fiscal 1997, compared with 14.4%
in the fiscal 1996.
Nonoperating Expense. Nonoperating expense in fiscal 1997, increased to $1.3
million compared with $0.1 million in fiscal 1996. The increase in
nonoperating expense is primarily attributable to increased interest expense
on bank debt outstanding since May 1996, when the ATEC and 3D acquisitions
were completed, and to a lesser extent from lower interest income.
Income Tax Expense. Income tax expense in fiscal 1997 was $4.1 million,
compared with $1.8 million in fiscal 1996. The income tax expense for fiscal
1996 reflects a one-time benefit of $0.4 million resulting from the merger of
Aurora Environmental Inc. ("Aurora") into ATC (the "Aurora Merger") which
allowed ATC to utilize Aurora's net operating loss carryforward as offsets to
future taxable income. During fiscal 1997 and 1996, after adjusting for the
one-time tax benefit, the Company's effective tax rates were 39.3% and 38.0%,
respectively.
Net Income. As a result of the foregoing, net income for fiscal 1997,
increased by approximately $2.4 million, or 63.2%, to $6.3 million compared
with $3.9 million in fiscal 1996. Excluding the impact of the one-time tax
benefit of $0.4 million, net income would have been $3.5 million.
FISCAL 1996 COMPARED WITH FISCAL 1995
Revenues. Revenues in fiscal 1996 increased by approximately $8.7 million,
or 24.0%, to $45.0 million compared with $36.3 million in fiscal 1995. This
increase was primarily attributable to the positive effect of the acquisitions
of Con Test ($6.0 million), Microbial ($1.4 million) and R.E. Blattert ($2.2
million) completed during the second half of fiscal 1995 and from the
acquisition of the Hill Businesses ($2.4 million) in November 1995. Revenues
attributable to operations resulting from these acquisitions totaled $12.0
million, or 26.8% of revenues, for fiscal 1996. During fiscal 1996, increased
revenues from certain existing operations were offset by lower revenues from a
significant customer due to delays in funding for certain projects and the
completion of certain work for another significant customer. In addition,
revenues of ATC's largest offices located in the Mid-
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<PAGE>
Atlantic and New England regions were negatively impacted for the three months
ended February 29, 1996, due to severe winter weather conditions. Revenues in
these regions, excluding revenues of the acquired Hill Businesses, declined
$1.8 million or 27.5% in the fourth quarter ended February 29, 1996 compared
to the third quarter period ended November 30, 1995. In fiscal 1995, where
normal seasonal changes were experienced, the decrease for the comparable
period was less than 3.0%. The Hill Businesses were acquired just prior to the
fourth quarter and were also adversely affected by these weather conditions.
Revenues in fiscal 1996 from ATC's branch offices having comparable
operations in fiscal 1995, increased 2.6% to $32.9 million, compared with
$32.1 million in fiscal 1995. If revenues from certain large projects for two
significant customers (discussed below) are eliminated in each period, ATC's
revenues from existing branch offices having comparable operations would have
increased 16.2% to $29.1 million in fiscal 1996, compared with $25.0 million
in fiscal 1995.
Revenues in fiscal 1996 earned directly from the New York City School
Construction Authority ("NYCSCA") decreased 30.2% to $2.7 million, compared
with $3.9 million in fiscal 1995. As a percentage of revenues, revenues from
the NYCSCA decreased to 6.0% in fiscal 1996, compared with 10.6% in fiscal
1995. During the first quarter 1996, delays in the approval of the NYCSCA's
program budget and funding requests for the New York City school construction
and maintenance program resulted in diminished service levels in asbestos
management consulting and testing services and, consequently, lower revenues
to ATC under this program. ATC's revenues under this program are not
predictable and depend upon many factors such as the scope of work necessary
at particular sites, budgeting constraints and the timing of projects.
Revenues in fiscal 1996 from the Army Corps of Engineers (the "Corps")
decreased 63.6% to $1.2 million, compared with $3.2 million in fiscal 1995. As
a percentage of revenues, revenues from the Corps decreased to 2.6% in fiscal
1996, compared with 8.9% in fiscal 1995. The Company's revenues from the Corps
during this period related to certain asbestos management services and
decreased due to the completion of the larger phases of the project during
fiscal 1995.
Reimbursable Costs. For fiscal 1996, reimbursable costs increased by
approximately $1.8 million, or 61.6%, to $4.9 million, compared with $3.0
million, in fiscal 1995. Reimbursable costs as a percentage of revenues
increased to 10.8% in fiscal 1996, compared with 8.3% in fiscal 1995. The
increase in reimbursable costs and reimbursable costs as a percentage of net
revenues is due to higher subcontract and drilling costs related to the
Company's geological and remediation services. These services increased as a
result of the acquisitions of R.E. Blattert and Microbial.
Cost of Net Revenues. Cost of net revenues in fiscal 1996 increased by
approximately $4.3 million, or 28.1%, to $19.7 million, compared with $15.4
million in fiscal 1995. Cost of net revenues as a percentage of net revenues
increased to 49.0% in fiscal 1996, compared with 46.1% in fiscal 1995. This
increase was due to lower revenues related to severe weather conditions
experienced during the three months ended February 29, 1996. Cost of net
revenues for the nine months ended November 30, 1995 was 46.7%. For the fourth
quarter ended February 29, 1996, cost of net revenues was $5.5 million on net
revenues of $9.8 million or 56.2%.
Gross Profit. For the reasons set forth above, gross profit in fiscal 1996
increased by approximately $2.5 million, or 14.1%, to $20.4 million, compared
with $17.9 million in fiscal 1995. Gross profits as a percentage of net
revenues decreased to 51.0% in fiscal 1996, compared with 53.9% in fiscal
1995.
Operating Expenses. Operating expenses in fiscal 1996 increased by
approximately $2.4 million, or 19.2%, to $14.7 million, compared with $12.3
million in fiscal 1995. Operating expenses decreased as a percentage of net
revenues to 36.5% in fiscal 1996, compared with 36.9% in fiscal 1995. The
decrease in operating expenses as a percentage of net revenues is the result
of ATC's ability to service greater revenue levels without corresponding
increases in general and administrative costs. Employee costs increased 18.0%
to $7.4 million, or 18.5% of net revenues, in fiscal 1996, compared with $6.3
million, or 18.9% of net revenues, in fiscal 1995. These increases in employee
costs were due to employees hired in connection with the expansion of ATC's
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<PAGE>
operations. Other increases in operating expenses resulted from higher
facility costs, travel and administrative expenses resulting from the growth
in operations and increased employee levels. Additionally, in fiscal 1996,
amortization of goodwill and intangibles increased to $0.4 million, compared
with $0.2 million in fiscal 1995, reflecting the additional goodwill
amortization resulting from acquisitions.
Operating Income. For the reasons set forth above, operating income in
fiscal 1996 increased by approximately $0.2 million, or 3.0%, to $5.8 million,
compared with $5.6 million in fiscal 1995. Operating income as a percentage of
net revenues was 14.4% in fiscal 1996 and 16.9% in fiscal 1995.
Nonoperating Expense. Nonoperating expenses in fiscal 1996 decreased by
approximately $0.2 million, or 61.6%, to $0.1 million compared with $0.3
million in fiscal 1995. The decrease in nonoperating expenses is primarily
attributable to higher interest income earned on the net proceeds of an
October 1995 secondary offering of shares of the Company's Common Stock which
were invested in short-term investments.
Income Tax Expense. Income tax expense in fiscal 1996 was $1.8 million,
compared with $2.0 million in fiscal 1995. The income tax expense reflects a
one-time benefit of $0.4 million resulting from the merger of Aurora into ATC
which allowed ATC to utilize Aurora's net operating loss carryforwards as
offsets to its future taxable income. During fiscal 1996, excluding for the
one-time tax benefit, and fiscal 1995, the Company's effective tax rates were
38.0% and 38.6%, respectively.
Net Income. As a result of the foregoing, net income in fiscal 1996
increased by approximately $0.6 million, or 18.7%, to $3.9 million, compared
with $3.3 million in fiscal 1995. Excluding the impact of the one-time tax
benefit of $0.4 million, net income would have been $3.5 million for fiscal
1996. Net income as a percentage of net revenues was 8.8% in fiscal 1996,
after excluding the one-time tax benefit, compared with 9.8% in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash flow from operations
and available borrowings under the Revolving Credit Facility. The Revolving
Credit Facility provides the Company with an aggregate of up to $30.0 million
of senior secured financing to be used for working capital and general
corporate purposes (including permitted acquisitions). As of March 24, 1998,
the Company had approximately $25.2 million of availability under the
Revolving Credit Facility. It is expected that the Company's principal uses of
liquidity will be to provide working capital, finance capital expenditures,
fund costs associated with acquisitions and meet debt service requirements. As
a result of the consummation of the Transactions, the Company is highly
leveraged. Except to the extent set forth below, there will be no mandatory
payments of principal on the Notes scheduled prior to their maturity. Based
upon current operations, anticipated cost savings and future growth, the
Company believes that its cash flow from operations, together with available
borrowings under the Revolving Credit Facility will be adequate to meet its
anticipated requirements for working capital, capital expenditures and
scheduled principal and interest payments, although the Company believes that
its ability to repay the Notes and amounts outstanding under the New Credit
Facility at maturity will require additional financing. There can be no
assurance, however, that any such additional financing will be available at
such time to the Company, or that any such available financing will be on
terms favorable to the Company. Furthermore there can be no assurance that the
Company's business will continue to generate cash flow at or above current
levels or that estimated cost savings or growth can be achieved.
The Supplemented Indenture imposes certain limitations on the ability of the
Company and its subsidiaries to, among other things, incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, issue preferred stock, merge or consolidate with any other person
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company and its subsidiaries. In
addition, the New Credit Facility contains
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other and more restrictive covenants effectively prohibiting the Company from
prepaying the Notes. The New Credit Facility also requires the Company to
maintain specified financial ratios and satisfy certain financial tests. The
Company's ability to meet such financial ratios and tests will be affected by
events beyond its control; there can be no assurance that the Company will be
able to meet such tests. See "Description of New Credit Facility."
The Company conducts part of its operations through its subsidiaries. As a
result, the Company relies, in part, upon payment from its subsidiaries for
the funds necessary to meet its obligations, including the payment of interest
on and principal of the Notes. The ability of the subsidiaries to make such
payments will be subject to, among other things, applicable state laws. Claims
of creditors of the Company's subsidiaries will generally have priority as to
the assets of such subsidiaries over the claims of the Company. At November
30, 1997, on a pro forma basis after giving effect to the Transactions and
Acquisitions, holders of the Notes would have been structurally subordinated
to no amount of indebtedness plus other liabilities (including trade payables)
of the Company's subsidiaries, which management believes were approximately
$5.0 million at November 30, 1997.
The Company has historically financed its operations through internally
generated funds, public and private equity and debt financings and borrowings
under its credit facilities. As of November 30, 1997, working capital was
$38.1 million, compared with working capital of $27.7 million at February 28,
1997, an increase of $10.4 million. The increase in working capital was
primarily due to the net proceeds from the offering of the 8.18% Senior
Secured Notes in May 1997 after repayment of bank debt and fees, and the
purchase of certain assets of BCM including accounts receivable and unbilled
receivables. As a result of the Company's acquisition of BCM and additional
costs incurred in connection with the ATEC acquisition, the Company's tangible
net worth decreased to $0.7 million at November 30, 1997 from $9.2 million at
February 29, 1997, primarily as a result of goodwill amounts recognized in
connection with these transactions.
Nine-month Cash Flows. During the nine months ended November 30, 1997, net
cash flows used in operating activities were $1.5 million, primarily due to
the increase in billed and unbilled receivables and decreases in accounts
payable and other liabilities, representing payments of property facility
rentals, non-compete consideration and assumed liabilities of ATEC and other
acquisitions. Net cash flows used in investing activities were $11.3 million,
resulting from the acquisitions of BCM and ATEC and purchases of property and
equipment. Net cash flows provided by financing activities were $16.7 million,
primarily representing the proceeds of the 8.18% Senior Secured Notes less
repayment of outstanding bank debt and a bank borrowing of $5,500,000 made in
connection with the BCM acquisition.
Twelve-month Cash Flows. During fiscal 1997 and fiscal 1996, net cash flows
used in operating activities were $6.7 million and $0.8 million, respectively,
primarily due to income generated from operations and increases in billed and
unbilled receivables, which were offset in fiscal 1997 by reductions of
accounts payable and other liabilities, including assumed liabilities
associated with acquisitions. Net cash flows used in investing activities were
$13.1 million and $4.6 million, respectively, in each of the periods,
resulting from the acquisitions of ATEC and 3D and purchases of property and
equipment in fiscal 1997 and the acquisitions of the Hill Assets, Applied,
Con-Test and R.E. Blattert, additional contingent purchase obligations in
connection with the BSE and R.E. Blattert acquisitions and purchases of
property and equipment in fiscal 1996. Net cash flows provided by financing
activities were $8.4 million and $17.5 million, respectively, representing the
proceeds of the bridge credit facility, less payments made on long-term debt
and notes payable assumed from ATEC in fiscal 1997 and representing the net
offering proceeds of the Company's secondary offering of Common Stock plus
proceeds from a $2.6 million increase in debt primarily under the Company's
prior credit facilities, less payments made on long-term debt and notes
payable of $6.7 million in fiscal 1996.
SEASONALITY
ATC typically experiences a slow down in business activities during the
winter months and an increase in business activities during the summer months.
This is due to seasonal fluctuations in construction and remediation
activities. As a result, operating results may vary from period to period. For
fiscal 1997 and 1996, comparable quarterly revenues as a percentage of
relevant annual revenues were 26.8%, 25.7%, 23.7% and 23.8% and 25.1%, 27.0%,
25.2% and 22.7%, respectively.
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BUSINESS
ATC is a leading national provider of professional consulting, engineering
and testing services within the environmental and construction materials
industries. Management believes the Company is also a leading provider of
integrated environmental information management technology services. The
Company provides a broad range of services to a diverse client base of over
8,000 customers, with domestic businesses and non-federal government entities
representing over 95.5% of the Company's gross revenues for the twelve months
ended November 30, 1997. No single customer represented more than 1.8% of the
Company's gross revenues during the twelve months ended November 30, 1997. In
addition, the Company's ten largest customers taken together accounted for
less than 13.6% of the Company's gross revenues during the twelve months ended
November 30, 1997. The Company provides its services through a network of 73
branch offices located in 34 states covering every major market of the United
States.
Asset preservation, liability and health related considerations have
increasingly driven demand in the environmental services industry, whereas
regulation has decreased as a driver over time. As a result of these market
dynamics, environmental administration has become an integral component of
day-to-day property management activities. Management believes that ATC is
well-positioned to take advantage of certain rapidly growing sectors of the
approximately $16.0 billion environmental services industry. In addition, the
industry is highly fragmented and management believes that the industry
presents many favorable opportunities for growth through acquisitions.
In 1993, the Company initiated a strategy of controlled growth through
acquisitions to build a national infrastructure and to broaden its range of
technical services. The Company has created a national infrastructure through
the completion of 12 acquisitions since May 1993. ATC has thereby also
expanded its service mix by adding construction materials testing and
engineering, lead risk management, indoor air quality management, water and
wastewater management and information management technology services. As a
result of this growth and diversification strategy, net revenues and EBITDA
increased to pro forma fiscal 1997 levels of $95.9 million and $13.8 million,
respectively, from $15.4 million and $1.4 million, respectively, in fiscal
1993.
Management believes that ATC is well-positioned to grow revenues and EBITDA
in the future. The key elements of its continuing strategy to achieve this
growth include (i) pursuing cross-selling opportunities presented by ATC's
recently diversified service mix and recently developed national
infrastructure, (ii) capitalizing on specific sectors which management
believes have high growth potential, including indoor air quality, risk
assessment, Brownfield development and environmental information management
technology services outsourcing, (iii) expanding its national programs, the
first of which was established in 1995, which emphasize expanding existing
regional or local customer relationships into national relationships and (iv)
increasing profitability by implementing tactical acquisitions. Management
intends to pursue companies that can be "tucked into" ATC's established
infrastructure and that provide opportunities for additional contributions
from branch operations without proportional increases to overhead or fixed
costs.
BUSINESS STRATEGY
In 1993, the Company began the implementation of a strategy, the key
elements of which were designed to (i) establish a national infrastructure of
branch office locations and (ii) diversify its service offerings. Management
believes that the Company has achieved these strategic, structural objectives
and now intends to focus on the following strategies to build on this
foundation to improve its market position and to grow operating earnings:
. Cross-Sell Services. As a result of its acquisition strategy, the Company
has expanded its service offerings and client portfolio. This has
resulted in many cross-selling successes for the Company because ATC has
been able to sell additional services to existing clients and newly
acquired clients. Management expects these cross-selling opportunities to
continue at an accelerated rate as a result of its acquired service
capabilities in the construction materials testing and engineering, lead
risk management,
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water and wastewater management and information management technology
services. Additionally, the Company's national infrastructure provides
opportunities for cross-selling expanded services to existing customers
that currently receive more limited services on a local or regional
basis.
. Focus on High-Growth Services and Sectors. The successful implementation
of strategies designed to increase service offerings has resulted in the
Company's ability to capitalize on many high-growth market opportunities.
ATC is well-positioned to take advantage of the niche markets of indoor
air quality, water and wastewater management, risk assessment, Brownfield
development and environmental information management technology services,
each of which management believes has high growth potential. In addition,
management intends to take advantage of trends such as the outsourcing of
specialized technical services by national and multi-national
corporations.
. Expand National Sales Programs and Develop International
Opportunities. Since 1995, ATC has implemented six national programs
which have been highly successful in generating new business from
existing clients and from specific industries with growth potential.
Existing programs focus on incremental revenues from clients in the lead
risk management, hazardous waste/Brownfield development, PCS/wireless
communications industry, national commercial account management programs,
federal programs and petroleum markets. In the Asia-Pacific markets, the
Company is in the early stages of its long-term effort to take advantage
of a developing demand for environmental services. ATC is currently
providing asbestos management services to Mitsui Fudosan in Japan and is
providing design services for a wastewater treatment facility in China
for a multi-national corporation. The Company intends to use such
relationships to pursue other opportunities in these markets.
. Pursue Tactical Acquisitions. ATC has developed significant expertise in
identifying, completing and integrating acquisitions. ATC plans to apply
its expertise in assimilating acquired companies' personnel and branch
operations into ATC's existing infrastructure and expanding acquired
companies' service and product offerings to existing clients. Management
intends to strengthen its position as a leading industry consolidator
through tactical acquisitions which meet operating, financial and
geographic criteria. Management believes that its existing national
infrastructure provides a platform for "tuck-in" acquisitions of regional
and local companies. According to management estimates, there are 3,500
companies whose businesses are complementary to those of the Company.
Management believes that a significant number of those companies could be
operated more profitably as part of ATC's operations.
. Emphasis on Business Fundamentals. Management believes industry
participants typically have management teams with predominantly technical
orientations. In contrast, ATC has distinguished itself by focusing on
business fundamentals to complement its technical expertise. ATC intends
to continue to emphasize a disciplined approach to such basic business
fundamentals as selling and marketing, customer service, cost management,
overtime minimization and collection of receivables.
INDUSTRY OVERVIEW
Environmental Services Industry
Unlike the 1970's and 1980's, when new environmental regulations were
frequently promulgated by federal and state agencies and regulatory compliance
was the primary market driver, the demand for environmental services has
shifted and is now driven by economic and liability management considerations.
In the early 1990's, public awareness also heightened concerns for
environmental issues. Today many companies insist that environmental
improvement expenditures not only satisfy regulatory compliance, but also be
justifiable on other grounds--such as protecting assets, increasing workplace
safety, reducing health risks, improving public relations, minimizing waste
and preventing pollution and reducing financial liabilities.
Customer needs and demands have also changed. Many customers have become
more sophisticated in their expectations of environmental services providers.
Cost and image considerations have become key drivers in the environmental
services industry. In addition, management believes that customers are looking
for service providers that can provide a broad range of integrated services,
can deliver these services on a national basis and
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can provide an adequate level of insurance coverage. Through its service
diversification and geographic expansion, ATC has positioned itself to respond
to these new market demands. ATC's national sales and technical programs (the
"National Programs") focus on providing services to targeted market segments
where these new demands create increased revenues and market share and higher
pricing opportunities. The Company believes that these trends will continue to
create new and more profitable opportunities for serving major commercial and
industrial clients.
The municipal water and wastewater services market is currently driven by
the deterioration of existing utilities and treatment facilities and the
expansion of new water and sewer facilities to developing areas. Regulatory
agencies play a secondary market driver role through placing construction
moratoriums on developments and utilities that do not meet existing water
quality criteria. Management believes that this market also presents revenue
growth opportunities for other integrated ATC services such as construction
materials testing and engineering and geotechnical engineering. In a recent
report to Congress, the U.S. Environmental Protection Agency (the "EPA")
estimated that approximately $140 billion in expenditures will be needed over
the next twenty years to meet expected municipal wastewater requirements.
Two independent market evaluations, one by the Environmental Business
Journal ("EBJ") and the other by the independent marketing firm of Richard K.
Miller & Associates, Inc. ("RKM&A"), estimate the size of the environmental
consulting and engineering services market for 1995 at between $15.0 and $16.0
billion. Annual growth is projected at 3.0% to 5.0% through the next three to
four years. Generally, the environmental consulting and engineering services
industry is viewed as having stabilized, with declining market demand in some
sectors being offset by growth in others. Over the last three years, the
market for federal agency contracts has declined, and those service firms
dependent on revenues from this sector have been negatively affected. ATC has
experienced more stable market conditions over the last three years due to its
focus on the commercial and industrial market segments. Certain companies in
the environmental services industry have been required to reduce size and
revenues in an effort to improve operating performance. During this period,
ATC has maintained its position as an industry leader in financial
performance, while increasing its market share through internal growth and
acquisitions.
Management believes that, for the next few years, growth in demand from
municipal clients, private sector clients (commercial and industrial) and in
certain service areas will exceed the expected average growth rate of the
overall environmental service industry. These service areas include lead risk
management, indoor air quality consulting services, occupational health and
industrial hygiene services, environmental risk management consulting,
hazardous waste consulting, water and wastewater design services,
environmental insurance and environmental information management technology.
The Company also believes that there will be significant opportunities in: (i)
outsourcing of environmental management and due diligence services to clients
with large portfolios of real estate holdings; (ii) providing environmental,
geotechnical and construction materials testing services to the PCS/Wireless
industry; and (iii) providing environmental insurance, assessment services,
remediation design and site development engineering of certain environmentally
impaired but otherwise valuable properties, which can be returned to the
market place with a "clean" status. Such sites are known as "Brownfield"
sites.
Industry observers believe that the asbestos market will show little growth
and the hazardous waste services market will experience some decline in the
coming years. The Company believes, based on the significant size of these
markets, that there are opportunities for continued revenues from existing
client relationships, increased market share through acquisitions and the
Company's ability to penetrate the market with competitive pricing and
reliable services. Furthermore, while governmental expenditures are expected
to grow more slowly in coming years as a result of changes in political
priorities, private sector spending on environmental services is expected to
increase, particularly in certain sectors.
Within the past three years, regulations have been promulgated which have
created new business opportunities within certain sectors of the environmental
consulting and engineering services industry. In February 1994, the United
States Department of Labor promulgated new asbestos regulations for the
construction
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industry, which are more stringent than the previous regulations. Lead-based
paint is another area of increasing regulatory activity, partially in response
to the provisions of Title X of the Housing and Community Development Act of
1992, as amended in 1997, and partially as a result of increasing concern
arising from evidence of the severe health effects of childhood lead
poisoning. A U.S. study has documented serious lead dust hazards caused by
conventional remodeling and painting practices in residential properties and
another federal study documented the problem of "take home" lead, wherein
unprotected construction workers expose their families to lead dust
transported home from the work place. Organizations, including the EPA and
Occupational Safety and Health Administration ("OSHA"), have placed a high
priority on enforcing these standards.
In the late 1970's and early 1980's, several significant environmental
regulations were promulgated: (i) the Clean Water Act, (ii) the Clean Air Act,
(iii) the Resource Conservation and Recovery Act ("RCRA"), (iv) the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") and (v) the Asbestos Hazard Emergency Response Act. While
regulatory matters may continue to diminish generally as a market driver, the
Company believes that clarification and enhancement of laws in some areas,
such as lead regulation, can create new business opportunities. For example,
the U.S. Department of Housing and Urban Development ("HUD") operates the
Lead-Based Paint Hazard Control Grant Program established by Title X of the
Housing and Community Development Act of 1992, as amended in 1997, known as
the Residential Lead-Based Paint Hazard Reduction Act. The primary purpose of
the HUD program is to reduce the exposure of young children to lead-based
paint hazards in their homes. Lead in paint, drinking water and soil is a
major threat to human health and the environment. Lead is known to be toxic to
the human body, even at relatively low doses. In children, excessive exposures
to lead can result in brain damage leading to learning disabilities and, in
some cases, retardation. Adult exposures to excessive amounts of lead can
cause reproductive, hematological and nervous system disorders.
The HUD program provides grants between $1.0 million and $4.0 million to
state and local governments for control of lead-based paint hazards in
privately-owned, low income owner-occupied and rental housing. As part of this
effort, HUD also provides grants between $0.5 million and $2.0 million for
conducting lead-based paint hazard control in low income, privately-owned
housing units on or near Superfund or Brownfield sites. All grants are
designed to stimulate the development of a trained and certified hazard
evaluation and control industry. Evaluation and hazard control work under the
program must be conducted by contractors who are certified and workers who are
trained through a state-accredited program. In awarding grants, HUD promotes
the use of cost-effective approaches to hazard control that can be replicated
across the nation. Since 1993, $335.0 million has been awarded to 70 grantees
in 26 states and is currently being spent by such agencies.
Additional opportunities are presented by federal regulations under Title X
of the Housing and Community Development Act of 1992 which, among other things
(i) established a national requirement for training and certification of all
lead contractor workers and supervisors, inspectors, risk assessors, project
designers and other individuals involved in lead paint activities and (ii)
established new disclosure requirements applicable to all property
transactions affecting residential properties built prior to 1978.
While historical growth in the demand for environmental services has been
stimulated by regulatory compliance concerns, management believes that future
growth will, in large part, be driven by private litigation, asset
preservation and productivity considerations. As companies have become
increasingly sensitive to the potential adverse consequences of environmental
problems and the potential impact of environmental liabilities, they have
taken an active approach to managing environmental health and safety risks and
liabilities, whether or not they are subject to regulations. This trend is
observed in such areas as steel structure repainting projects, real estate
transaction assessments and indoor air quality initiatives.
For example, bridge and tunnel authorities undertaking the removal of lead-
based paint from large steel structures are seeking to establish monitoring
systems to prevent the dispersion of lead dust into the environment, which
could lead to future liabilities. The Company believes that such actions are
motivated in large part by concerns regarding the potential liabilities
associated with lead contamination. Similarly, concerns over
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environmental liability risks have made environmental assessments an integral
component of the due diligence process for commercial real estate
transactions. Financial institutions frequently require environmental
assessments prior to loan origination, refinancing, and foreclosure
activities, while insurance companies increasingly require environmental
assessments before issuing environmental insurance liability policies. All of
these factors create opportunities and markets for ATC to provide its
integrated environmental services.
Construction Materials Testing and Engineering Industry
Numerous specialty services are provided to the construction and the related
engineering and architectural design industries. ATC provides services in the
areas of construction materials testing and engineering, geotechnical and
civil engineering services, site surveying, roofing system inspections, on-
site client construction services and development of material specifications.
Construction of a significant structure or improvement represents a major
permanent investment for any owner, whether commercial or governmental. The
primary driver for materials testing, inspection services and geotechnical
services (soil and earth analysis) is an owner's concern that this investment
be protected by quality construction materials that meet design
specifications. Architects and engineering firms require that the quality of
construction materials and on-site soil conditions be monitored in order to
ensure that the project design conditions are being met.
Contractors, architects and engineers hire materials testing and
geotechnical consultants to test materials such as concrete, structural and
reinforcing steel, soil and geosynthetic liners both prior to commencing
design and during the construction phase of a project. The quality of
materials and their ability to conform to design specifications are critical
to the future life and constructability of the facility. Three common types of
construction materials and geotechnical tests are (i) soil tests for moisture
content and compaction density, (ii) concrete tests for compressive strength
and (iii) structural and reinforcing steel tests for tensile strength and
connection strength.
The construction materials testing and engineering industry is driven by
national and local economic conditions. Most of the construction materials
testing and engineering services provided by ATC are for projects within 200
miles of the office where the service is provided. Geotechnical consulting and
engineering services are less sensitive to geographical constraints. For these
reasons, the ATC offices providing construction materials testing and
engineering services are located in metropolitan areas identified with current
and ongoing construction activities. Construction activities can develop from
commercial, industrial, institutional and governmental entities. ATC currently
offers construction materials testing and engineering services from offices
in: Miami, Florida; Nashville, Tennessee; Atlanta, Georgia; Dallas, Texas;
Washington D.C./Baltimore, Maryland; Boston, Massachusetts; Cincinnati, Ohio;
Indianapolis, Indiana; Chicago, Illinois; Detroit, Michigan; Louisville,
Kentucky; St. Louis, Missouri; Orange County, California; and San Antonio,
Texas. Based on anticipated demand for construction materials testing and
engineering services, offices in the markets serving Charlotte, North
Carolina, New York, New York and Mobile, Alabama are currently being
considered as expansion opportunities. Construction materials testing and
engineering services are considered mature markets and a project award is
generally based on service reputation, price, client relationship, and local
competition. Delivery of services on a national basis through a network of
offices is a factor considered by national clients. Expansion of ATC's
construction materials testing and engineering services to new markets can be
achieved through tactical acquisitions of local service firms.
Except for state licensure requirements for the engineering component, there
is little regulation of the construction materials testing and engineering or
geotechnical consulting service industries. Industry standards are set by
agencies such as the American Society of Testing Material, the American
Association of State Highway & Transportation Officials, the American Concrete
Institute, the American Welding Society and several others. Construction
projects themselves, however, are governed by state and local building codes,
the stringency of which varies by location. In general, independent third
party materials testing and inspection for construction projects are required
by owners on all new commercial and public construction projects over $1.0
million. Frequently, testing and inspection requirements also apply to
renovation and repair projects as well.
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Information Management Technology Industry
Information management technology services are driven by the desire for
businesses and government agencies to more efficiently manage complex
operational information utilizing the latest technologies. Economic benefits
of information management technology services are realized when the ability to
manage information maintains or creates a competitive market position for a
business. Government agencies look to information management technology
services as a means of cutting costs for many agency operations. Knowledge and
skills in the latest technological advances, along with quality service,
enable ATC to be a leading service provider in this market.
Over the last five years, the increased development and use of technology by
businesses and governmental agencies has led to a dramatic rise in the demand
for information management technology services including, project support,
software development and other computer-related services. To meet their needs,
many businesses and governmental agencies are seeking the services of
consulting firms for technical staff to supplement internal resources for the
management of complex projects and for expertise in leading edge technologies.
The information management technology services market grew by almost 25.0%
to a total of $24.7 billion during 1996 according to a special study by Input
Information Technology Intelligence Services ("INPUT") conducted for the
Updata Group, Inc. This market was expected to grow from 1996 at an annual
compounded rate of 17.3% to a total of $55.0 billion by the year 2001. In
similar studies conducted since 1993, actual industry growth has exceeded
INPUT estimates in every year. INPUT estimated in 1996 that the consulting
services segment of the industry, which is the industry's leading growth
segment, would grow at an annual rate of 21.1% to reach aggregate revenue of
$18.3 billion by 2001.
The Company believes that the demand for Internet/intranet system
development services will grow at a much faster rate as companies use the
Internet to provide their business partners with access to corporate data.
ATC provides information management technology services in general
consulting services, Internet/intranet applications development and on-site
staffing support or outsourcing.
SERVICE AND PRODUCT OFFERINGS
The Company's core service groups are (i) Environmental Services, (ii)
Construction Materials Testing and Engineering Services and (iii) Information
Management Technology Services. Other non-core services offered by ATC are
environmental analytical laboratory services, environmental insurance,
building condition surveys, construction management services, environmental
training and outsourcing of professional staff. A description of each service
group follows:
Environmental Services
The majority of ATC's project activities within this segment focus on
identifying potential environmental hazards and risk exposures and developing
regulatory and technical solutions for such problems. The major service areas
within this group are (i) Environmental Engineering and Consulting, (ii)
Industrial Hygiene, (iii) Water and Wastewater Management, (iv) Lead Risk
Management and (v) Health and Safety Training.
Environmental Engineering and Consulting. Management believes that ATC is
one of the largest providers in the environmental services industry of Phase I
and Phase II assessments of commercial and industrial properties. In addition,
ATC occasionally provides Phase III and Phase IV monitoring and testing on
these properties. The Company has a significant presence in the Phase I and II
markets, particularly Phase I work associated with property transfer
transactions. In addition, ATC effectively utilizes its national
infrastructure of offices to conduct Phase I assessments on large, multi-site
property portfolios under the direction of ATC's National Commercial Accounts
Program.
Phase I assessments generally involve a visual inspection of the site, an
examination of aerial photographs, an investigation of past land uses and a
review of other sources of site data that may be appropriate. As a result
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of its research and visual inspections, further investigation under a Phase II
may be recommended. Phase I assessments are now required in the majority of
commercial real estate transactions. Under standards promulgated by the
American Society of Testing and Materials, a minimum amount of environmental
due diligence must be performed by a commercial real estate buyer to qualify
for the "innocent landowner defense" as outlined under CERCLA. If necessary,
Phase II testing involves sampling of soil, water and other materials from a
site utilizing ATC's analytical laboratories to identify and quantify the
presence of specific compounds.
ATC provides hazardous waste consulting services to corporate and
governmental clients. Many of these clients are large regional and national
corporations with multi-site consulting needs. The market for these services
are primarily driven by client relationships and quality of service delivery.
Regulatory drivers are RCRA and CERCLA plus state-specific hazardous waste
regulations. Prerequisites for inspection by a client are strong regulatory
experience at both the federal and state level as well as expertise in site
investigation strategies and site remediation. Under the RCRA Corrective
Action Guidelines, tasks required on hazardous waste projects may include
regulatory strategy development, site investigations, corrective measures
studies, remedial design and remedial construction management. Similar tasks
are required under the CERCLA regulatory process. In addition to hourly
consulting fees, project revenues come from site drilling services and
analytical services which are also provided by ATC. In order to coordinate and
develop the technical resources of ATC in this complex service area and to
provide a mechanism for nurturing long-term client relationships with targeted
clients, ATC's Hazardous Waste/Brownfield Development Program was created. New
market opportunities exist in the areas of site characterization, regulatory
strategy development, environmental insurance, remedial design and remediation
management of Brownfield sites. ATC has formed business relationships with
three firms specializing in this market.
ATC provides environmental compliance services to industrial, commercial and
governmental clients. These services include environmental compliance audits,
wetland delineation and mitigation, environmental impact studies, air quality
permits, ambient air quality modeling and sampling, continuous emission
monitoring system design and solid waste landfill design and permitting.
Market drivers for these services are state and federal regulatory
requirements for compliance. Demand for these services varies by state
depending on the progress made by a particular state in promulgating and
enforcing regulations. Air quality permitting and consulting services are
currently in demand by many corporations.
ATC also offers hydrocarbon environmental services to companies engaged in
exploration, refining, distributing and retailing of petroleum products.
Typical facilities requiring these services are drilling operations,
pipelines, terminals, refineries, bulk storage facilities, convenience stores
and gas stations, and truck stops. Typical projects may include site
assessments, risk assessments, regulatory strategy development, above-ground
and underground tank testing, remediation design and construction, on-site
recovery and maintenance and state funding recovery. Market drivers are state
and federal regulatory mandates; however, clients are sensitive to value-added
pricing and the quality of services. For the reasons noted above, the
petroleum industry tends to award large volume contracts to a select number of
service providers that can meet these requirements. ATC's National Petroleum
Industry Program is focused on maintaining client relationships, ensuring
quality service delivery and coordinating internal pricing strategies. ATC's
success and commitment to the petroleum industry has made it a leading service
provider in this market. Management believes that targeted clients in this
industry can generate annual revenues for ATC in excess of $10.0 to $15.0
million over the next five years. Other integrated services offered by ATC to
petroleum clients include Phase I and Phase II assessments for property
transactions, environmental insurance, geotechnical engineering, construction
materials testing and engineering, analytical laboratory services and
construction management.
Industrial Hygiene Services. The Company offers a variety of industrial
hygiene services, including asbestos management, industrial hygiene
investigations and analyses, indoor air quality services and industrial
hygiene laboratory services, each as described below.
ATC provides asbestos management services including comprehensive asbestos
testing and consulting. These services may begin with a survey of facilities
to determine the condition, type, quantity and location of
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asbestos. After gathering field samples, the Company may utilize polarized
light microscopy, phase contrast microscopy and transmission electron
microscopy to analyze asbestos fibers. Other services include risk assessment,
remediation design for asbestos abatement, industrial hygiene services before,
during and after the asbestos removal process, development of operations and
maintenance training programs for facilities personnel and asbestos awareness
seminars for client personnel.
ATC's services are designed to enable building owners and operators to
comply with federal, state and local regulations for asbestos control by
providing a comprehensive approach for controlling or removing asbestos.
Management believes that ATC is one of the largest providers of asbestos
management services in the United States and that ATC will continue to gain
market share in the industry because small regional competitors will be unable
to meet the demands of national, multiple-site projects. ATC's technical
personnel include registered architects, professional engineers, certified
industrial hygienists, certified safety professionals and asbestos
specialists, all with extensive experience in managing asbestos materials.
Such personnel are licensed and certified by federal, state and local
agencies.
As part of the services related to industrial hygiene investigations and
analyses, ATC evaluates potential health hazards in occupational settings,
including hazards arising from exposure to chemical or biological substances.
Potential hazards include corrosive chemicals, solvents, gases, toxic dusts,
radiation, lasers, noise, lighting, heat, bacteria and other pathogenic
organisms. Results of these evaluations determine the extent of exposure to
potentially hazardous substances, and methods can then be developed to control
and minimize associated risks. Field measurements are used to determine
compliance with governmental regulations and other standards. After corrective
measures are designed and implemented, ATC provides follow-up monitoring which
is designed to ensure that workplace exposures are minimized.
Healthy indoor air quality is recognized as an essential factor in promoting
comfort and welfare. ATC's indoor air quality specialists conduct
investigations designed to identify (i) sources of indoor air pollution and
(ii) possible effects on occupants. A thorough building system investigation
evaluates mechanical and ventilation systems. An inventory of chemicals, air
contaminants, office equipment, plants, harmful sub-chemicals, air
contaminants and maintenance practices are part of the evaluation. ATC
typically recommends solutions that are customized to each specific facility
and problem. Market drivers are related to workplace environment and
productivity issues.
ATC's laboratory services utilize in-house analytical testing facilities
capable of detecting and quantifying a wide variety of materials, including
asbestos-containing materials and hazardous substances. These laboratories are
certified in states where ATC's industrial hygiene services are offered. ATC
provides industrial hygiene services to commercial, institutional and
industrial clients and governmental entities. Compliance with federal, state
and local regulations is a market driver; however, general concern for human
health and the environment, along with potential liabilities, are also
significant incentives for clients requesting these services.
Water and Wastewater Management. Due to the acquisition of BCM, ATC has the
ability to provide water and wastewater services for municipal and industrial
clients. For municipal water clients, these services include the design,
operation, maintenance and construction management of water supply systems and
reservoirs, water treatment plants, water pumping systems, pipelines and
elevated storage tanks. Municipal sewerage system services include the design,
operation and maintenance, financial rate analysis and construction management
of sewers, lift stations and wastewater treatment systems. Market drivers for
these services are the demand for new or upgraded water and sewerage systems
in developing residential and commercial areas. Furthermore, old water and
sewerage systems constructed prior to the 1980's are deteriorating and often
require upgrading. Regulatory requirements for meeting water quality criteria
and local moratoriums on area developments are often drivers for these
services. Municipal client relationships generally require a significant
effort to develop; however, once established, such relationships can provide
long-term demand for repeat services by a provider.
Industrial water and wastewater services are more client-specific with
regard to the types of services required. Prerequisite qualifications for
selection by an industrial client are knowledge and experience with
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various manufacturing processes along with expertise in a variety of
biological and physical/chemical processes. Client relationship development
and quality service delivery are key factors in maintaining repeat business
with industrial clients. Typical project tasks may include wastewater
characterization studies, permitting and regulatory strategy development,
process water and material balances, waste treatability studies, water and
wastewater treatment system design, system operation and maintenance and
construction management. Market drivers include the need to expand an
industrial facility's production rates and compliance with treated effluent
discharge criteria established by state and federal regulatory agencies. Other
integrated ATC services may include hazardous waste management services,
analytical laboratory services, construction materials testing and engineering
and environmental insurance.
Lead Risk Management Services. ATC was one of the first companies to provide
national lead risk management services because it had the first state-
accredited lead risk management training institute in the United States. ATC
is a co-founder of the National Lead Abatement Council, the first trade
organization representing contractors, inspectors, vendors, attorneys and
public officials engaged in managing lead risks. ATC maintains a high degree
of visibility and credibility in the lead services arena through participation
in professional and standard-setting organizations and through publishing
articles in trade publications.
Until recently, lead risk management services were sought primarily to
establish compliance with lead poisoning prevention regulations. However, the
market is now expanding as clients increasingly seek voluntary risk reduction
programs and defend against a proliferation of lead poisoning lawsuits.
Federal law requires lead paint testing of all federally assisted public
housing authority projects nationwide, and comprehensive abatement of lead
paint identified in these projects. ATC has provided lead paint testing and
abatement project management services to numerous public housing authorities
throughout the United States. ATC is currently pursuing opportunities created
by federally funded programs.
Management believes that the market for lead risk management services has a
potential for high growth rates over the next five to ten years. In order to
focus and develop its technical resources in this area of specialization and
provide a program dedicated to marketing these services to targeted groups,
ATC formed the Lead Risk Management Program in 1996.
ATC's lead risk management services are comprised of corporate lead risk
management services, steel structure and industrial compliance services and
residential lead paint testing and project management services.
ATC develops corporate lead risk management programs, policies and
procedures catering primarily to insurance companies, lending institutions,
law firms and large real estate managers. Policy development typically entails
an examination of a client's real estate with respect to potential lead
liabilities. Working closely with corporate legal and technical divisions, ATC
recommends policies and procedures to ensure lead-safe management of
properties and compliance with applicable lead poisoning prevention
regulations. The Company's corporate lead risk management services also
include designing and implementing compliance training seminars and workshops.
ATC also offers lead paint litigation support services exclusively in
support of property owners, managers, lending institutions and insurers. These
services include case consultation, regulatory analysis, document and
deposition review, expert testimony, as well as site investigation and testing
services.
ATC provides comprehensive environmental monitoring of surface preparation
activities that include the removal of lead and associated coatings from steel
structures. Nationwide, hundreds of thousands of petroleum storage tanks,
water tanks, transportation bridges and other major structures are made of
steel and painted with coats of lead-based paints and lead primers. These
structures require periodic maintenance, including full removal of the lead
paint and primers followed by re-painting to prevent corrosion. ATC employs
trained engineers and prepares abatement specifications to guide major
customers through lead removal activities in accordance with all federal,
state and local regulations.
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ATC provides residential property owners and managers with testing and
project management services for the analysis and abatement of lead
contamination in paint, soil, air and drinking water. Consultation services
include conducting surveys to identify lead problems, and designing optimal
procedures for the removal of lead paint. Project management services include
providing construction monitoring of lead projects to prevent exposure to lead
dust.
Health and Safety Training. The Company has established several health and
safety training and advisory programs. ATC operates training schools under the
name The Environmental Institute, as well as under ATC Associates. Management
believes that the Environmental Institute is a leading environmental services
learning center. The Company develops and presents public and private training
courses each year for those involved in environmental, asbestos, lead,
hazardous materials and safety and health issues. "Right-to-Know" programs in
accordance with mandates by OSHA, the EPA and some state regulations are
designed to communicate information regarding the hazards of chemicals to
workers and communities. ATC routinely customizes courses to meet specific
client needs. The Environmental Institute also provides basic technical
training for ATC's professionals.
Construction Materials Testing and Engineering Services
ATC provides testing and client representative services related to soil,
concrete and steel materials used in the construction industry. These services
are divided between two broad categories (i) construction materials testing
and engineering and (ii) geotechnical testing and engineering. From the
preconstruction stage of evaluating materials to the completion of the
project, ATC's range of services supporting construction projects include
quality assurance and quality control, construction specifications, test
evaluations, materials performance documentation and problem solving. These
services are conducted in ATC's laboratories prior to and during construction,
in the fabrication plant and at the construction site.
ATC's expertise in these areas provide valuable assistance to clients in the
construction of foundations, highways, railroads, dams, bridges, transmission
towers, buildings, airports, industrial plants, water supply facilities,
wastewater treatment facilities, dock and waterway facilities, solid waste
landfills, power plants and many other structures. Potential clients include
architects, engineers, contractors, commercial developers, local and federal
government agencies and corporations.
ATC provides state-of-the-art testing of concrete and structural and
reinforcing steel. Through proven systematic methods and procedures of quality
control management, ATC customizes project work to meet the specific needs of
the client. As a result of its national presence, ATC is able to deliver
materials testing services on-site for the duration of a construction project,
giving it a competitive advantage over regional and local providers.
Concrete is tested during and after placement to measure the mixture and
strength of concrete. Specifications are developed by the architect or
engineer and are customized for the design of the structure or foundation.
Steel structures are tested for deficiencies in two main areas, the beam
welds and the fastening bolts. While many steel tests are performed at the
project site, tests are also done at the steel fabrication plant, where the
process can be monitored and imperfections can be corrected more efficiently.
Concrete and steel samples collected in the field are transported back to a
local ATC laboratory for analysis. Field representatives are deployed to the
job site from the nearest area office providing these services. Typically, a
200-mile proximity to the job site is the most economically feasible distance
for providing these services. Therefore, ATC only provides these services in
areas with construction activities to support the necessary operational
resources. Periodically, field offices are established to accommodate large
projects.
Geotechnical Engineering and Consulting Services. ATC's geotechnical
engineering and consulting services involve the analysis of soil data and
design of structures supported on or within the earth. Geotechnical
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services begin with the project planning and design phase of a project, extend
through construction, and often continue through the service life of a
structure. Geotechnical engineers, geologists and earth scientists conduct
geotechnical, subsurface explorations to ascertain the behavior of soil, rock
and groundwater as affected by existing geologic features and new construction
activities. ATC's professionals have expertise in soil and rock mechanics,
geophysics and earthquake engineering. The design of a subsurface program
requires familiarity with local geology and a thorough knowledge of economical
construction methods. ATC provides expertise to customers through its
extensive geographic distribution of offices staffed by professionals with
expertise in a wide variety of soil conditions and physiographic provinces.
Soil tests are performed to determine soil compaction characteristics both
before foundation design and after excavation or soil placement has taken
place. The purpose of these tests is to determine the stability and load-
bearing characteristics of a soil before, during and after construction. ATC
uses the expertise of its geotechnical engineers, geologists and experienced
field drilling personnel to design a field exploratory program. The field data
and samples are brought to certified ATC soils laboratories for further
testing and evaluation. The information obtained during the field exploration
and laboratory testing is used to provide the client with cost-effective
designs for high-rise building foundations, site improvements, tunnels, dams,
manufacturing facilities, landfills, bridges and many other structures. ATC
also provides specific recommendations to avoid delays and cost overruns
during construction, particularly in the weather-dependent site preparation
phase of a project. An engineering report is prepared under the direction and
review of a licensed professional engineer familiar with the particular
geologic conditions and engineering practices of the project area.
Information Management Technology Services
ATC's information management technology services encompass all phases of
information system design, development, maintenance and management in client
server and mainframe-based environments. The Company also provides support to
clients in maintaining computer systems and in areas such as help desk
management and other system and network support services. The Company's
information management technology services fall into the following four
categories: (i) general information technology consulting services; (ii)
internet/intranet applications development; (iii) outsourcing services; and
(iv) environmental information management technology services.
The Company's general information management technology consulting services
are designed to provide highly-trained technical personnel to meet clients'
supplemental staffing needs. Such personnel typically provide services in the
areas of design, programming, testing, implementation, maintenance, support,
data conversions and the evaluation of networks, databases and operating
systems. These services are generally provided on an hourly billing rate
basis.
Through its Internet/intranet applications development services, the Company
provides leading-edge technology design and implementation services in the
development of dynamic database applications that operate over clients'
customized intranets or through the Internet. These services can include web
site hosting services, where appropriate, which are used to segregate the
applications database from a client's internal data base systems.
As part of its outsourcing services, ATC offers outsourcing staff support
services to provide staffing and management of all aspects of an information
management technology project or service within guidelines established by the
Company and the client. The Company's outsourcing service offerings include
help desk support, remote network administration and Internet site
development, hosting, maintenance and support.
ATC provides information management technology services related to
environmental data, data storage and access and regulatory compliance
documentation. This capability, along with ATC's core environmental services,
national infrastructure, depth of professional expertise and environmental
insurance products, has been a competitive advantage in winning certain
national contracts.
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Market demand for these services is high, and pricing strategies typically
allow high labor rate multipliers. This is especially the case for critically
needed expertise by a client when information management technology systems
are inoperable due to software or hardware problems. Prospective clients for
ATC's information management technology services include corporations,
institutions and governmental agencies.
Other ATC Products and Services
In addition to the core services described above, ATC maintains specialized
services that can be integrated with the overall needs of its clients. This is
part of ATC's overall business strategy to build and maintain client
relationships while adjusting to the market demand for professional services.
Most of these services have either developed within the last five years or
been obtained through recent acquisitions. The following is a description of
some of the non-core services offered by ATC to complement its core business.
Environmental Laboratory Analytical Services. ATC provides environmental
laboratory analytical services to outside clients as well as to internal
operations. Full-service analytical laboratories are located in Atlanta,
Georgia; Indianapolis, Indiana; Woburn, Massachusetts; and Dallas, Texas and
cover organic and inorganic analyses of soil, water, waste and gas media.
These laboratories as well as various other ATC offices also provide analysis
of asbestos materials. State and federal certifications are maintained by
ATC's laboratories for conducting tests under strict audits established by
state and federal agencies' quality assurance protocols. Annual
recertification procedures are typically required to ensure that laboratories
continue to operate under the latest standards of practice. Laboratory service
clients are comprised of commercial, industrial, municipal and federal
government clients. On many occasions, these services are provided as support
to other internal projects and services offered by ATC. However, due to market
demand, ATC's laboratories obtain over half of their revenues from outside
clients, many of which are direct competitors of ATC.
Environmental Insurance. As a result of the recent acquisition of EWI, ATC
can now offer environmental insurance products to existing and new clients. In
the last two years, numerous new insurance products have been developed to
meet the increasing demand by owners or operators for liability protection and
risk limitation against environmental problems. Examples of new insurance
products include: (i) environmental risk transfer insurance for sellers and
buyers of real estate; (ii) lender protection insurance; and (iii) remedial
cost cap insurance. Management believes that the ability to offer innovative
environmental insurance products to its clients is a distinct advantage in the
environmental services industry that will allow ATC to further meet the
special needs of its clients. Prospective clients for these products are
lending organizations, commercial developers, real estate holding companies,
municipalities and large corporations. Insurance premiums can vary from
several thousand dollars to several hundred thousand dollars, depending upon
the extent and amount of coverage required. These costs, although significant,
are seen as reasonable risk management tools by a client when spread across a
portfolio or when necessary to close a transaction or avoid carrying or
incurring a major liability on a corporate balance sheet.
Building Condition Surveys. As part of its integrated service strategy for
commercial and industrial clients, ATC also offers building condition surveys.
As a general rule, building condition surveys involve an evaluation of the
facility's heating, ventilation and lighting systems, water services, roofing
system and structural/ architectural construction. This service is frequently
associated with the purchase of real estate where the purchaser requires an
evaluation of operation and maintenance exposures of property prior to
closing. These services are also integrated with other ATC commercial and
industrial project services such as Phase I and Phase II assessments, asbestos
assessments, indoor air quality consulting and lead risk management. ATC is in
the process of promoting and developing building condition surveys on a
national level.
Construction Management Services. Through its effort to serve its clients'
needs and generate additional profitable revenue sources, ATC extends its
services to include construction management services. These services range
from serving as the client's field representative during construction to
complete management and responsibility for project construction. The role of
the client representative is to ensure that the construction is done according
to the plans and specifications developed by either ATC or the
architect/engineer. These services are typically billed on either daily rates
or hourly rates plus expense reimbursement.
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An example of such services includes the oversight of construction of a
water or wastewater treatment facility for a client. Such projects are
generally long duration assignments. Other client opportunities may occur when
a client desires to have a project completed on a "turnkey" basis, which
covers not only the facility design but also its construction and startup
operation.
MARKETING AND SALES
Marketing, Environmental and Construction Materials and Engineering Testing
Services. The Company provides its professional consulting, engineering and
testing services in the environmental and construction industries to Fortune
500 companies, small companies, real estate property owners and managers and
federal, state and local governments. The Company's contracts are obtained by
its professional sales staff through relationship building followed by
proposals and bidding. Referrals from existing and former clients, architects
and engineers are a significant source of contract leads. The Company has been
able to sell both environmental services and construction materials testing
and engineering services to the same clients.
Consistent with trends towards focusing on litigation, liability and cost
management, there is an increasing tendency for companies to obtain a greater
share of their environmental services from a smaller number of large national
service providers. Industry observers attribute this trend to (i) the need for
broader services, (ii) the desire to reduce the number of consultants used and
(iii) secondary issues such as minimizing liability exposure through the use
of large firms carrying greater insurance and indemnity coverage. The Company
believes that this trend presents a significant opportunity for firms, such as
ATC, that have the service diversity, the technical skills, branch office
coverage, team mobilization capabilities and financial resources to perform
the services and provide the insurance and indemnity protection demanded by
large corporate and governmental clients.
To take advantage of this trend, ATC's overall marketing strategy is a
combined national and regional approach. National efforts are directed by
senior professionals of the Company, while regional efforts are typically
directed either by a regional or branch manager or by a sales and marketing
professional. The Company's regional sales and marketing departments generate
leads, act as proposal administrators, perform technical writing and generally
support the Company's sales efforts. In addition, senior technical and sales
staff have been assigned to market specialized services to specific sectors
such as the PCS/Wireless communications industry and Brownfield initiatives.
ATC presently markets its environmental services and construction materials
testing and engineering services through its network of branch offices located
in 34 states. Direct marketing is accomplished by technical sales
representatives, technical personnel and management personnel who routinely
call on prospective clients. ATC also utilizes government and industry
publications to identify potential services and requests for project proposals
for submission of competitive bids. In addition, ATC markets its services
through its environmental seminars and training courses for existing and
potential clients.
Marketing, Information Management Technology Services. The Company provides
information management technology consulting services to Fortune 500 and other
clients, including major companies in the telecommunications, financial
services and pharmaceutical industries. A significant majority of the
Company's information management technology service revenue is derived from
its existing client base. The Company obtains new clients through personal
sales presentations, telemarketing, referrals from other clients and referrals
from current and former staff. In addition, ATC has found that a significant
need for information management technology services exists among its present
environmental services and construction materials testing and engineering
clients and as a result, cross-selling between these areas has been
advantageous.
National Technical and Sales Programs. Recent trends in the engineering and
consulting market require that a service provider commit considerable
resources toward maintaining and developing client relationships. This shift
from project-specific to long-term client relationship partnering requires a
service provider to dedicate both technical and marketing resources toward
tailoring services for a client. It also requires the provider to maintain a
broad range of responsive, quality services. The rewards of such client
relationship partnering and quality, service-focused programs are continued
revenues from repeat customers and, in many instances, sole source
solicitation and award of work to the firm.
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ATC's two initial national programs were the National Commercial Accounts
Program, started in November 1995, and the Lead Risk Management Program,
started in March 1996. Revenues from the National Commercial Accounts Program
are derived primarily from real estate assessment services provided to banks,
insurance companies, real estate management companies and retailers. The Lead
Risk Management Program's revenues are derived primarily from local and state
housing authorities, municipalities and financial institutions.
In May 1996, ATC established the Hazardous Waste Management/Brownfield
Development Program. This program was created to develop, coordinate and
market ATC's hazardous waste consulting services primarily targeted at large
industrial clients. In response to the emerging Brownfield redevelopment
market, ATC also established business relationships with firms specializing in
the identification, purchase and resale of environmentally-impaired
properties. Since April, 1997 when these relationships were formed, ATC has
been awarded two Brownfield projects.
In August 1996, ATC established the Federal Program which is focused on
procurement initiatives from the U.S. Postal Services, the Army Corps of
Engineers, the Veterans Administration and several other small federal
government agencies. Much of this work is derived from subcontracting or team
relationships with larger federal government contractors. The purpose of this
program is to coordinate and maximize ATC's efforts to obtain business from
the federal government.
In March 1997, ATC initiated the PCS/Wireless Communication Program. In
1995, it was anticipated that up to 100,000 towers would be needed by the year
2000 to deploy networks for mobile radio and PCS services. As of June 30,
1997, there were over 38,000 operating sites. ATC services required for each
tower installation include environmental, geotechnical, structural and
construction materials testing and engineering. Since its inception, the
program has received project awards from six nationally known communication
companies.
In July 1997, ATC formally established the Petroleum Services Program to
focus on coordinating and expanding ATC's services to existing and targeted
retail and fully integrated petroleum companies. Eligible facilities for ATC
services include underground and above-ground storage tank installations,
terminals, pipelines and refineries. Currently, eleven nationally-known
petroleum companies are managed by the program.
In order to capitalize on emerging high growth markets and services, ATC
plans to continue adding new National Programs. One program under
consideration is an international business development program. The Company
intends to expand its operations into international markets, beginning with
the Asia-Pacific region. ATC is currently providing asbestos management
services to Mitsui Fudosan in Japan and is designing a wastewater treatment
facility for a U.S. multi-national corporation in China. The Company intends
to use these and other relationships to pursue new opportunities in the Asia-
Pacific region and, if appropriate, establish an international business
development program. As part of its acquisition strategy, ATC will also
consider candidate firms with existing operations or business relationships in
attractive international markets.
KEY CLIENT SECTORS
ATC's services and products are applicable to a full range of business,
manufacturing, institutional and governmental sectors. However, based on
demand for its services, existing relationships and revenue generation
potential, ATC has targeted eight key client sectors for development under its
national and regional sales activities. Those key client sectors, in order of
priority, are:
1. Petroleum Industry
2. Chemical Industry
3. Financial Institutions
4. Real Estate Management and Development Firms
5. Municipalities
6. Public School Systems
7. Public Housing Authorities
8. U.S. Army Corps of Engineers
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COMPETITION
The environmental services, construction materials testing and engineering
and information management technology consulting industries in which the
Company operates are subject to intense competition. In addition to the
thousands of small environmental consulting and testing firms operating in the
United States, ATC competes with several national environmental engineering
and consulting firms including Law Companies Group, Inc., Dames & Moore, Inc.
and Professional Service Industries, Inc. In the information management
technology consulting market, ATC competes with many small and medium-sized
firms as well as large temporary staffing companies, including The Olsten
Corporation, Corestaff, Inc. and Accustaff Incorporated, among others, and
large systems consulting firms.
Certain of ATC's present and future competitors may have greater financial,
technical and personnel resources than ATC. It is not possible to predict the
extent of competition that ATC will encounter in the near future as the
environmental services, construction materials testing and engineering and
information management technology consulting services industries continue to
mature and consolidate. Historically, competition has been based primarily on
the quality, timeliness and costs of services. The ability of ATC to compete
successfully will depend upon its marketing efforts, its ability to accurately
estimate costs, the quality of the work it performs, its ability to hire and
train qualified personnel and the availability of insurance.
GOVERNMENTAL REGULATION
Public concern in the 1970's and 1980's over health, safety and preservation
of the environment resulted in the enactment of a broad range of environmental
laws and regulations. This growth has slowed somewhat in the 1990's. However,
the currently existing laws and their implementing regulations affect nearly
every industry in the United States and are expected to continue to stimulate
demand for ATC's services.
Most environmental laws and regulations are promulgated by Congress and
departments and agencies of the federal government. Many of the federal
regulations contemplate enforcement by state agencies and adoption by the
states of similar regulations which must meet the minimum federal
requirements. In areas of environmental law where federal regulation is
silent, the states may adopt their own environmental laws. Local governments
such as counties and municipalities may also enact and enforce environmental
laws that address local concerns.
Those federal agencies whose regulations, guidelines or standards have the
greatest potential impact on ATC are:
1. The EPA, which through a pervasive body of laws and regulations,
including statutes, such as the Clean Air Act, CERCLA, the Clean Water Act,
the National Environmental Policy Act and the Asbestos Hazard Emergency
Response Act and regulations such as the National Emissions Standards for
Hazardous Air Pollutants, regulates a very broad spectrum of industrial,
commercial and governmental activities, including the handling and disposal
of hazardous waste and the cleanup of asbestos contamination;
2. The United States Department of Labor, which, through OSHA requires
particular work practices, sets limits for worker exposure to hazardous
substances on the job, requires employers to provide employees in certain
industries with protective devices and requires employers to maintain
records for periods of up to 30 years;
3. HUD, which sets the standards for and funds the testing and
remediation of lead-based paint in publicly funded housing; and
4. The United States Department of Transportation, which regulates
packaging and transportation of hazardous waste by all who transport or
cause the transport of hazardous waste.
The EPA, OSHA and HUD have each published regulations and guidelines to
safeguard employees and the general public from environmental hazards. Federal
regulations specify work practices for removal of asbestos and lead containing
materials from buildings. Federal law also presently requires employers to
inform workers,
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and in some places the general public, of the dangers connected with hazardous
chemicals in the workplace. These "Right-to-Know" laws usually require
employers to list all hazardous chemicals in the workplace, to instruct
workers about safe work practices and to train workers on how to respond in
the case of exposure to or release of hazardous chemicals.
Most states and local governments have adopted licensing and certification
requirements for workers engaged in the environmental industry, which require
workers to attend training classes. ATC is currently accredited by the
National Voluntary Laboratory Program and expects to continue to participate
in all future National Institute of Standards and Technology programs.
Furthermore, ATC maintains various licenses and certifications pertaining to
its laboratories, training facilities and certain field testing equipment in
addition to licenses and certification of its employees. ATC has not
experienced, and does not contemplate, any material difficulties in complying
with regulatory and licensing provisions applicable to its business. ATC has
received citations from governmental authorities, none of which have had a
material adverse effect on the Company's business operations.
The information management technology industry is not subject to significant
government regulation or certification requirements. It is affected by tax
regulations concerning the definition of independent contractors and by
regulations governing the immigration of non-U.S. technical staff who make up
a growing percentage of the staff available for consulting assignments.
ORGANIZATIONAL STRUCTURE
ATC's organizational structure consists of five operating regions and
corporate support operations in Sioux Falls, South Dakota; New York, New York;
and Woburn, Massachusetts. Branch offices within each region are encouraged to
share projects and technical resources to accomplish common deadlines and
goals. Profits and losses are measured at the branch level to ensure
profitability of all operations. Operational management and performance
incentives, however, are maintained at the regional level to foster
coordination of effort and technical resources in broad geographic areas.
OFFICE AND SUPPORT SERVICES
ATC operates through 73 branches located in 34 states. The branch is the
basic economic and functional unit of the Company through which all services
are provided. Personnel located in each office are experienced in developing
and implementing solutions which meet the requirements of local regulations.
The Company monitors all branches with an experienced staff of regional vice
presidents. ATC specialists are responsible for introducing new services to
customers, managing projects within budget and meeting pre-established quality
control standards. Each region also has a dedicated sales and marketing staff
and a financial controller. ATC has created systems and controls at the branch
level through the use of standardized operating procedures.
Financial controls involve ongoing review of specific benchmarks, key
components of which include, bi-weekly sales and profit projections, payroll
expenses and employee utilization rates. Branch managers are responsible for
hiring, training, and motivating branch personnel. Incentives at ATC are based
on a bonus program directed at regional performance. The bonus program has two
key performance criteria: (i) operating margins and (ii) days sales
outstanding. Bonuses for a region are earned on an increasing scale with
minimum thresholds for Branch Operating Profit to encourage maximum operating
performance and the timely collection of accounts receivable. The Company
believes that the incentive program has allowed it to achieve a high retention
rate for managers.
The Company intends to relocate all administrative functions located in
Sioux Falls, South Dakota, consisting primarily of accounting, human resources
and MIS support, to Woburn, Massachusetts. Severance costs associated with the
relocation are expected to be nominal. It is anticipated that the relocation
will be complete by the end of the first quarter of fiscal 1999.
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PERSONNEL
As of November 30, 1997, ATC employed approximately 2,018 employees, 1,691
of which were full-time employees and 327 of which were part-time staff
members. ATC's employees consist of 1,585 technical and professional
personnel, 54 sales and marketing persons and 379 administrative employees
inclusive of executive officers. The backgrounds of ATC's technical and
professional staff include, among other disciplines, environmental
engineering, information management technology, industrial hygiene,
hydrogeology, chemistry, biology and geology. ATC from time to time hires
additional personnel on a temporary basis.
ATC believes that it has been able to establish and maintain a stable work
force of experienced personnel by paying competitive wages and by providing
standard benefits. ATC believes that its own training school has helped to
ensure the availability of a trained work force. To help maintain and grow its
information management technology staff, ATC has increased the proportion of
work performed in its facilities so that these projects may be used to provide
enhanced training and retention opportunities for staff when they are not
engaged at a client site.
FACILITIES
ATC leases office space, laboratory facilities, temporary housing facilities
and storage space under operating lease agreements, which have varying dates
of expiration. ATC utilizes all of its leased facilities near maximum
capacity. However, ATC does not foresee any difficulty in leasing adequate
supplementary facilities, if necessary, and therefore does not believe any of
its leases are material. The Company leases the facility housing its principal
executive, administrative, operations and laboratory facilities, aggregating
approximately 40,000 square feet located at 104 East 25th Street, New York,
New York at a base rate of $362,700 per annum with a term ending on September
30, 2001. ATC has three separate lease and sublease agreements which, on an
aggregate basis, cover the premises housing its consulting and laboratory
operations at 600 West Cummings Park, Woburn, Massachusetts, comprised of
approximately 24,567 square feet at an aggregate base rent of approximately
$310,844, with lease terms expiring at the end of the summer in 2002. ATC
entered into three leases with the Mann Realty Company in connection with its
acquisition of the assets of ATEC. These leases cover the premises located in
Indianapolis, Indiana; Dallas, Texas and Atlanta, Georgia. These leases cover
15,827 square feet, 12,150 square feet and 18,700 square feet, respectively,
at annual rents of $193,512, $117,540 and $209,936, respectively. Each of the
three leases has a ten-year term, all of which commenced on May 24, 1996, with
an option to terminate after four years upon the occurrence of certain
specified events. Although the Company believes it can lease similar space, no
assurances can be given that the Company will obtain leases at the same
locations and at the same lease rates. As a result of the Transactions, the
Company and certain of its subsidiaries are in technical violation of certain
of their leases which require prior written consent upon assignment or a
change of control. To the extent such consent is not obtained, the Company may
incur incremental rental expenses for its facilities or incur relocation costs
and there can be no assurance that any such expenses or costs would not have a
material adverse effect on the Company's financial position or results of
operations.
In addition, ATC utilizes various laboratory, field and computer equipment
which are owned or leased. ATC also rents equipment on a project-by-project
basis.
PROFESSIONAL TRAINING AND QUALITY CONTROL
ATC's commitment to quality control and high quality work and work practices
was first established when the Company was primarily an environmental
laboratory. This commitment is demonstrated by ATC's corporate quality
awareness strategy, the principles of which are founded on client
satisfaction, participation of employees at all levels, problem prevention and
continual quality improvement. ATC insures quality awareness through both
internal and external training at branch, regional and national levels. Branch
training covers all phases of regulatory requirements by discipline as well as
specific technical training developed through ATC's National Programs.
Additionally, field workshops and mentoring programs are commonly used. Formal
training is
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provided by the Environmental Institute and ATC's other training divisions and
supplemented by outside training providers as necessary.
INSURANCE
ATC has secured a "claims made" professional liability insurance policy,
including contractor's pollution liability coverage. The professional
liability insurance policy has a two-year term, ending on May 23, 1998, which
is subject to biennial renewal, with a per-claim and aggregate limit of $10.0
million and a deductible of $250,000 per claim, although increased limits have
been obtained on a specific endorsement basis to meet the needs of particular
clients or contracts. A "claims made" policy only insures against claims filed
during the period in which the policy is in effect. This policy covers both
errors and omissions. Under the policy, the deductible payable in respect of a
claim decreases to $50,000 per claim for the balance of the policy term, if
the Company has paid an aggregate of $750,000 during the policy term. Although
various claims have been made in the past against the Company's professional
liability/contractor's pollution policy, to date no such claim has ever
resulted in an insured loss. The Company has paid $0, $25,000 and $16,000,
respectively, for fiscal 1996, fiscal 1997 and the nine months ended November
30, 1997, for uninsured professional liability and pollution claims (i.e.,
claims that have not exceeded the $250,000 deductible) under this policy. In
the three months ended November 30, 1997, the Company recognized a $250,000
charge related to a probable loss for the uninsured portion of a claim made
under the Company's professional liability insurance policy. ATC also carries
an occurrence form general liability insurance policy in the amount of $1.0
million, with a $10.0 million umbrella; this coverage includes
products/completed operations. The general liability insurance policy has a
one-year term, ending on May 23, 1998, which is subject to annual renewal.
ATC's policies have been renewed in each of the last several years that they
have been in effect. The Company maintains a claims made directors and
officers' liability insurance policy, which was procured following the
consummation of the Transactions and procured a six-year extended reporting
period for the directors and officers' liability insurance policy that was in
effect prior to the Transactions.
LEGAL PROCEEDINGS
Recent Proceedings
On or about November 5, 1997, a summons and complaint were filed in the
Court of Chancery of the State of Delaware in and for New Castle County (the
"Delaware Court") on behalf of Irvin Richter, as plaintiff (the "Richter
Complaint"). The Richter Complaint named the Company and the members of the
Company's board of directors as defendants. On or about December 18, 1997,
counsel for Mr. Richter filed with the Delaware Court a Notice of Dismissal
Without Prejudice of the Richter Complaint. On or about November 12, 1997,
another summons and complaint were filed in the Delaware Court on behalf of
Joseph I. Peters, as plaintiff (the "Peters Action"). On or about December 18,
1997, an amended complaint was filed in the Peters Action (the "Amended
Complaint"). The Amended Complaint names the Company, the members of the
Company's board of directors, Weiss Peck and the WPG Corporate Development
Associates V, L.P. as defendants. The Amended Complaint challenges the Tender
Offer and Merger. The Amended Complaint seeks class action status on behalf of
the stockholders of the Company. The plaintiff in the Peters Action claims
that the offer price for the Company's Common Stock is inadequate and that the
defendants have breached their fiduciary duties to the plaintiff and other
stockholders of the Company. The plaintiff seeks, among other things, to
enjoin the Transactions or compensatory damages. On January 7, 1998, a motion
to dismiss was filed by Weiss Peck and WPG Corporate Development Associates V,
L.P. On January 13, 1998, answers to the complaint were filed by the Company
and the remaining defendants. The parties to the Peters Action are currently
conducting discovery. The Company believes the allegations contained in the
Amended Complaint are without merit and intends to defend the Peters Action
vigorously; however, there can be no assurance of the outcome.
General Litigation
First Fidelity Bank, N.A., et al v. Hill International, Inc. et al.,
Superior Court of New Jersey, Law Division, Burlington County, Docket No. Bur-
L-03400-95, filed December 19, 1995. Irvin E. Richter, et al v. ATC Group
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Services Inc., et al. United States District Court, District of New Jersey,
Civ. No. 96 CV 5818 (JBS) filed December 6, 1996. On December 19, 1995, a
second amended complaint was filed in the above-entitled action which joined
the Company as a defendant and included a count against the Company seeking
recovery of certain assets purchased from Hill on the grounds that plaintiff
banks held security interests in the assets and that Hill was in default under
the security agreement creating such alleged security interests. The original
plaintiffs in this action were First Fidelity Bank, N.A. and United Jersey
Bank, N.A. The primary defendants were Hill and certain of its subsidiaries,
and Irvin Richter, David Richter, Janice Richter and William Doyle. Irvin
Richter and David Richter are officers and stockholders of Hill. In April
1996, the Company filed a cross-claim against Hill, Irvin Richter and David
Richter alleging breach of contract and fraud, among other allegations and
seeking unspecified damages, including punitive damages and equitable relief.
In August, 1996, Hill and the Richters filed an answer denying ATC's cross-
claims, a cross-claim against ATC and a third party claim against certain
members of ATC's management and an employee. The cross-claim and third party
claim seek unspecified damages, including punitive damages, for defamation,
breach of the Richters' non-competition agreements and securities fraud. The
defamation claims are based (i) on plaintiff banks' allegation of fraud
against Hill and the Richters in their amended complaint, which Hill and the
Richters allege was based on defamatory statements made by ATC in settlement
discussions with the plaintiff banks and (ii) on a letter which was sent to an
account debtor of the Company by an employee alleged to contain defamatory
statements. In its answer, the Company both denies that it made defamatory
statements and asserts that the defamation allegations fail to state legally
valid claims. The breach of contract and securities claims are based on
allegations that ATC made representations concerning a registration rights
agreement to be provided in connection with options issued to the Richters as
consideration for their non-competition agreements. In its answer, the Company
denies that an agreement concerning registration rights was ever reached and
asserts that any such rights were forfeited or suspended by the Richters in
any case as a result of their conduct in connection with the asset purchase.
These related cases are in their discovery phases. In January, 1997, the
plaintiff banks dismissed their claim against ATC. On December 6, 1996, Hill
and the Richters commenced an action against ATC and the same officers and
employees of ATC alleging essentially the same claims in federal court as in
the state action. This action is entitled Irwin E. Richter et al. v. ATC Group
Services, et al., Civ. No. 96-5818 (JBS), U.S. District Court for the District
of New Jersey, December 6, 1996. ATC has answered, raising the same defenses
and additional defenses related to the timeliness of the federal claim. The
case is currently in the discovery phase. It does not create a risk of double
recovery. In the Company's opinion, the outcome of this matter will not have a
significant effect on the Company's financial position or future results of
operations, although no assurances can be given in this regard.
Commonwealth of Massachusetts v. TLT Construction Corp. et al., Civ. Action
No. 96-02281 F, Superior Court of Middlesex County, Massachusetts. This is an
action brought by the Commonwealth of Massachusetts in April 1996, against the
architects and general contractor on a renovation and construction project on
the Suffolk County Courthouse in Massachusetts. The basis of the lawsuit is
that one or more damp-proofing products specified by the architect defendants
and installed by the contractor defendant made employees in the courthouse ill
because of the off-gassing of harmful vapors. Dennison Environmental Services
Inc., ("Dennison") an ATC subsidiary, was joined on August 13, 1996, as a
third party defendant by TLT Construction Corporation, the general contractor,
because Dennison performed some air quality testing of the air in the
courthouse for the Commonwealth of Massachusetts during the construction
process. The contractor alleges that it acted in reliance on these tests in
continuing to install the material after the test report was given to it by
the state. ATC's position is that it did not commit any error or omission in
this case, that ATC made no representation to the contractors or material
supplier and had no privity with them and that Dennison's opinion concerning
short term, during-construction health effects of the off-gassing could not be
justifiably relied upon with respect to the long-term performance and health
effects of the product or its installation. This case is in the discovery
phase. At this point, ATC considers the case to be without merit, and ATC
intends to vigorously defend the action. The Company currently has in force a
professional liability insurance policy covering this claim in the amount of
$10,000,000 with a deductible of $250,000. Notice of claim has been made
regarding this action and the insurer has agreed to assume the defense. In the
Company's opinion, the outcome of this matter will not have a significant
effect on the Company's financial position or future results of operations,
although no assurances can be given in this regard.
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Barrett-Moeller et al. v. ATC Associates Inc., Civ. Action No. 97-01037D,
Superior Court of Middlesex County, Massachusetts. This is an action arising
out of the same set of occurrences as gave rise to Commonwealth of
Massachusetts v. TLT Construction, Inc. described above. The action was
brought by a group of employees who worked in the Suffolk County Courthouse
during the period in which the off-gassing of harmful vapors was alleged to
have occurred. The suit seeks damages for personal injury in an unspecified
amount. Notice of this claim has been made to ATC's professional liability
insurer. The claim should be covered by insurance, subject to a $250,000
deductible.
Joan Spencer v. TLT Construction et al., Civ. Action No. 97-4161C, Superior
Court of Middlesex County, Massachusetts. This is an action arising out of the
same set of occurrences as gave rise to Commonwealth of Massachusetts v. TLT
Construction, Inc. described above. The action was brought by an employee who
worked in the Suffolk County Courthouse during the period in which the off-
gassing of harmful vapors was alleged to have occurred. The suit seeks damages
for personal injury in an unspecified amount. Notice of this claim has been
made to ATC's professional liability insurer. The claim should be covered by
insurance, subject to a $250,000 deductible.
Cambridge Housing Authority v. CON-TEST, Inc. and ATC Group Services Inc.,
Superior Court of Middlesex County, Massachusetts. This action was brought on
October 1, 1997 for damages in excess of $1,000,000 alleging that Con-Test,
Inc. breached its contract with Cambridge Housing Authority and was negligent
in performing asbestos survey work preparatory to a housing project re-
modernization project. ATC was joined as a party on the theory of continuous
business enterprise successor liability. ATC has filed an answer denying that
it was a successor to Con-Test under Massachusetts law and asserting that it
should therefore have no liability for Con-Test's acts or omissions. The
Company believes that the case is without merit because ATC does not meet the
definition of successor liability in the State of Massachusetts.
State of New York Department of Taxation and Finance. The Company has
received a notice of audit from the New York State Department of Taxation and
Finance for the three fiscal years 1993, 1994 and 1995. The agent has issued a
preliminary audit report, which is expected to be the basis of a formal
assessment estimated to be approximately $200,000. The Company is disputing
the agent's positions and intends to appeal any assessment if rendered. No
assurances can be given regarding the ultimate liability, if any, which may
result.
Administrative Violations
Indiana Department of Environmental Management v. ATC Associates Inc. ATC
received a Notice of Violation and Proposed Agreed Order, EPA I.D. No. IND
004939765, dated June 9, 1997, on June 12, 1997. The Notice of Violation seeks
a penalty in the amount of $120,500 for alleged violations of the federal
hazardous waste regulations and Indiana hazardous waste regulations arising
out of the handling of hazardous wastes in ATC's Indianapolis laboratory. On
January 7, 1998, ATC attended a second informal settlement conference with the
Indiana Department of Environmental Management ("IDEM"). On March 24, 1998,
the Company submitted its settlement proposal to IDEM. As a result of this
settlement process, the Company believes that this penalty can be
significantly reduced although there can be no assurances in this regard. ATEC
will be responsible for a significant part of any ultimate penalty.
Accordingly, ATC does not believe this case will result in a material loss.
Probable Claims
One Parkway Project. ATC has received notice of related potential claims by
R.M. Shoemaker Co., a Pennsylvania construction firm, and four of its workers
arising out of ATC's performance of asbestos abatement survey, design and
project monitoring services. The services were performed by ATC's Burlington,
New Jersey office on a project known as the One Parkway Project. The claims
allege that ATC: (i) failed to locate certain asbestos-containing materials in
a high rise building during its inspection of the facility; (ii) failed to
include these undiscovered materials in the design specifications for an
asbestos abatement project in connection with a renovation project on the
building; and (iii) failed to properly clearance inspect and test the areas on
which
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abatement had been performed prior to demobilization of the asbestos abatement
project. The claimants allege that ATC's acts or omissions resulted in
additional corrective actions including remobilization of certain areas,
delays of the renovation project and exposure of construction workers to
asbestos contamination. R.M. Shoemaker has alleged that it sustained damages
in the amount of $1,500,000 for additional abatement costs plus additional
damages for delay. The workers' exposure claims have not been quantified. No
suit has been filed.
At this point, the Company believes that it was not responsible for the
alleged problems on this project. ATC's responsibilities on the project were
limited, and ATC believes that the alleged omissions which allegedly resulted
in the alleged losses were outside the scope of the Company's contractual
responsibilities. The Company has served notice of these claims upon its
professional liability insurer. This coverage is subject to a $250,000
deductible.
Intellectual Property. The Company possesses over one thousand computers, a
majority of which were acquired through acquisitions. No audits have been
performed to confirm that valid licenses exist for software run on all of such
acquired computers. The Company is unable to estimate the potential costs it
would incur if it were found to be in violation of any of the software
licenses.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the name, age and position of each of the
persons who are directors and executive officers of the Company and of key
employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Nicholas J. Malino....... 47 Chief Executive Officer, President and Director
Christopher P. Vincze.... 36 Chief Operating Officer and Director
Wayne A. Crosby.......... 44 Controller
Wesley W. Lang, Jr. ..... 40 Director
Nora E. Kerppola......... 33 Director
Benjamin J. James........ 41 Director
Donald W. Beck........... 39 Senior Vice President
Key Employee:
John J. Smith, Esq....... 47 General Counsel and Secretary
</TABLE>
Nicholas J. Malino. Mr. Malino became Chief Executive Officer, President and
director of the Company following consummation of the Merger. From May 1993 to
the consummation of the Merger, Mr. Malino served as Senior Vice President,
Financial and General Operations of ATC and has been an employee of ATC since
October 1992. Mr. Malino has over fourteen years of experience in managing
professional service organizations. From February 1991 to September 1993, Mr.
Malino was the New York Regional Manager of Kemron Inc., a hazardous waste
consulting company headquartered in McLean, Virginia. From August 1989 to
January 1991, he was the Operations Manager for the New York City branch of
Professional Service Industries, Inc.
Christopher P. Vincze. Mr. Vincze became Chief Operating Officer and
director of the Company following consummation of the Merger. From July 1993
to the consummation of the Merger, Mr. Vincze served as Senior Vice President,
Financial and General Operations of ATC. Mr. Vincze has served as a regional
manager of ATC since July 1991 and Vice President of a subsidiary of ATC since
1992. Mr. Vincze joined Dennison Environmental, Inc. in 1984 as an industrial
hygienist and served as Vice President of Marketing and Operations from 1987
to July 1991.
Wayne A. Crosby. Mr. Crosby has served as Controller of ATC since October,
1997, served as Chief Financial Officer of ATC between July 1995 and October
1997 and served as region controller of ATC from December 1993 to July 1995.
Prior to joining ATC, Mr. Crosby was the Chief Financial Officer of BSE
Management, Inc. from 1991 to 1993, and Chief Financial Officer of Compex
Systems, Inc. from 1986 through 1990. Mr. Crosby is a certified public
accountant and was employed by Deloitte Haskins & Sells for eight years.
Wesley W. Lang, Jr. Mr. Lang became a director of ATC following consummation
of the Tender Offer. Mr. Lang has been a principal of Weiss Peck since 1985.
Prior to joining Weiss Peck, Mr. Lang was employed by Manufacturers Hanover
Trust Company, where he specialized in acquisition financing. Mr. Lang serves
as a director of Chyron Corporation.
Nora E. Kerppola. Ms. Kerppola became a director of ATC following the
consummation of the Tender Offer. Ms. Kerppola is a principal of WPG Private
Equity Partners II, L.P., an affiliate of WPG Partners II. Prior to joining
WPG Private Equity Partners II, L.P. in 1994, Ms. Kerppola was employed as a
private equity investor at Investor International (U.S.), a subsidiary of
Sweden's Wallenberg Group since 1990. Prior to 1990, Ms. Kerppola was an
associate in the Investment Banking Department of Credit Suisse First Boston
Corporation.
Benjamin J. James. Mr. James became a director of ATC following consummation
of the Merger. For the last five years, Mr. James has been employed at PPM
America, Inc. ("PPM"), agent and investment manager for JNL, as Managing
Director since 1997 and as Vice President since May 1991. Mr. James serves on
the
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advisory boards of certain private equity funds. Mr. James presently serves as
an observer for JNL at various companies during their board meetings.
Donald W. Beck. Mr. Beck has been Senior Vice President of ATC since April
1990 and Vice President since January 1988. Mr. Beck is responsible for
managing the operations of certain ATC offices. Mr. Beck also served as a
director of ATC Laboratories, Inc., a predecessor company of ATC, from
November 1985 until January 1988, President of ATC Laboratories, Inc. from May
1986 until January 1988, and as Vice President of ATC Laboratories, Inc., from
November 1985 until May 1986. Mr. Beck has been a full-time employee of ATC
(and formerly ATC Laboratories, Inc.) since May 1982.
John J. Smith, Esq. Mr. Smith has been General Counsel since August 1989 and
served as a Vice President of ATC from September 1990 through December 1993.
Following consummation of the Merger, Mr. Smith assumed the position of
Secretary of the Company. Prior to joining ATC, from 1986 to 1989, Mr. Smith
was the Secretary of the South Dakota Department of Water and Natural
Resources, a cabinet level position responsible for managing all of the
State's environmental and natural resource development programs.
DIRECTORS COMPENSATION
During both fiscal 1996 and fiscal 1997, ATC granted options to purchase
7,500 shares to each of Julia S. Heckman and Richard S. Greenberg, Esq., ATC's
two outside directors. In fiscal 1997, ATC's Board approved the grant of
replacement options to both outside directors to extend the term of the
options and lower the exercise price. The replacement options were
subsequently exercised by each of Ms. Heckman and Mr. Greenberg. Other than
$35,000 earned by each of Ms. Heckman and Mr. Greenberg for their services as
members of the Special Committee of the Board of Directors appointed to review
and consider the Merger in fiscal 1998, no other compensation was paid to
ATC's directors for serving in the capacity of director. There are no current
arrangements for future compensation of directors.
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EXECUTIVE COMPENSATION
The following summarizes, for the fiscal year indicated, the principal
components of compensation for the Company's Chief Executive and the four most
highly compensated executive officers of the Company for the periods
indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- --------------------- -------
RESTRICTED SECURITIES
NAME AND YEAR ENDED OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION FEBRUARY 28 SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
------------------ ----------- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Morry F. Rubin(1)....... 1997 268,750 259,943 -0- -0- -0- -0- -0-
President and Chief 1996 225,000 141,774 -0- -0- -0-(3) -0- -0-
Executive Officer 1995 225,000 132,500 -0- -0- -0- -0- -0-
George Rubin(2)......... 1997 268,750 259,943 -0- -0- -0- -0- -0-
Chairman of the Board 1996 225,000 141,774 -0- -0- -0- -0- -0-
and Secretary 1995 225,000 132,500 -0- -0- -0- -0- -0-
Nicholas J. Malino......
Chief Executive 1997 170,000 100,000 -0- -0- 57,500 -0- -0-
Officer, 1996 142,308 -0- -0- -0- 30,000 -0- -0-
President and Director 1995 105,385 86,500 -0- -0- 37,500 -0- -0-
Christopher P. Vincze... 1997 170,000 100,000 6,000(4) -0- 37,500 -0- -0-
Chief Operating Officer 1996 142,308 -0- 6,000(4) -0- 30,000 -0- -0-
and Director 1995 105,385 86,500 5,550(4) -0- 17,500 -0- -0-
John J. Goodwin(5)......
President and Director 1997 140,000 51,335 -0- -0- -0- -0- -0-
ATC InSys Technology, 1996 140,000 -0- -0- -0- -0- -0- -0-
Inc. 1995 70,000 N/A -0- -0- -0- -0- -0-
</TABLE>
- --------
(1) Morry F. Rubin is no longer employed by the Company and resigned as
President, Chief Executive Officer and director in connection with the
consummation of the Transactions. Mr. Morry F. Rubin has agreed to provide
consulting services to the Company on the terms and conditions set forth
in a Severance Agreement (as defined herein). See "Certain Relationships
and Related Transactions--Severance Agreements."
(2) George Rubin is no longer employed by the Company and resigned as Chairman
of the Board and Secretary in connection with the consummation of the
Transactions. Mr. George Rubin had agreed to provide consulting services
to the Company on the terms and conditions set forth in the Severance
Agreement. See "Certain Relationships and Related Transactions."
(3) Does not include options to purchase 81,750 shares of Common Stock issued
in replacement of previously held options of Aurora, ATC's former parent
company, which was merged into ATC in June 1995, with ATC as the surviving
corporation.
(4) Represents compensation relating to a car allowance.
(5) John J. Goodwin commenced employment September 1, 1994.
EMPLOYMENT AGREEMENTS
In connection with the Transactions, the Company entered into employment
agreements with each of Nicholas J. Malino and Christopher P. Vincze (each
employment agreement is referred to as an "Employment Agreement," and both the
employment agreements are collectively referred to as the "Employment
Agreements." Messrs. Malino and Vincze are referred to individually as an
"Executive" and collectively as the "Executives"). The Employment Agreements
are for a term commencing on February 16, 1998 and expiring on February 28,
2001. Pursuant to the Employment Agreements, each of the Executives will
receive (i) a base salary
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of $200,000 per year until March 1, 1998, and thereafter an annual salary of
not less than $250,000, to be increased at a rate equal to the percentage
increase of the Consumer Price Index and (ii) an incentive bonus of up to
$250,000, which will be performance based. In addition, the Employment
Agreements provide for the grant to each of the Executives options for 3.41%
of the fully diluted common equity of Holdings following the consummation of
the Transactions. 50% of the options granted to each of the Executive are
time-vested, 50% of the options vest upon the Company's attaining certain
operating targets established in the Employment Agreements. In addition,
pursuant to the Employment Agreements, each Executive will receive 33,896
restricted shares of common stock of Holdings which will be subject to a time-
vesting schedule, and a special cash bonus of $168,000 payable no later than
June 1, 1998. The Employment Agreements also grant certain registration rights
to each Executive in connection with his securities and contain termination
provisions.
ATC pays John J. Goodwin a bonus based upon a percentage of pretax operating
profits of ATC InSys Technology, Inc.
During fiscal 1990, ATC approved a 401(k) employee savings plan (the "401(k)
Plan") which allows voluntary contributions by eligible employees into
designated investment funds. ATC may, at the discretion of its Board of
Directors, make additional contributions on behalf of the Plan's participants.
No contributions were made by the Company in fiscal years 1995, 1996 and 1997.
The 401(k) Plan continued in effect following the consummation of the Merger
ATC has no other annuity, pension or retirement benefits for its employees.
ATC provides life, dental and health insurance, which is available to all
full-time employees. ATC has not afforded any of its executive officers any
personal benefits, the value of which exceeds 10% of his salary, which are not
directly related to job performance or provided generally to all salaried
employees.
STOCK OPTION PLANS
Prior to the Transactions, the Company maintained (i) a Stock Option Plan
which was adopted by the Company's board of directors and ratified by
stockholders on January 12, 1988, (ii) the 1993 Incentive and Non-Qualified
Stock Option Plan and (iii) the 1995 Stock Option Plan (collectively, the "Old
Plans"). Options had been awarded to a number of individuals under each of the
Old Plans (the "Old Options"). In connection with the consummation of the
Transactions, all Old Options outstanding which were not fully vested were
accelerated and became immediately exercisable.
Holdings offered individuals who had been awarded Old Options with an
exercise price below twelve dollars ($12.00) per share at the time of the
consummation of the Merger the opportunity either (i) to receive a cash
payment in full settlement of their Old Options, (ii) to exchange Old Options
for options to purchase shares of common stock of Holdings (the "Holdings
Options"), with the number of shares covered thereby and at an exercise price
per share to be determined pursuant to a formula designed to cause the
economic value (i.e., the difference between the aggregate fair market value
of the shares of common stock of Holdings subject to such options and the
aggregate per share exercise price thereof) of the Holdings Options
immediately after the Merger to be the same as the economic value of the Old
Options immediately prior to Merger in a substitution transaction described in
Section 424(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
or (iii) to receive a combination of cash settlements and substituted options.
Holdings took action to effect such substitute grants by adopting, through its
Board of Directors, the Acquisition Holdings, Inc. 1998 Incentive and Non-
Qualified Stock Option Plan, effective as of January 28, 1998 (the "1998 Stock
Option Plan"). To the extent so elected by the optionees, non-qualified
options under the Old Plans were substituted by non-qualified options under
the 1998 Stock Option Plan and incentive stock options ("ISOs") under the Old
Plans were substituted by ISOS under the 1998 Stock Option Plan. Holdings also
intends to grant non-qualified stock options and ISOs to employees of Holdings
and its subsidiaries and non-qualified stock options to directors of Holdings
in the future under the 1998 Stock Option Plan.
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<PAGE>
The 1998 Stock Option Plan authorizes the Board of Directors of Holdings to
grant options to purchase Common Stock of Holdings at an exercise price (the
"option price") determined by the Board of Directors of Holdings, except in
the case of ISOs, which are awarded at an option price equal to the fair
market value of the Common Stock (110% of the fair market value in the case of
ISOs granted to ten (10%) percent shareholders of Common Stock).
The 1998 Stock Option Plan is administered by Holdings' Board of Directors.
Shares available under the 1998 Stock Option Plan can be allocated between
non-qualified options and ISOs among the participants as the Board of
Directors of Holdings deems appropriate. Awards may be granted for such terms
as the Board of Directors of Holdings may determine, except that the term of
an ISO may not exceed ten years from its date of grant.
The terms under which all options may be exercised are determined by
Holdings' Board of Directors. No option granted under the 1998 Stock Option
Plan is exercisable until approval and ratification of the Plan has been
obtained from the stockholders. No option may be exercised after the
expiration of its term, which in the case of an ISO may not exceed 10 years
from the date of grant. In addition, however, ISOs may not be exercised at any
time unless the holder is an employee of Holdings or any of its subsidiaries
and has been continuously employed by Holdings or any subsidiary since the
date of grant. This restriction with respect to ISOs applies regardless of
whether termination occurs as a result of death, disability or any other
reason.
The 1998 Stock Option Plan provides that, in the event of any change in the
outstanding Common Stock by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like, the Board of Directors of Holdings may appropriately
adjust the number of shares of Common Stock which may be issued under the 1998
Stock Option Plan, the number of shares of Common Stock subject to options
previously granted, the exercise price of options previously granted, and any
and all other matters it deems appropriate.
LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION
As permitted by the Delaware General Corporation Law, ATC's certificate of
incorporation provides that a director of ATC will not be personally liable to
ATC or its stockholders for monetary damages for breach of the fiduciary duty
of care as a director, except under certain circumstances, including breach of
the director's duty of loyalty to ATC or its stockholders or any transaction
from which the director derived an improper personal benefit.
ATC's by-laws provide for the indemnification of ATC's officers and
directors to the fullest extent permitted by Delaware law. In this respect,
ATC has entered into indemnification agreements with its officers and
directors to hold them harmless and to indemnify each person from and against
all fines, amounts paid in settlements and expenses, including attorneys' fees
incurred as a result of or in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or
administrative or investigative, by reason of the fact that the person was a
director and/or officer of ATC or served any other corporation in any capacity
at the request of ATC, in the manner and to the extent permitted by law.
ATC has been advised that it is the position of the Securities and Exchange
Commission that insofar as the foregoing provisions may be invoked to disclaim
liability for damages arising under the federal securities laws, such
provisions are against public policy as expressed in the federal securities
laws and are therefore unenforceable.
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PRINCIPAL STOCKHOLDERS
The Company is a wholly-owned subsidiary of Holdings. The following sets
forth certain information concerning ownership of shares of common stock, par
value $0.01 per share of Holdings (the "Holdings Common Stock") and the
Holdings Preferred Stock owned beneficially as of March 27, 1998, by (i) each
director, (ii) each of the named executive officers of the Company, (iii) all
executive officers and directors as a group, and (iv) each person who is the
beneficial owner of more than five percent of the shares of each class of
Holdings capital stock.
<TABLE>
<CAPTION>
HOLDINGS COMMON STOCK HOLDINGS PREFERRED STOCK
--------------------- ----------------------------
APPROXIMATE APPROXIMATE
PERCENT OF PERCENT OF
NUMBER BENEFICIAL NUMBER BENEFICIAL
OF OWNERSHIP OF OWNERSHIP
NAMES OF INDIVIDUALS(1) SHARES OF CLASS(2) SHARES OF CLASS
- ----------------------- --------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Nicholas J. Malino(3)...... * * -- --
Wesley W. Lang, Jr.(4)..... 1,661,253 97.55% -- --
Nora E. Kerppola(4)........ 1,661,253 97.55% -- --
Benjamin J. James(5)....... 187,771 10.16% -- --
WPG Corporate Development
Associates V, L.P. 1,661,253 97.55% -- --
and certain related
parties...................
One New York Plaza
New York, NY 10004
Jackson National Life 187,771 10.16% 100,000 100.0%
Insurance.................
c/o PPM America, Inc.(6)
225 West Wacker Drive,
Suite 1200
Chicago, Illinois 60606
All directors and officers
as a group(3)(7).......... * * -- --
</TABLE>
- --------
* Represents less than one percent.
(1) Each person has sole voting power and investment power with respect to the
number of shares indicated as owned. Except as otherwise indicated, the
business address for each of the parties listed in the chart above is: c/o
ATC Group Services Inc., 104 East 25th St., 10th Floor, New York, NY
10010.
(2) Based upon 1,702,920 shares of common stock of Holdings outstanding as of
March 27, 1998.
(3) In addition, directors, officers and certain employees of ATC will own an
equity ownership stake in Holdings, the parent of ATC, equal to
approximately 24.1%, which reflects management's investment of $2.1
million and options representing 11.7% of the fully diluted ownership of
common stock of Holdings.
(4) Includes 1,661,253 shares of Holdings Common Stock owned by certain
affiliates of Weiss Peck of which Mr. Lang and Ms. Kerppola are
principals. Mr. Lang and Ms. Kerppola disclaim beneficial ownership of
such shares of Common Stock.
(5) Includes 41,667 shares of Holdings Common Stock and warrants to purchase
146,104 shares of Holdings Common Stock owned by certain affiliates of
JNL, including PPM America, Inc., the agent and investment manager of JNL,
of which Mr. James is a managing director. Mr. James disclaims beneficial
ownership of such shares of Common Stock and warrants.
(6) The ultimate parent of JNL is Prudential Corporation PLC, headquartered in
the United Kingdom. The beneficial ownership of shares of Holdings Common
Stock indicated above includes warrants to purchase 146,104 shares of
Holdings Common Stock granted to JNL in connection with its investment in
the Holdings Preferred Stock; the warrants are currently exercisable.
(7) Excludes 1,661,253 shares of Holdings Common Stock beneficially owned by
certain affiliates of Weiss Peck, which may be deemed to be beneficially
owned by Wesley W. Lang, Jr. and Nora E. Kerppola and 187,771 shares of
Holdings Common Stock beneficially owned by affiliates of JNL, which may
be deemed to be beneficially owned by Benjamin J. James.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SEVERANCE AGREEMENTS
Upon consummation of the Merger, the Company entered into two separate
Severance, Consulting and Noncompetition Agreements (the "Severance
Agreements") with George Rubin and Morry F. Rubin, pursuant to which George
Rubin resigned his position as Chairman of the Board and Secretary of the
Company and Morry Rubin resigned his position as President and Chief Executive
Officer of the Company. Pursuant to the Severance Agreements, Messrs. George
and Morry Rubin have agreed to provide certain consulting services as
requested by the Company for a period of three years following the
consummation of the Transactions. The Severance Agreements restrict Messrs.
George and Morry Rubin for a period ranging from three to four years from (i)
competing in any aspect of the Company's business as conducted on the
effective date of the Merger (the "Effective Date") anywhere in the United
States, (ii) requesting or causing any employee of the Company to terminate
employment with the Company, (iii) competing with ATC InSys Technology Inc.
("InSys") or 3D Information Services, Inc., anywhere in the State of New
Jersey and (iv) soliciting certain customers of InSys within New York City. In
consideration for the Severance Agreements, the Company paid to the Rubins
$3.1 million in the aggregate upon the Effective Date and is required to pay
$553,430 on each of the six calendar quarters thereafter, in addition to the
continuance of certain other benefits currently provided by the Company.
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<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
The Company and Holdings are party to the New Credit Facility with various
lending institutions and Bankers Trust Company, as agent, which provides for
senior secured credit facilities consisting of a $20.0 million Term Loan and
the Revolving Credit Facility in the amount of $30.0 million which includes a
sublimit for letters of credit.
Loans under the Term Loan Facility ("Term Loans") and up to $9.0 million of
loans under the Revolving Credit Facility ("Revolving Loans") may be borrowed
to refinance certain existing indebtedness of the Company. Additional
Revolving Loans are available for the Company's and its subsidiaries working
capital and general corporate purposes, including to make certain permitted
acquisitions. The Term Loans will amortize quarterly and have a final maturity
date of January 29, 2003. Amounts repaid or prepaid in respect of the Term
Loans may not be reborrowed. Revolving Loans also will mature on January 29,
2003 and may be repaid and reborrowed prior to the final maturity date. The
Company will be required to pay the lenders under the New Credit Facility a
revolving loan commitment fee of 1/2 of 1% per annum, payable on a quarterly
basis, on the unutilized total commitment under the Revolving Credit Facility
and a term loan commitment fee of 1/2 of 1% per annum (or less based on a
leverage formula), payable on a quarterly basis, on the total commitment under
the Term Loan Facility. The obligation to pay such term loan commitment fee
terminated on the date on which the Term Loans were funded. The Company is
also required to pay the lenders participating in the Revolving Credit
Facility letter of credit fees equal to 2.25% per annum (or less based on a
leverage formula) on the outstanding stated amounts of letters of credit and,
to each lender issuing a letter of credit, a facing fee of 1/4 of 1% on the
outstanding stated amounts.
The obligations of the Company under the New Credit Facility are
unconditionally guaranteed by Holdings and any direct or indirect subsidiaries
of the Company (the "Bank Loan Guarantors"). In addition, the obligations of
the Company and the Bank Loan Guarantors under the New Credit Facility are
secured by substantially all of the assets of the Company and the Bank Loan
Guarantors.
At the Company's option, the interest rates per annum applicable to amounts
outstanding under the New Credit Facility will be either (a) an adjusted rate
based on the Eurodollar Rate (as defined in the New Credit Facility) plus
2.25% initially (subject to quarterly adjustments based on a leverage formula)
or (b) the Base Rate (as defined in the New Credit Facility) plus 1.25%
initially (subject to quarterly adjustments based on a leverage formula).
The New Credit Facility requires the Company to meet certain financial
tests, including minimum interest coverage and maximum leverage ratios. The
New Credit Facility also contains covenants which, among other things, limit
the ability of the Company to incur additional indebtedness, pay dividends,
enter into transactions with affiliates, form subsidiaries, enter into sale-
leaseback transactions, make capital expenditures, loans, investments or lease
payments, merge, consolidate or acquire or dispose of assets, voluntarily
prepay or amend other indebtedness, incur liens and encumbrances and other
matters customarily restricted in loan agreements of this type.
The New Credit Facility contains customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross defaults, certain events of bankruptcy and insolvency, ERISA, judgment
defaults, failure of any guarantee or security agreement supporting the
Company's obligations under the New Credit Facility to be in full force and
effect and a change of control of Holdings or the Company.
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<PAGE>
DESCRIPTION OF THE NOTES
The Private Notes were, and the Exchange Notes will be, issued under an
indenture (the "Indenture"), dated as of January 29, 1998 among Acquisition
Corp. and State Street Bank and Trust Company, as Trustee (the "Trustee"). The
Company, the Subsidiary Guarantors and the Trustee entered into a Supplemental
Indenture dated as of February 5, 1998 (the "Supplemental Indenture"),
pursuant to which the Company agreed to assume all of the rights and
obligations of Acquisition Corp. set forth in the Indenture. The Indenture and
the Supplemental Indenture are referred to herein as the "Supplemented
Indenture." The following summary of certain provisions of the Supplemented
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Trust Indenture Act of 1939, as amended
(the "TIA"), and to all of the provisions of the Supplemented Indenture,
including the definitions of certain terms therein and those terms made a part
of the Supplemented Indenture by reference to the TIA as in effect on the date
of the Supplemented Indenture. A copy of the Supplemented Indenture may be
obtained from the Company or the Trustee. The definitions of certain
capitalized terms used in the following summary are set forth below under "--
Certain Definitions."
The Notes are unsecured obligations of the Company, ranking subordinate in
right of payment to all Senior Indebtedness of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders of
the Notes (the "Holders"). The Company will pay principal (and premium, if
any) on the Notes at the Trustee's corporate office in New York, New York. At
the Company's option, interest may be paid at the Trustee's corporate trust
office or by check mailed to the registered address of Holders. Any Notes that
remain outstanding after the completion of the Exchange Offer, together with
the Exchange Notes issued in connection with the Exchange Offer, will be
treated as a single class of securities under the Supplemented Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150,000,000, of
which $100,000,000 was issued in the Offering, and will mature on January 15,
2008. Additional amounts may be issued in one or more series from time to
time, subject to the limitations set forth under "Certain Covenants--
Limitation on Incurrence of Additional Indebtedness." Interest on the Notes
will accrue at the rate of 12% per annum and will be payable semiannually in
arrears on each January 15 and July 15, commencing on July 15, 1998, to the
persons who are registered Holders at the close of business on the fifteenth
day immediately preceding the applicable 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 and including the date of
issuance.
The Notes will not be entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after January 15,
2003, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof)
if redeemed during the twelve-month period commencing on January 15 of the
year set forth below, plus, in each case, accrued and unpaid interest thereon,
if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003............................................................ 106.000
2004............................................................ 104.500
2005............................................................ 103.000
2006............................................................ 101.500
2007 and thereafter............................................. 100.000
</TABLE>
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<PAGE>
Optional Redemption upon Public Equity Offerings. Notwithstanding the
foregoing, at any time, or from time to time, on or prior to January 15, 2001,
the Company may, at its option, redeem, with the net cash proceeds of one or
more Public Equity Offerings (as defined), up to 35.0% of the aggregate
principal amount of the Notes originally issued, at a redemption price equal
to 112.0% of the principal amount thereof, plus accrued interest thereon, if
any, to the date of redemption; provided that, at least 65.0% of the aggregate
principal amount of the Notes originally issued remain outstanding immediately
following such redemption. In order to effect the foregoing redemption with
the proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 60 days after the consummation of any such Public
Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company or
Holdings pursuant to a registration statement filed with the Commission in
accordance with the Securities Act; provided that, in the case of an
underwritten public offering by Holdings, the proceeds of such offering to the
extent required to fund the redemption shall have been contributed to the
Company by Holdings as common equity.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part; provided further, however, that if a partial redemption is
made with the proceeds of a Public Equity Offering, selection of the Notes or
portions thereof for redemption shall be made by the Trustee only on a pro
rata basis or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice 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 a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Supplemented
Indenture.
SUBORDINATION
The payment of all Obligations on the Notes will be subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Indebtedness whether outstanding on the Issue Date, or
thereafter incurred including, without limitation, the Company's obligations
under the Credit Agreement. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any total or partial liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors or marshaling of
assets of the Company or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to the Company or its
property, whether voluntary or involuntary, all Obligations due or to become
due upon all Senior Indebtedness shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Indebtedness, before any payment or distribution of any kind
or character is made on account of any Obligations on the Notes, or for the
acquisition of any of the Notes for cash or property or otherwise. If any
default occurs and is continuing in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of or
regularly accruing fees with respect to, any Senior Indebtedness, no payment
of any kind or character shall be made by or on behalf of the Company or any
other Person on its or their behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise.
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<PAGE>
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders of such Designated Senior Indebtedness
then outstanding to accelerate the maturity thereof and if the Representative
for the respective issue of Designated Senior Indebtedness gives written
notice of the event of default to the Trustee (a "Default Notice"), then,
unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Indebtedness terminating the Blockage
Period (as defined below), during the 180 days after the delivery of such
Default Notice (the "Blockage Period"), neither the Company nor any other
Person on its behalf shall (x) make any payment of any kind or character with
respect to any Obligations on the Notes or (y) acquire any of the Notes for
cash or property or otherwise. No event of default which existed or was
continuing on the date of the commencement of any Blockage Period with respect
to the Designated Senior Indebtedness shall be, or be made, the basis for
commencement of a second Blockage Period by the Representative of such
Designated Senior Indebtedness whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action, or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period that, in
either case, would give rise to an event of default pursuant to any provisions
under which an event of default previously existed or was continuing shall
constitute a new event of default for this purpose). Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days.
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness,
including the Holders of the Notes, may recover less, ratably, than holders of
Senior Indebtedness.
As of November 30, 1997, on a pro forma basis, giving effect to the sale of
Notes and the application of the estimated net proceeds therefrom to
consummate the ATC Acquisition, the aggregate amount of Senior Indebtedness
outstanding would have been approximately $26.2 million (excluding unused
commitments of $30.0 million (excluding outstanding letters of credit)
available under the Credit Agreement).
GUARANTEES
Each Subsidiary Guarantor has unconditionally guaranteed, on a senior
subordinated unsecured basis, jointly and severally, to each Holder and the
Trustee, the full and prompt performance of the Company's obligations under
the Supplemented Indenture and the Notes, including the payment of principal
and interest on the Notes. The Guarantees will be subordinated to Guarantor
Senior Indebtedness on the same basis as the Notes are subordinated to Senior
Indebtedness.
The obligations of each Subsidiary Guarantor will be limited to the maximum
amount which, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Guarantee or pursuant to its contribution obligations under the
Supplemented Indenture, will result in the obligations of such Subsidiary
Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Subsidiary Guarantor that
makes a payment or distribution under its Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in an amount pro rata, based
on the net assets of each Subsidiary Guarantor, determined in accordance with
GAAP.
The Subsidiary Guarantors include (i) each of the Company's Subsidiaries as
of the effective date of the Merger other than its Foreign Subsidiaries, (ii)
each of the Company's Subsidiaries that executed a supplemental indenture in
which such Subsidiary agrees to be bound by the terms of the Supplemented
Indenture as a Subsidiary Guarantor and (iii) any Subsidiary, whether formed
or acquired after the Issue Date, that guarantees any Indebtedness outstanding
under the Credit Agreement; provided, however, that any Subsidiary acquired
after
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<PAGE>
the Issue Date which is prohibited from entering into a Guarantee pursuant to
restrictions contained in any debt instrument in existence at the time such
Subsidiary was so acquired and not entered into in anticipation or
contemplation of such acquisition shall not be required to become a Subsidiary
Guarantor so long as any such restriction is in existence and to the extent of
any such restriction; provided, further, that if any Subsidiary Guarantor is
released from its guarantee of the outstanding Indebtedness of the Company
under the Credit Agreement, such Guarantor shall be automatically released
from its obligations as Subsidiary Guarantor and, from and after such date,
such Subsidiary Guarantor shall cease to constitute a Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor that is a Wholly Owned
Subsidiary without limitation, or with or to other Persons upon the terms and
conditions set forth in the Supplemented Indenture. See "--Certain Covenants--
Merger, Consolidation and Sale of Assets." In addition, in the event all of
the Capital Stock of a Subsidiary Guarantor (or all or substantially all of
the assets of a Subsidiary Guarantor) is sold by the Company and/or one or
more of its Subsidiaries and the sale complies with the provisions set forth
in "--Certain Covenants--Limitation on Asset Sales," such Subsidiary
Guarantor's Guarantee will be released.
Separate financial statements of the Subsidiary Guarantors are not included
herein because such Subsidiary Guarantors are jointly and severally liable
with respect to the Company's Obligations pursuant to the Notes, but pro forma
condensed combined consolidated financial statements concerning ATC and its
Subsidiaries are included in the notes to the Financial Statement included
herein.
CHANGE OF CONTROL
The Supplemented Indenture provides that upon the occurrence of a Change of
Control, each Holder has the right to require that the Company purchase all or
a portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101.0% of the
principal amount thereof plus accrued and unpaid interest to the date of
purchase.
The Supplemented Indenture provides that, prior to the mailing of the notice
referred to below, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all indebtedness, and
terminate all commitments, under the Credit Agreement and all other Senior
Indebtedness the terms of which require repayment upon a Change of Control or
offer to repay in full all indebtedness, and terminate all commitments, under
the Credit Agreement and all other such Senior Indebtedness and to repay the
Indebtedness owed to each lender which has accepted such offer or (ii) obtain
the requisite consents under the Credit Agreement and all other such Senior
Indebtedness to permit the repurchase of the Notes as provided below. The
Company shall first comply with the covenant in the immediately preceding
sentence before it shall be required to repurchase Notes pursuant to the
provisions described below. The Company's failure to comply with the
immediately preceding sentence shall be governed by clause (iv), and not
clause (ii), of "Events of Default" below.
Within 30 days following the date upon which a Change of Control occurs, the
Company must send, by first class mail, a notice to each Holder at such
Holder's last registered address, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. Such notice shall
state, among other things, the purchase date, which must be no earlier than 30
days nor later than 45 days from the date such notice is mailed, other than as
may be required by law (the "Change of Control Payment Date"). Holders
electing to have a Note purchased pursuant to a Change of Control Offer will
be required to surrender the Note, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the
third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding
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Notes pursuant to a Change of Control Offer, the Company expects that it would
need to seek third party financing to the extent it does not have available
funds to meet its purchase obligations. However, there can be no assurance
that the Company would be able to obtain any such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to repurchase upon a Change of Control.
Restrictions in the Supplemented Indenture described herein on the ability of
the Company and its Subsidiaries to incur additional Indebtedness, to grant
liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage
any leveraged buyout of the Company or any of its Subsidiaries by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Supplemented Indenture may not afford the Holders of Notes
protection in all circumstances from the adverse aspects of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Supplemented Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under the "Change of Control" provisions of the
Supplemented Indenture by virtue thereof.
CERTAIN COVENANTS
The Supplemented Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not cause or permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible
for payment of (collectively, "incur"), any Indebtedness (including, without
limitation, Acquired Indebtedness) other than Permitted Indebtedness.
Notwithstanding the foregoing, if no Default or Event of Default shall have
occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company and its Subsidiaries may
incur Indebtedness (including, without limitation, Acquired Indebtedness) if
on the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than 2.25 to 1.0 from the Issue Date through February 29,
2000 and 2.5 to 1.0 thereafter. No Indebtedness incurred pursuant to the next
preceding sentence shall be included in calculating any limitation set forth
in the definition of Permitted Indebtedness. Upon the repayment of
Indebtedness which may have been incurred pursuant to more than one provision
of the Supplemented Indenture, the Company may, in its sole discretion,
designate which provision such Indebtedness shall have been incurred under.
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Subsidiaries to, directly or indirectly, (a) declare or
pay any dividend or make any distribution (other than dividends or
distributions made to the Company or any Subsidiary of the Company and other
than any dividend or distribution payable solely in Qualified Capital Stock of
the Company) on or in respect of shares of the Company's Capital Stock to
holders of such Capital Stock; (b) purchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock
(other than the exchange of such Capital Stock or any warrants, rights or
options to acquire shares of any class of Capital Stock of the Company for
Qualified Capital Stock of the Company);
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(c) make any principal payment on, purchase, defease, redeem, prepay, decrease
or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company or a Subsidiary Guarantor that is subordinate or
junior in right of payment to the Notes or such Subsidiary Guarantor's
Guarantee, as the case may be; or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing or
(ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant above, or (iii)
the aggregate amount of all Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount expended for
such purposes, if other than in cash, being the fair market value of such
property as determined reasonably and in good faith by the Board of Directors
of the Company) shall exceed the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned during the period
beginning on the first day of the fiscal quarter including the Issue Date and
ending on the last day of the fiscal quarter ending at least 30 days prior to
the date the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of
the Company) from the issuance and sale subsequent to the Issue Date and on or
prior to the Reference Date of Qualified Capital Stock of the Company,
including treasury stock; plus (y) without duplication of any amounts included
in clause (iii) (x) above, 100% of the aggregate net cash proceeds of any
equity contribution received by the Company from a holder of the Company's
Capital Stock (excluding, in the case of clauses (iii) (x) and (y), any net
cash proceeds from a Public Equity Offering to the extent used to redeem the
Notes); minus (z) the amount of all Investments made under clause (x) of the
definition of "Permitted Investments," which shall not exceed $4.0 million.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph shall not prohibit: (1) the payment of any dividend or the
consummation of any irrevocable redemption within 60 days after the date of
declaration of such dividend or the giving of such irrevocable redemption
notice if the dividend or redemption would have been permitted on the date of
declaration or giving of irrevocable redemption notice; (2) if no Default or
Event of Default shall have occurred and be continuing, the acquisition of any
shares of Capital Stock of the Company, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of
the Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) the repurchase of
shares of, or options to purchase shares of, common stock of Holdings, the
Company or any of their respective Subsidiaries from employees, former
employees, directors or former directors of Holdings, the Company or any of
its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments thereto)
approved by the board of directors of Holdings or the Company under which such
individuals purchase or sell, or are granted the option to purchase or sell
shares of common stock (or options to purchase common stock) (or any
Restricted Payment made to Holdings solely to fund at the time made such
payments); provided, however, that the aggregate amount of such repurchases or
Restricted Payments shall not exceed $500,000 in any calendar year which, to
the extent not used in any fiscal year, may be carried forward to the next
succeeding fiscal year, provided that the aggregate amount which may be
carried forward shall not exceed $1.0 million; (5) following the Initial
Public Equity Offering, if no Default or Event of Default shall have occurred
and be continuing, dividends or Common Stock buybacks by Holdings, the Company
or another Company in an aggregate amount in any year not to exceed 6% of the
aggregate Net Cash Proceeds received by Holdings (to the extent contributed to
the Company) or the Company in connection with such Initial Public Equity
Offering and any subsequent Public Equity Offering (or any Restricted Payment
made to Holdings
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or such other Company solely to fund at the time made such payments);
provided, however, that such dividends or Common Stock buybacks shall be
included in the calculation of the amount of Restricted Payments; (6) any
payment by the Company to Holdings pursuant to the Tax Sharing Agreement;
provided, however, that the amount of any such payment shall be the lesser of
(i) the amount of taxes that the Company would have been liable for without
regard to Holdings' ownership interest in the Company or (ii) the amount
actually paid or substantially concurrently therewith to be paid by Holdings
directly to the Internal Revenue Service or applicable taxing authority in
respect of the taxes in respect of which such payment is being made by the
Company to Holdings pursuant to such Tax Sharing Agreement; provided, further,
however, that such dividends shall be excluded in the calculation of the
amount of Restricted Payments; and (7) dividends to Holdings to the extent
required to pay for general corporate and overhead expenses incurred by
Holdings; provided, however, that such dividends shall not exceed $250,000 in
any calendar year; provided, further, however, that such dividends shall be
excluded from the calculation of the amount of Restricted Payments. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2) (ii), (3) (ii) (A),
(4) and (5) shall be included in such calculation.
Limitation on Asset Sales. The Company will not, and will not cause or
permit any of its Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition; and (iii) upon the consummation of an Asset Sale,
the Company shall apply, or cause such Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 360 days of receipt thereof either
(A) to prepay any Senior Indebtedness or Guarantor Senior Indebtedness and, in
the case of any Senior Indebtedness or Guarantor Senior Indebtedness under any
revolving credit facility, effect a permanent reduction in the commitment
available under such revolving credit facility, (B) to make an investment in
properties and assets that replace the properties and assets that were the
subject of such Asset Sale or in properties and assets that will be used in
the business of the Company and its Subsidiaries as existing on the Issue Date
or in businesses reasonably related or complementary thereto (as determined in
good faith by the Company's Board of Directors) ("Replacement Assets"), or (C)
a combination of prepayment and investment permitted by the foregoing clauses
(iii) (A) and (iii) (B). Pending final application, the Company or the
applicable Subsidiary may temporarily reduce Indebtedness under any revolving
credit facility or invest in cash or Cash Equivalents. On the 361st day after
an Asset Sale or such earlier date, if any, as the Board of Directors of the
Company or of such Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii) (A), (iii) (B) and
(iii) (C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii) (A), (iii) (B) and (iii) (C) of the next preceding sentence (each, a
"Net Proceeds Offer Amount") shall be applied by the Company or such
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on
a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
provided, however, that if at any time any non-cash consideration received by
the Company or any Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. The Company or any such Subsidiary
of the Company, as the case may be, may defer the Net Proceeds Offer until
there is an aggregate unutilized Net Proceeds Offer Amount equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which time,
the entire unutilized Net Proceeds Offer Amount, and not just the amount in
excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
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Notwithstanding the immediately preceding paragraph, the Company and its
Subsidiaries will be permitted to consummate an Asset Sale without complying
with such paragraph to the extent (i) at least 75% of the consideration for
such Asset Sale constitutes Replacement Assets and/or Cash Equivalents and
(ii) such Asset Sale is for fair market value; provided, however, that any
consideration constituting Cash Equivalents, if any, received by the Company
or any of its Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Cash Proceeds subject to
the provisions of the preceding paragraph.
Notice of each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the Trustee, and shall comply with the
procedures set forth in the Supplemented Indenture. Upon receiving notice of
the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in
part in integral multiples of $1,000 in exchange for cash. To the extent
Holders properly tender Notes in an amount exceeding the Net Proceeds Offer
Amount, Notes of tendering Holders will be purchased on a pro rata basis
(based on amounts tendered). A Net Proceeds Offer shall remain open for a
period of 20 business days or such longer period as may be required by law. To
the extent the amount of Notes tendered is less than the offer amount, the
Company may use the remaining Net Proceeds Offer Amount for general corporate
purposes and such Net Proceeds Offer Amount shall be reset to zero.
The Company will comply with the requirements of Rule l4e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Supplemented Indenture, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit
to exist or become effective any encumbrance or restriction on the ability of
any Subsidiary of the Company to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Subsidiary of the Company; or (c) transfer any of its property or
assets to the Company or any other Subsidiary of the Company, except for such
encumbrances or restrictions existing under or by reason of: (1) applicable
law; (2) the Supplemented Indenture; (3) the Credit Agreement; (4) non-
assignment provisions of any contract or any lease governing a leasehold
interest of any Subsidiary of the Company; (5) any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person
or the properties or assets of the Person so acquired; (6) agreements existing
on the Issue Date to the extent and in the manner such agreements are in
effect on the Issue Date; (7) restrictions on the transfer of assets subject
to any Lien permitted under the Supplemented Indenture imposed by the holder
of such Lien; (8) restrictions imposed by any agreement to sell assets
permitted under the Supplemented Indenture to any Person pending the closing
of such sale; (9) any agreement or instrument governing Capital Stock of any
Person that is acquired; or (10) an agreement governing Indebtedness incurred
to Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (3), (5) or (6) above; provided, however,
that the provisions relating to such encumbrance or restriction contained in
any such Indebtedness are no less favorable to the Company in any material
respect as determined by the Board of Directors of the Company in their
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (3), (5) or (6), respectively.
Limitation on Preferred Stock of Subsidiaries. The Company will not permit
any of its Subsidiaries to issue any Preferred Stock (other than to the
Company or to a Wholly Owned Subsidiary of the Company) or permit any Person
(other than the Company or a Wholly Owned Subsidiary of the Company) to own
any Preferred Stock of any Restricted Subsidiary of the Company.
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Limitation on Liens. The Company will not, and will not cause or permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of its Subsidiaries (whether owned on the
Issue Date or acquired after the Issue Date), or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes or any Guarantee, the
Notes and such Guarantee, as the case may be, are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes and the Guarantees are equally and ratably
secured, except for (A) Liens existing as of the Issue Date to the extent and
in the manner such Liens are in effect on the Issue Date; (B) Liens securing
Senior Indebtedness and/or Guarantor Senior Indebtedness; (C) Liens securing
the Notes and the Guarantees; (D) Liens of the Company or a Wholly Owned
Subsidiary of the Company on assets of any Subsidiary of the Company; (E)
Liens securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture
and which has been incurred in accordance with the provisions of the
Supplemented Indenture; provided, however, that such Liens (1) are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (2) do not extend to or cover any property or assets of the
Company or any of its Subsidiaries not securing the Indebtedness so Refinanced
(other than property or assets subject to Liens under clause (B) above); and
(F) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will not,
and will not permit any Subsidiary Guarantor to, incur or suffer to exist
Indebtedness that by its terms (or by the terms of any agreement governing
such Indebtedness) is senior in right of payment to the Notes or its
Guarantee, as the case may be, and expressly subordinate in right of payment
to any other Indebtedness of the Company or such Subsidiary Guarantor, as the
case may be.
Guarantees of Certain Indebtedness. The Company will not permit any of its
Subsidiaries which are not already Subsidiary Guarantors, directly or
indirectly, to incur, guarantee or secure through the granting of Liens the
payment of any Indebtedness of the Company under the Credit Agreement or any
refunding or refinancing thereof, in each case unless such Subsidiary, the
Company and the Trustee execute and deliver a supplemental indenture
evidencing such Subsidiary's Guarantee, such Guarantee to be a senior
subordinated unsecured obligation of such Subsidiary. Neither the Company nor
any such Guarantor shall be required to make a notation on the Notes or the
Guarantees to reflect any such subsequent Guarantee. Nothing in this covenant
shall be construed to permit any Subsidiary of the Company to incur
Indebtedness otherwise prohibited by the "Limitation on Incurrence of
Additional Indebtedness" covenant.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or
into any Person, or sell, assign, transfer, lease, convey or otherwise dispose
of (or cause or permit any Subsidiary of the Company to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of
the Company's assets (determined on a consolidated basis for the Company and
its Subsidiaries) unless: (i) either (1) the Company shall be the surviving or
continuing corporation or (2) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and its Subsidiaries substantially as
an entirety (the "Surviving Entity") (x) shall be a corporation organized and
validly existing under the laws of the United States or any State thereof or
the District of Columbia and (y) shall expressly assume, by supplemental
indenture (in form and substance satisfactory to the Trustee), executed and
delivered to the Trustee, the due and punctual payment of the principal of,
premium, if any, and interest on all of the Notes and the performance of every
covenant of the Notes, the Supplemented Indenture and the Registration Rights
Agreement on the part of the Company to be performed or observed, as the case
may be; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i) (2) (y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (1) shall have a Consolidated Net
Worth equal to or
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greater than the Consolidated Net Worth of the Company immediately prior to
such transaction and (2) (x) shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"--Limitation on Incurrence of Additional Indebtedness" covenant or (y) in the
case of a merger or consolidation with Holdings, shall have a Consolidated
Fixed Charge Coverage Ratio equal to or greater than the Consolidated Fixed
Charge Coverage Ratio of the Company immediately prior to such transaction;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i) (2) (y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred and be continuing; and (iv) the Company or the
Surviving Entity, as the case may be, shall have delivered to the Trustee an
officer's certificate and an opinion of counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with the applicable
provisions of the Supplemented Indenture and that all conditions precedent in
the Supplemented Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of
the Company the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
The Supplemented Indenture provides that upon any consolidation, combination
or merger or any transfer of all or substantially all of the assets of the
Company in accordance with the foregoing, in which the Company is not the
continuing corporation, the successor Person formed by such consolidation or
into which the Company is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Supplemented Indenture and the
Notes with the same effect as if such surviving entity had been named as such.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Guarantee is to be released in accordance with the terms of the Guarantee and
the Indenture in connection with any transaction complying with the provisions
of the Indenture described under "--Limitation on Asset Sales") will not, and
the Company will not cause or permit any Subsidiary Guarantor to, consolidate
with or merge with or into any Person other than the Company or another
Subsidiary Guarantor that is a Wholly Owned Subsidiary unless: (a) the entity
formed by or surviving any such consolidation or merger (if other than the
Subsidiary Guarantor) is a corporation organized and existing under the laws
of the United States or any state thereof or the District of Columbia; (b)
such entity assumes by execution of a supplemental indenture all of the
obligations of the Subsidiary Guarantor under its Guarantee: (c) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (d) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma
basis, the Company could satisfy the provisions of clause (ii) of the first
paragraph of this covenant. Any merger or consolidation of a Subsidiary
Guarantor with and into the Company (with the Company being the surviving
entity) or another Subsidiary Guarantor that is a Wholly Owned Subsidiary need
only comply with clause (iv) (and not clauses (i), (ii) or (iii)) of the first
paragraph of this covenant.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not cause or permit any of its Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related
transactions (including. without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable to the Company or
such Subsidiary, as the case may be, than those that might reasonably have
been obtained or are obtainable in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Company or
such Subsidiary, as the case may be. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market value
in excess of $2.0 million shall be approved by the Board of
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Directors of the Company or such Subsidiary, as the case may be, such approval
to be evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
the Company or any Subsidiary of the Company enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) involving aggregate payments or other property with a fair market value
in excess of $5.0 million, the Company or such Subsidiary, as the case may be,
from a financial point of view, from an Independent Financial Advisor and file
the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees, consultants or agents of the Company or any
Subsidiary of the Company as determined in good faith by the Company's Board
of Directors or senior management; (ii) transactions between or among the
Company and any of its Wholly Owned Subsidiaries or between or among such
Wholly Owned Subsidiaries; provided such transactions are not otherwise
prohibited by the Supplemented Indenture; (iii) any agreement as in effect as
of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) or in any replacement
agreement thereto so long as any such amendment or replacement agreement is
not more disadvantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date; and (iv) Restricted
Payments permitted by the Supplemented Indenture.
Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries
transfers or causes to be transferred, in one transaction or a series of
related transactions, any property aggregating more than $50,000 to any
Subsidiary that is not a Subsidiary Guarantor or a Foreign Subsidiary, or if
the Company or any of its Subsidiaries shall organize, acquire or otherwise
invest in another Subsidiary that is not a Foreign Subsidiary, then such
transferee or acquired or other Subsidiary shall (a) execute and deliver to
the Trustee a supplemental indenture in form reasonably satisfactory to the
Trustee pursuant to which such Subsidiary shall unconditionally guarantee all
of the Company's obligations under the Notes and the Supplemented Indenture on
the terms set forth in the Supplemented Indenture and (b) deliver to the
Trustee an opinion of counsel stating that such supplemental indenture has
been duly authorized, executed and delivered by such Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Subsidiary; except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding in equity or at law)
provided, however that any Subsidiary acquired on or after the Issue Date
which is prohibited from entering into a Guarantee pursuant to restrictions
contained in any debt instrument or other agreement in existence at the time
such Subsidiary was so acquired and was not entered into in anticipation or
contemplation of such acquisition shall not be required to become a Subsidiary
Guarantor so long as any such restriction is in existence and to the extent of
such restriction. After the execution and delivery of such supplemental
indenture, such Subsidiary shall be a Subsidiary Guarantor for all purposes of
the Supplemented Indenture.
Conduct of Business. The Company will not, and will not cause or permit any
of its Subsidiaries to, engage in any businesses other than the businesses in
which the Company is engaged on the Issue Date and any businesses reasonably
related or complementary thereto (as determined in good faith by the Company's
Board of Directors) provided, however, that the Company will not, and will not
cause or permit any of its Subsidiaries to, engage in any business related to
insurance other than as an insurance broker in which case without the
incurrence of any underwriting risk.
Reports to Holders. The Company will deliver to the Trustee within 15 days
after the filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and the Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of
314(a) of the TIA.
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default:"
(i) the failure to pay interest (including Additional Interest, if any)
on any Notes when the same becomes due and payable and the default
continues for a period of 30 days (whether or not such payment shall be
prohibited by the subordination provisions of the Supplemented Indenture);
(ii) the failure to pay the principal on any Notes, when such principal
becomes due and payable, at maturity, upon acceleration, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the Supplemented Indenture);
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Supplemented Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default with respect to the
"Merger, Consolidation and Sale of Assets" covenant, which will constitute
an Event of Default with such notice requirement but without such passage
of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Subsidiary of the Company and
such failure continues for a period of 20 days or more, or the acceleration
of the final stated maturity of any such Indebtedness (which acceleration
is not rescinded, annulled or otherwise cured within 20 days of receipt by
the Company or such Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been accelerated, in each case
with respect to which the 20-day period described above has passed,
aggregates $10.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and nonappealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; and
(vii) any of the Guarantees of a Subsidiary Guarantor that is a
Significant Subsidiary cease to be in full force and effect or any such
Guarantees are declared to be null and void or invalid and unenforceable or
any of the Subsidiary Guarantors denies or disaffirms its liability under
its Guarantees (other than by reason of release of a Subsidiary Guarantor
in accordance with the terms of the Supplemented Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Notes may declare the principal of and accrued interest on all the Notes to be
due and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or 5 business days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing. If
an Event of Default specified in clause (vi) above occurs and is continuing
with respect to the Company, then all unpaid principal of, and premium, if
any, and accrued and unpaid interest on all of the outstanding Notes shall
ipso facto become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Holder.
The Supplemented Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding
paragraph, the Holders of a majority in aggregate principal amount of the
Notes may rescind and cancel such declaration and its consequences (i) if the
rescission would not conflict with any judgment or decree, (ii) if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of such acceleration,
(iii) to the extent the payment of
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such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (v) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in aggregate principal amount of the Notes may
waive any existing Default or Event of Default under the Supplemented
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any Notes.
Holders of the Notes may not enforce the Supplemented Indenture or the Notes
except as provided in the Supplemented Indenture and under the TIA. Subject to
the provisions of the Supplemented Indenture relating to the duties of the
Trustee, the Trustee is under no obligation to exercise any of its rights or
powers under the Supplemented Indenture at the request, order or direction of
any of the Holders, unless such Holders have offered to the Trustee reasonable
indemnity. Subject to all provisions of the Supplemented Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
then outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee.
Under the Supplemented Indenture, the Company is required to provide an
officers' certificate to the Trustee promptly upon any such officer obtaining
knowledge of any Default or Event of Default (provided that such officers
shall provide such certification at least annually whether or not they know of
any Default or Event of Default) that has occurred and, if applicable,
describe such Default or Event of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the corresponding obligations of the Subsidiary Guarantors
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes,
except for (i) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on the Notes when such payments
are due, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payments, (iii)
the rights, powers, trust, duties and immunities of the Trustee and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Supplemented Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company and the
Subsidiary Guarantors, if any, released with respect to certain covenants that
are described in the Supplemented 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, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in United States dollars, non-callable United States
government obligations, 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 on
the Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonable acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Supplemented Indenture,
there has been a change in the applicable federal income tax law, in either
case to the
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effect that, and based thereon such opinion of counsel shall confirm that, the
Holders 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; provided,
however, such opinion of counsel will not be required if all the Notes will
become due and payable on the maturity date within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit (other than a Default or Event of Default resulting from the
incurrence of Indebtedness all or a portion of the proceeds of which will be
used to defease the Notes); (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under,
the Supplemented Indenture or any other material agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound; (vi) the Company shall have
delivered to the Trustee an officers' certificate stating that the deposit was
not made by the Company with the intent of preferring the Holders over any
other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others; (vii) the
Company shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance, as the case may
be, have been complied with; (viii) the Company shall have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (ix) certain other customary conditions
precedent are satisfied.
SATISFACTION AND DISCHARGE
The Supplemented Indenture will be discharged and will cease to be of
further effect (except as to surviving rights or registration of transfer or
exchange of the Notes, as expressly provided for in the Indenture) as to all
outstanding Notes when (i) either (a) all the Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company has paid all other sums payable under the Supplemented
Indenture by the Company; and (iii) the Company has delivered to the Trustee
an officers' certificate and an opinion of counsel stating that all conditions
precedent under the Supplemented Indenture relating to the satisfaction and
discharge of the Supplemented Indenture have been complied with.
MODIFICATION OF THE SUPPLEMENTED INDENTURE
From time to time, the Company, the Subsidiary Guarantors and the Trustee,
without the consent of the Holders, may amend the Supplemented Indenture for
certain specified purposes, including curing ambiguities, defects or
inconsistencies, so long as such change does not, in the opinion of the
Trustee, adversely affect the rights of any of the Holders in any material
respect. In formulating its opinion on such matters, the Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an opinion of counsel. Other modifications, waivers and
amendments of the Supplemented Indenture may be made with the
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consent of the Holders of a majority in principal amount of the then
outstanding Notes issued under the Supplemented Indenture, except that,
without the consent of each Holder affected thereby, no amendment or waiver
may: (i) reduce the amount of Notes whose Holders must consent to an
amendment; (ii) reduce the rate of or change or have the effect of changing
the time for payment of interest, including defaulted interest, on any Notes;
(iii) reduce the principal of or change or have the effect of changing the
fixed maturity of any Notes, or change the date on which any Notes may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price therefor; (iv) make any Notes payable in money other than that stated in
the Notes; (v) make any change in provisions of the Supplemented Indenture
protecting the right of each Holder to receive payment of principal of and
interest on such Note on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal amount
of Notes to waive Defaults or Events of Default; (vi) amend, change or modify
in any material respect the obligation of the Company to make and consummate a
Change of Control Offer in the event of a Change of Control or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect
thereto; (vii) modify or change any provision of the Supplemented Indenture or
the related definitions affecting the subordination or ranking of the Notes or
any Guarantee in a manner which adversely affects the Holders in any material
respect; or (viii) release any Subsidiary Guarantor from any of its
obligations under its Guarantee or the Supplemented Indenture other than in
accordance with the terms of the Supplemented Indenture.
GOVERNING LAW
The Supplemented Indenture provides that it, the Notes and the Guarantees
will be governed by, and construed in accordance with, the laws of the State
of New York but without giving effect to applicable principles of conflicts of
law to the extent that the application of the law of another jurisdiction
would be required thereby.
THE TRUSTEE
The Supplemented Indenture provides that, except during the continuance of
an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Supplemented Indenture. During the existence of
an Event of Default, the Trustee will exercise such rights and powers vested
in it by the Supplemented Indenture, and use the same degree of care and skill
in its exercise as a prudent man or woman would exercise or use under the
circumstances in the conduct of his own affairs.
The Supplemented Indenture and the provisions of the TIA contain certain
limitations on the rights of the Trustee, should it become a creditor of the
Company or a Subsidiary Guarantor, to obtain payments of claims in certain
cases or to realize on certain property received in respect of any such claim
as security or otherwise. Subject to the TIA, the Trustee will be permitted to
engage in other transactions; provided, however, that if the Trustee acquires
any conflicting interest as described in the TIA, it must eliminate such
conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Supplemented Indenture. Reference is made to the Supplemented Indenture for
the full definition of all such terms, as well as any other terms used herein
for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of such
Person or at the time it merges or consolidates with such Person or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person, and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of such
Person or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of
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the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any Subsidiary
of the Company in any other Person pursuant to which such Person shall become
a Subsidiary of the Company or any Subsidiary of the Company, or shall be
merged with or into the Company or any Subsidiary of the Company, or (b) the
acquisition by the Company or any Subsidiary of the Company of the assets of
any Person (other than a Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than the Company or a Wholly Owned Subsidiary of the Company of
(a) any Capital Stock of any Subsidiary of the Company, or (b) any other
property or assets of the Company or any Subsidiary of the Company other than
in the ordinary course of business; provided, however, that Asset Sales shall
not include (i) any transaction or series of related transactions for which
the Company or its Subsidiaries receive aggregate consideration of less than
$3.0 million in any consecutive 12-month period, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under "Merger, Consolidation and Sale of
Assets" or any disposition that constitutes a Change of Control, (iii)
disposals or replacements of obsolete or outdated equipment in the ordinary
course of business, (iv) the sale or discount, in each case without recourse
(other than recourse for a breach of a representation or warranty), of
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof in the ordinary course of
business and not as part of a financing transaction, and (v) the sale, lease,
conveyance, disposition or other transfer by the Company or any Subsidiary of
assets or property to one or more Wholly Owned Subsidiaries in connection with
Investments permitted under the "Limitations on Restricted Payments" covenant.
"ATC" means ATC Group Services Inc., a Delaware corporation.
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether voting or nonvoting) of corporate stock, including each
class of Common Stock and Preferred Stock of such Person and (ii) with respect
to any Person that is not a corporation, any and all partnership or other
equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof,
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation
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("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (i) through
(v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company to any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of the Indenture),
other than to a Permitted Holder or a Group controlled by a Permitted Holder;
(ii) the approval by the holders of Capital Stock of the Company of any plan
or proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of the Supplemented Indenture);
(iii) (x) prior to the Initial Public Equity Offering, any Person or Group
other than a Permitted Holder or a Group controlled by a Permitted Holder
shall become the owner, directly or indirectly, beneficially or of record, of
shares representing a percentage of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of the Company
("Voting Power") greater than the percentage of Voting Power owned by a
Permitted Holder (y) prior to the Initial Public Equity Offering, the
percentage of Voting Power owned by Permitted Holders is less than 40% or (z)
after the Initial Public Equity Offering, any Person or Group other than a
Person or Group controlled by a Permitted Holder owns, directly or indirectly,
beneficially or of record, shares representing more than 35% Voting Power; or
(iv) the replacement of a majority of the Board of Directors of the Company
from the directors who constituted the Board of Directors of the Company on
the Issue Date, and such replacement shall not have been approved by a vote of
at least a majority of the Board of Directors of the Company then still in
office who either were members of such Board of Directors on the Issue Date or
whose election as a member of such Board of Directors was previously so
approved.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of such Person's common stock,
whether outstanding on the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Subsidiaries paid or accrued in accordance with GAAP
for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense and (C) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Subsidiaries in accordance with
GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working
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capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the
Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including
any Person who becomes a Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness and
also including any Consolidated EBITDA (including any Pro Forma Adjustments)
(provided that such Consolidated EBITDA shall be included only to the extent
includible pursuant to the definition of "Consolidated Net Income")
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period
and on or prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the Four Quarter Period.
If such Person or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to
the incurrence of such guaranteed Indebtedness as if such Person or any
Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator)
of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period; and (3) notwithstanding clause (1)
above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state
and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including without limitation, (a)
any amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP, minus amortization or write off of deferred
financing costs.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for
such period on a consolidated basis, determined in accordance with GAAP;
provided, however, that there shall be excluded therefrom (a) gains (and
losses) on an after-tax effected basis from Asset Sales (without regard to the
$3 million limitation set forth in the definition thereof) or abandonments or
reserves relating thereto, (b) items classified as extraordinary or
nonrecurring gains or losses (including, without limitation, restructuring
costs related to facilities and/or operating line closings) on an after tax-
effected basis, (c) the net income or loss of any Person acquired in a
"pooling of interests" transaction accrued prior to the date it becomes a
Subsidiary of the referent Person or is merged or consolidated with the
referent Person or any Subsidiary of the referent Person, (d) the net income
(but not loss) of any Subsidiary of
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the referent Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income or loss of any other Person,
other than a Subsidiary of the referent Person, except to the extent (in the
case of net income) of cash dividends or distributions paid to the referent
Person, or to a Wholly Owned Subsidiary of the referent Person, by such other
Person, (f) any restoration to income of any contingency reserve of an
extraordinary, nonrecurring or unusual nature, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation, merger
or transfer of assets and (i) any amortization or write-off of deferred
financing costs.
"Consolidated Net Worth" means, with respect to any Person, the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate (A) depreciation, (B) amortization, (C) LIFO charges,
(D) the amount of any restructuring reserve or charge, and (E) other non-cash
charges of such Person and its Subsidiaries reducing Consolidated Net Income
of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding for purposes of clause
(C) any such charges which require an accrual of or a reserve for cash charges
for any future period).
"Credit Agreement" means the Credit Agreement dated as of January 29, 1998
among the Company, Holdings, the lenders party thereto in their capacities as
lenders thereunder and Bankers Trust Company, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreement may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor
or replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Indebtedness" means (i) Indebtedness under or in respect
of the Credit Agreement and (ii) any other Indebtedness constituting Senior
Indebtedness or Guarantor Senior Indebtedness which, at the time of
determination, has an aggregate principal amount of at least $2.0 million and
is specifically designated in the instrument evidencing such Senior
Indebtedness or Guarantor Senior Indebtedness as "Designated Senior
Indebtedness" or "Guarantor Senior Indebtedness" by the Company or the
applicable Subsidiary Guarantor, as the case may be.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the sole option of the holder thereof (other than as a
result of a Change of Control) on or prior to the final maturity date of the
Notes.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, until such amounts are repaid.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of
the Board of Directors of the Company.
"Foreign Subsidiary" means any Subsidiary of the Company organized under the
laws of a country or jurisdiction other than the United States, any state or
territory thereof or the District of Columbia.
"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 may be approved by a significant segment of the accounting
profession of the United States, which are in effect on the Issue Date.
"Guarantee" means the guarantee of the Notes by the Subsidiary Guarantors.
"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any Indebtedness of
such Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Guarantor Senior Indebtedness" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all monetary obligations (including guarantees
thereof) of every nature of a Subsidiary Guarantor under the Credit Agreement,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations (including guarantees thereof)
and (z) all obligations (including guarantees thereof) under Currency
Agreements, in each case whether outstanding on the Issue Date or thereafter
incurred. Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall
not include (i) any Indebtedness of a Subsidiary Guarantor to a Subsidiary of
such Subsidiary Guarantor or any Affiliate of such Subsidiary Guarantor or any
of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of the Company or
any Subsidiary of the Company (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by such Subsidiary
Guarantor, (vi) that portion of any Indebtedness incurred in violation of the
Supplemented Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness," (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (vi) if the holder(s) of
such obligation or their representative and the Trustee shall have received an
Officers' Certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness, that
the incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate such provisions of the
Indenture), (vii) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code is without
recourse to such Subsidiary Guarantor and (viii) any Indebtedness which is, by
its express terms, subordinated in right of payment to any other Indebtedness
of a Subsidiary Guarantor.
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"Holder" means any holder of Notes.
"Holdings" means Acquisition Holdings, Inc., a Delaware corporation.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other Person of
the type referred to in clauses (i) through (vi) above which are secured by
any lien on any property or asset of such Person, the amount of such
Obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the Obligation so secured, (viii) all
Obligations under Currency Agreements and Interest Swap Agreements of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the Company of such
Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Initial Public Equity Offering" means the first Public Equity Offering to
occur after the Issue Date.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and its Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Subsidiary, as
the case may be. For the purposes of the "Limitation on Restricted Payments"
covenant, the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the Company or any
of its Subsidiaries, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment; provided, however, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment to the extent such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If
the Company or any Subsidiary of the Company
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sells or otherwise disposes of any Common Stock of any direct or indirect
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, greater than
50% of the outstanding Common Stock of such Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such former Subsidiary
not sold or disposed of.
"Issue Date" means January 29, 1998.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"Merger" means the merger of Acquisition Corp. into ATC, with ATC as the
surviving corporation pursuant to and in accordance with the Merger Agreement.
"Merger Agreement" means the Merger Agreement dated as of November 26, 1997
among Acquisition Corp., Holdings and ATC pursuant to which Acquisition Corp.
was merged into and with ATC, as amended and in effect on the Issue Date.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account
any reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness
that is required to be repaid in connection with such Asset Sale and (d)
appropriate amounts to be provided by the Company or any Subsidiary, as the
case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Holder" means any of Weiss, Peck & Greer, L.L.C. and its
Affiliates.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes issued on the Issue Date and the
Guarantees outstanding on the Issue Date or entered into thereafter in
accordance with the Indenture;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate outstanding principal amount at any time not to exceed the sum of
the aggregate commitments pursuant to the Credit Agreement as in effect on
the Issue date (A) less the amount of all mandatory principal payments
actually made in respect of the term loan thereunder and (B) reduced by any
required repayments (which are accompanied by a corresponding permanent
commitment reduction) thereunder, in each case, actually effected in
satisfaction of the Net Cash Proceeds requirement described under "Certain
Covenants--Limitation on Asset Sales" (it being recognized that a reduction
in any borrowing base thereunder in and of itself shall not be deemed a
required permanent repayment);
(iii) Interest Swap Obligations covering Indebtedness of the Company or
any of its Subsidiaries; provided, however, that such Interest Swap
Obligations are entered into to protect the Company and its Subsidiaries
from fluctuations in interest rates on Indebtedness incurred in accordance
with the Supplemented Indenture to the extent the notional principal amount
of such Interest Swap Obligation does not exceed the principal amount of
the Indebtedness to which such Interest Swap Obligation relates;
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(iv) Indebtedness under Currency Agreements; provided, however, that in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(v) Indebtedness of a Subsidiary to the Company or to a Wholly Owned
Subsidiary of the Company for so long as such Indebtedness is held by the
Company or a Wholly Owned Subsidiary of the Company, in each case subject
to no Liens held by any Person other than the Company, a Wholly Owned
Subsidiary of the Company or the lenders under the Credit Agreement;
provided, however, that if as of any date any Person other than the
Company, a Wholly Owned Subsidiary of the Company or the lenders under the
Credit Agreement owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company of such
Indebtedness unless such Indebtedness is otherwise permitted under the
Supplemented Indenture;
(vi) Indebtedness of the Company to a Wholly Owned Subsidiary of the
Company for so long as such Indebtedness is held by a Wholly Owned
Subsidiary of the Company or the lenders under the Credit Agreement, in
each case subject to no Lien other than under the Credit Agreement;
provided, however, that (a) any Indebtedness of the Company to any Wholly
Owned Subsidiary of the Company that is not a Subsidiary Guarantor is
unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Supplemented Indenture and the Notes and
(b) if as of any date any Person other than a Wholly Owned Subsidiary of
the Company or the lenders under the Credit Agreement owns or holds any
such Indebtedness or a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company unless such Indebtedness is otherwise permitted
under the Supplemented Indenture;
(vii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within five business days of incurrence;
(viii) Indebtedness of the Company or any of its Subsidiaries represented
by letters of credit for the account of the Company or such Subsidiary, as
the case may be, in order to provide security for workers' compensation
claims, payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(ix) Existing Indebtedness (including Indebtedness of the Company and its
Subsidiaries under the Notes issued on the Issue Date) outstanding on the
Issue Date;
(x) additional Capitalized Lease Obligations and Purchase Money
Indebtedness of the Company or any of its Subsidiaries not to exceed $5.0
million at any one time outstanding;
(xi) Refinancing Indebtedness;
(xii) Indebtedness permitted by clause (x) of the definition of
"Permitted Investments";
(xiii) guarantees of Indebtedness otherwise permitted under the
Supplemented Indenture, provided that in the case of a guarantee by a
Subsidiary, such Subsidiary complies with the "Guarantees of Certain
Indebtedness" covenant to the extent applicable; and
(xiv) additional Indebtedness in the form of Seller Notes in an aggregate
principal amount not to exceed $10.0 million at any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Subsidiary of the Company in any Person that is or will become immediately
after such Investment a Subsidiary of the Company or that will merge or
consolidate into the Company or a Subsidiary of the Company; (ii) Investments
in the Company by any Subsidiary of the Company; provided, however, that any
Indebtedness evidencing such Investment by a Subsidiary that is not a
Subsidiary Guarantor is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Notes and the Supplemented
Indenture; (iii) Investments in cash and Cash
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Equivalents; (iv) loans and advances to employees and officers of the Company
and its Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $500,000 at any one time outstanding; (v) Currency
Agreements and Interest Swap Obligations entered into in the ordinary course
of the Company's or its Subsidiaries' businesses and otherwise in compliance
with the Supplemented Indenture; (vi) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors
or customers; (vii) Investments made by the Company or its Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant; (viii) Investments
existing on the Issue Date and (ix) guarantees of Indebtedness otherwise
permitted under the Supplemented Indenture, provided that in the case of a
guarantee by a Subsidiary, such Subsidiary complies with the "Guarantees of
Certain Indebtedness" covenant to the extent applicable; and (x) additional
Investments in unconsolidated joint ventures in businesses reasonably related
or complementary to those of the Company and its Subsidiaries (as determined
in good faith by the Company's Board of Directors) in an aggregate amount for
all such Investments made pursuant to this clause (x) not to exceed $4.0
million.
"Permitted Liens" means the following types of Liens:
(i) Liens in favor of the Trustee in its capacity as trustee for the
Holders;
(ii) Liens securing Indebtedness outstanding under the Credit Agreement;
(iii) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Subsidiaries shall have set
aside on its books such reserves as may be required pursuant to GAAP;
(iv) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(v) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(vi) judgment Liens not giving rise to an Event of Default;
(vii) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
(viii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, however, that such Liens do not extend to any
property or assets which is not leased property subject to such Capitalized
Lease Obligation;
(ix) Liens to secure Purchase Money Indebtedness of the Company or any
Subsidiary of the Company; provided, however, that (A) the related Purchase
Money Indebtedness shall not exceed the cost of such property or assets and
shall not be secured by any property or assets of the Company or any
Subsidiary of the Company other than the property and assets so acquired,
constructed or improved and (B) the Lien securing such Indebtedness shall
be created within 90 days of such acquisition, construction or improvement;
(x) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(xi) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
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(xii) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off;
(xiii) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Supplemented Indenture;
(xiv) Liens securing Indebtedness under Currency Agreements;
(xv) any lease or sublease not interfering in any material respect with
the business of the Company and its Subsidiaries;
(xvi) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided, however, that (A) such Liens secured such Acquired Indebtedness
at the time of and prior to the incurrence of such Acquired Indebtedness by
the Company or a Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Subsidiary of the Company and (B) such
Liens do not extend to or cover any property or assets of the Company or of
any of its Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Subsidiary of the Company and are no more
favorable to the lienholders than those securing the Acquired Indebtedness
prior to the incurrence of such Acquired Indebtedness by the Company or a
Subsidiary of the Company.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Pro Forma Adjustments" shall mean pro forma adjustments calculated on a
basis consistent with Regulation S-X under the Securities Act as in effect on
the Issue Date, plus the following detailed adjustments that may be made in
regard to businesses acquired or to be acquired (in either case, the
"target"), whether before or after the Issue Date:
(i) adjustments to revenues to reflect customers not likely to be
retained;
(ii) adjustments to labor and other direct costs to reflect application
of the Company's utilization rate (the billable hours of the Company's
employees divided by such employees' available hours) to the target and to
reflect the additional costs or savings, as the case may be, from the
continued use or elimination of outside laboratory and technical personnel
utilized by the target company;
(iii) adjustments to reflect home office functions of the target such as
accounting, payroll and legal that will be provided by the Company,
including any adjustments to eliminate outside professional services if
such functions are to be assumed by then existing Company personnel;
(iv) adjustments with respect to savings that will be realized by
including the target under the Company's insurance coverage and adjustments
to reflect the costs, if any, of transferring or terminating duplicate
insurance policies of the target;
(v) adjustments to reflect savings associated with the elimination of
duplicate facilities and adjustments to reflect costs associated with such
elimination (such as lease termination costs, moving and storage, etc.);
(vi) adjustments to employee benefit costs to reflect the Company's
actual employee benefit cost structure, to the extent the target's employee
benefits will be replaced with the Company's employee benefits;
(vii) adjustments to reflect the actual impact of the departure or
retention of highly compensated executives of the target (including
elimination of compensation, benefits and revenues attributable to such
executives, if departing, and any increases to compensation or benefits for
such executives continuing);
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<PAGE>
(viii) interest expense adjustments to reflect refinancing of existing
debt or increases in borrowings used to effect acquisition of the target;
and
(ix) adjustments to replace the target's then-current goodwill
depreciation and amortization with such amounts as are derived from the
application to the target of purchase accounting, if applicable, under
GAAP.
"Public Equity Offering" means an underwritten primary public offering of
common stock or common equity of the Company or any other Person that directly
or indirectly owns 100% of the common stock of the Company pursuant to an
effective registration statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness the net proceeds of which
are used to finance the cost (including the cost of acquisition, construction
or improvements) of property or assets acquired in the normal course of
business by the Person incurring such Indebtedness.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Subsidiary of the Company of Indebtedness (including any Indebtedness with
respect to letters of credit) incurred in accordance with the "Limitation on
Incurrence of Additional Indebtedness" covenant (other than pursuant to
clauses (ii), (iii), (iv), (v), (vi), (vii), (viii), (x), (xi), (xii) or
(xiii) of the definition of Permitted Indebtedness), in each case that does
not (1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing, plus
the amount of any interest and premium required to be paid under the terms of
the instrument governing such Indebtedness and plus the amount of reasonable
fees and expenses (including additional premiums that may be required to
effect such Refinancing, limited to 5.0% of the aggregate principal amount of
Indebtedness being Refinanced) incurred by the Company or such Subsidiary, as
the case may be, in connection with such Refinancing, except to the extent
that any such increase in Indebtedness is otherwise permitted by the
Supplemented Indenture or (2) create Indebtedness with (A) a Weighted Average
Life to Maturity that is less than the Weighted Average Life to Maturity of
the Indebtedness being Refinanced or (B) a final maturity earlier than the
final maturity of the Indebtedness being Refinanced; provided, however, that
(x) if such Indebtedness being Refinanced is Indebtedness of the Company, then
such Refinancing Indebtedness shall be Indebtedness solely of the Company and
(y) if such Indebtedness being Refinanced is subordinate or junior to the
Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at
least to the same extent and in the same manner as the Indebtedness being
Refinanced.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Subsidiary Guarantors and
the Initial Purchaser.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided,
however, that if, and for so long as, any Designated Senior Indebtedness lacks
such a representative, then the Representative for such Designated Senior
Indebtedness shall at all times constitute the holders of a majority in
outstanding principal amount of such Designated Senior Indebtedness in respect
of any Designated Senior Indebtedness.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Subsidiary of the Company of any property, whether
owned by the Company or any Subsidiary of the Company at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company
or such Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such property.
"Seller Notes" means notes issued by the Company or any Subsidiary thereof
to a seller in connection with an Asset Acquisition; such notes may be Senior
Indebtedness.
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<PAGE>
"Senior Indebtedness" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Senior Indebtedness" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations (including guarantees thereof) of every
nature of the Company under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities, (y) all
Interest Swap Obligations (including guarantees thereof) and (z) all
obligations (including guarantees) under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred. Notwithstanding
the foregoing, "Senior Indebtedness" shall not include (i) any Indebtedness of
the Company to a Subsidiary of the Company or any Affiliate of the Company or
any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of the Company or
any Subsidiary of the Company (including, without limitation, amounts owed for
compensation) but excluding Indebtedness in the original aggregate principal
amount of up to Two Million Six Hundred Fifty Thousand Dollars ($2,650,000)
issued to the former shareholders of Bing Yen & Associates, a California
corporation, in connection with the acquisition by ATC of all of the issued
and outstanding shares of said corporation, (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or
owing by the Company, (vi) that portion of any Indebtedness incurred in
violation of the Supplemented Indenture provisions set forth under "Limitation
on Incurrence of Additional Indebtedness," (but, as to any such obligation, no
such violation shall be deemed to exist for purposes of this clause (vi) if
the holder(s) of such obligation or their representative and the Trustee shall
have received an Officers' Certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the incurrence of the entire committed amount thereof at
the date on which the initial borrowing thereunder is made would not) violate
such provisions of the Supplemented Indenture), (vii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title
11, United States Code is without recourse to the Company, (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment
to any other Indebtedness of the Company, and (ix) any Indebtedness of ATC and
its Subsidiaries until consummation of the Merger and assumption by ATC of all
Obligations under the Indenture (including execution of the Guarantees by the
Subsidiary Guarantors);
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"Subsidiary" means, with respect to any Person, (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means individually and collectively, (i) each of the
Company's Subsidiaries as of the Issue Date other than the Foreign
Subsidiaries and (ii) each of the Company's Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of the Supplemented Indenture as a Subsidiary
Guarantor; (iii) any Subsidiary, whether formed or acquired after the Issue
Date, that guarantees any Indebtedness outstanding under the Credit Agreement;
provided, however, that any Subsidiary acquired after the Issue Date which is
prohibited from entering into a Guarantee pursuant to restrictions contained
in any debt instrument in existence at the time such Subsidiary was so
acquired and not
109
<PAGE>
entered into in anticipation or contemplation of such acquisition shall not be
required to become a Subsidiary Guarantor so long as any such restriction is
in existence and to the extent of any such restriction; provided, further,
that if any Subsidiary Guarantor is released from its guarantee of the
outstanding Indebtedness of the Company under the Credit Agreement and the
pledge by it, directly or indirectly, of any of its assets as security for
such Indebtedness at a time when no Default or Event of Default has occurred
and is continuing such Subsidiary Guarantor shall be automatically released
from its obligations as a Subsidiary Guarantor and, from and after such date,
such Subsidiary Guarantor shall cease to constitute a Subsidiary Guarantor
provided, however, that any Person constituting a Subsidiary Guarantor as
described above shall cease to constitute a Subsidiary Guarantor when its
Guarantee is released in accordance with the terms of the Supplemented
Indenture.
"Tax Sharing Agreement" means any tax sharing agreement between the Company
and Holdings or any other Person with which the Company is required to, or is
permitted to, file a consolidated tax return or with which the Company is or
could be part of a consolidated group for tax purposes.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" means, with respect to any Person, any Subsidiary
of such Person of which all the outstanding voting securities normally
entitled to vote in the election of directors are owned by such Person or any
Wholly Owned Subsidiary of such Person (other than directors qualifying shares
or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law).
110
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
Exchange Notes issued in exchange for Private Notes currently represented by
one or more fully registered global notes will be represented by one or more
permanent global certificates in definitive, fully registered form (the
"Global Notes"). The Global Notes will be deposited upon issuance with, or on
behalf of, DTC and registered in the name of a nominee of DTC. Except as set
forth below, The Global Notes may be transferred in whole and not in part only
to another nominee of DTC or to a successor of DTC or its nominee.
Exchange Notes issued in exchange for Private Notes will be issued in
registered, certificated form without interest coupons.
The Global Notes. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount of Notes
of the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and
the transfer of such ownership 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).
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Supplemented Indenture. No beneficial owner of an interest in the
Global Notes will be able to transfer that interest except in accordance with
DTC's procedures, in addition to those provided for under the Supplemented
Indenture with respect to the Notes.
Payments of the principal of, premium (if any) and interest on the Global
Notes will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, any Subsidiary Guarantor the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global Notes
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
participants to whose account the DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such participant or participants has or have
given such direction. However, if there is an Event of Default under the
Supplemented Indenture, DTC will exchange the Global Notes for certificated
securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York 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
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<PAGE>
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and a successor depositary is
not appointed within 90 days, certificated securities will be issued in
exchange for the Global Notes.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
EXCHANGE OFFER
The exchange of the Private Notes for the Exchange Notes pursuant to the
Exchange Offer should not be treated as a taxable transaction for U.S. federal
income tax purposes because the Exchange Notes will not be considered to
differ materially in kind or extent from the Private Notes. Rather, the
Exchange Notes received by any holder should be treated as a continuation of
such holders investment in the Private Notes. As a result, there should be no
material U.S. federal income tax consequences to holders exchanging the
Private Notes for the Exchange Notes pursuant to the Exchange Offer and such
holders should have the same adjusted issue price, adjusted basis and holding
period in the Exchange Notes as it had in the Private Notes immediately prior
to the exchange.
HOLDERS CONSIDERING THE EXCHANGE OF THE PRIVATE NOTES FOR EXCHANGE NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING
UNDER FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS OF SUCH AN EXCHANGE.
PLAN OF DISTRIBUTION
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 any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Each broker-dealer that
receives Exchange Notes for its own account in exchange for such Private Notes
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Company
has agreed that for a period of up to 45 days after the closing of the
Exchange Offer, it will make this Prospectus, as amended or supplemented,
available to any such broker-dealer that requests copies of this Prospectus in
the Letter of Transmittal for use in connection with any such resale.
None of the Company or any Subsidiary Guarantors will receive any proceeds
from any sale of Exchange Notes by broker-dealers or any other persons.
Exchange Notes received by broker-dealers for their own account pursuant to
the Exchange Offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions or through the
writing of options on the Exchange Notes, or a combination of such methods of
resale, at market prices prevailing at the time of resale or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer in exchange
for Private Notes acquired by such broker-dealer as a result of market-making
112
<PAGE>
or other trading activities and any broker-dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Chadbourne & Parke L.L.P, counsel to the Company will pass upon the validity
of the Exchange Notes and certain U.S. federal income tax consequences
relating to the Exchange Notes.
EXPERTS
The Consolidated Balance Sheets as of February 29, 1996 and February 28,
1997 and the related Consolidated Statements of Income, Shareholders' Equity
and Cash Flows for the fiscal years ended February 28, 1995, February 29, 1996
and February 28, 1997 of the Company, and the financial statements for Bing
Yen for the year ended December 31, 1996 and the financial statements for ATEC
as of December 31, 1995 and 1994 and for the years ended December 31, 1995 and
1994, the three months ended December 31, 1993 and the year ended September
30, 1993 included in this Prospectus, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports, which are included
herein and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing. The
Environmental Warranty, Inc. financial statements and financial statement
schedule, as of and for the years ended June 30, 1997 and 1996, included in
this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report. The financial statements for the Engineering Division of
Smith Technology Corporation as of and for the year ended September 30, 1996
included in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as stated in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
the division's ability to continue as a going concern as described in Note 1
to the financial statements) appearing elsewhere herein.
113
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ATC GROUP SERVICES INC. AND SUBSIDIARIES............................................ F-2
Independent Auditors' Consent Report and Report on Schedules........................ F-3
Consolidated Balance Sheets, February 28 (29), 1996 and 1997 and November 30, 1997
(unaudited)........................................................................ F-4
Consolidated Statements of Operations for the three years ended February 28, 1997
and the nine months
ended November 30, 1997 and 1996 (unaudited)....................................... F-5
Consolidated Statements of Stockholders' Equity for the three years ended February
28, 1997 and the
nine months ended November 30, 1997 (unaudited).................................... F-6
Consolidated Statements of Cash Flows for the three years ended February 28, 1997
and the nine months ended November 30, 1997 and 1996 (unaudited)................... F-7
Notes to the Consolidated Financial Statements for the three years ended February
28, 1997 and nine months ended November 30, 1997 and 1996 (unaudited).............. F-8
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION............................ F-30
(dba BCM ENGINEERS, INC.)
Report of Independent Auditors...................................................... F-31
Balance Sheet, September 30, 1996................................................... F-32
Statement of Operations and Smith Equity Investment for the year ended September 30,
1996............................................................................... F-33
Statement of Cash Flows for the year ended September 30, 1996....................... F-34
Notes to Financial Statements, September 30, 1996................................... F-35
AMERICAN TESTING AND ENGINEERING CORPORATION........................................ F-41
Independent Auditors' Report........................................................ F-42
Consolidated Balance Sheets for December 31, 1995 and 1994.......................... F-43
Consolidated Statements of Operations for the years ended December 31, 1995 and
1994, the
three months ended December 31, 1993 and the year ended September 30, 1993......... F-44
Consolidated Statements of Shareholders' Equity for the years ended December 31,
1995 and 1994,
the three months ended December 31, 1993 and the year ended September 30, 1993..... F-45
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and
1994, the
three months ended December 31, 1993 and the year ended September 30, 1993......... F-46
Notes to the Consolidated Financial Statements for the years ended December 31, 1995
and 1994,
the three months ended December 31, 1993 and the year ended September 30, 1993..... F-47
BING YEN & ASSOCIATES, INC. ........................................................ F-55
Independent Auditors' Report........................................................ F-56
Balance Sheet, December 31, 1996.................................................... F-57
Statement of Operations and Retained Earnings for the year ended December 31, 1996.. F-58
Statement of Cash Flows for the year ended December 31, 1996........................ F-59
Notes to the Financial Statements for the year ended December 31, 1996.............. F-60
ENVIRONMENTAL WARRANTY, INC......................................................... F-62
Report of Independent Public Accountants............................................ F-63
Balance Sheets as of June 30, 1997 and 1996......................................... F-64
Statements of Operations for the years ended June 30, 1997 and 1996................. F-65
Statements of Changes in Shareholders' Equity for the years ended June 30, 1997 and
1996............................................................................... F-66
Statements of Cash Flows for the years ended June 30, 1997 and 1996................. F-67
Notes to Financial Statements for the years ended June 30, 1997 and 1996............ F-68
Schedule of General and Administrative Expenses for the years ended June 30, 1997
and 1996........................................................................... F-73
</TABLE>
F-1
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS FOR THE THREE YEARS
ENDED FEBRUARY 28, 1997 AND THE NINE MONTHS
ENDED NOVEMBER 30, 1997 AND 1996
AND INDEPENDENT AUDITORS' REPORT
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
ATC Group Services Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of ATC Group
Services Inc. and subsidiaries as of February 29, 1996 and February 28, 1997,
and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended February 28,
1997. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of ATC Group Services Inc. and
subsidiaries as of February 29, 1996 and February 28, 1997 and the results of
their operations and their cash flows for each of the three years in the
period ended February 29, 1996 and February 28, 1997 and the results of their
operations and their cash flows for each of the three years in the period
ended February 28, 1997, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
May 22, 1997
(May 29, 1997 as to Notes B and D)
F-3
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28 (29), 1996 AND 1997 AND NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NOVEMBER 30,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 13,469,443 $ 2,003,890 $ 5,839,819
Trade accounts receivable, less
allowance for doubtful accounts
($383,220 in 1996, $1,455,716 in 1997
and $2,464,031 at November 30, 1997)
(Note K)............................. 14,161,774 34,406,026 42,507,431
Costs in excess of billings on
uncompleted contracts................ 2,333,835 5,191,569 9,291,883
Prepaid expenses and other current
assets............................... 906,289 2,934,193 2,308,060
Deferred income taxes (Note H)........ 440,600 790,400 790,400
Refundable income taxes (Note H)...... -- 118,340 --
------------ ------------ ------------
Total current assets................. 31,311,941 45,444,418 60,737,593
PROPERTY AND EQUIPMENT, Net (Note C)... 3,606,755 3,784,633 5,633,719
GOODWILL, net of accumulated
amortization ($453,646 in 1996,
$1,478,876 in 1997 and $2,709,740 at
November 30, 1997) (Note B)........... 11,375,399 35,587,076 48,340,578
COVENANTS NOT TO COMPETE, net of
accumulated amortization ($258,099 in
1996, $614,750 in 1997 and $557,207 at
November 30, 1997) (Note B)........... 274,401 632,184 622,750
OTHER ASSETS........................... 116,104 845,346 2,210,275
------------ ------------ ------------
$ 46,684,600 $ 86,293,657 $117,544,915
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt (Note D).............. $ 1,122,552 $ 300,000 $ 2,449,748
Current maturities of long-term debt
(Note D)............................. 354,858 1,986,730 1,343,007
Accounts payable...................... 2,231,175 7,440,024 7,355,315
Income taxes payable (Note H)......... 42,500 -- 887,673
Accrued compensation.................. 1,421,330 3,789,233 5,832,039
Accrued payment obligations--ATEC
acquisition (Note B)................. -- 1,721,594 1,748,500
Other accrued expenses................ 1,162,210 2,505,143 3,049,780
------------ ------------ ------------
Total current liabilities............ 6,334,625 17,742,724 22,666,062
LONG-TERM DEBT, less current maturities
(Note D).............................. 361,944 22,123,344 42,153,196
OTHER LIABILITIES (Note E)............. 598,817 270,386 2,364,618
DEFERRED INCOME TAXES (Note H)......... 196,800 717,900 717,900
------------ ------------ ------------
Total liabilities.................... 7,492,186 40,854,354 67,901,776
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes B
and E)
STOCKHOLDERS' EQUITY (Notes B, D, F,
and G):
Common stock, par value $.01 per
share; authorized 20,000,000 shares;
issued and outstanding 7,796,577
shares in 1996, 7,800,187 shares in
1997 and 7,930,107 shares at November
30, 1997............................. 77,966 78,002 79,301
Additional paid-in capital............ 29,030,189 28,996,627 29,595,099
Notes receivable--common stock ....... (45,000) --
Retained earnings..................... 10,129,259 16,364,674 19,968,739
------------ ------------ ------------
Total stockholders' equity........... 39,192,414 45,439,303 49,643,139
------------ ------------ ------------
$ 46,684,600 $ 86,293,657 $117,544,915
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED FEBRUARY 28 (29), NOVEMBER 30,
-------------------------------------- -------------------------
1995 1996 1997 1996 1997
----------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................ $36,271,557 $44,964,897 $113,855,364 $83,416,851 $104,263,345
Reimbursable Costs..... 3,001,811 4,851,206 17,953,895 13,354,833 15,874,338
----------- ----------- ------------ ----------- ------------
NET REVENUES............ 33,269,746 40,113,691 95,901,469 70,062,018 88,389,007
COST OF NET REVENUES.... 15,353,682 19,663,968 53,750,707 38,962,629 47,940,544
----------- ----------- ------------ ----------- ------------
Gross Profit........ 17,916,064 20,449,723 42,150,762 31,099,389 40,448,463
----------- ----------- ------------ ----------- ------------
OPERATING EXPENSES:
Selling................ 1,105,937 1,513,222 3,118,926 2,180,498 3,226,393
General and
administrative........ 10,996,709 12,850,874 26,299,172 18,779,916 28,077,190
Provision for bad
debts................. 188,819 290,165 1,021,631 624,981 1,160,529
----------- ----------- ------------ ----------- ------------
12,291,465 14,654,261 30,439,729 21,585,395 32,464,112
----------- ----------- ------------ ----------- ------------
Operating Income.... 5,624,599 5,795,462 11,711,033 9,513,994 7,984,351
NON-OPERATING EXPENSE
(INCOME):
Interest expense....... 285,570 376,621 1,569,043 1,080,217 2,163,548
Interest income........ (34,073) (272,463) (230,610) (221,115) (164,864)
Other.................. 72,582 20,306 (25,134) (36,182) (44,398)
----------- ----------- ------------ ----------- ------------
324,079 124,464 1,313,299 822,920 1,954,286
----------- ----------- ------------ ----------- ------------
Income before income
taxes.............. 5,300,520 5,670,998 10,397,734 8,691,074 6,030,065
INCOME TAX EXPENSE (Note
H)..................... 2,044,000 1,805,000 4,090,000 3,365,000 2,426,000
----------- ----------- ------------ ----------- ------------
NET INCOME.............. $ 3,256,520 $ 3,865,998 $ 6,307,734 $ 5,326,074 $ 3,604,065
=========== =========== ============ =========== ============
EARNINGS PER COMMON
SHARE AND DILUTIVE
COMMON EQUIVALENT
SHARE:
Primary (Note H)....... $ .57 $ .54 $ .74 $ .62 $ .42
=========== =========== ============ =========== ============
Fully diluted (Note H). $ .56 $ .54 $ .74 $ .62 $ .42
=========== =========== ============ =========== ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Primary................ 5,753,856 7,181,416 8,483,387 8,537,271 8,503,018
=========== =========== ============ =========== ============
Fully diluted.......... 5,850,233 7,181,416 8,508,061 8,570,170 8,548,252
=========== =========== ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
------------
NOTES
ADDITIONAL RECEIVABLE-
PAID-IN COMMON RETAINED
SHARES AMOUNT CAPITAL STOCK EARNINGS TOTAL
--------- ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, February 28,
1994................... 5,303,352 $53,034 $ 4,610,860 $(34,250) $ 3,029,841 $ 7,659,485
Sale of common stock at
$1.87 to $5.00 per
share, upon exercise of
stock options and
warrants............... 16,980 170 51,354 -- -- 51,524
Sale of common stock at
$8.00 per share, upon
exercise
of Class B common stock
purchase warrants...... 284,803 2,848 2,275,576 -- -- 2,278,424
Issuance of common stock
in connection with the
purchase of Con-Test,
Inc.................... 116,556 1,165 491,740 -- -- 492,905
Issuance of common stock
in connection with the
purchase of R.E.
Blattert & Associates.. 16,327 163 112,340 -- -- 112,503
Other capital
transactions........... -- -- (57,417) 19,250 -- (38,167)
Net income.............. -- -- -- -- 3,256,520 3,256,520
--------- ------- ----------- -------- ----------- -----------
BALANCE, February 28,
1995................... 5,738,018 57,380 7,484,453 (15,000) 6,286,361 13,813,194
Issuance of common stock
in public offering at
$12.00
per share less
expenses............... 1,970,000 19,700 21,534,761 -- -- 21,554,461
Sale of common stock at
$1.83 to $10.50 per
share,
upon exercise of stock
options and warrants... 39,613 396 100,223 -- -- 100,619
Net issuance of common
stock and adjustments
in connection with the
merger of Aurora
Environmental Inc. into
ATC (Note B)........... 83,356 834 60,283 (30,000) -- 31,117
Common stock recovered
in connection with the
Con-Test, Inc.
acquisition (Note B)... (33,130) (331) (139,682) -- -- (140,013)
Other capital
transactions........... (1,280) (13) (9,849) -- (23,100) (32,962)
Net income.............. -- -- -- -- 3,865,998 3,865,998
--------- ------- ----------- -------- ----------- -----------
BALANCE, February 29,
1996................... 7,796,577 77,966 29,030,189 (45,000) 10,129,259 39,192,414
Sale of common stock at
$1.85 to $10.00 per
share,
upon exercise of stock
options and warrants... 15,930 159 74,998 -- -- 75,157
Common stock received as
consideration for sale
of assets.............. (12,320) (123) (51,990) -- (72,319) (124,432)
Other capital
transactions........... -- -- (56,570) 45,000 -- (11,570)
Net income.............. -- -- -- -- 6,307,734 6,307,734
--------- ------- ----------- -------- ----------- -----------
BALANCE, February 28,
1997................... 7,800,187 78,002 28,996,627 -- 16,364,674 45,439,303
Sale of common stock at
$1.88 to $10.00 per
share,
upon exercise of stock
options and warrants... 96,920 969 288,973 -- -- 289,942
Issuance of common stock
in connection with the
acquisition of Bing Yen
& Associates, Inc...... 33,000 330 364,733 -- -- 365,063
Continuing registration
costs applied against
additional paid-in cap-
ital................... -- -- (55,234) -- -- (55,234)
Net income.............. -- -- -- -- 3,604,065 3,604,065
--------- ------- ----------- -------- ----------- -----------
BALANCE, November 30,
1997................... 7,930,107 $79,301 $29,595,099 $ -- $19,968,739 $49,643,139
========= ======= =========== ======== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
NOVEMBER 30
--------------------------
1995 1996 1997 1996 1997
---------- ----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............ $3,256,520 $ 3,865,998 $ 6,307,734 $ 5,326,074 $ 3,604,065
Adjustments to
reconcile net income
to net cash from
operating activities:
Depreciation and
leasehold
amortization......... 707,318 776,917 882,803 642,779 888,629
Amortization of
goodwill and
covenants............ 212,320 437,254 1,216,008 887,305 1,392,196
Provision for bad
debts................ 188,819 290,165 1,021,631 624,981 1,160,529
Deferred income taxes. 23,500 (191,700) 171,300 -- --
Other................. (57,258) (132,700) (143,981) (130,586) (2,230,058)
Changes in operating
assets and
liabilities, net of
amounts acquired in
acquisitions:
Receivables.......... (348,459) (4,168,658) (3,861,601) (5,400,578) (2,725,157)
Prepaid expenses and
other assets........ (22,269) (434,890) (143,679) (448,876) 1,990,786
Accounts payable and
other liabilities... 72,615 (1,199,278) (12,210,762) (7,316,178) (6,513,985)
Income taxes
refundable/payable.. (1,002,403) (85,750) 75,858 225,455 887,673
---------- ----------- ----------- ------------ ------------
Net cash flows from
operating
activities......... 3,030,703 (842,642) (6,684,689) (5,589,624) (1,545,322)
---------- ----------- ----------- ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of BCM
Engineers, Inc....... -- -- -- -- (5,425,539)
Purchase of Bing Yen &
Associates, Inc., net
of cash acquired..... -- -- -- -- (2,093,122)
Purchase of
Environmental
Warranty, Inc., net
of cash acquired..... -- -- -- -- 19,350
Purchase of American
Testing and
Engineering Corp.,
net of cash acquired. -- -- (8,965,952) (8,965,952) (2,420,766)
Purchase of 3D
Information Services,
Inc., net of cash
acquired............. -- -- (2,926,681) (2,926,681) --
Purchase of Hill
Businesses........... -- (2,517,949) -- -- --
Purchase of Applied
Geosciences, Inc..... -- (589,060) (22,324) -- --
Purchase of Con-Test,
Inc., net of cash
acquired............. (2,230,551) (169,038) -- -- --
Purchase of BSE
Management, Inc.--
contingent
consideration........ (887,325) (207,990) -- -- --
Purchase of Microbial
Environmental
Services, Inc........ (250,000) (45,307) -- -- --
Purchase of R.E.
Blattert &
Associates, net of
cash acquired........ (9,541) (134,376) -- -- --
Purchase of property
and equipment........ (756,444) (946,206) (1,285,695) (1,123,416) (1,502,618)
Other................. 34,049 22,987 56,328 (1,353) 91,887
---------- ----------- ----------- ------------ ------------
Net cash flows from
investing
activities......... (4,099,812) (4,586,939) (13,144,324) (13,017,402) (11,330,808)
---------- ----------- ----------- ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of common stock, net
of expenses.......... 2,329,948 21,655,080 75,157 69,338 289,942
Proceeds from issuance
of long-term debt and
notes payable........ 1,580,318 2,585,125 22,270,297 21,403,572 41,100,000
Principal payments on
long-term debt,
including capital
lease obligations.... (2,800,767) (6,663,581) (13,925,424) (13,592,048) (24,622,649)
Other capital
transactions......... (57,417) (55,462) (56,570) (28,570) (55,234)
---------- ----------- ----------- ------------ ------------
Net cash flows from
financing
activities......... 1,052,082 17,521,162 8,363,460 7,852,292 16,712,059
---------- ----------- ----------- ------------ ------------
Net change in cash
and cash
equivalents........ (17,027) 12,091,581 (11,465,553) 10,754,734 3,835,929
CASH AND CASH
EQUIVALENTS, Beginning
of year............... 1,394,889 1,377,862 13,469,443 13,469,443 2,003,890
---------- ----------- ----------- ------------ ------------
CASH AND CASH
EQUIVALENTS, End of
year.................. $1,377,862 $13,469,443 $ 2,003,890 $ 2,714,709 $ 5,839,819
========== =========== =========== ============ ============
SUPPLEMENTAL
DISCLOSURES OF CASH
FLOW INFORMATION:
Cash payments for:
Interest.............. $ 276,658 $ 374,466 $ 1,515,432 $ 967,711 $ 744,534
Income taxes.......... $3,023,000 $ 2,077,000 $ 4,062,000 $ 3,139,546 $ 1,753,267
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE NINE MONTHS ENDED NOVEMBER
30, 1997 AND 1996 (UNAUDITED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPALS OF CONSOLIDATION--The consolidated financial statements include
the accounts of ATC Group Services Inc. (formerly ATC Environmental Inc.) and
its wholly-owned subsidiaries ATC New England Corp., ATC Blattert Inc., Hygeia
Laboratories Inc., ATC Management Inc. and ATC InSys Technology Inc. All
significant inter-company accounts and transactions have been eliminated.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly, in all material respects, the
financial position, the results of operations and the cash flows for the
periods presented herein. These results of operations are not necessarily
indicative of the results to be expected for the full year due to certain
seasonality factors and the effects and timing of large service projects.
NATURE OF BUSINESS--ATC Group Services Inc. and its subsidiaries ("ATC" or
the "Company") is a national business services firm providing technical and
project management services relating to environmental consulting (the
"environmental consulting and engineering" segment) and information technology
consulting services (the "information technology consulting" segment). The
Company's environmental consulting and engineering segment provides
environmental and geotechnical engineering services, architectural engineering
services, construction materials testing and analytical testing. The Company's
information technology consulting segment provides analysis and design
services and system programming services to assist clients in building new or
modifying existing computer systems. This business unit also provides support
to clients in maintaining computer systems.
SENIOR SECURED NOTES--On May 29, 1997, the Company issued $32,500,000 of
8.18% Senior Secured Notes due in annual installments beginning May, 2000,
through May, 2004, to a group of financial institutions. Interest on the
Senior Secured Notes is payable semi-annually on May 31, and November 30,
commencing on November 30, 1997. The Senior Secured Notes are collateralized
by accounts receivable, work-in-process, intangible assets and the Company's
primary depository accounts. The proceeds from the Senior Secured Notes have
in part been utilized to repay the Company's outstanding bridge credit
facility. Accordingly, at February 28, 1997, the Company classified its
$ 20,850,000 outstanding bridge credit facility as long-term debt. The bridge
facility was entered into in May, 1996, to provide capital in connection with
the Company's acquisition of American Testing and Engineering Corporation and
3D Information Services, Inc.
BANK CREDIT AGREEMENT--In connection with the Senior Secured Note offering,
the Company executed a credit agreement with the Chase Manhattan Bank and
Atlantic Bank of New York. The credit agreement provides for a $15,000,000
revolving line of credit maturing on November 30, 1999. The borrowings under
the line of credit are collateralized by the Company's cash, accounts
receivable, work in process, and intangible assets on a pari passu basis with
the Senior Secured Note holders. Under the terms of the Note and Credit
Agreements, the Company is required to comply with certain financial and
business covenants including maintaining minimum working capital levels, fixed
charge and interest ratios and restrictions on dividend payments.
REVENUE RECOGNITION--The Company generally contracts for services to
customers on the basis of a fixed fee per procedure or services performed.
Revenue is recognized as services are performed in accordance with the terms
of the contract.
COSTS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS--Costs in excess of
billings on uncompleted contracts represent unbilled services and reimbursable
expenses associated with ongoing projects.
F-8
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
SIGNIFICANT CUSTOMER--In fiscal 1997 there were no revenues from a single
customer exceeding 5%. In fiscal 1996 and 1995, revenues from a single
customer comprised approximately 6.0% and 10.6% of total revenues,
respectively.
PROPERTY AND EQUIPMENT--Property and equipment are carried at cost.
Depreciation is computed on either the straight-line or declining balance
method over the estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Office equipment........................................ 5 years
Transportation equipment ............................... 4-5 years
Laboratory and field equipment.......................... 5-7 years
Leasehold improvements.................................. life of the lease
</TABLE>
AMORTIZATION OF INTANGIBLE ASSETS--Goodwill, which represents the excess of
cost over the fair market value of net assets acquired in the Company's
acquisitions, is being amortized on a straight-line basis over a 30 year
period. The carrying value of goodwill is periodically evaluated on the basis
of management's estimates of future undiscounted operating income associated
with the acquired businesses. The covenants not to compete are being amortized
over the terms of the agreements, which are 1 to 7 year periods.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121--On March 1, 1996, the
Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets to be Disposed Of. The
adoption of SFAS No. 121 did not have a material effect on the Company's
financial statements.
INCOME TAXES--ATC and its wholly-owned subsidiaries file a consolidated
income tax return. The liability method is used to measure deferred tax assets
and liabilities based on temporary differences between financial and taxable
income existing at each balance sheet date using enacted tax rates.
CREDIT RISK AND FINANCIAL INSTRUMENTS--Financial instruments which
potentially subject the Company to concentrations of credit risk are primarily
temporary investments and accounts receivable. The Company places its
temporary investments in highly rated financial institutions and investment
grade short-term debt instruments. Concentrations of credit risk with respect
to accounts receivable are limited due to the large number of customers, the
proportion of receivables from governmental entities, generally short payment
terms and dispersion across geographic areas.
FAIR VALUES OF FINANCIAL INSTRUMENTS--Fair values of financial instruments
have been estimated based on market prices of similar instruments and/or
valuation techniques using market assumptions. The Company assumes that the
carrying amount of short-term financial instruments approximates their fair
value. For these purposes, short-term is defined as any item that matures or
represents a cash transaction between willing parties within six months or
less of the measurement date. Unless otherwise noted, the carry value of
financial instruments approximates fair value.
EARNINGS PER COMMON SHARE AND DILUTIVE COMMON EQUIVALENT SHARE--Earnings per
common share and dilutive common equivalent share have been computed by using
the weighted average number of shares outstanding during the year. Outstanding
dilutive stock warrants and stock options are included in the computation of
weighted average number of shares.
F-9
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share. SFAS No. 128, which becomes effective for financial
statements of the Company issued for fiscal years ending after December 15,
1997, replaces primary and fully diluted earnings per share, as disclosed
under current pronouncements, with basic and diluted earnings per share. Pro
forma basic earnings per share for the fiscal years 1995, 1996, and 1997 are
$.59, $.59 and $.81, respectively. Pro forma diluted earnings per share for
the fiscal years 1995, 1996, and 1997 are $.57, $.54 and $.74, respectively.
Pro forma basic earnings per share for the nine months ended November 30, 1996
and 1997 are $.68 and $.46, respectively. Pro forma diluted earnings per share
for the nine months ended November 30, 1996 and 1997 are $.65 and $.44,
respectively.
CASH AND CASH EQUIVALENTS--For purposes of reporting cash flows, the Company
considers all commercial paper, money market funds and certificates of deposit
purchased with a maturity of three months or less at acquisition to be cash
equivalents.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS--In June 1996, the Financial Accounting
Standards Board issued SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, which established
accounting and reporting standards for such transfers. The Company intends to
adopt SFAS No. 125 effective March 1, 1997, as required. Management
anticipates that the adoption of SFAS No. 125 will not have a significant
effect on the Company's financial position and results of operations.
RECLASSIFICATIONS--Certain reclassifications have been made to the prior
years' financial statements to conform to the current year's presentation.
B. BUSINESS ACQUISITIONS AND MERGER
BUSINESS ACQUISITIONS--The following acquisitions have been accounted for as
purchases. The acquired company's assets and liabilities are included in the
accompanying consolidated balance sheets at fair value at the date of
purchase. The acquired company's operations subsequent to the acquisition are
included in the accompanying consolidated statements of operations.
Fiscal 1998 (Unaudited)
Bing Yen & Associates, Inc.--On November 26, 1997 ATC purchased all of the
outstanding stock of Bing Yen & Associates, Inc. ("Bing Yen"). Bing Yen
provides geotechnical and structural forensic services to a wide variety of
clients in the western United States and is located in Tustin, California.
F-10
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
The purchase price was comprised of the following consideration:
<TABLE>
<S> <C>
Amounts paid to seller:
Cash........................................................... $2,200,000
Note payable at 8% due January 2, 1998......................... 550,000
Notes payable at 8% due in three annual installments commencing
January 1999.................................................. 1,150,000
----------
3,900,000
Liabilities assumed:
Current liabilities............................................ 313,254
Direct expenses of transaction................................... 50,000
----------
$4,263,254
==========
</TABLE>
In addition, a maximum aggregate principal amount of $1,500,000 in unsecured
contingent achievement promissory notes will be issued if certain minimum net
revenue levels are achieved, resulting in a maximum total consideration to
seller of $5,400,000.
The notes payable of $1,150,000 are subject to setoffs if actual net assets
as of the closing date are below warranted amounts, for trade receivables not
collected within one year of the closing date and under certain other
specified conditions.
The preliminary purchase price allocation is as follows:
<TABLE>
<S> <C>
Cash............................................................. $ 163,680
Accounts receivable--net......................................... 2,292,191
Work in process.................................................. 5,122
Prepaid expense.................................................. 10,746
Property and equipment........................................... 142,241
Covenant not to compete.......................................... 50,000
Goodwill......................................................... 1,595,324
Other assets..................................................... 3,950
----------
$4,263,254
==========
</TABLE>
Environmental Warranty, Inc.--On November 4, 1997, ATC purchased 90.9% of
the outstanding stock of Environmental Warranty, Inc. ("E.W.I."), a property
and casualty insurance brokerage firm specializing in environmental insurance
products.
The purchase price was comprised of the following consideration:
<TABLE>
<S> <C>
Amounts paid to sellers:
Cash........................................................... $ 150,000
Notes payable, net of imputed interest at 8.0%................. 582,424
Payment commitments............................................ 275,000
ATC Common Stock (33,000 shares)............................... 365,062
----------
1,372,486
Liabilities assumed:
Current liabilities............................................ 314,811
Direct expenses of transaction................................... 25,000
----------
$1,712,297
==========
</TABLE>
F-11
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
The notes payable are due in three annual installments commencing November
1998 and are subject to certain setoffs. The payment commitments are also due
in three installments commencing November 1999. ATC issued 33,000 shares of
restricted common stock valued at 11 1/16 per share.
The preliminary purchaser price allocation is as follows:
<TABLE>
<S> <C>
Cash and equivalents............................................ $ 169,350
Receivables..................................................... 158,391
Prepaid and other current assets................................ 2,875
Property and other.............................................. 15,384
Goodwill........................................................ 1,366,297
-----------
$ 1,712,297
===========
</TABLE>
BCM Engineers, Inc.--On August 20, 1997 ATC purchased certain assets and
assumed certain liabilities of the environmental consulting and engineering
services division of the Smith Technology Corporation which operated primarily
as BCM Engineers, Inc. ("BCM"). BCM is a leading municipal water and
wastewater environmental engineering firm and provides services in water,
resource management, environmental compliance and site investigations,
remedial design and engineering, asbestos, and air quality management. BCM
serves major industrial clients in the chemical, petrochemical, oil and gas
manufacturing, water supply, commercial development and utilities industries
from multiple locations in the east and Gulf Coast.
The purchase price was comprised of the following consideration:
<TABLE>
<S> <C>
Amounts paid to seller or to others on behalf of seller:
Cash.......................................................... $ 5,425,539
Notes payable................................................. 2,950,000
Less note payable offset...................................... (200,000)
Liabilities assumed:
Current liabilities........................................... 2,833,665
Non current liabilities....................................... 1,356,151
Direct expenses related to acquisition.......................... 112,133
-----------
$12,477,488
===========
</TABLE>
Notes payable includes a $200,000 note which became due September 20, 1997
and is subject to offset for reductions in net assets and for unrecorded
liabilities arising through the closing date of the transaction. Based on the
closing balance sheet provided by the Seller, the Company will offset the
$200,000 in full. In addition, based on unrealized work in process warranted
by the seller, an additional offset of $1,172,471 has been reflected as an
offset to short term debt in the accompanying (unaudited) consolidated balance
sheet as of November 30, 1997.
The preliminary purchase price allocation is summarized as follows:
<TABLE>
<S> <C>
Accounts receivable, net of allowance........................... $ 4,710,960
Work in process................................................. 3,684,939
Other current assets............................................ 7,357
Other assets.................................................... 1,327,270
Covenants not to compete........................................ 100,000
Goodwill........................................................ 2,646,962
-----------
$12,477,488
===========
</TABLE>
F-12
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
Fiscal 1997
American Testing and Engineering Corporation--On May 24, 1996 ATC purchased
certain assets and assumed certain liabilities of American Testing and
Engineering Corporation ("ATEC"), a national environmental consulting firm.
ATEC provides environmental engineering and consulting services through a
large network of branch and regional offices.
At February 28, 1997, the Company was contingently liable to ATEC for
additional purchase consideration up to $10,750,000 if certain conditions are
met. At February 28, 1997, the maximum amounts payable, if fully earned, would
be paid as follows: $3,883,333 in fiscal 1998, $3,873,333 in fiscal 1999,
$1,293,334 in fiscal 2000 and $1,700,000 in fiscal 2002. Subsequent to
February 28, 1997 the seller met the contingent consideration requirements
obligating the Company to the fiscal 1998 amount. In addition, in connection
with the issuance of the Senior Secured Notes on May 29 1997, as discussed in
Note D, the Company and seller agreed to remove certain contingent
consideration requirements, and as a result, the Company is obligated to pay
$2,420,766 and expects to be obligated to pay the remaining contingent
consideration of $2,745,900 in fiscal 1999. Additionally, the Company has the
option to purchase certain properties from the seller for $1,700,000 in fiscal
2002.
The purchase price as of February 28, 1997 and November 30, 1997 was
comprised of the following consideration:
<TABLE>
<CAPTION>
FEBRUARY 27, 1997 NOVEMBER 30, 1997
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Amounts paid to seller and a majority
owner:
Cash................................. $ 9,000,000 $ 9,000,000
Payment obligations, for property and
facility rentals and
non-compete consideration........... 6,001,000 6,001,000
Contingent/additional consideration
under amended purchase agreement...... -- 9,049,000
Liabilities assumed:
Current liabilities.................. 15,731,076 15,731,076
Bank debt............................ 10,750,000 10,750,000
Direct expenses related to acquisition. 139,438 139,438
----------- -----------
$41,621,514 $50,670,514
=========== ===========
The purchase price allocation reflecting the additional consideration is
summarized as follows:
Accounts receivable and work in proc-
ess, net of allowances................ $18,957,768 $18,957,768
Other Current assets................... 2,023,996 2,023,996
Other assets........................... 548,301 1,428,617
Covenants not to compete............... 430,000 430,000
Goodwill............................... 19,661,449 27,830,133
----------- -----------
$41,621,514 $50,670,514
=========== ===========
</TABLE>
At February 28, 1997 the Company may set-off against certain payment
obligations the amount of any uncollected accounts receivable and work in
process, net of recorded allowances, not collected within one year from the
purchase date.
F-13
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
Nine Months Ended November 30, 1997 (Unaudited)--As a result of sellers
warranties of purchased trade receivables and work in process that were not
realized, the Company is entitled to set-offs of $618,835 against the option
price to acquire certain properties in fiscal 2002. If the Company does not
exercise its option, the set-offs will be refunded by the seller. Amounts are
included in other non-current assets in the accompanying consolidated balance
sheet as of November 30, 1997.
In connection with the purchase agreement, the Company has issued an
irrevocable letter of credit in the amount of $500,000 to secure the Company's
performance of its payment obligations. The letter of credit is renewable by
the seller until such time the Company has paid all of the purchase
obligations in full. At February 28, 1997, no amounts had been drawn against
the letter of credit.
3D Information Services, Inc.--On May 28, 1996, ATC purchased certain assets
and assumed certain liabilities of 3D Information Services, Inc. ("3D"), a New
Jersey based information services company providing technical information
consulting services in all phases of information system design, development,
maintenance and management in client server and mainframe based environments.
The purchase price was comprised of the following consideration:
<TABLE>
<S> <C>
Amounts paid to seller:
Cash........................................................ $3,000,000
Note payable................................................ 2,500,000
Assumed liabilities........................................... 247,905
Direct expenses related to acquisition........................ 23,149
----------
$5,771,054
==========
</TABLE>
The initial purchase price allocation is summarized as follows:
<TABLE>
<S> <C>
Accounts receivable........................................... $1,163,981
Work in process............................................... 279,047
Property and equipment........................................ 77,381
Other current assets.......................................... 77,560
Covenant not to compete....................................... 100,000
Goodwill ..................................................... 4,073,085
----------
$5,771,054
==========
</TABLE>
Fiscal 1996
Hill Businesses--In November 1995, ATC purchased certain assets and assumed
certain liabilities of Kaselaan & D'Angelo Associates, Inc., Hill
Environmental, Inc. (formerly the environmental division of Gibbs & Hill,
Inc.) and Particle Diagnostics, Inc., wholly owned subsidiaries of Hill
International, Inc. (collectively the "Hill Businesses").
The Hill Businesses provide environmental consulting and engineering
services, including asbestos management, industrial hygiene and indoor air
quality consulting, environmental auditing and permitting,
F-14
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
environmental regulatory compliance, water and wastewater engineering, solid
waste landfill management and analytical laboratory services. The purchase
price was comprised of the following consideration.
<TABLE>
<S> <C>
Amounts paid to seller:
Cash........................................................ $2,517,949
Letter of credit, net of imputed interest (Note E).......... 700,000
Note payable at 8.75% interest (Note E)..................... 300,000
Liabilities assumed........................................... 907,884
Direct expenses related to acquisition........................ 885,538
----------
$5,311,371
==========
</TABLE>
Direct expenses related to acquisition includes costs incurred in order to
obtain proper title to the assets from Sellers bank as described further in
Note E. In addition, the Company issued to certain selling shareholders,
50,000 stock options to purchase restricted common stock at $13.875 per share
as consideration for non compete agreements.
The purchase price allocation is summarized as follows:
<TABLE>
<S> <C>
Costs in excess of billings on uncompleted contracts, net of
unrealizable amounts....................................... $ 620,000
Property and equipment...................................... 175,000
Other assets................................................ 30,572
Covenants not to compete.................................... 37,500
Goodwill.................................................... 4,448,299
-----------
$ 5,311,371
===========
</TABLE>
The Company is contingently liable to reimburse up to $150,000 of certain
facility lease costs if incurred by Hill International, Inc. The payment of
the contingent liability, which the Seller claims is now due, certain other
liabilities and the $300,000 note is being withheld pending the outcome of the
litigation (Note E).
Applied Geosciences, Inc.--Effective February 29, 1996, ATC purchased
certain assets and assumed certain liabilities of Applied Geosciences, Inc.
("AGI"), a California based environmental consulting company having offices in
San Diego, Tustin and San Jose, California. The purchase price was comprised
of the following consideration. In addition, AGI will receive contingent
consideration of up to $190,000 subject to actual collections of the purchased
trade receivables in excess of a minimum amount established under the
agreements. As of February 28, 1997 $22,324 of contingent consideration had
been earned and paid.
<TABLE>
<S> <C>
Cash to seller................................................. $ 147,546
Contingent consideration earned to date........................ 22,324
Cash to secured creditors of seller............................ 441,514
Liabilities assumed............................................ 225,538
Direct expenses related to acquisition......................... 31,246
---------
$ 868,168
=========
</TABLE>
F-15
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
The purchase price allocation is summarized as follows:
<TABLE>
<S> <C>
Accounts receivable, net....................................... $ 474,973
Property and equipment......................................... 115,060
Covenants not to compete....................................... 30,000
Goodwill....................................................... 248,135
---------
$ 868,168
=========
</TABLE>
Other Acquisitions
Con-Test, Inc.--On October 1, 1994, ATC acquired substantially all of the
assets and liabilities of Con-Test, Inc. ("Con-Test"), a Massachusetts based
environmental consulting company having branch offices in the New England
states, New York and Pennsylvania. The seller guaranteed the net receivables
purchased resulting in the Company reacquiring 33,130 shares of its restricted
common stock in fiscal 1996. Effective March 31, 1996, the
Company sold its East Longmeadow, MA laboratory, originally part of the
operations acquired from Con-Test, back to the Seller in exchange for cash,
12,320 shares of the Company's restricted common stock, and the assumption of
certain liabilities and facility lease obligations. The assets sold included
property and equipment, leasehold improvements, and intangible assets
including contract rights, accreditation rights, customer lists, and the use
of the Con-Test business name and logo.
R.E. Blattert & Associates--On January 13, 1995, ATC acquired substantially
all of the assets and liabilities of R.E. Blattert & Associates ("R.E.
Blattert"), an environmental consulting firm having geologic, environmental
engineering and water resource expertise with offices in Indiana and Iowa. In
addition, the purchase agreement provides for the seller to receive additional
purchase consideration based on achieving agreed upon earnings targets. At
February 28, 1997, $200,000 of additional purchase consideration had been
earned and recorded as goodwill. The Company and Seller agreed to certain
modifications to the purchase agreement which limits the contingent
consideration to amounts earned through February 28, 1997.
Microbial Environmental Services, Inc.--On January 4, 1995, ATC acquired
certain operations of Microbial Environmental Services, Inc. ("MES"). ATC
agreed to assume service performance obligations under certain contracts and a
lease obligation of MES and MES assigned its accounts receivable to ATC. ATC
additionally purchased certain field and laboratory equipment from MES and
paid a finder's fee to an unrelated party.
BSE Management, Inc.--In fiscal 1994, ATC acquired certain assets and
liabilities of BSE Management, Inc. ("BSE"), a California based environmental
consulting holding company and those of its subsidiaries, Diagnostic
Environmental Inc., Hygeia Environmental Laboratories and The Environmental
Institute Inc. The acquisition was accomplished by purchasing certain BSE
assets at a foreclosure sale, acquiring certain BSE unsecured debt from its
holder, entering into consulting and employment contracts and non-compete
agreements with certain key BSE employees, and assuming specified liabilities
of BSE. The purchase agreement provided for additional purchase consideration
contingent upon future cash receipts of the ongoing business over five years.
These contingent payments totaled $1,355,165 and have been fully earned as of
February 29, 1996 and recorded as goodwill.
AURORA ENVIRONMENTAL INC. MERGER--Effective June 29, 1995, ATC and Aurora
Environmental Inc. ("Aurora") merged, with ATC as the surviving corporation.
ATC exchanged .545 of a share of ATC common stock for each share of Aurora
stock. ATC common shares held by Aurora of 3,258,000 were canceled. The merger
has been accounted for in a manner similar to a pooling of interests. Under
this method of accounting,
F-16
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
recorded assets and liabilities of Aurora were combined with ATC and the
results of operations of ATC and Aurora were combined on the date the merger
became effective. As a result of the merger, ATC utilized Aurora's net
operating loss carryforward, which was $970,000 as of the date of the merger.
In addition, ATC's liability to Aurora was canceled at the merger date.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)--The following unaudited pro
forma information sets forth the results of operations of ATC as if the merger
of Aurora and ATC's purchase of significant subsidiaries including ATEC, 3D
and the Hill Businesses had occurred on March 1, 1995, the beginning of fiscal
1996.
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
YEAR ENDED FEBRUARY 28
(29)
-------------------------
1996 1997
------------ ------------
<S> <C> <C>
Revenues............................... $149,025,093 $135,331,348
Net income............................. 9,796,788 7,432,906
Earnings per share (fully diluted)..... $ 1.33 $ .87
Weighted average shares................ 7,383,746 8,508,061
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)--The following unaudited pro
forma information sets forth the results of operations of ATC as if ATC's
purchase of significant subsidiaries including ATEC and 3D had occurred on
March 1, 1996:
<CAPTION>
PRO FORMA
-------------------------
NINE MONTHS ENDED
NOVEMBER 30,
-------------------------
1996 1997
------------ ------------
<S> <C> <C>
Revenues............................... $101,538,984 $104,263,345
Net income............................. $ 6,223,528 $ 3,604,065
Earnings per share (fully diluted)..... $ .73 $ .42
Weighted average shares (fully
diluted).............................. 8,570,170 8,548,252
</TABLE>
C. PROPERTY AND EQUIPMENT
Property and equipment as of February 28 (29) and November 30 (unaudited)
consist of:
<TABLE>
<CAPTION>
NOVEMBER
1996 1997 30, 1997
---------- ---------- ----------
<S> <C> <C> <C>
Office equipment......................... $2,645,325 $3,339,049 $4,867,987
Laboratory and field equipment........... 3,528,410 3,335,721 3,949,395
Transportation equipment................. 267,304 207,857 542,139
Leasehold improvements................... 633,595 849,700 1,078,240
---------- ---------- ----------
7,074,634 7,732,327 10,437,761
Less accumulated depreciation............ 3,467,879 3,947,694 4,804,042
---------- ---------- ----------
Property and equipment, net.............. $3,606,755 $3,784,633 $5,633,719
========== ========== ==========
</TABLE>
D. DEBT AND CREDIT AGREEMENTS
SHORT TERM DEBT--The February 28, 1997 balance consists of a 8.75%, $300,000
note payable issued in connection with the Company's purchase of the Hill
Businesses. The Company has withheld payment on the note pending the outcome
of the litigation with Hill as discussed in Note E. At February 29, 1996, the
Company had short-term notes payable of $1,122,552 with interest rates of 6.7%
to 8.75%.
F-17
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
LONG-TERM DEBT--Long term debt as of February (28) 29 consists of :
<TABLE>
<CAPTION>
1996 1997
-------- -----------
<S> <C> <C>
Borrowings from banks under the Company's $23,000,000
bridge credit facility. Interest is payable monthly
(7.3% at February 28, 1997)............................. $ -- $20,850,000
Note payable issued in connection with the purchase of 3D
Information Services, Inc. with a fixed interest rate of
8.25%. Interest and principal are payable
quarterly through May, 1999............................. -- 1,931,193
Insurance premium financing obligation payable in fixed
monthly installments of principal and interest through
April, 1998. Interest accrues at 6.4%................... -- 781,188
Note payable issued in connection with the purchase of
Con-Test, payable in three annual installments through
September 30, 1997. Interest accrues at 8.5% and is
payable quarterly....................................... 356,667 178,333
Notes payable issued in connection with other asset
acquisitions due in installments through May 1998.
Interest rates range from the prime rate, (8.25% at
February 28, 1997) to 9.0%.............................. 123,121 146,272
Note payable assumed in connection with the purchase of
ATEC. Interest accrues
at the prime rate plus 2% (10.25% at February 28, 1997).
Principal and interest
are due May 19, 1997.................................... -- 127,095
Notes payable issued in connection with the purchase of
MES, with interest
at prime (8.25% at February 28, 1997) payable through
February, 1998.......................................... 147,619 66,667
Other notes with interest rates ranging from 7.25% to
12.4% due in monthly installments through October, 2001. 89,395 29,326
-------- -----------
716,802 24,110,074
Less current maturities.................................. 354,858 1,986,730
-------- -----------
Long-term debt, less current maturities.................. $361,944 $22,123,344
======== ===========
</TABLE>
SENIOR SECURED NOTES--On May 29, 1997, the Company issued $32,500,000 of
8.18% Senior Secured Notes due in annual installments beginning May, 2000,
through May, 2004, to a group of financial institutions. Interest on the
Senior Secured Notes is payable semi-annually on May 31, and November 30,
commencing on November 30, 1997. The Senior Secured Notes are collateralized
by accounts receivable, work-in-process, intangible assets and the Company's
primary depository accounts. The proceeds from the Senior Secured Notes have
in part been utilized to repay the Company's outstanding bridge credit
facility. Accordingly, at February 28, 1997, the Company has classified its
$20,850,000 outstanding bridge credit facility as long-term debt. The bridge
facility was entered into in May, 1996, to provide capital in connection with
the Company's acquisition of American Testing and Engineering Corporation and
3D Information Services, Inc.
BANK CREDIT AGREEMENT--In connection with the Senior Secured Note offering,
the Company executed a credit agreement with the Chase Manhattan Bank and
Atlantic Bank of New York. The credit agreement provides for a $15,000,000
revolving line of credit maturing on November 30, 1999. The borrowings under
the line of credit are collateralized by the Company's cash, accounts
receivable, work in process, and intangible assets on a pari passu basis with
the Senior Secured Note holders. Under the terms of the Note and Credit
Agreements, the Company is required to comply with certain financial and
business covenants including maintaining minimum working capital levels, fixed
charge and interest ratios and restrictions on dividend payments.
F-18
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
Aggregate maturities of long-term debt as of February 28, 1997 are as
follows: fiscal 1998--$1,986,730; fiscal 1999--$1,028,877; fiscal 2000--
$236,692; fiscal 2001--$4,174,561; fiscal 2002--$4,173,167 and thereafter
$12,510,047. Aggregate maturities of bank debt are based on the terms of the
Senior Secured Notes.
E. COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENTS--The Company leases office space, laboratory
facilities, temporary housing facilities and automobiles under operating lease
agreements which expire at varying dates through September 2007. The Company
also rents equipment on a job-by-job basis. Minimum annual rental commitments
as of February 28, 1997 are as follows: fiscal 1998--$4,188,850; fiscal 1999--
$3,827,984; fiscal 2000--$2,798,251; fiscal 2001--$1,584,226; fiscal 2002--
$1,064,121 and thereafter $2,822,804 (total $16,286,236).
Rental expense associated with facility and equipment operating leases for
fiscal years 1995, 1996 and 1997 was $1,355,410, $1,908,217 and $4,937,752
respectively.
OTHER LIABILITIES--Other liabilities consist of long-term lease commitments
and other long-term contractual obligations assumed in connection with
business acquisitions. Contractual obligations representing existing
liabilities recorded within the financial statements that are expected to be
realized during the next fiscal year are included within other accrued
expenses.
First Fidelity Bank, N.A., et al v. Hill International, Inc. et al, Superior
Court of New Jersey, Law Division, Burlington County, Docket No. Bur-L-03400-
95, filed December 19, 1995. Irvin E. Richter, et al v. ATC Group Services
Inc., et al, United States District Court, District of New Jersey, Civ. No. 96
CV 5818 (JBS) filed December 6, 1996. On December 19, 1995, a second amended
complaint was filed in the above-entitled action which joined the Company as a
defendant and included a count against the Company seeking recovery of certain
assets purchased from Hill International, Inc. ("Hill") on the grounds that
plaintiff banks hold security interests in the assets and that Hill is in
default under the security agreement creating such alleged security interests.
The original plaintiffs in this action were First Fidelity Bank, N.A. and
United Jersey Bank, N.A. The primary defendants were Hill and certain of its
subsidiaries, and Irvin Richter, David Richter, Janice Richter and William
Doyle. Irvin Richter and David Richter are officers and stockholders of Hill.
In April 1996, the Company filed a cross-claim against Hill, Irvin Richter and
David Richter alleging breach of contract, fraud, among other allegations and
seeking unspecified damages, including punitive damages and equitable relief.
In August, 1996, Hill and the Richters filed an answer denying ATC's cross
claims, a cross-claim against ATC and a third party claim against certain
members of ATC's management and an employee. The cross claim and third party
claim seek unspecified damages, including punitive damages, for defamation,
breach of the Richters' non-competition agreements and securities fraud. The
defamation claim is based on plaintiff banks' allegation of fraud against Hill
and the Richters in their amended complaint, which Hill and the Richters
allege was based on defamatory statements made by ATC in settlement
discussions with the plaintiff banks. In its answer, the Company both denies
that it made defamatory statements and asserts that the defamation allegations
fail to state a legally valid claim. The breach of contract and securities
claims are based on allegations that ATC made representations concerning a
registration rights agreement to be provided in connection with options issued
to the Richters as consideration for their non-competition agreements. In its
answer, the Company denies that an agreement concerning registration rights
was ever reached and asserts that the Richters forfeited any such rights in
any case as a result of their conduct in connection with the asset purchase.
These related cases are in their early stages with discovery yet to take
place. In January, 1997, the plaintiff banks dismissed their claim against
ATC. On December 6, 1996, Hill and the Richters commenced an action against
ATC and the same officers and employees
F-19
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
of ATC alleging essentially the same claims in federal court as in the state
action. This action is entitled Irvin E. Richter et al. v. ATC Group Services,
et al., Civ. No. 96-5818(JBS), U.S. District Court for the District of New
Jersey, December 6, 1996. ATC has answered, raising the same defenses and
additional defenses related to the timeliness of the federal claim. This is
essentially the same action as in federal court as the pending state action.
The case is currently in the discovery phase. It does not create a risk of
double recovery. In the Company's opinion, the outcome of this matter will not
have a significant effect on the Company's financial position or future
results of operations, although no assurances can be given in this regard.
Commonwealth of Massachusetts v. TLT Construction Corp. et al, Civ. Action
No. 96-02281 F, Superior Court of Middlesex County, Massachusetts. This is an
action brought by the Commonwealth of Massachusetts in April 1996, against the
architects and general contractor on a renovation and construction project on
the Suffolk County Courthouse in Massachusetts. The basis of the lawsuit is
that one or more damp-proofing products specified by the architect defendants
and installed by the contractor defendant made employees in the courthouse ill
because of the off-gassing of harmful vapors. Dennison Environmental Services
Inc., ("Dennison") an ATC subsidiary, was joined on August 13, 1996, as a third
party defendant by TLT Construction Corporation, the general contractor, because
Dennison performed some air quality testing of the air in the courthouse for the
Commonwealth of Massachusetts during the construction process. The contractor
alleges that it acted in reliance on these tests in continuing to install the
material after the test report was given to it by the state. This case is in the
discovery stage. At this point, ATC considers the case to be totally without
merit, and ATC intends to vigorously defend the action. The Company currently
has in force a professional liability insurance policy covering this claim in
the amount of $10,000,000 with a deductible of $250,000. Notice of claim has
been made regarding this action and the insurer has agreed to assume the
defense. In the Company's opinion, the outcome of this matter will not have a
significant effect on the Company's financial position or future results of
operations, although no assurances can be given in this regard.
State of New York Department of Taxation and Finance--The Company has
received a notice of audit from the New York State Department of Taxation and
Finance for the three fiscal years 1993, 1994, and 1995. The agent has issued
a preliminary audit report, which is expected to be the basis of a formal
assessment estimated to be approximately $200,000. The Company is disputing
the agents positions and intends to appeal any assessment if rendered. No
assurances can be given regarding the ultimate liability, if any, which may
result.
Cambridge Housing Authority v. Con-Test, Inc. and ATC Group Services Inc.,
Superior Court of Middlesex County, Massachusetts; October 1, 1997. This is a
claim for damages in excess of $1,000,000 alleging that Con-Test, Inc.
breached its contract with Cambridge Housing Authority and was negligent in
performing asbestos survey work preparatory to a housing project re-
modernization project. ATC is joined as a party on a successor liability
theory, even though the services giving rise to the claim occurred over two
years prior to ATC's purchase of business assets from Con-Test. Although ATC
has not yet answered the complaint, ATC intends to vigorously defend the claim
on the grounds that it is not a successor under any known precedent of
Massachusetts law. It is therefore the opinion of the Company that the
probability of material loss from this claim is low.
AS OF AND FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
Executives Bonus Dispute--Two executives of the Company have indicated
commitments for discretionary bonuses were made to them totalling $1.1
million. They claim bonuses were to consist of approximately $300,000 of cash
and $800,000 from the issuance of stock and stock options having exercise
prices below market trading prices. They claim commitments were made pursuant
to an oral agreement. The Company had
F-20
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
discussions and negotiations concerning the possibility of such bonuses, but
no final determination had been made and no bonus arrangements were presented
to or approved by the Company's compensation committee. If the pending
Transactions are consummated, the Issuer's Board of Directors, who have
indicated their approval of such amounts, would become members of the
Company's Board of Directors, along with the executives making the claim.
Accordingly, the Company expects to record a charge against earnings of
approximately $1.1 million in the fourth quarter ending February 28, 1998.
First Fidelity Bank, N.A., et al v. Hill International, Inc. et al, Superior
Court of New Jersey, Law Division, Burlington County, Docket No. Bur-L-03400-
95, filed December 19, 1995. Irvin E. Richter, et al v. ATC Group Services
Inc., et al, United States District Court, District of New Jersey, Civ. No. 96
CV 5818 (JBS) filed December 6, 1996. On December 19, 1995, a second amended
complaint was filed in the above-entitled action which joined the Company as a
defendant and included a count against the Company seeking recovery of certain
assets purchased from Hill International, Inc. ("Hill") on the grounds that
plaintiff banks hold security interests in the assets and that Hill is in
default under the security agreement creating such alleged security interests.
The original plaintiffs in this action were First Fidelity Bank, N.A. and
United Jersey Bank, N.A. The primary defendants were Hill and certain of its
subsidiaries, and Irvin Richter, David Richter, Janice Richter and William
Doyle. Irvin Richter and David Richter are officers and stockholders of Hill.
In April 1996, the Company filed a cross-claim against Hill, Irvin Richter and
David Richter alleging breach of contract, fraud, among other allegations and
seeking unspecified damages, including punitive damages and equitable relief.
In August, 1996, Hill and the Richters filed an answer denying ATC's cross
claims, a cross-claim against ATC and a third party claim against certain
members of ATC's management and an employee. The cross claim and third party
claim seek unspecified damages, including punitive damages, for defamation,
breach of the Richters' non-competition agreements and securities fraud. The
defamation claim is based on plaintiff banks' allegation of fraud against Hill
and the Richters in their amended complaint, which Hill and the Richters
allege was based on defamatory statements made by ATC in settlement
discussions with the plaintiff banks. In its answer, the Company both denies
that it made defamatory statements and asserts that the defamation allegations
fail to state a legally valid claim. The breach of contract and securities
claims are based on allegations that ATC made representations concerning a
registration rights agreement to be provided in connection with options issued
to the Richters as consideration for their non-competition agreements. In its
answer, the Company denies that an agreement concerning registration rights
was ever reached and asserts that the Richters forfeited any such rights in
any case as a result of their conduct in connection with the asset purchase.
These related cases are in their early stages with discovery yet to take
place. In January, 1997, the plaintiff banks dismissed their claim against
ATC. On December 6, 1996, Hill and the Richters commenced an action against
ATC and the same officers and employees of ATC alleging essentially the same
claims in federal court as in the state action. This action is entitled Irvin
E. Richter et al. v. ATC Group Services, et al., Civ. No. 96-5818(JBS), U.S.
District. Court for the District of New Jersey, December 6, 1996. ATC has
answered, raising the same defenses and additional defenses related to the
timeliness of the federal claim. This is essentially the same action as in
federal court as the pending state action. The case is currently in the
discovery phase. It does not create a risk of double recovery. In the
Company's opinion, the outcome of this matter will not have a significant
effect on the Company's financial position or future results of operations,
although no assurances can be given in this regard.
Joseph I. Peters v. ATC Group Services Inc., et al., Court of Chancery of
the State of Delaware, New Castle County, C.A. No. 16026-NC, November 12,
1997. This action names ATC, ATC's board of directors, Weiss, Peck & Greer,
LLC ("WPG") and WPG Corporate Development Associates, V. L.P. ("WPG Fund") as
defendants. The suit challenges the announced offer for the acquisition of the
stock of the Company at $12 per share by a group led by certain members of
management of the Company and the WPG Fund (the "Offer").
F-21
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
The complaint seeks class status on behalf of the stockholders of the Company
and claims that the offer price for the Company's common stock is inadequate
and the defendants have breached their fiduciary duties to the plaintiffs and
the other stockholders of the Company. The suit seeks, among other things, to
enjoin the Offer and related merger transaction; to set aside the transaction
in the event that it is consumated; and to recover compensatory damages in an
unspecified amount. The Company believes the allegations contained in the
Complaint is meritless and, to the extent the actions proceed, intends to
defend the action vigorously.
Commonwealth of Massachusetts v. TLT Construction Corp. et al, Civ. Action
No. 96-02281 F, Superior Court of Middlesex County, Massachusetts. This is an
action brought by the Commonwealth of Massachusetts in April 1996, against the
architects and general contractor on a renovation and construction project on
the Suffolk County Courthouse in Massachusetts. The basis of the lawsuit is
that one or more damp-proofing products specified by the architect defendants
and installed by the contractor defendant made employees in the courthouse ill
because of the off-gassing of harmful vapors. Dennison Environmental Services
Inc., ("Dennison") an ATC subsidiary, was joined on August 13, 1996, as a
third party defendant by TLT Construction Corporation, the general contractor,
because Dennison performed some air quality testing of the air in the
courthouse for the Commonwealth of Massachusetts during the construction
process. The contractor alleges that it acted in reliance on these tests in
continuing to install the material after the test report was given to it by
the state. This case is in the discovery stage. At this point, ATC considers
the case to be totally without merit, and ATC intends to vigorously defend the
action. The Company currently has in force a professional liability insurance
policy covering this claim in the amount of $10,000,000 with a deductible of
$250,000. Notice of claim has been made regarding this action and the insurer
has agreed to assume the defense. In the Company's opinion, the outcome of
this matter will not have a significant effect on the Company's financial
position or future results of operations, although no assurances can be given
in this regard.
Barrett-Moeller et al. v. ATC Associates Inc., Civ. Action No. 97-01037D,
and Joan Spencer v. TLT Construction Et Al., Civ. Action No 97-4161C, Superior
Court of Middlesex County, Massachusetts. These actions arise out of the same
set of occurrences as Commonwealth of Massachusetts v. TLT Construction, Inc.
described above. These are suits by employees who worked in the Suffolk County
Courthouse during the period in which the off-gassing of harmful vapors was
alleged to have occurred. The suits seek damages for personal injury in
unspecified amounts. Notices of these claims have been made to ATC's
professional liability insurer, and the claims should be covered by insurance,
subject to a $250,000 deductible.
Cambridge Housing Authority v. Con-Test, Inc. and ATC Group Services Inc.,
Superior Court of Middlesex County, Massachusetts; October 1, 1997. This is a
claim for damages in excess of $1,000,000 alleging that Con-Test, Inc.
breached its contract with Cambridge Housing Authority and was negligent in
performing asbestos survey work preparatory to a housing project re-
modernization project. ATC is joined as a party on a successor liability
theory, even though the services giving rise to the claim occurred over two
years prior to ATC's purchase of business assets from Con-Test. Although ATC
has not yet answered the complaint, ATC intends to vigorously defend the claim
on the grounds that it is not a successor under any known precedent of
Massachusetts law. It is therefore the opinion of the Company that the
probability of material loss from this claim is low.
One Parkway Project. The Company has received notice of related potential
claims by R.M. Shoemaker Co., a Pennsylvania construction firm, and four of
its workers arising out of the Company's performance of asbestos abatement
survey, design and project monitoring services on a project known as the One
Parkway Project in Philadelphia. The claims allege that ATC: (i) failed to
locate certain asbestos-containing materials in a high rise building during
its inspection of the facility; (ii) failed to include these undiscovered
materials in the
F-22
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
design specifications for an asbestos abatement project in connection with a
renovation project on the building; and (iii) failed to properly clearance
inspect and test the areas on which abatement had been performed prior to
demobilization of the asbestos abatement project. The claimants allege that
the Company's acts or omissions resulted in additional corrective actions
including remobilization of certain areas, delays of the renovation project
and exposure of construction workers to asbestos contamination. R.M. Shoemaker
has alleged that it sustained damages in the amount of $1,500,000 for
additional abatement costs plus additional damages for delay. The workers'
exposure claims have not been quantified. No suit has been filed.
At this point, the Company believes that it was not responsible for the
alleged problems on this project. ATC's responsibilities on the project were
limited, and ATC believes that the alleged omissions which allegedly resulted
in the alleged losses were outside the scope of the Company's contractual
responsibilities. The Company has served notice of these claims upon its
professional liability insurer. This coverage is subject to a $250,000
deductible.
Indiana Department of Environmental Management v. ATC Associates Inc. ATC
received a Notice of Violation and Proposed Agreed Order, EPA I.D. No.
IND004939765, dated June 9, 1997, on June 12, 1997. The Notice of Violation
seeks a penalty amount of $120,500 for alleged violations of the federal
hazardous waste regulations and Indiana hazardous waste regulations arising
out of the handling of hazardous wastes in ATC's Indianapolis laboratory. On
January 7, 1998 ATC attended a second informal settlement conference with the
Indiana Department of Environmental Management ("IDEM"). As a result of this
meeting, a significant reduction in the penalty amount seems probable.
American Testing and Engineering Corporation will be responsible for a
significant part of any ultimate penalty. Accordingly, ATC does not believe
this case will result in a material loss.
State of New York Department of Taxation and Finance--The Company has
received a notice of audit from the New York State Department of Taxation and
Finance for the three fiscal years 1993, 1994, and 1995. The agent has issued
a preliminary audit report, which is expected to be the basis of a formal
assessment estimated to be approximately $200,000. The Company is disputing
the agents positions and intends to appeal any assessment if rendered. No
assurances can be given regarding the ultimate liability, if any, which may
result.
The Company has been named or has claims pending arising out of the conduct
of its business. In the opinion of management, these matters are adequately
covered by insurance, are without merit, or are not material.
F. STOCK OPTIONS
A stock option plan, established in 1988, (the "1988 Plan") provides for the
granting of 200,000 options to employees for purchase of common stock at
prices which cannot be less than the fair market value at the time of the
grant. Options generally become exercisable at 20% per year, 50% per year for
certain participants, and expire within five years of the date of grant.
In 1993, the Board of Directors approved an additional stock option plan
(the "1993 Plan") providing for the granting of 200,000 options to employees
for purchase of common stock at prices which cannot be less than fair market
value at the time of the grant. In December 1995, the 1993 Plan was amended to
increase the number of options to 500,000 shares and in October 1996, the 1993
Plan was amended to increase the number of options to 1,000,000 shares.
Options generally become exercisable at 20% per year and expire either within
five years or ten years of the date of grant.
F-23
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
In connection with the merger of Aurora into ATC, the Board of Directors of
ATC approved a stock option plan (the "1995 Plan") having identical provisions
to Aurora's 1987 Stock Option Plan. The 1995 Plan provides for the granting of
81,750 options representing the previously outstanding Aurora stock options
after adjustment by the stock exchange rate of .545 as provided for under the
terms of the merger agreement. The 81,750 options were granted at an exercise
price of $5.32 per share in June 1995 to an officer of ATC in replacement of
previously held Aurora options. All of the options are exercisable and expire
within ten years of the date of grant.
As of February 28, 1997, under the 1988, 1993 and 1995 Plans, 1,096,400
options have been granted, 40,410 options exercised, 335,650 options expired
and 521,000 options remain available for grant. In fiscal 1995, the Board of
Directors approved the granting of 20,000 options to an unrelated consultant
for purchase of common stock at $9.50 per share (fair market value at date of
grant). These options were terminated in fiscal 1996.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation. SFAS
No. 123 defines a fair market value based method of accounting for stock based
employee compensation plans and encourages all entities to adopt that method
of accounting. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees.
The Company has decided to continue to apply the intrinsic value based
method of accounting for its stock-based employee compensation plans. If
compensation cost for the Company's stock-based compensation plans had been
determined based on the fair value at the grant dates for awards under the
plans consistent with the method of SFAS No. 123, Accounting for Stock Based
Compensation, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Net Income:
As reported...................................... $3,865,998 $6,307,734
Pro forma........................................ $3,759,532 $6,065,136
Primary Earnings Per Share:
As reported...................................... $ .54 $ .74
Pro forma........................................ $ .52 $ .71
Fully Diluted Earnings Per Share:
As reported...................................... $ .54 $ .74
Pro forma........................................ $ .52 $ .71
</TABLE>
The fair value for stock options was estimated using the Black-Scholes
option pricing model with assumptions for the risk-free interest rate of 7.8%
in fiscal 1996 and 5.4% in fiscal 1997, expected volatility of 48% in fiscal
1996 and 1997, expected life of approximately 5 years in fiscal 1996 and 1997,
and no expected dividends. The weighted average fair value of options granted
during fiscal 1996 and 1997 was $5.58 per option and $4.48 per option,
respectively.
F-24
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
The changes in the outstanding stock options described above during fiscal
years 1995, 1996 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
PRICE
PER
OPTIONS SHARE
-------- --------
<S> <C> <C>
BALANCE, February 28, 1994............................. 170,700 $ 3.17
Granted.............................................. 132,350 9.76
Exercised............................................ (6,980) 2.90
Expired.............................................. (4,650) 9.48
-------- ------
BALANCE, February 28, 1995............................. 291,420 6.03
Granted.............................................. 334,500 9.44
Exercised............................................ (6,400) 5.56
Expired.............................................. (34,800) 10.09
-------- ------
BALANCE, February 29, 1996............................. 584,720 8.51
Granted.............................................. 407,400 9.85
Exercised............................................ (14,030) 4.00
Expired.............................................. (257,750) 12.62
-------- ------
BALANCE, February 28, 1997............................. 720,340 $ 7.89
======== ======
Options exercisable at:
February 28, 1995.................................... 127,000
February 29, 1996.................................... 307,950
February 28, 1997.................................... 457,550
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable as of February 28, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------- --------------------------
RANGE OF WEIGHTED WEIGHTED AVERAGE WEIGHTED
EXERCISE NUMBER AVERAGE REMAINING NUMBER AVERAGE
PRICES OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE
- -------- ----------- -------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.88 -
$ 5.99 223,720 $ 3.84 0.1 years 217,340 $ 3.81
6.00 -
11.99 352,870 8.10 2.8 years 158,710 8.22
12.00 -
17.99 143,750 13.66 2.2 years 81,500 13.73
- -------- ------- ------ --------- ------- ------
$ 1.88 -
$17.99 720,340 $ 7.89 1.8 years 457,550 $ 7.11
======== ======= ====== ========= ======= ======
</TABLE>
G. COMMON STOCK WARRANTS
At February 28, 1997, there are 568,207 Class C warrants outstanding. Each
Class C warrant entitles the holder to purchase one share of common stock at
an exercise price of $10.00. The Company has reserved common shares equal to
the outstanding warrants for issuance upon the exercise of the Class C
warrants. The expiration date of the Class C warrants is April 30, 1998.
During the year ended February 28, 1995, 284,803 of 285,817 outstanding
Class B warrants were exercised at an exercise price of $8.00 allowing the
holder to receive one share of common stock per warrant and one Class C
warrant. The Class B warrants not exercised expired as of September 30, 1994.
F-25
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
In connection with the merger of Aurora in fiscal 1996, ATC issued common
stock purchase warrants for the purchase of 523,200 shares of ATC common stock
at prices ranging from $1.03 to $2.75 per share in replacement of previously
outstanding Aurora warrants. During fiscal 1996, 32,700 warrants were
exercised at approximately $1.83 per share. The remaining warrants expire from
November 30, 2000 to January 10, 2004.
H. INCOME TAXES
Income tax expense (benefit) for the three years ended February 28, 1997
consists of the following:
<TABLE>
<CAPTION>
STATE &
FEDERAL LOCAL TOTAL
---------- -------- ----------
<S> <C> <C> <C>
1995:
Current............................... $1,725,000 $295,500 $2,020,500
Deferred.............................. 19,000 4,500 23,500
---------- -------- ----------
Total............................... $1,744,000 $300,000 $2,044,000
========== ======== ==========
1996:
Current............................... $1,700,400 $296,300 $1,996,700
Deferred.............................. (161,700) (30,000) (191,700)
---------- -------- ----------
Total............................... $1,538,700 $266,300 $1,805,000
========== ======== ==========
1997:
Current............................... $3,207,100 $711,600 $3,918,700
Deferred.............................. 168,100 3,200 171,300
---------- -------- ----------
Total............................... $3,375,200 $714,800 $4,090,000
========== ======== ==========
</TABLE>
The Company made Federal and State income tax payments of approximately
$3,023,000, $2,077,000, and $ 4,062,000 in fiscal 1995, 1996 and 1997,
respectively.
A reconciliation of the statutory US Federal tax rate and effective tax rate
for the three years ended February 28, 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Statutory US Federal rate.............................. 34.0% 34.0% 34.0%
State income taxes, net of federal benefit............. 4.1 4.3 4.5
Tax benefit of Aurora's net operating loss
carryforward.......................................... -- (6.2) --
Tax exempt interest income............................. -- (2.4) (1.3)
Non-deductible expenses................................ 0.5 2.1 2.1
---- ---- ----
38.6% 31.8% 39.3%
==== ==== ====
</TABLE>
F-26
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
The tax effects of temporary differences that give rise to a significant
portion of the deferred tax assets and liabilities as of February 28 (29)
consist of the following:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Deferred tax assets:
Nondeductible liabilities.......................... $339,400 $ 682,900
Nondeductible bad debt reserve..................... 76,900 453,800
Aurora net operating loss carryforward............. 150,000 --
-------- ----------
566,300 1,136,700
Deferred tax liabilities:
Property and equipment............................. 108,000 95,800
Prepaid expenses................................... 125,800 346,400
Intangible assets.................................. 88,700 622,000
-------- ----------
322,500 1,064,200
-------- ----------
Net deferred tax asset............................... $243,800 $ 72,500
======== ==========
</TABLE>
The current portion of net deferred tax assets of $440,600 and $790,400 at
February 28 (29), 1996 and 1997 is classified in the consolidated balance
sheets in current assets. The non-current portion is classified in non-current
liabilities.
During fiscal 1996, ATC utilized a one-time tax benefit of $350,000 to
offset taxable income relating to Aurora's net operating loss carryforward at
the time of the ATC and Aurora merger.
I. EMPLOYEE BENEFIT PLANS
The Company has an employee savings plan which allows for voluntary
contributions into designated investment funds by eligible employees. The
Company may, at the discretion of its Board of Directors, make additional
contributions on behalf of the Plan's participants. No Company contributions
were made in fiscal years 1995, 1996, and 1997.
F-27
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
J. INDUSTRY SEGMENT DATA
The Company provides services through its environmental consulting and
engineering segment and its information technology consulting segment. Prior
year segment data is not presented as the Company only operated in the
environmental and engineering segment prior to the acquisition of 3D in May
1996 as discussed in Note B.
<TABLE>
<CAPTION>
ENVIRONMENTAL INFORMATION ADJUSTMENTS &
& ENGINEERING TECHNOLOGY ELIMINATIONS TOTAL
------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
YEAR ENDED FEBRUARY 28,
1997
Revenues............... $106,661,312 $7,228,755 $ (34,703) $113,855,364
Operating income....... 11,323,277 387,756 -- 11,711,033
Depreciation and
amortization.......... 1,949,711 149,100 -- 2,098,811
Capital expenditures... 1,244,756 40,939 -- 1,285,695
Identifiable assets as of
February 28, 1997....... $ 83,486,251 $6,080,060 $(3,390,994) $ 86,175,317
NINE MONTHS ENDED
NOVEMBER 30, 1997
(UNAUDITED)
Revenues............... $ 98,086,874 $6,479,879 $ (303,408) $104,263,345
Operating income....... 7,608,478 375,873 -- 7,984,351
Depreciation and amor-
tization.............. 856,910 31,719 -- 888,629
Capital expenditures... 1,446,547 56,071 -- 1,502,618
Identifiable Assets as of
November 30, 1997....... $114,456,031 $5,759,521 $(2,670,637) $117,544,915
NINE MONTHS ENDED
NOVEMBER 30, 1996
(UNAUDITED)
Revenues............... $ 78,332,311 $5,084,540 $ -- $ 83,416,851
Operating income....... 9,179,261 334,733 -- 9,513,994
Depreciation and amor-
tization.............. 634,574 8,205 -- 642,779
Capital expenditures... 1,071,339 52,077 -- 1,123,416
Identifiable Assets as of
November 30, 1996....... $ 84,594,843 $6,233,209 $(2,300,000) $ 88,528,052
</TABLE>
K. SUPPLEMENTAL INFORMATION
Supplemental cash flow information--Supplemental cash flow information for
the years ended February 28 (29) is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ----------
<S> <C> <C> <C>
Cash paid for interest.......................... $ 276,658 $ 374,466 $1,515,432
Noncash investing and financing activities:
Liabilities assumed in connection with
business combinations........................ 6,056,441 640,082 26,728,981
Common stock issued in connection with
business combinations........................ 605,408 -- --
Common stock recovered in connection with the
Con-Test, Inc. acquisition................... -- 140,013 --
Common stock issued in connection with the
Aurora Merger................................ -- 61,117 --
Common stock received as consideration for
sale of assets............................... -- -- 124,432
Notes payable issued in connection with
business combinations........................ 835,000 1,000,000 2,589,086
</TABLE>
F-28
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 1997 AND THE
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 (UNAUDITED)
SUPPLEMENTAL ANALYSIS OF VALUATION AND QUALIFYING ACCOUNTS--Changes in the
allowance for doubtful accounts for the three years ended February 28, 1997
are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
BALANCE, beginning of year..................... $167,344 $535,886 $ 383,220
Provision for bad debts...................... 188,819 290,165 1,021,631
Amounts written-off, net of recoveries....... (136,350) (309,932) (452,836)
Adjustment for allowance for doubtful
accounts recorded on net acquired
(rescinded) accounts receivable............. 316,073 (132,899) 503,701
-------- -------- ----------
BALANCE, end of year........................... $535,886 $383,220 $1,455,716
======== ======== ==========
</TABLE>
L. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's unaudited quarterly results of operations for fiscal 1996 and
1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
MAY 31 AUGUST 31 NOVEMBER 30 FEBRUARY 29
FISCAL 1996 1995 1995(1) 1995(2) 1996
- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues...................... $10,814,953 $11,649,478 $11,223,139 $11,277,327
Gross profit.................. 5,269,542 5,529,416 5,342,623 4,308,142
Income before income taxes.... 1,462,628 1,921,617 1,811,675 475,078
Net income.................... 895,128 1,519,117 1,104,675 347,078
Earnings per common share and
dilutive common equivalent
share (4):
Primary..................... $ .15 $ .23 $ .15 $ .04
Fully diluted............... $ .15 $ .23 $ .15 $ .04
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
MAY 31 AUGUST 31 NOVEMBER 30 FEBRUARY 28
FISCAL 1997 1996(3) 1996 1996 1997
- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues...................... $16,645,983 $33,922,028 $32,848,840 $30,438,513
Gross profit.................. 7,282,012 12,529,814 11,287,563 11,051,373
Income before income taxes.... 2,772,303 3,485,493 2,433,278 1,706,660
Net income.................... 1,718,303 2,101,493 1,506,278 981,660
Earnings per common share and
dilutive common equivalent
share (4):
Primary..................... $ .20 $ .25 $ .18 $ .12
Fully diluted............... $ .20 $ .25 $ .18 $ .12
</TABLE>
- --------
The Company's operations are seasonal in nature, with a larger percentage of
income earned in the second quarter.
(1) Reflects the merger of ATC and Aurora effective June 29, 1995, (Note B).
Net income includes a one-time tax benefit of $350,000 ($.05 per share)
resulting from the merger of Aurora.
(2) Reflects the acquisition of the Hill Businesses effective November 10,
1995, (Note B).
(3) Reflects the acquisition of American Testing and Engineering Corporation
and 3D Information Services, Inc. effective May 24, 1996 and May 28, 1996,
respectively.
(4) For fiscal 1996, the sum of the quarterly earnings per share is less than
the reported fiscal year earnings per share due to the averaging effect of
the 1,970,000 shares issued in connection with the Company's stock
offering in October 1995.
F-29
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 1996 AND
INDEPENDENT AUDITORS' REPORT
F-30
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Smith Technology Corporation
We have audited the accompanying balance sheet of the Engineering Division
of Smith Technology Corporation ("Smith") (formerly Smith Environmental
Technologies Corporation) as of September 30, 1996, and the related statements
of operations and Smith equity investment, and cash flows for the year then
ended. These financial statements are the responsibility of Smith's and the
Division's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides 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 the Engineering Division
of Smith Technology Corporation as of September 30, 1996, and the results of
its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Engineering Division of Smith Technology Corporation will continue as a going
concern. As more fully described in Note 1, the Engineering Division is a
wholly owned division of Smith. Smith experienced significant liquidity
problems during 1996 and was in default of agreements with its Senior Lenders
at September 30, 1996. Further, certain of Smith's actions caused significant
liquidity problems at the Division. In August 1997, Smith sold substantially
all the assets and certain liabilities of the Division. In October 1997, Smith
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code.
The aforementioned conditions and actions raise substantial doubt about the
Engineering Division's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classifications of liabilities as of September 30, 1996 that may result from
the outcome of this uncertainty.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 17, 1997
F-31
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash.................................................................. $ 17
Accounts receivable, less allowance for doubtful accounts of $351..... 13,678
Prepaid expenses and other current assets............................. 211
-------
Total current assets.................................................... 13,906
Property and equipment:
Equipment............................................................. 3,830
Land, buildings, and improvements..................................... 149
Leasehold improvements................................................ 931
-------
Total property and equipment, at cost................................... 4,910
Less accumulated depreciation and amortization........................ 1,595
-------
Property and equipment, net............................................. 3,315
-------
Total assets........................................................ $17,221
=======
LIABILITIES AND SMITH EQUITY INVESTMENT
Current liabilities:
Accounts and subcontracts payable..................................... $ 5,760
Accrued expenses:
Legal............................................................... 746
Compensation and fringe............................................. 1,232
Other............................................................... 1,711
Deferred revenue...................................................... 430
Capital lease obligations............................................. 508
-------
Total current liabilities............................................... 10,387
Other long term liabilities............................................. 3,254
Smith equity investment................................................. 3,580
-------
Total liabilities and Smith equity investment........................... $17,221
=======
</TABLE>
See accompanying notes.
F-32
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
STATEMENT OF OPERATIONS AND SMITH EQUITY INVESTMENT
YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenues.............................................................. $ 51,469
Direct costs.......................................................... 32,016
Indirect costs and selling, general and administrative expenses....... 17,893
Special items......................................................... 800
Amortization of intangible assets and goodwill........................ 861
Writedown of goodwill and intangible assets........................... 18,324
--------
Loss from operations.................................................. (18,425)
Interest expense...................................................... 1,660
--------
Loss before income taxes.............................................. (20,085)
Income tax expense.................................................... --
--------
Net loss.............................................................. (20,085)
Smith equity investment at October 1, 1995............................ 23,665
--------
Smith equity investment at September 30, 1996......................... $ 3,580
========
</TABLE>
See accompanying notes.
F-33
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss............................................................ $(20,085)
Adjustments to reconcile net loss to net cash used in operating
activities:
Writedown of goodwill and intangible assets....................... 18,324
Depreciation and amortization..................................... 1,860
Provision for uncollectible accounts.............................. 795
Changes in operating assets and liabilities:
Accounts receivable............................................. (150)
Prepaid expenses and other current assets....................... 903
Accounts and subcontracts payable............................... (2,046)
Accrued expenses and deferred revenue........................... (452)
--------
Net cash used in operating activities............................... (851)
INVESTING ACTIVITIES
Capital expenditures................................................ (53)
--------
Net cash used in investing activities............................... (53)
FINANCING ACTIVITIES
Net transactions with Smith......................................... 740
Repayment of capital leases......................................... (88)
--------
Net cash provided by financing activities........................... 652
--------
Net decrease in cash................................................ (252)
Cash at beginning of year........................................... 269
--------
Cash at end of year................................................. $ 17
========
</TABLE>
See accompanying notes.
F-34
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
Smith Technology Corporation (Smith) (formerly Smith Environmental
Technologies Corporation), a Delaware corporation, operates three business
divisions, the Engineering Division (referred to as the Engineering Division
or the Division), the Construction Division and the Remediation Division. The
Engineering Division provides testing, consulting, engineering, design,
project management, and training in the areas of environmental contamination,
water resources and infrastructure. The Construction and Remediation Divisions
provide remedial action including the construction and operation of required
facilities, as well as emergency response actions involving spills and
accidental releases of hazardous waste.
Principally all of the operating assets and liabilities of the Engineering
Division were purchased or assumed (the "Purchased Assets and Liabilities") by
ATC Group Services, Inc. (ATC) on August 20, 1997. The stockholders of Smith
retained the Construction and Remediation Divisions and certain assets and
liabilities of the Engineering Division. The Purchased Assets and Liabilities
of the Engineering Division were purchased by ATC for an aggregate purchase
price of $5.4 million in cash, promissory notes of $2.8 million and the
assumption of $4.3 million in liabilities, subject to certain post-sales
adjustments which may be offset against the promissory notes. The assets which
were not purchased include cash, certain accounts receivable, and certain
fixed assets. Liabilities which were not assumed include certain accounts
payable and accrued expenses, including legal obligations of Smith related to
BCM.
The Engineering Division is dependent upon Smith for financing and funding
of current operations. Smith uses a centralized cash management system to
finance the operations of its divisions. During fiscal 1996, Smith experienced
significant liquidity problems and was in default of agreements with its
Senior Lenders at September 30, 1996. Further, certain of Smith's actions,
including using the Division's cash flow for corporate overhead and other
expenses, caused significant liquidity problems at the Division. In August
1997, Smith completed the sale to ATC as described above and on October 8,
1997, Smith filed a petition for reorganization under Chapter 11 of the
Bankruptcy Code. These conditions raise substantial doubt about the
Engineering Division's ability to continue as a going concern.
The statements of operations and cash flows of the Engineering Division were
derived from the accounting records of Smith and include the revenue,
expenses, and cash flows directly attributable to the Engineering Division's
operations, as well as an allocation of Smith corporate expenses. The balance
sheet includes the assets and liabilities at Smith's historical cost basis
which are specifically identifiable to the Engineering Division. The
accompanying financial statements have been prepared on a historical basis and
do not reflect the effect of ATC's purchase. The financial information in
these financial statements is not necessarily indicative of the results that
would have occurred if the Engineering Division had been a separate stand-
alone entity during the period presented or of future results of the
Engineering Division.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates and such
differences could be material to the financial statements.
REVENUE AND COST RECOGNITION
Revenues from cost-plus fee and time and materials contracts are generally
recognized as the services are provided. Direct costs include all direct
material, labor, and subcontract costs and other direct costs related to
F-35
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
contract performance. Indirect costs, selling, general, and administrative
costs are charged to expense as incurred. Estimated losses on contracts, if
any, are recognized in the period they are determined. An amount equal to
contract costs attributable to claims, if any, is included in revenues when
realization is probable and the amount can be reasonably estimated. Revenue
from one single customer approximated 17% of the Engineering Division's total
revenues for the year ended September 30, 1996.
PROPERTY, EQUIPMENT, AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is provided
primarily on the straight-line method and depreciation is based on the
following estimated useful lives:
<TABLE>
<S> <C>
Building and improvements.................... 30 years
Office, process, and field equipment......... 3-8 years
</TABLE>
Leasehold improvements are amortized over the shorter of their respective
useful lives or lease terms. Assets under capital lease obligations are
$709,000 with accumulated amortization of $341,000 at September 30, 1996.
INCOME TAXES
The taxable income of the Division is included in the consolidated tax
returns of Smith. As such, separate income tax returns were not prepared or
filed by the Division. Income tax expense has been determined as if the
Division was a separate tax paying entity by applying an asset and liability
approach.
INTANGIBLE ASSETS AND GOODWILL
The Division evaluates goodwill and intangible assets to ensure that these
assets are fully recoverable from projected undiscounted cash flows of the
Division. Impairments are recognized in operating results in the period in
which a permanent diminution in value occurs. In September 1996, the Division
recorded a write-down of its goodwill and intangible assets totaling $18.3
million. These assets were determined to have been impaired based on the
current financial condition of the Division and the Division's inability to
generate sufficient cash flows to recover the value of these assets.
Prior to September 1996, goodwill was being amortized over forty years and
intangible assets which include customer lists, contract backlog and assembled
workforce were being amortized over 15 years.
3. ACCOUNTS RECEIVABLE
Accounts receivable are comprised of the following (in thousands):
<TABLE>
<S> <C>
Commercial and non-U.S. government customers:
Amounts billed............................... 8,603
Unbilled recoverable costs and estimated
earnings.................................... 3,442
Retention.................................... 220
-------
12,265
United States Government and agencies:
Amounts billed............................... 1,362
Unbilled recoverable costs and estimated
earnings.................................... 308
Retention.................................... 94
-------
1,764
-------
All customers.................................. 14,029
Allowance for doubtful accounts................ 351
-------
$13,678
=======
</TABLE>
F-36
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Unbilled recoverable costs and estimated earnings represent revenue earned
and recognized on contracts which are not yet billable according to contract
terms, which usually consider the passage of time, achievement of certain
milestones, or the completion of the project.
4. LEASES
The Division leases office space and various equipment under noncancelable
leases expiring through 2004. For the year ended September 30, 1996, total
lease expense charged to operations was approximately $2,680,000 and includes
rentals under short-term cancelable leases.
As of September 30, 1996, future minimum rental payments required under
operating leases that have initial or remaining noncancelable terms in excess
of one year are as follows (in thousands):
<TABLE>
<S> <C>
1997................................. $ 2,917
1998................................. 2,733
1999................................. 2,516
2000................................. 1,744
2001................................. 669
Thereafter........................... 1,941
-------
$12,520
=======
</TABLE>
5. RELATED PARTY TRANSACTIONS
SMITH'S EQUITY INVESTMENT
Smith uses a centralized cash management system to finance its operations.
Cash receipts related to the Division's operations are received by Smith, and
cash disbursements of the Division are paid by Smith. No interest has been
charged or credited on transactions with Smith. The net intercompany balance
with Smith resulting from the funding of all financial transactions will not
be settled. As a result, the net intercompany balance has been included in
Smith equity investment in the balance sheet of the Engineering Division.
CORPORATE EXPENSES
The results of operations include significant transactions with Smith
business units that are outside of the Division's operations. These
transactions involve functions and services such as selling, general, and
administrative expenses including the Division's cash management, accounting
and finance, legal services, and employee benefits administration that have
been provided to the Division by Smith. The cost of these functions and
services has been allocated to the Division based on a percentage of Division
revenues to total Smith revenues. Such charges and allocations are not
necessarily indicative of the costs that would have been incurred by the
Division as a separate entity. Corporate charges allocated to the Engineering
Division included in indirect costs and selling, general, and administrative
expenses were approximately $2,721,000 for the year ended September 30, 1996.
SPECIAL ITEMS
The Division's special items of $800,000 for the year ended September 30,
1996 include legal settlements and associated defense costs for the Division
of approximately $720,000 pertaining to cases in process at the time of
Smith's acquisition of the Division and specifically identifiable costs of
approximately $80,000 for severance and relocation costs for the Division.
F-37
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
INTEREST
The Division's interest expense represents an allocation of Smith's interest
expense. The interest expense from Smith was allocated to the Engineering
Division and the Remediation and Construction Divisions based on their
percentages of combined total assets at September 30, 1996.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Prior to September 1994, the Division provided a Supplemental Executive
Retirement Plan (SERP) for certain directors. The SERP was frozen in 1994 upon
the acquisition of the Division by Smith and no new participants are eligible
to participate. The benefits for this plan were based on the directors' years
of service and compensation. The accrued SERP liability which represents the
projected benefit obligation of $1,356,000 at September 30, 1996 is included
in other liabilities and was determined by an actuarial valuation. Net
periodic pension expense was $126,000 for the year ended September 30, 1996.
The plan is unfunded at September 30, 1996 and does not hold any assets.
Assumptions used in determining the actuarial present value of benefit
obligations reflects a weighted average discount rate of 7.5%.
INSURANCE COVERAGE
Worker's Compensation. Smith purchases workers' compensation coverage for
all its Divisions from external carriers. Premiums paid are determined based
upon claims experience subject to a stop-loss provision. Each Division is
allocated a charge based upon the application of published workers'
compensation rates to division payroll costs adjusted for claims experience.
Charges included in indirect costs and selling, general, and administrative
expenses for the year ended September 30, 1996 were approximately $80,000.
Medical. Certain medical and other related benefits are provided to active
employees of the Division. Monthly premiums are paid to insurance carriers by
Smith and reimbursed by the Division on the basis of employee headcount. These
contracts are negotiated by Smith on a Company-wide basis.
Medical charges allocated to the Division included in indirect costs and
selling, general and administrative expenses were approximately $1,330,000 for
the year ended September 30, 1996.
The above-mentioned charges and allocations are not necessarily indicative
of the costs that would have been incurred if the Division had been operating
as a separate entity.
EMPLOYEE BENEFIT PLAN
The employees of the Division are eligible to participate in Smith's defined
contribution plan. Under the plan, employees may make tax deferred voluntary
contributions which, at the discretion of Smith's Board of Directors, are
matched within certain limits by Smith. In addition, Smith may make additional
discretionary contributions to the plan as profit sharing contributions. The
Division's share of the Company's accrued matching contributions was
approximately $90,000 as of September 30, 1996 and is included in indirect
costs and selling, general and administrative expenses.
6. INCOME TAXES
There was no provision or benefit for current or deferred federal and state
income taxes.
F-38
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Significant components of the Division's deferred tax assets and liabilities
at September 30, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Bad debt allowance............................................. $ 140
Net operating loss carryforward................................ 70
Property and equipment......................................... 123
Accrued liabilities............................................ 2,125
Valuation allowance............................................ (1,549)
-------
Total deferred tax assets........................................ 909
-------
Deferred tax liabilities:
Cash to accrual (Sec. 481 Adjustment).......................... (909)
-------
Total deferred tax liabilities................................... (909)
-------
Net deferred taxes............................................... $ --
=======
</TABLE>
For financial reporting purposes, a valuation allowance has been recorded to
reduce the deferred tax asset related to the carryforwards and other deferred
tax assets net of deferred tax liabilities, to zero since the realization of
such amounts is not assured. Future tax benefits from the carryfowards will
reduce income tax expense if and when realized.
A reconciliation of income tax expense to amounts computed using federal
statutory rates is as follows:
<TABLE>
<S> <C>
Income tax benefit computed at the federal statutory rate....... $(7,030)
Non deductible items:
Writedown of goodwill and intangibles......................... 6,413
Goodwill amortization......................................... 301
Increase in valuation allowance................................. 316
-------
Income tax expense.............................................. $ --
=======
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The following litigation against the Division is related to BCM Engineers,
Inc. (BCM) a wholly-owned corporation of Smith included in the Division. As
part of the asset purchase agreement, Smith has agreed to assume all
liabilities, if any, in resolving these claims.
Transcontinental Realty Investors, Inc. filed an action against BCM and
various unrelated parties in the Superior Court of New Jersey, Burlington
County. The action sought to recover alleged damages exceeding $8 million
based on breach of contract and negligence. An agreement has been reached by
the plaintiff and the professional liability carrier of BCM to resolve all
claims. The insurance carrier will pay the agreed settlement directly to the
plaintiff. BCM's obligation is limited to reimbursing the insurance carrier
for the balance of the unexpended portion of a self-insured retention of
approximately $280,000, which is included in other liabilities at September
30, 1996, in installments of $50,000 payable quarterly beginning September 26,
1996, with final payment of any remaining balance due on September 30, 1997.
U-Max was awarded a judgment in the United States District Court for the
Middle District of Pennsylvania of $2 million against Stroud Township. The
F-39
<PAGE>
THE ENGINEERING DIVISION OF SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Township has been granted a judgment of $1 million against BCM. Stroud
Township has appealed the judgment against the Township and the $1 million
judgment awarded in favor of the Township against BCM. BCM's insurance
coverage will respond to losses exceeding a $500,000 deductible of which
approximately $220,000 has been expended. On November 7, 1996, BCM filed a
notice of appeal to the United States Third Circuit Court of Appeals with a
motion to stay execution. BCM's counsel believes there are grounds for
reversal or modification of the judgment on appeal, however, the likelihood of
obtaining relief from the District Court judgment is unknown. The difference
between the insurance deductible and the amount expended of $280,000 is
included in other liabilities at September 30, 1996.
A settlement agreement of the claim filed in the Court of Common Pleas of
Philadelphia County, Philadelphia has been reached with Mutual Pharmaceutical
Company, Inc. whereby BCM will be required to pay the plaintiff for its out-
of-pocket costs incurred to date for the site investigation and carrying costs
amounting to $207,000. This amount is to be paid in 13 monthly installments
beginning September 12, 1996 of $16,000 in lieu of exposure to the remaining
deductible and further litigation. The claim is covered by BCM's professional
liability coverage which carries a $500,000 deductible. The insurance carrier
has approved the settlement agreement. Additionally, BCM will be responsible
for performing certain remediation services at the site to obtain a "No
Further Action" letter from the Pennsylvania Department of Environmental
Protection. The estimated cost of the services is $50,000. If BCM fails to pay
the agreed amount or perform under the agreement, the plaintiff reserves the
right to recommence the litigation and claim additional out-of-pocket costs.
The agreement leaves open a possible claim for diminution of property value up
to $420,000 for up to 10 years and requires BCM to indemnify the plaintiff for
any third-party claims not to exceed $500,000 plus costs of defense until
September 2001. BCM is unaware of any third-party claims and has not been
notified of any claim of diminution of value of the site.
In December 1995, BellSouth filed a complaint for unstated damages in the
Circuit Court, Jefferson County, Alabama against BCM and Smith. The complaint,
alleging professional negligence, fraudulent and negligent misrepresentation,
nondisclosure, innocent misrepresentation and breach of contract, arises out
of BCM's alleged failure to provide oversight and certification of services
performed by BellSouth's asbestos abatement contractors. The plaintiff claims
it has expended an additional $1.7 million to perform asbestos removal which
allegedly was to have been performed by its prior contractor. BCM believes its
services were performed in compliance with all legal requirements, that it has
been released from BellSouth claims, and that a substantial amount of the
claims are barred by statute of limitations. The parties to the lawsuit have
entered into a settlement agreement dated April 21, 1997, which resolved all
claims; the agreement provides for the payment by BCM of $150,000 in monthly
installments which is included in other liabilities. The settlement agreement
provided that it could be rescinded or a consent judgment could be entered if
there were default on the installments. BCM defaulted and BellSouth sought to
have the consent judgement entered, but this was blocked by the chapter 11
filing of Smith.
Stroudsburg Municipal Authority has filed a claim against BCM in the Monroe
County, Pennsylvania, Court of Common Pleas for damages exceeding $500,000
based on allegations of breach of contract and negligent performance of design
services. BCM and its professional liability carrier are investigating the
claim. The case was in the discovery stage at the time of the Smith
bankruptcy. No provision for loss, if any, has been recorded at September 30,
1996.
The Division is currently a party to other litigation and claims incidental
to its business. The Division believes that these matters are adequately
accrued or covered by insurance, are without merit, or the disposition thereof
is not anticipated to have a material effect on the Division's financial
position.
F-40
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1994
AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994,
THE THREE MONTHS ENDED DECEMBER 31, 1993
AND THE YEAR ENDED SEPTEMBER 30, 1993
AND INDEPENDENT AUDITORS' REPORT
F-41
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
American Testing and Engineering Corporation
We have audited the accompanying balance sheets of American Testing and
Engineering Corporation (the Company) as of December 31, 1995 and 1994, and
the related statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1995 and 1994, the three months ended December
31, 1993 and the year ended September 30, 1993. 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, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1994, and the results of its operations and its cash flows for the years ended
December 31, 1995 and 1994, the three months ended December 31, 1993 and the
year ended September 30, 1993 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
January 31, 1997
(June 25, 1997 as to Note 11)
F-42
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................ $ 46,693 $ 62,285
Receivables:
Trade accounts receivable.......................... 20,282,027 20,732,006
Unbilled revenue on work in progress............... 6,795,912 6,395,647
----------- -----------
27,077,939 27,127,653
Less allowance for doubtful accounts............... (690,500) (814,600)
----------- -----------
26,387,439 26,313,053
Collateral bonds.................................... 801,430 1,110,652
Other current assets................................ 779,722 825,214
----------- -----------
Total current assets............................. 28,015,284 28,311,204
Property and equipment, net (Note 3)................. 5,901,641 9,041,493
Other Assets:
Cash surrender value of life insurance.............. 1,824,437 1,872,902
Advances to related parties (Note 4)................ 156,712 114,141
Other............................................... 428,621 324,125
----------- -----------
2,409,770 2,311,168
----------- -----------
Total assets..................................... $36,326,695 $39,663,865
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Working capital loans (Note 5)...................... $ 1,679,756 $ 632,235
Current portion of long-term debt (Note 5).......... 11,043,881 3,548,168
Accounts payable, trade............................. 7,804,426 7,211,534
Accrued salaries, wages and other compensation...... 3,948,186 4,774,441
Accrued legal liabilities (Note 11)................. 1,288,265 1,391,875
Other accrued expenses.............................. 2,914,423 2,918,901
----------- -----------
Total current liabilities........................ 28,678,937 20,477,154
Long-term debt (Note 5).............................. 877,095 10,255,382
Performance share obligation (Notes 2 and 7)......... 688,147 1,139,894
Lease and revenue reserve............................ 187,739 76,190
Minority interest.................................... 7,173 5,011
Commitments and contingencies (Notes 5, 7 and 11)
Shareholders' equity:
Common stock, no par value, 2,000,000 shares
authorized;
1,585,000 shares issued and outstanding............ 79,250 79,250
Additional paid-in capital.......................... 633,131 633,131
Advances to shareholders (Note 4)................... (21,266) (17,947)
Retained earnings................................... 5,196,489 7,015,800
----------- -----------
Total shareholders' equity....................... 5,887,604 7,710,234
----------- -----------
Total liabilities and shareholders' equity....... $36,326,695 $39,663,865
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-43
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994, THE THREE MONTHS ENDED DECEMBER 31,
1993 AND THE YEAR ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
YEARS ENDED THREE
DECEMBER 31, MONTHS ENDED YEAR ENDED
-------------------------- DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Service revenue........ $95,130,122 $102,253,268 $28,354,269 $117,609,574
Cost of service revenue
(Note 2).............. 26,926,568 30,116,429 11,832,987 38,794,916
------------ ------------ ------------ ------------
Net service revenue. 68,203,554 72,136,839 16,521,282 78,814,658
------------ ------------ ------------ ------------
Cost and expenses:
Engineering and
consulting costs...... 31,064,366 31,189,662 11,122,048 35,075,967
General and
administrative
expenses.............. 37,291,935 38,760,752 10,726,126 46,082,281
Interest expense....... 1,664,066 1,539,513 398,232 1,485,275
Legal judgment (Note
11)................... -- -- 704,375 --
------------ ------------ ------------ ------------
Total costs and
expenses........... 70,020,367 71,489,927 22,950,781 82,643,523
------------ ------------ ------------ ------------
Income (loss) before
cumulative effect
of change in
accounting method.. (1,816,813) 646,912 (6,429,499) (3,828,865)
Cumulative effect of
change in accounting
method (Note 2)........ -- 470,611 -- --
------------ ------------ ------------ ------------
Net income (loss)
before minority
interest........... (1,816,813) 1,117,523 (6,429,499) (3,828,865)
Minority interest....... 2,162 (3,904) (5,814) 3,751
------------ ------------ ------------ ------------
Net income (loss)... $ (1,818,975) $ 1,121,427 $ (6,423,685) $ (3,832,616)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-44
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995 AND 1994, THE THREE MONTHS ENDED DECEMBER 31, 1993
AND THE YEAR ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ADVANCES TO RETAINED SHAREHOLDERS'
STOCK CAPITAL SHAREHOLDERS EARNINGS EQUITY
------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, September 30,
1992................... $79,250 $384,240 $ -- $15,911,335 $16,374,825
Distributions to
shareholders.......... -- -- -- (391,157) (391,157)
Advances to
shareholders.......... -- -- (70,048) -- (70,048)
Reclassification of
shareholder
distribution (Note 4). -- -- (630,496) 630,496 --
Net loss............... -- -- -- (3,832,616) (3,832,616)
------- -------- --------- ----------- -----------
Balance, September 30,
1993................... 79,250 384,240 (700,544) 12,318,058 12,081,004
Advances to
shareholder........... -- -- (11,376) -- (11,376)
Net loss............... -- -- -- (6,423,685) (6,423,685)
------- -------- --------- ----------- -----------
Balance, December 31,
1993................... 79,250 384,240 (711,920) 5,894,373 5,645,943
Shareholder
contribution.......... -- 248,891 -- -- 248,891
Repayment of
shareholder advances.. -- -- 693,973 -- 693,973
Net income............. -- -- -- 1,121,427 1,121,427
------- -------- --------- ----------- -----------
Balance, December 31,
1994................... 79,250 633,131 (17,947) 7,015,800 7,710,234
Distributions to
shareholders.......... -- -- -- (336) (336)
Advance to shareholder. -- -- (3,319) -- (3,319)
Net loss............... -- -- -- (1,818,975) (1,818,975)
------- -------- --------- ----------- -----------
Balance, December 31,
1995................... $79,250 $633,131 $ (21,266) $ 5,196,489 $ 5,887,604
======= ======== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-45
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994, THE THREE MONTHS ENDED DECEMBER 31,
1993 AND THE YEAR ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED YEAR ENDED
------------------------ DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)....... $(1,818,975) $ 1,121,427 $ (6,423,685) $ (3,832,616)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and
amortization........... 3,913,346 4,311,092 1,174,178 5,076,527
Revenue and lease
reservations........... 111,549 76,190 -- --
Provision for doubtful
accounts............... (124,049) (1,154,000) 288,600 281,000
(Gain) loss on sale of
property and
equipment.............. 221,749 (76,446) (17,090) 176,382
Appreciation
(depreciation) in
performance share
value.................. (126,608) 217,433 -- --
Cumulative effect of
change in accounting
method................. -- (470,611) -- --
Appreciation of
performance shares
redeemed by issuance
of note payable........ -- -- -- 134,511
Changes in assets and
liabilities:
Trade accounts
receivable............ 449,979 2,095,995 3,480,946 2,756,359
Unbilled revenue on
work in progress...... (400,316) 2,452,964 (2,502,053) (2,658,219)
Accounts payable....... 175,131 1,691,361 (4,736,242) 2,256,065
Accrued salaries and
expenses.............. (779,940) (5,277,894) 7,235,340 1,206,256
Collateral bonds....... 309,222 477,656 412,304 (847,024)
Other, net............. (60,949) 427,311 107,265 (1,144,252)
----------- ----------- ------------ ------------
Net cash provided by
operating activities. 1,870,139 5,892,478 (980,437) 3,404,989
----------- ----------- ------------ ------------
Cash flows from investing
activities:
Purchase of property and
equipment.............. (1,310,662) (1,869,058) (474,064) (2,198,370)
Proceeds from sale of
property and equipment. 325,418 295,010 53,063 346,603
----------- ----------- ------------ ------------
Net cash used in
investing activities. (985,244) (1,574,048) (421,001) (1,851,767)
----------- ----------- ------------ ------------
Cash flows from financing
activities:
Net (deposits)
borrowings (to) from
cash collateral
account................ 1,047,521 (1,767,190) -- --
Proceeds from
obligations to banks
and notes payable...... 2,059,189 7,175,000 11,015,000 23,765,000
Payments on obligations
to banks and notes
payable................ (3,941,762) (8,565,195) (10,823,825) (24,545,218)
Advances and
distributions to
shareholders........... (3,655) -- (11,376) (391,157)
Performance shares
redeemed............... (479,542) (43,159) (14,517) (128,477)
Change in cash
overdraft.............. 417,762 (2,058,354) 1,215,597 (236,671)
Shareholder
contribution........... -- 248,891 -- --
Proceeds from repayment
of shareholder
advances............... -- 693,973 -- --
----------- ----------- ------------ ------------
Net cash used in
financing activities. (900,487) (4,316,034) 1,380,879 (1,536,523)
----------- ----------- ------------ ------------
Increase (decrease) in
cash................. (15,592) 2,396 (20,559) 16,699
Cash, beginning of
period.................. 62,285 59,889 80,448 63,749
----------- ----------- ------------ ------------
Cash, end of period...... $ 46,693 $ 62,285 $ 59,889 $ 80,448
=========== =========== ============ ============
Supplemental disclosures
of cash flow
information:
Cash paid during the
year for:
Interest................ $ 1,554,879 $ 1,489,863 $ 376,429 $ 1,487,936
=========== =========== ============ ============
Income taxes (Note 2)... $ -- $ -- $ -- $ 577,043
=========== =========== ============ ============
</TABLE>
During the year ended September 30, 1993, the Company redeemed performance
shares with a recorded value of $194,726, a redemption value of $493,856, by
issuance of a note payable of $329,237 and a cash payment for the residual.
The difference between the recorded and redemption value was recorded as
compensation expense and is included in general and administrative expenses.
During the year ended December 31, 1995, the three months ended December 31,
1993 and the year ended September 30, 1993, performance shares with a value
of $154,403, $120,757 and $72,634, respectively, were issued in lieu of ac-
crued bonuses.
The accompanying notes are an integral part of the consolidated financial
statements.
F-46
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994, THE THREE MONTHS ENDED
DECEMBER 31, 1993 AND THE YEAR ENDED SEPTEMBER 30, 1993
1. SUBSEQUENT EVENT
Effective May 23, 1996, the shareholders of American Testing and Engineering
Corporation (the Company) or ("ATEC") transferred substantially all of the
Company's tangible and intangible business assets to ATC Environmental, Inc.
("ATC"), an unrelated company. The assets sold included cash, accounts
receivable, unbilled work in progress, prepaid expenses, goodwill, customer
contract rights and customer lists. In addition, the Company leased to ATC
substantially all of its property, plant and equipment under annually
renewable leases expiring six years from the date of the closing. ATC
additionally has the right to purchase all fixed assets leased at the end of
such period. Assets retained by the Company include all nonleased fixed
assets, intercompany accounts receivable/payable, certain land, cash surrender
value of life insurance policies, and the investment in Waste Abatement
Technology, L.P. ("WATEC").
As consideration for the sale, ATC assumed essentially all of the recorded
liabilities exclusive of bank debt which was repaid concurrent with the sale
of ATEC. In addition, at closing the Company received $6,000,000 in cash and
will receive, an additional $16,750,000 in lease payments, rents, and
consideration for covenants not to compete over the next six years. In
connection with this transaction, the Company recorded a gain of approximately
$4.9 million at the closing date, and additional contingent gains
approximating $12.5 million are expected to be recorded as certain defined
contingencies lapse.
The Company's credit agreement with Bank One (Note 5) expired on April 30,
1996. In anticipation of the sale of the Company, the bank amended and
extended the credit agreement through July 31, 1996. All amounts due Bank One
in connection with the credit agreement, exclusive of WATEC borrowings of
approximately $360,000 and contingent amounts due under letters of credit,
were paid on May 24, 1996, concurrent with the sale of the Company's business
operations to ATC.
In connection with the sale, the Company recorded additional 1996 expense of
approximately $2.2 million associated with the performance shares and
performance share options (see Notes 7 and 8) in accordance with the
Performance Share and Performance Share Option Plans. During the period from
January 1, 1996 through May 23, 1996, 94,830 additional performance share
options were granted at an option price of $7.41 per share.
These financial statements are presented on the historical basis of
accounting and are not presented on the basis of a liquidation, nor do they
reflect fair value accounting principles.
2. SIGNIFICANT ACCOUNTING POLICIES
General--ATEC engages in four principal lines of business which contribute
to gross revenues. They include traditional services which consist of
engineering and materials testing, environmental, hazardous waste, and
chemical testing laboratories. The geographic concentration of the 40 plus
offices is in the eastern half of the United States. The concentration of
revenue by client is largely industrial and small business with approximately
25% of its revenue generated from federal, state and local governmental
agencies.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires that management make
estimates and assumptions affecting the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual amounts and results could differ from the
estimated amounts and results.
F-47
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Consolidation Principles and Financial Statement Presentation--These
consolidated financial statements include the accounts of ATEC and WATEC, a
limited partnership in which the Company holds a 99% interest (together, the
"Company"). All significant intercompany accounts have been eliminated.
Property and Equipment--Property and equipment are recorded at cost and are
depreciated using the straight-line method. Estimated useful lives range from
three to ten years for machinery, equipment and office furniture and three to
seven years for vehicles. Leasehold improvements are generally amortized over
the term of the respective leases. Expenditures for normal repair and
maintenance are charged to expense as incurred. Cost and accumulated
depreciation of assets disposed are removed from the accounts, and any
resulting gain or loss is included in income.
Income Taxes--Effective October 1, 1991, the Company elected status as an S
Corporation under the provisions of the Internal Revenue Code. Accordingly, it
is generally not subject to federal or state income taxes, and the income or
loss of the Company is reflected in the personal income tax returns of its
shareholders.
Revenue and Cost Recognition--The Company's principal business is providing
professional engineering and consulting services under cost-plus-fee and
fixed-price contracts. Revenues attributable to such contracts and claims for
revenue on additional contract revisions are accounted for under the
percentage-of-completion (cost-to-cost) method of accounting and are recorded
equivalent to costs incurred plus a pro rata portion of estimated profits
expected to be realized on the contracts.
Profits expected to be realized on contracts are based on total contract
value and management's estimates of costs at completion. These estimates are
reviewed and revised periodically throughout the lives of the contracts, and
adjustments to profits resulting from such revisions are recorded in the
accounting period in which the revisions are made. Provisions for estimated
losses on contracts are recorded when they are identified.
Costs of service include all direct material and subcontract costs, and
those indirect costs related to contract performance.
Change in Accounting Method--Performance Share Obligation--Amounts
contributed by participants to the Performance Share Plan are recognized as
compensation expense when earned. Prior to January 1, 1994, the Company
recognized additional expense (appreciation of performance share value) or
other income (diminution of performance share value) upon election by the
participant to redeem units in accordance with the plan's provisions. To more
directly relate the periodic results of its operations with related changes in
the valuation of performance shares, the Company changed its method of
accounting for changes in the appreciation or diminution of performance share
value. As part of this change, during the year ended December 31, 1994, the
Company recorded a one-time cumulative benefit of $470,611, which recognizes
the cumulative difference in expense recorded under the two methods from the
inception of the plan through January 1, 1994.
Reclassification--Certain amounts in the prior year's financial statements
have been reclassified to conform to the 1995 presentation.
F-48
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Machinery and equipment.......................... $ 11,584,942 $ 12,102,895
Vehicles......................................... 6,285,807 6,828,868
Office furniture and equipment................... 9,059,094 8,508,533
Leasehold improvements........................... 3,256,232 3,660,734
Building......................................... 291,220 291,220
Land............................................. 276,480 276,480
Construction in progress......................... 102,221 427,241
------------ ------------
30,855,996 32,095,971
Less accumulated depreciation.................... (24,954,355) (23,054,478)
------------ ------------
$ 5,901,641 $ 9,041,493
============ ============
</TABLE>
4. RELATED PARTY TRANSACTIONS
Advances to related parties are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Mann Realty Co............................................. $108,212 $ 68,913
Mann Technology, Inc....................................... 7,085 3,813
ATEC International......................................... 41,415 41,415
-------- --------
$156,712 $114,141
======== ========
</TABLE>
The Company has entered into certain noncancelable operating lease
agreements for office space with Mann Realty Co., a partnership in which the
Company's president is a partner. Minimum annual rental commitments under
these leases are included in Note 9 and aggregate $464,959, $323,471,
$208,884, $100,800, $100,800, and $756,000 for the years ending December 31,
1996, 1997, 1998, 1999, 2000, and thereafter, respectively. Rents paid to Mann
Realty Co. for the years ended December 31, 1995 and 1994 and the three months
ended December 31, 1993 and the year ended September 30, 1993 were $607,913,
$546,544, $193,230 and $615,144, respectively. The Company also has $125,000
on deposit with Mann Realty Co. pursuant to lease agreements on certain
locations. No interest is earned on advances, and there are no agreements
identifying specific repayment terms.
The Company's president is an officer and shareholder of Mann Technology,
Inc., which serves as the corporate general partner and one-percent owner of
WATEC. Mann Technology, Inc.'s 1% interest and earnings therefrom have been
reflected as minority interest on the Company's consolidated balance sheets
and statements of operations. Two shareholders of the Company are also
shareholders in ATEC International. Advances to Mann Technology and ATEC
International bear no interest, and there are no agreements identifying
specific repayment terms.
The Company's interim distributions to shareholders for estimated income
taxes have been determined by the Company's management to be advances to
shareholders until such time as the actual liability is calculated. Advances
to shareholders were $21,266 and $17,947 at December 31, 1995 and 1994,
respectively. The Company reports shareholder advances as a reduction of
shareholders' equity. The Company's Credit Agreement (Note 5) requires that
any such shareholder advances in excess of the related tax liability be repaid
to the Company when corresponding refunds are received from taxing
authorities.
F-49
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. LONG-TERM DEBT AND CREDIT AGREEMENTS
Long-term debt and credit agreements are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
------------ -----------
<S> <C> <C>
Credit agreement:
Working capital loan--ATEC....................... $ 1,345,739 $ 332,810
Working capital loan--WATEC...................... 344,017 299,425
------------ -----------
Borrowings under working capital loans.......... $ 1,689,756 $ 632,235
============ ===========
Term loan one.................................... $ 5,214,793 $ 6,907,321
Term loan two.................................... 1,572,648 2,715,048
Term loan three.................................. 1,240,313 1,791,563
Term loan four................................... 1,709,033 1,475,000
Equipment acquisition loan....................... 1,180,000 --
------------ -----------
Borrowings under term loans..................... 10,916,787 12,888,932
Notes payable.................................... 1,004,189 914,618
------------ -----------
11,920,976 13,803,550
Less current portion............................. (11,043,881) (3,548,168)
------------ -----------
Total long-term debt............................ $ 877,095 $10,255,382
============ ===========
</TABLE>
Credit Agreement--Under the Company's credit agreement (the "Agreement")
with Bank One, Indianapolis, N.A. ("Bank One"), substantially all assets have
been pledged as collateral. The Agreement also contains certain financial
covenants which require the Company to meet financial ratios and tests,
including a minimum current ratio, a minimum tangible capital test, a maximum
debt to tangible capital ratio, and a minimum debt service coverage ratio. The
Company was in default of substantially all financial ratio covenants as of
December 31, 1995.
On April 30, 1996, the Company and Bank One amended and extended the
Agreement (the "Amended Agreement"). The Amended Agreement established new
financial ratios and tests which the Company is required to maintain. Bank One
may, at its sole discretion, extend the maturity date of the working capital
loans. The Amended Agreement provides for the revision of a previously
established cash collateral account, whereby the Company deposits all cash
into the account to pay down working capital loans and then draws funds to
meet current operating requirements.
Under the Amended Agreement, the working capital loans bear interest,
payable monthly, at Bank One's prime rate, which was 8.5% at December 31,
1995, plus .75%, and mature on July 31, 1996. ATEC and WATEC may borrow up to
$3,000,000 and $1,000,000, respectively, under the working capital loans.
Additionally, the Agreement provides for annual short-term equipment
acquisition loans. On April 30, 1996, the due date for the equipment
acquisition loan was extended to July 31, 1996. The equipment acquisition loan
bears interest at Bank One's prime rate plus 1%.
Term loan one is due in consecutive monthly principal payments of $116,500
plus interest, with the remaining unpaid principal plus accrued interest due
March 1, 1998. The loan bears interest at Bank One's prime rate plus 1%. Term
loan two is due in consecutive monthly principal payments of $95,200 plus
interest, with the remaining balances of principal and interest due on June 1,
1997. The loan bears interest at an annual rate of 9.51% through February 28,
1996 and at Bank One's prime rate plus 1% thereafter. Term loan three is due
in
F-50
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
consecutive monthly principal payments of $45,938 plus interest, with the
remaining balance of principal and interest due on February 28, 1998. The loan
bears interest at Bank One's prime rate plus 1%. Term loan four is due in
consecutive monthly principal payments of $41,700 plus interest, with the
remaining balance of principal and interest due March 15, 1999. The loan bears
interest at Bank One's prime rate plus 1%.
The Term loans contain provisions which permit the bank to accelerate
payment terms in the event of non-compliance with covenants included in the
working capital loan.
A $6,000,000 facility for letters of credit is provided under the Agreement
with a 1.5% annual fee on outstanding letters of credit (Note 6). In addition,
up to a maximum of $5,000,000 of total indebtedness under the credit agreement
has been guaranteed by the Company's principle shareholder.
Notes Payable--The Company's principal shareholder advanced the Company
$750,000 in September 1994. The note bears interest at 12.0% and the principal
and accrued interest are due on February 1, 1997. The note is subordinated to
the interest of Bank One.
In connection with the retirement of certain performance share obligations,
a note with a principal balance of $254,189 was issued in 1995. The first
payment of $127,094 plus accrued interest is due in May 1996, with the payment
of the remaining $127,095 plus accrued interest due on May 19, 1997. Interest
is payable at the prime rate of Bank One.
6. LETTERS OF CREDIT
The Company has $5,904,353 in letters of credit outstanding at December 31,
1995, which collateralize performance bonds required under certain contracts,
certain litigation, and deductibles under workers' compensation insurance.
They expire in various amounts through November 1996.
7. PERFORMANCE SHARE OBLIGATION
The Company adopted a Performance Share Plan ("Share Plan") intended to
operate for the benefit of key employees of the Company. At the beginning of
each fiscal year, each Share Plan participant can elect to receive a portion
of his bonus payable under the ATEC Incentive Bonus Plan in the form of
Performance Shares ("Shares"), for which the Company has agreed to later pay a
formula value per Share, subject to adjustment (see below). Except as
otherwise determined by the Board, Shares issued in lieu of cash bonuses were
initially valued at twice the book value of shares of the Company's common
stock through September 30, 1992 and at one and one-half times the book value
of common stock, thereafter ("Purchase Price").
The Company will satisfy the Performance Share Obligation by cash payments
to the Share Plan participants in the event of the Share Plan participant's
death, total disability, hardship or termination from the Company, or upon
sale of 50% of the Company's common stock or substantially all of the assets
of the Company.
F-51
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The value per unit and the right to receive payment for Shares held by a
Share Plan participant are determined as follows:
EVENT CAUSING UNIT REDEMPTION SHARE VALUE DETERMINED BY
Death, total disability, hardship or The Share Purchase Price plus or
termination. minus the change in book value of
the common stock of the Company from
the date of purchase to the end of
the fiscal year immediately
preceding the event.
Sale or transfer of more than 50% of The payment received by the Company
the issued and outstanding common shareholders for each share of the
stock of the Company. Company.
Sale of substantially all of the The payment received by the Company
assets of the Company, or the shareholders for each share of the
liquidation of the Company. Company.
Activity in the years ended December 31, 1995 and 1994 and the three months
ended December 31, 1993 and the year ended September 30, 1993 was as follows:
<TABLE>
<CAPTION>
PERFORMANCE
SHARES OBLIGATIONS
----------- -----------
<S> <C> <C>
Balance at September 30, 1992....................... 255,499 $1,580,560
Issued............................................ 3,721 72,634
Redeemed.......................................... (55,343) (323,203)
------- ----------
Balance at September 30, 1993....................... 203,877 1,329,991
Issued............................................ 10,677 120,757
Redeemed.......................................... (1,061) (14,517)
------- ----------
Balance at December 31, 1993........................ 213,493 1,436,231
Cumulative effect of change in accounting method
(Note 1)......................................... -- (470,611)
Issued............................................ -- --
Redeemed.......................................... (6,558) (43,159)
Appreciation in share value....................... -- 217,433
------- ----------
Balance at December 31, 1994........................ 206,935 1,139,894
Issued............................................ 20,805 154,403
Redeemed.......................................... (87,211) (479,542)
Depreciation in share value....................... -- (126,608)
------- ----------
Balance at December 31, 1995........................ 140,529 $ 688,147
======= ==========
</TABLE>
8. PERFORMANCE SHARE OPTION PLAN
Effective May 3, 1995, the Company adopted a Performance Share Option Plan
("Option Plan") intended to offer incentives beyond current compensation to
certain officers and key employees responsible for furthering the Company's
long-term earnings growth. Performance share options are issued at the sole
discretion of the Performance Share Option Plan Committee (the "Committee").
Under the Plan, 200,000 option shares are available for grant. The option
price is determined by the Committee and for 1995 was set at $7.41 per share.
Options are exercisable only upon a "Transfer" of ownership as defined in the
Option Plan agreement. The options have no stated expiration date but will
expire upon termination of the optionee's employment. No compensation expense
was recorded during 1995, since the options were granted at fair market value.
At December 31, 1995, there were 77,250 shares under option at an option price
of $7.41 per share.
F-52
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. LEASES
Minimum annual rental commitments under noncancelable operating leases at
December 31, 1995 (primarily for office space) are as follows:
<TABLE>
<S> <C>
1996........................................................... $2,642,509
1997........................................................... 1,692,026
1998........................................................... 1,060,172
1999........................................................... 705,190
2000........................................................... 302,074
Thereafter..................................................... 822,097
----------
$7,224,068
==========
</TABLE>
Total rental expense for the year ended December 31, 1995 and 1994 and the
three months ended December 31, 1993 and the year ended September 30, 1993 was
$3,404,000, $3,107,000, $775,000 and $3,216,000, respectively.
10. 401(K) PROFIT SHARING PLAN
The Company sponsors a defined contribution 401(k) Profit Sharing Plan
("Plan") covering substantially all employees. Annual contributions made by
the Company to the Plan are strictly discretionary in nature and may be
discontinued or temporarily suspended for a definite or indefinite period of
time. The Company's profit sharing contributions are allocated to the account
balance of each participant based upon the ratio of the participant's Plan
year compensation to the total Plan year compensation of all participants and
vest over a six-year period. There were no profit sharing contributions for
any of the periods presented.
During the year ended December 31, 1995, the Company contributed $331,064 to
the 401(k) portion of the Plan, equivalent to 50% of employees' pre-tax
contributions, up to 3% of each employees' pay. These contributions also vest
over a six-year period. Participant forfeitures aggregating $49,460 were
retained. The Company's contribution for the year ended December 31, 1994 was
$273,513 with forfeitures of $46,938. The Company's contributions to the Plan
were $113,850 during the three months ended December 31, 1993. During the year
ended September 30, 1993, participant forfeitures totaling $321,033 were
retained to satisfy the Company's contribution to the Plan.
11. LITIGATION
A lawsuit was filed on April 24, 1991 against the Company in the Superior
Court of Lake County, Indiana. The claim alleged negligent and careless
conduct on the part of the Company, which resulted in permanent personal
injuries being suffered by the plaintiff as a result of exposure to hazardous
materials while operating equipment at a landfill. On March 23, 1995, a trial
jury returned a verdict against the Company and awarded the plaintiff $704,375
in damages. The Company filed a motion with the Court to correct errors in May
1995 and, as a result, the Court reduced the judgment against the Company by
$70,000. Since that time, the plaintiff has accepted the Company's settlement
offer of $500,000 and such amount was paid subsequent to December 31, 1995.
The Company has pursued recovery of the settlement amount from its insurance
carrier and in June 1997 reached an agreement to recover $550,000 from the
insurance carrier related to this claim.
On March 1, 1994, the Company and another party were named as defendants in
a lawsuit filed in the Court of Common Pleas, Franklin, Ohio. The plaintiff
alleges that the Company negligently performed an environmental site
assessment which failed to indicate environmental contamination that has made
a mortgage on the property in the amount of $15 million worthless. The Company
believes it has a meritorious defense with
F-53
<PAGE>
AMERICAN TESTING AND ENGINEERING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
respect to the lawsuit and intends to vigorously defend the action. While the
ultimate outcome cannot be determined at this time, management does not
believe it will have a material adverse effect on the Company's financial
statements.
By letter dated December 12, 1993, the Company entered the Voluntary
Disclosure Program administered by the U.S. Department of Defense ("DoD"). The
bases of the disclosure are allegations that certain former Company employees
paid unlawful gratuities to a federal government inspector concerning a
contract at a federal government site. Possible violations involve the federal
Anti-Kickback Act, federal criminal law against bribery, and the federal civil
False Claims Act. The Company retained independent legal counsel to undertake
internal investigation of the matter and to prepare a report for presentation
to the Office of the Inspector General, DoD. The Company could be responsible
for the repayment of any losses suffered by the federal government related to
the gratuities, fraud or kickbacks. In January 1995, the Company submitted the
internal investigation report to DoD in which it found that the illegal
gratuities had been paid by a former Company employee. The Company paid the
federal government the losses identified in the internal investigation report.
The Company does not believe it has any additional monetary obligation to the
federal government as a result of the matters covered by the investigation;
however, the federal government accepted the funds with the express
reservation that the acceptance did not constitute a limitation of the
Company's liability. The federal government conducted a compliance audit of
the report in 1995 and requested additional information to determine if fines
should be levied against the Company or if the Company should be suspended
from participation in future government contracts. As of June 25, 1997, the
Company is negotiating a final settlement agreement with the DoD which will
include the withdrawal of the Company from all federal government contracting
work. The Company has historically derived approximately 10% of its net
service revenues from federal government sources.
A complaint was filed in December 1995 against the Company and another party
in the Circuit Court of Dade County, Florida. The plaintiff alleges that the
Company failed to update its report on the suitability of the foundation
material after a substitution in those materials was made. As a result of the
plaintiff's reliance on this report, the materials used in the foundation were
found to be inadequate and the building pad settled, resulting in damages. The
Company believes it has a meritorious defense with respect to the lawsuit and
intends to vigorously defend the action. While the ultimate outcome cannot be
determined at this time, management does not believe it will have a material
adverse effect on the Company's financial statements.
On December 5, 1996, the Company received notice of a claim by Western
Capital Corporation. Western Capital Corporation's claim against the Company
arises from a claim made by a third party. The third party allegedly received
serious bodily injuries during the removal of underground storage tanks from
Western Capital Corporation's property as a subcontracted employee of the
Company. The Company believes it has a meritorious defense with respect to the
lawsuit and intends to vigorously defend the action. While the ultimate
outcome cannot be determined at this time, management does not believe it will
have a material adverse effect on the Company's financial statements.
The Company has been named or has claims pending arising out of the ordinary
conduct of its business. In the opinion of management, these matters are
adequately covered by insurance, appropriately provided for in the
accompanying financial statements, without merit, or are not material to the
Company's financial statements.
F-54
<PAGE>
BING YEN & ASSOCIATES, INC.
FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1996
AND INDEPENDENT AUDITORS' REPORT
F-55
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Bing Yen & Associates, Inc.
Irvine, California
We have audited the accompanying balance sheet of Bing Yen & Associates,
Inc. as of December 31, 1996, and the related statements of operations and
retained earnings and of cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Bing Yen & Associates, Inc. as of December
31, 1996 and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
November 18, 1997
F-56
<PAGE>
BING YEN & ASSOCIATES, INC.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 713,991
Accounts receivable--net of allowance of $46,625.................. 1,948,991
Accounts receivable--unbilled..................................... 67,459
Prepaid expenses.................................................. 3,365
----------
Total current assets............................................ 2,733,806
----------
PROPERTY AND EQUIPMENT--net......................................... 136,077
OTHER ASSETS........................................................ 7,450
----------
TOTAL ASSETS........................................................ $2,877,333
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................. $ 213,397
Accrued expenses.................................................. 117,342
Deferred income................................................... 34,680
----------
Total current liabilities....................................... 365,419
----------
STOCKHOLDERS' EQUITY:
Capital stock:
Common, $.01 par value--authorized, issued and outstanding,
100,000 shares................................................... 1,000
Retained earnings................................................. 2,510,914
----------
Stockholders' equity............................................ 2,511,914
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................... $2,877,333
==========
</TABLE>
See notes to financial statements.
F-57
<PAGE>
BING YEN & ASSOCIATES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
PROFESSIONAL FEES.................................................. $ 4,274,820
DIRECT PROJECT COSTS............................................... 2,059,102
INDIRECT PROJECT COSTS............................................. 568,957
-----------
Gross margin..................................................... 1,646,761
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....................... 498,485
-----------
OPERATING INCOME................................................... 1,148,276
INTEREST INCOME.................................................... 14,433
-----------
NET INCOME......................................................... 1,162,709
RETAINED EARNINGS, Beginning of year............................... 2,397,920
DIVIDENDS.......................................................... (1,049,715)
-----------
RETAINED EARNINGS, End of year..................................... $ 2,510,914
===========
</TABLE>
See notes to financial statements.
F-58
<PAGE>
BING YEN & ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................... $ 1,162,709
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and amortization................................. 17,326
Increase in receivables--net.................................. (271,458)
Increase in prepaid assets.................................... (1,426)
Increase in accounts payable and other liabilities............ 62,260
-----------
Net cash flows from operating activities.................... 969,411
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment....................... (46,483)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid.................................................. (1,049,715)
-----------
NET DECREASE IN CASH.............................................. (126,787)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................... 840,778
-----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.......................... $ 713,991
===========
</TABLE>
See notes to financial statements.
F-59
<PAGE>
BING YEN & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
1. NATURE OF OPERATIONS
Bing Yen & Associates, Inc. (the "Company") provides geothermal consulting
services (primarily litigation support) in the state of California.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Cost Recognition--Consulting services are generally performed on
a cost-plus fixed fee basis. Revenues are recognized as services are
performed.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents--The Company considers all highly liquid
investments with a maturity of three months or less at the date of purchase to
be cash equivalents.
Property and Equipment--Property and equipment are recorded at cost and are
depreciated using straight-line depreciation over the following estimated
useful service lives of the assets:
<TABLE>
<S> <C>
Leasehold improvements.............................................. 39 years
Computer and equipment.............................................. 5 years
Furniture and fixtures.............................................. 7 years
Lab and field equipment............................................. 7 years
</TABLE>
Income Taxes--The Company elected to be taxed under Subchapter S of the
Internal Revenue Code. No income taxes are recorded in the accompanying
financial statements as the payment of the income taxes of the Company is the
responsibility of the stockholders.
3. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. A summary by classification as
of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Computer equipment................................................. $ 86,200
Furniture and fixtures............................................. 62,960
Lab and field equipment............................................ 46,088
Leasehold improvements............................................. 25,437
Vehicles........................................................... 2,920
--------
Total property and equipment..................................... 223,605
Less accumulated depreciation...................................... 87,528
--------
Property and equipment--net...................................... $136,077
========
</TABLE>
F-60
<PAGE>
BING YEN & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. OTHER ASSETS
A summary of other assets at December 31, 1996 is as follows:
<TABLE>
<S> <C>
Investment in joint venture.......................................... $3,950
Loan to related party................................................ 3,500
------
$7,450
======
</TABLE>
5. COMMITMENTS
The Company has entered into a lease agreement for office space with an
affiliated company owned by three officers of the Company. Rent expense related
to this lease for the year ended December 31, 1996 was $86,806. Minimum rental
commitments as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997................................................................ $ 63,763
1998................................................................ 102,496
1999................................................................ 129,600
2000................................................................ 136,800
2001................................................................ 144,000
--------
Total............................................................. $576,659
========
</TABLE>
6. EMPLOYEE BENEFIT PLAN
The Company has adopted a 401(k) plan covering all eligible employees. The
plan provides for matching contributions at the discretion of the Board of
Directors. Contribution expense for the year ended December 31, 1996 was
$21,957.
7. SUBSEQUENT EVENTS (UNAUDITED)
Effective November 26, 1997, ATC Group Services, Inc. acquired all of the
assets of the Company.
F-61
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
FINANCIAL STATEMENTS
AS OF JUNE 30, 1997 AND 1996
TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
F-62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Environmental Warranty, Inc.:
We have audited the accompanying balance sheets of Environmental Warranty,
Inc. (a Connecticut corporation) as of June 30, 1997 and 1996, and the related
statements of operations, changes in shareholders' equity and cash flows for
the years ended June 30, 1997 and 1996. These financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule 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 Environmental Warranty,
Inc. as of June 30, 1997 and 1996, and the results of its operations and its
cash flows for the years ended June 30, 1997 and 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 2 of Notes to Financial Statements, ATC Group Services,
Inc., Environmental Warranty, Inc.'s parent effective November 4, 1997, is
committed to provide financial support to Environmental Warranty, Inc.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of general and
administrative expenses (Exhibit I) is presented for purposes of additional
analysis and is not a required part of the basic financial statements. This
information has been subjected to the auditing procedures applied in our audit
of the basic financial statements and in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
Hartford,
Connecticut
November 20, 1997
F-63
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
BALANCE SHEETS
AS OF JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents.......................... $ 219,367 $ 18,993
Investments held to maturity (market value of $0
and $145,000,
respectively)..................................... -- 143,000
Trading account investments, at market............. 10,120 62,357
Interest receivable................................ -- 1,015
Commissions receivable............................. 157,927 117,961
Prepaid expenses................................... -- 4,747
----------- -----------
Total current assets........................... 387,414 348,073
----------- -----------
Furniture and equipment, net of accumulated depre-
ciation of $24,299 and $18,437, respectively...... 10,488 16,350
Deposits........................................... -- 9,494
Deferred costs, net of accumulated amortization of
$342,987 and $258,891, respectively............... 77,485 161,581
----------- -----------
Total assets................................... $ 475,387 $ 535,498
=========== ===========
LIABILITIES:
Accounts payable and accrued liabilities........... $ 36,366 $ 13,204
Premiums payable to insurer........................ 297,006 83,918
----------- -----------
Total current liabilities...................... 333,372 97,122
----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 5, 6 and 8)
SHAREHOLDERS' EQUITY:
Redeemable, convertible, cumulative 8% preferred
stock, 5,000 shares
authorized:
Series A, 2,668 shares issued and outstanding,
initial conversion price of $749.63 per share,
plus unpaid dividends........................... 2,747,102 2,587,103
Series B, 1,334 shares issued and outstanding,
initial conversion price of $1,491.7541 per
share, plus unpaid dividends.................... 2,397,195 2,237,995
Common stock, no par value, 15,000 shares autho-
rized, 1,100 and 800 shares issued and outstand-
ing, respectively................................. 4,000 1,000
Less--Stock subscriptions receivable............... (2,000) (1,000)
Accumulated deficit................................ (5,004,282) (4,386,722)
----------- -----------
Total shareholders' equity..................... 142,015 438,376
----------- -----------
Total liabilities and shareholders' equity..... $ 475,387 $ 535,498
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
REVENUES:
Commissions earned..................................... $ 543,879 $ 194,210
Investment income...................................... 4,038 32,696
Other.................................................. 5,725 15,450
--------- ---------
Total revenue...................................... 553,642 242,356
EXPENSES:
General and administrative expenses.................... 850,524 1,000,286
--------- ---------
Loss before state income taxes..................... (296,882) (757,930)
Provision for state income taxes....................... 1,479 4,821
--------- ---------
Net loss........................................... $(298,361) $(762,751)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK, PREFERRED STOCK,
SERIES A SERIES B COMMON STOCK STOCK
----------------- ----------------- ------------- SUBSCRIPTIONS ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE DEFICIT TOTAL
------ ---------- ------ ---------- ------ ------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholders' equity,
June 30, 1995.......... 2,668 $2,426,667 1,334 $2,078,359 800 $1,000 $(1,000) $(3,303,899) $1,201,127
Unpaid preferred stock
dividends.............. -- 160,436 -- 159,636 -- -- -- (320,072) --
Net loss................ -- -- -- -- -- -- -- (762,751) (762,751)
----- ---------- ----- ---------- ----- ------ ------- ----------- ----------
Shareholders' equity,
June 30, 1996.......... 2,668 2,587,103 1,334 2,237,995 800 1,000 (1,000) (4,386,722) 438,376
Unpaid preferred stock
dividends.............. -- 159,999 -- 159,200 -- -- -- (319,199) --
Stock options exercised. -- -- -- -- 300 3,000 (1,000) -- 2,000
Net loss................ -- -- -- -- -- -- -- (298,361) (298,361)
----- ---------- ----- ---------- ----- ------ ------- ----------- ----------
Shareholders' equity,
June 30, 1997.......... 2,668 $2,747,102 1,334 $2,397,195 1,100 $4,000 $(2,000) $(5,004,282) $ 142,015
===== ========== ===== ========== ===== ====== ======= =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................. $(298,361) $ (762,751)
Adjustments to reconcile net loss to net
cash provided by (used for) operating
activities:
Depreciation and amortization....................... 89,958 89,714
Increase in commissions receivable.................. (39,966) (97,003)
Decrease in interest receivable..................... 1,015 25,985
Decrease in deposits................................ 9,494 --
Decrease (increase) in prepaid expenses............. 4,747 (266)
Increase (decrease) in accounts payable and accrued
liabilities........................................ 23,162 (17,571)
Increase in premiums payable to insurer............. 213,088 36,821
--------- ----------
Net cash provided by (used for) operating activi-
ties............................................. 3,137 (725,071)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of trading account investments............... (145,763) (303,474)
Proceeds from sale of trading account investments..... 198,000 259,000
Proceeds from maturities of investments held to matu-
rity................................................. 243,000 4,975,000
Purchase of investments held to maturity.............. (100,000) (4,223,000)
Purchase of furniture and equipment................... -- (2,607)
--------- ----------
Cash provided by (used for) investing activities.. 195,237 704,919
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock options exercised.......... 2,000 --
--------- ----------
Cash provided by financing activities............. 2,000 --
--------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... 200,374 (20,152)
CASH AND CASH EQUIVALENTS, beginning of year............ 18,993 39,145
--------- ----------
CASH AND CASH EQUIVALENTS, end of year.................. $ 219,367 $ 18,993
========= ==========
SUPPLEMENTAL INFORMATION:
Non-cash transactions--Undeclared preferred stock div-
idends............................................... $ 319,199 $ 320,074
Cash paid for--Income taxes........................... 1,479 4,821
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-67
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
1. DESCRIPTION OF COMPANY AND BUSINESS:
Organization
Environmental Warranty, Inc. (the Company) was incorporated on April 3,
1992, and sold 1,334 shares of Preferred Stock, Series A for $1,000,000 on May
1, 1992. In April 1993, an additional 1,334 shares of Preferred Stock, Series
A were sold for $1,000,000. On April 15, 1994, the Company issued to Lawyers
Title Environmental Insurance Service Agency, Inc. (LTEISA) (the Series B
preferred shareholder and a subsidiary of Lawyers Title Corporation) 667
shares of Preferred Stock, Series B for $995,000, and obtained an
unconditional commitment for the purchase of an additional 667 shares for
$995,000, which purchase was consummated on January 15, 1995. Offering costs
of $43,580 were charged against the proceeds. As of June 30, 1997 and 1996,
the Company had issued 1,100 and 800 shares of common stock to employees of
the Company (see Note 5).
Business
The Company serves as the brokerage and program administrator for
environmental site assessment specialty insurance coverage, providing
marketing and underwriting services. Prior to March 1996, the Company had a
program administration agreement with SAFECO Corporation (SAFECO). This
agreement authorized the Company to sell environmental site assessment
insurance underwritten by SAFECO. All risk of loss was retained by SAFECO.
During 1996, the Company terminated its agreement with SAFECO and entered into
a program administration agreement with American International Surplus Lines
Agency, Inc. (AIG). This agreement authorizes the Company to sell
environmental site assessment insurance underwritten by AIG. All risk of loss
is retained by AIG. The Company collects the premiums from the insured,
retains a commission and remits the remaining premium to AIG.
The Company was a development stage enterprise which had not generated
significant operating revenues through June 30, 1996. Prior to July 1996,
expenses incurred were primarily related to development, marketing and
administration.
2. CHANGE IN COMPANY OWNERSHIP:
On November 4, 1997 (the Closing Date), ATC Group Services Inc. (ATC)
entered into and closed a Stock Purchase Agreement (the Agreement) with the
Company's preferred shareholders, whereby the Company's preferred shareholders
sold all outstanding redeemable, convertible, cumulative 8% preferred stock
(consisting of 2,668 Series A shares and 1,334 Series B shares) and 1,000
shares of outstanding common stock (100 shares of common stock were retained
by one shareholder, see Notes 5 and 8) to ATC. The purchase price consisted of
$150,000 in cash, paid the Escrow Agent, as defined in the Agreement, $678,000
in a non-interest bearing promissory note payable, maturing in equal amounts
on October 1, 1998, 1999 and 2000, for the benefit of the Qualified
Stockholders, as defined in the Agreement, and 33,000 shares of ATC
unregistered, restricted common stock.
In connection with the transaction, management of ATC is committed to
provide the necessary level of financial support to the Company to enable the
Company to pay its debts as they become due for the period from the closing
date to July 1, 1998, and believes ATC has the financial resources to fulfill
that commitment.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue recognition
The Company recognizes all commissions as earned on the effective date of
the underlying policy.
F-68
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1997 AND 1996
Investments
The Company records investments held to maturity, representing securities
for which the Company has the positive intent and ability to hold to maturity,
at amortized cost and trading account investments, representing securities
which are held for resale in the near term, at fair value, with unrealized
gains and losses included in investment income.
The Company had investments held to maturity, recorded at cost as of June
30, 1996 which matured in July 1996. In addition, the Company holds shares of
mutual funds in trading account investments which are recorded at market
value.
For the years ended June 30, 1997 and 1996, there were no transfers of
securities to the available for sale or trading categories.
Deferred costs
Costs of $420,472, incurred in May 1993, relating to the initial formation
of the Company and product development activities, were capitalized and are
being amortized on a straight-line basis over a 60-month period.
Depreciation
Depreciation of furniture and equipment is computed on the straight-line
basis over five and seven years, respectively.
Cash and cash equivalents
Cash and cash equivalents include cash and short-term investments in
commercial paper, with original maturities of less than 90 days.
Reclassifications
Certain reclassifications have been made to the 1996 financial statements to
conform to the 1997 presentation.
4. PREFERRED STOCK:
Conversion
Each outstanding share of preferred stock is convertible, at the option of
the holder, into one share of common stock at conversion prices (subject to
adjustment) of $749.63 for each Preferred Stock, Series A share and
$1,491.7541 for each Preferred Stock, Series B share, plus any accrued unpaid
dividends. As of June 30, 1997, the preferred stock would have been
convertible into 4,002 shares of common stock.
All of the preferred stock is automatically converted into common stock
immediately following a sale of the Company or a public offering in which the
aggregate proceeds to the Company, net of underwriting discounts and
commissions, equals or exceeds $7,500,000 without further action by the holder
of such shares (see Note 2).
Redemption
The holders of preferred stock may elect, at their option, to have the
Company redeem their outstanding preferred shares beginning May 31, 1998. The
redemption price for each share is equal to the initial conversion price per
share ($749.63 and $1,491.7541 for Series A and Series B, respectively) plus
any accrued unpaid dividends. Also, the Series B preferred shareholder may
require redemption of its shares if the marketing agreement is terminated (see
Note 6).
F-69
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1997 AND 1996
Dividends
Holders of preferred stock are entitled to cumulative annual dividends equal
to 8% of the initial conversion price of the preferred stock upon dissolution,
conversion into common stock or redemption of the preferred stock. No
dividends have been declared or paid as of June 30, 1997; however, the Company
has accrued dividends of $319,199 and $320,076 for the years ended June 30,
1997 and 1996, respectively ($1,197,877 since inception, April 3, 1992), and
has reflected these amounts as increases in the carrying value of the
preferred stock.
Other
The holder of the Preferred Stock, Series B has the right to purchase any
Series A shares offered for sale by a preferred shareholder to another third
party.
Preferred shareholders are entitled to vote on all matters submitted to a
vote by holders of common stock. Preferred shareholders are entitled to the
number of votes equal to the number of common shares into which their
preferred shares could be converted.
5. COMMON STOCK:
Stock transactions
Prior to a shareholder selling any Company common stock, the shareholder
must offer such stock to the Company. If the Company does not repurchase the
common stock, the shareholder may sell such shares to a third party.
In the event that the Series B preferred shareholder obtains a controlling
interest, as defined, in the Company, the Company may be required to
repurchase all outstanding common stock and redeem all unexercised stock
options (see below) upon the occurrence of certain events, at a fair market
price, as defined.
Long-term incentive stock option plan
In 1993, the Company's Board of Directors (the Board) approved a long-term
stock option plan (the Plan). Under the Plan the Board has sole discretion to
award options. At June 30, 1995 and 1994, 532 shares of common stock were
reserved for issuance under the Plan and options for 475 shares at an exercise
price of $10 per share (the fair value of one share of common stock at grant
date) had been granted. Effective July 1, 1996, an additional 250 shares were
reserved for issuance under the Plan, and effective September 1, 1997,
additional options for 100 shares at an exercise price of $10 per share had
been granted. The options become exercisable over various periods up to five
years from the date the options were granted.
The options will lapse if not exercised within 15 years after the original
grant date. The term of the options may be accelerated or expired upon certain
conditions, as defined. As of June 30, 1997 and 1996, no options had been
accelerated or expired. For the years ended June 30, 1997 and 1996, options
for 300 and 0 shares, respectively, were exercised. As of June 30, 1997, the
Company had not received the proceeds from the exercise of options for 100
shares of common stock. As of June 30, 1997 and 1996, 100% and 99%,
respectively, of the options had vested. As of the Closing Date, the remaining
options for 275 shares of common stock had been terminated through termination
agreements with each option holder (see Note 2).
The Company has the right to repurchase any stock issued pursuant to these
options, including stock resulting from stock splits or other
recapitalization, upon sale of the Company or acquisition of at least two
thirds of the Company's outstanding common stock by a third-party investor. On
the Closing Date, 200 of the 300 shares issued and outstanding, due to the
exercise of options during 1997, were sold to ATC as described in Note 2. The
remaining 100 shares were retained by one common stock shareholder (see Notes
2 and 8).
F-70
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1997 AND 1996
6. MARKETING AGREEMENT:
In January 1994, the Company entered into a marketing agreement with the
Series B preferred shareholder to assist in the marketing and sale of the
product being brokered by the Company. Under this agreement, the Company is
required to pay a 5% commission on gross premiums with respect to any product
sold by the Series B preferred shareholder on the Company's behalf. For the
years ended June 30, 1997 and 1996, the preferred shareholder's commissions
were $20,028 and $18,329, respectively. The initial agreement expires on April
14, 2004 and is subject to automatic one-year renewals unless terminated by
either party. If the marketing agreement is terminated by either party, under
defined conditions, the Series B preferred shareholder may require that the
Company redeem its preferred shares at an adjusted conversion price, as
defined, plus unpaid dividends. On October 21, 1997, the marketing agreement
was terminated by both the Company and the Series B preferred shareholder. On
the Closing Date, the Series B preferred shareholder sold all issued and
outstanding Series B preferred stock (1,334 shares) to ATC as described in
Note 2.
7. INCOME TAXES:
For the years ended June 30, 1997 and 1996, the provision for income taxes
consisted of the following:
<TABLE>
<CAPTION>
1997 FEDERAL STATE TOTAL
---- ------- ----------- ----------
<S> <C> <C> <C>
Current provision....................... $ -- $ 1,479 $ 1,479
Deferred benefit........................ -- -- --
----- ----------- ----------
$ -- 1,479 $ 1,479
===== =========== ==========
1996
----
Current provision....................... $ -- $ 4,821 $ 4,821
Deferred benefit........................ -- -- --
----- ----------- ----------
$ -- $ 4,821 $ 4,821
===== =========== ==========
As of June 30, 1997 and 1996, the components of the deferred income tax asset
included in current and deferred income taxes in the accompanying balance sheet
were:
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Total deferred tax asset........................ $ 1,512,395 $1,408,830
Total deferred tax liabilities.................. (17,253) (33,724)
Total valuation reserve......................... (1,495,142) (1,375,106)
----------- ----------
Net deferred tax asset.......................... $ -- $ --
=========== ==========
</TABLE>
The deferred tax asset is the result of net operating loss carryforwards,
and the deferred tax liabilities are the result of temporary differences
between book and tax depreciation and amortization. A valuation reserve has
been established for the net deferred tax asset.
As of June 30, 1997, the Company had net operating loss carryforwards of
approximately $3,700,000 for federal income tax return purposes (expiring from
2008 through 2012) and approximately $3,700,000 for state income tax return
purposes (expiring from 1998 through 2002). Under the Internal Revenue Code,
with the change in Company ownership in 1997 (see Note 2), the ability to
utilize the net operating loss carryforwards will be limited.
F-71
<PAGE>
ENVIRONMENTAL WARRANTY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1997 AND 1996
8. COMMITMENTS:
Litigation reserve
As of June 30, 1997, the Company was involved in a litigation action by a
former employee and common stock shareholder for severance and vacation pay
claimed upon the termination of his employment. (This shareholder did not sell
his shares of common stock on the Closing Date (see Notes 2 and 5)).
Management, based on discussions with legal counsel, cannot determine the
likely outcome of this action; however, it believes the Company has
meritorious defenses. Management believes that the potential liability ranges
from $0 to approximately $60,000. Since the outcome of this matter is
uncertain, no provision for liability was reflected in the accompanying
financial statements as of June 30, 1997.
Leases
The Company previously leased its office facilities under a non-cancelable
operating lease with a monthly rental of approximately $4,800, which lease
term ended July 31, 1997. Subsequently, the Company moved to a different
location with a lease term of one year and monthly payments of $2,875.
Employment agreements
As of June 30, 1997, the Company had employment agreements with three key
employees. These agreements are subject to automatic one-year renewals and may
be terminated by the Company for cause. The agreements include noncompetition
covenants in the event of termination, as defined by the agreements. These
agreements were terminated prior to the Closing Date.
F-72
<PAGE>
EXHIBIT I
ENVIRONMENTAL WARRANTY, INC.
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------- ----------
<S> <C> <C>
Salaries............................................. $457,866 $ 603,190
Benefits............................................. 21,971 31,409
-------- ----------
479,837 634,599
-------- ----------
Travel and entertainment............................. 29,910 41,957
Depreciation and amortization........................ 89,959 89,714
Professional services................................ 80,349 30,312
Advertising and promotion............................ 4,868 38,726
Rent................................................. 56,387 58,035
Insurance............................................ 33,435 37,929
Commissions.......................................... 20,028 18,329
Consulting........................................... 15,893 12,429
Telephone............................................ 14,368 14,080
Insurance filings and license bonds.................. 9,023 4,380
Postage.............................................. 7,683 9,054
Printing and supplies................................ 6,523 5,404
Subscriptions........................................ 131 329
Taxes................................................ 917 1,270
Miscellaneous........................................ 1,213 3,739
-------- ----------
370,687 365,687
-------- ----------
$850,524 $1,000,286
======== ==========
</TABLE>
The accompanying notes are an integral part of this schedule.
F-73
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPEC-
TUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SUBSIDIARY GUARAN-
TOR. NEITHER THE MAKING OF THE EXCHANGE OFFER PURSUANT TO THIS PROSPECTUS NOR
THE ACCEPTANCE OF PRIVATE NOTES FOR SURRENDER FOR EXCHANGE PURSUANT THERETO
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR ANY SUBSIDIARY GUARANTOR SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Summary................................................................... 5
Risk Factors.............................................................. 20
The Company............................................................... 26
No Cash Proceeds to the Company........................................... 28
Capitalization............................................................ 29
The Exchange Offer........................................................ 30
Unaudited Pro Forma Combined Condensed Financial Data..................... 37
Selected Historical Financial Data........................................ 44
Management's Discussion and Analysis of Financial Condition and Results of
Operation................................................................ 45
Business.................................................................. 54
Management................................................................ 75
Principal Stockholders.................................................... 80
Certain Relationships and Related Transactions............................ 81
Description of the New Credit Facility.................................... 82
Description of the Notes.................................................. 83
Certain U.S. Federal Income Tax Considerations............................ 112
Plan of Distribution...................................................... 112
Legal Matters............................................................. 113
Experts................................................................... 113
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ATC GROUP SERVICES INC.
12% SENIOR SUBORDINATED NOTES DUE 2008 FOR ALL OUTSTANDING
12% SUBORDINATED NOTES DUE 2008
----------------
OFFER TO EXCHANGE
----------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law, ATC's Certificate of
Incorporation provides that a director of ATC will not be personally liable to
ATC or its Stockholders for monetary damages for breach of the fiduciary duty
of care as a director, except under certain circumstances including breach of
the director's duty of loyalty to ATC or its Stockholders or any transaction
from which the director derived an improper personal benefit.
ATC's By-Laws provide for the indemnification of ATC's officers and
directors to the fullest extent permitted by Delaware law. In this respect,
ATC entered into indemnification agreements with its officers and directors to
hold them harmless and to indemnify each person from and against all fines,
amounts paid in settlements and expenses, including attorneys' fees incurred
as a result of or in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal or administrative or
investigative, by reason of the fact that the person was a director or officer
of ATC or served any other corporation in any capacity at the request of ATC,
in the manner and to the extent permitted by law.
ATC has been advised that it is the opinion of the Commission that insofar
as the foregoing provisions may be invoked to disclaim liability for damages
arising under the federal securities laws, that such provisions are against
public policy as expressed in such securities laws and are therefore
unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
1.1 Purchase Agreement, dated as of January 22, 1998, between Acquisition
Corp. and BT Alex. Brown Incorporated.
3.1 Articles of Incorporation of the Company.
3.2 By-Laws of the Company.
4.1 Indenture, dated as of January 29, 1998 among Acquisition Corp. and
State Street Bank and Trust Company, as trustee.
4.2 First Supplemental Indenture, dated as of February 5, 1998, by and
among ATC Group Services Inc., the Guarantors named therein and State
Street Bank and Trust Company.
4.3 Form of Exchange Note (included in Exhibit 4.1)
4.4 Registration Rights Agreement, dated as of January 29, 1998, between
Acquisition Corp., the Guarantors named therein and BT Alex. Brown
Incorporated.
*5.1 Opinion and Consent of Chadbourne & Parke LLP regarding validity of the
Exchange Notes.
*8.1 Tax Opinion of Chadbourne & Parke LLP (included in Exhibit 5.1).
10.1 Employment Agreement, dated as of February 16, 1998, between ATC Group
Services Inc., Acquisition Holdings, Inc. and Nicholas J. Malino.
10.2 Employment Agreement, dated as of February 16, 1998, between ATC Group
Services Inc., Acquisition Holdings, Inc. and Christopher P. Vincze.
10.3 Credit Agreement, dated as of January 29, 1998, among Acquisition
Holdings, Inc., Acquisition Corp., various banks and Bankers Trust
Company, as agent.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.4 First Amendment, dated as of February 5, 1998, among Acquisition
Holdings, Inc., ATC Group Services Inc., the lenders party to the
Credit Agreement (Exhibit 4.1) and Bankers Trust Company, as agent.
10.5 Second Amendment, dated as of February 27, 1998, among Acquisition
Holdings, Inc., ATC Group Services Inc., the banks party to the
Credit Agreement (Exhibit 4.1), Bankers Trust Company, as agent, and
each of the lenders listed on Schedule A thereto.
10.6 Severance, Consulting and Non-Competition Agreement, dated as of
February 5, 1998, by and between ATC Group Services Inc. and George
Rubin.
10.7 Severance, Consulting and Non-Competition Agreement, dated as of
February 5, 1998, by and between ATC Group Services Inc. and Morry F.
Rubin.
10.8 Agreement for Sale and Purchase of Business Assets, dated August 18,
1997, by and among ATC Group Services Inc., Smith Technology
Corporation, BCM Engineers Inc. (DE. Corp.), BCM Engineers Inc. (PA.
Corp.), BCM Engineers Inc. (AL. Corp.) and BCM Engineers Inc. (W. VA.
Corp.)
10.9 Stock Purchase Agreement, dated November 26, 1998, between ATC Group
Services Inc., Bing Yen & Associates, Inc. and Glenn Tofani.
10.10 Stock Purchase Agreement, dated as of November 4, 1997, by and among
ATC Group Services Inc., Conning Insurance Capital Limited
Partnership II, Conning Insurance Capital International Partners II,
Cullinane & Donnelly Venture Partners, Limited Partnership, Lawyers
Title Environmental Insurance Services Agency, Inc. and Charles L.
Perry, Jr.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Ernst & Young LLP
23.3 Consent of Arthur Andersen LLP
*23.4 Consent of Chadbourne & Parke LLP (included in Ex. 5.1).
24.1 Power of Attorney (included on signature page).
*25.1 Statement of Eligibility of State Street Bank and Trust Company, as
Trustee.
**27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement.
</TABLE>
(b) FINANCIAL STATEMENTS AND SCHEDULES
Schedule II--Valuation and Qualifying Accounts
- --------
* To be filed by amendment.
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act.
ITEM 22. UNDERTAKINGS
1. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
II-2
<PAGE>
2. The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a) (3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
3. The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim of indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
4. The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
ATC Group Services Inc.
/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino and Christopher P.
Vincze, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and all
amendments and supplements to any prospectus relating thereto and any other
documents and instruments incidental thereto, and any registration statement
filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that each of said
attorneys-in-fact and agents and/or either of them, 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 INDICATED ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Nicholas J. Malino President and March 30,
_____________________________________ Director(Principal 1998
NICHOLAS J. MALINO Executive Officer)
/s/ Christopher P. Vincze Chief Operating Officer March 30,
_____________________________________ and Director (Principal 1998
CHRISTOPHER P. VINCZE Executive Officer)
/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)
/s/ Wesley W. Lang, Jr. Director March 30,
_____________________________________ 1998
WESLEY W. LANG, JR.
/s/ Nora E. Kerppola Director March 30,
_____________________________________ 1998
NORA E. KERPPOLA
/s/ Benjamin J. James Director March 30,
_____________________________________ 1998
BENJAMIN J. JAMES
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
ATC Blattert Inc.
/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino, 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 any and all amendments (including post-effective
amendments) to this registration statement and all amendments and supplements
to any prospectus relating thereto and any other documents and instruments
incidental thereto, and any registration statement filed pursuant to Rule 462
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, 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 full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming 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 INDICATED ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Nicholas J. Malino President and Director March 30,
_____________________________________ (Principal Executive 1998
NICHOLAS J. MALINO Officer)
/s/ Wayne A. Crosby Controller and March 30,
_____________________________________ Director(Principal 1998
WAYNE A. CROSBY Financial and Accounting
Officer)
/s/ John J. Smith Secretary and Director March 30,
_____________________________________ 1998
JOHN J. SMITH
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
ATC Construction Services Inc.
/s/ Christopher P. Vincze
By: _________________________________
Name: Christopher P. Vincze
Title:President
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Christopher P. Vincze, 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 any and all amendments (including post-effective
amendments) to this registration statement and all amendments and supplements
to any prospectus relating thereto and any other documents and instruments
incidental thereto, and any registration statement filed pursuant to Rule 462
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, 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 full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming 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 INDICATED ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Christopher P. Vincze President and Director March 30,
_____________________________________ (Principal Executive 1998
CHRISTOPHER P. VINCZE Officer)
/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)
/s/ P. Douglas Burgess Director March 30,
_____________________________________ 1998
P. DOUGLAS BURGESS
/s/ Kevin F. Drinan Director March 30,
_____________________________________ 1998
KEVIN F. DRINAN
/s/ James A. Cleveland Director March 30,
_____________________________________ 1998
JAMES A. CLEVELAND
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
ATC Environmental Inc.
/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino and Christopher P.
Vincze, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and all
amendments and supplements to any prospectus relating thereto and any other
documents and instruments incidental thereto, and any registration statement
filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that each of said
attorneys-in-fact and agents and/or either of them, 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 INDICATED
ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Nicholas J. Malino President and March 30,
_____________________________________ Director(Principal 1998
NICHOLAS J. MALINO Executive Officer)
/s/ Christopher P. Vincze Vice President and March 30,
_____________________________________ Director 1998
CHRISTOPHER P. VINCZE
/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
ATC Insys Technology Inc.
/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:Chief Executive Officer
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino, 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 any and all amendments (including post-effective
amendments) to this registration statement and all amendments and supplements
to any prospectus relating thereto and any other documents and instruments
incidental thereto, and any registration statement filed pursuant to Rule 462
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, 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 full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming 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 INDICATED ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Nicholas J. Malino Chief Executive Officer March 30,
_____________________________________ and Director (Principal 1998
NICHOLAS J. MALINO Executive Officer)
/s/ John J. Goodwin President, Chief Operating March 30,
_____________________________________ Officer and Director 1998
JOHN J. GOODWIN
/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
ATC Management Inc.
/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino, 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 any
and all amendments (including post-effective amendments) to this registration
statement and all amendments and supplements to any prospectus relating thereto
and any other documents and instruments incidental thereto, and any
registration statement filed pursuant to Rule 462 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, 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 full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming 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 INDICATED
ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Nicholas J. Malino President and Director March 30,
_____________________________________ (Principal Executive 1998
NICHOLAS J. MALINO Officer)
/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)
/s/ Mary J. Tounsley Vice President, Secretary March 30,
_____________________________________ and Director 1998
MARY J. TOUNSLEY
/s/ John J. Smith Treasurer and Director March 30,
_____________________________________ 1998
JOHN J. SMITH
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
ATC New England Corp.
/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino and Christopher P.
Vincze, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and all
amendments and supplements to any prospectus relating thereto and any other
documents and instruments incidental thereto, and any registration statement
filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that each of said
attorneys-in-fact and agents and/or either of them, 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 INDICATED ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Nicholas J. Malino President, Secretary and March 30,
_____________________________________ Director (Principal 1998
NICHOLAS J. MALINO Executive Officer)
/s/ Christopher P. Vincze Vice President, Treasurer March 30,
_____________________________________ and Director (Principal 1998
CHRISTOPHER P. VINCZE Executive Officer)
/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
Bing Yen & Associates, Inc.
/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:Chief Executive Officer
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino, 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 any
and all amendments (including post-effective amendments) to this registration
statement and all amendments and supplements to any prospectus relating thereto
and any other documents and instruments incidental thereto, and any
registration statement filed pursuant to Rule 462 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, 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 full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming 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 INDICATED
ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Nicholas J. Malino Chief Executive Officer March 30,
_____________________________________ and Director (Principal 1998
NICHOLAS J. MALINO Executive Officer)
/s/ Bing C. Yen President and March 30,
_____________________________________ Director(Principal 1998
BING C. YEN Executive Officer)
/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)
/s/ John W. Cowdery Vice President, Secretary, March 30,
_____________________________________ Treasurer, Chairman of 1998
JOHN W. COWDERY the Board and Director
/s/ Christopher P. Vincze Director March 30,
_____________________________________ 1998
CHRISTOPHER P. VINCZE
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
Environmental Warranty, Inc.
/s/ Christopher P. Vincze
By: _________________________________
Name: Christopher P. Vincze
Title:Chief Executive Officer
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Christopher P. Vincze, 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 any and all amendments (including post-effective
amendments) to this registration statement and all amendments and supplements
to any prospectus relating thereto and any other documents and instruments
incidental thereto, and any registration statement filed pursuant to Rule 462
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, 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 full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming 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 INDICATED ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Christopher P. Vincze Chief Executive March 30,
_____________________________________ Officer,Secretary and 1998
CHRISTOPHER P. VINCZE Director (Principal
Executive Officer)
/s/ Charles L. Perry, Jr. President, Chief Operating March 30,
_____________________________________ Officer and Director 1998
CHARLES L. PERRY, JR. (Principal Executive
Officer)
/s/ Wayne A. Crosby Controller and March 30,
_____________________________________ Director(Principal 1998
WAYNE A. CROSBY Financial and Accounting
Officer)
/s/ Nicholas J. Malino Vice President and March 30,
_____________________________________ Director 1998
NICHOLAS J. MALINO
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
MARCH 30, 1998.
Hygeia Laboratories Inc.
/s/ Nicholas J. Malino
By: _________________________________
Name: Nicholas J. Malino
Title:President
Know All Men By These Presents, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Malino and Christopher P.
Vincze, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and all
amendments and supplements to any prospectus relating thereto and any other
documents and instruments incidental thereto, and any registration statement
filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that each of said
attorneys-in-fact and agents and/or either of them, 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 INDICATED
ON MARCH 30, 1998.
SIGNATURE TITLE DATE
/s/ Nicholas J. Malino President, Treasurer and March 30,
_____________________________________ Director (Principal 1998
NICHOLAS J. MALINO Executive Officer)
/s/ Christopher P. Vincze Secretary and March 30,
_____________________________________ Director(Principal 1998
CHRISTOPHER P. VINCZE Executive Officer)
/s/ Wayne A. Crosby Controller (Principal March 30,
_____________________________________ Financial and Accounting 1998
WAYNE A. CROSBY Officer)
II-13
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
(a) 1.1 Purchase Agreement, dated as of January 22, 1998, between
Acquisition Corp. and BT Alex. Brown Incorporated.
3.1 Articles of Incorporation of the Company.
3.2 By-Laws of the Company.
4.1 Indenture, dated as of January 29, 1998, among Acquisition Corp. and
State Street Bank and Trust Company, as trustee.
4.2 First Supplemental Indenture, dated as of February 5, 1998, by and
among ATC Group Services Inc., the Guarantors named therein and
State Street Bank and Trust Company.
4.3 Form of Exchange Note (included in Exhibit 4.1).
4.4 Registration Rights Agreement, dated as of January 29, 1998, between
Acquisition Corp., the Guarantors named therein and BT Alex. Brown
Incorporated (included in Exhibit 1.1).
*5.1 Opinion and Consent of Chadbourne & Parke LLP regarding validity of
the Exchange Notes.
*8.1 Tax Opinion of Chadbourne & Parke LLP (included in Exhibit 5.1).
10.1 Employment Agreement, dated as of February 16, 1998, between ATC
Group Services Inc., Acquisition Holdings, Inc. and Nicholas J.
Malino.
10.2 Employment Agreement, dated as of February 16, 1998, between ATC
Group Services Inc., Acquisition Holdings, Inc. and Christopher P.
Vincze.
10.3 Credit Agreement, dated as of January 29, 1998, among Acquisition
Holdings, Inc., Acquisition Corp., various banks and Bankers Trust
Company, as agent.
10.4 First Amendment, dated as of February 5, 1998, among Acquisition
Holdings, Inc., ATC Group Services Inc., the lenders party to the
Credit Agreement (Exhibit 4.1) and Bankers Trust Company, as agent.
10.5 Second Amendment, dated as of February 27, 1998, among Acquisition
Holdings, Inc., ATC Group Services Inc., the banks party to the
Credit Agreement (Exhibit 4.1), Bankers Trust Company, as agent, and
each of the lenders listed on Schedule A thereto.
10.6 Severance, Consulting and Non-Competition Agreement, dated as of
February 5, 1998, by and between ATC Group Services Inc. and George
Rubin.
10.7 Severance, Consulting and Non-Competition Agreement, dated as of
February 5, 1998, by and between ATC Group Services Inc. and Morry
F. Rubin.
10.8 Agreement for Sale and Purchase of Business Assets, dated August 18,
1997, by and among ATC Group Services Inc., Smith Technology
Corporation, BCM Engineers Inc. (DE. Corp.), BCM Engineers Inc. (PA.
Corp.), BCM Engineers Inc. (AL. Corp.) and BCM Engineers Inc. (W.
VA. Corp.)
10.9 Stock Purchase Agreement, dated November 26, 1998, between ATC Group
Services Inc., Bing Yen & Associates, Inc. and Glenn Tofani.
10.10 Stock Purchase Agreement, dated as of November 4, 1997, by and among
ATC Group Services Inc., Conning Insurance Capital Limited
Partnership II, Conning Insurance Capital International Partners II,
Cullinane & Donnelly Venture Partners, Limited Partnership, Lawyers
Title Environmental Insurance Services Agency, Inc. and Charles L.
Perry, Jr.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Arthur Andersen LLP.
*23.4 Consent of Chadbourne & Parke LLP (included in Ex. 5.1).
24.1 Power of Attorney (included on signature page).
*25.1 Statement of Eligibility of State Street Bank and Trust Company, as
Trustee.
**27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement.
(b) Financial Statement and Schedules
Schedule II--Valuation and Qualifying Accounts
</TABLE>
- --------
* To be filed by amendment.
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act.
2
<PAGE>
EXHIBIT 1.1
- -------------------------------------------------------------------------------
12% Senior Subordinated Notes due 2008
- -------------------------------------------------------------------------------
PURCHASE AGREEMENT
January 22, 1998
BT Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Acquisition Corp. (the "Company"), a Delaware corporation,
hereby confirms its agreement with you (the "Initial Purchaser"), as set forth
below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchaser
$100,000,000 aggregate principal amount of the Company's 12% Senior Subordinated
Notes due 2008 (the "Notes"). The Notes will be guaranteed (collectively, the
"Guarantees") upon consummation of the Merger (as defined below) on a senior
subordinated basis by each of ATC's Subsidiaries listed on the signature pages
hereof (collectively, and together with any subsidiary that in the future
executes a supplemental indenture pursuant to which such subsidiary agrees to
guarantee the Notes, the "Guarantors"). The Notes and the Guarantees are
collectively referred to herein as the "Securities." The Securities are to be
issued under an indenture (the "Indenture") dated as of January 29, 1998 by and
between the Company and State Street Bank and Trust Company, as trustee (the
"Trustee"). The term "Credit Agreement" as used herein shall have the meaning
provided therefor in the Indenture. The Company, Acquisition Holdings, Inc.
("Holdings") and ATC Group Services, Inc. ("ATC") have entered into a Merger
Agreement dated as of November 26, 1997 (as in effect on the date hereof, the
"Merger Agreement") pursuant to which the Company has offered to purchase (the
"Tender Offer"), pursuant to the terms of that certain Offer to Purchase dated
December 4, 1997 (as in effect on the date hereof, the "Offer to Purchase"), all
of the outstanding shares (the "Shares") of common stock,
<PAGE>
-2-
par value $0.01 per share, of ATC. Pursuant to the Merger Agreement, the Company
will be merged into and with ATC (the "Merger"), with ATC as the surviving
corporation. Upon effectiveness of the Merger (the "Effective Time"), ATC will
execute and deliver a supplemental indenture (the "Supplemental Indenture") to
the Indenture, expressly assuming all of the Company's obligations under the
Indenture. Also at the Effective Time, the Company will cause the Guarantors to
execute and deliver the Supplemental Indenture, the Guarantees, this Agreement
and the Registration Rights Agreement (as defined below).
The Securities will be offered and sold to you without being
registered under the Securities Act of 1933, as amended (the "Act"), in reliance
on exemptions therefrom.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum dated January 2, 1998 (the
"Preliminary Memorandum") and a final offering memorandum dated January 22, 1998
(the "Final Memorandum," the Preliminary Memorandum and the Final Memorandum
each herein being referred to as a "Memorandum") setting forth or including a
description of the terms of the Securities, the terms of the offering of the
Securities, descriptions of the Company, Holdings, ATC and its subsidiaries and
any material developments relating to the Company, Holdings and ATC occurring
after the date of the most recent historical financial statements included
therein.
The Company understands that the Initial Purchaser proposes to
make an offering of the Notes only on the terms and in the manner set forth in
the Final Memorandum and Section 8 hereof as soon as the Initial Purchaser deems
advisable after this Agreement has been executed and delivered, to persons in
the United States whom the Initial Purchaser reasonably believes to be qualified
institutional buyers ("Qualified Institutional Buyers" or "QIBs") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A") and outside the United States to certain persons in reliance on
Regulation S under the Act.
The Initial Purchaser and its direct and indirect transferees
of the Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company has agreed and
the Guarantors will agree, among other things, to file a registration statement
(the "Registration Statement") with the Securities and Exchange Commission (the
"Commission") registering the Exchange Notes (as defined in the Registration
Rights Agreement) under the Act. Furthermore, the Initial Purchaser and the
affiliates, directors, officers, agents, representatives and employees of the
Initial Purchaser, and each other person, if any, who controls the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Securities Exchange Act of 1934 will be entitled to the benefits of the letter
agreement, substantially in the form attached hereto as Exhibit B (the "Letter
Agreement"), from ATC to the Initial Purchaser.
<PAGE>
-3-
2. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Initial Purchaser that:
(a) Neither the Final Memorandum nor any amendment or
supplement thereto as of the date thereof and at all times subsequent
thereto up to the Closing Date (as defined in Section 3 below)
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties set forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with information
relating to the Initial Purchaser furnished to the Company in writing
by the Initial Purchaser expressly for use in the Preliminary
Memorandum, the Final Memorandum or any amendment or supplement
thereto.
(b) As of the Closing Date, the Company will have the
authorized, issued and outstanding capitalization set forth in the
Final Memorandum; all of the outstanding shares of capital stock of the
Company and each of its significant subsidiaries within the meaning of
Regulation S-X (each, a "Subsidiary" and collectively, the
"Subsidiaries") have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights; all
of the outstanding shares of capital stock of the Subsidiaries will be
free and clear of all liens, encumbrances, equities and claims or
restrictions on transferability (other than those created pursuant to
the Credit Agreement and those imposed by the Act and the securities or
"Blue Sky" laws of certain jurisdictions) or voting; except as set
forth in the Final Memorandum, there are no, and as of the Closing Date
there will be no, (i) options, warrants or other rights to purchase;
(ii) agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in the Company or any of the
Subsidiaries outstanding. Except for the Company's direct and indirect
interests in the Subsidiaries and in other wholly owned subsidiaries,
the Company does not own, directly or indirectly, any shares of capital
stock or any other equity or long-term debt securities or have any
equity interest in any firm, partnership, joint venture or other entity
other than as described in the Final Memorandum.
(c) Each of the Company and the Subsidiaries is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite corporate or other
power and authority to own its properties and conduct its business as
now conducted and as described in the Final Memorandum; each of the
Company and the Subsidiaries is duly qualified to do business and is in
good standing in all other jurisdictions where the ownership or leasing
of its properties or the conduct of its business re-
<PAGE>
-4-
quires such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect on the general affairs, management,
business, condition (financial or otherwise), prospects or results of
operations of the Company and the Subsidiaries, taken as a whole (any
such event, a "Material Adverse Effect").
(d) The Company has all requisite corporate power and
authority to execute, deliver and perform each of its obligations under
the Notes, the Exchange Notes and the Private Exchange Notes (each as
defined in the Registration Rights Agreement and the Indenture). The
Notes, when issued, will be in the form contemplated by the Indenture.
The Notes, the Exchange Notes and the Private Exchange Notes have each
been duly and validly authorized by the Company and, when executed by
the Company and authenticated by the Trustee in accordance with the
provisions of the Indenture and, in the case of the Notes, when
delivered to and paid for by the Initial Purchaser in accordance with
the terms of this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of
the Company (assuming the due authorization, execution and delivery of
the Indenture by the Trustee and the due authorization and delivery of
the Notes by the Trustee in accordance with the Indenture), entitled to
the benefits of the Indenture, and enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of
equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(e) Each of the Guarantors has, and will have at the
Effective Time, all requisite corporate power and authority to execute,
deliver and perform each of its obligations under the Supplemental
Indenture and the Guarantees. The Company shall cause the Guarantees to
be duly and validly authorized by each Guarantor at or prior to the
Effective Time. When executed and delivered by each such Guarantor, the
Supplemental Indenture and the Guarantees will constitute the valid and
legally binding obligations of such Guarantor, entitled to the benefits
of the Indenture, enforceable against each of them in accordance with
its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
<PAGE>
-5-
(f) The Company has and each of the the Guarantors has and
will have at the Effective Time all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Indenture. The Indenture meets the requirements for qualification under
the Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture
has been duly and validly authorized by the Company and will be duly
and validly authorized at or prior to the Effective Time by each of the
Guarantors and, when executed and delivered in accordance with its
terms (assuming the due authorization, execution and delivery by the
Trustee), will have been duly executed and delivered and will
constitute a valid and legally binding agreement of the Company and,
after due execution of the Supplemental Indenture, the Guarantors,
enforceable against each of them in accordance with its terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding
in equity or at law).
(g) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement. The Registration
Rights Agreement has been duly and validly authorized by the Company
and will be duly and validly authorized at or prior to the Effective
Time by each of the Guarantors and, when executed and delivered by the
Company and each of the Guarantors (assuming due authorization,
execution and delivery by the other parties thereto), will have been
duly executed and delivered and will constitute a valid and legally
binding agreement of each of the Company and the Guarantors,
enforceable against each of them in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding
in equity or at law) and (B) any rights to indemnity or contribution
thereunder may be limited by federal and state securities laws and
public policy considerations.
(h) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Credit Agreement and to
consummate the transactions contemplated hereby and thereby. This
Agreement and the Credit Agreement and the consummation by the Company
and the Guarantors of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Company and will be duly
and
<PAGE>
-6-
validly authorized at or prior to the Effective Time by each of the
Guarantors. This Agreement and the Credit Agreement have been duly
executed and delivered by the Company and will be duly executed and
delivered by the Guarantors at or prior to the Effective Time.
(i) No consent, approval, authorization or order of any court
or governmental agency or body or third party is required for the
performance of this Agreement by the Company and, at or after the
Effective Time, the Guarantors or the consummation by them of the other
transactions contemplated hereby, except such (i) as have been obtained
or made, (ii) as would not be reasonably likely to have a Material
Adverse Effect, (iii) as would not materially adversely affect the
validity of this Agreement, the Notes, the Indenture, the Registration
Rights Agreement or the Credit Agreement and (iv) such as may be
required under state securities or "Blue Sky" laws in connection with
the purchase and resale of the Securities by the Initial Purchaser and
except with respect to the registration of the Exchange Notes and
Private Exchange Notes, if applicable, pursuant to the Registration
Rights Agreement and the qualification of the Indenture under the TIA.
Neither the Company nor any of the Subsidiaries is (i) in violation of
its certificate of incorporation or bylaws, (ii) in breach or violation
of any statute, judgment, decree, order, rule or regulation applicable
to any of them or any of its respective properties or assets, except
for any such breach or violation which would not, individually or in
the aggregate, be reasonably likely to have a Material Adverse Effect,
or (iii) in breach of or default under (nor has any event occurred
which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease,
license, franchise agreement, permit, certificate, contract or other
agreement or instrument to which any of them is a party or to which its
respective properties or assets are subject (collectively,
"Contracts"), except for any such breach, default, violation or event
which would not, individually or in the aggregate, be reasonably likely
to have a Material Adverse Effect.
(j) The execution, delivery and performance by the Company
and, at and after the Effective Time, the Guarantors of this Agreement,
the Indenture, the Notes, the Supplemental Indenture, the Guarantees,
the Exchange Notes, the Private Exchange Notes, the Registration Rights
Agreement, the Credit Agreement, the consummation of the transactions
contemplated hereby and thereby, and the fulfillment of the terms
hereof and thereof, will not conflict with or constitute or result in a
breach of or a default under (or an event which with notice or passage
of time or both would constitute a default under) or violation of or
cause an acceleration of any obligation under, or result in the
imposition or creation of (or the obligation to create or impose) a
lien on any property or assets of the Company or any Subsidiary with
respect to
<PAGE>
-7-
(i) the terms or provisions of any Contract, except for any such
conflict, breach, violation, default or event which would not,
individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect, (ii) the certificate of incorporation or
bylaws of the Company or any of the Subsidiaries, or (iii) (assuming
compliance with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties of the
Initial Purchaser in Section 8 hereof and assuming qualification of the
Indenture under the TIA) any statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to
the Company, the Subsidiaries or any of its respective properties or
assets, except for any such conflict, breach or violation which would
not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.
(k) Each of the Indenture, the Notes, the Exchange Notes, the
Guarantees, the Registration Rights Agreement and the Credit Agreement
conforms in all material respects to the description thereof in the
Final Memorandum.
(l) The consolidated financial statements of the Company and
the related notes thereto included in the Final Memorandum present
fairly in all material respects the financial position, results of
operations and cash flows of the Company at the dates and for the
periods to which they relate and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis,
except as otherwise stated therein, and comply as to form in all
material respects with the applicable accounting requirements of the
Act and the rules and regulations thereunder. The summary and selected
financial data included in the Final Memorandum present fairly in all
material respects the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial
statements included therein, except as otherwise stated therein, and
comply as to form in all material respects with the applicable
accounting requirements of the Act and the rules and regulations
thereunder. To the Company's knowledge, each of Deloitte & Touche LLP,
Arthur Andersen LLP, and Ernst & Young LLP is an independent public
accounting firm as required by the Act and the rules and regulations
thereunder.
(m) (i) The pro forma financial statements (including the
notes thereto) included in the Final Memorandum (A) comply as to form
in all material respects with the applicable requirements of Regulation
S-X promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (B) have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and (C) have been properly computed on the bases described
therein, and (ii) the assumptions used in the preparation of the pro
forma financial statements included in the Final Memorandum are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
<PAGE>
-8-
(n) Except as set forth in the Final Memorandum, there is not
pending or, to the best knowledge of the Company, threatened any
action, suit, proceeding, inquiry or investigation to which the Company
or any Subsidiary is a party, or to which any of its properties or
assets are subject, before or brought by any court, arbitrator or
governmental agency or body, which, if determined adversely to the
Company or any such Subsidiary, would, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect, or
which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold
hereunder or the consummation of the other transactions described in
the Final Memorandum.
(o) Each of the Company and the Subsidiaries owns or
possesses adequate licenses or other rights to use all patents,
trademarks, service marks, trade names, copyrights and know-how
necessary to conduct the businesses operated by it as described in the
Final Memorandum except where the failure to own or possess such of the
foregoing would not be reasonably likely to have a Material Adverse
Effect, and neither the Company nor any of the Subsidiaries has
received any notice of infringement of or conflict with (or knows of no
such infringement of or conflict with) asserted rights of others with
respect to any patents, trademarks, service marks, trade names,
copyrights or know-how which, if such assertion of infringement or
conflict were sustained, would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
(p) Each of the Company and the Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made or will have made all declarations
and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals presently required or necessary to own or lease, as the case
may be, and to operate its properties and to carry on its business as
set forth in the Final Memorandum ("Permits"), except where the failure
to obtain such Permits would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect; each of the
Company and the Subsidiaries has fulfilled and performed all of its
obligations with respect to such Permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit except where such
revocation, termination or impairment would not be reasonably likely to
have a Material Adverse Effect; and neither the Company nor any
Subsidiary has received any notice of any proceeding relating to
revocation or modification of any such Permit, except as described in
the Final Memorandum and except where such revocation or modification
would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect.
<PAGE>
-9-
(q) Since the respective dates as of which information is
given in the Final Memorandum, except as described therein, there has
been no material adverse change or any fact, taken by itself, known to
the Company which could reasonably be expected to result in a material
adverse change, in the general affairs, management, business, condition
(financial or otherwise) or results of operations of the Company and
the Subsidiaries taken as a whole, whether or not arising from
transactions in the ordinary course of business, or any loss of, or
damage to, properties (whether or not insured) which could reasonably
be expected to affect materially and adversely the general affairs,
management, business, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries taken as a whole. Since
the date of the latest balance sheet presented in the Final Memorandum,
except as expressly disclosed in the Final Memorandum, neither the
Company nor any of its Subsidiaries has (i) incurred or undertaken any
liabilities or obligations, direct or contingent, that are material to
the Company and the Subsidiaries taken as a whole other than capital
equipment leases in the ordinary course of business consistent with
past practice, (ii) entered into any material transaction not in the
ordinary course of business and consistent with past practice or (iii)
declared or paid any dividend or made any distribution on any shares of
its capital stock or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its
capital stock.
(r) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns,
except where the failure to so file such returns would not,
individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect, and has paid all taxes shown as due thereon;
and other than tax deficiencies which the Company or any of the
Subsidiaries is contesting in good faith and for which the Company or
such Subsidiary has provided adequate reserves, there is no tax
deficiency that has been asserted against the Company or any Subsidiary
that would, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect.
(s) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Company
believes to be reliable and accurate.
(t) Neither the Company nor any of the Subsidiaries nor any
agent acting on its behalf has taken or will take any action that might
cause this Agreement or the sale of the Securities to violate
Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System, in each case as in effect, or as the same may hereafter
be in effect, on the Closing Date.
<PAGE>
-10-
(u) Each of the Company and the Subsidiaries has good title
to all personal property described in the Final Memorandum as being
owned by it, good and valid title to all real property described in the
Final Memorandum as being owned by it and good and valid title to a
leasehold estate in the real and personal property described in the
Final Memorandum as being leased by it free and clear of all liens,
charges, encumbrances or restrictions, except as described in the Final
Memorandum or to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions would
not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect. All leases, contracts and agreements to which
the Company or any Subsidiary is a party or by which the Company or
such Subsidiary is bound are valid and enforceable against the Company
or such Subsidiary, to the knowledge of the Company are valid and
enforceable against the other party or parties thereto and are in full
force and effect with only such exceptions as would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse
Effect.
(v) There are no legal or governmental proceedings involving
or affecting the Company, any of the Subsidiaries or any of their
respective properties or assets which would be required to be described
in a prospectus pursuant to the Act that are not described in the Final
Memorandum, nor are there any material contracts or other documents
which would be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum.
(w) Except as described in the Final Memorandum or as would
not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect, (A) each of the Company and the Subsidiaries
is in compliance with and not subject to liability under applicable
Environmental Laws, (B) each of the Company and the Subsidiaries has
made all filings and provided all notices required under any applicable
Environmental Law, and has and is in compliance with all Permits
required under any applicable Environmental Laws and each of them is in
full force and effect, (C) there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter or
request for information pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary under any
Environmental Law, (D) no lien, charge, encumbrance or restriction has
been recorded under any Environmental Law with respect to any assets,
facility or property owned, operated, leased or controlled by the
Company or any Subsidiary, (E) neither the Company nor any Subsidiary
has received notice that it has been identified as a potentially
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or any
comparable state law and (F) no property or facility of the Company or
any Subsidiary is (i) listed or proposed for listing on the National
Priorities List under
<PAGE>
-11-
CERCLA or (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to
CERCLA, or on any comparable list maintained by any state or local
governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder, relating to pollution or
protection of public or employee health and safety or the environment,
including, without limitation, laws relating to (i) emissions,
discharges, releases or threatened releases of hazardous materials,
into the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), (ii)
the manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of hazardous materials, and
(iii) underground and aboveground storage tanks, and related piping,
and emissions, discharges, releases or threatened releases therefrom.
(x) There is no strike, labor dispute, slowdown or work
stoppage with the employees of the Company or the Subsidiaries which is
pending or, to the knowledge of the Company, threatened, which would be
reasonably likely to have a Material Adverse Effect.
(y) Each of the Company and the Subsidiaries carries
insurance in such amounts and covering such risks as is adequate for
the conduct of its business and the value of its properties.
(z) Except as set forth in the Final Memorandum, neither the
Company nor any Subsidiary has any liability for any prohibited
transaction within the meaning of ss.406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or funding
deficiency within the meaning of ss.302 of ERISA or any complete or
partial withdrawal liability under ss.4201 of ERISA with respect to any
pension, profit sharing or other plan which is subject to ERISA to
which the Company or any Subsidiary makes or ever has made a
contribution and in which any employee of the Company or any Subsidiary
is or has ever been a participant, which prohibited transaction
liability or withdrawal liability is reasonably likely to have a
Material Adverse Effect. With respect to such plans, each of the
Company and the Subsidiaries is in compliance in all material respects
with all applicable provisions of ERISA.
(aa) Each of the Company and the Subsidiaries (i) makes and
keeps accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its
<PAGE>
-12-
financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(bb) Neither the Company nor any Subsidiary will be an
"investment company" or "promoter" or "principal underwriter" for an
"investment company," as such terms are defined in the Investment
Company Act of 1940, as amended, and the rules and regulations
thereunder.
(cc) Except as set forth on Exhibit A hereto, no holder of
securities of the Company (other than the Registrable Notes (as defined
in the Registration Rights Agreement)) will be entitled to have such
securities registered under the registration statements required to be
filed by the Company pursuant to the Registration Rights Agreement
other than as expressly permitted thereby.
(dd) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair
saleable value of the assets of the Company and the Subsidiaries, on a
consolidated basis, will exceed the sum of its consolidated stated
liabilities and identified contingent liabilities (after giving effect,
in the case of each of the Guarantors, to the limitations contained in
each Guarantee); neither the Company nor any of the Subsidiaries is, or
will be after giving effect to the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby, (a) left with unreasonably small capital with which to carry on
its business as it is proposed to be conducted, (b) unable to pay its
debts (contingent or otherwise) as they mature or (c) otherwise
insolvent.
(ee) Neither the Company nor any of the Subsidiaries nor any
of its respective Affiliates (as defined in Rule 501(b) of Regulation D
under the Act) has directly, or through any agent, (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of
any "security" (as defined in the Act) which is or could be integrated
with the sale of the Securities in a manner that would require the
registration under the Act of the Securities or (ii) engaged in any
form of general solicitation or general advertising (as those terms are
used in Regulation D under the Act) in connection with the offering of
the Securities or in any manner involving a public offering within the
meaning of Section 4(2) of the Act.
(ff) Assuming the accuracy of the representations and
warranties of the Initial Purchaser in Section 8 hereof, it is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchaser in the manner contemplated by this
<PAGE>
-13-
Agreement to register any of the Securities under the Act or to qualify
the Indenture under the TIA.
(gg) No securities of the Company are of the same class
(within the meaning of Rule 144A under the Act) as the Securities and
listed on a national securities exchange registered under Section 6 of
the Exchange Act, or quoted in a U.S. automated inter-dealer quotation
system.
(hh) Neither the Company nor any Subsidiary has taken, nor
will take, directly or indirectly, any action designed to, or that
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities.
(ii) Neither the Company nor any of the Subsidiaries, nor any
of their respective Affiliates (as defined in Rule 501(b) of Regulation
D under the Act) or any person acting on any of their behalf (other
than the Initial Purchaser, as to which the Company makes no
representation) has engaged in any directed selling efforts (as that
term is defined in Regulation S under the Act ("Regulation S")) with
respect to the Securities; the Company and its respective Affiliates
and any person acting on any of their behalf (other than the Initial
Purchaser, as to which the Company makes no representation) have
complied with the offering restrictions requirement of Regulation S.
(jj) As of the date specified, ATC had the authorized, issued
and outstanding capital stock set forth under "Capitalization" in the
Final Memorandum; all of the outstanding shares of capital stock of ATC
and each of its significant subsidiaries within the meaning of
Regulation S-X (each, an "ATC Subsidiary" and collectively, the "ATC
Subsidiaries") have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights; all
of the outstanding shares of capital stock of the ATC Subsidiaries will
be free and clear of all liens, encumbrances, equities and claims or
restrictions on transferability) or voting; except as set forth in the
Final Memorandum, there are no (i) options, warrants or other rights to
purchase; (ii) agreements or other obligations to issue or (iii) other
rights to convert any obligation into, or exchange any securities for,
shares of capital stock of or ownership interests in ATC or any of the
ATC Subsidiaries outstanding. Except for ATC's direct and indirect
interests in the ATC Subsidiaries, in other wholly owned subsidiaries
and in Environmental Warranty, Inc. ("EWI"), ATC does not own, directly
or indirectly, any shares of capital stock or any other equity or
long-term debt securities or have any equity interest in any firm,
partnership, joint venture or other entity other than as described in
the Final Memorandum.
<PAGE>
-14-
(kk) Each of ATC and the ATC Subsidiaries is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite corporate or other
power and authority to own its properties and conduct its business as
now conducted and as described in the Final Memorandum; each of ATC and
the ATC Subsidiaries is duly qualified to do business and is in good
standing in all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, be reasonably likely to have a
material adverse effect on the general affairs, management, business,
condition (financial or otherwise), prospects or results of operations
of ATC and the ATC Subsidiaries, taken as a whole (any such event, an
"ATC Material Adverse Effect").
(ll) ATC had all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Merger
Agreement. The Merger Agreement has been duly and validly authorized by
ATC and executed and delivered by it, and constitutes a valid and
legally binding obligation of ATC (assuming the due authorization,
execution and delivery thereof by the other parties thereto),
enforceable against ATC in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and
(ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding in equity or at
law).
(mm) At the Effective Time, the Notes, the Exchange Notes, if
issued prior to the Effective Time, the Private Exchange Notes, if
issued prior to the Effective Time, the Indenture, the Registration
Rights Agreement, the Credit Agreement and this Agreement will
constitute the valid and legally binding obligations of ATC,
enforceable against it in accordance with their respective terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding
in equity or at law). At the Effective Time, the Guarantees will have
been duly and validly authorized by each Guarantor, and when executed
and delivered by such Guarantor, will constitute the valid and legally
binding obligations of each such Guarantor, entitled to the benefits of
the Indenture, enforceable against each of them in accordance with its
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect
<PAGE>
-15-
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(nn) No consent, approval, authorization or order of any
court or governmental agency or body or third party is required for the
performance of the Merger Agreement by ATC or the consummation by it of
the transactions contemplated thereby, except such (i) as have been
obtained or made, (ii) as would not be reasonably likely to have an ATC
Material Adverse Effect, (iii) as would not materially adversely affect
the validity of this Agreement, the Notes, the Indenture, the
Registration Rights Agreement or the Credit Agreement upon the
effectiveness of the Merger, (iv) except with respect to the
registration of the Exchange Notes and Private Exchange Notes, if
applicable, pursuant to the Registration Rights Agreement and the
qualification of the Indenture under the TIA and (v) except for the
requisite vote of ATC stockholders and the requisite consent by
Acquisition Corp. to approve the Merger. Neither ATC nor any of the ATC
Subsidiaries is (i) in violation of its certificate of incorporation or
bylaws, (ii) in breach or violation of any statute, judgment, decree,
order, rule or regulation applicable to any of them or any of its
respective properties or assets, except for any such breach or
violation which would not, individually or in the aggregate, be
reasonably likely to have an ATC Material Adverse Effect, or (iii) in
breach of or default under (nor has any event occurred which, with
notice or passage of time or both, would constitute a default under) or
in violation of any of the terms or provisions of any indenture,
mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement
or instrument to which any of them is a party or to which its
respective properties or assets are subject (collectively, "ATC
Contracts"), except for any such breach, default, violation or event
which would not, individually or in the aggregate, be reasonably likely
to have an ATC Material Adverse Effect.
(oo) The execution, delivery and performance by ATC of the
Merger Agreement and the consummation of the transactions contemplated
thereby, and the fulfillment of the terms thereof, will not conflict
with or constitute or result in a breach of or a default under (or an
event which with notice or passage of time or both would constitute a
default under) or violation of or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose) a lien on any property or assets of ATC
or any ATC Subsidiary with respect to (i) the terms or provisions of
the ATC Contracts, except for any such conflict, breach, violation,
default or event which would not, individually or in the aggregate, be
reasonably likely to have an ATC Material Adverse Effect, (ii) the
certificate of incorporation or bylaws of ATC or any of the ATC
Subsidiaries, or (iii) any statute, judgment, decree,
<PAGE>
-16-
order, rule or regulation of any court or governmental agency or body
applicable to ATC, the ATC Subsidiaries or any of their respective
properties or assets, except for any such conflict, breach or violation
which would not, individually or in the aggregate, be reasonably likely
to have an ATC Material Adverse Effect.
(pp) The consolidated financial statements of ATC and the
related notes thereto included in the Final Memorandum present fairly
in all material respects the financial position, results of operations
and cash flows of ATC at the dates and for the periods to which they
relate and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as
otherwise stated therein, and comply as to form in all material
respects with the applicable accounting requirements of the Act and the
rules and regulations thereunder. The summary and selected financial
data included in the Final Memorandum present fairly in all material
respects the information shown therein and have been prepared and
compiled on a basis consistent with the audited financial statements
included therein, except as otherwise stated therein, and comply as to
form in all material respects with the applicable accounting
requirements of the Act and the rules and regulations thereunder. The
Company believes that Deloitte & Touche, LLP is an independent public
accounting firm as required by the Act and the rules and regulations
thereunder.
(qq) Except as set forth in the Final Memorandum, there is
not pending or, to the best knowledge of the Company, threatened any
action, suit, proceeding, inquiry or investigation to which ATC or any
of the ATC Subsidiaries is a party, or to which any of its properties
or assets are subject, before or brought by any court, arbitrator or
governmental agency or body, which, if determined adversely to ATC or
any such ATC Subsidiary, would, individually or in the aggregate, be
reasonably likely to have an ATC Material Adverse Effect, or which
seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the Merger or the consummation of the other transactions
described in the Final Memorandum.
(rr) Each of ATC and the ATC Subsidiaries owns or possesses
adequate licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights and know-how necessary to
conduct the businesses operated by it as described in the Final
Memorandum except where the failure to own or possess such of the
foregoing would not be reasonably likely to have an ATC Material
Adverse Effect, and neither ATC nor any of the ATC Subsidiaries has
received any notice of infringement of or conflict with (or knows of no
such infringement of or conflict with) asserted rights of others with
respect to any patents, trademarks, service marks, trade names,
copyrights or know-how which, if such assertion of infringement or
conflict were sustained, would, individually or in the aggregate, be
reasonably likely to have an ATC Material Adverse Effect.
<PAGE>
-17-
(ss) Each of ATC and the ATC Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made or will have made all declarations
and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals presently required or necessary to own or lease, as the case
may be, and to operate its properties and to carry on its business as
set forth in the Final Memorandum ("ATC Permits"), except where the
failure to obtain such ATC Permits would not, individually or in the
aggregate, be reasonably likely to have an ATC Material Adverse Effect;
each of ATC and the ATC Subsidiaries has fulfilled and performed all of
its obligations with respect to such Permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of
the rights of the holder of any such ATC Permit except where such
revocation, termination or impairment would not be reasonably likely to
have an ATC Material Adverse Effect; and neither ATC nor any ATC
Subsidiary has received any notice of any proceeding relating to
revocation or modification of any such ATC Permit, except as described
in the Final Memorandum and except where such revocation or
modification would not, individually or in the aggregate, be reasonably
likely to have an ATC Material Adverse Effect.
(tt) Since the respective dates as of which information is
given in the Final Memorandum, except as described therein, there has
been no material adverse change or any fact, taken by itself, known to
the Company which could reasonably be expected to result in a material
adverse change, in the general affairs, management, business, condition
(financial or otherwise) or results of operations of ATC and the ATC
Subsidiaries taken as a whole, whether or not arising from transactions
in the ordinary course of business, or any loss of, or damage to,
properties (whether or not insured) which could reasonably be expected
to affect materially and adversely the general affairs, management,
business, condition (financial or otherwise) or results of operations
of ATC and the ATC Subsidiaries taken as a whole. Since the date of the
latest balance sheet presented in the Final Memorandum, except as
expressly disclosed in the Final Memorandum, neither ATC nor any of the
ATC Subsidiaries has (i) incurred or undertaken any liabilities or
obligations, direct or contingent, that are material to the Company and
the ATC Subsidiaries taken as a whole other than capital equipment
leases in the ordinary course of business consistent with past
practice, (ii) entered into any material transaction not in the
ordinary course of business and consistent with past practice or (iii)
declared or paid any dividend or made any distribution on any shares of
its capital stock or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its
capital stock.
<PAGE>
-18-
(uu) Each of ATC and the ATC Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns,
except where the failure to so file such returns would not,
individually or in the aggregate, be reasonably likely to have an ATC
Material Adverse Effect, and has paid all taxes shown as due thereon;
and other than tax deficiencies which ATC or any of the ATC
Subsidiaries is contesting in good faith and for which the Company or
such Subsidiary has provided adequate reserves, there is no tax
deficiency that has been asserted against ATC or any ATC Subsidiary
that would have, individually or in the aggregate, an ATC Material
Adverse Effect.
(vv) Each of ATC and the ATC Subsidiaries has good title to
all personal property described in the Final Memorandum as being owned
by it, good and valid title to all real property described in the Final
Memorandum as being owned by it and good and valid title to a leasehold
estate in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final
Memorandum or to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions would
not, individually or in the aggregate, be reasonably likely to have an
ATC Material Adverse Effect. All leases, contracts and agreements to
which ATC or any ATC Subsidiary is a party or by which ATC or such ATC
Subsidiary is bound are valid and enforceable against ATC or such ATC
Subsidiary, to the knowledge of the Company are valid and enforceable
against the other party or parties thereto and are in full force and
effect with only such exceptions as would not, individually or in the
aggregate, be reasonably likely to have an ATC Material Adverse Effect.
(ww) There are no legal or governmental proceedings involving
or affecting ATC, any of the ATC Subsidiaries or any of its respective
properties or assets which would be required to be described in a
prospectus pursuant to the Act that are not described in the Final
Memorandum, nor are there any material contracts or other documents
which would be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum.
(xx) Except as described in the Final Memorandum or as would
not, individually or in the aggregate, be reasonably likely to have an
ATC Material Adverse Effect, (A) each of ATC and the ATC Subsidiaries
is in compliance with and not subject to liability under applicable
Environmental Laws, (B) each of ATC and the ATC Subsidiaries has made
all filings and provided all notices required under any applicable
Environmental Law, and has and is in compliance with all Permits
required under any applicable Environmental Laws and each of them is in
full force and effect, (C) there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice
<PAGE>
-19-
of violation, investigation, proceeding, notice or demand letter or
request for information pending or, to the knowledge of the Company,
threatened against ATC or any ATC Subsidiary under any Environmental
Law, (D) no lien, charge, encumbrance or restriction has been recorded
under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by ATC or any ATC
Subsidiary, (E) neither ATC nor any ATC Subsidiary has received notice
that it has been identified as a potentially responsible party under
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), or any comparable state law and (F)
no property or facility of ATC or any ATC Subsidiary is (i) listed or
proposed for listing on the National Priorities List under CERCLA or
(ii) listed in the Comprehensive Environmental Response, Compensation,
Liability Information System List promulgated pursuant to CERCLA, or on
any comparable list maintained by any state or local governmental
authority.
(yy) There is no strike, labor dispute, slowdown or work
stoppage with the employees of ATC or the ATC Subsidiaries which is
pending or, to the knowledge of the Company, threatened, which would be
reasonably likely to have an ATC Material Adverse Effect.
(zz) Each of ATC and the ATC Subsidiaries carries insurance
in such amounts and covering such risks as is adequate for the conduct
of its business and the value of its properties.
(aaa) Except as set forth in the Final Memorandum, neither
ATC nor any ATC Subsidiary has any liability for any prohibited
transaction within the meaning of ss.406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or funding
deficiency within the meaning of ss.302 of ERISA or any complete or
partial withdrawal liability under ss.4201 of ERISA with respect to any
pension, profit sharing or other plan which is subject to ERISA to
which ATC or any ATC Subsidiary makes or ever has made a contribution
and in which any employee of ATC or any ATC Subsidiary is or has ever
been a participant, which prohibited transaction liability or
withdrawal liability is reasonably likely to have a Material Adverse
Effect. With respect to such plans, each of ATC and the ATC
Subsidiaries is in compliance in all material respects with all
applicable provisions of ERISA.
(bbb) Each of ATC and the ATC Subsidiaries (i) makes and
keeps accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the re-
<PAGE>
-20-
ported accountability for its assets is compared with existing assets
at reasonable intervals.
(ccc) Neither ATC nor any ATC Subsidiary is an "investment
company" or "promoter" or "principal underwriter" for an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended, and the rules and regulations thereunder.
(ddd) Except as set forth on Exhibit A hereto, no holder of
securities of ATC (other than the Registrable Notes (as defined in the
Registration Rights Agreement and the Indenture)) will be entitled to
have such securities registered under the registration statements
required to be filed by ATC pursuant to the Registration Rights
Agreement and the Indenture than as expressly permitted thereby.
(eee) Immediately after the consummation of the transactions
contemplated by the Merger Agreement, the fair value and present fair
saleable value of the assets of ATC and its subsidiaries, on a
consolidated basis, will exceed the sum of its consolidated stated
liabilities and identified contingent liabilities (after giving effect,
in the case of each of the guarantors, to the limitations contained in
each Guarantee); neither ATC nor any of its subsidiaries is, or will be
after giving effect to the execution, delivery and performance of the
Merger Agreement and the consummation of the transactions contemplated
hereby, (a) left with unreasonably small capital with which to carry on
its business as it is proposed to be conducted, (b) unable to pay its
debts (contingent or otherwise) as they mature or (c) otherwise
insolvent.
(fff) Each of the foregoing representations and warranties,
as far as each relates to ATC and the ATC Subsidiaries, is made by
Acquisition Corp. to the best of its knowledge; upon the Effective Time
and the assumption by ATC of the obligations of the Company hereunder,
such representations and warranties shall be deemed to be have been
made by ATC without such knowledge limitation.
Each of the foregoing representations and warranties, insofar
as each relates to information concerning ATC or any subsidiary of ATC, is made
by Acquisition Corp. to the best of its knowledge; upon the Effective Time and
the assumption by ATC of the obligations of the Company hereunder, such
representations and warranties shall be deemed to be have been made by ATC
without such knowledge limitation.
Any certificate signed by any officer of the Company or any
Subsidiary and delivered to the Initial Purchaser or to counsel for the Initial
Purchaser shall be deemed a joint and several representation and warranty by the
Company and each of the Subsidiaries to each Initial Purchaser as to the matters
covered thereby.
<PAGE>
-21-
3. Purchase, Sale and Delivery of the Notes. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase, the Notes, at 97% of their principal amount.
One or more certificates in definitive form for the Notes that
the Initial Purchaser has agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Initial Purchaser
requests upon notice to the Company at least 48 hours prior to the Closing Date,
shall be delivered by or on behalf of the Company to the Initial Purchaser,
against payment by or on behalf of the Initial Purchaser of the purchase price
therefor by wire transfer of immediately available funds payable to such account
or account as the Company shall specify prior to the Closing Date, or by such
means as the parties hereto shall agree prior to the Closing Date. Such delivery
of and payment for the Securities shall be made at the offices of Chadbourne &
Parke LLP, 30 Rockefeller Plaza, New York, at 10:00 A.M., New York time, on
January 29, 1998, or at such other place, time or date as the Initial Purchaser
and the Company may agree upon, such time and date of delivery against payment
being herein referred to as the "Closing Date." The Company will make such
certificate or certificates for the Securities available for checking and
packaging by the Initial Purchaser at the offices of the Initial Purchaser in
New York, New York or such other place as the Initial Purchaser may designate,
at least 24 hours prior to the Closing Date.
4. Offering by the Initial Purchaser. The Initial Purchaser
proposes to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum as soon as practicable after this Agreement is
entered into and as in the sole judgment of the Initial Purchaser is advisable.
5. Covenants of the Company. The Company and, at and after
the Effective Time, the Guarantors covenant and agree with the Initial Purchaser
that:
(a) The Company will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial
Purchaser and counsel to the Initial Purchaser shall not previously
have been advised and furnished a copy for a reasonable period of time
prior to the proposed amendment or supplement and as to which the
Initial Purchaser shall not have given its consent, which consent shall
not be unreasonably withheld. The Company will promptly, upon the
reasonable request of the Initial Purchaser or counsel for the Initial
Purchaser, make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be reasonably necessary or
advisable in connection with the initial resale of the Securities by
the Initial Purchaser.
<PAGE>
-22-
(b) The Company will use reasonable efforts to consummate the
Merger as soon as possible, taking into account all relevant factors
including successful operation of the Company's business.
(c) The Company and, at and after the Effective Time, the
Guarantors will cooperate with the Initial Purchaser in arranging for
the qualification of the Securities for offering and sale under the
securities or "Blue Sky" laws of such jurisdictions as the Initial
Purchaser may designate and will continue such qualification in effect
for as long as may be necessary to complete the resale of the
Securities by the Initial Purchaser; provided, however, that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of
process in any jurisdiction or subject the Company to any tax in any
such jurisdiction where it is not then so subject.
(d) If, at any time prior to the completion of the
distribution by the Initial Purchaser of the Notes or the Private
Exchange Notes, any event occurs or information becomes known as a
result of which the Final Memorandum as then amended or supplemented
would include an untrue statement of a material fact, or omit to state
a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if
for any other reason it is necessary at any time to amend or supplement
the Final Memorandum in order to comply with applicable law, the
Company will promptly notify the Initial Purchaser thereof and will
prepare, at the Company's expense, an amendment to the Final Memorandum
that corrects such statement or omission or effects such compliance.
(e) The Company will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of
the Preliminary Memorandum and the Final Memorandum or any amendment or
supplement thereto as the Initial Purchaser may reasonably request.
(f) The Company will apply the net proceeds from the sale of
the Securities substantially as set forth under "Use of Proceeds" in
the Final Memorandum.
(g) The Company will ensure that the capital contribution by
Holdings of the full amount of the proceeds of the rollover of
management and employee equity in ATC into equity of Holdings, as
described in the Final Memorandum, occurs on or prior to the Effective
Time.
(h) For so long as any Securities remain outstanding, the
Company will furnish to the Initial Purchaser copies of all reports and
other communications (financial or otherwise) furnished by the Company
to the Trustee or the holders of the
<PAGE>
-23-
Securities and, as soon as available, copies of any reports or
financial statements furnished to or filed by the Company with the
Commission or any national securities exchange on which any class of
securities of the Company may be listed.
(i) Prior to the Closing Date, the Company will furnish to
the Initial Purchaser, as soon as they have been prepared by or are
available to the Company, a copy of any unaudited interim consolidated
financial statements of the Company or ATC for any period subsequent to
the period covered by its most recent financial statements appearing in
the Final Memorandum.
(j) None of the Company nor any of its respective Affiliates
will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Act) that
could be integrated with the sale of the Securities in a manner that
would require the registration under the Act of the Securities.
(k) The Company will not, nor will the Company permit any of
the Subsidiaries to, engage in any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Act) in connection with the offering of the Securities or in any manner
involving a public offering within the meaning of Section 4(2) of the
Act.
(l) For so long as any of the Securities remain outstanding,
the Company will make available, upon request, to any holder of such
Securities and any prospective purchaser thereof the information
specified in Rule 144A(d)(4) under the Act, unless the Company is then
subject to Section 13 or 15(d) of the Exchange Act.
(m) Each of the Company and, at and after the Effective Time,
the Guarantors will use its commercially reasonable best efforts to (i)
permit the Securities to be designated PORTAL securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. (the "NASD") relating to trading in the
Private Offerings, Resales and Trading through Automated Linkages
market (the "PORTAL Market") and (ii) permit the Securities to be
eligible for clearance and settlement through The Depository Trust
Company.
(n) In connection with any Notes offered and sold in an
offshore transaction (as defined in Regulation S), the Company will not
register any transfer of such Notes not made in accordance with the
provisions of Regulation S and will not, except in accordance with the
provisions of Regulation S, if applicable, issue any such Notes in the
form of definitive securities.
<PAGE>
-24-
6. Expenses. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to: (i) the printing, word processing or other production of documents
with respect to such transactions, including any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendments or
supplements thereto, and any "Blue Sky" memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchaser of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) the preparation
(including printing), issuance and delivery to the Initial Purchaser of any
certificates evidencing the Securities, (v) the qualification of the Securities
under state securities and "Blue Sky" laws, including filing fees and reasonable
fees and disbursements of counsel up to $10,000 for the Initial Purchaser
relating thereto, (vi) the expenses of the Company in connection with any
meetings with prospective investors in the Securities, (vii) the fees and
expenses of the Trustee, including fees and expenses of its counsel, and (viii)
all expenses and listing fees incurred in connection with the application for
quotation of the Securities on the PORTAL Market and (ix) any fees charged by
investment rating agencies for the rating of the Securities. If the issuance and
sale of the Securities provided for herein is not consummated because any
condition to the obligation of the Initial Purchaser set forth in Section 7
hereof is not satisfied, because this Agreement is terminated pursuant to
Section 11 hereof or because of any failure, refusal or inability on the part of
the Company or the apparent inability of any Guarantor to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder (other than by reason of a default by the Initial Purchaser of its
obligations hereunder after all conditions hereunder have been satisfied in
accordance herewith), the Company will promptly reimburse the Initial Purchaser
upon demand for all reasonable out-of-pocket expenses (including reasonable
fees, disbursements and charges of Cahill Gordon & Reindel, counsel for the
Initial Purchaser) that shall have been incurred by the Initial Purchaser in
connection with the proposed purchase and sale of the Securities.
7. Conditions of the Initial Purchaser's Obligations. The
obligation of the Initial Purchaser to purchase and pay for the Securities
shall, in its sole discretion, be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have
received the opinion, dated as of the Closing Date and addressed to the
Initial Purchaser, of Chadbourne & Parke LLP, counsel for the Company,
in form and substance reasonably satisfactory to counsel for the
Initial Purchaser, to the effect that:
(i) The Company is duly incorporated; each of the Company,
ATC and ATC's subsidiaries is validly existing and in good
standing under the laws of its jurisdiction of incorporation
and has all requisite corporate power and
<PAGE>
-25-
authority to own, lease and operate its properties and to
conduct its business as described in the Final Memorandum.
Each of the Company, ATC and ATC's subsidiaries is duly
qualified as a foreign corporation and in good standing in
each jurisdiction set forth on a schedule attached to such
opinion.
(ii) The Company has the authorized capital stock as set
forth under "Capitalization" in the Final Memorandum.
(iii) To the knowledge of such counsel, except as set forth
in the Final Memorandum, (A) no options, warrants or other
rights to purchase from the Company shares of capital stock or
ownership interests in the Company are outstanding, (B) no
agreements or other obligations of the Company to issue, or
other rights to cause the Company to convert, any obligation
into, or exchange any securities for, shares of capital stock
or ownership interests in the Company are outstanding and (C)
no holder of securities of the Company (other than the
Registrable Notes) is entitled to have such securities
registered under a registration statement filed by the Company
pursuant to the Registration Rights Agreement and the
Indenture (other than as set forth on Exhibit A hereto).
(iv) The Indenture is in sufficient form for qualification
under the TIA; the Indenture has been duly and validly
authorized, executed and delivered by the Company, and
(assuming the due authorization, execution and delivery
thereof by the Trustee) constitutes the valid and legally
binding agreement of the Company, enforceable against the
Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at
law).
(v) The Notes are in the form of Exhibit A to the Indenture
with legends in the forms of Exhibits C, D or E to the
Indenture. The Notes have each been duly and validly
authorized, executed and delivered by the Company and, when
paid for by the Initial Purchaser in accordance with the terms
of this Agreement (assuming the due authorization, execution
and delivery of the Indenture by the Trustee and due
authentication and delivery of the Notes by the Trustee in
accordance with the Indenture), will constitute the valid and
legally binding obligations of the Company, entitled to the
benefits of the Indenture, and enforceable against the Company
in accordance with their terms, except
<PAGE>
-26-
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at
law).
(vi) The Exchange Notes and the Private Exchange Notes and
the Guarantees to be endorsed on them have been duly and
validly authorized by the Company, and when the Exchange Notes
and the Private Exchange Notes have been duly executed and
delivered by the Company and the Guarantees have been duly
authorized, executed and delivered by the Guarantors, each in
accordance with the terms of the Registration Rights Agreement
and the Indenture (assuming the due authorization, execution
and delivery of the Indenture by the Trustee and due
authentication and delivery of the Exchange Notes and the
Private Exchange Notes by the Trustee in accordance with the
Indenture and also assuming the due authorization, execution
and delivery of the Guarantees and the Supplemental Indenture
by the Guarantors), will constitute the valid and legally
binding obligations of the Company and the Guarantors,
respectively, entitled to the benefits of the Indenture, and
enforceable against the Company and the Guarantors,
respectively, in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at
law).
(vii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations
under the Merger Agreement (to the extent a party thereto),
the Registration Rights Agreement and the Credit Agreement;
the Merger Agreement (to the extent a party thereto), the
Registration Rights Agreement and the Credit Agreement have
each been duly and validly authorized, executed and delivered
by the Company, and (assuming due authorization, execution and
delivery thereof by the Initial Purchaser in the case of the
Registration Rights Agreement and the banks party thereto in
the case of the Credit Agreement) constitutes the valid and
legally binding agreement of the Company enforceable against
the Company in accordance with its terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium
or other
<PAGE>
-27-
similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor
may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law) and (B) any
rights to indemnity or contribution thereunder may be limited
by federal and state securities laws and public policy
considerations.
(viii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations
under this Agreement and the Merger Agreement and to
consummate the transactions contemplated hereby and thereby;
this Agreement and the Merger Agreement and the consummation
by the Company and the Guarantors of the transactions
contemplated hereby and thereby have been duly and validly
authorized by the Company. This Agreement and the Merger
Agreement have been duly executed and delivered by the
Company.
(ix) The Indenture, the Notes, the Exchange Notes, the
Guarantees, the Registration Rights Agreement, the Merger
Agreement and the Credit Agreement conform as to legal matters
in all material respects to the descriptions thereof contained
in the Final Memorandum.
(x) To the knowledge of such counsel, except as described in
the Final Memorandum, no legal or governmental proceedings are
pending or threatened to which the Company or any Guarantor is
a party or to which the property or assets of the Company or
any Guarantor is subject which would be required under the Act
to be described in a registration statement or in a
prospectus, or which seek to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of
the Notes to be sold hereunder or the consummation of the
Merger or the consummation of the other transactions described
in the Final Memorandum.
(xi) To the knowledge of such counsel, the Company is not in
violation of its certificate of incorporation or bylaws,
except for any such breach, default, violation or event which
would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect.
(xii) Except as set forth in the Final Memorandum, the
execution, delivery and performance of this Agreement, the
Indenture, the Registration Rights Agreement, the Merger
Agreement and the Credit Agreement and the consummation of the
Tender Offer, the Merger, the issuance and sale of the Notes
to the Initial Purchaser, registration of the Notes under the
Act, registra-
<PAGE>
-28-
tion of the Exchange Notes and Private Exchange Notes under
the Act and borrowings under the Credit Agreement (expressing
no opinion as to the compliance or non-compliance, or the
effect of non-compliance, with any financial tests, ratios or
covenants) will not constitute or result in a breach or a
default under (or an event which with notice or passage of
time or both would constitute a default under) or violation of
or cause an acceleration of any obligation under or result in
the imposition or creation of (or the obligation to create or
impose) a lien on any property or assets of the Company, ATC
or any Guarantor with respect to (i) the terms or provisions
of any of the terms or provisions of any contract described in
the Final Memorandum (such contracts, the "Material Contracts"
(expressing no opinion as to the compliance or non-compliance,
or the effect of non-compliance, with any financial tests,
ratios or covenants)), except for any such conflict, breach,
violation, default or event which would not, individually or
in the aggregate, be reasonably likely to have a Material
Adverse Effect and except for requirements to prepay the 8.18%
Senior Secured Notes and Existing Credit Facility in the
manner described in the Final Memorandum upon consummation of
the Merger, (ii) the certificate of incorporation or bylaws of
the Company or (iii) (assuming compliance with all applicable
state securities or "Blue Sky" laws and assuming the accuracy
of the representations and warranties of the Initial Purchaser
in Section 8 hereof, the accuracy of the representations and
warranties of the Company herein, the performance by the
Company and the Initial Purchaser of their agreements herein
and compliance with federal securities laws in connection with
obligations under the Registration Rights Agreement) any
statute, judgment, decree, order, rule or regulation known to
such counsel to be applicable to the Company, ATC or any
Guarantor and to transactions of the type contemplated by the
Final Memorandum, except for any such conflict, breach or
violation which would not, individually or in the aggregate,
be reasonably likely to have a Material Adverse Effect.
(xiii) Assuming the truthfulness and accuracy of the
representations and warranties of the Company and the Initial
Purchaser and assuming compliance by the Company and the
Initial Purchaser with their agreements herein, to the
knowledge of such counsel, no consent, approval, authorization
or order of any governmental authority is required for the
issuance and sale by the Company of the Notes to the Initial
Purchaser or the Merger or the Holdings Equity Contribution or
the Preferred Stock Offering or the rollover of management and
employee equity in ATC into equity of Holdings, except (i) in
connection with the registration under the Act of the Notes,
and the Private Exchange Notes, if applicable, pursuant to the
Registration Rights Agreement, (ii) the
<PAGE>
-29-
qualification of the Indenture under the TIA in connection
with the issuance of the Notes, (iii) such consents,
approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits (x) as have been obtained
and made, (y) as may be required under state securities or
blue sky laws, as to which such counsel need express no
opinion, or (x) as would not, if not obtained, be reasonably
likely to have a Material Adverse Effect, or (iv) the approval
of the Merger by the shareholders of ATC and Acquisition Corp.
(xiv) None of the Company or the Guarantors is, or
immediately after the sale of the Notes to be sold hereunder
and the application of the proceeds from such sale (as
described in the Final Memorandum under the caption "Use of
Proceeds") will be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(xv) No registration under the Act of the Notes is required
in connection with the sale of the Notes to the Initial
Purchaser as contemplated by this Agreement and the Final
Memorandum or in connection with the initial resale of the
Notes by the Initial Purchaser in accordance with Section 8 of
this Agreement, and prior to the commencement of the Exchange
Offer (as defined in the Registration Rights Agreement) or the
effectiveness of the Shelf Registration Statement (as defined
in the Registration Rights Agreement), the Indenture is not
required to be qualified under the TIA, in each case assuming
(i) that the purchasers who buy such Notes in the initial
resale thereof are QIBs, (ii) the accuracy of the Initial
Purchaser's representations in Section 8 and those of the
Company contained in this Agreement regarding the absence of a
general solicitation in connection with the sale of such Notes
to the Initial Purchaser and the initial resale thereof, and
(iii) the due performance by the Initial Purchaser of the
agreements set forth in Section 8 hereof and the offering and
transfer procedures set forth in the Final Memorandum.
(xvi) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance,
execution or delivery of the Notes will violate Regulation G,
T, U or X of the Board of Governors of the Federal Reserve
System.
(xvii) To the knowledge of such counsel, except as set forth
in the Final Memorandum, upon the effectiveness of the Merger,
no holder of securities of ATC or any ATC Subsidiary (other
than the Registrable Notes) is entitled to have such
securities registered under a registration statement filed by
ATC pursuant to the Registration Rights Agreement.
<PAGE>
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(xviii) The Merger Agreement and Letter Agreement have been
duly and validly authorized, executed and delivered by ATC,
and (assuming the due authorization, execution and delivery
thereof by the other parties thereto) constitutes the valid
and legally binding agreement of ATC, enforceable against it
in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor
may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(xix) To the knowledge of such counsel, except as described
in the Final Memorandum, no legal or governmental proceedings
are pending or threatened to which ATC or any ATC Subsidiary
is a party or to which the property or assets of ATC or any
ATC Subsidiary is subject which would be required under the
Act to be described in a registration statement or in a
prospectus or which seek to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of
the Notes to be sold hereunder or the consummation of the
Merger or the consummation of the other transactions described
in the Final Memorandum.
(xx) Except as set forth in the Final Memorandum, the
execution, delivery and performance of the Merger Agreement
and the Letter Agreement and the consummation of the
transactions contemplated thereby will not constitute or
result in a breach or a default under (or an event which with
notice or passage of time or both would constitute a default
under) or violation of or cause an acceleration of any
obligation under or result in the imposition or creation of
(or the obligation to create or impose) a lien on any property
or assets of ATC or any ATC Subsidiary with respect to (i) the
terms or provisions of any contract described in the Final
Memorandum (such contracts, the "ATC Material Contracts"
(expressing no opinion as to the compliance or non-compliance,
or the effect of non-compliance, with any financial tests,
ratios or covenants)), except for any such conflict, breach,
violation, default or event which would not, individually or
in the aggregate, be reasonably likely to have an ATC Material
Adverse Effect, (ii) the certificate of incorporation or
bylaws of ATC or any ATC Subsidiary, or (iii) (assuming
compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and
warranties of the Initial Purchaser in Section 8 hereof and
assuming the accuracy of the representations and warranties of
ATC in the Letter Agreement and, after the Effective Time,
herein) any statute, judgment, decree,
<PAGE>
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order, rule or regulation known to such counsel to be
applicable to ATC or any ATC Subsidiary and to transactions of
the type contemplated by the Final Memorandum, except for any
such conflict, breach or violation which would not,
individually or in the aggregate, be reasonably likely to have
an ATC Material Adverse Effect.
(xxi) Each of ATC and its subsidiaries is duly incorporated.
(xxii) Each of ATC and its subsidiaries has all requisite
corporate power and authority to execute, deliver and perform
its obligations under this Agreement, the Registration Rights
Agreement, the Indenture, the Supplemental Indenture, the
Guarantees and the Credit Agreement.
(xxiii) To the knowledge of such counsel, neither ATC nor
any of its subsidiaries is in violation of its certificate of
incorporation or bylaws, except for any such breach, default,
violation or event which would not, individually or in the
aggregate, be reasonably likely to have an ATC Material
Adverse Effect.
(xxiv) The execution, delivery and performance of this
Agreement, the Indenture, the Supplemental Indenture, the
Guarantees, the Registration Rights Agreement, the Merger
Agreement and the Credit Agreement and the consummation of the
Tender Offer, the Merger, the assumption by ATC and the
Guarantors of obligations under the Indenture and the Notes,
the Guarantee of the Notes by the Guarantors, registration of
the Securities under the Act, registration of the Exchange
Notes and Private Exchange Notes under the Act and borrowings
under the Credit Agreement, will not constitute or result in a
breach or violation of the certificate of incorporation or
bylaws of the ATC or any of its Subsidiaries.
(xxv) Except as set forth in the Final Memorandum, ATC owns,
directly or indirectly, all of the outstanding shares of
capital stock of its subsidiaries free and clear of all liens,
encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Act and the
securities or "Blue Sky" laws of certain jurisdictions) or
voting.
At the time the foregoing opinion is delivered, such counsel
shall additionally state that it has participated in conferences with
officers and other representatives of the Company and ATC,
representatives of the independent public accountants for the Company
and ATC, representatives of the Initial Purchaser and counsel for the
Initial Purchaser, at which conferences the contents of the Final
Memorandum and related
<PAGE>
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matters were discussed, and, although it has not independently verified
and is not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the Final
Memorandum (except to the extent specified in subsection 7(a)(x)), no
facts have come to its attention which lead it to believe that the
Final Memorandum, on the date thereof or at the Closing Date, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such firm need
express no opinion with respect to the financial statements and related
notes thereto and the other financial, statistical, accounting, reserve
and well data included in the Final Memorandum). The opinion of such
counsel described in this Section shall be rendered to the Initial
Purchaser at the request of the Company and shall so state therein.
References to the Final Memorandum in this subsection (a)
shall include any amendment or supplement thereto prepared in
accordance with the provisions of this Agreement at the Closing Date.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction other than the
federal laws of the United States and the laws of the States of New
York and the Delaware General Corporation Law (the "DGCL"). Such
counsel may also state that with respect to the opinions as to the DGCL
and the laws of jurisdictions other than New York, such counsel has
relied on the opinion of local counsel of the Company. Such counsel may
also state that, insofar as such opinion involves factual matters, such
counsel have relied, to the extent they deem proper, upon certificates
of officers of the Company and ATC and certificates of public
officials; provided that such certificates have been provided to the
Initial Purchaser. Furthermore, the opinions in (xxi) through (xxv),
above, may be rendered by John Smith, Esq., General Counsel of ATC;
John Smith, Esq. may also render the opinions in (i) above, insofar as
they relate to subsidiaries incorporated in jurisdictions other than
Delaware and New York.
(b) The Initial Purchaser shall have received an opinion,
dated the Closing Date, of Cahill Gordon & Reindel, counsel for the
Initial Purchaser, with respect to certain legal matters relating to
this Agreement, and such other related matters as the Initial Purchaser
may reasonably require. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such certificates and
other documents and information as they may reasonably request to pass
upon such matters.
(c) The Initial Purchaser shall have received from Deloitte &
Touche, LLP ("Deloitte"), independent public accountants for ATC, and
from Arthur Andersen LLP
<PAGE>
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and Ernst & Young LLP, as independent public accountants for EWI and
BCM Engineers, Inc., respectively, comfort letters, dated the date
hereof and a comfort letter from Deloitte dated the Closing Date, in
form and substance reasonably satisfactory to the Initial Purchaser and
counsel for the Initial Purchaser.
(d) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of the
Closing Date; the Company shall have performed in all material respects
all covenants and agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to the Closing Date;
and, except as set forth in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof) subsequent to
the date of the most recent financial statements in such Final
Memorandum, there shall have been no event or development that,
individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect.
(e) The issuance and sale of the Securities pursuant to this
Agreement shall not be enjoined (temporarily or permanently) and no
restraining order or other injunctive order shall have been issued or,
except for the action set forth in the Final Memorandum under "Business
-- Legal Proceedings -- Recent Proceedings," any action, suit or
proceeding shall have been commenced with respect to this Agreement
before any court or governmental authority.
(f) The Initial Purchaser shall have received certificates,
dated the Closing Date, signed on behalf of the Company by its
President and its Secretary to the effect that, to their knowledge:
(i) The representations and warranties of the Company in
this Agreement are true and correct in all material respects
as if made on and as of the Closing Date, and the Company has
performed in all material respects all covenants and
agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing
Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final
Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), no event or events have occurred, no
information has become known nor does any condition exist
that, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect or an ATC Material
Adverse Effect; and
<PAGE>
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(iii) The sale of the Securities hereunder has not been
enjoined (temporarily or permanently).
(g) The Initial Purchaser shall have received certificates,
dated the Closing Date, signed on behalf of ATC by its Senior Vice
Presidents Nicholas Malino and Christopher Vincze to the effect that,
to their knowledge:
(i) The representations and warranties of ATC in the Letter
Agreement are true and correct in all material respects as if
made on and as of the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final
Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), no event or events have occurred, no
information has become known nor does any condition exist
that, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect or an ATC Material
Adverse Effect; and
(iii) The sale of the Securities hereunder has not been
enjoined (temporarily or permanently).
(iv) the schedule attached to the opinion of Chadbourne &
Parke, dated the closing date, sets forth each of the
subsidiaries of ATC and, for each of ATC and its subsidiaries,
each jurisdiction where the ownership or leasing of its
properties or the conduct of its business requires such
qualification, except where the failure to be so qualified
would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect or an ATC Material
Adverse Effect.
(h) On the Closing Date, the Initial Purchaser shall have
received the Registration Rights Agreement executed by the Company and
such agreement shall be in full force and effect at all times from and
after the Closing Date.
(i) The Indenture shall have been duly executed and delivered
by the Company and the Trustee, and the Notes shall have been duly
executed by the Company and duly authenticated by the Trustee.
(j) The Initial Purchaser shall have received a true and
correct copy of the Company's Credit Agreement, dated and executed on
or prior to the Closing Date (the "Credit Agreement"), in substantially
the form described in the Final Memorandum and on and as of the Closing
Date (after giving effect to the transactions contemplated
<PAGE>
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by this Agreement and the application of the proceeds received by the
Company from the sale of the Notes) no condition shall exist that would
constitute a Default or an Event of Default (each as defined in the
Credit Agreement) under the Credit Agreement.
(k) The Initial Purchaser shall have received a true and
correct copy of an agreement between Holdings and the Company, dated
and executed on or prior to the Closing Date, providing for the capital
contribution, on or prior to the Effective Time, by Holdings to
Acquisition Corp. of the full amount of the proceeds of any rollover of
management and employee equity in ATC into equity of Holdings, and no
condition shall exist on the Closing Date that is reasonably likely to
prevent such rollover (as such rollover is described in the Final
Memorandum).
(l) On or prior to the Closing Date, there shall have been
delivered to the Initial Purchaser true and correct copies of the
Tender Offer Documents, which Tender Offer Documents (except for any
such Tender Offer Documents dated and delivered to the Initial
Purchaser prior to the date hereof) shall be in form and substance
reasonably satisfactory to the Initial Purchaser and shall be in full
force and effect. All material conditions precedent to the consummation
of the Tender Offer as contained in the Offer to Purchase shall have
been satisfied (and not waived without the consent of the Initial
Purchaser, which consent shall not be unreasonably withheld), and any
amendment (except for any such Tender Offer Documents dated and
delivered to the Initial Purchaser prior to the date hereof) to the
Tender Offer Documents shall be required to be reasonably satisfactory
in form and substance to the Initial Purchaser.
(m) On or prior to the Closing Date, (i) the Tender Offer
shall have been consummated in accordance with the Offer to Purchase
and all applicable laws, (ii) all shares that have been tendered to the
Company pursuant to the Offer to Purchase shall have been validly
tendered and not withdrawn and shall be available for purchase by, and
shall have been purchased by, the Company in accordance with the terms
and conditions set forth in the Offer to Purchase and (iii) such
tendered Shares shall be transferable to purchaser with good title and
shall be free and clear of Liens and incumbencies created by the
Company or its affiliates. After giving effect to the consummation of
the purchase of the Shares pursuant to the Tender Offer, the Company
shall own and control that number of shares as shall be necessary to
permit the Company to approve the Merger without the affirmative vote
or approval of any other Person, and there shall be no applicable
statute or other restriction (other than provisions of the Delaware
General Corporation Law and proxy rules under Section 14 of the
Securities Exchange Act of 1934, as amended) which would prohibit,
materially restrict or materially delay the consummation of the Merger
or would be reasonably likely to make the consummation of the Merger
economically unfeasible. In addition, any state
<PAGE>
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anti-takeover law regulating the Acquisition shall have been complied
with or shall have been determined by the Initial Purchaser to be
invalid or inapplicable to the Tender Offer and the Merger. At the time
of the consummation of the Tender Offer, neither the fair price
provisions under applicable law nor the fair price provisions of ATC's
articles of incorporation shall require a higher price be paid for
Shares in the Merger than that paid in the Tender Offer, which price,
in any event, shall not exceed that amount set forth in the Offer to
Purchase and the Merger Agreement as in effect at the Effective Time.
(n) The Initial Purchaser shall have received a true and
correct copy of the Merger Agreement. The Merger Agreement as received
by the Initial Purchaser shall remain in full force and effect and
shall not have been amended, altered or modified and each party thereto
shall have performed in all material respects each of its obligations
thereunder to be performed by it on or prior to the Closing Date
(without giving effect to any waiver or consent to the modification of
any term thereof).
(o) The Letter Agreement shall have been duly executed and
delivered by ATC.
(p) (i) Holdings shall have received gross cash proceeds of
at least $30,000,000 from the sales of its common and preferred equity,
as described in the Final Memorandum (the "Equity Financing"), (ii)
Holdings shall have contributed the full amount of the gross cash
proceeds received by it from the Equity Financing, plus the full amount
of any proceeds received on or prior to the Closing Date from
investments in Holdings by existing management and employees of ATC, to
the capital of Acquisition Corp. as a common equity contribution, (iii)
Acquisition Corp. shall have utilized the full amount of such cash
contribution to make payments owing in connection with the Tender Offer
and (iv) the components of the Equity Financing (including the
Preferred Stock and Warrants) shall be substantially in the form
described in the Final Memorandum.
(q) On or before the Closing Date, the Initial Purchaser and
counsel for the Initial Purchaser shall have received such further
documents, certificates and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Company and ATC
as they shall have heretofore reasonably requested from the Company,
ATC and the Guarantors.
(r) On or prior to the Closing Date, the Initial Purchaser
shall have received a solvency opinion from Houlihan & Lokey, which
solvency opinion shall be in form and substance reasonably satisfactory
to the Initial Purchaser and shall set forth the conclusions that,
after giving effect to the Transactions, each of Holdings and its
<PAGE>
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Subsidiaries on a consolidated basis and Acquisition Corp. and its
Subsidiaries on a consolidated basis, is not insolvent, will not be
rendered insolvent by the indebtedness incurred in connection
therewith, will not be left with unreasonably small capital with which
to engage in their business and will not have incurred debts beyond
their ability to pay such debts as they mature.
All such documents, opinions, certificates and schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchaser and counsel for the Initial Purchaser. The Company shall
furnish to the Initial Purchaser such conformed copies of such documents,
opinions, certificates and schedules or instruments in such quantities as the
Initial Purchaser shall reasonably request.
8. Offering of Securities; Restrictions on Transfer. The
Initial Purchaser represents and warrants that it is a QIB. The Initial
Purchaser agrees with the Company that (i) it has not and will not solicit
offers for, or offer or sell, the Securities by any form of general solicitation
or general advertising (as those terms are used in Regulation D under the Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Act; and (ii) it has and will solicit offers for the Securities only
from, and will offer the Securities only to (A) in the case of offers inside the
United States, persons whom the Initial Purchaser reasonably believes to be QIBs
or, if any such person is buying for one or more institutional accounts for
which such person is acting as fiduciary or agent, only when such person has
represented to the Initial Purchaser that each such account is a QIB, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, and, in each case, in transactions under Rule 144A and (B) in the
case of offers outside the United States, to persons other than U.S. persons
("foreign Purchaser," which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)); provided, however, that in
the case of this clause (B), in purchasing such Securities such persons are
deemed to have represented and agreed as provided under the caption "Transfer
Restrictions" contained in the Final Memorandum.
9. Indemnification and Contribution. (a) The Company and the
Guarantors agree, jointly and severally, to indemnify and hold harmless the
Initial Purchaser and the affiliates, directors, officers, agents,
representatives and employees of the Initial Purchaser, and each other person,
if any, who controls the Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, against any losses, claims, damages
or liabilities, joint or several, to which the Initial Purchaser or any such
affiliate, director, officer, agent, representative, employee or controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as any such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon:
<PAGE>
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(i) any untrue statement or alleged untrue statement of any material
fact contained in (A) any Memorandum or any amendment or supplement
thereto or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or any Guarantor or based
upon written information furnished by or on behalf of the Company or
any Guarantor filed in any jurisdiction in order to qualify the
Securities under the securities or "Blue Sky" laws thereof or filed
with any securities association or securities exchange (each, an
"Application"); or
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto, or any Application, a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading,
and will reimburse, as incurred, the Initial Purchaser and each such affiliate,
director, officer, agent, representative and employee and each such controlling
person for any legal or other expenses reasonably incurred by the Initial
Purchaser, such affiliate, director, officer, agent, representative or employee
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and the
Guarantors will not be liable (i) in any such case to the extent that any such
loss, claim, damage, or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Memorandum or any amendment or supplement thereto, or any Application, in
reliance upon and in conformity with written information furnished to the
Company by the Initial Purchaser specifically for use therein or (ii) with
respect to the Preliminary Memorandum, to the extent that any such loss, claim,
damage or liability arises solely from the fact that the Initial Purchaser sold
Securities to a person to whom there was not sent or given a copy of the Final
Memorandum (as amended or supplemented) at or prior to the written confirmation
of such sale if the Company shall have previously furnished copies thereof to
the Initial Purchaser in accordance with Section 5(d) hereof and the Final
Memorandum (as amended or supplemented) would have corrected any such untrue
statement or omission. This indemnity agreement will be in addition to any
liability that the Company and the Guarantors may otherwise have to the
indemnified parties. The Company and the Guarantors shall not be liable under
this subsection (a) for any settlement of any claim or action effected without
its consent, which consent shall not be unreasonably withheld or delayed.
The Initial Purchaser shall not, without the prior written
consent of the Company and the Guarantors, effect any settlement or compromise
of any pending or threatened proceeding in respect of which the Company and the
Guarantors are or could have been a party, or indemnity could have been sought
hereunder by the Company and the Guarantors, unless such settlement (A) includes
an unconditional written release of the Company and the Guarantors, in form and
substance reasonably satisfactory to the Company and the Guaran-
<PAGE>
-39-
tors, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of the Company or the Guarantors.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Company and the Guarantors, its respective affiliates, directors,
officers, agents, representatives and employees and each other person, if any,
who controls the Company and the Guarantors within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act against any losses, claims, damages or
liabilities to which the Company or any Guarantor or any such affiliate,
director, officer, agent, representative, employee or controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendments or supplement
thereto, or any Application or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in any Memorandum or any
amendment or supplement thereto, or any Application, or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information concerning the Initial Purchaser furnished to the Company by the
Initial Purchaser specifically for use therein; and, subject to the limitation
set forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses reasonably incurred by the Company or any Guarantor or
any such affiliate, director, officer, agent, representative, employee or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability that the Initial Purchaser may otherwise have to
the indemnified parties. The Initial Purchaser shall not be liable under this
Section 9 for any settlement of any claim or action effected without its
consent, which consent shall not be unreasonably withheld or delayed.
The Company and the Guarantors shall not, without the prior
written consent of the Initial Purchaser, effect any settlement or compromise of
any pending or threatened proceeding in respect of which the Initial Purchaser
is or could have been a party, or indemnity could have been sought hereunder by
the Initial Purchaser, unless such settlement (A) includes an unconditional
written release of the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser, from all liability on claims that are the
subject matter of such proceeding and (B) does not include any statement as to
an admission of fault, culpability or failure to act by or on behalf of the
Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to in-
<PAGE>
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demnification under this Section 9, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section
9, notify the indemnifying party of the commencement thereof in writing; but the
omission to so notify the indemnifying party (i) will not relieve it from any
liability under subsection (a) or (b) above or (d) below unless and to the
extent such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in subsections (a) and (b) above or (d)
below. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 9 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Initial Purchaser in the case
subsection (a) of this Section 9 or the Company in the case of subsection (b) of
this Section 9, representing the indemnified parties under such subsection (a)
or subsection (b), as the case may be, who are parties to such action or
actions) or (ii) the indemnifying party has authorized in writing the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by
<PAGE>
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such indemnified party without the prior written consent of the indemnifying
party (which consent shall not be unreasonably withheld), unless such
indemnified party waived in writing its rights under this Section 9, in which
case the indemnified party may effect such a settlement without such consent.
(d) In circumstances in which the indemnity agreement
provided for in the preceding subsections of this Section 9 is unavailable to,
or insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company and
the Guarantors on the one hand and the Initial Purchaser on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company bear to the total discounts
and commissions received by the Initial Purchaser. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Guarantors on the one hand, or the Initial Purchaser on the other, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission or alleged statement or omission,
and any other equitable considerations appropriate in the circumstances. The
Company, the Guarantors and the Initial Purchaser agree that it would not be
just and equitable if the amount of such contribution were determined by pro
rata or per capita allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the first sentence
of this subsection (d). Notwithstanding any other provision of this subsection
(d), the Initial Purchaser shall not be obligated to make contributions
hereunder that in the aggregate exceed the total discounts, commissions and
other compensation received by the Initial Purchaser under this Agreement, less
the aggregate amount of any damages that the Initial Purchaser has otherwise
been required to pay by reason of the untrue or alleged untrue statements or the
omissions or alleged omissions to state a material fact, and no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this subsection (d), each
affiliate, director, officer, agent, representative and employee of the Initial
Purchaser and each person, if
<PAGE>
-42-
any, who controls the Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as the Initial Purchaser, and each affiliate, director, officer, agent,
representative and employee of the Company and the Guarantors and each person,
if any, who controls the Company or an Guarantor within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company and the Guarantors.
10. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Company, the Guarantors, its officers and the Initial Purchaser set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, the Guarantors, any of its
officers or directors, the Initial Purchaser or any controlling person referred
to in Section 9 hereof and (ii) delivery of and payment for the Securities. The
respective agreements, covenants, indemnities and other statements set forth in
Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the
sole discretion of the Initial Purchaser by notice to the Company given prior to
the Closing Date in the event that the Company shall have failed, refused or
been unable to perform, in all material respects, all obligations and satisfy,
in all material respects, all conditions on its part to be performed or
satisfied hereunder at or prior thereto or, if at or prior to the Closing Date:
(i) except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto), either (x) the
Company or any Guarantor or ATC or any ATC Subsidiary shall have
sustained any loss or interference with respect to its businesses or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any strike, labor dispute,
slow down or work stoppage or any legal or governmental proceeding,
which loss or interference, in the sole judgment of the Initial
Purchaser, has had or has a Material Adverse Effect or ATC Material
Adverse Effect, or (y) there shall have been, in the sole judgment of
the Initial Purchaser, any event or development that, individually or
in the aggregate, has or could be reasonably likely to have a Material
Adverse Effect (including without limitation a change in control of the
Company) or ATC Material Adverse Effect (including without limitation a
change in control of ATC other than pursuant to the Offer to Purchase);
(ii) trading in securities generally on the New York Stock Exchange,
the American Stock Exchange or the NASDAQ National Market shall have
been suspended or maximum or minimum prices shall have been established
on any such exchange or market;
<PAGE>
-43-
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency or (C) any material change in the financial
markets of the United States that, in the case of (A), (B) or (C) above
and in the sole judgment of the Initial Purchaser, makes it
impracticable or inadvisable to proceed with the offering or the
delivery of the Securities as contemplated by the Final Memorandum;
(v) any securities of the Company or ATC shall have been downgraded
or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization;
(vi) the Company shall have withdrawn or modified the offer to
purchase made pursuant to the Offer to Purchase without the consent of
the Initial Purchaser; or
(vii) any party to the Merger Agreement shall have terminated, or
taken steps to terminate, such Merger Agreement or its obligations
thereunder.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchaser. The
statements set forth in the last paragraph of the cover page and the third,
fifth, sixth and seventh paragraphs of the section entitled "Private Placement"
constitute the only information furnished by the Initial Purchaser to the
Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing
and, if sent to the Initial Purchaser, shall be mailed or delivered or
telecopied and confirmed in writing to BT Alex. Brown Incorporated, One Bankers
Trust Plaza, 130 Liberty Street, New York, New York 10006, Attention: Corporate
Finance Department, and if sent to the Company or the Guarantors, shall be
mailed, delivered or telecopied and confirmed in writing to the Company at:
Acquisition Corp., c/o Weiss, Peck & Greer, L.L.C., One New York Plaza, New
York, New York 10004, Attention: President.
14. Successors. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchaser, the Company, the Guarantors and their
respective successors, assigns and legal representatives, and nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or
<PAGE>
-44-
claim under or in respect of this Agreement, or any provisions herein contained;
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the Initial Purchaser, the Company,
the Guarantors and their respective successors, assigns and legal
representatives and for the benefit of no other person except that (i) the
indemnities of the Company and the Guarantors contained in Section 9 of this
Agreement shall also be for the benefit of the affiliates, directors, officers,
agents, representatives and employees of the Initial Purchaser and any person or
persons who control the Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act and (ii) the indemnities of the
Initial Purchaser contained in Section 9 of this Agreement shall also be for the
benefit of the affiliates, directors, officers, agents, representatives and
employees of the Company and the Guarantors and any person or persons who
control the Company or any Guarantor within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act. No purchaser of any of the Securities from
the Initial Purchaser will be deemed a successor because of such purchase.
15. Guarantor Execution. The Company shall cause each of the
Guarantors to execute and deliver this Agreement, the Registration Rights
Agreement, the Supplemental Indenture and the Guarantees concurrently with the
Effective Time and the Guarantors shall execute each of the foregoing in
consideration of, among other things, consummation of the Offering and Merger;
provided, however, that all obligations of the Guarantors arising under this
Agreement (including indemnity obligations) shall be as of the date first
written above and all representations and warranties of the Guarantors herein
shall be as of the date first written above and the Closing Date. In the event
of a breach by the Company of its obligations under this Section 15, the Company
agrees that monetary damages would not be adequate compensation for any loss or
damage incurred by such breach and hereby further agrees that, in the event of
an action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
16. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
17. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
-45-
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among the
Company, the Guarantors and the Initial Purchaser.
Very truly yours,
THE COMPANY:
ACQUISITION CORP.
By: /s/ Wesley W. Lang, Jr.
---------------------------
Name: Wesley W. Lang, Jr.
Title: President
THE GUARANTORS:
ATC BLATTERT INC., a South
Dakota corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
ATC CONSTRUCTION SERVICES INC.,
a Massachusetts corporation,
as Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Vice President
<PAGE>
-46-
ATC ENVIRONMENTAL INC., a
Delaware corporation, as Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
ATC INSYS TECHNOLOGY INC., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Chief Executive Officer
ATC MANAGEMENT INC., a South
Dakota corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: President
ATC NEW ENGLAND CORP., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: President
BING YEN & ASSOCIATES, INC., a
California corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: Chief Executive Officer
<PAGE>
-47-
ENVIRONMENTAL WARRANTY, INC., a
Connecticut corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Vice President
HYGEIA LABORATORIES INC., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
BT ALEX. BROWN INCORPORATED
By: /s/ Daniel McCready
-------------------------
Name: Daniel McCready
Title: Managing Director
<PAGE>
Exhibit A
CONFORMED AS EXECUTED
----------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of January 29, 1998
Among
ACQUISITION CORP.
and
THE GUARANTORS NAMED HEREIN
as Issuers
and
BT ALEX. BROWN INCORPORATED
as Initial Purchaser
12% Senior Subordinated Notes due 2008
- -------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of January 29, 1998, among ACQUISITION CORP., a Delaware corporation (the
"Company"), as issuer, ATC BLATTERT INC., a South Dakota corporation, ATC
CONSTRUCTION SERVICES INC., a Massachusetts corporation, ATC ENVIRONMENTAL INC.,
a Delaware corporation, ATC INSYS TECHNOLOGY INC., a Delaware corporation, ATC
MANAGEMENT INC., a South Dakota corporation, ATC NEW ENGLAND CORP., a Delaware
corporation, BING YEN & ASSOCIATES, INC., a California corporation,
ENVIRONMENTAL WARRANTY INC., a Connecticut corporation, and HYGEIA LABORATORIES
INC., a Delaware corporation, as guarantors (the "Guarantors," and together with
the Company, the "Issuers"), and BT ALEX.
BROWN INCORPORATED, as initial purchaser (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of January 22, 1998, among the Issuers and the Initial
Purchaser (the "Purchase Agreement"), which provides for the sale by the Company
to the Initial Purchaser of $100,000,000 aggregate principal amount of the
Company's 12% Senior Subordinated Notes due 2008 (the "Notes"), guaranteed by
the Guarantors (the "Guarantees"). In order to induce the Initial Purchaser to
enter into the Purchase Agreement, the Issuers have agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchaser and any subsequent holder or holders of the Notes. The execution and
delivery of this Agreement is a condition to the Initial Purchaser's obligation
to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2 hereof.
Effectiveness Date: The 130th day after the Issue Date
Effectiveness Period: See Section 3(a) hereof.
<PAGE>
-2-
Event Date: See Section 4(b) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section 2 hereof.
Exchange Offer Registration Statement: See Section 2 hereof.
Filing Date: (A) If no Exchange Offer Registration Statement
has been filed by the Issuers pursuant to this Agreement, the 60th day after the
Issue Date; provided, however, that if a Shelf Notice is given within 10 days of
the Filing Date, then the Filing Date with respect to the Initial Shelf
Registration shall be the 30th calendar day after the date of the giving of such
Shelf Notice; and (B) in each other case (which may be applicable
notwithstanding the consummation of the Exchange Offer), the 30th day after the
delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of January 29, 1998, by and
among the Issuers and State Street Bank and Trust Company, as Trustee, pursuant
to which the Notes and the Guarantees are being issued, as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
Initial Purchaser: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(n) hereof.
Issue Date: January 29, 1998, the date of original issuance of
the Notes.
Issuers: See the introductory paragraphs hereto.
NASD: See Section 5(r) hereof.
<PAGE>
-3-
Offering Memorandum: The final offering memorandum of the
Company dated January 22, 1998, in respect of the offering of the Notes.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act and any term sheet filed pursuant
to Rule 434 under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(m) hereof.
Registrable Notes: Each Note upon its original issuance and at
all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction other than prospectus
delivery requirements for Participating Broker/Dealers under state and federal
securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the
case may be, ceases to be outstanding for purposes of the Indenture or (iv) such
Note, Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
<PAGE>
-4-
Registration Statement: Any registration statement of the
Company and/or the Guarantors that covers any of the Notes, the Exchange Notes
or the Private Exchange Notes (and the related Guarantees) filed with the SEC
under the Securities Act, including the Prospectus, amendments and supplements
to such registration statement, including post-effective amendments, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if
any) under any indenture governing the Exchange Notes and Private Exchange
Notes.
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the Issuers are sold to an
underwriter for reoffering to the public.
<PAGE>
-5-
2. Exchange Offer
(a) The Issuers shall file with the SEC, no later than the
Filing Date, a Registration Statement (the "Exchange Offer Registration
Statement") on an appropriate registration form with respect to a
registered offer (the "Exchange Offer") to exchange any and all of the
Registrable Notes for a like aggregate principal amount of notes of the
Company, guaranteed by the Guarantors, that are identical in all
material respects to the Notes, except that the Exchange Notes shall
contain no restrictive legend thereon (the "Exchange Notes"), and which
are entitled to the benefits of the Indenture or a trust indenture
which is identical in all material respects to the Indenture (other
than such changes to the Indenture or any such identical trust
indenture as are necessary to comply with the TIA) and which, in either
case, has been qualified under the TIA. The Exchange Offer shall comply
with all applicable tender offer rules and regulations under the
Exchange Act and other applicable law. The Issuers shall use their
commercially reasonable best efforts to (x) cause the Exchange Offer
Registration Statement to be declared effective under the Securities
Act on or before the Effectiveness Date; (y) keep the Exchange Offer
open for at least 20 days (or longer if required by applicable law)
after the date that notice of the Exchange Offer is mailed to Holders;
and (z) consummate the Exchange Offer on or prior to the 45th day
following the date on which the Exchange Offer Registration Statement
is declared effective by the SEC. If, after the Exchange Offer
Registration Statement is initially declared effective by the SEC, the
Exchange Offer or the issuance of the Exchange Notes thereunder is
interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, the
Exchange Offer Registration Statement shall be deemed not to have
become effective for purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be
required, as a condition to its participation in the Exchange Offer, to
represent to the Company in writing (which may be contained in the
applicable letter of transmittal) that any Exchange Notes to be
received by it will be acquired in the ordinary course of its business,
that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, and that such Holder is not an
affiliate of the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to
apply, mutatis mutandis, solely with respect to Registrable Notes that
are Private Exchange Notes, Exchange Notes as to which Section 2(c)(iv)
is applicable and Exchange Notes held by Participating Broker-Dealers
(as defined), and the Issuers shall have no further obligation to
register
<PAGE>
-6-
Registrable Notes (other than Private Exchange Notes and other than in
respect of any Exchange Notes as to which clause 2(c)(iv) hereof
applies) pursuant to Section 3 hereof. No securities other than the
Exchange Notes and Guarantees shall be included in the Exchange Offer
Registration Statement.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution," reasonably acceptable to the Initial Purchaser, which
shall contain a summary statement of the positions taken or policies
made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes
received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also expressly permit, to the extent
permitted by applicable policies and regulations of the SEC, the use of
the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including, to the extent permitted
by applicable policies and regulations of the SEC, all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes in
compliance with the Securities Act.
The Issuers shall use their commercially reasonable best
efforts to keep the Exchange Offer Registration Statement effective and
to amend and supplement the Prospectus contained therein in order to
permit such Prospectus to be lawfully delivered by all Persons subject
to the prospectus delivery requirements of the Securities Act for such
period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Notes covered thereby;
provided, however, that such period shall not exceed 45 days after such
Exchange Offer Registration Statement is declared effective (or such
longer period if extended pursuant to the last paragraph of Section 5
hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, any Holder
holds any Notes acquired by it that have, or that are reasonably likely
to be determined to have, the status of an unsold allotment in an
initial distribution, or any Holder is not entitled by law to
participate in the Exchange Offer, the Company upon the request of any
such Holder shall simultaneously with the delivery of the Exchange
Notes in the Exchange Offer, issue and deliver to any such Holder, in
exchange (the "Private Exchange") for such Notes held by any such
Holder, a like principal amount of notes (the "Private Exchange Notes")
of the Company, guaranteed by the Guarantors, if applicable, that are
<PAGE>
-7-
identical in all material respects to the Exchange Notes except for the
placement of a restrictive legend on such Private Exchange Notes. The
Private Exchange Notes shall be issued pursuant to the same indenture
as the Exchange Notes and bear the same CUSIP number as the Exchange
Notes.
In connection with the Exchange Offer, the Issuers shall:
(i) mail, or cause to be mailed, to each Holder of record
entitled to participate in the Exchange Offer a copy of the
Prospectus forming part of the Exchange Offer Registration
Statement, together with an appropriate letter of transmittal
and related documents;
(ii) use their commercially reasonable best efforts to keep
the Exchange Offer open for not less than 20 days after the
date that notice of the Exchange Offer is mailed to Holders
(or longer if required by applicable law);
(iii) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of
New York;
(iv) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last
business day on which the Exchange Offer shall remain open;
and
(v) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Issuers shall:
(x) accept for exchange all Registrable Notes validly
tendered and not validly withdrawn pursuant to the Exchange
Offer and the Private Exchange, if any;
(y) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly
to each Holder of Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the
Notes of such Holder so accepted for exchange.
<PAGE>
-8-
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or
Private Exchange, as the case may be, does not violate applicable law
or any applicable interpretation of the staff of the SEC, (ii) no
action or proceeding shall have been instituted or threatened in any
court or by any governmental agency which might materially impair the
ability of the Issuers to proceed with the Exchange Offer or the
Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the
ability of the Issuers to so proceed and (iii) all governmental
approvals shall have been obtained, which approvals the Issuers deem
necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all
material respects to the Indenture and which, in either case, has been
qualified under the TIA or is exempt from such qualification and shall
provide that the Exchange Notes shall not be subject to the transfer
restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange
Notes and the Notes shall vote and consent together on all matters as
one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate
class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuers are not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not
consummated within 175 days of the Issue Date, (iii) any holder of
Private Exchange Notes so requests in writing to the Company within 60
days after the consummation of the Exchange Offer, or (iv) in the case
of any Holder that participates in the Exchange Offer, such Holder does
not receive Exchange Notes on the date of the exchange that may be sold
without restriction under state and federal securities laws (other than
due solely to the status of such Holder as an affiliate of the Company
within the meaning of the Securities Act and other than prospectus
delivery requirements for Participating Broker/Dealers), then in the
case of each of clauses (i) to and including (iv) of this sentence, the
Company shall promptly deliver to the Holders and the Trustee written
notice thereof (the "Shelf Notice") and shall file a Shelf Registration
pursuant to Section 3 hereof.
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
<PAGE>
-9-
(a) Shelf Registration. The Issuers shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Notes not
exchanged in the Exchange Offer, Private Exchange Notes and Exchange
Notes as to which Section 2(c)(iv) is applicable (the "Initial Shelf
Registration"). The Issuers shall use their commercially reasonable
best efforts to file with the SEC the Initial Shelf Registration on or
before the applicable Filing Date. The Initial Shelf Registration shall
be on Form S-1 or another appropriate form permitting registration of
such Registrable Notes for resale by Holders in the manner or manners
designated by them (including, without limitation, one or more
underwritten offerings). The Issuers shall not permit any securities
other than the Registrable Notes to be included in the Initial Shelf
Registration or any Subsequent Shelf Registration (as defined below).
Subject to the last sentence of Section 5(j) the Issuers shall
use their commercially reasonable best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on
or prior to the Effectiveness Date and to keep the Initial Shelf
Registration continuously effective under the Securities Act until the
date which is two years from the Issue Date (the "Effectiveness
Period"), or such shorter period ending when (i) all Registrable Notes
covered by the Initial Shelf Registration have been sold in the manner
set forth and as contemplated in the Initial Shelf Registration or (ii)
a Subsequent Shelf Registration covering all of the Registrable Notes
covered by and not sold under the Initial Shelf Registration or an
earlier Subsequent Shelf Registration has been declared effective under
the Securities Act; provided, however, that the Effectiveness Period in
respect of the Initial Shelf Registration shall be extended to the
extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 under the Securities Act
and as otherwise provided herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period
(other than because of the sale of all of the securities registered
thereunder), the Issuers shall use their commercially reasonable best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such
cessation of effectiveness amend the Initial Shelf Registration in a
manner to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the Registrable Notes
covered by and not sold under the Initial Shelf Registration or an
earlier Subsequent Shelf Registration (each, a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed, the
Issuers shall use their commercially reasonable best efforts to cause
the Subsequent Shelf Registration
<PAGE>
-10-
to be declared effective under the Securities Act as soon as
practicable after such filing and to keep such subsequent Shelf
Registration continuously effective in the Effectiveness Period. As
used herein the term "Shelf Registration" means the Initial Shelf
Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used
for such Shelf Registration, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement or by any underwriter of such Registrable Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchaser agree that the
Holders will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not
be feasible to ascertain the extent of such damages with precision.
Accordingly, the Company agrees to pay, as liquidated damages,
additional interest on the Notes ("Additional Interest") under the
circumstances and to the extent set forth below (each of which shall be
given independent effect):
(i) if (A) neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration has been filed on
or prior to the applicable Filing Date or (B) notwithstanding
that the Issuers have consummated or will consummate the
Exchange Offer, the Issuers are required to file a Shelf
Registration and such Shelf Registration is not filed on or
prior to the Filing Date applicable thereto, then, commencing
on the day after any such Filing Date, Additional Interest
shall accrue on the principal amount of the Notes at a rate of
0.50% per annum for the first 90 days immediately following
each such Filing Date, and such Additional Interest rate shall
increase by an additional 0.50% per annum at the beginning of
each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration is declared
effective by the SEC on or prior to the relevant Effectiveness
Date or (B) notwithstanding that the Issuers have consummated
or will consummate the Exchange Offer, the Issuers are
required to file a Shelf Registration and such Shelf
Registration is not declared effective by the SEC on or prior
to the date which is 100 days from the date such Shelf
Registration was filed, then, commencing on the day after such
required effective date, Additional Interest shall accrue on
the principal amount of the Notes at a rate of 0.50% per annum
for the first 90 days immediately following such
<PAGE>
-11-
date, and such Additional Interest rate shall increase by an
additional 0.50% per annum at the beginning of each subsequent
90-day period; or
(iii) if (A) the Issuers have not exchanged
Exchange Notes for all Notes validly tendered in accordance
with the terms of the Exchange Offer on or prior to the 45th
day after the date on which the Exchange Offer Registration
Statement relating thereto was declared effective or (B) if
applicable, a Shelf Registration has been declared effective
and such Shelf Registration ceases to be effective at any time
it is required to be kept effective during the Effectiveness
Period, then Additional Interest shall accrue on the principal
amount of the Notes at a rate of 0.50% per annum for the first
90 days commencing on the (x) 46th day after such effective
date, in the case of (A) above, or (y) the day such Shelf
Registration ceases to be effective in the case of (B) above,
and such Additional Interest rate shall increase by an
additional 0.50% per annum at the beginning of each such
subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may
not exceed at any one time in the aggregate 1.0% per annum; provided,
further, however, that (1) upon the filing of the applicable Exchange
Offer Registration Statement or the applicable Shelf Registration as
required hereunder (in the case of clause (i) above of this Section 4),
(2) upon the effectiveness of the Exchange Offer Registration Statement
or the applicable Shelf Registration Statement as required hereunder
(in the case of clause (ii) of this Section 4), or (3) upon the
exchange of the applicable Exchange Notes for all Notes tendered (in
the case of clause (iii)(A) of this Section 4), or upon the
effectiveness of the applicable Shelf Registration Statement which had
ceased to remain effective (in the case of (iii)(B) of this Section 4),
Additional Interest on the Notes in respect of which such events relate
as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within three
business days after each and every date on which an event occurs in
respect of which Additional Interest is required to be paid (an "Event
Date"). Any amounts of Additional Interest due pursuant to (a)(i),
(a)(ii) or (a)(iii) of this Section 4 will be payable in cash
semiannually on each July 15 and January 15 (to the holders of record
on the July 1 and January 1 immediately preceding such dates),
commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by
the principal amount of the Registrable Notes, multiplied by a
fraction, the numerator of which is the number of days such Additional
Interest rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months
<PAGE>
-12-
and, in the case of a partial month, the actual number of days
elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder each
of the Issuers shall:
(a) Prepare and file with the SEC prior to the applicable
Filing Date, a Registration Statement or Registration Statements as
prescribed by Sections 2 or 3 hereof, and use its commercially
reasonable best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3 hereof, or
(2) a Prospectus contained in the Exchange Offer Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period relating thereto, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Issuers shall furnish to and afford the
Holders of the Registrable Notes included in such Registration
Statement or each such Participating Broker-Dealer who has provided
written notice to the Company that it will be a Participating
Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all
such documents (including, to the extent requested by any such Holder,
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five days
prior to such filing, or such later date as is reasonable under the
circumstances). The Issuers shall not file any Registration Statement
or Prospectus or any amendments or supplements thereto if the Holders
of a majority in aggregate principal amount of the Registrable Notes
included in such Registration Statement, or any such Participating
Broker-Dealer, as the case may be, their counsel, or the managing
underwriters, if any, shall reasonably object on a timely basis.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or
Exchange Offer Registration Statement, as the case may be, as may be
necessary to keep such Registration Statement continuously effective
for the Effectiveness Period or the Applicable Period, as the case may
be; during the Effectiveness Period or Applicable Period, as the case
may be, cause the related Prospectus to be supplemented by any
Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or
<PAGE>
-13-
any similar provisions then in force) promulgated under the Securities
Act; and during the Effectiveness Period and Applicable Period, as the
case may be, comply with the provisions of the Securities Act and the
Exchange Act applicable to each of them with respect to the disposition
of all securities covered by such Registration Statement as so amended
or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus. The Issuers shall be
deemed not to have used their commercially reasonable best efforts to
keep a Registration Statement effective during the Effectiveness Period
or the Applicable Period, as the case may be, relating thereto if any
Issuer voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell
such Registrable Notes or such Exchange Notes during that period unless
such action is required by applicable law or permitted by this
Agreement.
(c) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period relating thereto from whom the Company has received written
notice that it will be a Participating Broker-Dealer in the Exchange
Offer, notify the selling Holders of Registrable Notes (during the
Effectiveness Period), or each such Participating Broker-Dealer (during
the Applicable Period), as the case may be, their counsel and the
managing underwriters, if any, promptly (but in any event within one
day), and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any such Holder may,
upon request, obtain, at the sole expense of the Issuers, one conformed
copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or
deemed to be incorporated by reference and exhibits), (ii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus or the initiation of any proceedings for
that purpose, (iii) if at any time when it has been notified by such
Holder that a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Notes or resales
of Exchange Notes by Participating Broker-Dealers the representations
and warranties of the Issuers contained in any agreement (including any
underwriting agreement) contemplated by Section 5(l) hereof cease to be
true and correct in all material respects, (iv) of the receipt by any
Issuer of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration
State-
<PAGE>
-14-
ment or any of the Registrable Notes or the Exchange Notes to be sold
by any Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any
condition or any information becoming known that makes any statement
made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any
changes in or amendments or supplements to such Registration Statement,
Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (vi)
of the Issuers' determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period and has provided written notice to the Company that it will be a
Participating Broker-Dealer, use its commercially reasonable best
efforts during the Effectiveness Period or Applicable Period, as the
case may be, to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer, for sale
in any jurisdiction, and, if any such order is issued, to use its
commercially reasonable best efforts to obtain the withdrawal of any
such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if any),
the Holders of a majority in aggregate principal amount of the
Registrable Notes being sold in connection with an underwritten
offering or any Participating Broker-Dealer, (i) as promptly as
practicable, to the extent required by law, incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating
Broker-Dealer or counsel for any of them reasonably request to be
included therein, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable
after an Issuer has
<PAGE>
-15-
received notification of such matters to be incorporated in such
prospectus supplement or post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, furnish to each selling Holder of Registrable Notes and to each
such Participating Broker-Dealer who so requests and to their
respective counsel and each managing underwriter, if any, at the sole
expense of the Issuers, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment
thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, deliver to each selling Holder of Registrable Notes, or each
such Participating Broker-Dealer who so requests, as the case may be,
their respective counsel, and the underwriters, if any, at the sole
expense of the Issuers, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each
amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject
to the last paragraph of this Section 5, the Issuers hereby consent to
the use of such Prospectus and each amendment or supplement thereto by
each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters
or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, and has provided written notice to
the Company that it will be a Participating Broker-Dealer use its
commercially reasonable best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Notes for offer
and sale under the securities or Blue Sky laws of such jurisdictions
within the United States
<PAGE>
-16-
as any selling Holder, such Participating Broker-Dealer, or the
managing underwriter or underwriters reasonably request in writing;
provided, however, that where Exchange Notes held by such Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h), keep
each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions
of the Exchange Notes held by Participating Broker-Dealers or the
Registrable Notes covered by the applicable Registration Statement;
provided, however, that no Issuer shall be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or
(C) subject itself to taxation in excess of a nominal dollar amount in
any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may request.
(j) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period and has provided written notice to the Company that it will be a
Participating Broker-Dealer, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the
SEC, at the sole expense of the Issuers, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being
sold thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by such a Participating Broker-Dealer, any
such Prospectus will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements
<PAGE>
-17-
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Issuers shall not be
required to amend or supplement a Registration Statement, any related
Prospectus or any document incorporated therein by reference, in the
event that, and for a period not to exceed an aggregate of 60 days in
any calendar year if, (i) an event occurs and is continuing as a result
of which the Shelf Registration would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, and (ii) (a) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the
Company or (b) the disclosure otherwise relates to a pending material
business transaction that has not yet been publicly disclosed.
(k) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Registrable Notes.
(l) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of
debt securities similar to the Notes in form and substance reasonably
satisfactory to the Company and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in
order to expedite or facilitate the registration or the disposition of
such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters
with respect to the business of the Company and the subsidiaries of the
Company (including any acquired business, properties or entity, if
applicable) and the Registration Statement, Prospectus and documents,
if any, incorporated or deemed to be incorporated by reference therein,
in each case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Notes but in
no event more onerous than those contained in the Purchase Agreement,
and confirm the same in writing if and when requested in form and
substance reasonably satisfactory to the Company; (ii) obtain the
written opinions of counsel to the Company and written updates thereof
in form, scope and substance reasonably satisfactory to the managing
underwriter or underwriters, addressed to the underwriters covering the
matters customarily covered in opinions reasonably requested in
underwritten offerings and such other matters as may be reasonably
requested by the managing underwriter or underwriters; (iii) use its
best efforts to obtain "cold comfort" letters and updates thereof in
form, scope and substance reasonably satisfactory to the managing
<PAGE>
-18-
underwriter or underwriters from the independent public accountants of
the Company (and, if necessary, any other independent public
accountants of the Company, any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings of debt securities similar to the Notes and
such other matters as reasonably requested by the managing underwriter
or underwriters as permitted by the Statement on Auditing Standards No.
72; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures no less
favorable to the sellers and underwriters, if any, than those set forth
in Section 7 hereof (or such other provisions and procedures acceptable
to Holders of a majority in aggregate principal amount of Registrable
Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents, if any). The above shall be done
at each closing under such underwriting agreement, or as and to the
extent required thereunder.
(m) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, or each such Participating Broker-Dealer,
as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant
or other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours and upon reasonable notice to the
Company, all financial and other records, pertinent corporate documents
and instruments of the Company and subsidiaries of the Company
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Company and any
of its subsidiaries to supply all information reasonably requested by
any such Inspector in connection with such Registration Statement and
Prospectus. Each Inspector shall agree in writing that it will keep the
Records confidential and that it will not disclose any of the Records
that the Company determines, in good faith, to be confidential and
notifies the Inspectors in writing are confidential unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or material omission in such Registration Statement or
Prospectus, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, or
(iii) the information in such Records has been made generally available
<PAGE>
-19-
to the public; provided, however, that prior notice shall be provided
as soon as practicable to the Company of the potential disclosure of
any information by such Inspector pursuant to clauses (i) or (ii) of
this sentence to permit the Company to obtain a protective order (or
waive the provisions of this paragraph (m)) and that such Inspector
shall take such actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the extent such
action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector.
(n) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a) hereof, as the case may
be, to be qualified under the TIA not later than the effective date of
the first Registration Statement relating to the Registrable Notes; and
in connection therewith, cooperate with the trustee under any such
indenture and the Holders of the Registrable Notes, to effect such
changes to such indenture as may be required for such indenture to be
so qualified in accordance with the terms of the TIA; and execute, and
use its commercially reasonable best efforts to cause such trustee to
execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to
enable such indenture to be so qualified in a timely manner.
(o) Comply in all material respects with all applicable rules
and regulations of the SEC and make generally available to its
securityholders with regard to any applicable Registration Statement, a
consolidated earnings statement satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than 60 days after
the end of any fiscal quarter (or 120 days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the
end of any fiscal quarter in which Registrable Notes are sold to
underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company after the
effective date of a Registration Statement, which statements shall
cover said 12-month periods.
(p) Upon consummation of the Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, in a form
customary for underwritten transactions, addressed to the Trustee for
the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, that the
Exchange Notes or Private Exchange Notes, as the case may be, the
related Guarantees and the related indenture constitute legal, valid
and binding obligations of the Issuers, enforceable against them in
accordance with their respective terms, subject to customary exceptions
and qualifications.
<PAGE>
-20-
(q) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Issuer) in exchange
for the Exchange Notes or the Private Exchange Notes, as the case may
be, the Company shall mark, or cause to be marked, on such Registrable
Notes that such Registrable Notes are being canceled in exchange for
the Exchange Notes or the Private Exchange Notes, as the case may be;
in no event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(r) Cooperate with each seller of Registrable Notes covered
by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(s) Use its commercially reasonable best efforts to take all
other steps reasonably necessary to effect the registration of the
Exchange Notes and/or Registrable Notes covered by a Registration
Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller so long as
such seller fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such seller not materially misleading.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Participat-
<PAGE>
-21-
ing Broker-Dealer, as the case may be, that, upon actual receipt of any notice
from the Company of the happening of any event of the kind described in Section
5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith
discontinue disposition of such Registrable Notes covered by such Registration
Statement or Prospectus or Exchange Notes to be sold by such Holder or
Participating Broker-Dealer, as the case may be, until such Holder's or
Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto. In the event that the Company shall give any such notice,
the Applicable Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y)
the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers (other than any underwriting
discounts or commissions) shall be borne by the Company whether or not the
Exchange Offer Registration Statement or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) reasonable fees and expenses of compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and reasonable fees and disbursements of one special
counsel for all of the sellers of Registrable Notes (exclusive of any counsel
retained pursuant to Section 7 hereof), (v) fees and disbursements of all
independent certi-
<PAGE>
-22-
fied public accountants referred to in Section 5(l)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) Securities
Act liability insurance, if the Company desires such insurance, (vii) fees and
expenses of all other Persons retained by the Issuer, (viii) internal expenses
of the Company (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(ix) the expense of any annual audit of the Company, (x) any fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange, and the obtaining of a rating of the securities, in
each case, if applicable, and (xi) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, indentures and any other documents necessary in order to comply with
this Agreement.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to
indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, the affiliates, officers, directors,
representatives, employees and agents of each such Person, and each
Person, if any, who controls any such Person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "Participant"), from and against any and all losses,
claims, damages, judgments, liabilities and expenses (including,
without limitation, the reasonable legal fees and other expenses
actually incurred in connection with any suit, action or proceeding or
any claim asserted) caused by, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in
any Registration Statement (or any amendment thereto) or Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or
caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the case of the
Prospectus in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity
with information relating to any Participant furnished to the Company
in writing by such Participant expressly for use therein and with
respect to any preliminary Prospectus, to the extent that any such
loss, claim, damage or liability arises solely from the fact that any
Participant sold Notes to a person to whom there was not sent or given
a copy of the Prospectus (as amended or supplemented) at or prior to
the written confirmation of such sale if the Company shall have
previously furnished copies thereof to the Participant in accordance
herewith and the Prospectus
<PAGE>
-23-
(as amended or supplemented) would have corrected any such untrue
statement or omission.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective affiliates,
officers, directors, representatives, employees and agents of each
Issuer and each Person who controls each Issuer within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent (but on a several, and not joint, basis) as the
foregoing indemnity from the Issuers to each Participant, but only with
reference to information relating to such Participant furnished to the
Company in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement
thereto, or any preliminary prospectus. The liability of any
Participant under this paragraph shall in no event exceed the proceeds
received by such Participant from sales of Registrable Notes or
Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be
brought or asserted against any Person in respect of which indemnity
may be sought pursuant to either of the two preceding paragraphs, such
Person (the "Indemnified Person") shall promptly notify the Persons
against whom such indemnity may be sought (the "Indemnifying Persons")
in writing, and the Indemnifying Persons, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others
the Indemnifying Persons may reasonably designate in such proceeding
and shall pay the fees and expenses actually incurred by such counsel
related to such proceeding; provided, however, that the failure to so
notify the Indemnifying Persons (i) will not relieve it from any
liability under paragraph (a) or (b) above unless and to the extent
such failure results in the forfeiture by the Indemnifying Person of
substantial rights and defenses and (ii) will not, in any event,
relieve the Indemnifying Person from any obligations to any Indemnified
Person other than the indemnification obligation provided in paragraphs
(a) and (b) above. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless
(i) the Indemnifying Persons and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Persons shall
have failed within a reasonable period of time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties)
include both any Indemnifying Person and the Indemnified Person or any
affiliate thereof and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Persons
shall not, in connection with such proceeding or separate but
<PAGE>
-24-
substantially similar related proceeding in the same jurisdiction
arising out of the same general allegations, be liable for the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly as they are incurred. Any such
separate firm for the Participants and such control Persons of
Participants shall be designated in writing by Participants who sold a
majority in interest of Registrable Notes and Exchange Notes sold by
all such Participants and shall be reasonably acceptable to the
Company, and any such separate firm for the Issuers, their affiliates,
officers, directors, representatives, employees and agents and such
control Persons of such Issuer shall be designated in writing by the
Company and shall be reasonably acceptable to the Holders.
The Indemnifying Persons shall not be liable for any
settlement of any proceeding effected without its prior written consent
(which consent shall not be unreasonably withheld or delayed), but if
settled with such consent or if there be a final non-appealable
judgment for the plaintiff for which the Indemnified Person is entitled
to indemnification pursuant to this Agreement, each of the Indemnifying
Persons agrees to indemnify and hold harmless each Indemnified Person
from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be
unreasonably withheld or delayed), effect any settlement or compromise
of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party, or indemnity could
have been sought hereunder by such Indemnified Person, unless such
settlement (A) includes an unconditional written release of such
Indemnified Person, in form and substance reasonably satisfactory to
such Indemnified Person, from all liability on claims that are the
subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by
or on behalf of such Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to,
or insufficient to hold harmless, an Indemnified Person in respect of
any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraphs, in lieu of indemnifying
such Indemnified Person thereunder and in order to provide for just and
equitable contribution, shall contribute to the amount paid or payable
by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Person or Persons on the one hand
and the Indemnified Person or Persons on the other in connection with
the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other rele-
<PAGE>
-25-
vant equitable considerations. The relative fault of the parties 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 Issuers on the one hand or such Participant or such
other Indemnified Person, as the case may be, on the other, the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any
other equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for
such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages, judgments,
liabilities and expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred
by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 7, in no event shall a Participant be required to
contribute any amount in excess of the amount by which proceeds
received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages
that such Participant has otherwise been required to pay or has paid by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or
contribution under this Section 7 shall be paid by the Indemnifying
Person to the Indemnified Person as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 7 and the representations and
warranties of the Issuers set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who
controls a Holder, the Issuer, its directors, officers, employees or
agents or any person controlling an Issuer, and (ii) any termination of
this Agreement.
(g) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the
Indemnifying Persons may otherwise have to the Indemnified Persons
referred to above.
<PAGE>
-26-
8. Rules 144 and 144A
Each of the Issuers covenants and agrees that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time such Issuer is not required to file such reports, such
Issuer will, upon the request of any Holder or beneficial owner of Registrable
Notes, make available such information necessary to permit sales pursuant to
Rule 144A under the Securities Act. Each of the Issuers further covenants and
agrees, for so long as any Registrable Notes remain outstanding that it will
take such further action as any Holder of Registrable Notes may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Notes without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Issuer.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuers have not, as of
the date hereof, and the Issuers shall not, after the date of this
Agreement, enter into any agreement with respect to any of its
securities that is inconsistent with the rights granted to the Holders
of Registrable Notes in this Agreement or otherwise conflicts with the
provisions hereof. The 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 Issuers' other issued and outstanding
securities under any such agreements. The Issuers will not enter into
any agreement with respect to any of their securities which will
<PAGE>
-27-
grant to any Person piggy-back registration rights with respect to any
Registration Statement.
(b) Adjustments Affecting Registrable Notes. The Issuers shall
not, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of
the Holders of Registrable Notes to include such Registrable Notes in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, otherwise
than with the prior written consent of (I) the Company and (II)(A) the
Holders of not less than a majority in aggregate principal amount of
the then outstanding Registrable Notes and (B) in circumstances that
would adversely affect the Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a majority in
aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; provided, however, that Section 7 and
this Section 10(c) may not be amended, modified or supplemented without
the prior written consent of each Holder and each Participating
Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Notes or Exchange Notes, as the case may
be, disposed of pursuant to any Registration Statement) affected by any
such amendment, modification or supplement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of
Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold pursuant
to such Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee)
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or
facsimile:
(i) if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of
such Holder or Participating Broker-Dealer, as the case may
be, set forth on the records of the registrar under the
Indenture.
<PAGE>
-28-
(ii) if to the Issuers, at the address as follows:
c/o Weiss, Peck & Greer, L.L.C.
One New York Plaza
New York, New York
Facsimile No.: (212) 908-0112
Attention: Wesley Lang
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; one business day after being timely delivered to a next-day air
courier; and when receipt is acknowledged by the addressee, if sent by
facsimile.
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 and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
the parties hereto, the Holders and the Participating Broker-Dealers.
(f) 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.
(g) Guarantor Execution. The Company shall cause each of the
Guarantors to execute and deliver this Agreement concurrently with the
Effective Time and the Guarantors shall execute this Agreement in
consideration of, among other things, consummation of the Merger;
provided, however, that all obligations of the Guarantors arising under
this Agreement (including indemnity obligations) shall be as of the
date first written above and all representations and warranties of the
Guarantors herein shall be as of the date first written above. In the
event of a breach by the Company of its obligations under this Section
10(g), the Company agrees that monetary damages would not be adequate
compensation for any loss or damage incurred by such breach and hereby
further agrees that, in the event of an action for specific performance
in respect of such breach, it shall waive the defense that a remedy at
law would be adequate.
<PAGE>
-29-
(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, AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
(j) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(k) Securities Held by the Company or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the
Company or its affiliates (as such term is defined in Rule 405 under
the Securities Act) shall not be counted in determining whether such
consent or approval was given by the Holders of such required
percentage.
(l) Third-Party Beneficiaries. Holders of Registrable Notes
and Participating Broker-Dealers are intended third-party beneficiaries
of this Agreement, and this Agreement may be enforced by such Persons.
(m) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a
final and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and
therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Holders on the
one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affili-
<PAGE>
-30-
ates, predecessors in interest or successors in interest with respect
to the subject matter hereof and thereof are merged herein and replaced
hereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
THE COMPANY:
ACQUISITION CORP.
By: /s/ Wesley W. Lang, Jr.
---------------------------
Name: Wesley W. Lang, Jr.
Title: President
THE GUARANTORS:
ATC BLATTERT INC., a South
Dakota corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
ATC CONSTRUCTION SERVICES INC.,
a Massachusetts corporation,
as Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Vice President
ATC ENVIRONMENTAL INC., a
Delaware corporation, as Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
<PAGE>
-2-
ATC INSYS TECHNOLOGY INC., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Chief Executive Officer
ATC MANAGEMENT INC., a South
Dakota corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: President
ATC NEW ENGLAND CORP., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: President
BING YEN & ASSOCIATES, INC., a
California corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: Chief Executive Officer
ENVIRONMENTAL WARRANTY, INC., a
Connecticut corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Vice President
<PAGE>
-3-
HYGEIA LABORATORIES INC., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
BT ALEX. BROWN INCORPORATED
By: /s/ Daniel McCready
-------------------------
Name: Daniel McCready
Title: Managing Director
<PAGE>
Exhibit B
ATC Group Services Inc.
104 East 25th Street, 10th Floor
New York, New York 10010
January 22, 1998
BT Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
This letter agreement (this "Agreement") is being executed and
delivered by ATC Group Services Inc. ("Company") pursuant to the requirements
of, and in order to induce you to enter into and perform, that certain Purchase
Agreement dated as of January 22, 1998 between Acquisition Corp. ("Acquisition")
and BT Alex. Brown Incorporated ("Initial Purchaser"). All terms used herein
which are not otherwise defined herein shall have the meaning provided therefor
in the Purchase Agreement.
1. The Company hereby represents and warrants to and agrees
with the Initial Purchaser that:
(a) the representations and warranties of the Company set
forth in the Merger Agreement are true and correct on the date hereof
and will be true and correct at the Closing Date; provided, that (this
representation (a) shall expire at the Effective Time and provided,
further, that upon the Effective Time, the Initial Purchaser and its
Affiliates waive any cause of action or exercise of right that they may
have had arising from any breach of this representation and
warranty(a).
(b) the representations and warranties of Acquisition (whether
or not made by it on a knowledge basis) set forth in the Purchase
Agreement with respect to the Company and its subsidiaries and related
matters are true and correct on the date hereof and will be true and
correct at the Closing Date (upon the Effective Time, such
representations and warranties shall be deemed to be have been made
without any knowledge basis limitation); and
<PAGE>
-2-
(c) neither the Final Memorandum nor any amendment or
supplement thereto as of the date thereof and at all times subsequent
thereto up to the Closing Date contained or contains any untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this clause (c) do not
apply to statements or omissions made in reliance upon and in
conformity with information relating solely to (x) the Initial
Purchaser furnished to Acquisition in writing by the Initial Purchaser
expressly for use in the Final Memorandum or any amendment or
supplement thereto or (y) Acquisition furnished in writing by
Acquisition expressly for use the Final Memorandum or any amendment or
supplement thereto.
(d) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Company
believes to be reliable and accurate.
2. (a) The Company and the Guarantors agree, jointly and
severally, to indemnify and hold harmless the Initial Purchaser and the
affiliates, directors, officers, agents, representatives and employees of the
Initial Purchaser, and each other person, if any, who controls the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which the Initial Purchaser or any such affiliate, director,
officer, agent, representative, employee or controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Memorandum or any amendment or
supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or any
Guarantor or based upon written information furnished by or on behalf
of the Company or any Guarantor filed in any jurisdiction in order to
qualify the Securities under the securities or "Blue Sky" laws thereof
or filed with any securities association or securities exchange (each,
an "Application"); or
<PAGE>
-3-
(ii) the omission or alleged omission to state, in any
Memorandum or any amendment or supplement thereto, or any Application,
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; or
(iii) any breach of any representation, warranty or agreement
of the Company or any Guarantor contained in this Agreement,
and will jointly and severally reimburse, as incurred, the Initial Purchaser and
each such affiliate, director, officer, agent, representative and employee and
each such controlling person for any legal or other expenses reasonably incurred
by the Initial Purchaser, such affiliate, director, officer, agent,
representative or employee or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
however, that the Company and the Guarantors will not be liable (i) in any such
case to the extent that any such loss, claim, damage, or liability arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any Memorandum or any amendment or supplement thereto,
or any Application, in reliance upon and in conformity with written information
furnished to Acquisition by the Initial Purchaser specifically for use therein
or (ii) with respect to the Preliminary Memorandum, to the extent that any such
loss, claim, damage or liability arises solely from the fact that the Initial
Purchaser sold Securities to a person to whom there was not sent or given a copy
of the Final Memorandum (as amended or supplemented) at or prior to the written
confirmation of such sale if Acquisition shall have previously furnished copies
thereof to the Initial Purchaser in accordance with the Purchase Agreement and
the Final Memorandum (as amended or supplemented) would have corrected any such
untrue statement or omission. This indemnity agreement will be in addition to
any liability that the Company and the Guarantors may otherwise have to the
indemnified parties. The Company and the Guarantors shall not be liable under
this subsection (a) for any settlement of any claim or action effected without
their consent, which consent shall not be unreasonably withheld or delayed.
The Initial Purchaser shall not, without the prior written
consent of the Company and the Guarantors, effect any settlement or compromise
of any pending or threatened proceeding in respect of which the Company and the
Guarantors are or
<PAGE>
-4-
could have been a party, or indemnity could have been sought hereunder by the
Company and the Guarantors, unless such settlement (A) includes an unconditional
written release of the Company and the Guarantors, in form and substance
reasonably satisfactory to the Company and the Guarantors, from all liability on
claims that are the subject matter of such proceeding and (B) does not include
any statement as to an admission of fault, culpability or failure to act by or
on behalf of the Company or the Guarantors.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Company and the Guarantors, its respective affiliates, directors,
officers, agents, representatives and employees and each other person, if any,
who controls the Company and the Guarantors within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act against any losses, claims, damages or
liabilities to which the Company or any Guarantor or any such affiliate,
director, officer, agent, representative, employee or controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendments or supplement
thereto, or any Application or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in any Memorandum or any
amendment or supplement thereto, or any Application, or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information concerning the Initial Purchaser furnished to Acquisition by the
Initial Purchaser specifically for use therein; and, subject to the limitation
set forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses reasonably incurred by the Company or any Guarantor or
any such affiliate, director, officer, agent, representative, employee or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability that the Initial Purchaser may otherwise have to
the indemnified parties. The Initial Purchaser shall not be liable under this
Section 2 for any settlement of any claim or action effected without its
consent, which consent shall not be unreasonably withheld or delayed.
<PAGE>
-5-
The Company and the Guarantors shall not, without the prior
written consent of the Initial Purchaser, effect any settlement or compromise of
any pending or threatened proceeding in respect of which the Initial Purchaser
is or could have been a party, or indemnity could have been sought hereunder by
the Initial Purchaser, unless such settlement (A) includes an unconditional
written release of the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser, from all liability on claims that are the
subject matter of such proceeding and (B) does not include any statement as to
an admission of fault, culpability or failure to act by or on behalf of the
Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 2 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 2, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 2, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under subsection (a) or (b) above unless
and to the extent such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in subsections (a) and (b)
above. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
<PAGE>
-6-
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 2 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Initial Purchaser in the case
subsection (a) of this Section 2 or the Company in the case of subsection (b) of
this Section 2, representing the indemnified parties under such subsection (a)
or subsection (b), as the case may be, who are parties to such action or
actions) or (ii) the indemnifying party has authorized in writing the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the prior
written consent of the indemnifying party (which consent shall not be
unreasonably withheld), unless such indemnified party waived in writing its
rights under this Section 2, in which case the indemnified party may effect such
a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided
for in the preceding subsections of this Section 2 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative
<PAGE>
-7-
benefits but also the relative fault of the indemnifying party or parties on the
one hand and the indemnified party on the other in connection with the
statements or omissions or alleged statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof). The
relative benefits received by the Company and the Guarantors on the one hand and
the Initial Purchaser on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (before deducting expenses) received by
Acquisition bear to the total discounts and commissions received by the Initial
Purchaser. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Guarantors on the one
hand, or the Initial Purchaser on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission or alleged statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company, the Guarantors and
the Initial Purchaser agree that it would not be just and equitable if the
amount of such contribution were determined by pro rata or per capita allocation
or by any other method of allocation that does not take into account the
equitable considerations referred to in the first sentence of this subsection
(d). Notwithstanding any other provision of this subsection (d), the Initial
Purchaser shall not be obligated to make contributions hereunder that in the
aggregate, together with contributions made by it under the Purchase Agreement,
exceed the total discounts, commissions and other compensation received by the
Initial Purchaser under the Purchase Agreement, less the aggregate amount of any
damages that the Initial Purchaser has otherwise been required to pay by reason
of the untrue or alleged untrue statements or the omissions or alleged omissions
to state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this subsection (d), each affiliate,
director, officer, agent, representative and employee of the Initial Purchaser
and each person, if any, who controls the Initial Purchaser within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Initial Purchaser, and each affiliate, director,
officer, agent, representative and employee of the Company and the Guarantors
and each person, if any, who controls the Company or a Guarantor within the
meaning of Section 15 of
<PAGE>
-8-
the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company and the Guarantors.
3. The representations, warranties, agreements, covenants,
indemnities and other statements of the Company and the Guarantors and its
officers set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall remain in full force and effect
regardless of (i) any investigation made by or on behalf of the Initial
Purchaser or any controlling person of the Initial Purchaser, (ii) delivery of
and payment for the Securities and (iii) any termination or cancellation of the
Purchase Agreement.
4. This Agreement may not be amended, modified or supplemented
except by a writing specifically referring hereto which is signed by both the
Initial Purchaser and the Company.
5. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflicts of laws.
6. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7. All communications hereunder shall be in writing and, if
sent to the Initial Purchaser, shall be mailed or delivered or telecopied and
confirmed in writing to BT Alex. Brown Incorporated, One Bankers Trust Plaza,
130 Liberty Street, New York, New York 10006, Attention: Corporate Finance
Department, and if sent to the Company or any Guarantor, shall be mailed,
delivered or telecopied and confirmed in writing to the Company or such
Guarantor at 104 East 25th Street, 10th Floor, New York, New York 10010,
Attention: President.
8. This Agreement shall inure to the benefit of and be binding
upon the Initial Purchaser, the Company, the Guarantors and their respective
successors, assigns and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the Initial Purchaser, the Company, the Guarantors and their
respective successors, assigns and legal representatives and
<PAGE>
-9-
for the benefit of no other person except that (i) the indemnities of the
Company and the Guarantors contained in this Agreement shall also be for the
benefit of the affiliates, directors, officers, agents, representatives and
employees of the Initial Purchaser and any person or persons who control the
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
this Agreement shall also be for the benefit of the affiliates, directors,
officers, agents, representatives and employees of the Company and the Guarantor
and any person or persons who control the Company within the meaning of Section
15 of the Act of Section 20 of the Exchange Act. No purchaser of any of the
Securities from the Initial Purchaser will be deemed a successor because of such
purchase.
<PAGE>
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among the
Company and the Initial Purchaser.
Very truly yours,
THE COMPANY:
ATC GROUP SERVICES INC.,
on behalf of itself and
each of the Guarantors
By: /s/ Nicholas J. Malino
--------------------------
Name: Nicholas J. Malino
Title: President
Accepted and agreed to
as of the date first
above written.
THE INITIAL PURCHASER:
BT ALEX. BROWN INCORPORATED
By: /s/ Daniel McCready
---------------------------
Name: Daniel McCready
Title: Managing Director
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION OF
ATC GROUP SERVICES INC.
FIRST: The name of the Corporation is ATC Group Services Inc.
SECOND: The registered office of the Corporation in the State of Delaware is
located at 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The nature of the business and the objects and purposes proposed to be
transacted, promoted and carried on are to do any or all things herein
mentioned, as fully and to the same extent as natural persons might or could
do, and in any part of the world, viz:
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 Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 10,000 shares of Common Stock, par
value $.01 per share.
FIFTH: The name and address of the incorporator is as follows:
Rita J. Deakins
410 South State Street
Dover, Delaware 19901
SIXTH: The Directors shall have power to make and to alter or amend the
By-Laws; to fix the amount to be reserved as working capital, and to authorize
and cause to be executed, mortgages and liens without limit as to the amount,
upon the property and franchise of this Corporation.
With the consent in writing, and pursuant to a vote of the holders of
a majority of the capital stock issued and outstanding, the Directors shall
have authority to dispose, in any manner, of the whole property of this
corporation.
<PAGE>
The By-Laws shall determine whether and to what extent the account and
books of this corporation, or any of them, shall be open to the inspection of
the stockholders; no stockholder shall have any right of inspecting any
account, or book, or document of this Corporation, except as conferred by the
law or the By-Laws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their meetings
and keep the books, documents and papers of the corporation outside of the
State of Delaware, at such places as may be, from time to time, designated by
the By-Laws or by resolution of the stockholders or directors, except as
otherwise required by the laws of Delaware.
It is the intention that the objects, purposes and powers specified in
the THIRD paragraph hereof shall, except where otherwise specified in said
paragraph, be nowise limited or restricted by reference to or inference from
the terms of any other clause or paragraph in this certificate of
incorporation, but that the objects, purposes and powers specified in the THIRD
paragraph and in each of the clauses or paragraphs of this charter shall be
regarded as independent objects, purposes and powers.
SEVENTH: No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
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 ss. 174 of the General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
2
<PAGE>
EXHIBIT 3.2
ATC GROUP SERVICES
f/k/a ATC ENVIRONMENTAL INC.
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be at such place
within the State of Delaware as the board of directors may, from time to time,
determine.
Section 2. 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. All meetings of the stockholders for the election
of directors shall be held in the State of New York, at such place as may be
fixed, from time to time by the board of directors, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the board of directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on
the fifteenth day of the fifth month following the end of each fiscal year or
as soon thereafter as practicable, as shall be designated from time to time by
the board of director and stated in the notice of the meeting, at which they
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating
place, date and hour of the meeting shall be given
<PAGE>
to each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting.
Section 4. 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 stockholder, 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 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chairman or president and
shall be called by the president or secretary at the request in writing of a
majority of the board of directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten nor more than sixty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of
2
<PAGE>
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
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 business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, of
the certificate of incorporation or other provisions of the by-laws, a
different vote is required in which case such express provision shall govern
and control the decision of such question.
Section 10. 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 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.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
3
<PAGE>
Section 12. At each meeting of the stockholders, the chairman
of the board or, in his absence or inability to act, any person chosen by the
majority of those stockholders present in person or represented by proxy shall
act as chairman of the meeting. The secretary or, in his absence or inability
to act, any person appointed by the chairman of the meeting shall act as
secretary of the meeting and keep the minutes thereof.
Section 13. The board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting shall appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors
shall make a report in writing of any challenge, question or matter determined
by them and shall execute a certificate of any fact found by them. No director
or candidate for the office of director shall act as an inspector of an
election of directors. Inspectors need not be stockholders.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the
whole board shall be not less than two nor more than nine. The number of
directors shall be determined by resolution of the board of directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
4
<PAGE>
Section 2. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten
percent of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed
by 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.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held immediately following the annual meeting of
stockholders at the place of such annual meeting of stockholders and no notice
of such meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting, provided a quorum shall be present. In the
event such meeting is not held immediately following the annual meeting of
stockholders at the place of such annual meeting of 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.
5
<PAGE>
Section 6. Regular meetings of the board of directors may be
held without notice at such time and at such place as shall from time to time
be determined by the board.
Section 7. Special meetings of the board may be called by the
president on one day's notice to 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 (one
director in the event that there be a single director in office).
Section 8. At all meetings of the board a majority of the
directors 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. 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. 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 be taken
without a meeting, if all members of the board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, 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 in a meeting shall
constitute presence in person at the meeting.
Section 11. No contract or other transaction between this
corporation and any other corporation shall be impaired, affected or
invalidated, nor shall any director be liable in any way by reason of the fact
that any one or more
6
<PAGE>
of the directors of this corporation is or are interested in, or is a director
or officer, or are directors of such other corporation, provided that such facts
are disclosed or made known to the board of directors.
Any director, personally and individually, may be a party to
or may be interested in any contract or transaction of this corporation, and no
director shall be liable in any way by reason of such interest, provided that
the fact of such interest be disclosed or made known to the board of directors,
and provided that the board of directors shall authorize, approve or ratify
such contract or transaction by the vote (not counting the vote of any such
director) of a majority of a quorum, notwithstanding the presence of any such
director at the meeting at which such action is taken. Such director or
directors may be counted in determining the presence of a quorum at such
meeting. This Section shall not be construed to impair or invalidate or in any
way affect any contract or other transaction which would otherwise be valid
under the law (common, statutory or otherwise) applicable thereto.
COMMITTEES OF DIRECTORS
Section 12. 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 one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at a meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors, shall have and may
exercise all the powers and authority 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;
but no such committee shall have the power or authority in reference to
amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the
7
<PAGE>
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a
stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or 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
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of 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
8
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States mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under
the provisions of the statutes or of the certificate of incorporation or of
these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a secretary and a treasurer.
The board of directors may also choose a chairman, one or more vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. 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 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.
9
<PAGE>
THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE PRESIDENT
Section 6. In the event that the corporation elects a
Chairman of the board of directors, he shall, if present, at each meeting of
the stockholders and of the board and shall be an ex officio member of all
committees of the board. He shall perform all duties incident to the office of
chairman of the board and such other duties as may from time to time be
assigned to him by the board.
The president shall be the chief executive officer and chief
operating officer of the Corporation and shall have general and active
supervision and direction over the business operations and affairs of the
Corporation and over its several officers, agents and employees, subject,
however, to the direction and the control of the board of directors. In general
the president shall have such other powers and shall perform such other duties
as usually pertaining to office of president or as from time to time may be
assigned to him by the board or these by-laws.
Section 7. The president shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. In the absence of the president or in the event of
his inability or refusal to act, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings
10
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of the corporation and of the board of directors in a book to be kept for that
purpose and shall perform like duties for the standing committees when required.
He shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the board of directors, and shall perform such other
duties as may be prescribed by the board of directors or president, under whose
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have the authority to affix
the same to any instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the power of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall
give the corporation a bond (which shall be renewed every six years) in such
sum and with such surety or sureties as shall be satisfactory to the board of
11
<PAGE>
directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the corporation.
Section 14. The assistant treasurer, or if there shall be
more than one, the assistant treasurers in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman or vice-chairman of the board of directors or the president or
a vice-president and the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation.
If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate which the corporation shall issue to represent such
class or series of stock, a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and
12
<PAGE>
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its sole discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give, the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against
the corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of 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
13
<PAGE>
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of 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 nor 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, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 3. 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.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. 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, subject to the provisions of the certificate of
incorporation.
Section 2. 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 or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purposes as the directors shall think conducive to the interest
of
14
<PAGE>
the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall end on
February 28 of each year.
SEAL
Section 6. 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 reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed
or new by-laws may be adopted by the stockholders or by the board of directors,
at any meeting of the stockholders or of the board of directors if notice of
such alteration, amendment, repeal or adoption of new by-laws be contained in
the notice of such special meeting. The by-laws may also be amended by the
stockholders pursuant to Section 11 of Article II without prior notice of
alteration, amendment, repeal or adoption of new by-laws. The power to adopt,
amend or repeal by-laws by the board of directors shall not divest or limit the
power of the stockholders to adopt, amend or repeal by-laws.
15
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ARTICLE IX
INDEMNIFICATION
The officers and directors of the corporation shall be
entitled to indemnification to the maximum extent permitted by Delaware Law.
16
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EXHIBIT 4.1
ACQUISITION CORP.,
as Issuer
and
STATE STREET BANK AND TRUST COMPANY
as Trustee
-------------------------
INDENTURE
Dated as of January 29, 1998
----------------------
up to $150,000,000
12% Senior Subordinated Notes due 2008, Series A
12% Senior Subordinated Notes due 2008, Series B
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1)...................................................7.10
(a)(2)...................................................7.10
(a)(3)...................................................N.A.
(a)(4)...................................................N.A.
(a)(5)...................................................7.10; 7.11
(b)......................................................7.08; 7.10; 11.02
(c)......................................................N.A.
311(a)......................................................7.11
(b)......................................................7.11
(c)......................................................N.A.
312(a)......................................................2.05
(b).....................................................11.03
(c).....................................................11.03
313(a)......................................................7.06
(b)(1)...................................................7.06
(b)(2)...................................................7.06
(c)......................................................7.06; 11.02
(d)......................................................7.06
314(a)......................................................4.06; 4.08; 11.02
(b)......................................................N.A.
(c)(1)...................................................7.02; 11.04
(c)(2)...................................................7.02; 11.04
(c)(3)...................................................N.A.
(d)......................................................N.A.
(e).....................................................11.05
(f)......................................................N.A.
315(a)......................................................7.01(b)
(b)......................................................7.05; 11.02
(c)......................................................7.01(a)
(d)......................................................6.05; 7.01(c)
(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)......................................................9.05
317(a)(1)......................................................6.08
(a)(2)...................................................6.09
(b)......................................................2.04
318(a).....................................................11.01
(c).....................................................11.01
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
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Page
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Incorporation by Reference of TIA.............................32
SECTION 1.03. Rules of Construction.........................................32
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating...............................................33
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount......34
SECTION 2.03. Registrar and Paying Agent....................................36
SECTION 2.04. Paying Agent To Hold Assets in Trust..........................36
SECTION 2.05. Holder Lists..................................................37
SECTION 2.06. Transfer and Exchange.........................................37
SECTION 2.07. Replacement Notes.............................................38
SECTION 2.08. Outstanding Notes.............................................38
SECTION 2.09. Treasury Notes................................................39
SECTION 2.10. Temporary Notes...............................................39
SECTION 2.11. Cancellation..................................................40
SECTION 2.12. Defaulted Interest............................................40
SECTION 2.13. CUSIP Number..................................................41
SECTION 2.14. Deposit of Monies.............................................41
SECTION 2.15. Restrictive Legends...........................................42
SECTION 2.16. Book-Entry Provisions for Global Security.....................42
SECTION 2.17. Special Transfer Provisions...................................44
SECTION 2.18. Liquidated Damages Under Registration Rights Agreement........47
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee............................................47
SECTION 3.02. Selection of Notes To Be Redeemed.............................48
SECTION 3.03. Optional Redemption...........................................48
SECTION 3.04. Notice of Redemption..........................................49
SECTION 3.05. Effect of Notice of Redemption................................50
SECTION 3.06. Deposit of Redemption Price............................/......51
SECTION 3.07. Notes Redeemed in Part........................................51
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<PAGE>
SECTION 3.08. Special Redemption Provisions Prior to Effectiveness of
the Merger..................................................................51
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes..............................................52
SECTION 4.02. Maintenance of Office or Agency...............................52
SECTION 4.03. Corporate Existence...........................................52
SECTION 4.04. Payment of Taxes and Other Claims.............................53
SECTION 4.05. Maintenance of Properties and Insurance.......................53
SECTION 4.06. Compliance Certificate; Notice of Default.....................54
SECTION 4.07. Compliance with Laws..........................................55
SECTION 4.08. Reports to Holders............................................55
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.......................55
SECTION 4.10. Limitation on Restricted Payments.............................56
SECTION 4.11. Limitation on Transactions with Affiliates....................59
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness...........60
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries......................................................61
SECTION 4.14. [Intentionally Omitted].......................................62
SECTION 4.15. Change of Control.............................................62
SECTION 4.16. Limitation on Asset Sales.....................................65
SECTION 4.17. Limitation on Preferred Stock of Subsidiaries.................69
SECTION 4.18. Limitation on Liens...........................................69
SECTION 4.19. Conduct of Business...........................................70
SECTION 4.20. Additional Subsidiary Guarantees..............................70
SECTION 4.21. Prohibition on Incurrence of Senior Subordinated Debt..........71
SECTION 4.22. Special Covenants Prior to Effectiveness of the Merger.........71
SECTION 4.23. Certain Net Proceeds to be Held by the Trustee.................72
SECTION 4.24. Guarantees of Certain Indebtedness.............................73
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets......................74
SECTION 5.02. Successor Corporation Substituted.............................76
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ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.............................................76
SECTION 6.02. Acceleration..................................................78
SECTION 6.03. Other Remedies................................................79
SECTION 6.04. Waiver of Past Defaults.......................................80
SECTION 6.05. Control by Majority...........................................80
SECTION 6.06. Limitation on Suits...........................................80
SECTION 6.07. Right of Holders To Receive Payment...........................81
SECTION 6.08. Collection Suit by Trustee....................................81
SECTION 6.09. Trustee May File Proofs of Claim..............................82
SECTION 6.10. Priorities....................................................82
SECTION 6.11. Undertaking for Costs.........................................83
SECTION 6.12. Restoration of Rights and Remedies............................83
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.............................................83
SECTION 7.02. Rights of Trustee.............................................85
SECTION 7.03. Individual Rights of Trustee..................................86
SECTION 7.04. Trustee's Disclaimer..........................................86
SECTION 7.05. Notice of Default.............................................87
SECTION 7.06. Reports by Trustee to Holders.................................87
SECTION 7.07. Compensation and Indemnity....................................88
SECTION 7.08. Replacement of Trustee........................................89
SECTION 7.09. Successor Trustee by Merger, Etc..............................90
SECTION 7.10. Eligibility; Disqualification.................................90
SECTION 7.11. Preferential Collection of Claims Against the Company.........91
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations..........................91
SECTION 8.02. Application of Trust Money....................................94
SECTION 8.03. Repayment to the Company......................................94
SECTION 8.04. Reinstatement.................................................95
SECTION 8.05. Acknowledgment of Discharge by Trustee........................95
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders....................................96
SECTION 9.02. With Consent of Holders.......................................96
SECTION 9.03. Effect on Senior Indebtedness and Guarantor Senior
Indebtedness................................................................97
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SECTION 9.04. Compliance with TIA...........................................97
SECTION 9.05. Revocation and Effect of Consents.............................98
SECTION 9.06. Notation on or Exchange of Notes..............................98
SECTION 9.07. Trustee To Sign Amendments, Etc...............................99
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Indebtedness Upon
Effectiveness of the Merger.................................................99
SECTION 10.02. Suspension of Payment When Senior Indebtedness
is in Default..............................................................100
SECTION 10.03. Notes Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of Company......101
SECTION 10.04. Holders To Be Subrogated to Rights of Holders of
Senior Indebtedness........................................................103
SECTION 10.05. Obligations of the Company Unconditional.....................103
SECTION 10.06. Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice............................................105
SECTION 10.07. Application by Trustee of Assets Deposited with It...........105
SECTION 10.08. No Waiver of Subordination Provisions........................106
SECTION 10.09. Holders Authorize Trustee To Effectuate
Subordination of Notes.....................................................106
SECTION 10.10. Right of Trustee to Hold Senior Indebtedness.................107
SECTION 10.11. This Article Ten Not To Prevent Events of Default............107
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness...............................................................108
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls................................................108
SECTION 11.02. Notices.....................................................108
SECTION 11.03. Communications by Holders with Other Holders................109
SECTION 11.04. Certificate and Opinion as to Conditions Precedent..........110
SECTION 11.05. Statements Required in Certificate or Opinion...............110
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar...................111
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SECTION 11.07. Legal Holidays..............................................111
SECTION 11.08. Governing Law...............................................111
SECTION 11.09. No Adverse Interpretation of Other Agreements...............111
SECTION 11.10. No Personal Liability.......................................111
SECTION 11.11. Successors..................................................112
SECTION 11.12. Duplicate Originals.........................................112
SECTION 11.13. Severability................................................112
ARTICLE TWELVE
GUARANTEE OF NOTES
SECTION 12.01. Unconditional Guarantee.....................................112
SECTION 12.02. Limitations on Guarantees...................................114
SECTION 12.03. Execution and Delivery of Guarantee.........................115
SECTION 12.04. Release of a Subsidiary Guarantor...........................115
SECTION 12.05. Waiver of Subrogation.......................................116
SECTION 12.06. No Set-Off..................................................117
SECTION 12.07. Obligations Absolute........................................117
SECTION 12.08. Obligations Continuing......................................118
SECTION 12.09. Obligations Not Reduced.....................................118
SECTION 12.10. Obligations Reinstated......................................118
SECTION 12.11. Obligations Not Affected....................................119
SECTION 12.12. Waiver......................................................120
SECTION 12.13. No Obligation To Take Action Against the Company............120
SECTION 12.14. Dealing with the Company and Others.........................121
SECTION 12.15. Default and Enforcement.....................................121
SECTION 12.16. Amendment, Etc..............................................122
SECTION 12.17. Acknowledgment..............................................122
SECTION 12.18. Costs and Expenses..........................................122
SECTION 12.19. No Merger or Waiver; Cumulative Remedies....................122
SECTION 12.20. [Intentionally omitted].....................................122
SECTION 12.21. Guarantee in Addition to Other Obligations..................123
SECTION 12.22. Severability................................................123
SECTION 12.23. Successors and Assigns......................................123
ARTICLE THIRTEEN
SUBORDINATION OF GUARANTEE
SECTION 13.01. Obligations of Guarantors Subordinated to Guarantor
Senior Indebtedness........................................................123
SECTION 13.02. Suspension of Guarantee Obligations When Guarantor
Senior Indebtedness is in Default..........................................124
-vi-
<PAGE>
SECTION 13.03. Guarantee Obligations Subordinated to Prior Payment
of All Guarantor Senior Indebtedness on Dissolution, Liquidation or
Reorganization of Such Subsidiary Guarantor................................126
SECTION 13.04. Holders of Guarantee Obligations To Be Subrogated to
Rights of Holders of Guarantor Senior Indebtedness.........................127
SECTION 13.05. Obligations of the Subsidiary Guarantors'
Unconditional..............................................................128
SECTION 13.06. Trustee Entitled To Assume Payments Not Prohibited
in Absence of Notice.......................................................130
SECTION 13.07. Application by Trustee of Assets Deposited with It..........130
SECTION 13.08. No Waiver of Subordination Provisions.......................131
SECTION 13.09. Holders Authorize Trustee To Effectuate Subordination
of Guarantee Obligations...................................................131
SECTION 13.10. Right of Trustee to Hold Guarantor Senior Indebtedness......132
SECTION 13.11. No Suspension of Remedies...................................132
SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor
Senior Indebtedness........................................................133
SIGNATURES..................................................................S-1
EXHIBIT A - Form of Series A Note.................................A-1
Exhibit B - Form of Series B Note.................................B-1
Exhibit C - Form of Legend for Global Notes.......................C-1
Exhibit D - Form of Certificate To Be Delivered
in Connection with Transfers to Non-QIB
Accredited Investors..................................D-1
Exhibit E - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant to
Regulation S..........................................E-1
Exhibit F - Form of Guarantee.....................................F-1
-vii-
<PAGE>
INDENTURE, dated as of January 29, 1998, among Acquisition
Corp., a Delaware corporation (the "Company") and State Street Bank and Trust
Company, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of
12% Senior Subordinated Notes due 2008, Series A, and 12% Senior Subordinated
Notes due 2008, Series B, to be issued in exchange for the 12% Senior
Subordinated Notes due 2008, Series A, pursuant to the Registration Rights
Agreement (as defined herein) and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary to
make the Notes (as defined), when duly issued and executed by the Company, and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding agreement of the Company, have been
done.
Each party hereto agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders (as defined)
of the Company's 12% Senior Subordinated Notes due 2008, Series A and Series B.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Subsidiary of
such Person or at the time it merges or consolidates with such Person or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person, and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Subsidiary of such
Person or such acquisition, merger or consolidation.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
power to
<PAGE>
-2-
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Affiliate Transaction" has the meaning provided in Section
4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company or
any Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company, or
shall be merged with or into the Company or any Subsidiary of the Company, or
(b) the acquisition by the Company or any Subsidiary of the Company of the
assets of any Person (other than a Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprises any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Subsidiary
of the Company of (a) any Capital Stock of any Subsidiary of the Company; or (b)
any other property or assets of the Company or any Subsidiary of the Company
other than in the ordinary course of business; provided, however, that Asset
Sales shall not include (i) any transaction or series of related transactions
for which the Company or its Subsidiaries receive aggregate consideration of
less than $3.0 million in any consecutive 12-month period, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Section 5.01 or any disposition that
constitutes a Change of Control, (iii) disposals or replacements of obsolete or
outdated equipment in the ordinary course of business, (iv) the sale or
discount, in each case without recourse (other than recourse for a breach of a
representation or warranty), of accounts receivable arising in the ordinary
course of business, but only in connection with the compromise
<PAGE>
-3-
or collection thereof in the ordinary course of business and not as part of a
financing transaction, and (v) the sale, lease, conveyance, disposition or other
transfer by the Company or any Subsidiary of the Company of assets or property
to one or more Wholly Owned Subsidiaries of the Company in connection with
Investments permitted under Section 4.10.
"ATC" means ATC Group Services Inc., a Delaware corporation.
"Authenticating Agent" has the meaning provided in Section
2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal, state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banking institutions in the city of New York or the city
in which the principal office of the Trustee is located are required or
authorized by law or other governmental action to be closed.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether voting or nonvoting) of corporate stock,
including each class
<PAGE>
-4-
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no
more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in money market funds which invest substantially all their assets in securities
of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture), other than to a Permitted Holder or a Group controlled by a
Permitted Holder; (ii) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of this
Indenture); (iii) (x) prior to the Initial Public Equity Offering, any Person or
Group other than a Permitted Holder or a Group controlled by a Permitted Holder
shall become
<PAGE>
-5-
the owner, directly or indirectly, beneficially or of record, of shares
representing a percentage of the aggregate ordinary voting power represented by
the issued and outstanding Capital Stock of the Company ("Voting Power") greater
than the aggregate percentage of Voting Power owned by Permitted Holders
together with any Group controlled by Permitted Holders, (y) prior to the
Initial Public Equity Offering, the percentage of Voting Power owned by
Permitted Holders is less than 40% or (z) after the Initial Public Equity
Offering, any Person or Group other than a Person or Group controlled by a
Permitted Holder owns, directly or indirectly, beneficially or of record, shares
representing more than 35% Voting Power; or (iv) the replacement of a majority
of the Board of Directors of the Company from the directors who constituted the
Board of Directors of the Company on the Issue Date, and such replacement shall
not have been approved by a vote of at least a majority of the Board of
Directors of the Company then still in office who either were members of such
Board of Directors on the Issue Date or whose election as a member of such Board
of Directors was previously so approved.
"Change of Control Offer" has the meaning provided in Section
4.15.
"Change of Control Payment Date" has the meaning provided in
Section 4.15.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all
shares, interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of such Person's common stock,
whether outstanding on the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor and also includes for the purposes of any provision contained
herein and required by the TIA any other obligor on the Notes.
"Consolidated EBITDA" means, with respect to any Person for
any period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes of such
<PAGE>
-6-
Person and its Subsidiaries paid or accrued in accordance with GAAP for such
period (other than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to sales or dispositions
outside the ordinary course of business), (B) Consolidated Interest Expense, (C)
Consolidated Non-cash Charges, less any non-cash items increasing Consolidated
Net Income for such period, all as determined on a consolidated basis for such
Person and its Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person during the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including any Pro Forma
Adjustments) (provided that such Consolidated EBITDA shall be included only to
the extent includable pursuant to the definition of "Consolidated Net Income")
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition
(including the incur-
<PAGE>
-7-
rence, assumption or liability for any such Acquired Indebtedness) occurred on
the first day of the Four Quarter Period. If such Person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Subsidiary of such Person had directly
incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining the
denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage
Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date; (2)
if interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Swap Obligations, shall
be deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP, including without limitation,
(a) any amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
<PAGE>
-8-
Person and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP, minus amortization or write-off of deferred
financing costs.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate net income (or loss) of such Person and its
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom (a) gains
(and losses) on an after-tax effected basis from Asset Sales (without regard to
the $3 million limitation in the definition thereof) or abandonments or reserves
relating thereto, (b) items classified as extraordinary or nonrecurring gains or
losses including, without limitation, restructuring costs related to facilities
and/or operating line closings) on an after tax effected basis, (c) the net
income or loss of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Subsidiary of the referent Person or is
merged or consolidated with the referent Person or any Subsidiary of the
referent Person, (d) the net income (but not loss) of any Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income or loss of any other Person,
other than a Subsidiary of the referent Person, except to the extent (in the
case of net income) of cash dividends or distributions paid to the referent
Person, or to a Wholly Owned Subsidiary of the referent Person, by such other
Person, (f) any restoration to income of any contingency reserve of an
extraordinary, non-recurring or unusual nature, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets and (i) any amortization or write-off of deferred financing
costs.
"Consolidated Net Worth" means, with respect to any Person,
the consolidated stockholders' equity of such Person, determined on a
consolidated basis in accordance with GAAP, less (without duplication) amounts
attributable to Disqualified Capital Stock of such Person.
<PAGE>
-9-
"Consolidated Non-cash Charges" means, with respect to any
Person for any period, the aggregate (A) depreciation, (B) amortization, (C)
LIFO charges, (D) the amount of any restructuring reserve or charge, and (E)
other non-cash charges of such Person and its Subsidiaries reducing Consolidated
Net Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding for purposes of clause (C)
any such charges which require an accrual of or a reserve for cash charges for
any future period).
"consolidation" means, with respect to any Person, the
consolidation of the accounts of the Subsidiaries of such Person with those of
such Person, all in accordance with GAAP. The term "consolidated" has a
correlative meaning to the foregoing.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at Two International Place, Boston, Massachusetts 02110.
"Covenant Defeasance" has the meaning set forth in Section
8.01.
"Credit Agreement" means the Credit Agreement dated as of
January 29, 1998 among Holdings, the Company, the lenders party thereto in their
capacities as lenders thereunder and Bankers Trust Company, as agent, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder or adding Subsidiaries
of the Company as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Subsidiary of the Company against fluctuations in
currency values.
<PAGE>
-10-
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be, an Event
of Default.
"Defeasance Payment" means any distribution from any
defeasance trust described under Section 8.01.
"Depository" means The Depository Trust Company, its nominees
and successors.
"Designated Senior Indebtedness" means (i) Indebtedness under
or in respect of the Credit Agreement and (ii) any other Indebtedness
constituting Senior Indebtedness or Guarantor Senior Indebtedness which, at the
time of determination, has an aggregate principal amount of at least $2.0
million and is specifically designated in the instrument evidencing such Senior
Indebtedness or Guarantor Senior Indebtedness as "Designated Senior
Indebtedness" or "Guarantor Senior Indebtedness" by the Company or the
applicable Subsidiary Guarantor, as the case may be.
"Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (other than as a result of a Change of Control) on or prior to the final
maturity of the Notes.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" means the 12% Senior Subordinated Notes due
2008, Series B to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.02, a
registration rights agreement substantially identical to the Registration Rights
Agreement.
<PAGE>
-11-
"Exchange Offer" has the meaning provided in the Registration
Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and
its Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the Issue Date, until such amounts are repaid.
"fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company.
"Foreign Subsidiary" means any Subsidiary of the Company
organized under the laws of a country or jurisdiction other than the United
States, any state or territory thereof or the District of Columbia.
"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 may be approved by a significant segment of
the accounting profession of the United States, which are in effect on the Issue
Date.
"Global Note" has the meaning provided in Section 2.01.
"guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or
<PAGE>
-12-
to protect such obligee against loss in respect thereof (in whole or in part)
(but if in part, only to the extent thereof); provided, however, that the term
"guarantee" shall not include (A) endorsements for collection or deposit in the
ordinary course of business and (B) guarantees (other than guarantees of
Indebtedness) by the Company in respect of assisting one or more Subsidiaries in
the ordinary course of their respective businesses, including without limitation
guarantees of trade obligations and operating leases, on ordinary business
terms. The term "guarantee" used as a verb has a corresponding meaning.
"Guarantee" means the guarantee of the obligations under this
Indenture and the Notes by each of the Subsidiary Guarantors as set forth in
Article Twelve.
"Guarantor Senior Indebtedness" means, with respect to any
Subsidiary Guarantor, the principal of, premium, if any, and interest (including
any interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any Indebtedness of
such Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Guarantor Senior Indebtedness" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations (including guarantees thereof) of every nature
of a Subsidiary Guarantor under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations (including guarantees thereof) and (z) all obligations (including
guarantees thereof) under Currency Agreements, in each case whether outstanding
on the Issue Date or thereafter incurred. Notwithstanding the foregoing,
"Guarantor Senior Indebtedness" shall not include (i) any Indebtedness of a
Subsidiary Guarantor to a Subsidiary of such Subsidiary Guarantor or any
Affiliate of such Subsidiary Guarantor or any of such Affiliate's Subsidiaries,
(ii) Indebtedness to, or guaranteed on behalf of, any
<PAGE>
-13-
shareholder, director, officer or employee of the Company or any Subsidiary of
the Company (including, without limitation, amounts owed for compensation),
(iii) Indebtedness to trade creditors and other amounts incurred in connection
with obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by such Subsidiary Guarantor, (vi) that portion of any
Indebtedness incurred in violation of the provisions set forth under Section
4.12 (but, as to any such obligation, no such violation shall be deemed to exist
for purposes of this clause (vi) if the holder(s) of such obligation or their
representative and the Trustee shall have received an Officers' Certificate of
the Company to the effect that the incurrence of such Indebtedness does not (or,
in the case of revolving credit Indebtedness, that the incurrence of the entire
committed amount thereof at the date on which the initial borrowing thereunder
is made would not) violate such provisions of this Indenture), (vii)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code is without recourse to such
Subsidiary Guarantor and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of a Subsidiary
Guarantor.
"Holder" means any holder of Notes.
"Holdings" means Acquisition Holdings, Inc., a Delaware
corporation.
"IAI Global Note" means, a permanent global note in registered
form representing the aggregate principal amount of Notes sold to Institutional
Accredited Investors.
"incur" has the meaning set forth in Section 4.12.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all Obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all Obligations under
any title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business), (v) all
Obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) guarantees and other
contingent obligations in respect of
<PAGE>
-14-
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) above which are secured by any lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of the
Obligation so secured, (viii) all Obligations of such Person under Currency
Agreements and all Interest Swap Obligations of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends, if any. For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect material financial interest in the Company and (ii) which, in
the judgment of the Board of Directors of the Company, is otherwise, independent
and qualified to perform the task for which it is to be engaged.
"Initial Notes" means, collectively, (i) the 12% Senior
Subordinated Notes due 2008, Series A, of the Company issued on the Issue Date
and (ii) one or more series of 12% Senior Subordinated Notes due 2008 that are
issued under this Indenture subsequent to the Issue Date pursuant to Section
2.02, in each case for so long as such securities constitute Restricted
Securities.
"Initial Public Equity Offering" means the first Public Equity
Offering to occur after the Issue Date.
<PAGE>
-15-
"Initial Purchaser" means BT Alex. Brown Incorporated.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"interest" means, when used with respect to any Note, the
amount of all interest accruing on such Note, including any applicable defaulted
interest pursuant to Section 2.12 and any Additional Interest pursuant to the
Registration Rights Agreement.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.
"Interest Swap Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
the Company and its Subsidiaries on commercially reasonable terms in accordance
with normal trade practices of the Company or such Subsidiary, as the case may
be. For the purposes of Section 4.10, the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
the Company or any of its Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment, re-
<PAGE>
-16-
duced by the payment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such Investment;
provided, however, that no such payment of dividends or distributions or receipt
of any such other amounts shall reduce the amount of any Investment to the
extent such payment of dividends or distributions or receipt of any such amounts
would be included in Consolidated Net Income. If the Company or any Subsidiary
of the Company sells or otherwise disposes of any Common Stock of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, the Company no longer owns, directly or indirectly, greater
than 50% of the outstanding Common Stock of such Subsidiary, the Company shall
be deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such former Subsidiary not
sold or disposed of.
"Issue Date" means January 29, 1998.
"Legal Defeasance" has the meaning set forth in Section 8.01.
"Legal Holiday" has the meaning provided in Section 11.07.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" means January 15, 2008.
"Merger" means the merger of the Company into ATC, with ATC as
the surviving corporation pursuant to and in accordance with the Merger
Agreement.
"Merger Agreement" means the Merger Agreement dated as of
November 26, 1997 among the Company, Holdings and ATC pursuant to which the
Company is to be merged into and with ATC, as amended and in effect on the Issue
Date.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Subsidiaries from
<PAGE>
-17-
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Subsidiary, as
the case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth in Section
4.16.
"Net Proceeds Offer Amount" has the meaning set forth in
Section 4.16.
"Net Proceeds Offer Payment Date" has the meaning set forth in
Section 4.16.
"Net Proceeds Offer Trigger Date" has the meaning set forth in
Section 4.16.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means, collectively, the Initial Notes, the Private
Exchange Notes, if any, and the Unrestricted Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person other than the
Trustee, the Chairman of the Board of Directors, the Chief Executive Officer,
the President, any Vice President, the Chief Financial Officer, the Treasurer,
the Controller, or the Secretary of such Person, or any other officer designated
by
<PAGE>
-18-
the Board of Directors serving in a similar capacity, and with respect to the
Trustee, a Trust Officer.
"Officers' Certificate" means a certificate signed by two
Officers of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee complying with the
requirements of Sections 11.04 and 11.05, as they relate to the giving of an
Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holder" means any of Weiss, Peck & Greer, L.L.C.
and its Affiliates.
"Permitted Indebtedness" means, without duplication, each of
the following:
(i) Indebtedness under the Notes issued on the Issue Date and
the Guarantees outstanding on the Issue Date or entered into thereafter
in accordance with this Indenture;
(ii) Indebtedness incurred pursuant to the Credit Agreement in
an aggregate outstanding principal amount at any time not to exceed the
sum of the aggregate commitments pursuant to the Credit Agreement as in
effect on the Issue Date (A) less the amount of all mandatory principal
payments actually made in respect of the term loan thereunder and (B)
reduced by any required repayments (which are accompanied by a
corresponding permanent commitment reduction) thereunder, in each case,
actually effected in satisfaction of the Net Cash Proceeds requirement
described under Section 4.16 (it being recognized that a reduction in
any borrowing base thereunder in and of itself shall not be deemed a
required permanent repayment);
(iii) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Subsidiaries; provided,
however, that such Interest Swap Obligations are entered into to
protect the Company and its Subsidiaries from fluctuations in interest
rates on Indebtedness incurred in accordance with this Indenture to the
extent the notional principal amount of such Interest Swap Obligation
does not exceed the principal amount of the Indebtedness to which such
Interest Swap Obligation relates;
<PAGE>
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(iv) Indebtedness under Currency Agreements; provided,
however, that in the case of Currency Agreements which relate to
Indebtedness, such Currency Agreements do not increase the Indebtedness
of the Company and its Subsidiaries outstanding other than as a result
of fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
(v) Indebtedness of a Subsidiary to the Company or to a
Wholly Owned Subsidiary of the Company for so long as such Indebtedness
is held by the Company or a Wholly Owned Subsidiary of the Company, in
each case subject to no Liens held by any Person other than the
Company, a Wholly Owned Subsidiary of the Company or the lenders or any
collateral agent the Credit Agreement; provided, however, that if as of
any date any Person other than the Company, a Wholly Owned Subsidiary
of the Company or the lenders or any collateral agent the Credit
Agreement owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting Permitted Indebtedness by the issuer
of such Indebtedness unless such Indebtedness is otherwise permitted
hereunder;
(vi) Indebtedness of the Company to a Wholly Owned Subsidiary
of the Company for so long as such Indebtedness is held by a Wholly
Owned Subsidiary of the Company or the lenders or any collateral agent
the Credit Agreement, in each case subject to no Lien other than under
the Credit Agreement; provided, however, that (a) any Indebtedness of
the Company to any Wholly Owned Subsidiary of the Company that is not a
Subsidiary Guarantor is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under this Indenture
and the Notes and (b) if as of any date any Person other than a Wholly
Owned Subsidiary of the Company or the lenders or any collateral agent
the Credit Agreement owns or holds any such Indebtedness or a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting Permitted Indebtedness by the Company
unless such Indebtedness is otherwise permitted hereunder;
(vii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
however, that such
<PAGE>
-20-
Indebtedness is extinguished within five business days of incurrence;
(viii) Indebtedness of the Company or any of its Subsidiaries
represented by letters of credit for the account of the Company or such
Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of
business;
(ix) Existing Indebtedness (including Indebtedness of the
Company and its Subsidiaries under the Notes issued on the Issue Date)
outstanding on the Issue Date;
(x) additional Capitalized Lease Obligations and Purchase
Money Indebtedness of the Company or any of its Subsidiaries not to exceed $5.0
million at any one time outstanding;
(xi) Refinancing Indebtedness;
(xii) Indebtedness permitted by clause (x) of the definition
of "Permitted Investments";
(xiii) guarantees of Indebtedness otherwise permitted under
this Indenture, provided that in the case of a guarantee by a Subsidiary, such
Subsidiary complies with the provisions of Section 4.24 to the extent
applicable; and
(xiv) additional Indebtedness in the form of Seller Notes in
an aggregate principal amount not to exceed $10.0 million at any one time
outstanding.
"Permitted Investments" means (i) Investments by the Company
or any Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Subsidiary of the Company or that will merge
or consolidate into the Company or a Subsidiary of the Company; (ii) Investments
in the Company by any Subsidiary of the Company; provided, however, that any
Indebtedness evidencing such Investment by a Subsidiary that is not a Subsidiary
Guarantor is unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Notes and this Indenture; (iii) Investments in
cash and Cash Equivalents; (iv) loans and advances to employees and officers of
the Company and its Subsidiaries in the ordinary course of business for bona
fide business purposes not in excess of $500,000 at any one time outstanding;
(v) Currency
<PAGE>
-21-
Agreements and Interest Swap Obligations entered into in the ordinary course of
the Company's or its Subsidiaries' businesses and otherwise in compliance with
this Indenture; (vi) Investments in securities of trade creditors or customers
received pursuant to any plan or reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; (vii) Investments
made by the Company or its Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with Section 4.16; (viii)
Investments existing on the Issue Date; (ix) guarantees of Indebtedness
otherwise permitted under this Indenture, provided that in the case of a
guarantee by a Subsidiary, such Subsidiary complies with the provisions of
Section 4.24 to the extent applicable; and (x) additional Investments in
unconsolidated joint ventures in businesses reasonably related or complementary
to those of the Company and its Subsidiaries (as determined in good faith by the
Company's Board of Directors) in an aggregate amount for all such Investments
made pursuant to this clause (x) not to exceed $4.0 million.
"Permitted Liens" means the following types of Liens:
(i) Liens in favor of the Trustee in its capacity as trustee
for the Holders;
(ii) Liens securing Indebtedness outstanding under the Credit
Agreement;
(iii) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or its Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(iv) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(v) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien
securing letters of credit issued in the ordinary course of business
consistent with
<PAGE>
-22-
past practice in connection therewith, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);
(vi) judgment Liens not giving rise to an Event of Default;
(vii) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Subsidiaries;
(viii) any interest or title of a lessor under any Capitalized
Lease Obligation; provided, however, that such Liens do not extend to
any property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(ix) Liens to secure Purchase Money Indebtedness of the
Company or any Subsidiary of the Company; provided, however, that (A)
the related Purchase Money Indebtedness shall not exceed the cost of
such property or assets and shall not be secured by any property or
assets of the Company or any Subsidiary of the Company other than the
property and assets so acquired, constructed or improved and (B) the
Lien securing such Indebtedness shall be created within 90 days of such
acquisition, construction or improvement;
(x) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or
other goods;
(xi) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(xii) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual,
<PAGE>
-23-
or warranty requirements of the Company or any of its Subsidiaries,
including rights of offset and set-off;
(xiii) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted
under this Indenture;
(xiv) Liens securing Indebtedness under Currency Agreements;
(xv) any lease or sublease not interfering in any material
respect with the business of the Company and its Subsidiaries; and
(xvi) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.12; provided, however, that (A) such Liens
secured such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Subsidiary
of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the
Company or a Subsidiary of the Company and (B) such Liens do not extend
to or cover any property or assets of the Company or of any of its
Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Subsidiary of the Company and
are no more favorable to the lienholders than those securing the
Acquired Indebtedness prior to the incurrence of such Acquired
Indebtedness by the Company or a Subsidiary of the Company.
"Person" means an individual, partnership, limited liability
company, corporation, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means
the principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
<PAGE>
-24-
"Private Exchange Notes" has the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Initial Notes in the form set forth in Exhibit A.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act, except
where such calculation specifies that Pro Forma Adjustments may be used.
"Pro Forma Adjustments" shall mean pro forma adjustments
calculated on a basis consistent with Regulation S-X under the Securities Act as
in effect on the Issue Date, plus the following detailed adjustments that may be
made in regard to businesses acquired or to be acquired (in either case, the
"target"), whether before or after the Issue Date:
(i) adjustments to revenues to reflect customers not likely to
be retained;
(ii) adjustments to labor and other direct costs to reflect
application of the Company's utilization rate (the billable hours of
the Company's employees divided by such employees' available hours) to
the target and to reflect the additional costs or savings, as the case
may be, from the continued use or elimination of outside laboratory and
technical personnel utilized by the target company;
(iii) adjustments to reflect home office functions of the
target such as accounting, payroll and legal that will be provided by
the Company, including any adjustments to eliminate outside
professional services if such functions are to be assumed by then
existing Company personnel;
(iv) adjustments with respect to savings that will be realized
by including the target under the Company's insurance coverage and
adjustments to reflect the costs, if any, of transferring or
terminating duplicate insurance policies of the target;
<PAGE>
-25-
(v) adjustments to reflect savings associated with the
elimination of duplicate facilities and adjustments to reflect costs
associated with such elimination (such as lease termination costs,
moving and storage, etc.);
(vi) adjustments to employee benefit costs to reflect the
Company's actual employee benefit cost structure, to the extent the
target's employee benefits will be replaced with the Company's employee
benefits;
(vii) adjustments to reflect the actual impact of the
departure or retention of highly compensated executives of the target
(including elimination of compensation, benefits and revenues
attributable to such executives, if departing, and any increases to
compensation or benefits for such executives continuing);
(viii) interest expense adjustments to reflect refinancing of
existing debt or increases in borrowings used to effect acquisition of
the target; and
(ix) adjustments to replace the target's then-current goodwill
depreciation and amortization with such amounts as are derived from the
application to the target of purchase accounting, if applicable, under
GAAP.
"Property" means, with respect to any Person, any interests of
such Person in any kind of property or asset, whether real, personal or mixed,
or tangible or intangible, including, without limitation, Capital Stock,
partnership interests and other equity or ownership interests in any other
Person.
"Public Equity Offering" means an underwritten primary public
offering of common stock or common equity of the Company or any other Person
that directly or indirectly owns 100% of the common stock of the Company
pursuant to an effective registration statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness the net
proceeds of which are used to finance the cost (including the cost of
acquisition, construction or improvements) of property or assets acquired in the
normal course of business by the Person incurring such Indebtedness.
<PAGE>
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"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A.
"Record Date" means the Record Dates specified in the Notes.
"Redemption Date" means, when used with respect to any Note to
be redeemed, the date fixed for such redemption pursuant to this Indenture and
the Notes.
"Redemption Price" means, when used with respect to any Note
to be redeemed, the price fixed for such redemption, including principal and
premium, if any, pursuant to this Indenture and the Notes.
"Reference Date" has the meaning set forth in Section 4.10.
"Refinance" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the
Company or any Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.12 (other than pursuant to clauses (ii), (iii), (iv), (v), (vi),
(vii), (viii), (x), (xi), (xii) or (xiii) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of such
proposed Refinancing, plus the amount of any interest and premium required to be
paid under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable fees and expenses (including additional premiums that may
be required to effect such Refinancing limited to 5.0% of the aggregate
principal amount of Indebtedness being Refinanced) incurred by the Company or
such Subsidiary, as the case may be, in connection with such Refinancing, except
to the extent that any such increase in Indebtedness is otherwise permitted by
this Indenture or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
matur-
<PAGE>
-27-
ity of the Indebtedness being Refinanced; provided, however, that (x) if such
Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes, then
such Refinancing Indebtedness shall be subordinate to the Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date between the Company and the Initial
Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a permanent global note in
registered form representing the aggregate principal amount of Notes sold in
reliance on Regulation S under the Securities Act.
"Related Person" means, with respect to any Person, any other
Person directly or indirectly owning 10% or more of the outstanding voting
Common Stock of such Person (or, in the case of a Person that is not a
corporation, 10% or more of the equity interest in such Person).
"Replacement Assets" shall have the meaning set forth in
Section 4.16.
"Representative" means the trustee, agent or representative in
respect of any Designated Senior Indebtedness; provided, however, that if, and
for so long as, any Designated Senior Indebtedness lacks such a representative,
then the Representative for such Designated Senior Indebtedness shall at all
times constitute the holders of a majority in outstanding principal amount of
such Designated Senior Indebtedness in respect of any Designated Senior
Indebtedness.
"Restricted Payment" shall have the meaning set forth in
Section 4.10.
"Restricted Security" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee
shall be entitled to request and con-
<PAGE>
-28-
clusively rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Security.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Subsidiary of the Company of any property,
whether owned by the Company or any Subsidiary of the Company at the Issue Date
or later acquired, which has been or is to be sold or transferred by the Company
or such Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such property.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Seller Notes" means notes issued by the Company or any
Subsidiary thereof to a seller in connection with an Asset Acquisition; such
notes may be Senior Indebtedness.
"Senior Indebtedness" means, upon and after consummation of
the Merger, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of the
Company, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Notes. Without limiting the generality of the foregoing, "Senior
Indebtedness" shall also include the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other amounts owing in respect of, (x) all monetary obligations (including
guarantees thereof) of every nature of the Company under the Credit Agreement,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations (including guarantees thereof)
and (z) all obligations (including guarantees) under Currency Agreements, in
each
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case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company or any Affiliate of
the Company or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or
guaranteed on behalf of, any shareholder, director, officer or employee of the
Company or any Subsidiary of the Company (including, without limitation, amounts
owed for compensation), but excluding Indebtedness in the original aggregate
principal amount of up to Two Million Six Hundred Fifty Thousand Dollars
($2,650,000) issued to the former shareholders of Bing Yen & Associates, a
California corporation, in connection with the acquisition by ATC of all of the
issued and outstanding shares of said corporation, (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by the Company, (vi) that portion of any Indebtedness incurred in violation of
the provisions set forth under Section 4.12 (but, as to any such obligation, no
such violation shall be deemed to exist for purposes of this clause (vi) if the
holder(s) of such obligation or their representative and the Trustee shall have
received an Officers' Certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the incurrence of the entire committed amount thereof at the
date on which the initial borrowing thereunder is made would not) violate such
provisions of this Indenture), (vii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code is without recourse to the Company, (viii) any Indebtedness which is, by
its express terms, subordinated in right of payment to any other Indebtedness of
the Company, and (ix) any Indebtedness of ATC and its Subsidiaries until
consummation of the Merger and assumption by ATC of all Obligations under this
Indenture (including execution of the Guarantees by the Subsidiary Guarantors).
"Significant Subsidiary" shall have the meaning set forth in
Rule 1.02(w) of Regulation S-X under the Securities Act.
"Subsidiary" means, with respect to any Person, (i) any
corporation of which the outstanding Capital Stock having at least a majority of
the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such Person
or (ii) any other Person of which at least a majority of the voting in-
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terest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"Subsidiary Guarantor" means, at and after the time of the
Merger, individually and collectively, (i) each of the Company's Subsidiaries as
of the Issue Date other than the Foreign Subsidiaries and (ii) each of the
Company's Subsidiaries that in the future executes a supplemental indenture in
which such Subsidiary agrees to be bound by the terms of this Indenture as a
Subsidiary Guarantor; (iii) any Subsidiary, whether formed or acquired after the
Issue Date, that guarantees any Indebtedness outstanding under the Credit
Agreement; provided, however, that any Subsidiary acquired after the Issue Date
which is prohibited from entering into a Guarantee pursuant to restrictions
contained in any debt instrument in existence at the time such Subsidiary was so
acquired and not entered into in anticipation or contemplation of such
acquisition shall not be required to become a Subsidiary Guarantor so long as
any such restriction is in existence and to the extent of any such restriction;
provided, further, that if any Subsidiary Guarantor is released from its
guarantee of the outstanding Indebtedness of the Company under the Credit
Agreement and the pledge by it, directly or indirectly, of any of its assets as
security for such Indebtedness at a time when no Default or Event of Default has
occurred and is continuing such Subsidiary Guarantor shall be automatically
released from its obligations as a Subsidiary Guarantor and, from and after such
date, such Subsidiary Guarantor shall cease to constitute a Subsidiary Guarantor
provided, however, that any Person constituting a Subsidiary Guarantor as
described above shall cease to constitute a Subsidiary Guarantor when its
Guarantee is released in accordance with the terms of this Indenture.
"Surviving Entity" shall have the meaning set forth in Section
5.01.
"Tax Sharing Agreement" means any tax sharing agreement
between the Company and Holdings or any other Person with which the Company is
required to, or is permitted to, file a consolidated tax return or with which
the Company is or could be part of a consolidated group for tax purposes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.04.
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"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer this Indenture, or in the case of
a successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Unrestricted Notes" means one or more Notes that do not and
are not required to bear the Private Placement legend in the form set forth in
Exhibit A, including, without limitation, the Exchange Notes.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" means, with respect to any Person,
any Subsidiary of such Person of which all the outstanding voting securities
normally entitled to vote in the election of directors are owned by such Person
or any Wholly Owned Subsidiary of such Person (other than directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law).
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SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
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.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by Commission
rule and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. 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 of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision; and
(6) any reference to a statute, law or regulation means that
statute, law or regulation as amended and in effect from time to time
and includes any successor statute, law or regulation; provided,
however, that any refer-
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ence to the Bankruptcy Law shall mean the Bankruptcy Law as applicable
to the relevant case.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes, the notation thereon relating to the
Guarantees, if any, and the Trustee's certificate of authentication relating
thereto shall be substantially in the form of Exhibit A hereto, provided, that
any Initial Notes issued in a public offering shall be substantially in the form
of Exhibit B hereto. The Exchange Notes, the notation thereon relating to the
Guarantees, if any, and the Trustee's certificate of authentication relating
thereto shall be substantially in the form of Exhibit B hereto. The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. Each Note shall be
dated the date of its issuance and shall show the date of its authentication.
Upon consummation of the Merger, each Note shall have an executed Guarantee
endorsed thereon substantially in the form of Exhibit F hereto.
The terms and provisions contained in the Notes and the
Guarantees, if any, annexed hereto as Exhibits A and B, shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company, the Subsidiary Guarantors, if any, and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A, Notes offered
and sold to institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and Notes offered and sold in reliance
on Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form, substantially in the form set forth in Exhibit
A (the "Global Note"), deposited with the Trustee, as custodian for the
Depository, duly executed by the Company (and having an executed Guarantee
endorsed thereon) and authenticated by the Trustee as hereinafter provided and
shall bear the legend set forth in Exhibit C. The aggregate
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principal amount of the Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Notes issued in exchange for interests in a Global Note
pursuant to Section 2.16 may be issued and Notes offered and sold in reliance on
any other exemption from registration under the Securities Act other than as
described in the preceding paragraph shall be issued in the form of permanent
certificated Notes in registered form in substantially the form set forth in
Exhibit A (the "Physical Notes").
All Notes offered and sold in reliance on Regulation S shall
remain in the form of a Global Note until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement; provided, however, that all of
the time periods specified in the Registration Rights Agreement to be complied
with by the Company and the Subsidiary Guarantors have been so complied with.
SECTION 2.02. Execution and Authentication; Aggregate
Principal Amount.
Two Officers, or an Officer and an Assistant Secretary of the
Company and each Subsidiary Guarantor, shall sign, or one Officer shall sign and
one Officer or an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) shall attest to, the
Notes for the Company and the Guarantees for the Subsidiary Guarantors by manual
or facsimile signature.
If an Officer or Assistant Secretary whose signature is on a
Note or a Guarantee was an Officer or Assistant Secretary at the time of such
execution but no longer holds that office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount not to exceed $150,000,000 in one or
more series, (ii) Private Exchange Notes from time to time for issue only in
exchange for a like principal amount of Initial Notes and (iii) Unrestricted
Notes from
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time to time only (A) in exchange for a like principal amount of Initial Notes
or (B) in an aggregate principal amount of not more than the excess of
$150,000,000 over the sum of the aggregate principal amount of (x) Initial Notes
then outstanding, (y) Private Exchange Notes then outstanding and (z)
Unrestricted Notes issued in accordance with (iii)(A) above, in each case upon a
written order of the Company in the form of an Officers' Certificate of the
Company. Each such written order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated, whether
the Notes are to be Initial Notes, Private Exchange Notes or Unrestricted Notes
and whether the Notes are to be issued as Physical Notes or Global Notes or such
other information as the Trustee may reasonably request. The aggregate principal
amount of Notes outstanding at any time may not exceed $150,000,000, except as
provided in Sections 2.07 and 2.08.
In the event that the Company shall issue and the Trustee
shall authenticate any Notes issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Company shall use its reasonable efforts to obtain the
same "CUSIP" number for such Notes as is printed on the Notes outstanding at
such time; provided, however, that if any series of Notes issued under this
Indenture subsequent to the Issue Date is determined, pursuant to an Opinion of
Counsel of the Company in a form reasonably satisfactory to the Trustee to be a
different class of security than the Notes outstanding at such time for federal
income tax purposes, the Company may obtain a "CUSIP" number for such Notes that
is different than the "CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this Indenture shall vote
and consent together on all matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the
"Authenticating Agent") reasonably acceptable to the Company to authenticate
Notes. Unless otherwise provided in the appointment, an Authenticating Agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same rights as an Agent to
deal with the Company or with any Affiliate of the Company.
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The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("Registrar"), (b) Notes may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange. The Company may have
one or more co-Registrars and one or more additional paying agents reasonably
acceptable to the Trustee. The term "Paying Agent" includes any additional
Paying Agent. The Company may act as its own Paying Agent, except that for the
purposes of payments on the Notes pursuant to Sections 4.15 and 4.16, neither
the Company nor any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which agreement shall incorporate
the provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company shall fail to maintain a Registrar or
Paying Agent the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar,
Paying Agent and agent for service of demands and notices in connection with the
Notes, until such time as the Trustee has resigned or a successor has been
appointed. Any of the Registrar, the Paying Agent or any other agent may resign
upon 30 days' notice to the Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that such Paying Agent shall hold in trust for the
benefit of the Holders or the Trustee all assets held by the Paying Agent for
the payment of principal of, premium, if any, or interest on, the Notes (whether
such assets have been distributed to it by the Company or any other obligor on
the Notes), and the Company and the Paying Agent shall notify the Trustee of any
Default by the
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Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
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 the Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish or cause the Registrar
to furnish to the Trustee five (5) Business Days before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee, and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. Transfer and Exchange.
Subject to Sections 2.16 and 2.17, when Notes are presented to
the Registrar or a co-Registrar with a request to register the transfer of such
Notes or to exchange such Notes for an equal principal amount of Notes or other
authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes presented or surrendered
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written instrument of transfer in form satisfactory to the Company, the
Trustee and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registration of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Notes and, at and after consummation of the Merger, the Subsidiary Guarantors
shall execute Guarantees thereon at the Registrar's or co-Registrar's request.
No service charge shall be made for any registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any transfer
tax, fee or similar governmental charge payable in connection there-
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with (other than any such transfer taxes or similar governmental charge payable
upon exchanges or transfers pursuant to Section 2.10, 3.04, 4.15, 4.16 or 9.05,
in which event the Company shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of any Note (i) during a period beginning
at the opening of business 15 days before the mailing of a notice of redemption
of Notes and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry system.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Note and, at and after consummation of the Merger, the Subsidiary Guarantors
shall execute a Guarantee thereon if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity of reasonable tenor, sufficient in the reasonable
judgment of the Company, the Subsidiary Guarantors and the Trustee, to protect
the Company, the Subsidiary Guarantors, the Trustee or any Agent from any loss
which any of them may suffer if a Note is replaced. Every replacement Note shall
constitute an additional obligation of the Company and the Subsidiary
Guarantors.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because the Company or any of its Affiliates holds the Note.
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If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent
holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of
the principal, premium, if any, and interest due on the Notes payable on that
date and is not prohibited from paying such money to the Holders thereof
pursuant to the terms of this Indenture, then on and after that date such Notes
shall be deemed not to be outstanding and interest on them shall cease to
accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver, consent or notice,
Notes owned by the Company or an Affiliate of the Company shall be considered as
though they are 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 which a Trust Officer of the Trustee actually knows are
so owned shall be so considered. The Company shall notify the Trustee, in
writing, when either it or, to its knowledge, any of its Affiliates repurchases
or otherwise acquires Notes, of the aggregate principal amount of such Notes so
repurchased or otherwise acquired and such other information as the Trustee may
reasonably request and the Trustee shall be entitled to rely thereon.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company consider appropriate for temporary Notes and so
indicate in the Officers' Certificate. Without unreasonable delay, the Company
shall prepare, the Trustee shall authenticate and, at and after consummation of
the Merger, the Subsidiary Guarantors
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shall execute Guarantees on, upon receipt of a written order of the Company
pursuant to Section 2.02, definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose,
in its customary manner, of all Notes surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.07, the Company may not issue new
Notes to replace Notes that they have paid or delivered to the Trustee for
cancellation. If the Company shall acquire any of the Notes, such acquisition
shall not operate as a redemption or satisfaction of the Indebtedness
represented by such Notes unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company will pay interest on overdue principal from time
to time on demand at the rate of interest then borne by the Notes. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate of interest then borne by the Notes. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months, and, in the case of a
partial month, the actual number of days elapsed.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which special record date shall be the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest or the next succeeding Business Day if such date is not a Business Day.
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
(a "Default Interest Payment Date"), and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to
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the Trustee for such deposit on or prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the Persons
entitled to such defaulted interest as provided in this Section; provided,
however, that in no event shall the Company deposit monies proposed to be paid
in respect of defaulted interest later than 11:00 a.m. New York City time of the
proposed Default Interest Payment Date. At least 15 days before the subsequent
special record date, the Company shall mail (or cause to be mailed) to each
Holder, as of a recent date selected by the Company, with a copy to the Trustee,
a notice that states the subsequent special record date, the payment date and
the amount of defaulted interest, and interest payable on such defaulted
interest, if any, to be paid. Notwithstanding the foregoing, any interest which
is paid prior to the expiration of the 30-day period set forth in Section
6.01(i) shall be paid to Holders as of the regular record date for the Interest
Payment Date for which interest has not been paid. Notwithstanding the
foregoing, the Company may make payment of any defaulted interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange.
SECTION 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number,
and, if so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided, however, that no representation
is hereby deemed to be made by the Trustee as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Notes, and that reliance may be
placed only on the other identification numbers printed on the Notes. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Monies.
Prior to 11:00 a.m. New York City time on each Interest
Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and
Net Proceeds Offer Payment Date, the Company shall have deposited with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date, Maturity Date, Redemption
Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the
case may be, in a timely manner which permits the Paying Agent to remit payment
to the Holders on such Interest Payment Date, Maturity Date, Redemption Date,
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Change of Control Payment Date and Net Proceeds Offer Payment Date, as the case
may be.
SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a
Restricted Security shall bear the legend (the "Private Placement Legend") as
set forth in Exhibit A on the face thereof until after the second anniversary of
the later of the Issue Date and the last date on which the Company or any
Affiliate of the Company was the owner of such Note (or any predecessor
security) (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) (or such longer period of
time as may be required under the Securities Act or applicable state securities
laws in the opinion of counsel for the Company, unless otherwise agreed by the
Company and the Holder thereof).
Each Global Note shall also bear the legend as set forth in
Exhibit C.
SECTION 2.16. Book-Entry Provisions for Global Security.
(a) The Global Notes initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear the legend as set
forth in Exhibit C.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Notes, and the Depository may be treated by the Company, the
Trustee and any Agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any Agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depository or impair, as between the
Depository and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of benefi-
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cial owners in a Global Note may be transferred or exchanged for Physical Notes
in accordance with the rules and procedures of the Depository and the provisions
of Section 2.17. In addition, Physical Notes shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global Note if
(i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for the Global Notes and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a written
request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in a Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, the Subsidiary Guarantors shall execute Guarantees on, and the
Trustee shall authenticate and deliver, one or more Physical Notes of like tenor
and amount.
(d) In connection with the transfer of an entire Global Note
to beneficial owners pursuant to paragraph (b) of this Section 2.16, such Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, the Subsidiary Guarantors shall execute Guarantees on and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depository in exchange for its beneficial interest in the Global Note, an
equal aggregate principal amount of Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph (b)
or (c) of this Section 2.16 shall, except as otherwise provided by paragraphs
(a)(i)(x) and (c) of Section 2.17, bear the Private Placement Legend.
(f) The Holder of a Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
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SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors
and Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the
second anniversary of the Issue Date (provided, however, that neither
the Company nor any Affiliate of the Company has held any beneficial
interest in such Note, or portion thereof, at any time on or prior to
the second anniversary of the Issue Date) or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit D
hereto or (2) in the case of a transfer to a Non-U.S. Person, the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit E hereto; and
(ii) if the proposed transferee is an Agent Member and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in the IAI Global Note or Regulation
S Global Note, as the case may be, upon receipt by the Registrar of (x)
written instructions given in accordance with the Depository's and the
Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, the Registrar shall
register the transfer and reflect on its books and records the date and
an increase in the principal amount of the IAI Global Note or
Regulation S Global Note, as to case may be, in an amount equal to the
principal amount of Physical Notes to be transferred, and the Trustee
shall cancel the Physical Notes so transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, the Regis-
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trar shall register the transfer and reflect on its books and records
the date and (A) a decrease in the principal amount of the Global Note
from which such interests are to be transferred in an amount equal to
the principal amount of the Notes to be transferred and (B) an increase
in the principal amount of the IAI Global Note or the Regulation S
Global Note, as the case may be, in an amount equal to the principal
amount of the Notes to be transferred.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Note constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer of any
Restricted Security if such transfer is being made by a proposed
transferor who has checked the box provided for on the form of Note
stating, or has otherwise advised the Company and the Registrar in
writing, that the sale has been made in compliance with the provisions
of Rule 144A to a transferee who has signed the certification provided
for on the form of Note stating, or has otherwise advised the Company
and the Registrar in writing, that it is purchasing the Note for its
own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within
the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that it
is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in a Global Note, upon receipt by
the Registrar of written instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of such Global Note in an amount equal to the
principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred; and
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(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in the IAI Global Note or the Regulation S Global
Note, upon receipt by the Registrar of written instructions given in
accordance with the Depository's and the Registrar's procedures, the
Registrar shall register the transfer and reflect on its books and
records the date and (A) a decrease in the principal amount of the IAI
Global Note or the Regulation S Global Note, as the case may be, in an
amount equal to the principal amount of the Notes to be transferred and
(B) an increase in the principal amount of the Global Note in an amount
equal to the principal amount of the Notes to be transferred.
(c) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(d) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the second anniversary of the Issue
Date (provided, however, that neither the Company nor any Affiliate of the
Company has held any beneficial interest in such Note, or portion thereof, at
any time prior to or on the second anniversary of the Issue Date), or (ii) there
is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to
the Company and the Trustee to the effect that neither such legend nor the
related restrictions on transfer are required in order to maintain compliance
with the provisions of the Securities Act.
(e) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.16 or this Section
2.17. The Company shall have
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the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time during the Registrar's normal
business hours upon the giving of reasonable written notice to the Registrar.
(f) Transfers of Notes Held by Affiliates. Any certificate (i)
evidencing a Note that has been transferred to an Affiliate of the Company
within two years after the Issue Date, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
respect thereof or (ii) evidencing a Note that has been acquired from an
Affiliate of the Company (other than by an Affiliate of the Company) in a
transaction or a chain of transactions not involving any public offering, shall,
until two years after the last date on which the Company or any Affiliate of the
Company was an owner of such Note, in each case, bear the Private Placement
Legend, unless otherwise agreed by the Company (with written notice thereof to
the Trustee).
SECTION 2.18. Liquidated Damages Under Registration Rights
Agreement.
Under certain circumstances, the Company shall be obligated to
pay certain liquidated damages to the Holders, all as set forth in Section 5 of
the Registration Rights Agreement. The terms thereof are hereby incorporated
herein by reference.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph
(5) of the Notes, it shall notify the Trustee and the Paying Agent in writing of
the Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this
Section 3.01 at least 10 days before the date that notice of redemption is
mailed to Holders (unless a shorter notice period shall be satisfactory to the
Trustee, as evidenced in a writing signed on behalf of the Trustee), together
with an Officers' Certificate stating that such redemption shall comply with the
conditions contained herein and in the Notes. Any such notice may be cancelled
at any time prior to notice of
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such redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION 3.02. Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be
redeemed at any time, selection of such Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
no Notes of a principal amount of $1,000 or less shall be redeemed in part;
provided, further, however, that if a partial redemption is made with the
proceeds of a Public Equity Offering, selection of the Notes or portions thereof
for redemption shall be made by the Trustee only on a pro rata basis or on as
nearly a pro rata basis as is practicable (subject to DTC procedures), unless
such method is otherwise prohibited. Notice 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 a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the Redemption Date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the Paying Agent funds in satisfaction of the applicable
Redemption Price.
SECTION 3.03. Optional Redemption.
The Notes will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after January 15, 2003,
upon not less than 30 nor more than 60 days' notice, at the following Redemption
Prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on January 15 of the years set forth
below, plus, in each case, accrued and unpaid interest thereon, if any, to the
date of redemption:
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Year Percentage
---- ----------
2003....................................................106.000%
2004....................................................104.500%
2005....................................................103.000%
2006....................................................101.500%
2007 and thereafter.....................................100.000%
Notwithstanding the foregoing, at any time, or from time to
time, on or prior to January 15, 2001, the Company may, at its option, redeem,
with the net cash proceeds of one or more Public Equity Offerings, up to 35% of
the aggregate principal amount of the Notes originally issued at a redemption
price equal to 112.0% of the principal amount thereof, plus accrued interest
thereon, if any, to the date of redemption; provided, that at least 65% of the
aggregate principal amount of the Notes originally issued remain outstanding
immediately following such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Company shall
make such redemption not more than 60 days after the consummation of any such
Public Equity Offering.
SECTION 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date (unless a different period is required by Section 3.08), the Company shall
mail or cause to be mailed a notice of redemption by first class mail to each
Holder of Notes to be redeemed at its registered address, with a copy to the
Trustee and any Paying Agent. At the Company's request, the Trustee shall give
the notice of redemption in the Company's name and at the Company's expense. The
Company shall provide such notices of redemption to the Trustee at least five
days before the intended mailing date.
Each notice of redemption shall identify (including the CUSIP
number) the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest,
if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
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(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued interest,
if any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes or applicable portions thereof called for
redemption ceases to accrue on and after the Redemption Date, and the
only remaining right of the Holders of such Notes is to receive payment
of the Redemption Price plus accrued interest as of the Redemption
Date, if any, upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes
in the aggregate principal amount equal to the unredeemed portion
thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
purchase of Notes.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.04, such notice of redemption shall be irrevocable and Notes called for
redemption become due and payable on the Redemption Date and at the Redemption
Price plus accrued interest as of such date, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price plus accrued interest thereon to the Redemption Date, but
installments of interest, the maturity of which is on or prior to the Redemption
Date, shall be payable to Holders of record at the close of business on the
relevant record dates referred to in the Notes. Interest shall accrue on or
after the Redemption Date and shall be payable only if the Company defaults in
payment of the Redemption Price.
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SECTION 3.06. Deposit of Redemption Price.
On or before the Redemption Date and in accordance with
Section 2.14, the Company shall deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Redemption Price plus accrued interest, if any, of all
Notes to be redeemed on that date. The Paying Agent shall promptly return to the
Company any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
Unless the Company fails to comply with the preceding
paragraph and defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
SECTION 3.07. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Note or Notes equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.08. Special Redemption Provisions Prior to
Effectiveness of the Merger.
(a) Optional Redemption Prior to Consummation of the Merger.
Upon termination of the Merger Agreement, or upon the Company's reasonable
determination that the Merger cannot or will not be consummated by October 29,
1998, the Company, at its option, may redeem the Notes in whole at any time
prior to October 29, 1998, upon not less than 10 nor more than 60 days' notice
(but in no event after October 29, 1998), at a redemption price of 102.5% of the
principal amount thereof, plus accrued and unpaid interest to the date of
redemption.
(b) Mandatory Redemption if Merger not Consummated. In the
event that the Merger is not consummated on or before October 29, 1998, the
Company shall immediately redeem the Notes in whole at a Redemption Price equal
to 102.5% of the principal amount of the Notes, plus accrued and unpaid interest
to the Redemption Date.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
(a) The Company shall pay the principal of, premium, if any,
and interest on the Notes on the dates and in the manner provided in the Notes
and in this Indenture.
(b) An installment of principal of or interest on the Notes
shall be considered paid on the date it is due if the Trustee or Paying Agent
(other than the Company or any of its Affiliates) holds, prior to 11:00 a.m. New
York City time on that date, U.S. Legal Tender designated for and sufficient to
pay the installment in full and is not prohibited from paying such money to the
Holders pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Article Five, the Company
shall do or cause to be done, at its own cost and expense, all things necessary
to preserve and keep in full force and effect its corporate existence and the
corporate existence of each of its Subsidiaries in accordance with the
respective organizational documents of each such Subsidiary and the material
rights (charter and statutory) and franchises of the Company and each such
Subsidiary; provided, however, that the Com-
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pany shall not be required to preserve, with respect to itself, any material
right or franchise and, with respect to any of its Subsidiaries, any such
existence, material right or franchise, if the Board of Directors of the Company
shall determine in good faith that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any of
its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all
material lawful claims for labor, materials and supplies that, if unpaid, might
by law become a Lien upon the property of the Company or any of its
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate negotiations or proceedings properly instituted and
diligently conducted for which adequate reserves, to the extent required under
GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of the
Subsidiaries to, maintain all material properties used or useful in the conduct
of its business in good working order and condition (subject to ordinary wear
and tear) and make all necessary repairs, renewals, replacements, additions,
betterments and improvements thereto and actively conduct and carry on its
business; provided, however, that nothing in this Section 4.05 shall prevent the
Company or any of the Subsidiaries of the Company from discontinuing the
operation and maintenance of any of its properties, if such discontinuance is
(i) in the ordinary course of business pursuant to customary business terms or
(ii) in the good faith judgment of the respective Boards of Directors or other
governing body of the Company or Subsidiary, as the case may be, desirable in
the conduct of their respective businesses and is not disadvantageous in any
material respect to the Holders.
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(b) The Company shall provide or cause to be provided, for
itself and each of the Subsidiaries of the Company, insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
good faith judgment of the Company, are adequate and appropriate for the conduct
of the business of the Company and its Subsidiaries in a prudent manner, with
reputable insurers.
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each of the Company's fiscal years, an Officers' Certificate
(provided, however, that one of the signatories to each such Officers'
Certificate shall be the Company's principal executive officer, principal
financial officer or principal accounting officer), as to such Officers'
knowledge, without independent investigation, of the Company's compliance with
all conditions and covenants under this Indenture (without regard to any period
of grace or requirement of notice provided hereunder) and in the event any
Default of the Company's exists, such Officers shall specify the nature of such
Default. Each such Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year-end.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
annual financial statements delivered pursuant to Section 4.08 shall be
accompanied by a written report of the Company's independent certified public
accountants (who shall be a firm of established national reputation) stating (A)
that their audit examination has included a review of the terms of this
Indenture and the form of the Notes as they relate to accounting matters, and
(B) whether, in connection with their audit examination, any Default or Event of
Default has come to their attention and if such a Default or Event of Default
has come to their attention, specifying the nature and period of existence
thereof; provided, however, that, without any restriction as to the scope of the
audit examination, such independent certified public accountants shall not be
liable by reason of any failure to obtain knowledge of any such Default or Event
of Default that would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing standards.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exer-
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cise any remedy hereunder with respect to a claimed Default under this Indenture
or the Notes, the Company shall deliver to the Trustee, at its address set forth
in Section 11.02, by registered or certified mail or by facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action within 10 days of its becoming
aware of such occurrence.
SECTION 4.07. Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as could not singly or in the
aggregate reasonably be expected to have a material adverse effect on the
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole.
SECTION 4.08. Reports to Holders.
The Company will deliver to the Trustee within 15 days after
filing of the same with the Commission, copies of the quarterly and annual
reports and of the information, documents and other reports, if any, which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will
also comply with the other provisions of Section 314(a) of the TIA.
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Notes as
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contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution
(other than dividends or distributions made to the Company or any
Subsidiary of the Company and other than any dividend or distribution
payable solely in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such
Capital Stock;
(b) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock (other
than the exchange of such Capital Stock or any warrants, rights or
options to acquire shares of any class of Capital Stock of the Company
for Qualified Capital Stock of the Company);
(c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of the Company or a Subsidiary Guarantor that
is subordinate or junior in right of payment to the Notes or such
Subsidiary Guarantor's Guarantee, as the case may be; or
(d) make any Investment (other than Permitted Investments)
(each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing, or (ii) the Company is not able
to incur at least $1.00 of additional Indebtedness (other than
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Permitted Indebtedness) in compliance with Section 4.12, or (iii) the aggregate
amount of all Restricted Payments (including such proposed Restricted Payment)
made subsequent to the Issue Date (the amount expended for such purposes, if
other than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) shall
exceed the sum of:
(w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss) of the Company earned during the period beginning on the first
day of the fiscal quarter including the Issue Date and ending on the
last day of the fiscal quarter ending at least 30 days prior to the
date the Restricted Payment occurs (the "Reference Date") (treating
such period as a single accounting period); plus
(x) 100% of the aggregate net proceeds (including the fair
market value of any business or property other than cash) received by
the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date and on or prior
to the Reference Date of Qualified Capital Stock of the Company,
including treasury stock; plus
(y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's
Capital Stock (excluding, in the case of clause (iii)(x) above and this
clause (y), any net cash proceeds from a Public Equity Offering to the
extent used to redeem the Notes); minus
(z) the amount of all Investments made under clause (x) of the
definition of "Permitted Investments," which shall not exceed $4.0
million.
Notwithstanding the foregoing, the provisions set forth above shall not
prohibit:
(1) the payment of any dividend or the consummation of any
irrevocable redemption within 60 days after the date of declaration of
such dividend or the giving of such irrevocable redemption notice if
the dividend or redemption would have been permitted on the date of
declaration or giving of irrevocable redemption notice;
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(2) if no Default or Event of Default shall have occurred and
be continuing, the acquisition of any shares of Capital Stock of the
Company, either (i) solely in exchange for shares of Qualified Capital
Stock of the Company or (ii) through the application of net proceeds of
a substantially concurrent sale for cash (other than to a Subsidiary of
the Company) of shares of Qualified Capital Stock of the Company;
(3) if no Default or Event of Default shall have occurred and
be continuing, the acquisition of any Indebtedness of the Company that
is subordinate or junior in right of payment to the Notes either (i)
solely in exchange for shares of Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of
the Company) of (A) shares of Qualified Capital Stock of the Company or
(B) Refinancing Indebtedness;
(4) the repurchase of shares of, or options to purchase shares
of, common stock of Holdings, the Company or any of their respective
Subsidiaries from employees, former employees, directors or former
directors of Holdings, the Company or any of its Subsidiaries (or
permitted transferees of such employees, former employees, directors or
former directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by the
board of directors of Holdings or the Company under which such
individuals purchase or sell, or are granted the option to purchase or
sell shares of common stock (or options to purchase common stock) (or
any Restricted Payment made to Holdings solely to fund at the time made
such payments); provided, however, that the aggregate amount of such
repurchases or Restricted Payments shall not exceed $500,000 in any
fiscal year (starting March 1, 1998, with no amount allowable prior to
March 1, 1998) which, to the extent not used in any fiscal year, may be
carried forward to succeeding fiscal years, provided that the aggregate
amount which may be carried forward at any time shall not exceed $1.0
million;
(5) following the Initial Public Equity Offering, if no
Default or Event of Default shall have occurred and be continuing,
dividends or Common Stock buybacks by Holdings, the Company or another
issuer in an aggregate amount in any year not to exceed 6% of the
aggregate Net Cash Proceeds received by Holdings (to the extent
contributed to the Company) or the Company in connection with such
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Initial Public Equity Offering and any subsequent Public Equity
Offering (or any Restricted Payment made to Holdings or such other
issuer solely to fund at the time made such payments); provided,
however, that such dividends or Common Stock buybacks shall be included
in the calculation of the amount of Restricted Payments;
(6) any payment by the Company to Holdings pursuant to the Tax
Sharing Agreement; provided, however, that the amount of any such
payment shall be the lesser of (i) the amount of taxes that the Company
would have been liable for without regard to Holdings' ownership
interest in the Company or (ii) the amount actually paid or
substantially concurrently therewith to be paid by Holdings directly to
the Internal Revenue Service or applicable taxing authority in respect
of the taxes in respect of which such payment is being made by the
Company to Holdings pursuant to such Tax Sharing Agreement; provided,
further, however, that such dividends shall be excluded in the
calculation of the amount of Restricted Payments; and
(7) dividends to Holdings to the extent required to pay for
general corporate and overhead expenses incurred by Holdings; provided,
however, that such dividends shall not exceed $250,000 in any calendar
year; provided, further, however, that such dividends shall be excluded
from the calculation of the amount of Restricted Payments.
In determining the aggregate amount of Restricted Payments
made subsequent to the Issue Date in accordance with clause (iii) of this
Section 4.10, amounts expended pursuant to clauses (1), (2)(ii), (3)(ii)(A)
shall be included in such calculation.
SECTION 4.11. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not cause or permit any of
its Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
(b) of this Section 4.11 and (y) Affiliate Transactions on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than those
that might reasonably have been obtained or are ob-
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tainable in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Subsidiary, as the case
may be. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $2.0 million
shall be approved by the Board of Directors of the Company or such Subsidiary,
as the case may be, such approval to be evidenced by a Board Resolution stating
that such Board of Directors has determined that such transaction complies with
the foregoing provisions. If the Company or any Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) involving aggregate payments or other property with a
fair market value in excess of $5.0 million, the Company or such Subsidiary, as
the case may be, shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related transactions
to the Company or the relevant Subsidiary, as the case may be, from a financial
point of view, from an Independent Financial Advisor and file the same with the
Trustee.
(b) The restrictions set forth in clause (a) shall not apply
to (i) reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors, employees, consultants or agents of the Company or any
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions between or among the Company
and any of its Wholly Owned Subsidiaries or between or among such Wholly Owned
Subsidiaries; provided such transactions are not otherwise prohibited hereunder;
(iii) any agreement as in effect as of the Issue Date or any amendment thereto
or any transaction contemplated thereby (including pursuant to any amendment
thereto) or in any replacement agreement thereto so long as any such amendment
or replacement agreement is not more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue Date; and
(iv) Restricted Payments permitted hereunder.
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness.
The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur"), any Indebtedness
(including, without limitation, Acquired Indebtedness) other
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than Permitted Indebtedness. Notwithstanding the foregoing, if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company and its
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage
Ratio of the Company is greater than 2.25 to 1.0 from the Issue Date through
February 29, 2000 and 2.5 to 1.0 thereafter. No Indebtedness incurred pursuant
to the next preceding sentence shall be included in calculating any limitation
set forth in the definition of Permitted Indebtedness. Upon the repayment of
Indebtedness which may have been incurred pursuant to more than one provision of
this Indenture, the Company may, in its sole discretion, designate which
provision such Indebtedness shall have been incurred under.
For purposes of determining any particular amount of
Indebtedness under this Section 4.12, guarantees of Indebtedness otherwise
included in the determination of such amount shall not also be included.
Indebtedness of a Person existing at the time such Person
becomes a Subsidiary (whether by merger, consolidation, acquisition of Capital
Stock or otherwise) or is merged with or into the Company or any Subsidiary or
which is secured by a Lien on an asset acquired by the Company or a Subsidiary
(whether or not such Indebtedness is assumed by the acquiring Person) shall be
deemed incurred at the time the Person becomes a Subsidiary or at the time of
the asset acquisition, as the case may be.
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends or make any other distributions
on or in respect of its Capital Stock; (b) make loans or advances or to pay any
Indebtedness or other obligation owed to the Company or any other Subsidiary of
the Company; or (c) transfer any of its property or assets to the Company or any
other Subsidiary of the Company, except for such encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) this Indenture; (3) the
Credit Agree-
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ment; (4) non-assignment provisions of any contract or any lease governing a
leasehold interest of any Subsidiary of the Company; (5) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (6) agreements
existing on the Issue Date to the extent and in the manner such agreements are
in effect on the Issue Date; (7) restrictions on the transfer of assets subject
to any Lien permitted under this Indenture imposed by the holder of such Lien;
(8) restrictions imposed by any agreement to sell assets permitted under this
Indenture to any Person pending the closing of such sale; (9) any agreement or
instrument governing Capital Stock of any Person that is acquired; or (10) an
agreement governing Indebtedness incurred to Refinance the Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clause (2), (3), (5)
or (6) above; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Company in any material respect as determined by the Board of
Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (3), (5) or (6), respectively.
SECTION 4.14. [Intentionally Omitted]
SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder
will have the right to require that the Company purchase all or a portion of
such Holder's Notes pursuant to the offer described below (the "Change of
Control Offer"), at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest to the date of purchase.
(b) Prior to the mailing of the notice referred to below, but
in any event within 30 days following any Change of Control, the Company
covenants to (i) repay in full all indebtedness, and terminate all commitments,
under the Credit Agreement and all other Senior Indebtedness the terms of which
require repayment upon a Change of Control or offer to repay in full all
indebtedness, and terminate all commitments, under the Credit Agreement and all
other such Senior Indebtedness and to repay the Indebtedness owed to each lender
which has accepted such offer or (ii) obtain the requisite consents under the
Credit Agreement and all other such Senior Indebtedness to permit the repurchase
of the Notes as provided below. The Company
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shall first comply with the covenant in the immediately preceding sentence
before it shall be required to repurchase Notes pursuant to the provisions
described below. The Company's failure to comply with the immediately preceding
sentence shall be governed by Section 6.01(iv) and not Section 6.01(ii).
(c) Within 30 days following the date upon which a Change of
Control occurs, the Company shall send, by first class mail, a notice to each
Holder at such Holder's last registered address, with a copy to the Trustee,
which notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Change of Control Offer. Such
notice shall state:
(i) that the Change of Control Offer is being made pursuant
to this Section 4.15, that all Notes tendered and not withdrawn will be
accepted for payment and that the Change of Control Offer shall remain
open for a period of 20 Business Days or such longer period as may be
required by law;
(ii) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be no earlier than 30 days
nor later than 45 days from the date such notice is mailed, other than
as may be required by law) (the "Change of Control Payment Date");
(iii) that any Note not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that Holders electing to have a Note purchased pursuant
to a Change of Control Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the second Business Day
prior to the Change of Control Payment Date, a telegram, facsimile
transmission or letter setting
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forth the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is
withdrawing its election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will
be issued new Notes in a principal amount equal to the unpurchased
portion of the Notes surrendered; provided, however, that each Note
purchased and each new Note issued shall be in an original principal
amount of $1,000 or integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such
Change of Control.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Notes or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent in accordance with
Section 2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. Upon receipt by the Paying
Agent of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. For purposes of this Section 4.15,
the Trustee shall act as the Paying Agent.
Neither the Board of Directors of the Company nor the Trustee
may waive the provisions of this Section 4.15 relating to the Company's
obligation to make a Change of Control Offer.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.15, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of this Section 4.15 by virtue thereof.
<PAGE>
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SECTION 4.16. Limitation on Asset Sales.
(a) The Company will not, and will not cause or permit any of
its Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed
of (as determined in good faith by the Company's Board of Directors);
(ii) at least 75% of the consideration received by the Company
or the Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents and is received at the time of
such disposition; and
(iii) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 360 days of receipt thereof either
(A) to prepay any Senior Indebtedness or Guarantor Senior Indebtedness
and, in the case of any Senior Indebtedness or Guarantor Senior
Indebtedness under any revolving credit facility, effect a permanent
reduction in the commitment available under such revolving credit
facility, (B) to make an investment in properties and assets that
replace the properties and assets that were the subject of such Asset
Sale or in properties and assets that will be used in the business of
the Company and its Subsidiaries as existing on the Issue Date or in
businesses reasonably related or complementary thereto (as determined
in good faith by the Company's Board of Directors)("Replacement
Assets") or (C) a combination of prepayment and investment permitted by
the foregoing clauses (iii)(A) and (iii)(B). Pending final application,
the Company or the applicable Subsidiary may temporarily reduce
Indebtedness under any revolving credit facility or invest in cash or
Cash Equivalents. On the 361st day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such
Subsidiary determines not to apply the Net Cash Proceeds relating to
such Asset Sale as set forth in clauses (iii)(A), (iii)(B) and (iii)(C)
of the next preceding sentence (each a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Offer Trigger Date as permitted
in clauses (iii)(A), (iii)(B) and (iii)(C) of
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the next preceding sentence (each a "Net Proceeds Offer Amount") shall
be applied by the Company or such Subsidiary to make an offer to
purchase (a "Net Proceeds Offer") on a date (the "Net Proceeds Offer
Payment Date") not less than 30 nor more than 45 days following the
applicable Net Proceeds Offer Trigger Date, from all Holders on a pro
rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, if any, to the
date of purchase; provided, however, that if at any time any non-cash
consideration received by the Company or any Subsidiary of the Company,
as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received
with respect to any such non-cash consideration), then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder
and the Net Cash Proceeds thereof shall be applied in accordance with
this Section 4.16. The Company or any such Subsidiary of the Company,
as the case may be, may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of
$5.0 million resulting from one or more Asset Sales (at which time, the
entire unutilized Net Proceeds Offer Amount, and not just the amount in
excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
(b) Notwithstanding the immediately preceding paragraph, the
Company and its Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraph to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes Replacement Assets and/or Cash
Equivalents and (ii) such Asset Sale is for fair market value; provided,
however, that any consideration constituting Cash Equivalents, if any, received
by the Company or any of its Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of the preceding paragraph.
(c) Subject to the deferral of the Net Proceeds Offer
contained in clause (a)(iii) above, each notice of a Net Proceeds Offer pursuant
to this Section 4.16 shall be mailed or caused to be mailed, by first class
mail, by the Company not more than 25 days after the Net Proceeds Offer Trigger
Date to all Holders at their last registered addresses, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursu-
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ant to the Net Proceeds Offer and shall state the following terms:
(i) that the Net Proceeds Offer is being made pursuant to
this Section 4.16, that all Notes tendered will be accepted for
payment; provided, however, that if the aggregate principal amount of
Notes tendered in a Net Proceeds Offer plus accrued interest at the
expiration of such offer exceeds the aggregate amount of the Net
Proceeds Offer, 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 multiples
thereof shall be purchased) and that the Net Proceeds Offer shall
remain open for a period of 20 Business Days or such longer period as
may be required by law;
(ii) the purchase price (including the amount of accrued
interest) and the Net Proceeds Offer Payment Date (which shall be not
less than 30 nor more than 45 days (unless a longer period is required
by law) following the applicable Net Proceeds Offer Trigger Date and
which shall be at least five Business Days after the Trustee receives
notice thereof from the Company);
(iii) that any Note not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Net Proceeds
Offer shall cease to accrue interest after the Net Proceeds Offer
Payment Date;
(v) that Holders electing to have a Note purchased pursuant
to a Net Proceeds Offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day
prior to the Net Proceeds Offer Payment Date;
(vi) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the second Business Day
prior to the Net Proceeds Offer Payment Date, a telegram, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder delivered for purchase and a
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statement that such Holder is withdrawing its election to have such
Note purchased; and
(vii) that Holders whose Notes are purchased only in part will
be issued new Notes in a principal amount equal to the unpurchased
portion of the Notes surrendered; provided, however, that each Note
purchased and each new Note issued shall be in an original principal
amount of $1,000 or integral multiples thereof;
On or before the Net Proceeds Offer Payment Date, the Company
shall (i) accept for payment Notes or portions thereof tendered pursuant to the
Net Proceeds Offer which are to be purchased in accordance with item (b)(i)
above, (ii) deposit with the Paying Agent in accordance with Section 2.14 U.S.
Legal Tender sufficient to pay the purchase price plus accrued interest, if any,
of all Notes to be purchased and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price
plus accrued interest, if any. For purposes of this Section 4.16, the Trustee
shall act as the Paying Agent. The Trustee shall promptly authenticate and mail
to such Holders new Notes equal in principal amount to any unpurchased portion
of the Notes surrendered. Upon the payment of the purchase price for the Notes
accepted for purchase, the Trustee shall cancel such Notes. Any monies remaining
after the purchase of Notes pursuant to a Net Proceeds Offer shall be returned
within three Business Days by the Trustee to the Company except with respect to
monies owed as obligations to the Trustee pursuant to Article Seven. For
purposes of this Section 4.16, the Trustee shall act as the Paying Agent.
To the extent the amount of Notes tendered pursuant to any Net
Proceeds Offer is less than the amount of Net Cash Proceeds subject to such Net
Proceeds Offer, the Company may use any remaining portion of such Net Cash
Proceeds not required to fund the repurchase of tendered Notes for general
corporate purposes and such Net Proceeds Offer Amount shall be reset to zero.
(d) The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
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provisions of this Section 4.16, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of this Section 4.16 by virtue thereof.
SECTION 4.17. Limitation on Preferred Stock of Subsidiaries.
The Company will not permit any of its Subsidiaries to issue
any Preferred Stock (other than to the Company or to a Wholly Owned Subsidiary
of the Company) or permit any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) to own any Preferred Stock of any Subsidiary of the
Company.
SECTION 4.18. Limitation on Liens.
The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets of
the Company or any of its Subsidiaries (whether owned on the Issue Date or
acquired after the Issue Date), or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom unless (i) in
the case of Liens securing Indebtedness that is expressly subordinate or junior
in right of payment to the Notes or any Guarantee, the Notes and such Guarantee,
as the case may be, are secured by a Lien on such property, assets or proceeds
that is senior in priority to such Liens and (ii) in all other cases, the Notes
and the Guarantees are equally and ratably secured, except for (A) Liens
existing as of the Issue Date to the extent and in the manner such Liens are in
effect on the Issue Date; (B) Liens securing Senior Indebtedness and/or
Guarantor Senior Indebtedness; (C) Liens securing the Notes and the Guarantees;
(D) Liens of the Company or a Wholly Owned Subsidiary of the Company on assets
of any Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness
which is incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under this Indenture and which has been incurred in accordance with
the provisions of this Indenture; provided, however, that such Liens (1) are no
less favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (2) do not extend to or cover any property or assets of the
Company or any of its Subsidiaries not securing the Indebtedness so Refinanced
(other than property or assets subject to Liens under clause (B) above); and (F)
Permitted Liens.
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SECTION 4.19. Conduct of Business.
The Company will not, and will not cause or permit any of its
Subsidiaries to, engage in any businesses other than the businesses in which the
Company is engaged on the Issue Date, giving effect to the Merger, and any
businesses reasonably related or complementary thereto (as determined in good
faith by the Company's Board of Directors); provided, however, that the Company
shall not, and not cause or permit any of its Subsidiaries to, engage in any
business related to insurance other than as an insurance broker in which case
without the incurrence of any underwriting risk.
SECTION 4.20. Additional Subsidiary Guarantees.
If the Company or any of its Subsidiaries transfers or causes
to be transferred, in one transaction or a series of related transactions, any
property aggregating more than $50,000 to any Subsidiary that is not a
Subsidiary Guarantor or a Foreign Subsidiary, or if the Company or any of its
Subsidiaries shall organize, acquire or otherwise invest in another Subsidiary
that is not a Foreign Subsidiary, then such transferee or acquired or other
Subsidiary shall (a) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such Subsidiary
shall unconditionally guarantee all of the Company's obligations under the Notes
and this Indenture on the terms set forth in this Indenture and (b) deliver to
the Trustee an Opinion of Counsel stating that such supplemental indenture has
been duly authorized, executed and delivered by such Subsidiary and constitutes
a legal, valid, binding and enforceable obligation of such Subsidiary except
that the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought regardless of whether such enforcement is considered in
a proceeding in equity or at law; provided, however, that any Subsidiary
acquired on or after the Issue Date which is prohibited from entering into a
Guarantee pursuant to restrictions contained in any debt instrument or other
agreement in existence at the time such Subsidiary was so acquired which was not
entered into in anticipation or contemplation of such acquisition shall not be
required to become a Subsidiary Guarantor so long as any such restriction is in
existence and to the extent of such restriction. After the execution and
delivery of such
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supplemental indenture, such Subsidiary shall be a Subsidiary Guarantor for
all purposes of this Indenture.
SECTION 4.21. Prohibition on Incurrence of Senior Subordinated
Debt.
The Company will not, and will not permit any Subsidiary
Guarantor to, incur or suffer to exist Indebtedness that by its terms (or by the
terms of any agreement governing such Indebtedness) is senior in right of
payment to the Notes or its Guarantee, as the case may be, and expressly
subordinate in right of payment to any other Indebtedness of the Company or such
Subsidiary Guarantor, as the case may be.
SECTION 4.22. Special Covenants Prior to Effectiveness of the
Merger.
In addition to, and not in substitution for, any other
covenant or agreement contained in this Indenture, prior to the effectiveness of
the Merger,
(a) the Company will not incur or suffer to exist any
Indebtedness of the Company other than this Indenture and the Notes;
(b) the Company will not permit any of its Subsidiaries to,
incur or suffer to exist any Indebtedness other than Permitted Indebtedness
(other than Permitted Indebtedness incurred pursuant to clause (xii) or (xiii)
of the definition thereof);
(c) the Company will not, and will not permit any of its
Subsidiaries to, sell, transfer or otherwise dispose of, or create, incur,
assume or permit or suffer to exist any Lien on, any shares of capital stock of
ATC owned by the Company or any of its Subsidiaries except for the concurrent
sale in a single transaction for cash (other than to an Affiliate) by the
Company and its Subsidiaries of all such shares then owned by them and the
concurrent application of the net proceeds thereof to permanently retire and
redeem the Notes;
(d) the Company will not fail to perform or terminate, or
permit ATC to fail to perform or terminate, the Merger Agreement and the Company
will, and will cause ATC to, take all steps necessary to complete the Merger as
soon as practicable but in no event later than October 29, 1998;
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(e) the Company will not engage in any activities not directly
related to the consummation of the Merger (except that the Company may engage in
attempts to obtain the consent of Holders of the Notes pursuant to the
provisions of Article Nine);
(f) the Company will not permit ATC and its Subsidiaries to
engage in any transactions other than ones in the ordinary course of their
business consistent with past practice and other than ones directly related to
consummation of the Merger;
(g) the Company will not, and will not cause or permit any of
its Subsidiaries, directly or indirectly to make any Restricted Payment (other
than payments pursuant to the Tax Sharing Agreement);
(h) the Company will not, and will not cause or permit any of
its Subsidiaries to, make any Investment (other than Permitted Investments
described in clauses (ii), (iii), (iv), (v), (vi) and (vii) of the definition of
Permitted Investments);
(i) the Company will not permit ATC to sell or issue any
shares of its capital stock other than to the Company; and the Company will not
permit ATC or any of its Subsidiaries to sell or issue any shares of capital
stock of any of ATC's Subsidiaries other than to ATC or a wholly-owned
Subsidiary thereof;
(j) the Company will not have any Subsidiaries (other than ATC
and its Subsidiaries); and
(k) the Company will not sell any shares of capital stock of
ATC owned by it except for fair value and for cash and will either (a) invest
the net proceeds of any such sale in cash and Cash Equivalents or (b) use the
net proceeds to pay, prepay or redeem the Notes substantially concurrent with
such sale.
SECTION 4.23. Certain Net Proceeds to be Held by the Trustee.
Until the effectiveness of the Merger, the net proceeds of the
Notes after consummation of the Tender Offer (the "Proceeds") shall be held in
trust by the Trustee for the sole and exclusive benefit of the holders of the
Notes and as security for such Notes, and the Company shall not be entitled to
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the Proceeds nor have any interest in the Proceeds; provided, however, that the
Trustee shall, upon any redemption of the Notes pursuant to the provisions of
Section 3.08, apply the Proceeds then held by it to the redemption of the Notes
together with other funds therefor provided by the Company.
Upon or concurrently with the effectiveness of the Merger, as
evidenced by an Officers' Certificate, the Trustee shall release the Proceeds
then held by it to the Company. In addition, in the event that the Merger has
not been consummated by the date of the first semiannual interest payment, the
Trustee shall, upon written request of the Company, release the amount of
Proceeds necessary to make such payment.
Until so applied or so released, the Proceeds shall be
invested solely in U.S. Legal Tender or U.S. Government Obligations held by the
Trustee which do not have a stated maturity of more than the earlier of 30 days
from the date acquired by the Trustee or the date the Notes would be required to
be redeemed pursuant to Section 3.08.
SECTION 4.24. Guarantees of Certain Indebtedness
The Company will not permit any of its Subsidiaries which are
not already Subsidiary Guarantors, directly or indirectly, to incur, guarantee
or secure through the granting of Liens the payment of any Indebtedness of the
Company under the Credit Agreement or any refunding or refinancing thereof, in
each case unless such Subsidiary, the Company and the Trustee execute and
deliver a supplemental indenture evidencing such Subsidiary's Guarantee, such
Guarantee to be a senior subordinated unsecured obligation of such Subsidiary.
Neither the Company nor any such Guarantor shall be required to make a notation
on the Notes or the Guarantees to reflect any such subsequent Guarantee. Nothing
in this covenant shall be construed to permit any Subsidiary of the Company to
incur Indebtedness otherwise prohibited by Section 4.12.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
(a) The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and its Subsidiaries) unless: (i) either (1)
the Company shall be the surviving or continuing corporation or (2) the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or the Person which acquires by sale, assignment, transfer,
lease, conveyance or other disposition the properties and assets of the Company
and its Subsidiaries substantially as an entirety (the "Surviving Entity") (x)
shall be a corporation organized and validly existing under the laws of the
United States or any state thereof or the District of Columbia and (y) shall
expressly assume, by supplemental indenture (in form and substance satisfactory
to the Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of, premium, if any, and interest on all of the Notes
and the performance of every covenant of the Notes, this Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed, as the case may be; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2)(x) shall
be able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.12 or (y) in the case of a merger or
consolidation with Holdings, shall have a Consolidated Fixed Charge Coverage
Ratio equal to or greater than the Consolidated Fixed Charge Coverage Ratio of
the Company immediately prior to such transaction; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limita-
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tion, giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred and any Lien granted in connection with or in respect
of the transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity, as the case may be,
shall have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions hereof and that all conditions
precedent in this Indenture relating to such transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company shall be deemed to
be the transfer of all or substantially all of the properties and assets of the
Company.
(c) Each Subsidiary Guarantor (other than any Subsidiary
Guarantor whose Guarantee is to be released in accordance with the terms of the
Guarantee and this Indenture in connection with any transaction complying with
the provisions of Section 4.16) will not, and the Company will not cause or
permit any Subsidiary Guarantor to, consolidate with or merge with or into any
Person other than the Company or another Subsidiary Guarantor that is a Wholly
Owned Subsidiary unless: (a) the entity formed by or surviving any such
consolidation or merger (if other than the Subsidiary Guarantor) is a
corporation organized and existing under the laws of the United States or any
state thereof or the District of Columbia; (b) such entity assumes by execution
of a supplemental indenture all of the obligations of the Subsidiary Guarantor
under its Guarantee; (c) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and (d)
immediately after giving effect to such transaction and the use of any net
proceeds therefrom on a pro forma basis, the Company could satisfy the
provisions of clause (ii) of the first paragraph of this Section 5.01. Any
merger or consolidation of a Subsidiary Guarantor with and into the Company
(with the Company being the surviving entity) or another Subsidiary Guarantor
that is a Wholly Owned Subsidiary need only comply with clause (iv) (and not
clauses (i) (ii) or (iii)) of paragraph (a) of this Section 5.01.
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SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer
of all or substantially all of the assets of the Company in accordance with
Section 5.01, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, lease or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture and the Notes with the same effect as if
such successor had been named as the Company herein and thereafter (except in
the case of a lease) the predecessor corporation will be relieved of all further
obligations and covenants under this Indenture and the Notes.
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" means any of the following events:
(i) the failure to pay interest (including any Additional
Interest, if any) on any Notes when the same becomes due and payable
and the default continues for a period of 30 days (whether or not such
payment is prohibited by Article Ten of this Indenture);
(ii) the failure to pay the principal on any Notes when such
principal becomes due and payable, at maturity, upon acceleration, upon
redemption or otherwise (including the failure to make a payment to
purchase Notes tendered pursuant to a Change of Control Offer or a Net
Proceeds Offer) (whether or not such payment is prohibited by Article
Ten of this Indenture);
(iii) a default in the observance or performance of the
covenants and agreements described in Section 4.22 and Section 4.23;
(iv) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default
continues for a period of 30 days after the Company receives written
notice specifying the default
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(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to Section 5.01,
which will constitute an Event of Default with such notice requirement
but without such passage of time requirement);
(v) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Subsidiary of the
Company and such failure continues for a period of 20 days or more, or
the acceleration of the final stated maturity of any such Indebtedness
(which acceleration is not rescinded, annulled or otherwise cured
within 20 days of receipt by the Company or such Subsidiary of notice
of any such acceleration) if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final maturity
or which has been accelerated, in each case with respect to which the
20-day period described above has passed, aggregates $10.0 million or
more at any time;
(vi) one or more judgments in an aggregate amount in excess of
$10.0 million shall have been rendered against the Company or any of
its Significant Subsidiaries and such judgments remain undischarged,
unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable;
(vii) the Company or any of its Significant Subsidiaries
pursuant to or under or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding;
(b) consents to the entry of an order for relief against it
in an involuntary case or proceeding;
(c) consents to the appointment of a Custodian of it or for
all or substantially all of its property; or
(d) makes a general assignment for the benefit of its
creditors; or
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
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(a) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case or
proceeding,
(b) appoints a Custodian of the Company or any Significant
Subsidiary of the Company for all or substantially all of its
Properties, or
(c) orders the liquidation of the Company or any
Significant Subsidiary of the Company,
and in each case the order or decree remains unstayed and in effect for
60 consecutive days; or
(ix) any of the Guarantees of a Subsidiary Guarantor that is a
Significant Subsidiary cease to be in full force and effect or any of
such Guarantees are declared to be null and void or invalid and
unenforceable or any of the Subsidiary Guarantors denies or disaffirms
its liability under its Guarantees (other than by reason of release of
a Subsidiary Guarantor in accordance with the terms of this Indenture);
and
(x) at any time prior to the consummation of the Merger the
Merger Agreement shall cease to be in full force and effect or any of
the obligations of Holdings, the Company or ATC are declared to be null
and void or invalid and unenforceable or any of Holdings, the Company
or ATC denies or disaffirms any of its obligations under the Merger
Agreement or a majority stockholders of ATC vote against the Merger in
accordance with Delaware law.
SECTION 6.02. Acceleration.
(a) Upon the happening of an Event of Default specified in
Section 6.01 (other than an Event of Default specified in clause (vii) or (viii)
of Section 6.01 with respect to the Company) the Trustee may, or the holders of
at least 25% in principal amount of outstanding Notes may, declare the principal
of and accrued interest on all the Notes to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration," (an "Acceleration Notice")
and the same (i) shall become immediately due and payable or (ii) if there are
any amounts outstanding under the Credit Agreement, shall become immediately due
and payable upon the first to occur of an acceleration under the Credit
Agreement or 5 Business Days after receipt by the Company and the Representative
under the
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Credit Agreement of such Acceleration Notice but only if such Event of Default
is then continuing. If an Event of Default of the type described in clause (vii)
or (viii) of Section 6.01 occurs and is continuing with respect to the Company,
then all unpaid principal of, and premium, if any, and accrued and unpaid
interest on all of the outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
(b) At any time after a declaration of acceleration with
respect to the Notes as described in the preceding paragraph, the Holders of a
majority in aggregate principal amount of the Notes then outstanding by written
notice to the Company and the Trustee may rescind and cancel such declaration
and its consequences (i) if the rescission would not conflict with any judgment
or decree, (ii) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely because of
such acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (vii) or (viii) of Section 6.01, the Trustee shall have received an
Officers' Certificate and an Opinion of Counsel that such Event of Default has
been cured or waived; provided, however, that such counsel may rely, as to
matters of fact, on a certificate or certificates of officers of the Company. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the
Notes may be enforced by the Trustee 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 in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. No remedy
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is exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Prior to the declaration of acceleration of the Notes, the
Holders of not less than a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may, on behalf of the Holders of all
the Notes, waive any existing Default or Event of Default and its consequences
under this Indenture, except a Default or Event of Default specified in Section
6.01(i) or (ii) or in respect of any provision hereof which cannot be modified
or amended without the consent of the Holder so affected pursuant to Section
9.02. When a Default or Event of Default is so waived, it shall be deemed cured
and shall cease to exist. This Section 6.04 shall be in lieu of ss. 316(a)(1)(B)
of the TIA and such ss. 316(a)(1)(B) of the TIA is hereby expressly excluded
from this Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of the Notes may not
enforce this Indenture or the Notes except as provided in this Article Six and
under the TIA. The Holders of not less than a majority in aggregate principal
amount of the outstanding Notes shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, provided, however,
that the Trustee may refuse to follow any direction (a) that conflicts with any
rule of law or this Indenture, (b) that the Trustee determines may be unduly
prejudicial to the rights of another Holder, or (c) that may expose the Trustee
to personal liability for which reasonable indemnity provided to the Trustee
against such liability shall be inadequate; provided, further, however, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction or this Indenture. This Section 6.05 shall be
in lieu of ss. 316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is
hereby expressly excluded from this Indenture and the Notes, as permitted by the
TIA.
SECTION 6.06. Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding with respect to this Indenture or the Notes or any remedy hereunder,
unless the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made
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written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and this Indenture, the Trustee has
failed to institute such proceeding within 25 days after receipt of such notice,
request and offer of indemnity and the Trustee, within such 25-day period, has
not received directions inconsistent with such written request by Holders of not
less than a majority in aggregate principal amount of the outstanding Notes.
The foregoing limitations shall not apply to a suit instituted
by a Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of
any other Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the
right of any Holder of a Note to receive payment of the principal of, premium,
if any, and interest on such Note, on or after the respective due dates
expressed or provided for in such Note, or to bring suit for the enforcement of
any such payment on or after the respective due dates, is absolute and
unconditional and shall not be impaired or affected without the consent of the
Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in clause (i) or (ii) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company, or any other
obligor on the Notes for the whole amount of the principal of, premium, if any,
and accrued interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful, interest
on overdue installments of interest, in each case at the rate per annum provided
for by the Notes 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.
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SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, counsel, accountants and
experts) and the Holders allowed in any judicial proceedings relative to the
Company or Subsidiaries (or any other obligor upon the Notes), their creditors
or their property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings 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 agent and
counsel, and any other amounts due the Trustee under Section 7.07. The Company's
payment obligations under this Section 6.09 shall be secured in accordance with
the provisions of Section 7.07. 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 thereof, 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 Six
it shall pay out such money in the following order:
First: to the Trustee for compensation, expenses, disbursements and
advances, and any other amounts in each case due under Section 7.07;
Second: to Holders for interest accrued on the Notes, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for interest;
Third: to Holders for the principal amounts (including any premium)
owing under the Notes, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for the
principal (including any premium); and
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Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court may in its discretion require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to any suit by the Trustee, any suit
by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more
than 10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Company, the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee may exercise such of the rights and powers vested in it by this
Indenture and shall use the same degree of care and skill in its exercise
thereof as a prudent person
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would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no duties, covenants or
obligations of the Trustee shall be implied in this Indenture.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained,
the Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
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(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01 and Section 7.02.
(f) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
(g) The Trustee may refuse to perform any duty or exercise any
right or power hereunder unless (i) it is provided adequate funds to enable it
to do so and (ii) it receives indemnity reasonably satisfactory to it against
any loss, liability, fee or expense.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not and shall not be required to investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel of its selection and may require an Officers'
Certificate or an Opinion of Counsel, or both, which shall conform to
Sections 11.04 and 11.05. 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.
(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 that it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture,
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or other paper or document, but the Trustee, in its discretion, may
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, upon reasonable
notice to the Company, to examine the books, records, and premises of
the Company, personally or by agent or attorney and to consult with the
officers and representatives of the Company, including the Company's
accountants and attorneys.
(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,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
security or indemnity reasonably satisfactory to the Trustee against
the costs, expenses and liabilities which may be incurred by it in
compliance with such request, order or direction.
(g) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties
hereunder.
(h) Delivery of reports, information and documents to the
Trustee under Section 4.08 is for informational purposes only and the
Trustee's receipt of the foregoing shall not constitute constructive
notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with
any of their covenants hereunder (as to which the Trustee is entitled
to rely exclusively on Officers' Certificates).
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, any of
their Subsidiaries, or their respective Affiliates with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture
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or the Notes, and it shall not be accountable for the Company's use of the
proceeds from the Notes, and it shall not be responsible for any statement of
the Company in this Indenture or any document entered into or issued in
connection with the issuance and sale of the Notes or any statement in the Notes
other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing
and if it is known to a Trust Officer, the Trustee shall mail to each Holder
notice of the uncured Default or Event of Default within 90 days after obtaining
knowledge thereof. Except in the case of a Default or an Event of Default in
payment of principal of, or interest on, any Note, including an accelerated
payment, a Default in payment on the Change of Control Payment Date pursuant to
a Change of Control Offer or on the Net Proceeds Offer Payment Date pursuant to
a Net Proceeds Offer and a Default in compliance with Article Five hereof, the
Trustee may withhold the notice if and so long as its Board of Directors, the
executive committee of its Board of Directors or a committee of its directors
and/or Trust Officers in good faith determines that withholding the notice is in
the interest of the Holders. The foregoing sentence of this Section 7.05 shall
be in lieu of the proviso to ss. 315(b) of the TIA and such proviso to ss.
315(b) of the TIA is hereby expressly excluded from this Indenture and the
Notes, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after May 15 of each year beginning with 1998,
the Trustee shall, to the extent that any of the events described in TIA ss.
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA ss.
313(a). The Trustee also shall comply with TIA ss.ss. 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders
shall be mailed to the Company and filed with the Commission and each stock
exchange, if any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA ss.
313(d).
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SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its services as has been agreed to in writing signed by the
Company and the Trustee. 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 upon request for all reasonable out-of-pocket
disbursements, advances or expenses incurred or made by it in connection with
the performance of its duties under this Indenture. Such expenses shall include
the reasonable fees and expenses of the Trustee's agents, counsel, accountants
and experts.
The Company shall indemnify each of the Trustee (or any
predecessor Trustee) and its agents, employees, stockholders, Affiliates and
directors and officers for, and hold them each harmless against, any and all
loss, liability, damage, claim or expense (including reasonable fees and
expenses of counsel), including taxes (other than taxes based on the income of
the Trustee) incurred by any of them except for such actions to the extent
caused by any negligence, bad faith or willful misconduct on their part, arising
out of or in connection with the acceptance or administration of this trust
including the reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of any of
their rights, powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity, provided, however, that failure to so notify the Company shall not
release the Company of its obligations hereunder unless and to the extent such
failure results in the forfeiture by the Company of substantial rights and
defenses. At the Trustee's sole discretion, the Company shall defend the claim
and the Trustee shall cooperate and may participate in the defense; provided,
however, that any settlement of a claim shall be approved in writing by the
Trustee if such settlement would result in an admission of liability by the
Trustee or if such settlement would not be accompanied by a full release of the
Trustee for all liability arising out of the events giving rise to such claim.
Alternatively, the Trustee may at its option have separate counsel of its own
choosing and the Company shall pay the reasonable fees and expenses of such
counsel.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Notes on all assets or money
held or collected by the Trustee, in its capacity as Trustee, except assets or
money held in trust to
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pay principal of or premium, if any, or interest on particular Notes.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(vii) or (viii) occurs, such expenses
and the compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the
termination of this Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company
in writing at least 30 days in advance of such resignation; provided, however,
that no such resignation shall be effective until a successor Trustee has
accepted its appointment pursuant to this Section 7.08. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee and
appoint a successor Trustee with the Company's consent, by so notifying the
Company and the Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in aggregate
principal amount of the outstanding Notes may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor
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Trustee, subject to the lien provided in Section 7.07, 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 notice of such successor Trustee's
appointment to each Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in aggregate principal amount of the
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business (including
its business pursuant to this Indenture) to, another corporation, the resulting,
surviving or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise eligible hereunder,
be the successor Trustee; provided, however, that such corporation shall be
otherwise qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case
of a Trustee that is a corporation included in a bank holding company system,
the related bank holding company) shall have a combined capital and surplus of
at least $100 million as set forth in its most recent published annual report of
condition, and have a Corporate Trust Office in the City of New York. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
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capital requirements of TIA ss. 310(a)(2). The Trustee shall comply with TIA ss.
310(b); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. The provisions of TIA ss. 310 shall apply to the Company, as
obligor of the Notes.
SECTION 7.11. Preferential Collection of Claims Against the
Company.
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
The provisions of TIA ss. 311 shall apply to the Company, as obligor of the
Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations.
This Indenture will be discharged and will cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of the Notes, as expressly provided for in this Indenture) as to all
outstanding Notes when (i) either (a) all Notes theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under this Indenture by the Company;
and (iii) the Company has delivered to the Trustee an Officers'
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Certificate and an Opinion of Counsel stating that all conditions precedent
under this Indenture relating to the satisfaction and discharge of this
Indenture have been complied with.
The Company may, at its option and at any time, elect to have
its obligations and the corresponding obligations of the Subsidiary Guarantors
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes, and
satisfied all of its obligations with respect to the Notes, except for (i) the
rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest on the Notes when such payments are due, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of this Section
8.01. In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and the Subsidiary Guarantors, if any, released
with respect to covenants contained in Sections 4.10 through 4.24 and Article
Five ("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 of Covenant Defeasance, those events described under
Section 6.01 (except those events described in Section 6.01(i),(ii),(vii) and
(viii)) will no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(i) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders cash in United States dollars,
non-callable U.S. Government Obligations, 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 on the Notes on the stated date for
payment thereof or on the applicable Redemption Date, as the case may
be;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee
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confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the
date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders 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;
provided, however, such Opinion of Counsel will not be required if all
the Notes will become due and payable on the maturity date within one
year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee;
(iii) in the case of Covenant Defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders
will not recognize income, gain or loss for federal income tax purposes
as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default
under Section 6.01(vii) or (viii) are concerned, at any time in the
period ending on the 91st day after the date of deposit (other than a
Default or Event of Default resulting from the incurrence of
Indebtedness all or a portion of the proceeds of which will be used to
defease the Notes);
(v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under this
Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(vi) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with
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the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(vii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance, as the case may be, have been complied
with; provided, however, that such counsel may rely, as to matters of
fact, on a certificate or certificates of officers of the Company;
(viii) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; provided, however, that such
counsel may rely, as to matters of fact, on a certificate or
certificates of officers of the Company; and
(ix) certain other customary conditions precedent are
satisfied.
SECTION 8.02. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal
Tender or U.S. Government Obligations deposited with it pursuant to Section
8.01, and shall apply the deposited U.S. Legal Tender and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of the
principal of and interest on the Notes. The Trustee shall be under no obligation
to invest said U.S. Legal Tender or U.S. Government Obligations except as it may
agree in writing with the Company.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or
U.S. Government Obligations deposited pursuant to Section 8.01 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 outstanding Notes.
SECTION 8.03. Repayment to the Company.
Subject to Section 8.01, the Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess U.S. Legal Tender or
U.S. Government Obligations held by them
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at any time and thereupon shall be relieved from all liability with respect to
such money. The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or interest that
remains unclaimed for one year; provided, however, that the Trustee or such
Paying Agent, before being required to make any payment, may at the expense of
the Company cause to be published once in a newspaper of general circulation in
the City of New York or mail to each Holder entitled to such money notice that
such money remains unclaimed and that after a date specified therein which shall
be at least 30 days from the date of such publication or mailing any unclaimed
balance of such money then remaining will be repaid to the Company. After
payment to the Company, Holders entitled to such money must look to the Company
for payment as general creditors unless an applicable law designates another
Person.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S.
Legal Tender or U.S. Government Obligations in accordance with Section 8.01 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.01 until such time as the Trustee or Paying Agent is permitted to
apply all such U.S. Legal Tender or U.S. Government Obligations in accordance
with Section 8.01; provided, however, that if the Company has made any payment
of interest on or principal of any Notes because of the reinstatement of their
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
SECTION 8.05. Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.01 have been satisfied,
(ii) the Company has paid or caused to be paid all other sums payable hereunder
by the Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture except
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for those surviving obligations specified in Section 8.01; provided the legal
counsel delivering such Opinion of Counsel may rely as to matters of fact on one
or more Officers' Certificates of the Company.
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders.
Notwithstanding Section 9.02, the Company, the Subsidiary
Guarantors and the Trustee may amend, waive or supplement this Indenture without
notice to or consent of any Holder: (a) to cure any ambiguity, defect or
inconsistency; (b) to comply with Section 5.01 of this Indenture; (c) to provide
for uncertificated Notes in addition to certificated Notes; (d) to comply with
any requirements of the Commission in order to effect or maintain the
qualification of this Indenture under the TIA; or (e) to make any change that
would provide any additional benefit or rights to the Holders or that does not
adversely affect the rights of any Holder in any material respect.
Notwithstanding the foregoing (but except as otherwise provided by Section 9.02)
the Trustee and the Company may not make any change that adversely affects the
rights of any Holder under this Indenture without the consent of such Holder. In
formulating its opinion on such matters, the Trustee will be entitled to rely on
such evidence as it deems appropriate, including, without limitation, solely on
an Opinion of Counsel; provided, however, that in delivering such Opinion of
Counsel, such counsel may rely as to matters of fact, on a certificate or
certificates of officers of the Company.
SECTION 9.02. With Consent of Holders.
All other modifications, waivers and amendments of this
Indenture may be made with the consent of the Holders of a majority in principal
amount of the then outstanding Notes, except that, without the consent of each
Holder of the Notes affected thereby, no amendment or waiver may: (i) reduce the
amount of Notes whose Holders must consent to an amendment; (ii) reduce the rate
of or change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Notes, or change
the date on which any Notes may be subject to redemp-
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tion or repurchase, or reduce the redemption or repurchase price therefor; (iv)
make any Notes payable in money other than that stated in the Notes; (v) make
any change in provisions of this Indenture protecting the right of each Holder
to receive payment of principal of and interest on such Note on or after the due
date thereof or to bring suit to enforce such payment, or permitting Holders of
a majority in principal amount of Notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto; (vii) modify or change any provision of this
Indenture affecting the subordination or ranking of the Notes or any Guarantee
in a manner which adversely affects the Holders in any material respect; or
(viii) release any Subsidiary Guarantor from any of its obligations under its
Guarantee or this Indenture other than in accordance with the terms of this
Indenture.
After an amendment, supplement or waiver under this Section
9.02 becomes effective (as provided in Section 9.05), the Company shall mail to
the Holders 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 supplemental indenture.
SECTION 9.03. Effect on Senior Indebtedness and Guarantor
Senior Indebtedness.
No amendment of this Indenture shall adversely affect the
rights of any holder of Senior Indebtedness or Guarantor Senior Indebtedness
under Article Ten or Article Thirteen of this Indenture, without the consent of
such holder.
SECTION 9.04. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect; provided, however, that this
Section 9.04 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
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SECTION 9.05. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment, supplement
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence of consent by the Holders of the requisite percentage
in principal amount of outstanding Notes.
The Company may, but shall not be obligated to, fix a Record
Date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which Record Date shall be at least 30 days
prior to the first solicitation of such consent. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such Record Date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
Record Date. No such consent shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not revoked within
such 90 day period.
SECTION 9.06. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a
Note, the Trustee may require the Holder of such Note to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Note about the
changed terms and return it to the Holder. Alternatively, if the Company or the
Trustee so determine, the Company in exchange for the Note shall issue and the
Trustee shall authenticate a new Note that reflects the changed terms.
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SECTION 9.07. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided, however, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. In executing such supplement or waiver the Trustee shall be entitled
to receive indemnity reasonably satisfactory to it, and shall be fully protected
in relying upon an Opinion of Counsel and an Officers' Certificate of the
Company, stating that no event of default shall occur as a result of such
amendment, supplement or waiver and that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture; provided the legal counsel delivering such Opinion
of Counsel may rely as to matters of fact on one or more Officers' Certificates
of the Company. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Indebtedness Upon
Effectiveness of the Merger.
The Company covenants and agrees, and each Holder of the
Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes
shall be issued subject to the provisions of this Article Ten, provided,
however, that the subordination provisions of this Article Ten shall not be
effective until the effectiveness of the Merger; and each Person holding any
Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Obligations on the Notes by
the Company shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash Equivalents of all Obligations on Senior Indebtedness, including,
without limitation, the Company's obligations under the Credit Agreement; that
the subordination is for the benefit of, and shall be enforceable directly by,
the holders of Senior Indebtedness, and that each holder of Senior Indebtedness
whether now outstanding or hereafter created, incurred, assumed or guaranteed
shall be deemed to have acquired Senior Indebted-
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ness in reliance upon the covenants and provisions contained in this Indenture
and the Notes.
SECTION 10.02. Suspension of Payment When Senior Indebtedness
is in Default.
(a) If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or otherwise,
of any principal of, interest on, unpaid drawings for letters of credit issued
in respect of, or regularly accruing fees with respect to, any Senior
Indebtedness, no payment of any kind or character shall be made by or on behalf
of the Company or any other Person on its or their behalf with respect to any
Obligations on the Notes or to acquire any of the Notes for cash or property or
otherwise. In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders of such Designated Senior Indebtedness then
outstanding to accelerate the maturity thereof and if the Representative for the
respective issue of Designated Senior Indebtedness gives notice of the event of
default to the Trustee (a "Default Notice"), then, unless and until all events
of default have been cured or waived or have ceased to exist or the Trustee
receives notice thereof from the Representative for the respective issue of
Designated Senior Indebtedness terminating the Blockage Period (as defined
below), during the 180 days after the delivery of such Default Notice (the
"Blockage Period"), neither the Company nor any other Person on its behalf shall
(x) make any payment of any kind or character with respect to any Obligations on
the Notes or (y) acquire any of the Notes for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a Blockage
Period extend beyond 180 days from the date the payment on the Notes was due and
only one such Blockage Period may be commenced within any 360 consecutive days.
No event of default which existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Designated Senior
Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Indebtedness
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any prov
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isions under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amount of
Senior Indebtedness held by such holders) or their respective Representatives,
as their respective interests may appear. The Trustee shall be entitled to rely
on information regarding amounts then due and owing on the Senior Indebtedness,
if any, received from the holders of Senior Indebtedness (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from the Company and only amounts included in the
information provided to the Trustee shall be paid to the holders of Senior
Indebtedness.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Senior Indebtedness thereafter due or
declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment of any kind or character
with respect to Obligations on the Notes.
SECTION 10.03. Notes Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation or Reorganization of
Company.
(a) Upon any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Indebtedness
shall first be paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Senior Indebtedness, before
any payment or distribution of any kind or character is made on account of any
Obligations on the Notes, or for the acquisition of any of the Notes for cash or
property or
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otherwise. Upon any such dissolution, winding-up, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provisions hereof, shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders or by the Trustee under
this Indenture if received by them, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their respective Representatives,
or to the trustee or trustees under any indenture pursuant to which any of such
Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of Senior Indebtedness remaining unpaid
until all such Senior Indebtedness has been paid in full in cash or Cash
Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether
by or on behalf of the Company, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential, set
aside or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Senior Indebtedness or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment has not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or any
Holder when such payment or distribution is prohibited by Section 10.03(a), such
payment or distribution shall be held in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Indebtedness (pro rata to such
holders on the basis of the respective amount of Senior Indebtedness held by
such holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of Senior Indebtedness remaining unpaid until all such Senior
Indebtedness
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has been paid in full in cash or Cash Equivalents, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Indebtedness.
(d) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the liquidation or dissolution
of the Company following the conveyance or transfer of all or substantially all
of its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior
Indebtedness shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 10.03 if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, assume
the Company's obligations hereunder in accordance with Article Five hereof.
SECTION 10.04. Holders To Be Subrogated to Rights of Holders
of Senior Indebtedness.
Subject to the payment in full in cash or Cash Equivalents of
all Senior Indebtedness, the Holders of the Notes shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Indebtedness until the Notes shall be paid in full; and, for the purposes
of such subrogation, no such payments or distributions to the holders of the
Senior Indebtedness by or on behalf of the Company or by or on behalf of the
Holders by virtue of this Article Ten which otherwise would have been made to
the Holders shall, as between the Company and the Holders of the Notes, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness, it being understood that the provisions of this Article Ten are
and are intended solely for the purpose of defining the relative rights of the
Holders of the Notes, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
SECTION 10.05. Obligations of the Company Unconditional.
Nothing contained in this Article Ten or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as between the Company
and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of
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the Holders and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
Ten of the holders of Senior Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy. Upon
any payment or distribution of assets or securities of the Company referred to
in this Article Ten, the Trustee, subject to the provisions of Sections 7.01 and
7.02, and the Holders shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which any liquidation, dissolution,
winding-up or reorganization proceedings are pending, or a certificate of the
receiver, trustee in bankruptcy, liquidating trustee or agent or other Person
making any payment or distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Ten. Nothing in this Article Ten shall apply to the claims of, or payments to,
the Trustee under or pursuant to Section 7.07. The Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
or itself to be a holder of any Senior Indebtedness (or a trustee on behalf of,
or other representative of, such holder) to establish that such notice has been
given by a holder of such Senior Indebtedness or a trustee or representative on
behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Ten, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
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SECTION 10.06. Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Indebtedness or of any other facts which would prohibit the making of
any payment to or by the Trustee unless and until the Trustee shall have
received notice in writing from the Company, or from a holder of Senior
Indebtedness or a Representative therefor, together with proof satisfactory to
the Trustee of such holding of Senior Indebtedness or of the authority of such
Representative, and, prior to the receipt of any such written notice, the
Trustee shall be entitled to assume that no such facts exist.
SECTION 10.07. Application by Trustee of Assets Deposited with
It.
U.S. Legal Tender or U.S. Government Obligations deposited in
trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02
shall be for the sole benefit of the Holders of the Notes and, to the extent
allocated for the payment of Notes, shall not be subject to the subordination
provisions of this Article Ten. Otherwise, any deposit of assets or securities
by or on behalf of the Company with the Trustee or any Paying Agent (whether or
not in trust) for the payment of principal of or interest on any Notes shall be
subject to the provisions of this Article Ten; provided, however, that if prior
to the second Business Day preceding the date on which by the terms of this
Indenture any such assets may become distributable for any purpose (including,
without limitation, the payment of either principal of or interest on any Note)
the Trustee or such Paying Agent shall not have received with respect to such
assets the notice provided for in Section 10.06, then the Trustee or such Paying
Agent shall have full power and authority to receive such assets and to apply
the same to the purpose for which they were received, and shall not be affected
by any notice to the contrary received by it on or after such date. The
foregoing shall not apply to the Paying Agent if the Company or any Subsidiary
or Affiliate of the Company is acting as Paying Agent. Nothing contained in this
Section 10.07 shall limit the right of the holders of Senior Indebtedness to
recover payments as contemplated by this Article Ten.
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SECTION 10.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 10.08, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Ten or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place,
terms or time of payment of, or renew or alter, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection or payment of Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against the
Company and any other Person.
SECTION 10.09. Holders Authorize Trustee To Effectuate
Subordination of Notes.
Each Holder of the Notes by such Holder's acceptance thereof
authorizes and expressly directs the Trustee on such Holder's behalf to take
such action as may be necessary or appropriate to effect the subordination
provisions contained in this Article Ten, and appoints the Trustee such Holder's
attorney-in-fact for such purpose, including, in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of the Company tending towards liquidation or
reorganization of the business and assets of the Company, the immediate filing
of a claim for the unpaid balance of such Holder's Notes in the form required in
said proceedings and cause said claim to be approved. If the Trustee does not
file a proper claim or proof of debt in the form required in such proceeding
prior to 30 days before the expiration of the time to file such claim or claims,
then any of the holders of the Senior Indebtedness or
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their Representative is hereby authorized to file an appropriate claim for and
on behalf of the Holders of said Notes. Nothing herein contained shall be deemed
to authorize the Trustee or the holders of Senior Indebtedness or their
Representative 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 thereof, or to authorize the
Trustee or the holders of Senior Indebtedness or their Representative to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 10.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee and any agent of the Company or the Trustee shall
be entitled to all the rights set forth in this Article Ten with respect to any
Senior Indebtedness which may at any time be held by it in its individual or any
other capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Indenture shall deprive the Trustee or any such agent of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Ten, and no implied
covenants or obligations with respect to the holders of Senior Debt shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Indebtedness, the distribution may be made and the
notice may be given to their representative, if any.
SECTION 10.11. This Article Ten Not To Prevent Events of
Default.
The failure to make a payment on account of principal of or
interest on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Six or to pursue any rights or
remedies hereunder or under applica-
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ble law, subject to the rights, if any, under this Article Ten of the holders,
from time to time, of Senior Indebtedness.
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of
Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness, and it undertakes to perform or observe such
of its covenants and obligations as are specifically set forth in this Article
Ten, and no implied covenants or obligations with respect to the Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be liable to any such holders (other than for its willful misconduct
or gross negligence) if it shall pay over or deliver to the Holders of Notes or
the Company or any other Person money or assets in compliance with the terms of
this Indenture. Nothing in this Section 10.12 shall affect the obligation of any
Person other than the Trustee and the Holders to hold such payment for the
benefit of, and to pay such payment over to, the holders of Senior Indebtedness
or their Representative.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control; provided, however,
that this Section 11.01 shall not of itself require that this Indenture or the
Trustee be qualified under the TIA or constitute any admission or acknowledgment
by any party hereto that any such qualification is required prior to the time
this Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 11.02. Notices.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telecopier or overnight courier guaranteeing next-day delivery or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
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if to the Company or any Subsidiary Guarantor:
ACQUISITION CORP.
c/o Weiss, Peck & Greer, L.L.C.
One New York Plaza
New York, New York 10004
Telecopier Number: (212) 908-0112
Attn: President
if to the Trustee:
STATE STREET BANK AND TRUST COMPANY
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Telecopier Number: (860) 244-1897
Attention: Corporate Trust Administration
Each of the Company and the Trustee by written notice to the
other may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered if hand delivered;
when receipt is acknowledged, if faxed; and five (5) calendar days after mailing
if sent by registered or certified mail, postage prepaid (except that a notice
of change of address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Holder shall be mailed
by first class mail, certified or registered return receipt requested, or by
overnight courier guaranteeing next-day delivery to its address as it appears on
the registration books of the Registrar. Any notice or communication shall be
mailed to any Person as described in TIA ss. 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, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture
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or the Notes. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA ss. 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company,
if any, provided for in this Indenture relating to the proposed action
have been complied with (which counsel, as to factual matters, may rely
on an Officers' Certificate).
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 the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
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SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York or at such place of payment are not required to be open. If a
payment date is a Legal Holiday at such place, payment may be made at such place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 11.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Indenture.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Personal Liability.
No director, officer, employee or stockholder, as such, of the
Company or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Notes, this
Indenture, the Guarantees or the Registration Rights Agreement 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 the issuance of the
Notes.
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SECTION 11.11. Successors.
All agreements of the Company and any Subsidiary Guarantors in
this Indenture and the Notes shall bind their successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall represent
the same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or
in the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
ARTICLE TWELVE
GUARANTEE OF NOTES
SECTION 12.01. Unconditional Guarantee.
Subject to the provisions of this Article Twelve, each
Subsidiary Guarantor, if any, hereby, jointly and severally, unconditionally and
irrevocably guarantees, on a senior subordinated basis (such guarantee to be
referred to herein as a "Guarantee") to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns, the
Notes or the obligations of the Company hereunder or thereunder, that: (a) the
principal of, premium, if any, and interest on the Notes (and any Additional
Interest payable thereon) shall be duly and punctually paid in full when due,
whether at maturity, upon redemption at the option of Holders pursuant to the
provisions of the Notes relating thereto, by acceleration or otherwise, and
interest on the overdue principal and (to the extent permitted by law) interest,
if any, on the Notes and all other obligations of the Company or the Subsidiary
Guarantors to the Holders or the Trustee hereunder
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or thereunder (including amounts due the Trustee under Section 7.07) and all
other obligations shall be promptly paid in full or performed, all in accordance
with the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, the same shall
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed, or failing performance of
any other obligation of the Company to the Holders under this Indenture or under
the Notes, for whatever reason, each Subsidiary Guarantor shall be obligated to
pay, or to perform or cause the performance of, the same immediately. An Event
of Default under this Indenture or the Notes shall constitute an event of
default under this Guarantee, and shall entitle the Holders of Notes to
accelerate the obligations of the Subsidiary Guarantors hereunder in the same
manner and to the same extent as the obligations of the Company.
Each of the Subsidiary Guarantors hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions hereof or thereof, any release of any other
Subsidiary Guarantor, the recovery of any judgment against the Company, any
action to enforce the same, whether or not a Guarantee is affixed to any
particular Note, or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each of the Subsidiary
Guarantors hereby waives the benefit of diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that its Guarantee
shall not be discharged except by complete performance of the obligations
contained in the Notes, this Indenture and this Guarantee. This Guarantee is a
guarantee of payment and not of collection. If any Holder or the Trustee is
required by any court or otherwise to return to the Company or to any Subsidiary
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or such Subsidiary Guarantor, any amount paid
by the Company or such Subsidiary Guarantor to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Subsidiary Guarantor further agrees that, as between it,
on the one hand, and the Holders of Notes and the Trustee, on the other hand,
(a) subject to this
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Article Twelve, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six hereof for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article Six
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Subsidiary Guarantors for the purpose of this Guarantee.
No stockholder, officer, director, employee or incorporator,
past, present or future, of any Subsidiary Guarantor, as such, shall have any
personal liability under this Guarantee by reason of his, her or its status as
such stockholder, officer, director, employee or incorporator.
Each Subsidiary Guarantor that makes a payment or distribution
under its Guarantee shall be entitled to a contribution from each other
Subsidiary Guarantor in an amount pro rata, based on the net assets of each
Subsidiary Guarantor, determined in accordance with GAAP.
SECTION 12.02. Limitations on Guarantees.
The obligations of each Subsidiary Guarantor under its
Guarantee will be limited to the maximum amount which, after giving effect to
all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other Subsidiary Guarantor in respect of the obligations of such other
Subsidiary Guarantor under its Guarantee or pursuant to its contribution
obligations under this Indenture, will result in the obligations of such
Subsidiary Guarantor under its Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law.
At and after consummation of the Merger, the Subsidiary
Guarantors shall include (i) each of the Company's Subsidiaries as of the Issue
Date other than its Foreign Subsidiaries, (ii) each of the Company's
Subsidiaries that in the future executes a supplemental indenture in which such
Subsidiary agrees to be bound by the terms hereof as a Subsidiary Guarantor; and
(iii) any Subsidiary, whether formed or acquired after the Issue Date, that
guarantees any Indebtedness outstanding under the Credit Agreement; provided,
however, that any Subsidiary acquired after the Issue Date which is prohibited
from entering into a Guarantee pursuant to restrictions contained in any debt
instrument in existence at the time such Subsidiary was so ac-
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quired and not entered into in anticipation or contemplation of such acquisition
shall not be required to become a Subsidiary Guarantor so long as any such
restriction is in existence and to the extent of any such restriction; provided,
further, that if any Subsidiary Guarantor is released from its guarantee of the
outstanding Indebtedness of the Company under the Credit Agreement, such
Guarantor shall be automatically released from its obligations as Subsidiary
Guarantor and, from and after such date, such Subsidiary Guarantor shall cease
to constitute a Subsidiary Guarantor.
SECTION 12.03. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 12.01,
each Subsidiary Guarantor hereby agrees that a notation of such Guarantee,
substantially in the form of Exhibit F hereto, shall be endorsed on each Note
authenticated and delivered by the Trustee. Such Guarantee shall be executed on
behalf of each Subsidiary Guarantor by either manual or facsimile signature of
two Officers of each Subsidiary Guarantor, each of whom, in each case, shall
have been duly authorized to so execute by all requisite corporate action. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.
Each of the Subsidiary Guarantors hereby agrees that its
Guarantee set forth in Section 12.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee.
If an Officer of a Subsidiary Guarantor whose signature is on
this Indenture or a Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which such Guarantee is endorsed or at any
time thereafter, such Subsidiary Guarantor's Guarantee of such Note shall be
valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any Guarantee
set forth in this Indenture on behalf of each Subsidiary Guarantor.
SECTION 12.04. Release of a Subsidiary Guarantor.
(a) If no Default exists or would exist under this Indenture,
upon the sale or disposition of all of the Capital Stock of a Subsidiary
Guarantor by the Company or a Subsidiary of the Company or upon the sale of all
or substantially all of
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the assets of such Subsidiary Guarantor in a transaction constituting an Asset
Sale the Net Cash Proceeds of which are applied in accordance with Section 4.16,
or upon the consolidation or merger of a Subsidiary Guarantor with or into any
Person in compliance with Article Five (in each case, other than to the Company
or an Affiliate of the Company or a Subsidiary), or if any Subsidiary Guarantor
is dissolved or liquidated in accordance with this Indenture, such Subsidiary
Guarantor and each Subsidiary of such Subsidiary Guarantor that is also a
Subsidiary Guarantor shall be deemed released from all obligations under this
Article Twelve without any further action required on the part of the Trustee or
any Holder; provided, however, that each such Subsidiary Guarantor is sold or
disposed of in accordance with this Indenture. Any Subsidiary Guarantor not so
released or the entity surviving such Subsidiary Guarantor, as applicable, shall
remain or be liable under its Guarantee as provided in this Article Twelve.
(b) The Trustee shall deliver an appropriate instrument
evidencing the release of a Subsidiary Guarantor upon receipt of a request by
the Company or such Subsidiary Guarantor accompanied by an Officers' Certificate
and an Opinion of Counsel certifying as to the compliance with this Section
12.04, provided the legal counsel delivering such Opinion of Counsel may rely as
to matters of fact on one or more Officers' Certificates.
The Trustee shall execute any documents reasonably requested
by the Company or a Subsidiary Guarantor in order to evidence the release of
such Subsidiary Guarantor from its obligations under its Guarantee endorsed on
the Notes and under this Article Twelve.
Except as set forth in Articles Four and Five and this Section
12.04, nothing contained in this Indenture or in any of the Notes shall prevent
any consolidation or merger of a Subsidiary Guarantor with or into the Company
or another Subsidiary Guarantor or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Company or another Subsidiary Guarantor.
SECTION 12.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are
discharged and paid in full, each Subsidiary Guarantor hereby irrevocably waives
and agrees not to exercise any claim or other rights which it may now or
hereafter acquire
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against the Company that arise from the existence, payment, performance or
enforcement of the Company's obligations under the Notes or this Indenture and
such Subsidiary Guarantor's obligations under this Guarantee and this Indenture,
in any such instance including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, and any right to
participate in any claim or remedy of the Holders against the Company, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Company, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any Subsidiary Guarantor in violation of
the preceding sentence and any amounts owing to the Trustee or the Holders of
Notes under the Notes, this Indenture, or any other document or instrument
delivered under or in connection with such agreements or instruments, shall not
have been paid in full, such amount shall have been deemed to have been paid to
such Subsidiary Guarantor for the benefit of, and held in trust for the benefit
of, the Trustee or the Holders and shall forthwith be paid to the Trustee for
the benefit of itself or such Holders to be credited and applied to the
obligations in favor of the Trustee or the Holders, as the case may be, whether
matured or unmatured, in accordance with the terms of this Indenture. Each
Subsidiary Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
the waiver set forth in this Section 12.05 is knowingly made in contemplation of
such benefits.
SECTION 12.06. No Set-Off.
Each payment to be made by a Subsidiary Guarantor hereunder in
respect of the Obligations shall be payable in the currency or currencies in
which such Obligations are denominated, and shall be made without set-off,
counterclaim, reduction or diminution of any kind or nature.
SECTION 12.07. Obligations Absolute.
The obligations of each Subsidiary Guarantor hereunder are and
shall be absolute and unconditional and any monies or amounts expressed to be
owing or payable by each Subsidiary Guarantor hereunder which may not be
recoverable from such Subsidiary Guarantor on the basis of a Guarantee shall be
recoverable from such Subsidiary Guarantor as a primary obligor and principal
debtor in respect thereof.
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SECTION 12.08. Obligations Continuing.
The obligations of each Subsidiary Guarantor hereunder shall
be continuing and shall remain in full force and effect until all the
obligations have been paid and satisfied in full. Each Subsidiary Guarantor
agrees with the Trustee that it will from time to time deliver to the Trustee
suitable acknowledgments of this continued liability hereunder and under any
other instrument or instruments in such form as counsel to the Trustee may
advise and as will prevent any action brought against it in respect of any
default hereunder being barred by any statute of limitations now or hereafter in
force and, in the event of the failure of a Subsidiary Guarantor so to do, it
hereby irrevocably appoints the Trustee the attorney and agent of such
Subsidiary Guarantor to make, execute and deliver such written acknowledgment or
acknowledgments or other instruments as may from time to time become necessary
or advisable, in the judgment of the Trustee on the advice of counsel, to fully
maintain and keep in force the liability of such Subsidiary Guarantor hereunder.
SECTION 12.09. Obligations Not Reduced.
The obligations of each Subsidiary Guarantor hereunder shall
not be satisfied, reduced or discharged solely by the payment of such principal,
premium, if any, interest, fees and other monies or amounts as may at any time
prior to discharge of this Indenture pursuant to Article 8 be or become owing or
payable under or by virtue of or otherwise in connection with the Notes or this
Indenture.
SECTION 12.10. Obligations Reinstated.
The obligations of each Subsidiary Guarantor hereunder shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any payment which would otherwise have reduced the obligations of any
Subsidiary Guarantor hereunder (whether such payment shall have been made by or
on behalf of the Company or by or on behalf of a Subsidiary Guarantor) is
rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy,
liquidation or reorganization of the Company or any Subsidiary Guarantor or
otherwise, all as though such payment had not been made. If demand for, or
acceleration of the time for, payment by the Company is stayed upon the
insolvency, bankruptcy, liquidation or reorganization of the Company, all such
Indebtedness otherwise subject to demand for payment or acceleration shall
nonetheless be payable by each Subsidiary Guarantor as provided herein.
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SECTION 12.11. Obligations Not Affected.
The obligations of each Subsidiary Guarantor hereunder shall
not be affected, impaired or diminished in any way by any act, omission, matter
or thing whatsoever, occurring before, upon or after any demand for payment
hereunder (and whether or not known or consented to by any Subsidiary Guarantor
or any of the Holders) which, but for this provision, might constitute a whole
or partial defense to a claim against any Subsidiary Guarantor hereunder or
might operate to release or otherwise exonerate any Subsidiary Guarantor from
any of its obligations hereunder or otherwise affect such obligations, whether
occasioned by default of any of the Holders or otherwise, including, without
limitation:
(a) any limitation of status or power, disability, incapacity
or other circumstance relating to the Company or any other person,
including any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding up or other proceeding
involving or affecting the Company or any other person;
(b) any irregularity, defect, unenforceability or invalidity
in respect of any indebtedness or other obligation of the Company or
any other person under this Indenture, the Notes or any other document
or instrument;
(c) any failure of the Company, whether or not without fault
on its part, to perform or comply with any of the provisions of this
Indenture or the Notes, or to give notice thereof to a Subsidiary
Guarantor;
(d) the taking or enforcing or exercising or the refusal or
neglect to take or enforce or exercise any right or remedy from or
against the Company or any other Person or their respective assets or
the release or discharge of any such right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other Person;
(f) any change in the time, manner or place of payment of, or
in any other term of, any of the Notes, or any other amendment,
variation, supplement, replacement or waiver of, or any consent to
departure from, any of the Notes or this Indenture, including, without
limitation,
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any increase or decrease in the principal amount of or premium, if
any, or interest on any of the Notes;
(g) any change in the ownership, control, name, objects,
businesses, assets, capital structure or constitution of the Company or
a Subsidiary Guarantor;
(h) any merger or amalgamation of the Company or a Subsidiary
Guarantor with any Person or Persons;
(i) the occurrence of any change in the laws, rules,
regulations or ordinances of any jurisdiction by any present or future
action of any governmental authority or court amending, varying,
reducing or otherwise affecting, or purporting to amend, vary, reduce
or otherwise affect, any of the Obligations or the obligations of a
Subsidiary Guarantor under its Guarantee; and
(j) any other circumstance, including release of the
Subsidiary Guarantor pursuant to Section 12.04 (other than by complete,
irrevocable payment) that might otherwise constitute a legal or
equitable discharge or defense of the Company under this Indenture or
the Notes or of a Subsidiary Guarantor in respect of its Guarantee
hereunder.
SECTION 12.12. Waiver.
Without in any way limiting the provisions of Section 12.01
hereof, each Subsidiary Guarantor hereby waives notice of acceptance hereof,
notice of any liability of any Subsidiary Guarantor hereunder, notice or proof
of reliance by the Holders upon the obligations of any Subsidiary Guarantor
hereunder, and diligence, presentment, demand for payment on the Company,
protest, notice of dishonor or non-payment of any of the Obligations, or other
notice or formalities to the Company or any Subsidiary Guarantor of any kind
whatsoever.
SECTION 12.13. No Obligation To Take Action Against the
Company.
Neither the Trustee nor any other Person shall have any
obligation to enforce or exhaust any rights or remedies or to take any other
steps under any security for the Obligations or against the Company or any other
Person or any Property of the Company or any other Person before the Trustee is
entitled to demand payment and performance by any or all Subsidiary Guarantors
of their liabilities and obligations under their Guarantees or under this
Indenture.
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SECTION 12.14. Dealing with the Company and Others.
The Holders, without releasing, discharging, limiting or
otherwise affecting in whole or in part the obligations and liabilities of any
Subsidiary Guarantor hereunder and without the consent of or notice to any
Subsidiary Guarantor, may
(a) grant time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other Person;
(b) take or abstain from taking security or collateral from
the Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or
otherwise deal with or do any act or thing in respect of (with or
without consideration) any and all collateral, mortgages or other
security given by the Company or any third party with respect to the
obligations or matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or
from any security upon such part of the Obligations as the Holders may
see fit or change any such application in whole or in part from time to
time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to
deal with, the Company and all other Persons and any security as the
Holders or the Trustee may see fit.
SECTION 12.15. Default and Enforcement.
If any Subsidiary Guarantor fails to pay in accordance with
Section 12.01 hereof, the Trustee may proceed in its name as trustee hereunder
in the enforcement of the Guarantee of any such Subsidiary Guarantor and such
Subsidiary Guarantor's obligations thereunder and hereunder by any remedy
provided by law, whether by legal proceedings or otherwise, and to recover from
such Subsidiary Guarantor the obligations.
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SECTION 12.16. Amendment, Etc.
No amendment, modification or waiver of any provision of this
Indenture relating to any Subsidiary Guarantor or consent to any departure by
any Subsidiary Guarantor or any other Person from any such provision will in any
event be effective unless it is signed by such Subsidiary Guarantor and the
Trustee.
SECTION 12.17. Acknowledgment.
Each Subsidiary Guarantor hereby acknowledges communication of
the terms of this Indenture and the Notes and consents to and approves of the
same.
SECTION 12.18. Costs and Expenses.
Each Subsidiary Guarantor shall pay on demand by the Trustee
any and all costs, fees and expenses (including, without limitation, legal fees
on a solicitor and client basis) incurred by the Trustee, its agents, advisors
and counsel or any of the Holders in enforcing any of their rights under any
Guarantee.
SECTION 12.19. No Merger or Waiver; Cumulative Remedies.
No Guarantee shall operate by way of merger of any of the
obligations of a Subsidiary Guarantor under any other agreement, including,
without limitation, this Indenture. No failure to exercise and no delay in
exercising, on the part of the Trustee or the Holders, any right, remedy, power
or privilege in the Guarantee or under this Indenture or the Notes, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege in the Guarantee or under this Indenture or
the Notes preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges in the Guarantee and under this Indenture, the Notes and any other
document or instrument between a Subsidiary Guarantor and/or the Company and the
Trustee are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
SECTION 12.20. [Intentionally Omitted].
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SECTION 12.21. Guarantee in Addition to Other Obligations.
The obligations of each Subsidiary Guarantor under its
Guarantee and this Indenture are in addition to and not in substitution for any
other obligations to the Trustee or to any of the Holders in relation to this
Indenture or the Notes and any guarantees or security at any time held by or for
the benefit of any of them.
SECTION 12.22. Severability.
Any provision of this Article Twelve which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Twelve.
SECTION 12.23. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit
of each Subsidiary Guarantor and the Trustee and the other Holders and their
respective successors and permitted assigns, except that no Subsidiary Guarantor
may assign any of its obligations hereunder or thereunder.
ARTICLE THIRTEEN
SUBORDINATION OF GUARANTEE
SECTION 13.01. Obligations of Guarantors Subordinated to
Guarantor Senior Indebtedness.
Anything herein to the contrary notwithstanding, each of the
Subsidiary Guarantors, for itself and its successors, and each Holder, by its
acceptance of Guarantees, agrees that the payment of all Obligations owing to
the Holders in respect of its Guarantee (collectively, as to any Subsidiary
Guarantor, its "Guarantee Obligations") is subordinated, to the extent and in
the manner provided in this Article Thirteen, to the prior payment in full in
cash or Cash Equivalents of all Obligations on Guarantor Senior Indebtedness of
such Subsidiary Guarantor,
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including without limitation, the Subsidiary Guarantors' obligations under the
Credit Agreement.
This Article Thirteen shall constitute a continuing offer to
all Persons who become holders of, or continue to hold, Guarantor Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Guarantor Senior Indebtedness and such holders are made obligees hereunder and
any one or more of them may enforce such provisions.
SECTION 13.02. Suspension of Guarantee Obligations When
Guarantor Senior Indebtedness is in Default.
(a) If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or otherwise,
of any principal of, interest on, unpaid drawings for letters of credit issued
in respect of, or regularly accruing fees with respect to, any Designated Senior
Indebtedness of a Subsidiary Guarantor or guaranteed by a Subsidiary Guarantor
(which Designated Senior Indebtedness or guarantee, as the case may be,
constitutes Guarantor Senior Indebtedness of such Subsidiary Guarantor), no
payment of any kind or character shall be made by or on behalf of such
Subsidiary Guarantor or any other Person on its or their behalf with respect to
any Guarantee Obligations on the Notes or to acquire any of the Notes for cash
or property or otherwise. In addition, if any other event of default occurs and
is continuing with respect to any Guarantor Senior Indebtedness which is
Designated Senior Indebtedness, as such event of default is defined in the
instrument creating or evidencing such Guarantor Senior Indebtedness, permitting
the holders of such Guarantor Senior Indebtedness then outstanding to accelerate
the maturity thereof and if the Representative for the respective issue of
Guarantor Senior Indebtedness gives a Default Notice, then, unless and until all
events of default have been cured or waived or have ceased to exist or the
Trustee receives notice from the Representative for the respective issue of
Guarantor Senior Indebtedness terminating the Blockage Period, during the
Blockage Period, neither any Subsidiary Guarantor nor any other Person on its
behalf shall (x) make any payment of any kind or character with respect to any
Guarantee Obligations on the Notes or (y) acquire any of the Notes for cash or
property or otherwise. Notwithstanding anything herein to the contrary, in no
event will a Blockage Period extend beyond 180 days from the date the payment on
the Notes was due and only one such Blockage Period may be commenced within any
360 consecutive days. No event of default which existed or was continuing on the
date of the com-
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mencement of any Blockage Period with respect to the Guarantor Senior
Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Guarantor Senior Indebtedness
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period, that in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 13.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Guarantor
Senior Indebtedness (pro rata to such holders on the basis of the respective
amount of Guarantor Senior Indebtedness held by such holders) or their
respective Representatives, as their respective interests may appear. The
Trustee shall be entitled to rely on information regarding amounts then due and
owing on the Guarantor Senior Indebtedness, if any, received from the holders of
Guarantor Senior Indebtedness (or their Representatives) or, if such information
is not received from such holders or their Representatives, from the Company and
only amounts included in the information provided to the Trustee shall be paid
to the holders of Guarantor Senior Indebtedness.
Nothing contained in this Article Thirteen shall limit the
right of the Trustee or the Holders of Notes to take any action to accelerate
the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Guarantor Senior Indebtedness thereafter
due or declared to be due shall first be paid in full in cash or Cash
Equivalents before the Holders are entitled to receive any payment of any kind
or character with respect to Obligations on the Notes.
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SECTION 13.03. Guarantee Obligations Subordinated to Prior
Payment of All Guarantor Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Such Subsidiary Guarantor.
Upon any payment or distribution of assets of any Subsidiary
Guarantor of any kind or character, whether in cash, property or securities to
creditors upon any total or partial liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshaling of assets
of such Subsidiary Guarantor, whether voluntary or involuntary, or in a
bankruptcy, reorganization, insolvency, receivership or other similar proceeding
relating to any Subsidiary Guarantor or its property, whether voluntary or
involuntary, but excluding any liquidation or dissolution of a Subsidiary
Guarantor into the Company or into another Subsidiary Guarantor:
(a) the holders of all Guarantor Senior Indebtedness of such
Subsidiary Guarantor shall first be entitled to receive payments in
full in cash or Cash Equivalents, or such payment duly provided for to
the satisfaction of the holders of Guarantor Senior Indebtedness, of
all amounts payable under Guarantor Senior Indebtedness before the
Holders will be entitled to receive any payment or distribution of any
kind or character on account of the Guarantee of such Subsidiary
Guarantor, and until all Obligations with respect to the Guarantor
Senior Indebtedness are paid in full in cash or Cash Equivalents, or
such payment duly provided for to the satisfaction of the holders of
Guarantor Senior Indebtedness, any distribution to which the Holders
would be entitled shall be made to the holders of Guarantor Senior
Indebtedness of such Subsidiary Guarantor;
(b) any payment or distribution of assets of such Subsidiary
Guarantor of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee on behalf of the
Holders would be entitled except for the provisions of this Article
Thirteen shall be paid by the liquidating trustee or agent or other
Person making such a payment or distribution, directly to the holders
of Guarantor Senior Indebtedness of such Subsidiary Guarantor or their
representatives, ratably according to the respective amounts of such
Guarantor Senior Indebtedness remaining unpaid held or represented by
each, until all such Guarantor Senior Indebtedness remaining unpaid
shall have been paid in full in cash or Cash Equivalents, or such
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payment duly provided for to the satisfaction of the holders of
Guarantor Senior Indebtedness, after giving effect to any concurrent
payment or distribution to the holders of such Guarantor Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of such Subsidiary Guarantor of any
kind or character, whether such payment shall be in cash, property or
securities, and such Subsidiary Guarantor shall have made payment to
the Trustee or directly to the Holders or any Paying Agent in respect
of payment of the Guarantees before all Guarantor Senior Indebtedness
of such Subsidiary Guarantor is paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of
the holders of Guarantor Senior Indebtedness, such payment or
distribution shall be received, segregated from other funds, and held
in trust by the Trustee or such Holder or Paying Agent for the benefit
of, and shall immediately be paid over by the Trustee or by the Holder
to, the holders of such Guarantor Senior Indebtedness or their
representatives, ratably according to the respective amounts of such
Guarantor Senior Indebtedness held or represented by each, until all
such Guarantor Senior Indebtedness remaining unpaid shall have been
paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Guarantor Senior
Indebtedness, after giving effect to any concurrent payment or
distribution to the holders of Guarantor Senior Indebtedness.
Each Subsidiary Guarantor shall give prompt notice to the
Trustee prior to any dissolution, winding-up, total or partial liquidation or
reorganization (including, without limitation, in bankruptcy, insolvency, or
receivership proceedings or upon any assignment for the benefit of creditors or
any other marshaling of such Subsidiary Guarantor's assets and liabilities).
SECTION 13.04. Holders of Guarantee Obligations To Be
Subrogated to Rights of Holders of Guarantor Senior Indebtedness.
Subject to the payment in full in cash or Cash Equivalents of
all Guarantor Senior Indebtedness, the Holders of Guarantee Obligations of a
Subsidiary Guarantor shall be subrogated to the rights of the holders of
Guarantor Senior Indebtedness of such Subsidiary Guarantor to receive payments
or distributions of assets of such Subsidiary Guarantor applicable
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to such Guarantor Senior Indebtedness until all amounts owing on or in respect
of the Guarantee Obligations shall be paid in full in cash or Cash Equivalents,
and for the purpose of such subrogation no payments or distributions to the
holders of such Guarantor Senior Indebtedness by or on behalf of such Subsidiary
Guarantor, or by or on behalf of the Holders by virtue of this Article Thirteen,
which otherwise would have been made to the Holders shall, as between such
Subsidiary Guarantor and the Holders, be deemed to be payment by such Subsidiary
Guarantor to or on account of such Guarantor Senior Indebtedness, it being
understood that the provisions of this Article Thirteen are and are intended
solely for the purpose of defining the relative rights of the Holders, on the
one hand, and the holders of such Guarantor Senior Indebtedness, on the other
hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Thirteen
shall have been applied, pursuant to the provisions of this Article Thirteen, to
the payment of all amounts payable under such Guarantor Senior Indebtedness,
then the Holders shall be entitled to receive from the holders of such Guarantor
Senior Indebtedness any such payments or distributions received by such holders
of such Guarantor Senior Indebtedness in excess of the amount sufficient to pay
all amounts payable under or in respect of such Guarantor Senior Indebtedness in
full in cash or Cash Equivalents.
Each Holder by purchasing or accepting a Note waives any and
all notice of the creation, modification, renewal, extension or accrual of any
Guarantor Senior Indebtedness of the Subsidiary Guarantors and notice of or
proof of reliance by any holder or owner of Guarantor Senior Indebtedness of the
Subsidiary Guarantors upon this Article Thirteen and the Guarantor Senior
Indebtedness of the Subsidiary Guarantors shall conclusively be deemed to have
been created, contracted or incurred in reliance upon this Article Thirteen, and
all dealings between the Subsidiary Guarantors and the holders and owners of the
Guarantor Senior Indebtedness of the Subsidiary Guarantors shall be deemed to
have been consummated in reliance upon this Article Thirteen.
SECTION 13.05. Obligations of the Subsidiary Guarantors'
Unconditional.
Nothing contained in this Article Thirteen or elsewhere in
this Indenture or in the Guarantees is intended to or shall impair, as between
the Subsidiary Guarantors and the Holders, the obligation of the Subsidiary
Guarantors, which is
<PAGE>
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absolute and unconditional, to pay to the Holders all amounts due and payable
under the Guarantees as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Subsidiary Guarantors other than the
holders of the Guarantor Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article Thirteen, of the holders of Guarantor Senior
Indebtedness in respect of cash, property or securities of the Subsidiary
Guarantors received upon the exercise of any such remedy. Upon any payment or
distribution of assets of any Subsidiary Guarantor referred to in this Article
Thirteen, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and
the Holders shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which any liquidation, dissolution, winding-up or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee or agent or other Person making any
payment or distribution to the Trustee or to the Holders for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Guarantor Senior Indebtedness and other
Indebtedness of any Subsidiary Guarantor, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Thirteen. Nothing in this Article Thirteen shall
apply to the claims of, or payments to, the Trustee under or pursuant to Section
7.07. The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself or itself to be a holder of any
Guarantor Senior Indebtedness (or a trustee on behalf of, or other
representative of, such holder) to establish that such notice has been given by
a holder of such Guarantor Senior Indebtedness or a trustee or representative on
behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Thirteen, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Thirteen, and if
such evidence is not furnished, the Trustee may defer any
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payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 13.06. Trustee Entitled To Assume Payments Not
Prohibited in Absence of Notice.
The Trustee shall not at any time be charged with knowledge of
the existence of any facts that would prohibit the making of any payment to or
by the Trustee unless and until the Trustee or any Paying Agent shall have
received notice thereof from the Company or any Subsidiary Guarantor or from one
or more holders of Guarantor Senior Indebtedness or from any Representative
therefor and, prior to the receipt of any such notice, the Trustee, subject to
the provisions of Sections 7.01 and 7.02, shall be entitled in all respects
conclusively to assume that no such fact exists.
SECTION 13.07. Application by Trustee of Assets Deposited with
It.
U.S. Legal Tender or U.S. Government Obligations deposited in
trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02
shall be for the sole benefit of Holders of the Notes and, to the extent
allocated for the payment of Notes, shall not be subject to the subordination
provisions of this Article Thirteen. Otherwise, any deposit of assets or
securities by or on behalf of a Subsidiary Guarantor with the Trustee or any
Paying Agent (whether or not in trust) for payment of the Guarantees shall be
subject to the provisions of this Article Thirteen; provided, however, that if
prior to the second Business Day preceding the date on which by the terms of
this Indenture any such assets may become distributable for any purpose
(including, without limitation, the payment of either principal of or interest
on any Note) the Trustee or such Paying Agent shall not have received with
respect to such assets the notice provided for in Section 13.06, then the
Trustee or such Paying Agent shall have full power and authority to receive such
assets and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary received by it on or after
such date. The foregoing shall not apply to the Paying Agent if the Company or
any Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing
contained in this Section 13.07 shall limit the right of the holders of
Guarantor Senior Indebtedness to recover payments as contemplated by this
Article Thirteen.
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SECTION 13.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Guarantor
Senior Indebtedness to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of any Subsidiary Guarantor or by any act or failure to act, by any such
holder, or by any non-compliance by any Subsidiary Guarantor with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 13.08, the holders of Guarantor Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Notes, without incurring responsibility to the Holders of the
Notes and without impairing or releasing the subordination provided in this
Article Thirteen or the obligations hereunder of the Holders of the Notes to the
holders of Guarantor Senior Indebtedness, do any one or more of the following:
(1) change the manner, place, terms or time of payment of, or renew or alter,
Guarantor Senior Indebtedness or any instrument evidencing the same or any
agreement under which Guarantor Senior Indebtedness is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Guarantor Senior Indebtedness; (3) release any Person liable
in any manner for the collection or payment of Guarantor Senior Indebtedness;
and (4) exercise or refrain from exercising any rights against the Subsidiary
Guarantors and any other Person.
SECTION 13.09. Holders Authorize Trustee To Effectuate
Subordination of Guarantee Obligations.
Each Holder of the Guarantee Obligations by its acceptance
thereof authorizes and expressly directs the Trustee on its behalf to take such
action as may be necessary or appropriate to effect the subordination provisions
contained in this Article Thirteen, and appoints the Trustee its
attorney-in-fact for such purpose, including, in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of any Subsidiary Guarantor tending towards liquidation
or reorganization of the business and assets of any Subsidiary Guarantor, the
immediate filing of a claim for the unpaid balance under its or his Guarantee
Obligations in the form required in said proceedings and
<PAGE>
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cause said claim to be approved. If the Trustee does not file a proper claim or
proof of debt in the form required in such proceeding prior to 30 days before
the expiration of the time to file such claim or claims, then any of the holders
of the Guarantor Senior Indebtedness or their Representative is hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Guarantee Obligations. Nothing herein contained shall be deemed to authorize the
Trustee or the holders of Guarantor Senior Indebtedness or their Representative
to authorize or consent to or accept or adopt on behalf of any holder of
Guarantee Obligations any plan of reorganization, arrangement, adjustment or
composition affecting the Guarantee Obligations or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Guarantor Senior
Indebtedness or their Representative to vote in respect of the claim of any
holder of Guarantee Obligations in any such proceeding.
SECTION 13.10. Right of Trustee to Hold Guarantor Senior
Indebtedness.
The Trustee shall be entitled to all of the rights set forth
in this Article Thirteen in respect of any Guarantor Senior Indebtedness at any
time held by it to the same extent as any other holder of Guarantor Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness,
the Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Thirteen, and no
implied covenants or obligations with respect to the holders of Guarantor 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 Guarantor Senior
Indebtedness.
Whenever a distribution is to be made or a notice given to
holders or owners of Guarantor Senior Indebtedness, the distribution may be made
and the notice may be given to their agent or other representative, if any.
SECTION 13.11. No Suspension of Remedies.
The failure to make a payment in respect of the Guarantees by
reason of any provision of this Article Thirteen shall not be construed as
preventing the occurrence of a Default or an Event of Default under Section
6.01.
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Nothing contained in this Article Thirteen shall limit the
right of the Trustee or the Holders of Notes to take any action to accelerate
the maturity of the Notes pursuant to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Thirteen of the holders, from time to time, of Guarantor Senior
Indebtedness.
SECTION 13.12. No Fiduciary Duty of Trustee to Holders of
Guarantor Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Guarantor Senior Indebtedness, and it undertakes to perform or
observe such of its covenants and obligations as are specifically set forth in
this Article Thirteen, and no implied covenants or obligations with respect to
the Guarantor Senior Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be liable to any such holders (other than for its
willful misconduct or gross negligence) if it shall pay over or deliver to the
holders of Guarantee Obligations or the Guarantors or any other Person, money or
assets in compliance with the terms of this Indenture. Nothing in this Section
13.12 shall affect the obligation of any Person other than the Trustee and the
Holders to hold such payment for the benefit of, and to pay such payment over
to, the holders of Guarantor Senior Indebtedness or their Representative.
<PAGE>
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
ACQUISITION CORP.
By: /s/ Wesley W. Lang
-----------------------
Name: Wesley W. Lang
Title: President
STATE STREET BANK AND
TRUST COMPANY, as Trustee
By: /s/ P. G. Kane, Jr.
-----------------------
Name: P. G. Kane, Jr.
Title: Vice President
<PAGE>
EXHIBIT A
[FORM OF SERIES A NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE OF THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY, RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
A-1
<PAGE>
CUSIP No.:_____
ACQUISITION CORP.
12% SENIOR SUBORDINATED NOTE DUE 2008, SERIES A
No._______ $___________
ACQUISITION CORP., a Delaware corporation (the "Company,"
which term includes any successor entities), for value received promises to pay
to or registered assigns the principal sum of
Dollars on January 15, 2008.
Interest Payment Dates: July 15 and January 15, commencing
July 15, 1998
Record Dates: July 1 and January 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
ACQUISITION CORP.
By:
-------------------
Name:
Title:
By:
-------------------
Name:
Title:
Dated: [month date], [year]
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<PAGE>
Certificate of Authentication
This is one of the 12 % Senior Subordinated Notes due 2008,
Series A, referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
------------------------
Authorized Signatory
Date of Authentication: [month date], [year]
A-3
<PAGE>
(REVERSE OF SECURITY)
12% Senior Subordinated Note due 2008, Series A
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Indenture, dated as of January 29,
1998 (the "Indenture"), and as amended from time to time, by and among
Acquisition corp., a Delaware corporation (the "Company"), the Subsidiary
Guarantors named therein and State Street Bank and Trust Company, as trustee
(the "Trustee").
(1) Interest. The Company promises to pay interest on the
principal amount of this Note at the rate per annum shown above. Interest on the
Notes will accrue from the most recent date on which interest has been paid or,
if no interest has been paid, from January 29, 1998. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing July
15, 1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months and, in the case of a partial month, the actual number of days
elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful.
(2) Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange (including pursuant to an Exchange Offer (as defined in
the Registration Rights Agreement)) after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts ("U.S. Legal Tender"). However, the Company may pay principal and
premium, if any, and interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
(3) Paying Agent and Registrar. Initially, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders.
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<PAGE>
(4) Indenture. The Company issued the Notes under the
Indenture. This Note is one of a duly authorized issue of Notes of the Company
designated as its 12% Senior Subordinated Notes due 2008, Series A (the "Initial
Notes"), limited (except as otherwise provided in the Indenture) in aggregate
principal amount to $150,000,000 which may be issued under the Indenture. The
Notes include the Initial Notes, the Private Exchange Notes and the Unrestricted
Notes, as defined below, issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement. The Initial Notes, the Private Exchange Notes
and the Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of such terms. The Notes are general unsecured
obligations of the Company. Payment on each Note is guaranteed on a senior basis
by the Subsidiary Guarantors pursuant to Article 12 of the Indenture. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time in
accordance with its terms.
(5) Redemption. (a) The Notes are redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after January
15, 2003, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15 of the years
set forth below, plus, in each case, accrued and unpaid interest thereon, if
any, to the date of redemption:
Year Percentage
---- ----------
2003..................................................106.000%
2004..................................................104.500%
2005..................................................103.000%
2006..................................................101.500%
2007 and thereafter...................................100.000%
(b) Notwithstanding the foregoing, at any time, or from time
to time, on or prior to January 15, 2001, the Company may, at its option,
redeem, with the net cash proceeds of one or more Public Equity Offerings, up to
35% of the aggregate principal amount of the Notes originally issued at a
redemption price equal to 112.0% of the principal amount thereof, plus accrued
interest thereon, if any, to the date of redemption; pro-
A-5
<PAGE>
vided, that at least 65% of the aggregate principal amount of the Notes
originally issued remain outstanding immediately following such redemption. In
order to effect the foregoing redemption with the proceeds of any Public Equity
Offering, the Company shall make such redemption not more than 60 days after the
consummation of any such Public Equity Offering.
(c) Optional Redemption Prior to Consummation of the Merger.
Upon termination of the Merger Agreement, or upon the Company's reasonable
determination that the Merger cannot or will not be consummated by October 29,
1998, the Company, at its option, may redeem the Notes in whole at any time
prior to October 29, 1998, upon not less than 10 nor more than 60 days' notice
(but in no event after October 29, 1998), at a redemption price of 102.5% of the
principal amount thereof, plus accrued and unpaid interest to the date of
redemption.
(d) Mandatory Redemption if Merger not Consummated. In the
event that the Merger is not consummated on or before October 29, 1998, the
Company shall immediately redeem the Notes in whole at a Redemption Price equal
to 102.5% of the principal amount of the Notes, plus accrued and unpaid interest
to the Redemption Date.
(6) Notice of Redemption. Notice of redemption will be mailed
at least 30 days (or, prior to consummation of the Merger, at least 10 days) but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at its registered address. Notes in denominations larger than $1,000
may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued interest, if any,
the Notes called for redemption will cease to bear interest from and after such
Redemption Date and the only right of the Holders of such Notes will be to
receive payment of the Redemption Price plus accrued interest, if any.
(7) Offers to Purchase. Sections 4.15 and 4.16 of the
Indenture provide that, after certain Asset Sales and upon the occurrence of a
Change of Control, and subject to further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Notes in
accordance with the procedures set forth in the Indenture.
(8) Registration Rights. Pursuant to the Registration Rights
Agreement among the Company, the Subsidiary Guarantors and the Initial
Purchasers, the Company and the Sub-
A-6
<PAGE>
sidiary Guarantors will be obligated to consummate an exchange offer pursuant to
which the Holder of this Note shall have the right to exchange this Note for the
Company's 12% Senior Subordinated Notes due 2008, Series B (the "Unrestricted
Notes"), which will be registered under the Securities Act, in like principal
amount and having terms identical in all material respects as the Initial Notes.
The Holders of the Initial Notes shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
(9) Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, and (except Notes issued as payment of
Interest) in denominations of $1,000 and integral multiples of $1,000. A Holder
shall register the transfer of or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
required by law or as permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Notes or portions thereof selected
for redemption except for the unredeemed portion of any Note being redeemed in
part.
(10) Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
(11) Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
(12) Discharge Prior to Redemption or Maturity. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but including, under
certain circumstances, their obligation to pay the principal of and interest on
the Notes but without affecting the rights of the Holders to receive such
amounts from such deposits).
(13) Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written con-
A-7
<PAGE>
sent of the Holders of not less than a majority in aggregate principal amount of
the Notes then outstanding, and any past Default or Event of Default or
noncompliance with any provision may be waived with the written consent of the
Holders of not less than a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Notes in addition to or in place of certificated Notes, comply with any
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the TIA or comply with Section 5.01 of the Indenture or
make any other change that does not adversely affect the rights of any Holder of
a Note in any material respect.
(14) Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and the Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries, issue Preferred Stock of its
Subsidiaries, and on the ability of the Company to merge or consolidate with any
other Person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the Company's and its Subsidiaries' assets or adopt
a plan of liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.
(15) Subordination. Upon effectiveness of the Merger (as
defined in the Indenture), the Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Obligations on Senior Indebtedness of
the Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. Each Holder by its acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on its behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee its attorney-in-fact for such purposes.
(16) Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor,
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<PAGE>
subject to certain exceptions, will be released from those obligations.
(17) Defaults and Remedies. Except as set forth in the
Indenture, if an Event of Default occurs and is continuing, the Trustee or the
Holders of not less than 25% in principal amount of Notes then outstanding may
declare all the Notes to be due and payable in the manner, at the time and with
the effect provided in the Indenture. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Notes unless it has received indemnity
reasonably satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of any
continuing Default or Event of Default (except a Default in payment of principal
or interest when due, for any reason or a Default in compliance with Article
Five of the Indenture) if it determines that withholding notice is in their
interest.
(18) Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
(19) No Recourse Against Others. No partner, director,
officer, employee or stockholder, as such, of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Notes, the Indenture, the Guarantees or
the Registration Rights Agreement 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 the issuance of the Notes.
(20) Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Subsidiary
Guarantors, the Trustee and the Holders.
(21) Authentication. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
A-9
<PAGE>
(22) Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed within the State of New York, without
regard to principles of conflict of laws. Each of the parties hereto and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Note.
(23) Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(24) 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 as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to: ACQUISITION CORP., c/o Weiss, Peck & Greer,
L.L.C., One New York Plaza, New York, New York 10004.
A-10
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
_____________________________
_____________________________
_____________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: _____________________ Signed:___________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:____________________________________________
Signature must be guaranteed by an "eligible guarantor
institution," that is, a bank, stockbroker, savings and loan association or
credit union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") covering resales of this Note
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) the second anniversary of the Issue Date (provided,
however, that neither the Company nor any affiliate of the Company has held any
beneficial interest in such Note, or portion thereof, at any time on or prior to
the second anniversary of the Issue Date), the undersigned confirms that it has
not utilized any general solicitation or general advertising in connection with
the transfer:
A-11
<PAGE>
[Check One]
(1) __ to the Company or a Subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933,
as amended) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form
of which letter can be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act of
1933, as amended; or
(5) __ pursuant to the exemption from registration provided by Rule
144 under the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
|_| The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided, however, that if item (3), (4), (5) or (7)
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in their sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company have reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
A-12
<PAGE>
If none of the foregoing items are checked, the Trustee or
Registrar shall not be obligated to register this Note in the name of any person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.17 of the Indenture
shall have been satisfied.
Dated:_____________________ Signed:__________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: __________________ ________________________________
NOTICE: To be executed by
an executive officer
A-13
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$-------------------
Dated: _________________ _________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in every
particular without alteration or
enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee:_______________________________
A-14
<PAGE>
EXHIBIT B
CUSIP No.:___________
ACQUISITION CORP.
12% SENIOR SUBORDINATED NOTE DUE 2008, SERIES B
No._________________ $_________
ACQUISITION CORP., a Delaware corporation (the "Company,"
which term includes any successor entities), for value received promises to pay
to or registered assigns the principal sum of
Dollars on January 15, 2008.
Interest Payment Dates: July 15 and January 15, commencing
July 15, 1998
Record Dates: July 1 and January 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
ACQUISITION CORP.
By:
----------------------
Name:
Title:
By:
----------------------
Name:
Title:
Dated:
B-1
<PAGE>
Certificate of Authentication
This is one of the 12% Senior Subordinated Notes due 2008,
Series B, referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
---------------------------
Authorized Signatory
Date of Authentication:
B-2
<PAGE>
(REVERSE OF SECURITY)
12% Senior Subordinated Note due 2008, Series B
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Indenture, dated as of January 29,
1998 (the "Indenture"), and as amended from time to time, by and among Safety
Components International, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors named therein and State Street Bank and Trust Company, as
trustee (the "Trustee").
(1) Interest. The Company promises to pay interest on the
principal amount of this Note at the rate per annum shown above. Interest on the
Notes will accrue from the most recent date on which interest has been paid or,
if no interest has been paid, from January 29, 1998. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing July
15, 1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months and, in the case of a partial month, the actual number of days
elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful.
(2) Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall pay principal
and premium, if any, and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and premium, if any, and
interest by check payable in such U.S. Legal Tender. The Company may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
(3) Paying Agent and Registrar. Initially, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders.
(4) Indenture. The Company issued the Notes under the
Indenture. This Note is one of a duly authorized issue of Exchange Notes of the
Company designated as its 12% Senior Subordinated Notes due 2008, Series B (the
"Unrestricted Notes"), limited (except as otherwise provided in the Inden-
B-3
<PAGE>
ture) in aggregate principal amount to $150,000,000, which may be issued under
the Indenture. The Notes include the 12% Senior Subordinated Notes due 2008,
Series A (the "Initial Notes"), the Private Exchange Notes, and the Unrestricted
Notes, issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement. The Initial Notes, the Private Exchange Notes and the
Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of such terms. The Notes are general unsecured
obligations of the Company. Payment on each Note is guaranteed on a senior basis
by the Subsidiary Guarantors pursuant to Article 12 of the Indenture. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time in
accordance with its terms.
(5) Redemption. (a) The Notes are redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after January
15, 2003, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15 of the years
set forth below, plus, in each case, accrued and unpaid interest thereon, if
any, to the date of redemption:
Year Percentage
---- ----------
2003...................................................106.000%
2004...................................................104.500%
2005...................................................103.000%
2006...................................................101.500%
2007 and thereafter....................................100.000%
(b) Notwithstanding the foregoing, at any time, or from time
to time, on or prior to January 15, 2001, the Company may, at its option,
redeem, with the net cash proceeds of one or more Public Equity Offerings, up to
35% of the aggregate principal amount of the Notes originally issued at a
redemption price equal to 112.0% of the principal amount thereof, plus accrued
interest thereon, if any, to the date of redemption; provided, that at least 65%
of the aggregate principal amount of the Notes originally issued remain
outstanding immediately following such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 60 days after the consummation
of any such Public Equity Offering.
B-4
<PAGE>
(c) Optional Redemption Prior to Consummation of the Merger.
Upon termination of the Merger Agreement, or upon the Company's reasonable
determination that the Merger cannot or will not be consummated by October 29,
1998, the Company, at its option, may redeem the Notes in whole at any time
prior to October 29, 1998, upon not less than 10 nor more than 60 days' notice
(but in no event after October 29, 1998), at a redemption price of 102.5% of the
principal amount thereof, plus accrued and unpaid interest to the date of
redemption.
(d) Mandatory Redemption if Merger not Consummated. In the
event that the merger is not consummated on or before October 29, 1998, the
Company shall immediately redeem the Notes in whole at a Redemption Price equal
to 102.5% of the principal amount of the Notes, plus accrued and unpaid interest
to the Redemption Date.
(6) Notice of Redemption. Notice of redemption will be mailed
at least 30 days (or, prior to consummation of the Merger, at least 10 days) but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at its registered address. Notes in denominations larger than $1,000
may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued interest, if any,
the Notes called for redemption will cease to bear interest from and after such
Redemption Date and the only right of the Holders of such Notes will be to
receive payment of the Redemption Price plus accrued interest, if any.
(7) Offers to Purchase. Sections 4.15 and 4.16 of the
Indenture provide that, after certain Asset Sales and upon the occurrence of a
Change of Control, and subject to further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Notes in
accordance with the procedures set forth in the Indenture.
(8) Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, and (except Notes issued as payment of
Interest) in denominations of $1,000 and integral multiples of $1,000. A Holder
shall register the transfer of or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith required
by law or as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part.
B-5
<PAGE>
(9) Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
(10) Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
(11) Discharge Prior to Redemption or Maturity. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, including, under certain
circumstances, their obligation to pay the principal of and interest on the
Notes but without affecting the rights of the Holders to receive such amounts
from such deposit).
(12) Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding, and any
past Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of not less than a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, comply with any requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA or comply
with Section 5.01 of the Indenture or make any other change that does not
adversely affect the rights of any Holder of a Note in any material respect.
(13) Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and the Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries, issue Preferred Stock of its
Subsidiaries, and on the ability of the Company to merge or consolidate with any
other Person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the Company's and its Subsidiaries' assets or adopt
a plan of liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the
Company must an-
B-6
<PAGE>
nually report to the Trustee on compliance with such limitations.
(14) Subordination. Upon effectiveness of the Merger (as
defined in the Indenture), the Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Obligations on Senior Indebtedness of
the Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. Each Holder by its acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on its behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee its attorney-in-fact for such purposes.
(15) Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(16) Defaults and Remedies. Except as set forth in the
Indenture, if an Event of Default occurs and is continuing, the Trustee or the
Holders of not less than 25% in principal amount of Notes then outstanding may
declare all the Notes to be due and payable in the manner, at the time and with
the effect provided in the Indenture. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Notes unless it has received indemnity
reasonably satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of any
continuing Default or Event of Default (except a Default in payment of principal
or interest when due, for any reason or a Default in compliance with Article
Five of the Indenture) if it determines that withholding notice is in their
interest.
(17) Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
(18) No Recourse Against Others. No partner, director,
officer, employee or stockholder, as such, of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Notes, the Indenture, the Guarantees or
the Registration Rights Agreement or for any claim based on, in respect of, or
by reason of, such obligations or their creation.
B-7
<PAGE>
Each Holder of Notes 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.
(19) Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Subsidiary
Guarantors, the Trustee and the Holders.
(20) Authentication. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
(21) Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed within the State of New York, without
regard to principles of conflict of laws. Each of the parties hereto and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Note.
(22) Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(23) 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 as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to: ACQUISITION CORP., c/o Weiss, Peck & Greer,
L.L.C., One New York Plaza, New York, New York 10004.
B-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
______________________________________
______________________________________
______________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated:______________________ Signed:__________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:___________________________________
Signature must be guaranteed by an "eligible guarantor
institution," that is, a bank, stockbroker, savings and loan association or
credit union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agent Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.
B-9
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$_______________________
Dated: _________________ _________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in every
particular without alteration or
enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee:__________________________________
B-10
<PAGE>
EXHIBIT C
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
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
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.17 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
---------- --, ----
New York, New York
Ladies and Gentlemen:
In connection with our proposed purchase of 12% Senior
Subordinated Notes due 2008 (the "Notes") of ACQUISITION CORP. (the "Company"),
we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the
indenture relating to the Notes (the "Indenture") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer
the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act"), and
all applicable State securities laws.
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act or any other applicable
securities law, and that the Notes may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons
except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes, we will do so
only (i) to the Company or any subsidiary thereof, (ii) inside the
United States in accordance with Rule 144A under the Securities Act to
a person who we reasonably believe is a "qualified institutional buyer"
(as defined in Rule 144A promulgated under the Securities Act), (iii)
inside the United States 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 the Trustee (as
defined in the Indenture) a signed letter containing certain
representations and agreements relating to the restrictions on transfer
of the Notes (the form of which letter can be
D-1
<PAGE>
obtained from the Trustee), (iv) outside the United States in
accordance with Rule 904 of Regulation S promulgated under the
Securities Act, (v) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (vi)
pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of
the Notes from us a notice advising such purchaser that resales of the
Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to the Trustee, the Company such
certification, legal opinions and other information as the Trustee and
the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that
the Notes purchased by us will bear a legend to the foregoing effect.
4. We are an 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 their
investment, as the case may be.
5. We are acquiring the Notes purchased by us for our account
or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
6. We have received a copy of the Company's Offering
Memorandum dated January 22, 1998 and acknowledge that we have had
access to such financial and other information, and have been afforded
the opportunity to ask such questions of representatives of the Company
and receive answers thereto, as we deem necessary in connection with
our decision to purchase the Notes.
D-2
<PAGE>
You, the Company, the Trustee, the Initial Purchaser and
others are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
---------------------
Name:
Title:
D-3
<PAGE>
EXHIBIT E
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
---------- --, ----
New York, New York
Re: ACQUISITION CORP. (the "Company")
12% Senior Subordinated Notes due 2008
(the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
E-1
<PAGE>
You, the Company and counsel for the Company are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By:
---------------------
Authorized Signature
E-2
<PAGE>
EXHIBIT F
GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest on this Note (and including Additional Interest payable
thereon) in the amounts and at the times when due and interest on the overdue
principal, premium, if any, and interest, if any, of this Note, if lawful, and
the payment or performance of all other obligations of the Company under the
Indenture or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
Twelve of the Indenture and this Guarantee. This Guarantee will become effective
in accordance with Article Twelve of the Indenture and its terms shall be
evidenced therein. This Guarantee will be subordinated to Guarantor Senior
Indebtedness, as defined in the Indenture, and in accordance with Article
Thirteen thereof. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Indenture dated as of January 29, 1998, among
Acquisition corp., a Delaware corporation, the Subsidiary Guarantors named
therein and State Street Bank and Trust Company, as trustee (the "Trustee"), as
amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and
to the Trustee pursuant to this Guarantee and the Indenture are expressly set
forth in Article Twelve of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee and all of the other provisions
of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW. Each Subsidiary Guarantor hereby agrees to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
F-1
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its
Guarantee to be duly executed.
Date: ____________________
[NAME OF SUBSIDIARY GUARANTOR],
as Guarantor
By:
---------------------------
Name:
Title:
F-2
<PAGE>
EXHIBIT 4.2
- -------------------------------------------------------------------------------
ATC GROUP SERVICES INC.
and
STATE STREET BANK AND TRUST COMPANY, as Trustee
- -------------------------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 5, 1998
to
INDENTURE
Dated as of January 23, 1998
by and between
ACQUISITION CORP., as Issuer
and
STATE STREET BANK AND TRUST COMPANY, as Trustee
---------------------------
$150,000,000
12% Senior Subordinated Notes Due 2008
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
ASSUMPTION OF OBLIGATIONS OF ACQUISITION CORP.
Section 1.01. Assumption..............................................2
ARTICLE II
MISCELLANEOUS PROVISIONS
Section 2.01. Terms Defined...........................................2
Section 2.02. Indenture...............................................2
Section 2.03. Governing Law...........................................3
Section 2.04. Successors..............................................3
Section 2.05. Multiple Counterparts...................................3
Section 2.06. Effectiveness...........................................3
Section 2.07. Trustee Disclaimer......................................3
SIGNATURES.............................................................4
-i-
<PAGE>
FIRST SUPPLEMENTAL INDENTURE dated as of February 5, 1998, by
and among ATC GROUP SERVICES INC., a Delaware corporation ("ATC"), the
guarantors set forth on the signature pages hereto (the "Guarantors") and STATE
STREET BANK AND TRUST COMPANY as trustee under the hereafter defined Indenture
(the "Trustee").
WHEREAS, ACQUISITION CORP., a Delaware corporation (the
"Company"), heretofore executed and delivered to the Trustee an Indenture dated
as of January 23, 1998 (the "Indenture"), providing for the issuance of up to
$150,000,000 aggregate principal amount of the Company's 12% Senior Subordinated
Notes Due 2008 (the "Notes"); and
WHEREAS, there have been issued and are now outstanding under
the Indenture, Notes in the aggregate principal amount of $100,000,000; and
WHEREAS, in connection with the merger of the Company with and
into ATC pursuant to an Agreement and Plan of Merger dated as of November 26,
1997, the Company has been merged with and into ATC and in connection therewith,
ATC has assumed, by operation of law, all of the Company's debts, liabilities,
duties and obligations, including the Company's obligations in respect of the
Notes and under the Indenture; and
WHEREAS, ATC desires by this First Supplemental Indenture, to
expressly assume the covenants, agreements and undertakings of the Company in
the Indenture, under the Notes and in the Registration Rights Agreement; and
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by a resolution of the Board of Directors of ATC;
and
WHEREAS, the Guarantors desire, by this First Supplemental
Indenture, to expressly assume, jointly and severally, the obligations of
Guarantors under the Indenture and under Guarantees attached to the Notes; and
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by a resolution of the Board of Directors of each
of the several Guarantors; and
WHEREAS, all conditions and requirements necessary to make
this First Supplemental Indenture a valid, binding and legal instrument in
accordance with its terms have been performed and fulfilled by the parties
hereto and the execution and de-
<PAGE>
-2-
livery thereof have been in all respects duly authorized by the parties hereto.
NOW, THEREFORE, in consideration of the above premises, each
party agrees, for the benefit of the others and for the equal and ratable
benefit of the Holders of the Notes, as follows:
ARTICLE I
ASSUMPTION OF OBLIGATIONS OF ACQUISITION CORP.
Section 1.01. Assumption. ATC hereby expressly and
unconditionally assumes each and every covenant, agreement and undertaking of
the Company in the Indenture and the Registration Rights Agreement as if ATC had
been the original issuer of the Notes, and also hereby expressly and
unconditionally assumes each and every covenant, agreement and undertaking in
each Note outstanding on the date of this First Supplemental Indenture and any
Notes delivered hereafter. Any Notes delivered after the date of this First
Supplemental Indenture, including Notes delivered in substitution or exchange
for any outstanding Notes, as provided in the Indenture, may be executed and
delivered by ATC in its own name, with such notations, legends or endorsements
required by law, stock exchange rules or usage, and each such Note shall
constitute the obligation of ATC.
ARTICLE II
MISCELLANEOUS PROVISIONS
Section 2.01. Terms Defined. For all purposes of this First
Supplemental Indenture, except as otherwise defined or unless the context
otherwise requires, terms used in capitalized form in this First Supplemental
Indenture and defined in the Indenture have the meanings specified in the
Indenture.
Section 2.02. Indenture. Except as amended hereby, the
Indenture and the Notes are in all respects ratified and confirmed and all the
terms shall remain in full force and effect.
Section 2.03. Governing Law. THIS FIRST SUPPLEMENTAL INDENTURE
SHALL BE GOVERNED BY AND CONSTRUED IN
<PAGE>
-3-
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this First Supplemental Indenture, provided that
such jurisdiction shall be non-exclusive.
Section 2.04. Successors. All agreements of ATC in this First
Supplemental Indenture and the Notes shall bind its successors. All agreements
of each of the Guarantors in this First Supplemental Indenture, the Notes and
the Guarantees shall jointly and severally bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.
Section 2.05. Multiple Counterparts. The parties may sign
multiple counterparts of this First Supplemental Indenture. Each signed
counterpart shall be deemed an original, but all of them together represent the
same agreement.
Section 2.06. Effectiveness. The provisions of this First
Supplemental Indenture will take effect immediately upon its execution and
delivery by the Trustee in accordance with the provisions of Section 8.06 of the
Indenture.
Section 2.07. Trustee Disclaimer. The Trustee accepts the
amendment of the Indenture effected by his First Supplemental Indenture and
agrees to execute the trust created by the Indenture and agrees to execute the
trust created by the Indenture as hereby amended, but only upon the terms and
conditions set forth in the Indenture, including the terms and provisions
defining and limiting the liabilities and responsibilities of the Trustee, which
terms and provisions shall in like manner define and limit its liabilities and
responsibilities in the performance of the trust created by the Indenture as
hereby amended, and without limiting the generality of the foregoing, the
Trustee shall not be responsible in any manner whatsoever for or with respect to
any of the recitals or statements contained herein, all of which recitals or
statements are made solely by ATC, or for or with respect to (i) the validity or
sufficiency of this First Supplemental Indenture or any of the terms or
provisions hereof, (ii) the proper authorization hereof by ATC and each
Guarantor by corporate action or otherwise, (iii) the due execution hereof by
ATC and each Guarantor, (iv) the consequences (direct or indirect and whether
deliberate or inadvertent) of any amendment herein provided for, and the Trustee
makes no representation with respect to any such matters.
<PAGE>
-4-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first written above.
ATC GROUP SERVICES INC.
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Chief Executive Officer
THE GUARANTORS:
ATC BLATTERT INC., a South
Dakota corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
ATC CONSTRUCTION SERVICES INC.,
a Massachusetts corporation,
as Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Vice President
<PAGE>
-5-
ATC ENVIRONMENTAL INC., a
Delaware corporation, as Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
ATC INSYS TECHNOLOGY INC., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Chief Executive Officer
ATC MANAGEMENT INC., a South
Dakota corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: President
ATC NEW ENGLAND CORP., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: President
<PAGE>
-6-
BING YEN & ASSOCIATES, INC., a
California corporation, as
Guarantor
By: /s/ Nicholas J. Malino
----------------------------
Name: Nicholas J. Malino
Title: Chief Executive Officer
ENVIRONMENTAL WARRANTY, INC., a
Connecticut corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Vice President
HYGEIA LABORATORIES INC., a
Delaware corporation, as
Guarantor
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
THE TRUSTEE:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Kathy A. Larimore
----------------------------
Name: Kathy A. Larimore
Title: Assistant Vice President
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of February
16, 1998, between ATC Group Services Inc., a Delaware Corporation ("Employer" or
"Company"), Acquisition Holdings, Inc., a Delaware corporation ("Holdings") and
Nicholas J. Malino ("Executive").
WHEREAS, Acquisition Corp. has entered into an Agreement and
Plan of Merger dated November 26, 1997 (the "Merger Agreement") to, among other
things, acquire all of outstanding shares of common stock of the Company;
WHEREAS, in connection with the acquisition, Executive has
agreed to enter into an employment contract with the Company upon the terms and
conditions set forth herein;
WHEREAS, Holdings has agreed to grant certain options and
restricted stock to the Executive in connection with his employment with the
Company upon the terms and conditions set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
1. Employment Term. The term of Executive's employment under
this Agreement shall commence on the date hereof and expire on February 28, 2001
(the "Employment Term"); it being understood, however, that to the extent
Executive's employment is terminated pursuant to Section 6, the Employment Term
shall cease. This Agreement shall automatically extend for successive one year
periods unless either party provides written notice of its intent not to renew
no later than ninety days prior to the expiration of the then current term.
2. Position, Duties, Responsibilities.
(a) Position. Executive hereby accepts employment with
the Company as its President and Chief Executive Officer in accordance with
the terms and conditions herein. Executive shall devote his best efforts and his
full professional time and attention (except for vacation, sick leave and other
excused leaves of absence) to the performance of the services customarily
incident to such office and consistent with past practices and customs at the
Company and of such other duties as may be reasonably assigned to the Executive
from time to time by the Board of Directors of the Company (the "Board").
Company will provide office
2
<PAGE>
facilities, secretarial and clerical support consistent with past practices and
customs of the Company.
(b) Other Activities. Except upon the prior written
consent of the Board, during the Employment Term, Executive will not (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
competitive with, or that places him in a competing position to that of Company.
This clause shall not prohibit Executive from investing his assets in a publicly
traded company, so long as such investment does not include the performance of
services by Executive in the operation or affairs of the companies in which such
investments are made, or teaching, writing or publicly speaking, so long as
these activities do not interfere or conflict with Executive's duties hereunder.
3. Compensation, Benefits, Expenses.
(a) Compensation. In consideration of the services to be
rendered hereunder, Executive shall be paid a salary at the rate of $200,000 per
year until March 1, 1998, and thereafter an annual salary of not less than
$250,000, payable in accordance with the Company's payroll practices in effect
during the course of this Agreement. Each year (commencing in 1999), effective
March 1, Executive's annual salary shall increase by the percentage increase of
the
3
<PAGE>
Consumer Price Index (All items) ("CPI") for the area during the twelve month
period prior to such date.
(b) Bonus. As further compensation for the services of
Executive, the Company shall pay Executive annual cash bonuses determined as
follows and payable within ninety (90) days of the end of the relevant fiscal
year:
(i) Executive shall be eligible to receive with respect to
each fiscal year during the term hereof a cash bonus in an aggregate amount
equal to the Target Bonus Amount. For any fiscal year the Target Bonus Amount
shall be equal to $100,000 if the Company achieves EBITDA equal to the Lower
EBITDA Target for such fiscal year and $250,000 if the Company achieves EBITDA
equal to or in excess of the Higher EBITDA Target for such fiscal year. If the
Company achieves EBITDA for any fiscal year between the Lower EBITDA Target and
Higher EBITDA Target, the Target Bonus Amount shall equal $150,000 times a
fraction, the numerator of which is the amount of EBITDA achieved by the Company
during such fiscal year in excess of the Lower EBITDA Target for such fiscal
year and the denominator of which is the Higher EBITDA Target for such fiscal
year minus the Lower EBITDA Target for such fiscal year. If the Company achieves
EBITDA of less than the Lower EBITDA Target in any fiscal year, the Target Bonus
Amount for such fiscal year shall equal zero. For fiscal 1999, the Lower EBITDA
Target and Higher EBITDA Target shall be $27 million and $30 million,
respectively; and for each
4
<PAGE>
fiscal year thereafter the Lower EBITDA Target and Higher EBITDA Target shall
equal 115% of the Lower EBITDA Target and Higher EBITDA Target, respectively,
for the prior fiscal year; provided that if revenues for any fiscal year
increase by more than 20% from the prior fiscal year as a result of one or more
acquisitions or mergers, then the Lower EBITDA Target and Higher EBITDA Target
for such fiscal year shall be determined in good faith by the Board in
consultation with Executive. The EBITDA between and including the Lower EBITDA
Target and Higher EBITDA Target is hereinafter referred to as the "EBITDA
Target".
(ii) For all purposes of this Agreement, EBITDA shall mean
income before income taxes, depreciation, amortization and interest expense
computed from the audited annual financial statements of the Company. Other
operating target results for the 1999 fiscal year and future fiscal years shall
be determined in good faith by the Board in consultation with Executive and may
include, for example, among other things, maintaining the Company's technical
capacity and high quality customer service, installation of a new MIS system,
hiring a chief financial officer and, if appropriate, completing acquisitions.
The parties will use their best efforts to establish other operating targets for
fiscal 1999 within 30 days after the date hereof.
(iii) For purposes of calculating actual annual bonus
amounts to be paid hereunder for any fiscal
5
<PAGE>
year, 66 2/3% of the Target Bonus Amount for such fiscal year shall be paid to
Executive based upon achievement of the EBITDA Target for such fiscal year and
33 1/3% of the Target Bonus Amount for such fiscal year shall be paid to
Executive based upon achievement of both the EBITDA Target and other operating
targets for such fiscal year.
(c) Benefits. As he becomes eligible therefor, the
Company shall provide Executive with the right to participate in and to receive
benefits from all present and future life, vacation, accident, disability,
medical, pension, and savings plans and all similar benefits made available
generally to executives of the Company. The amount and extent of benefits to
which Executive is entitled shall be governed by any applicable benefit plan, as
it may be amended from time to time.
(d) Leased Automobile. The Company shall provide
Executive during the Employment Term with a leased automobile similar to the
vehicle provided to Employee at the commencement of this Agreement.
(e) Relocation Expenses. The Company shall pay the
reasonable expenses incurred by Executive in connection with Executive's
relocation to New York City, up to a maximum dollar amount equal to the lowest
of three bids provided by a moving company to Executive in writing, and
forwarded to the Company prior to Executive's relocation.
6
<PAGE>
(f) Other Expenses. The Company shall reimburse Executive
for reasonable travel and other business expenses incurred by Executive in the
performance of his duties hereunder in accordance with Company's general
policies, as they may be amended from time to time during the course of this
Agreement.
(g) Options. Holdings shall grant to Executive, on or
before March 31, 1998, options ("New Options") to purchase Holdings common
stock, par value $0.01 per share ("Holdings Common Stock"), representing a
maximum of 3.41% of the then common equity of Holdings on a fully diluted basis.
The New Options shall have an initial exercise price of $12 per share and shall
be subject to adjustment upon any stock split, subdivision, combination or other
similar event. The New Options, Holdings Common Stock issued upon exercise
thereof and the Holdings Restricted Common Stock referred to in Section 4 shall
be subject to restrictions on transfer and subject to the right of repurchase by
Holdings on the same terms as those applicable to Holdings Common Stock
contained in the Employee Subscription Agreements dated January 20, 1998 (except
to the extent otherwise provided herein with respect to the price to be paid to
Executive upon any such repurchase as set forth herein).
(i) One half of the New Options, exercisable for 1.7% of
the then common equity of Holdings on a fully
7
<PAGE>
diluted basis (the "Time Vested Options"), shall vest in equal 25% increments
over a four year period, such vesting to occur on each of the first four
anniversary dates of the commencement of the term of this Agreement; provided
that all of such Time Vested Options shall vest upon a Change of Control and
provided further that to the extent this Agreement is terminated pursuant to
Section 6(e) and a Change of Control occurs within six months of such
termination (x) any of such Time Vested Options as well as any other options
that vest based on time that had been forfeited upon such termination shall be
reinstated and immediately vest and (y) Executive shall have the right to
receive for each share of Holdings Common Stock theretofore purchased by
Holdings upon such termination the difference between the amount Executive
received from Holdings pursuant to such purchase and the amount, if any, to be
paid for one share of Holdings Common Stock in such Change of Control. For
purposes of this Agreement, Change of Control shall have the meaning set forth
in the Indenture, dated January 29, 1998, between Acquisition Corp. and State
Street Bank and Trust Company, as trustee.
(ii) With respect to the other half of the New Options,
exercisable for the other 1.7% of the then common equity of Holdings on a fully
diluted basis (the "Performance Based Options"), such Performance Based Options
shall vest effective as of each of the first four anniversary dates of the
commencement of the term of this Agreement, if
8
<PAGE>
the Company has achieved EBITDA for the immediately preceding fiscal year equal
to at least the mid point of the Lower EBITDA Target and Higher EBITDA Target
for such fiscal year. If the Company does not achieve such EBITDA for such
immediately preceding fiscal year, the Performance Based Options eligible to
vest for the fiscal year in question shall be forfeited.
(iii) Executive shall have the right to exercise any vested
New Option within ten (10) business days of a termination of employment pursuant
to Section 6, but not thereafter. Notwithstanding the provisions of the Employee
Subscription Agreement dated January 20, 1998, in the event of termination
pursuant to Section (6)(d) or (e), the purchase price to be paid by Holdings to
Executive for any Holdings Common Stock whether or not issued upon exercise of
any options (including the New Options) shall be the greater of the purchase
price of such Holdings Common Stock or the Fair Market Value thereof.
"Fair Market Value" shall mean, at any time, per share of
Holdings Common Stock (a) the arithmetic average of the daily last sale prices
of the Holdings Common Stock for twenty consecutive trading days ending
immediately prior to such time or, if no such sale takes place on such dates,
the average of the closing bid and asked prices on such dates, in each case as
officially reported on the principal national securities exchange on which the
Holdings Common
9
<PAGE>
Stock is then listed or admitted to trading, (b) if such Holdings Common Stock
is not then listed or admitted to trading on any national securities exchange,
but is designated as a national market system security by the NASD, the
arithmetic average of the daily last trading prices of the Holdings Common Stock
for twenty consecutive trading days ending immediately prior to such time, or if
there shall have been no trading on such date, the average of the reported
closing bid and asked prices on such dates as shown by the NASDAQ, (c) if the
Holdings Common Stock is being offered in an initial public offering at or
within 20 days prior to such time, the average price of such Holdings Common
Stock per share, net of underwriter's discount and expenses, sold in such
initial public offering, and (d) if the Holdings Common Stock is not then listed
or admitted to trading on any national exchange or quoted in the
over-the-counter market and not then being offered in the initial public
offering, the fair market value of the Holdings Common Stock as determined in
good faith by Holdings Board of Directors; provided that Executive shall have
the right, within 7 days of receiving the Fair Market Value, to select a
nationally recognized investment bank reasonably acceptable to Holdings to
determine the Fair Market Value. To the extent that Executive elects to so
retain such an investment bank, then Fair Market Value shall mean the fair
market value chosen by such investment bank, provided that the cost and expense
of
10
<PAGE>
such investment bank shall be borne by Executive if the fair market value
determined by such investment bank shall be 5% or more greater than or less than
the fair market value previously determined in good faith by Holdings Board of
Directors.
4. Grant of Holdings Restricted Common Stock. On February
5, 1998, the effective date of the merger of Acquisition Corp. with and into the
Company, Holdings issued to Executive 33,896 shares of Holdings Restricted
Common Stock which shall vest on the dates set forth below; provided that on
such date Executive shall then be employed by the Company and to the extent
Executive's employment is terminated prior to any such date, the Holdings
Restricted Common Stock scheduled to vest on such date shall be forfeited.
Number of Shares of
Holdings Restricted
Common Stock
8,474. . . . . . . . .March 1, 1999
8,474. . . . . . . . .March 1, 2000
8,474. . . . . . . . .March 1, 2001
8,474. . . . . . . . .March 1, 2002
For purposes of Holding's repurchase right with respect to
such Holdings Restricted Common Stock, the original per share purchase price for
purposes of calculating Adjusted Purchase Price, as set forth in the Employee
11
<PAGE>
Subscription Agreement dated as of January 20, 1998, shall be deemed to be $12
per share.
5. Special Bonus.
(a) Payment of Fiscal Year 1997 Bonus. The Company shall
pay to the Executive a special bonus (the "Fiscal Year 1997 Bonus") (x) no later
than June 1, 1998 or (y) to the extent the Company meets its budget for the
first fiscal quarter of 1999, during the first fiscal quarter of 1999. The
Fiscal Year 1997 Bonus shall equal $168,000.
(b) Release. Upon receipt of the Fiscal Year 1997 Bonus and
Holdings Restricted Common Stock specified in Section 4 (whether or not any
Holdings Restricted Common Stock ultimately vests), Executive on behalf of
himself and his heirs, successors and assigns, hereby releases and forever
discharges the Company, its affiliates, and its former, present and future
shareholders, officers, directors, successors, assigns and predecessors (the
"Released Parties") of any and all claims, actions, causes of action, demands,
rights, damages, debts, compensation, costs or other expenses, including without
limitation attorneys' fees, of any nature whatsoever, known or unknown, which
Executive ever had or has against the Released Parties arising out of any
payments (including bonuses) for services rendered to the Released Parties for
all prior periods.
6. Termination of Employment.
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(a) By Death. If Executive dies prior to the expiration of
the Employment Term, his base salary, bonus pursuant to Section 3(b) (if any)
and accrued but unused vacation will be prorated through the day of his death,
and paid to his beneficiaries or estate. Thereafter, Company's obligations
hereunder shall terminate.
(b) By Disability. If Executive becomes "Permanently
Disabled" (as defined below) prior to the expiration of the Employment Term,
Company shall be entitled to terminate his employment, subject to the
requirements of applicable law, and Executive shall be entitled to receive
disability benefits in accordance with any applicable disability policy
maintained by Company as of the date of such disability. In the event of such
termination, Executive's base salary and bonus pursuant to Section 3(b) (if any)
will be prorated through the date of termination and paid to him, and Executive
shall receive a cash lump sum payment for accrued but unused vacation for the
year of termination. Upon such termination, Company shall have no further
obligations to the Executive hereunder other than to provide the Executive with
the benefits as set forth in this subparagraph. For the purposes of this
subparagraph, Executive shall be deemed "Permanently Disabled" when, and only
when the Company determines, after consultation with Executive's physician, that
Executive suffers a physical or mental disability that prevents Executive from
performing the
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<PAGE>
essential duties of his position with reasonable accommodations as may be
required by law (i) for a period of one hundred twenty (120) consecutive days;
or (ii) for an aggregate of one hundred fifty (150) business days in any twelve
(12) month period.
(c) By Company For Cause. If the Company terminates the
Executive for "Cause" (as defined below), Company shall thereafter have no
obligations to the Executive hereunder. "Cause" shall mean termination by
Company of Executive's employment because of (i) any act or omission that
constitutes a material breach by Executive of any of his obligations under this
Agreement, or under any other material agreement with, or material written
policy of Company, which act or omission is not cured within thirty days of the
Company providing Executive with notice of the act, omission or failure deemed
to constitute Cause; (ii) the failure or refusal by Executive to follow any
lawful reasonable written direction of the Board, which failure or refusal is
not cured within thirty days of the Company providing Executive with reasonably
detailed written notice of the failure or refusal deemed to constitute Cause;
(iii) the conviction by Executive of a felony, a crime involving moral turpitude
or the perpetration by Executive of a common law fraud; or (iv) any other
willful act or omission by Executive, which is or will be materially injurious
to the financial condition or business reputation of, or is otherwise materially
injurious
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<PAGE>
to the Company, which act or omission is not cured within thirty days of
the Company providing Executive with reasonably detailed written notice of the
act or omission deemed to constitute Cause. The parties hereto hereby agree that
notwithstanding the provisions in the Employee Subscription Agreement between
Executive and Holdings, dated as of January 20, 1998, the term "Cause" in such
Employee Subscription Agreement shall be interpreted to mean Cause as defined in
this Agreement.
(d) By Executive For Good Reason. Executive may terminate,
without liability, the Employment Term for "Good Reason" (as defined below) upon
thirty (30) business days' advance written notice to Company. Company shall pay
Executive the annual salary to which he is entitled pursuant to Section 3(a) for
1 year from the date of such termination (the "Section 6(d) Termination
Period"), less the amount of compensation, income or benefits earned or paid to
Executive as an employee or consultant from any entity other than the Company
during the Section 6(d) Termination Period; provided that in no event shall
Executive be entitled to receive less than $125,000. In addition, the Company
shall pay to Executive (x) all amounts due to Executive up to the date of
termination under Sections 3(c) and 3(f) of this Agreement and (y) Executive's
bonus pursuant to Section 3(b) (if any) prorated through the date of such
termination. The Company shall have no obligations to Executive other than those
set
15
<PAGE>
forth herein. Good Reason shall exist if: (i) there is an assignment to the
Executive of any duties materially inconsistent with or which constitute a
material adverse diminution in the Executive's position, duties,
responsibilities, or status with Company, or a material adverse diminution in
the Employee's reporting responsibilities, title, or offices; or (ii) there is a
material breach by Company of this Agreement or any other material agreement
between the Company and Executive. If Executive terminates his employment
without Good Reason, Company shall thereafter have no obligations to Executive
hereunder, except as otherwise required by law. Upon termination by Executive of
his employment under this Section 6(d), Executive shall in good faith seek to
obtain alternative employment in a comparable senior executive position and to
otherwise mitigate the amount payable to Executive pursuant to this Section
6(d).
(e) Termination By the Company Other Than By Reason of
Death, Disability or Cause. If the Company terminates Executive's employment for
any reason other than death, disability or Cause, Company shall pay to Executive
the compensation he is entitled to pursuant to Section 3(a) for 1 year from the
date of such termination (the "Section 6(e) Termination Period"), less the
amount of compensation, income or benefits earned or paid to Executive as an
employee or consultant from any entity other than the Company during
16
<PAGE>
the Section 6(e) Termination Period; provided that in no event shall Executive
be entitled to receive less than $125,000. In addition, the Company shall pay to
Executive all amounts due to Executive up to the date of termination under
Sections 3(c) and 3(f) of this Agreement. The payments and benefits provided for
in this Section 6(e) are contingent on Executive executing a general release on
behalf of the Company in the form attached hereto as Exhibit A. Upon termination
of Executive under this Section 6(e), Executive shall in good faith seek to
obtain alternative employment in a comparable senior executive position and to
otherwise mitigate the amount payable to Executive pursuant to this Section
6(e).
(f) Bonus Calculation. The pro rata bonus pursuant to
Section 3(b) (if any) payable to Executive pursuant to Section 6(a), (b) or (d)
shall be calculated at the end of the fiscal year in question and be determined
based on the portion of such fiscal year Executive was employed by Company
pursuant to this Agreement and whether or not the Company obtained its EBITDA
Target and other operating targets for such fiscal year.
7. Proprietary Information.
(a) Defined. "Proprietary Information" is all proprietary,
secret or confidential information pertaining to the business of the Company.
17
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(b) General Restrictions on Use. Executive agrees to hold
all Proprietary Information in strict confidence and trust for the sole benefit
of Company and not directly or indirectly, to disclose, use, copy, publish,
summarize, or remove from Company's premises any Propriety Information except
(i) during the Employment Term to the extent necessary to carry out Executive's
responsibilities under this Agreement, and (ii) after termination of the
Employment Term as specifically authorized in writing by the Board.
(c) Interference with Business; Competitive Activities. In
consideration of his employment under this Agreement, Executive agrees that for
a period of one (1) year after termination of the Employment Term (or any
renewal term, if applicable), he shall not, for himself or for any third party,
directly or indirectly (i) divert or attempt to divert from Company any business
of any kind in which it is engaged, including, without limitation, the
solicitation or interference with any of its suppliers or customers; (ii)
employ, solicit for employment, or recommend for employment any person employed
by Company during the period of such person's employment and for a period of one
(1) year thereafter, or (iii) engage in any business activity that is or may be
competitive with the Company; provided that notwithstanding the foregoing, if
Executive is terminated pursuant to Section 6(d) or 6(e), Executive shall be
required
18
<PAGE>
to comply with the provisions of this Section 7(c) only for such time as
Executive is receiving amounts he is entitled to pursuant to Section 3(a) in
accordance with such Section 6(d) or 6(e), as the case may be. If the scope of
any of the restrictions set forth above is too broad to permit enforcement of
such restriction to its full extent, then such restriction shall be enforced to
the maximum extent permitted by law, and Executive hereby consents and agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.
8. No Assignment.
(a) Neither this Agreement nor any right or interest
hereunder shall be assignable by Executive, his beneficiaries or legal
representatives, without Company's prior written consent; provided, however,
that nothing in this subsection 8(a) shall preclude Executive from designating a
beneficiary to receive upon his death any benefit payable hereunder, or the
executors, administrators or other legal representatives of Executive's estate
from assigning any rights hereunder to the person or persons entitled thereto.
(b) Except as otherwise required by law, without Company's
prior written consent, no right to receive payments under this Agreement shall
be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to
19
<PAGE>
exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
9. Registration Rights.
(a) "Piggy-Back" Registrations. If Holdings proposes to
register any shares of Holdings Common Stock under the Securities Act of 1933,
as amended (the "Securities Act"), in connection with any offering of its
securities, whether or not for its own account, Holdings shall furnish prompt
written notice to Executive of its intention to effect such registration and the
intended method of distribution in connection therewith. Upon the written
request of Executive made to Holdings within 30 days after the receipt of such
notice by Holdings, Holdings shall include in such registration in accordance
with the other provisions of this Section 9, the requested number of Executive's
Registrable Securities (a "Piggy-Back Registration").
(b) Underwriting Requirements. In connection with any
offering involving an underwriting of Holdings Common Stock, Holdings shall not
be required under Section 9(a) to include any of the securities of Executive in
the registration of the securities to be included in such underwriting, or in
such underwriting itself, unless Executive accepts the terms of the underwriting
as agreed upon between Holdings and the underwriters selected by it,
20
<PAGE>
and then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by Holdings. If the
total amount of securities, including Registrable Securities, requested by
Executive and any other stockholder of Holdings to be included in such offering,
exceeds the number of securities that the underwriters determine in their sole
discretion is compatible with the success of the offering, then Holdings shall
be required to include in the offering only such number of Registrable
Securities as the underwriters determine in their sole discretion will not
jeopardize the success of the offering. In connection with any such offering,
Holdings shall include in such registration (to the extent of the number which
Holdings is so advised can be sold), first the securities, if any, being sold by
Holdings, and second the securities proposed to be registered by WPG Corporate
Development Associates V, L.P. or its affiliates, Jackson National Life
Insurance Company or its affiliates and any similar third party investors
granted piggy-back registration rights, and third, Executive and any other
stockholders (including other employees of the Company) of Holdings not included
in the foregoing second priority. The Registrable Securities so included shall
be apportioned among Executive and any other stockholders of Holdings pro rata
in proportion to the total number of Registrable Securities and shares of
Holdings Common Stock owned by them, respectively.
21
<PAGE>
Notwithstanding anything herein to the contrary, to the extent the underwriters
in any such Piggyback Registration determine that Executive must sell lesser pro
rata shares than any other stockholder or no shares, Executive shall sell such
lesser amount of shares or no shares as determined by such underwriters and the
fact that Executive was required to sell such lesser amount of shares or no
shares shall not affect the right of any other stockholders to include Holdings
Common Stock in such registration.
(c) Expenses of Registration. With respect to a Piggy-back
Registration, Holdings shall bear and pay all expenses incurred in connection
with any registration, filing or qualification of Registrable Securities with
respect to the registrations made pursuant to Section 9(a), including (without
limitation) all registration, filing, and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for Holdings, but excluding
fees and disbursements of counsel to holders of Registrable Securities and
underwriting discounts and commissions relating to Registrable Securities.
As used in Section 9, the following shall have the
following meaning:
"register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act
22
<PAGE>
and the declaration or ordering of effectiveness of such registration statement.
"Registrable Securities" shall mean any and all shares of
Holdings Common Stock whenever acquired. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of by Executive in accordance with such registration statement or (ii)
such securities may be sold pursuant to Rule 144 of the Securities Act.
10. Notices. All notices, requests, claims, demands and
other communications under this agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such address
for a party as shall be specified by like notice): (i) if to Company, to the
addresses therefor specified in Section 10.02 of the Merger Agreement, (ii) if
to Executive, 104 East 25th Street, New York, New York 10010.
11. Entire Agreement. The terms of this Agreement are
intended by the parties to be the final expression of their agreement with
respect to the employment of Executive by Company and may not be contradicted by
evidence of any prior or contemporaneous agreement.
23
<PAGE>
The parties further intend that this Agreement shall constitute the complete
and exclusive statement of its terms and that no extrinsic evidence whatsoever
may be introduced in any judicial, administrative, or other legal proceeding
involving this Agreement.
12. Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, signed by
the Executive and by a duly authorized representative of Company other than
Executive. By an instrument in writing similarly executed, either party may
waive compliance by the other party with any provision of this Agreement that
such other party was or is obligated to comply with or perform; provided,
however, that such waiver shall not operate as a waiver of, or estoppel with
respect to, any other or subsequent failure. No failure to exercise and no delay
in exercising any right, remedy, or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or in equity.
13. Confidentiality. Executive agrees that the terms and
conditions of this Agreement are confidential and shall not be disclosed by
Executive to any third parties, other than Executive's lawyers and other
professional advisors, unless such disclosure is required by law.
24
<PAGE>
14. Governing Law. The validity, interpretation,
enforceability, and performance of this Agreement shall be governed by and
construed in accordance with the law of the State of New York.
15. Employee Acknowledgment. Executive acknowledges (i)
that he has consulted with or has had the opportunity to consult with
independent counsel of his own choice concerning this Agreement and has been
advised to do so by Company, and (ii) that he has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely
based on his own judgment.
16. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the Corporation and its respective successors
and assigns, but the rights and obligation of Executive are personal and may not
be assigned or delegated without the Company's prior written consent.
17. Arbitration. Any dispute between the parties arising
under this Agreement or Executive's employment with the Company (or the
termination thereof) shall not be decided in court, but instead shall be
submitted to final, binding arbitration before the American Arbitration
Association in New York City.
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<PAGE>
The parties have duly executed this Agreement as of the
date first written above.
ATC GROUP SERVICES INC.
By: /s/ Christopher P. Vincze
---------------------------
Name: Christopher P. Vincze
Title: Chief Operating Officer
ACQUISITION HOLDINGS, INC.
By: /s/ Wesley W. Lang, Jr.
-----------------------------
Name: Wesley W. Lang, Jr.
Title: President
EXECUTIVE
/s/ Nicholas J. Malino
----------------------------
Nicholas J. Malino
26
<PAGE>
Exhibit A
GENERAL RELEASE
In consideration of the payment of _____________________
received from ATC Group Services Inc. ("Employer"), _____________________
("Employee") and except for all accrued but unpaid compensation, benefits and
rights of Employee provided under Section 6(e) of that certain Employment
Agreement between Employee, Employer and Acquisition Holdings, Inc., dated as of
February 16, 1998 and all amendments and extensions thereto which the parties
may adopt, Employee, on behalf of himself and his heirs, executors,
administrators, successors and assigns, hereby releases, relieves and forever
discharges Employer, its former and present subsidiaries, affiliates, branches,
successors and assigns, and their former and present officers, directors,
trustees, employees, agents and attorneys, (collectively, the "Released
Parties"), from any and all claims, actions, causes of action, demands, rights,
damages, debts, compensation, costs or other expenses, including without
limitation attorneys' fees, of any nature whatsoever, whether known or unknown,
which Employee ever had, now has, or which he, his heirs, executors,
administrators, successors and assigns hereinafter can, shall or may have
against the Released Parties arising out of any matter, cause, acts, conduct,
claim or event, including without limitation all matters relating to Employee's
employment with the Employer, including without limitation
<PAGE>
contract claims, tort claims, claims for compensation or benefits, personal
injury claims and claims for attorneys' fees, and further includes all claims
arising under the Age Discrimination in Employment of 1967, as amended, 29
U.S.C. ss. 621 et seq., National Labor Relations Act, as amended, 29 U.S.C. ss.
151 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
ss. 2000e et seq., the Americans with Disabilities Act of 1990, 42 U.S.C. ss.
12191 et seq., the Civil Rights Act of 1866, 42 U.S.C. ss. 1981, the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. ss. 1001 et seq.,
or any other federal, state and local law or principal of contract law or common
law; provided, however, that this General Release shall not operate to prohibit
Employee from commencing an action to enforce the terms of his Employment
Agreement.
Employee represents that he has not and will not file any
complaints, grievances, or charges relating to his employment against any of the
Released Parties.
Employee warrants that he is signing this General Release
voluntarily, and that no promises or inducements for this General Release have
been made, and he enters into this General Release without reliance upon any
statement or representation by any of the Released Parties or any other person,
concerning any fact material to this General Release. Employee acknowledges that
he is not otherwise entitled to receive the consideration set forth above.
2
<PAGE>
The Employer hereby advises the Employee to consult with
legal counsel concerning this General Release. The Employee acknowledges that he
has had at least twenty-one days in which to consider this General Release and
has had the opportunity to obtain legal counsel concerning this General Release.
Employee represents and warrants that he fully understands the terms of this
General Release, and that he knowingly and voluntarily, of his own free will
without any duress, being fully informed and after due deliberation, accepts its
terms and signs the same as his own free act for the purpose of making full
withdrawal, compromise and settlement of all claims.
This General Release contains the entire agreement among
the parties hereto and the terms of this General Release are contractual and not
a mere recital.
The Employee understands that he has seven (7) days to
revoke this General Release after signing. Employee agrees that in the event he
elects to revoke this General Release, he will provide the Employer with a
written revocation by the close of business on the seventh day following his
execution of this General Release.
PLEASE READ CAREFULLY BEFORE SIGNING. THIS DOCUMENT
INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, EXCEPT AS SPECIFICALLY
PROVIDED HEREIN.
---------------------
EMPLOYEE
3
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STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On _________ , 1997 before me personally came _________ ,
to me known, and known to me to be the individual described herein, and who
executed the foregoing General Release, and duly acknowledged to me that he
executed the same of his own free will without any duress.
-----------------
NOTARY PUBLIC
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of February
16, 1998, between ATC Group Services Inc., a Delaware Corporation ("Employer" or
"Company"), Acquisition Holdings, Inc., a Delaware corporation ("Holdings") and
Christopher P. Vincze ("Executive").
WHEREAS, Acquisition Corp. has entered into an Agreement and
Plan of Merger dated November 26, 1997 (the "Merger Agreement") to, among other
things, acquire all of outstanding shares of common stock of the Company;
WHEREAS, in connection with the acquisition, Executive has
agreed to enter into an employment contract with the Company upon the terms and
conditions set forth herein;
WHEREAS, Holdings has agreed to grant certain options and
restricted stock to the Executive in connection with his employment with the
Company upon the terms and conditions set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
1. Employment Term. The term of Executive's employment under
this Agreement shall commence on the date hereof and expire on February 28, 2001
(the "Employment Term"); it being understood, however, that to the extent
Executive's employment is terminated pursuant to Section 6, the Employment Term
shall cease. This Agreement shall automatically extend for successive one year
periods unless either party provides written notice of its intent not to renew
no later than ninety days prior to the expiration of the then current term.
2. Position, Duties, Responsibilities.
(a) Position. Executive hereby accepts employment with the
Company as its Chief Operating Officer in accordance with the terms and
conditions herein. Executive shall devote his best efforts and his full
professional time and attention (except for vacation, sick leave and other
excused leaves of absence) to the performance of the services customarily
incident to such office and consistent with past practices and customs at the
Company and of such other duties as may be reasonably assigned to the Executive
from time to time by the Board of Directors of the Company (the "Board").
Company will provide office facilities, secretarial and
2
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clerical support consistent with past practices and customs of the Company.
(b) Other Activities. Except upon the prior written consent
of the Board, during the Employment Term, Executive will not (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 competitive
with, or that places him in a competing position to that of Company. This clause
shall not prohibit Executive from investing his assets in a publicly traded
company, so long as such investment does not include the performance of services
by Executive in the operation or affairs of the companies in which such
investments are made, or teaching, writing or publicly speaking, so long as
these activities do not interfere or conflict with Executive's duties hereunder.
3. Compensation, Benefits, Expenses.
(a) Compensation. In consideration of the services
to be rendered hereunder, Executive shall be paid a salary at the rate of
$200,000 per year until March 1, 1998, and thereafter an annual salary of not
less than $250,000, payable in accordance with the Company's payroll practices
in effect during the course of this Agreement. Each year (commencing in 1999),
effective March 1, Executive's annual salary shall increase by the percentage
increase of the
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Consumer Price Index (All items) ("CPI") for the area during the twelve month
period prior to such date.
(b) Bonus. As further compensation for the services of
Executive, the Company shall pay Executive annual cash bonuses determined as
follows and payable within ninety (90) days of the end of the relevant fiscal
year:
(i) Executive shall be eligible to receive with respect to
each fiscal year during the term hereof a cash bonus in an aggregate amount
equal to the Target Bonus Amount. For any fiscal year the Target Bonus Amount
shall be equal to $100,000 if the Company achieves EBITDA equal to the Lower
EBITDA Target for such fiscal year and $250,000 if the Company achieves EBITDA
equal to or in excess of the Higher EBITDA Target for such fiscal year. If the
Company achieves EBITDA for any fiscal year between the Lower EBITDA Target and
Higher EBITDA Target, the Target Bonus Amount shall equal $150,000 times a
fraction, the numerator of which is the amount of EBITDA achieved by the Company
during such fiscal year in excess of the Lower EBITDA Target for such fiscal
year and the denominator of which is the Higher EBITDA Target for such fiscal
year minus the Lower EBITDA Target for such fiscal year. If the Company achieves
EBITDA of less than the Lower EBITDA Target in any fiscal year, the Target Bonus
Amount for such fiscal year shall equal zero. For fiscal 1999, the Lower EBITDA
Target and Higher EBITDA Target shall be $27 million and $30 million,
respectively; and for each
4
<PAGE>
fiscal year thereafter the Lower EBITDA Target and Higher EBITDA Target shall
equal 115% of the Lower EBITDA Target and Higher EBITDA Target, respectively,
for the prior fiscal year; provided that if revenues for any fiscal year
increase by more than 20% from the prior fiscal year as a result of one or more
acquisitions or mergers, then the Lower EBITDA Target and Higher EBITDA Target
for such fiscal year shall be determined in good faith by the Board in
consultation with Executive. The EBITDA between and including the Lower EBITDA
Target and Higher EBITDA Target is hereinafter referred to as the "EBITDA
Target".
(ii) For all purposes of this Agreement, EBITDA shall mean
income before income taxes, depreciation, amortization and interest expense
computed from the audited annual financial statements of the Company. Other
operating target results for the 1999 fiscal year and future fiscal years shall
be determined in good faith by the Board in consultation with Executive and may
include, for example, among other things, maintaining the Company's technical
capacity and high quality customer service, installation of a new MIS system,
hiring a chief financial officer and, if appropriate, completing acquisitions.
The parties will use their best efforts to establish other operating targets for
fiscal 1999 within 30 days after the date hereof.
(iii) For purposes of calculating actual annual bonus amounts
to be paid hereunder for any fiscal
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<PAGE>
year, 66 2/3% of the Target Bonus Amount for such fiscal year shall be paid to
Executive based upon achievement of the Lower EBITDA Target for such fiscal year
and 33 1/3% of the Target Bonus Amount for such fiscal year shall be paid to
Executive based upon achievement of both the EBITDA Target and other operating
targets for such fiscal year.
(c) Benefits. As he becomes eligible therefor, the Company
shall provide Executive with the right to participate in and to receive benefits
from all present and future life, vacation, accident, disability, medical,
pension, and savings plans and all similar benefits made available generally to
executives of the Company. The amount and extent of benefits to which Executive
is entitled shall be governed by any applicable benefit plan, as it may be
amended from time to time.
(d) Automobile Allowance. The Company shall provide Executive
during the Employment Term with an automobile allowance of $750 per month.
(e) Expenses. The Company shall reimburse Executive for
reasonable travel and other business expenses incurred by Executive in the
performance of his duties hereunder in accordance with Company's general
policies, as they may be amended from time to time during the course of this
Agreement.
(f) Repayment of Loan. This Agreement shall not impact
Executive's obligation to repay the Company an
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<PAGE>
outstanding loan in the amount of $7,657.50, which loan was extended to
Executive by the Company pursuant to a loan agreement.
(g) Options. Holdings shall grant to Executive, on or before
March 31, 1998, options ("New Options") to purchase Holdings common stock, par
value $0.01 per share ("Holdings Common Stock"), representing a maximum of 3.41%
of the then common equity of Holdings on a fully diluted basis. The New Options
shall have an initial exercise price of $12 per share and shall be subject to
adjustment upon any stock split, subdivision, combination or other similar
event. The New Options, Holdings Common Stock issued upon exercise thereof and
the Holdings Restricted Common Stock referred to in Section 4 shall be subject
to restrictions on transfer and subject to the right of repurchase by Holdings
on the same terms as those applicable to Holdings Common Stock contained in the
Employee Subscription Agreements dated January 20, 1998 (except to the extent
otherwise provided herein with respect to the price to be paid to Executive upon
any such repurchase as set forth herein).
(i) One half of the New Options, exercisable for 1.7% of the
then common equity of Holdings on a fully diluted basis (the "Time Vested
Options"), shall vest in equal 25% increments over a four year period, such
vesting to occur on each of the first four anniversary dates of the
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<PAGE>
commencement of the term of this Agreement; provided that all of such Time
Vested Options shall vest upon a Change of Control and provided further that to
the extent this Agreement is terminated pursuant to Section 6(e) and a Change of
Control occurs within six months of such termination (x) any of such Time Vested
Options as well as any other options that vest based on time that had been
forfeited upon such termination shall be reinstated and immediately vest and (y)
Executive shall have the right to receive for each share of Holdings Common
Stock theretofore purchased by Holdings upon such termination the difference
between the amount Executive received from Holdings pursuant to such purchase
and the amount, if any, to be paid for one share of Holdings Common Stock in
such Change of Control. For purposes of this Agreement, Change of Control shall
have the meaning set forth in the Indenture, dated January 29, 1998, between
Acquisition Corp. and State Street Bank and Trust Company, as trustee.
(ii) With respect to the other half of the New Options,
exercisable for the other 1.7% of the then common equity of Holdings on a fully
diluted basis (the "Performance Based Options"), such Performance Based Options
shall vest effective as of each of the first four anniversary dates of the
commencement of the term of this Agreement, if the Company has achieved EBITDA
for the immediately preceding fiscal year equal to at least the mid-point of the
Lower EBITDA Target and Higher EBITDA Target for such fiscal year.
8
<PAGE>
If the Company does not achieve such EBITDA for such immediately preceding
fiscal year, the Performance Based Options eligible to vest for the fiscal year
in question shall be forfeited.
(iii) Executive shall have the right to exercise any vested
New Option within ten (10) business days of a termination of employment pursuant
to Section 6, but not thereafter. Notwithstanding the provisions of the Employee
Subscription Agreement dated January 20, 1998, in the event of termination
pursuant to Section (6)(d) or (e), the purchase price to be paid by Holdings to
Executive for any Holdings Common Stock whether or not issued upon exercise of
any options (including the New Options) shall be the greater of the purchase
price of such Holdings Common Stock or the Fair Market Value thereof.
"Fair Market Value" shall mean, at any time, per share of
Holdings Common Stock (a) the arithmetic average of the daily last sale prices
of the Holdings Common Stock for twenty consecutive trading days ending
immediately prior to such time or, if no such sale takes place on such dates,
the average of the closing bid and asked prices on such dates, in each case as
officially reported on the principal national securities exchange on which the
Holdings Common Stock is then listed or admitted to trading, (b) if such
Holdings Common Stock is not then listed or admitted to trading on any national
securities exchange, but is
9
<PAGE>
designated as a national market system security by the NASD, the arithmetic
average of the daily last trading prices of the Holdings Common Stock for twenty
consecutive trading days ending immediately prior to such time, or if there
shall have been no trading on such date, the average of the reported closing bid
and asked prices on such dates as shown by the NASDAQ, (c) if the Holdings
Common Stock is being offered in an initial public offering at or within 20 days
prior to such time, the average price of such Holdings Common Stock per share,
net of underwriter's discount and expenses, sold in such initial public
offering, and (d) if the Holdings Common Stock is not then listed or admitted to
trading on any national exchange or quoted in the over-the-counter market and
not then being offered in the initial public offering, the fair market value of
the Holdings Common Stock as determined in good faith by Holdings Board of
Directors; provided that Executive shall have the right, within 7 days of
receiving the Fair Market Value, to select a nationally recognized investment
bank reasonably acceptable to Holdings to determine the Fair Market Value. To
the extent that Executive elects to so retain such an investment bank, then Fair
Market Value shall mean the fair market value chosen by such investment bank,
provided that the cost and expense of such investment bank shall be borne by
Executive if the fair market value determined by such investment bank shall be
5% or more greater than or less than the fair market value
10
<PAGE>
previously determined in good faith by Holdings Board of Directors.
4. Grant of Holdings Restricted Common Stock. On February 5,
1998, the effective date of the merger of Acquisition Corp. with and into the
Company, Holdings issued to Executive 33,896 shares of Holdings Restricted
Common Stock which shall vest on the dates set forth below; provided that on any
such date Executive shall then be employed by the Company and to the extent
Executive's employment is terminated prior to any such date, the Holdings
Restricted Common Stock scheduled to vest on such date shall be forfeited.
Number of Shares
of Holdings Restricted
Common Stock
8,474. . . . . . . . .March 1, 1999
8,474. . . . . . . . .March 1, 2000
8,474. . . . . . . . .March 1, 2001
8,474. . . . . . . . .March 1, 2002
For purposes of Holding's repurchase right with respect to
such Holdings Restricted Common Stock, the original per share purchase price for
purposes of calculating Adjusted Purchase Price, as set forth in the Employee
Subscription Agreement dated as of January 20, 1998, shall be deemed to be $12
per share.
11
<PAGE>
5. Special Bonus.
(a) Payment of Fiscal Year 1997 Bonus. The Company shall pay
to the Executive a special bonus (the "Fiscal Year 1997 Bonus") (x) no later
than June 1, 1998 or (y) to the extent the Company meets its budget for the
first fiscal quarter of 1999, during the first fiscal quarter of 1999. The
Fiscal Year 1997 Bonus shall equal $168,000.
(b) Release. Upon receipt of the Fiscal Year 1997 Bonus and
Holdings Restricted Common Stock specified in Section 4 (whether or not any
Holdings Restricted Common Stock ultimately vests), Executive on behalf of
himself and his heirs, successors and assigns, hereby releases and forever
discharges the Company, its affiliates, and its former, present and future
shareholders, officers, directors, successors, assigns and predecessors (the
"Released Parties") of any and all claims, actions, causes of action, demands,
rights, damages, debts, compensation, costs or other expenses, including without
limitation attorneys' fees, of any nature whatsoever, known or unknown, which
Executive ever had or has against the Released Parties arising out of any
payments (including bonuses) for services rendered to the Released Parties for
all prior periods.
6. Termination of Employment.
(a) By Death. If Executive dies prior to the expiration of
the Employment Term, his base salary, bonus pursuant to Section 3(b) (if any)
and accrued but unused
12
<PAGE>
vacation will be prorated through the day of his death, and paid to his
beneficiaries or estate. Thereafter, Company's obligations hereunder shall
terminate.
(b) By Disability. If Executive becomes "Permanently
Disabled" (as defined below) prior to the expiration of the Employment Term,
Company shall be entitled to terminate his employment, subject to the
requirements of applicable law, and Executive shall be entitled to receive
disability benefits in accordance with any applicable disability policy
maintained by Company as of the date of such disability. In the event of such
termination, Executive's base salary and bonus pursuant to Section 3(b)(if any)
will be prorated through the date of termination and paid to him, and Executive
shall receive a cash lump sum payment for accrued but unused vacation for the
year of termination. Upon such termination, Company shall have no further
obligations to the Executive hereunder other than to provide the Executive with
the benefits as set forth in this subparagraph. For the purposes of this
subparagraph, Executive shall be deemed "Permanently Disabled" when, and only
when the Company determines, after consultation with Executive's physician, that
Executive suffers a physical or mental disability that prevents Executive from
performing the essential duties of his position with reasonable accommodations
as may be required by law (i) for a period of one hundred twenty (120)
consecutive days; or (ii) for an
13
<PAGE>
aggregate of one hundred fifty (150) business days in any twelve (12) month
period.
(c) By Company For Cause. If the Company terminates the
Executive for "Cause" (as defined below), Company shall thereafter have no
obligations to the Executive hereunder. "Cause" shall mean termination by
Company of Executive's employment because of (i) any act or omission that
constitutes a material breach by Executive of any of his obligations under this
Agreement, or under any other material agreement with, or material written
policy of Company, which act or omission is not cured within thirty days of the
Company providing Executive with notice of the act, omission or failure deemed
to constitute Cause; (ii) the failure or refusal by Executive to follow any
lawful reasonable written direction of the Board, which failure or refusal is
not cured within thirty days of the Company providing Executive with reasonably
detailed written notice of the failure or refusal deemed to constitute Cause;
(iii) the conviction by Executive of a felony, a crime involving moral turpitude
or the perpetration by Executive of a common law fraud; or (iv) any other
willful act or omission by Executive, which is or will be materially injurious
to the financial condition or business reputation of, or is otherwise materially
injurious to Company, which act or omission is not cured within thirty days of
the Company providing Executive with reasonably detailed written notice of the
act or omission deemed to
14
<PAGE>
constitute Cause. The parties hereto hereby agree that notwithstanding the
provisions in the Employee Subscription Agreement between Executive and
Holdings, dated as of January 20, 1998, the term "Cause" in such Employee
Subscription Agreement shall be interpreted to mean Cause as defined in this
Agreement.
(d) By Executive For Good Reason. Executive may terminate,
without liability, the Employment Term for "Good Reason" (as defined below) upon
thirty (30) business days' advance written notice to Company. Company shall pay
Executive the annual salary to which he is entitled pursuant to Section 3(a) for
1 year from the date of such termination (the "Section 6(d) Termination
Period"), less the amount of compensation, income or benefits earned or paid to
Executive as an employee or consultant from any entity other than the Company
during the Section 6(d) Termination Period; provided that in no event shall
Executive be entitled to receive less than $125,000. In addition, the Company
shall pay to Executive (x) all amounts due to Executive up to the date of
termination under Sections 3(c) and 3(f) of this Agreement and (y) Executive's
bonus pursuant to Section 3(b)(if any) prorated through the date of such
termination. The Company shall have no obligations to Executive other than those
set forth herein. Good Reason shall exist if: (i) there is an assignment to the
Executive of any duties materially inconsistent with or which constitute a
material adverse
15
<PAGE>
diminution in the Executive's position, duties, responsibilities, or status with
Company, or a material adverse diminution in the Employee's reporting
responsibilities, title, or offices; or (ii) there is a material breach by
Company of this Agreement or any other material agreement between the Company
and Executive. If Executive terminates his employment without Good Reason,
Company shall thereafter have no obligations to Executive hereunder, except as
otherwise required by law. Upon termination by Executive of his employment under
this Section 6(d), Executive shall in good faith seek to obtain alternative
employment in a comparable senior executive position and to otherwise mitigate
the amount payable to Executive pursuant to this Section 6(d).
(e) Termination By the Company Other Than By Reason of Death,
Disability or Cause. If the Company terminates Executive's employment for any
reason other than death, disability or Cause, Company shall pay to Executive the
compensation he is entitled to pursuant to Section 3(a) for 1 year from the date
of such termination (the "Section 6(e) Termination Period"), less the amount of
compensation, income or benefits earned or paid to Executive as an employee or
consultant from any entity other than the Company during the Section 6(e)
Termination Period; provided that in no event shall Executive be entitled to
receive less than $125,000. In addition, the Company shall pay to Executive
16
<PAGE>
all amounts due to Executive up to the date of termination under Sections 3(c)
and 3(f) of this Agreement. The payments and benefits provided for in this
Section 6(e) are contingent on Executive executing a general release on behalf
of the Company in the form attached hereto as Exhibit A. Upon termination of
Executive under this Section 6(e), Executive shall in good faith seek to obtain
alternative employment in a comparable senior executive position and to
otherwise mitigate the amount payable to Executive pursuant to this Section
6(e).
(f) Bonus Calculation. The pro rata bonus pursuant to Section
3(b) (if any) payable to Executive pursuant to Section 6(a), (b) or (d) shall be
calculated at the end of the fiscal year in question and be determined based on
the portion of such fiscal year Executive was employed by Company pursuant to
this Agreement and whether or not the Company obtained its EBITDA Target and
other operating targets for such fiscal year.
7. Proprietary Information.
(a) Defined. "Proprietary Information" is all proprietary,
secret or confidential information pertaining to the business of the Company.
(b) General Restrictions on Use. Executive agrees to hold all
Proprietary Information in strict confidence and trust for the sole benefit of
Company and not directly or indirectly, to disclose, use, copy, publish,
17
<PAGE>
summarize, or remove from Company's premises any Propriety Information except
(i) during the Employment Term to the extent necessary to carry out Executive's
responsibilities under this Agreement, and (ii) after termination of the
Employment Term as specifically authorized in writing by the Board.
(c) Interference with Business: Competitive Activities. In
consideration of his employment under this Agreement, Executive agrees that for
a period of one (1) year after termination of the Employment Term (or any
renewal term, if applicable), he shall not, for himself or for any third party,
directly or indirectly (i) divert or attempt to divert from Company any business
of any kind in which it is engaged, including, without limitation, the
solicitation or interference with any of its suppliers or customers; (ii)
employ, solicit for employment, or recommend for employment any person employed
by Company during the period of such person's employment and for a period of one
(1) year thereafter, or (iii) engage in any business activity that is or may be
competitive with the Company; provided that notwithstanding the foregoing, if
Executive is terminated pursuant to Section 6(d) or 6(e), Executive shall be
required to comply with the provisions of this Section 7(c) only for such time
as Executive is receiving amounts he is entitled to pursuant to Section 3(a) in
accordance with such Section 6(d) or 6(e), as the case may be. If the scope of
any of the
18
<PAGE>
restrictions set forth above is too broad to permit enforcement of such
restriction to its full extent, then such restriction shall be enforced to the
maximum extent permitted by law, and Executive hereby consents and agrees that
such scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
8. No Assignment.
(a) Neither this Agreement nor any right or interest
hereunder shall be assignable by Executive, his beneficiaries or legal
representatives, without Company's prior written consent; provided, however,
that nothing in this subsection 8(a) shall preclude Executive from designating a
beneficiary to receive upon his death any benefit payable hereunder, or the
executors, administrators or other legal representatives of Executive's estate
from assigning any rights hereunder to the person or persons entitled thereto.
(b) Except as otherwise required by law, without Company's
prior written consent, no right to receive payments under this Agreement shall
be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to exclusion, attachment, levy
or similar process or assignment by operation of law, and any attempt, voluntary
or involuntary, to effect any such action shall be null, void and of no effect.
19
<PAGE>
9. Registration Rights.
(a) "Piggy-Back" Registrations. If Holdings proposes to
register any shares of Holdings Common Stock under the Securities Act of 1933,
as amended (the "Securities Act"), in connection with any offering of its
securities, whether or not for its own account, Holdings shall furnish prompt
written notice to Executive of its intention to effect such registration and the
intended method of distribution in connection therewith. Upon the written
request of Executive made to Holdings within 30 days after the receipt of such
notice by Holdings, Holdings shall include in such registration in accordance
with the other provisions of this Section 9, the requested number of Executive's
Registrable Securities (a "Piggy-Back Registration").
(b) Underwriting Requirements. In connection with any
offering involving an underwriting of Holdings Common Stock, Holdings shall not
be required under Section 9(a) to include any of the securities of Executive in
the registration of the securities to be included in such underwriting, or in
such underwriting itself, unless Executive accepts the terms of the underwriting
as agreed upon between Holdings and the underwriters selected by it, and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by Holdings. If the total amount
of securities, including Registrable Securities, requested by Executive and
20
<PAGE>
any other stockholder of Holdings to be included in such offering, exceeds the
number of securities that the underwriters determine in their sole discretion is
compatible with the success of the offering, then Holdings shall be required to
include in the offering only such number of Registrable Securities as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering. In connection with any such offering, Holdings shall include in
such registration (to the extent of the number which Holdings is so advised can
be sold), first the securities, if any, being sold by Holdings, and second the
securities proposed to be registered by WPG Corporate Development Associates V,
L.P. or its affiliates, Jackson National Life Insurance Company or its
affiliates and any similar third party investors granted piggy-back registration
rights, and third, Executive and any other stockholders (including other
employees of the Company) of Holdings not included in the foregoing second
priority. The Registrable Securities so included shall be apportioned among
Executive and any other stockholders of Holdings pro rata in proportion to the
total number of Registrable Securities and shares of Holdings Common Stock owned
by them, respectively. Notwithstanding anything herein to the contrary, to the
extent the underwriters in any such Piggyback Registration determine that
Executive must sell lesser pro rata shares than any other stockholder or no
shares, Executive shall sell
21
<PAGE>
such lesser amount of shares or no shares as determined by such underwriters
and the fact that Executive was required to sell such lesser amount of shares
or no shares shall not affect the right of any other stockholders to include
Holdings Common Stock in such registration.
(c) Expenses of Registration. With respect to a Piggy-back
Registration, Holdings shall bear and pay all expenses incurred in connection
with any registration, filing or qualification of Registrable Securities with
respect to the registrations made pursuant to Section 9(a), including (without
limitation) all registration, filing, and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for Holdings, but excluding
fees and disbursements of counsel to holders of Registrable Securities and
underwriting discounts and commissions relating to Registrable Securities.
As used in Section 9, the following shall have the following
meaning: "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement.
"Registrable Securities" shall mean any and all shares of
Holdings Common Stock whenever acquired. As to any particular Registrable
Securities, such securities shall
22
<PAGE>
cease to be Registrable Securities when (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of by Executive in
accordance with such registration statement or (ii) such securities may be sold
pursuant to Rule 144 of the Securities Act.
10. Notices. All notices, requests, claims, demands and other
communications under this agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such address for a
party as shall be specified by like notice): (i) if to Company, to the addresses
therefor specified in Section 10.02 of the Merger Agreement, (ii) if to
Executive, 1 Eisenhaure Lane, North Reading, MA 01864.
11. Entire Agreement. The terms of this Agreement are
intended by the parties to be the final expression of their agreement with
respect to the employment of Executive by Company and may not be contradicted by
evidence of any prior or contemporaneous agreement. The parties further intend
that this Agreement shall constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding involving this Agreement.
23
<PAGE>
12. Amendments; Waivers. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, signed by the
Executive and by a duly authorized representative of Company other than
Executive. By an instrument in writing similarly executed, either party may
waive compliance by the other party with any provision of this Agreement that
such other party was or is obligated to comply with or perform; provided,
however, that such waiver shall not operate as a waiver of, or estoppel with
respect to, any other or subsequent failure. No failure to exercise and no delay
in exercising any right, remedy, or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or in equity.
13. Confidentiality. Executive agrees that the terms and
conditions of this Agreement are confidential and shall not be disclosed by
Executive to any third parties, other than Executive's lawyers and other
professional advisors, unless such disclosure is required by law.
14. Governing Law. The validity, interpretation,
enforceability, and performance of this Agreement shall be governed by and
construed in accordance with the law of the State of New York.
24
<PAGE>
15. Employee Acknowledgment. Executive acknowledges (i) that
he has consulted with or has had the opportunity to consult with independent
counsel of his own choice concerning this Agreement and has been advised to do
so by Company, and (ii) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based on his own
judgment.
16. Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the Corporation and its respective successors and
assigns, but the rights and obligation of Executive are personal and may not be
assigned or delegated without the Company's prior written consent.
17. Arbitration. Any dispute between the parties arising
under this Agreement or Executive's employment with the Company (or the
termination thereof) shall not be decided in court, but instead shall be
submitted to final, binding arbitration before the American Arbitration
Association in New York City.
25
<PAGE>
The parties have duly executed this Agreement as of the date
first written above.
ATC GROUP SERVICES INC.
By: /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: Chief Executive Officer
ACQUISITION HOLDINGS, INC.
By: /s/ Wesley W. Lang, Jr.
-----------------------------
Name: Wesley W. Lang, Jr.
Title: President
EXECUTIVE
/s/ Christopher P. Vincze
----------------------------
Christopher P. Vincze
26
<PAGE>
Exhibit A
GENERAL RELEASE
In consideration of the payment of _____________________
received from ATC Group Services Inc. ("Employer"), _____________________
("Employee") and except for all accrued but unpaid compensation, benefits and
rights of Employee provided under Section 6(e) of that certain Employment
Agreement between Employee, Employer and Acquisition Holdings, Inc., dated as of
February 16, 1998 and all amendments and extensions thereto which the parties
may adopt, Employee, on behalf of himself and his heirs, executors,
administrators, successors and assigns, hereby releases, relieves and forever
discharges Employer, its former and present subsidiaries, affiliates, branches,
successors and assigns, and their former and present officers, directors,
trustees, employees, agents and attorneys, (collectively, the "Released
Parties"), from any and all claims, actions, causes of action, demands, rights,
damages, debts, compensation, costs or other expenses, including without
limitation attorneys' fees, of any nature whatsoever, whether known or unknown,
which Employee ever had, now has, or which he, his heirs, executors,
administrators, successors and assigns hereinafter can, shall or may have
against the Released Parties arising out of any matter, cause, acts, conduct,
claim or event, including without limitation all matters relating to Employee's
employment with the Employer, including without limitation
<PAGE>
contract claims, tort claims, claims for compensation or benefits, personal
injury claims and claims for attorneys' fees, and further includes all claims
arising under the Age Discrimination in Employment of 1967, as amended, 29
U.S.C. ss. 621 et seq., National Labor Relations Act, as amended, 29 U.S.C. ss.
151 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
ss. 2000e et seq., the Americans with Disabilities Act of 1990, 42 U.S.C. ss.
12191 et seq., the Civil Rights Act of 1866, 42 U.S.C. ss. 1981, the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. ss. 1001 et seq.,
or any other federal, state and local law or principal of contract law or common
law; provided, however, that this General Release shall not operate to prohibit
Employee from commencing an action to enforce the terms of his Employment
Agreement.
Employee represents that he has not and will not file any
complaints, grievances, or charges relating to his employment against any of the
Released Parties.
Employee warrants that he is signing this General Release
voluntarily, and that no promises or inducements for this General Release have
been made, and he enters into this General Release without reliance upon any
statement or representation by any of the Released Parties or any other person,
concerning any fact material to this General Release. Employee acknowledges that
he is not otherwise entitled to receive the consideration set forth above.
2
<PAGE>
The Employer hereby advises the Employee to consult with
legal counsel concerning this General Release. The Employee acknowledges that he
has had at least twenty-one days in which to consider this General Release and
has had the opportunity to obtain legal counsel concerning this General Release.
Employee represents and warrants that he fully understands the terms of this
General Release, and that he knowingly and voluntarily, of his own free will
without any duress, being fully informed and after due deliberation, accepts its
terms and signs the same as his own free act for the purpose of making full
withdrawal, compromise and settlement of all claims.
This General Release contains the entire agreement among
the parties hereto and the terms of this General Release are contractual and not
a mere recital.
The Employee understands that he has seven (7) days to
revoke this General Release after signing. Employee agrees that in the event he
elects to revoke this General Release, he will provide the Employer with a
written revocation by the close of business on the seventh day following his
execution of this General Release.
PLEASE READ CAREFULLY BEFORE SIGNING. THIS DOCUMENT
INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, EXCEPT AS SPECIFICALLY
PROVIDED HEREIN.
---------------------
EMPLOYEE
3
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On _________ , 1997 before me personally came _________ ,
to me known, and known to me to be the individual described herein, and who
executed the foregoing General Release, and duly acknowledged to me that he
executed the same of his own free will without any duress.
-----------------
NOTARY PUBLIC
<PAGE>
EXHIBIT 10.3
CREDIT AGREEMENT
among
ACQUISITION HOLDINGS, INC.,
ACQUISITION CORP.,
VARIOUS BANKS
and
BANKERS TRUST COMPANY,
as AGENT
----------------------------------
Dated as of January 29, 1998
----------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit..................................... 1
1.01 The Commitments............................................. 1
1.02 Minimum Amount of Each Borrowing............................ 4
1.03 Notice of Borrowing......................................... 4
1.04 Disbursement of Funds....................................... 5
1.05 Notes....................................................... 6
1.06 Conversions................................................. 7
1.07 Pro Rata Borrowings......................................... 8
1.08 Interest.................................................... 8
1.09 Interest Periods............................................ 9
1.10 Increased Costs, Illegality, etc............................ 11
1.11 Compensation................................................ 13
1.12 Change of Lending Office.................................... 13
1.13 Replacement of Banks........................................ 14
SECTION 2. Letters of Credit.............................................. 15
2.01 Letters of Credit........................................... 15
2.02 Maximum Letter of Credit Outstandings; Final Maturities..... 16
2.03 Letter of Credit Requests; Minimum Stated Amount............ 16
2.04 Letter of Credit Participations............................. 17
2.05 Agreement to Repay Letter of Credit Drawings................ 19
2.06 Increased Costs............................................. 20
SECTION 3. Commitment Commission; Fees; Reductions of Commitment.......... 21
3.01 Fees........................................................ 21
3.02 Voluntary Termination of Unutilized Revolving Loan
Commitments.............................................. 22
3.03 Mandatory Reduction of Commitments.......................... 23
SECTION 4. Prepayments; Payments; Taxes................................... 24
4.01 Voluntary Prepayments....................................... 24
4.02 Mandatory Repayments and Commitment Reductions.............. 25
(i)
<PAGE>
Page
4.03 Method and Place of Payment................................. 29
4.04 Net Payments................................................ 29
SECTION 5. Conditions Precedent to Credit Events on the Initial
Borrowing Date................................................. 31
5.01 Execution of Agreement; Notes............................... 31
5.02 Officer's Certificate....................................... 31
5.03 Opinions of Counsel......................................... 32
5.04 Corporate Documents; Proceedings; etc....................... 32
5.05 Plans; Shareholders' Agreements; Management Agreements;
Employment Agreements; Non-Compete Agreements;
Collective Bargaining Agreements; Tax Sharing
Agreements; Existing Indebtedness Agreements.............. 32
5.06 Financings; etc............................................. 34
5.07 Tender Offer; Merger; etc................................... 34
5.08 Refinancing................................................. 35
5.09 ATEC Subordination Agreement................................ 36
5.10 Adverse Change, etc......................................... 36
5.11 Litigation.................................................. 37
5.12 Pledge Agreement............................................ 37
5.13 Security Agreement.......................................... 37
5.14 Subsidiaries Guaranty....................................... 38
5.15 Acknowledgment and Joinder Agreement........................ 38
5.16 Financial Statements; Pro Forma Financial Statements,
Projections.............................................. 38
5.17 Solvency Opinion; Insurance Certificates.................... 39
5.18 Fees, etc................................................... 39
SECTION 6. Conditions Precedent to All Credit Events...................... 39
6.01 No Default; Representations and Warranties.................. 39
6.02 Notice of Borrowing; Letter of Credit Request............... 40
SECTION 7. Representations, Warranties and Agreements..................... 40
7.01 Corporate Status............................................ 40
7.02 Corporate and Other Power and Authority..................... 41
7.03 No Violation................................................ 41
7.04 Approvals................................................... 41
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc............................ 42
7.06 Litigation.................................................. 43
7.07 True and Complete Disclosure................................ 44
(ii)
<PAGE>
Page
7.08 Use of Proceeds; Margin Regulations......................... 44
7.09 Tax Returns and Payments.................................... 44
7.10 Compliance with ERISA....................................... 45
7.11 The Security Documents...................................... 46
7.12 Representations and Warranties in the Documents............. 47
7.13 Properties.................................................. 47
7.14 Capitalization.............................................. 47
7.15 Subsidiaries................................................ 48
7.16 Compliance with Statutes, etc............................... 48
7.17 Investment Company Act...................................... 49
7.18 Public Utility Holding Company Act.......................... 49
7.19 Environmental Matters....................................... 49
7.20 Labor Relations............................................. 50
7.21 Patents, Licenses, Franchises and Formulas.................. 50
7.22 Indebtedness................................................ 50
7.23 Tender Offer................................................ 51
7.24 Merger...................................................... 51
7.25 Issuance of the Senior Subordinated Notes................... 51
7.26 Special Purpose Corporations................................ 52
7.27 Insurance................................................... 52
7.28 Senior Subordinated Notes................................... 52
SECTION 8. Affirmative Covenants.......................................... 52
8.01 Information Covenants....................................... 53
(a) Monthly Reports..................................... 53
(b) Quarterly Financial Statements...................... 53
(c) Annual Financial Statements......................... 53
(d) Management Letters.................................. 54
(e) Budgets and Projections............................. 54
(f) Officer's Certificates.............................. 54
(g) Notice of Default or Litigation..................... 54
(h) Other Reports and Filings........................... 54
(i) Environmental Matters............................... 55
(j) Other Information................................... 56
8.02 Books, Records, Inspections and Annual Meetings............. 56
8.03 Maintenance of Property; Insurance.......................... 56
8.04 Corporate Franchises........................................ 57
8.05 Compliance with Statutes, etc............................... 57
8.06 Compliance with Environmental Laws.......................... 58
8.07 ERISA....................................................... 59
8.08 End of Fiscal Years; Fiscal Quarters........................ 60
(iii)
<PAGE>
Page
8.09 Performance of Obligations.................................. 60
8.10 Payment of Taxes............................................ 60
8.11 Additional Security; Further Assurances..................... 60
8.12 Contributions............................................... 61
SECTION 9. Negative Covenants............................................. 62
9.01 Liens....................................................... 62
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc...... 65
9.03 Dividends................................................... 68
9.04 Indebtedness................................................ 69
9.05 Advances, Investments and Loans............................. 71
9.06 Transactions with Affiliates................................ 72
9.07 Capital Expenditures........................................ 73
9.08 Consolidated Interest Coverage Ratio........................ 74
9.09 Maximum Leverage Ratio...................................... 75
9.10 Limitation on Payments of Certain Indebtedness,;
Modifications of Certain Indebtedness; Modifications
of Certificate of Incorporation, By-Laws and Certain
Other Agreements; etc.................................... 76
9.11 Limitation on Certain Restrictions on Subsidiaries.......... 77
9.12 Limitation on Issuance of Capital Stock..................... 77
9.13 Business.................................................... 77
9.14 Limitation on Creation of Subsidiaries...................... 78
9.15 Senior Subordinated Notes................................... 79
SECTION 10. Events of Default............................................. 79
10.01 Payments................................................... 79
10.02 Representations, etc....................................... 79
10.03 Covenants.................................................. 79
10.04 Default Under Other Agreements............................. 79
10.05 Bankruptcy, etc............................................ 80
10.06 ERISA...................................................... 80
10.07 Security Documents......................................... 81
10.08 Guaranties................................................. 81
10.09 Judgments.................................................. 81
10.10 Change of Control.......................................... 81
10.11 ATEC Subordination Agreement............................... 81
SECTION 11. Definitions and Accounting Terms.............................. 82
11.01 Defined Terms.............................................. 82
(iv)
<PAGE>
Page
SECTION 12. The Agent.................................................... 109
12.01 Appointment............................................... 109
12.02 Nature of Duties.......................................... 109
12.03 Lack of Reliance on the Agent............................. 110
12.04 Certain Rights of the Agent............................... 110
12.05 Reliance.................................................. 110
12.06 Indemnification........................................... 110
12.07 The Agent in its Individual Capacity...................... 111
12.08 Holders................................................... 111
12.09 Resignation by the Agent.................................. 111
SECTION 13. Miscellaneous................................................ 112
13.01 Payment of Expenses, etc.................................. 112
13.02 Right of Setoff........................................... 113
13.03 Notices................................................... 114
13.04 Benefit of Agreement; Assignments; Participations......... 114
13.05 No Waiver; Remedies Cumulative............................ 116
13.06 Payments Pro Rata......................................... 117
13.07 Calculations; Computations; Accounting Terms.............. 118
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL............................ 118
13.09 Counterparts.............................................. 119
13.10 Effectiveness............................................. 119
13.11 Headings Descriptive...................................... 120
13.12 Amendment or Waiver; etc.................................. 120
13.13 Survival.................................................. 121
13.14 Domicile of Loans......................................... 121
13.15 Register.................................................. 122
13.16 Confidentiality........................................... 122
SECTION 14. Parent Guaranty.............................................. 123
14.01 Guaranty.................................................. 123
14.02 Bankruptcy................................................ 124
14.03 Nature of Liability....................................... 124
14.04 Independent Obligation.................................... 124
14.05 Authorization............................................. 124
14.06 Reliance.................................................. 126
14.07 Subordination............................................. 126
14.08 Waiver.................................................... 126
14.09 Nature of Liability....................................... 128
(v)
<PAGE>
SCHEDULE I Commitments
SCHEDULE II Bank Addresses
SCHEDULE III Real Properties
SCHEDULE IV Plans
SCHEDULE V Subsidiaries
SCHEDULE VI Existing Indebtedness
SCHEDULE VII Insurance
SCHEDULE VIII Existing Liens
SCHEDULE IX Existing Investments
SCHEDULE X Indebtedness to be Refinanced
SCHEDULE XI Litigation
SCHEDULE XII Certain Contingent Liabilities
SCHEDULE XIII Certain Matters
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B-1 Form of Term Note
EXHIBIT B-2 Form of Revolving Note
EXHIBIT B-3 Form of Swingline Note
EXHIBIT C Form of Letter of Credit Request
EXHIBIT D Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1 Form of Opinion of Chadbourne & Parke LLP,
Special Counsel to the Credit Parties
EXHIBIT E-2 Form of Opinion of John J. Smith, Esq., General Counsel
to the Borrower
EXHIBIT F Form of Officers' Certificate
EXHIBIT G Form of Pledge Agreement
EXHIBIT H Form of Security Agreement
EXHIBIT I Form of Subsidiaries Guaranty
EXHIBIT J Form of Acknowledgment and Joinder Agreement
EXHIBIT K Form of Assignment and Assumption Agreement
EXHIBIT L Form of Intercompany Note
(vi)
<PAGE>
CREDIT AGREEMENT, dated as of January 29, 1998, among
ACQUISITION HOLDINGS, INC., a Delaware corporation ("Holdings"), ACQUISITION
CORP., a Delaware corporation ("Acquisition Corp."), the Banks party hereto from
time to time, and BANKERS TRUST COMPANY, as Agent (all capitalized terms used
herein and defined in Section 11 are used herein as therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set
forth herein, the Banks are willing to make available to the Borrower the
respective credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit
1.01 The Commitments. (a) Subject to and upon the terms and conditions set
forth herein, each Bank with a Term Loan Commitment severally agrees to make a
term loan or term loans (each a "Term Loan" and, collectively, the "Term Loans")
to the Borrower, which Term Loans (i) only may be incurred by the Borrower on
the Initial Borrowing Date, (ii) shall, at the option of the Borrower, be
incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar
Loans, provided that (A) except as otherwise specifically provided in Section
1.10(b), all Term Loans comprising the same Borrowing shall at all times be of
the same Type and (B) unless the Agent has determined (and has notified the
Borrower) that the Syndication Date has occurred (at which time this clause (B)
shall no longer be applicable), no more than three Borrowings of Term Loans to
be maintained as Eurodollar Loans may be incurred prior to the 90th day after
the Effective Date (each of which Borrowings of Eurodollar Loans may only have
an Interest Period of one month, and the first of which Borrowings may only be
made on the Initial Borrowing Date or on or prior to the sixth Business Day
after the Initial Borrowing Date, the second of which Borrowings may only be
made on the last day of the Interest Period of the first such Borrowing and the
third of which Borrowings may only be made on the last day of the Interest
Period of the second such Borrowing) and (iii) shall be made by each such Bank
in that aggregate principal amount which does not exceed the Term Loan
Commitment of such Bank on the Initial Borrowing Date (before giving effect to
the termination thereof on such date pursuant to Section 3.03(b)(ii)).
Once repaid, Term Loans incurred hereunder may not be reborrowed.
<PAGE>
(b) (A) Subject to and upon the terms and conditions set forth
herein, each Bank with a Revolving Loan Commitment severally agrees to make, at
any time and from time to time on and after the Initial Borrowing Date and prior
to the Revolving Loan Maturity Date, a revolving loan or revolving loans (each a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower,
which Revolving Loans (i) shall, at the option of the Borrower, be incurred and
maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans,
provided that (A) except as otherwise specifically provided in Section 1.10(b),
all Revolving Loans comprising the same Borrowing shall at all times be of the
same Type and (B) unless the Agent has determined (and has notified the
Borrower) that the Syndication Date has occurred (at which time this clause (B)
shall no longer be applicable), no more than three Borrowings of Revolving Loans
to be maintained as Eurodollar Loans may be incurred prior to the 90th day after
the Effective Date (each of which Borrowings of Eurodollar Loans may only have
an Interest Period of one month, and the first of which Borrowings may only be
made on the same day as the first day of the first Interest Period of the Term
Loans that are maintained as Eurodollar Loans, the second of which Borrowings
may only be made on the last day of the Interest Period of the first such
Borrowing and the third of which Borrowings may only be made on the last day of
the Interest Period of the second such Borrowing), (ii) may be repaid and
reborrowed in accordance with the provisions hereof, (iii) shall not exceed for
any such Bank at any time outstanding that aggregate principal amount which,
when added to the product of (x) such Bank's RL Percentage and (y) the sum of
(I) the aggregate amount of all Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) at such time
and (II) the aggregate principal amount of all Swingline Loans (exclusive of
Swingline Loans which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) then
outstanding, equals the Revolving Loan Commitment of such Bank at such time and
(iv) shall not exceed for all such Banks at any time outstanding that aggregate
principal amount which, when added to the sum of (I) the aggregate amount of all
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time and (II) the aggregate principal
amount of all Swingline Loans (exclusive of Swingline Loans which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) then outstanding, equals the Total Revolving Loan
Commitment at such time. Notwithstanding anything to the contrary contained in
this Agreement, no more than $9,000,000 of Revolving Loans in the aggregate may
be incurred on the Initial Borrowing Date.
(B) Revolving Loans may not be incurred as Acquisition Loans
if after giving effect thereto the aggregate outstanding principal amount of
Acquisition Loans would exceed the Acquisition Sub-Limit then in effect. Except
to the extent made pursuant to a Mandatory Borrowing, Revolving Loans may not be
incurred as Working Capital Loans if after giving effect thereto the aggregate
outstanding principal amount of Working Capital Loans
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<PAGE>
would exceed the Working Capital Sub-Limit then in effect.
(c) Subject to and upon the terms and conditions set forth
herein, the Swingline Bank agrees to make, at any time and from time to time
after the Initial Borrowing Date and prior to the Swingline Expiry Date, a
revolving loan or revolving loans (each a "Swingline Loan" and, collectively,
the "Swingline Loans") to the Borrower, which Swingline Loans (i) shall be made
and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in
accordance with the provisions hereof, (iii) shall not exceed in aggregate
principal amount at any time outstanding, when combined with the aggregate
principal amount of all Revolving Loans then outstanding and the aggregate
amount of all Letter of Credit Outstandings at such time, an amount equal to the
Total Revolving Loan Commitment at such time, and (iv) shall not exceed in
aggregate principal amount at any time outstanding the Maximum Swingline Amount.
Notwithstanding anything to the contrary contained in this Section 1.01(c), (x)
the Swingline Bank shall not be obligated to make any Swingline Loans at a time
when a Bank Default exists unless the Swingline Bank has entered into
arrangements satisfactory to it and the Borrower to eliminate the Swingline
Bank's risk with respect to the Defaulting Bank's or Banks' participation in
such Swingline Loans, including by cash collateralizing such Defaulting Bank's
or Banks' RL Percentage of the outstanding Swingline Loans and (y) the Swingline
Bank shall not make any Swingline Loan after it has received written notice from
the Borrower, any other Credit Party or the Required Banks stating that a
Default or an Event of Default exists and is continuing until such time as the
Swingline Bank shall have received written notice (I) of rescission of all such
notices from the party or parties originally delivering such notice or (II) of
the waiver of such Default or Event of Default by the Required Banks.
(d) On any Business Day, the Swingline Bank may, in its sole
discretion, give notice to the Banks with Revolving Loan Commitments that the
Swingline Bank's outstanding Swingline Loans shall be funded with one or more
Borrowings of Revolving Loans (provided that such notice shall be deemed to have
been automatically given upon the occurrence of a Default or an Event of Default
under Section 10.05 or upon the exercise of any of the remedies provided in the
last paragraph of Section 10), in which case one or more Borrowings of Revolving
Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all
Banks with a Revolving Loan Commitment (without giving effect to any termination
thereto pursuant to the last paragraph of Section 10) pro rata based on each
such Bank's RL Percentage (determined before giving effect to any termination of
the Revolving Loan Commitments pursuant to the last paragraph of Section 10) and
the proceeds thereof shall be applied directly by the Swingline Bank to repay
the Swingline Bank for such outstanding Swingline Loans. Each such Bank hereby
irrevocably agrees to make Revolving Loans upon one Business Day's notice
pursuant to each Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the date specified in writing by
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<PAGE>
the Swingline Bank notwithstanding (i) the amount of the Mandatory Borrowing
may not comply with the Minimum Borrowing Amount otherwise required hereunder,
(ii) whether any conditions specified in Section 6 are then satisfied, (iii)
whether a Default or an Event of Default then exists, (iv) the date of such
Mandatory Borrowing and (v) the amount of the Total Revolving Loan Commitment
at such time. In the event that any Mandatory Borrowing cannot for any reason
be made on the date otherwise required above (including, without limitation, as
a result of the commencement of a proceeding under the Bankruptcy Code with
respect to the Borrower), then each such Bank hereby agrees that it shall
forthwith purchase (as of the date the Mandatory Borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrower on or after
such date and prior to such purchase) from the Swingline Bank such
participations in the outstanding Swingline Loans as shall be necessary to
cause such Banks to share in such Swingline Loans ratably based upon their
respective RL Percentages (determined before giving effect to any termination
of the Revolving Loan Commitments pursuant to the last paragraph of Section
10), provided that (x) all interest payable on the Swingline Loans shall be for
the account of the Swingline Bank until the date as of which the respective
participation is required to be purchased and, to the extent attributable to
the purchased participation, shall be payable to the participant from and after
such date and (y) at the time any purchase of participations pursuant to this
sentence is actually made, the purchasing Bank shall be required to pay the
Swingline Bank interest on the principal amount of participation purchased for
each day from and including the day upon which the Mandatory Borrowing would
otherwise have occurred to but excluding the date of payment for such
participation, at the overnight Federal Funds Rate for the first three days and
at the rate otherwise applicable to Revolving Loans maintained as Base Rate
Loans hereunder for each day thereafter.
1.02 Minimum Amount of Each Borrowing. The aggregate principal amount of
each Borrowing of Loans under a respective Tranche shall not be less than the
Minimum Borrowing Amount for such Tranche. More than one Borrowing may occur on
the same date, but at no time shall there be outstanding more than eight
Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to incur (x)
Eurodollar Loans hereunder, the Borrower shall give the Agent at the Notice
Office at least three Business Days' prior notice of each Eurodollar Loan to be
incurred hereunder and (y) Base Rate Loans hereunder (excluding Swingline Loans
and Revolving Loans made pursuant to a Mandatory Borrowing), the Borrower shall
give the Agent at the Notice Office at least one Business Day's prior notice of
each Base Rate Loan to be incurred hereunder, provided that (in each case) any
such notice shall be deemed to have been given on a certain day only if given
before 11:00 A.M. (New York time) on such day. Each such notice (each a "Notice
of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be
irrevocable and shall be given by the Borrower in writing, or by telephone
promptly confirmed in writing, in the form of Exhibit A, appropriately completed
-4-
<PAGE>
to specify (i) the aggregate principal amount of the Loans to be incurred
pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a
Business Day), (iii) whether the Loans being incurred pursuant to such Borrowing
shall constitute Term Loans or Revolving Loans, (iv) whether the Loans being
incurred pursuant to such Borrowing are to be initially maintained as Base Rate
Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar
Loans, the initial Interest Period to be applicable thereto and (v) the
respective portion of any Borrowing of Revolving Loans to constitute Acquisition
Loans and/or Working Capital Loans, as the case may be. The Agent shall promptly
give each Bank which is required to make Loans of the Tranche specified in the
respective Notice of Borrowing, notice of such proposed Borrowing, of such
Bank's proportionate share thereof and of the other matters required by the
immediately preceding sentence to be specified in the Notice of Borrowing.
(b)(i) Whenever the Borrower desires to incur Swingline Loans
hereunder, the Borrower shall give the Swingline Bank no later than 1:00 P.M.
(New York time) on the date that a Swingline Loan is to be incurred, written
notice or telephonic notice promptly confirmed in writing of each Swingline Loan
to be incurred hereunder. Each such notice shall be irrevocable and specify in
each case (A) the date of Borrowing (which shall be a Business Day) and (B) the
aggregate principal amount of the Swingline Loans to be incurred pursuant to
such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice
specified in Section 1.01(d), with the Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of the Mandatory Borrowings as
set forth in Section 1.01(d).
(c) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice of any Borrowing or prepayment of
Loans, the Agent or the Swingline Bank, as the case may be, may act without
liability upon the basis of telephonic notice of such Borrowing or prepayment,
as the case may be, believed by the Agent or the Swingline Bank, as the case may
be, in good faith to be from the Chairman of the Board, the President, the Chief
Financial Officer, the Treasurer or any Assistant Treasurer of the Borrower, or
from any other authorized officer of the Borrower designated in writing by the
Borrower to the Agent as being authorized to give such notices, prior to receipt
of written confirmation. In each such case, the Borrower hereby waives the right
to dispute the Agent's or Swingline Bank's record of the terms of such
telephonic notice of such Borrowing or prepayment of Loans, as the case may be,
absent manifest error.
1.04 Disbursement of Funds. No later than 12:00 Noon (New York time) on the
date specified in each Notice of Borrowing (or (x) in the case of Swingline
Loans, no later than 3:00 P.M. (New York time) on the date specified pursuant to
Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, no later than
1:00 P.M. (New York time) on the date specified in Section 1.01(d)), each Bank
with a Commitment of the
-5-
<PAGE>
respective Tranche will make available its pro rata portion (determined in
accordance with Section 1.07) of each such Borrowing requested to be made on
such date (or in the case of Swingline Loans, the Swingline Bank will make
available the full amount thereof). All such amounts will be made available in
Dollars and in immediately available funds at the Payment Office, and, except
for Revolving Loans made pursuant to a Mandatory Borrowing, the Agent will
promptly thereafter make available to the Borrower at the Payment Office the
aggregate of the amounts so made available by the Banks. Unless the Agent shall
have been notified by any Bank prior to the date of Borrowing that such Bank
does not intend to make available to the Agent such Bank's portion of any
Borrowing to be made on such date, the Agent may assume that such Bank has made
such amount available to the Agent on such date of Borrowing and the Agent may
(but shall not be obligated to), in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such corresponding amount
is not in fact made available to the Agent by such Bank, the Agent shall be
entitled to recover such corresponding amount on demand from such Bank. If such
Bank does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower and the Borrower shall
immediately pay such corresponding amount to the Agent. The Agent also shall be
entitled to recover on demand from such Bank or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Agent to the Borrower until
the date such corresponding amount is recovered by the Agent, at a rate per
annum equal to (i) if recovered from such Bank, at the overnight Federal Funds
Rate and (ii) if recovered from the Borrower, the rate of interest applicable to
the respective Borrowing, as determined pursuant to Section 1.08. Nothing in
this Section 1.04 shall be deemed to relieve any Bank from its obligation to
make Loans hereunder or to prejudice any rights which the Borrower may have
against any Bank as a result of any failure by such Bank to make Loans
hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of, and
interest on, the Loans made by each Bank shall be evidenced (i) if Term Loans,
by a promissory note duly executed and delivered by the Borrower substantially
in the form of Exhibit B-1, with blanks appropriately completed in conformity
herewith (each a "Term Note" and, collectively, the "Term Notes"), (ii) if
Revolving Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of Exhibit B-2, with blanks appropriately
completed in conformity herewith (each a "Revolving Note" and, collectively, the
"Revolving Notes") and (iii) if Swingline Loans, by a promissory note duly
executed and delivered by the Borrower substantially in the form Exhibit B-3,
with blanks appropriately completed in conformity herewith (the "Swingline
Note").
(b) The Term Note issued to each Bank that has a Term Loan
Commitment or outstanding Term Loans shall (i) be executed by the Borrower, (ii)
be payable to such Bank or its registered assigns and be dated the Initial
Borrowing Date (or, if issued after the Initial Borrowing Date, be dated the
date of the issuance thereof), (iii) be in a stated
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<PAGE>
principal amount equal to the Term Loans made by such Bank on the Initial
Borrowing Date (or, if issued after the Initial Borrowing Date, be in a stated
principal amount equal to the outstanding principal amount of Term Loans of such
Bank at such time) and be payable in the outstanding principal amount of Term
Loans evidenced thereby, (iv) mature on the Term Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby,
(vi) be subject to voluntary prepayment as provided in Section 4.01, and
mandatory repayment as provided in Section 4.02, and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(c) The Revolving Note issued to each Bank that has a
Revolving Loan Commitment or outstanding Revolving Loans shall (i) be executed
by the Borrower, (ii) be payable to such Bank or its registered assigns and be
dated the Initial Borrowing Date (or, if issued after the Initial Borrowing
Date, be dated the date of the issuance thereof), (iii) be in a stated principal
amount equal to the Revolving Loan Commitment of such Bank (or, if issued after
the termination thereof, be in a stated principal amount equal to the
outstanding Revolving Loans of such Bank at such time) and be payable in the
outstanding principal amount of the Revolving Loans evidenced thereby, (iv)
mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01, and mandatory repayment as
provided in Section 4.02, and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
(d) The Swingline Note issued to the Swingline Bank shall (i)
be executed by the Borrower, (ii) be payable to the Swingline Bank or its
registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated
principal amount equal to the Maximum Swingline Amount and be payable in the
outstanding principal amount of the Swingline Loans evidenced thereby from time
to time, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans
evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(e) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in such notation shall not affect the Borrower's obligations in
respect of such Loans.
1.06 Conversions. The Borrower shall have the option to convert, on any
Business Day occurring after the Initial Borrowing Date, all or a portion equal
to at least
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<PAGE>
the Minimum Borrowing Amount of the outstanding principal amount of
Loans (other than Swingline Loans which may not be converted pursuant to this
Section 1.06) made pursuant to one or more Borrowings (so long as of the same
Tranche) of one or more Types of Loans into a Borrowing (of the same Tranche) of
another Type of Loan, provided that, (i) except as otherwise provided in Section
1.10(b), Eurodollar Loans may be converted into Base Rate Loans only on the last
day of an Interest Period applicable to the Loans being converted and no such
partial conversion of Eurodollar Loans shall reduce the outstanding principal
amount of such Eurodollar Loans made pursuant to a single Borrowing to less than
the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may only
be converted into Eurodollar Loans if no Default under Section 10.01 or 10.05 is
in existence or no Event of Default is in existence (in either case) on the date
of the conversion, (iii) unless the Agent has determined (and has notified the
Borrower) that the Syndication Date has occurred (at which time this clause
(iii) shall no longer be applicable), prior to the 90th day after the Effective
Date, conversions of Base Rate Loans into Eurodollar Loans may only be made if
any such conversion is effective on the first day of the first, second or third
Interest Period referred to in clause (B) of each of Sections 1.01(a)(ii) and
1.01(b)(i) and so long as such conversion does not result in a greater number of
Borrowings of Eurodollar Loans prior to the 90th day after the Effective Date as
are permitted under such Sections and (iv) no conversion pursuant to this
Section 1.06 shall result in a greater number of Borrowings of Eurodollar Loans
than is permitted under Section 1.02. Each such conversion shall be effected by
the Borrower by giving the Agent at the Notice Office prior to 11:00 A.M. (New
York time) at least three Business Days' prior notice (each a "Notice of
Conversion") specifying the Loans to be so converted, the Borrowing or
Borrowings pursuant to which such Loans were made and, if to be converted into
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Agent shall give each Bank prompt notice of any such proposed conversion
affecting any of its Loans. Upon any such conversion the proceeds thereof will
be deemed to be applied directly on the day of such conversion to prepay the
outstanding principal amount of the Loans being converted.
1.07 Pro Rata Borrowings. All Borrowings of Term Loans and Revolving Loans
under this Agreement shall be incurred from the Banks pro rata on the basis of
their Term Loan Commitments or Revolving Loan Commitments, as the case may be.
It is understood that no Bank shall be responsible for any default by any other
Bank of its obligation to make Loans hereunder and that each Bank shall be
obligated to make the Loans provided to be made by it hereunder, regardless of
the failure of any other Bank to make its Loans hereunder.
1.08 Interest. (a) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Base Rate Loan from the date of Borrowing
thereof until the earlier of (i) the maturity thereof (whether by acceleration
or otherwise) and (ii) the conversion of such Base Rate Loan to a Eurodollar
Loan pursuant to Section 1.06, at a rate
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per annum which shall be equal to the sum of the Applicable Base Rate Margin
plus the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan from the date of Borrowing
thereof until the earlier of (i) the maturity thereof (whether by acceleration
or otherwise) and (ii) the conversion of such Eurodollar Loan to a Base Rate
Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum
which shall, during each Interest Period applicable thereto, be equal to the sum
of the Applicable Eurodollar Rate Margin plus the Eurodollar Rate for such
Interest Period.
(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall, in each case, bear interest at a rate per annum equal to the
greater of (x) the rate which is 2% in excess of the rate then borne by such
Loans and (y) the rate which is 2% in excess of the rate otherwise applicable to
Base Rate Loans of such Tranche from time to time. Interest which accrues under
this Section 1.08(c) shall be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, on any
repayment or prepayment (on the amount repaid or prepaid), at maturity (whether
by acceleration or otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Agent shall
determine the Eurodollar Rate for each Interest Period applicable to Eurodollar
Loans and shall promptly notify the Borrower and the Banks thereof. Each such
determination shall, absent manifest error, be final and conclusive and binding
on all parties hereto.
1.09 Interest Periods. At the time the Borrower gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, any Eurodollar Loan (in the case of the initial Interest Period applicable
thereto) or on the third Business Day prior to the expiration of an Interest
Period applicable to such Eurodollar Loan (in the case of any subsequent
Interest Period), the Borrower shall have the right to elect, by giving the
Agent notice thereof, the interest period (each an "Interest Period") applicable
to such Eurodollar Loan, which Interest Period shall, at the option of the
Borrower (but otherwise subject to the limitation set forth in clause (B) of the
proviso in each of Sections 1.01(a)(ii) and 1.01(b)(i)), be a one, two, three or
six-month period, provided that:
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(i) all Eurodollar Loans comprising a Borrowing shall at all
times have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including
the date of any conversion thereto from a Base Rate Loan) and each
Interest Period occurring thereafter in respect of such Eurodollar Loan
shall commence on the day on which the next preceding Interest Period
applicable thereto expires;
(iii) if any Interest Period for a Eurodollar Loan begins on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall
end on the last Business Day of such calendar month;
(iv) if any Interest Period for a Eurodollar Loan would
otherwise expire on a day which is not a Business Day, such Interest
Period shall expire on the next succeeding Business Day, provided,
however, that if any Interest Period for a Eurodollar Loan would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period may be selected at any time when a
Default under Section 10.01 or 10.05 is then in existence or an Event
of Default is then in existence;
(vi) no Interest Period in respect of any Borrowing of any
Tranche of Loans shall be selected which extends beyond the respective
Maturity Date for such Tranche of Loans; and
(vii) no Interest Period in respect of any Borrowing of Term
Loans shall be selected which extends beyond any date upon which a
mandatory repayment of Term Loans will be required to be made under
Section 4.02(b), if the aggregate principal amount of Term Loans which
have Interest Periods which will expire after such date will be in
excess of the aggregate principal amount of Term Loans then outstanding
less the aggregate amount of such required repayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
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1.10 Increased Costs, Illegality, etc. (a) In the event that any Bank shall
have determined (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto but, with respect to clause (i)
below, may be made only by the Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the
interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect
to any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation,
order, guideline or request (whether or not having the force of law) or
in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, order,
guideline or request, such as, for example, but not limited to: (A) a
change in the basis of taxation of payment to any Bank of the principal
of or interest on the Notes or any other amounts payable hereunder
(except for changes in the rate of tax on, or determined by reference
to, the net income or profits of such Bank pursuant to the laws of the
jurisdiction in which such Bank is organized or in which such Bank's
principal office or applicable lending office is located or any
subdivision thereof or therein), but without duplication of any amounts
payable to such Bank pursuant to Section 4.04, or (B) a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation
of the Eurodollar Rate and/or (y) other circumstances since the date of
this Agreement affecting the interbank Eurodollar market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has been made (x) unlawful by any law or governmental
rule, regulation or order, (y) impossible by compliance by any Bank in
good faith with any governmental request (whether or not having force
of law) or (z) impracticable as a result of a contingency occurring
after the date of this Agreement which materially and adversely affects
the interbank Eurodollar market;
then, and in any such event, such Bank (or the Agent, in the case of clause (i)
above) shall promptly give notice (by telephone promptly confirmed in writing)
to the Borrower and, except in the case of clause (i) above, to the Agent of
such determination (which notice the Agent shall promptly transmit to each of
the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar
Loans shall no longer be available until such time as the Agent notifies the
Borrower and the Banks that the circumstances giving rise to such notice by the
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
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by the Borrower with respect to Eurodollar Loans which have not yet been
incurred (including by way of conversion) shall be deemed rescinded by the
Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such
Bank, upon such Bank's written request therefor, such additional amounts (in the
form of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing in reasonable detail the basis for the
calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding on all the parties hereto)
and (z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, cancel such Borrowing by
giving the Agent telephonic notice (confirmed in writing) on the same date that
the Borrower was notified by the affected Bank or the Agent pursuant to Section
1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding,
upon at least three Business Days' written notice to the Agent, require the
affected Bank to convert such Eurodollar Loan into a Base Rate Loan, provided
that, (A) to the extent permitted by applicable law or any governmental request
(whether or not having the force of law), any such outstanding Eurodollar Loan
may be continued as such until the end of the then current Interest Period for
such Eurodollar Loan and (B) if more than one Bank is affected at any time, then
all affected Banks must be treated the same pursuant to this Section 1.10(b).
(c) If any Bank determines that after the date of this
Agreement the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank based on the existence of such Bank's Commitments
hereunder or its obligations hereunder, then the Borrower shall pay to such
Bank, upon its written demand therefor, such additional amounts as shall be
required to compensate such Bank or such other corporation for the increased
cost to such Bank or such other corporation or the reduction in the rate of
return to such Bank or such other corporation as a result of such increase of
capital. In determining such additional amounts, each Bank will act reasonably
and in good faith and will use averaging and attribution methods which are
reasonable, provided that such Bank's determination of compensation owing under
this Section 1.10(c) shall, absent
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manifest error, be final and conclusive and binding on all the parties hereto.
Each Bank, upon determining that any additional amounts will be payable pursuant
to this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall show in reasonable detail the basis for calculation
of such additional amounts.
(d) Notwithstanding anything to the contrary contained in this
Section 1.10, unless a Bank gives notice to the Borrower that the Borrower is
obligated to pay any amount under this Section 1.10 within 180 days after the
later of (x) the date such Bank incurs the respective increased costs or
reduction in return the rate of return or (y) the date such Bank has actual
knowledge of its incurrence of the respective increased costs or reduction in
the rate of return, then such Bank shall only be entitled to be compensated for
such amount by the Borrower pursuant to this Section 1.10 to the extent the
respective increased costs or reduction in the rate of return are incurred or
suffered on or after the date which occurs 180 days prior to such Bank giving
notice to the Borrower that it is obligated to pay the respective amounts
pursuant to this Section 1.10.
1.11 Compensation. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth in reasonable detail the basis
for requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Eurodollar Loans but excluding loss of
anticipated profits) which such Bank may sustain: (i) if for any reason (other
than a default by such Bank or the Agent) a Borrowing of, or conversion from or
into, Eurodollar Loans does not occur on a date specified therefor in a Notice
of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower
or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment
(including any repayment made pursuant to Section 4.01, Section 4.02 or as a
result of an acceleration of the Loans pursuant to Section 10) or conversion of
any of its Eurodollar Loans occurs on a date which is not the last day of an
Interest Period with respect thereto; (iii) if any prepayment of any of its
Eurodollar Loans is not made on any date specified in a notice of prepayment
given by the Borrower; or (iv) as a consequence of (x) any other default by the
Borrower to repay its Loans when required by the terms of this Agreement or any
Note held by such Bank or (y) any election made pursuant to Section 1.10(b).
1.12 Change of Lending Office. Each Bank agrees that on the occurrence of
any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section
1.10(c), Section 2.06 or Section 4.04 with respect to such Bank, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office for any Loans
or Letters of Credit affected by such event, provided that such designation is
made on such terms that such Bank and its lending office suffer no economic,
legal or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of such Section. Nothing in this Section
1.12 shall
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affect or postpone any of the obligations of the Borrower or the right of any
Bank provided in Sections 1.10, 2.06 and 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank or
otherwise defaults in its obligations to make Loans, (y) upon the occurrence of
an event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section
1.10(c), Section 2.06 or Section 4.04 with respect to any Bank which results in
such Bank charging to the Borrower increased costs in excess of those being
generally charged by the other Banks or (z) in the case of a refusal by a Bank
to consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks as (and
to the extent) provided in Section 13.12(b), the Borrower shall have the right,
if no Event of Default then exists (or, in the case of preceding clause (z), no
Event of Default will exist immediately after giving effect to such
replacement), to replace such Bank (the "Replaced Bank") with one or more other
Eligible Transferees, none of whom shall constitute a Defaulting Bank at the
time of such replacement (collectively, the "Replacement Bank") and each of whom
shall be required to be reasonably acceptable to the Agent, provided that (i) at
the time of any replacement pursuant to this Section 1.13, the Replacement Bank
shall enter into one or more Assignment and Assumption Agreements pursuant to
Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to
be paid by the Replacement Bank) pursuant to which the Replacement Bank shall
acquire all of the Commitments and outstanding Loans of, and in each case
participations in Letters of Credit by, the Replaced Bank and, in connection
therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal
to the sum of (I) an amount equal to the principal of, and all accrued interest
on, all outstanding Loans of the Replaced Bank, (II) an amount equal to all
Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced
Bank, together with all then unpaid interest with respect thereto at such time
and (III) an amount equal to all accrued, but theretofore unpaid, Fees owing to
the Replaced Bank pursuant to Section 3.01, (y) the Issuing Bank an amount equal
to such Replaced Bank's RL Percentage of any Unpaid Drawing (which at such time
remains an Unpaid Drawing) to the extent such amount was not theretofore funded
by such Replaced Bank to such Issuing Bank and (z) the Swingline Bank an amount
equal to such Replaced Bank's RL Percentage of any Mandatory Borrowing to the
extent such amount was not theretofore funded by such Replaced Bank to the
Swingline Bank and (ii) all obligations of the Borrower due and owing to the
Replaced Bank at such time (other than those specifically described in clause
(i) above in respect of which the assignment purchase price has been, or is
concurrently being, paid) shall be paid in full to such Replaced Bank
concurrently with such replacement. Upon the execution of the respective
Assignment and Assumption Agreement, the payment of amounts referred to in
clauses (i) and (ii) above and, if so requested by the Replacement Bank,
delivery to the Replacement Bank of the appropriate Note or Notes executed by
the Borrower, the Replacement Bank shall become a Bank hereunder and the
Replaced Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement (including, without limitation,
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Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01), which shall survive as to
such Replaced Bank with respect to any liabilities incurred by such Replaced
Bank relating to periods prior to the date such Replaced Bank ceased to be a
Bank hereunder.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and conditions
set forth herein, the Borrower may request that the Issuing Bank issue, at any
time and from time to time on and after the Initial Borrowing Date and prior to
the 30th day prior to the Revolving Loan Maturity Date, for the account of the
Borrower and for the benefit of any holder (or any trustee, agent or other
similar representative for any such holders) of L/C Supportable Obligations of
the Borrower or any of its Subsidiaries, an irrevocable standby letter of
credit, in a form customarily used by the Issuing Bank or in such other form as
has been approved by the Issuing Bank (each such standby letter of credit, a
"Letter of Credit") in support of such L/C Supportable Obligations. All Letters
of Credit shall be denominated in Dollars and shall be issued on a sight basis
only.
(b) Subject to and upon the terms and conditions set forth
herein, the Issuing Bank agrees that it will, at any time and from time to time
on and after the Initial Borrowing Date and prior to the 30th day prior to the
Revolving Loan Maturity Date, following its receipt of the respective Letter of
Credit Request, issue for the account of the Borrower, one or more Letters of
Credit in support of such L/C Supportable Obligations of the Borrower or any of
its Subsidiaries as are permitted to remain outstanding without giving rise to a
Default or an Event of Default, provided that the Issuing Bank shall be under no
obligation to issue any Letter of Credit of the types described above if at the
time of such issuance:
(i) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or
restrain the Issuing Bank from issuing such Letter of Credit or any
requirement of law applicable to the Issuing Bank or any request or
directive (whether or not having the force of law) from any
governmental authority with jurisdiction over the Issuing Bank shall
prohibit, or request that the Issuing Bank refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated) not in effect on the date
hereof, or any unreimbursed loss, cost or expense which was not
applicable or in effect with respect to the Issuing Bank as of the date
hereof and which the Issuing Bank reasonably and in good faith deems
material to it; or
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(ii) the Issuing Bank shall have received notice from the
Borrower, any other Credit Party or the Required Banks prior to the
issuance of such Letter of Credit of the type described in the second
sentence of Section 2.03(b).
2.02 Maximum Letter of Credit Outstandings; Final Maturities.
Notwithstanding anything to the contrary contained in this Agreement, (i) no
Letter of Credit shall be issued the Stated Amount of which, when added to the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on
the date of, and prior to the issuance of, the respective Letter of Credit) at
such time would exceed either (x) $2,000,000 or (y) when added to the aggregate
principal amount of all Revolving Loans then outstanding and the aggregate
principal amount of all Swingline Loans then outstanding, an amount equal to the
Total Revolving Loan Commitment at such time and (ii) each Letter of Credit
shall by its terms terminate on or before the earlier of (x) the date which
occurs 12 months after the date of the issuance thereof (although any such
Letter of Credit may be extendable for successive periods of up to 12 months,
but not beyond the third Business Day prior to the Revolving Loan Maturity Date,
on terms acceptable to the Issuing Bank) and (y) three Business Days prior to
the Revolving Loan Maturity Date.
2.03 Letter of Credit Requests; Minimum Stated Amount. (a) Whenever the
Borrower desires that a Letter of Credit be issued for its account, the Borrower
shall give the Agent and the Issuing Bank at least five Business Days' (or such
shorter period as is acceptable to the Issuing Bank) written notice thereof.
Each notice shall be in the form of Exhibit C appropriately completed (each a
"Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be
deemed to be a representation and warranty by the Borrower that such Letter of
Credit may be issued in accordance with, and will not violate the requirements
of, Section 2.02. Unless the Issuing Bank has received notice from the Borrower,
any other Credit Party or the Required Banks before it issues a Letter of Credit
that one or more of the conditions specified in Section 5 or 6 are not then
satisfied, or that the issuance of such Letter of Credit would violate Section
2.02, then the Issuing Bank shall, subject to the terms and conditions of this
Agreement, issue the requested Letter of Credit for the account of the Borrower
in accordance with the Issuing Bank's usual and customary practices. Upon its
issuance of or amendment or modification to any Letter of Credit, the Issuing
Bank shall promptly notify the Borrower and the Agent of such issuance,
amendment or modification and such notification shall be accompanied by a copy
of the issued Letter of Credit or amendment or modification. Notwithstanding
anything to the contrary contained in this Agreement, in the event that a Bank
Default exists, the Issuing Bank shall not be required to issue any Letter of
Credit unless the Issuing Bank has entered into an arrangement satisfactory to
it and the Borrower to eliminate the Issuing Bank's risk with respect to the
participation in Letters of Credit by the Defaulting Bank or Banks, including by
cash collateralizing such Defaulting Bank's or Banks' RL Percentage of the
Letter of Credit Outstandings.
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(c) The initial Stated Amount of each Letter of Credit shall
not be less than $100,000 or such lesser amount as is acceptable to the Issuing
Bank.
2.04 Letter of Credit Participations. (a) Immediately upon the issuance by
the Issuing Bank of any Letter of Credit, the Issuing Bank shall be deemed to
have sold and transferred to each Bank with a Revolving Loan Commitment, other
than the Issuing Bank (each such Bank, in its capacity under this Section 2.04,
a "Participant"), and each such Participant shall be deemed irrevocably and
unconditionally to have purchased and received from the Issuing Bank, without
recourse or warranty, an undivided interest and participation, to the extent of
such Participant's RL Percentage, in such Letter of Credit, each drawing or
payment made thereunder and the obligations of the Borrower under this Agreement
with respect thereto, and any security therefor or guaranty pertaining thereto.
Upon any change in the Revolving Loan Commitments or RL Percentages of the Banks
pursuant to Section 1.13 or 13.04, it is hereby agreed that, with respect to all
outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic
adjustment to the participations pursuant to this Section 2.04 to reflect the
new RL Percentages of the assignor and assignee Bank, as the case may be.
(b) In determining whether to pay under any Letter of Credit,
the Issuing Bank shall not have an obligation relative to the other Banks other
than to confirm that any documents required to be delivered under such Letter of
Credit appear to have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by the Issuing Bank under or in connection with any
Letter of Credit if taken or omitted in the absence of gross negligence or
willful misconduct (as finally determined by a court of competent jurisdiction),
shall not create for the Issuing Bank any resulting liability to the Borrower,
any other Credit Party, any Bank or any other Person.
(c) In the event that the Issuing Bank makes any payment under
any Letter of Credit and the Borrower shall not have reimbursed such amount in
full to the Issuing Bank pursuant to Section 2.05(a), the Issuing Bank shall
promptly notify the Agent, which shall promptly notify each Participant of such
failure, and each Participant shall promptly and unconditionally pay to the
Issuing Bank the amount of such Participant's RL Percentage of such unreimbursed
payment in Dollars and in same day funds. If the Agent so notifies, prior to
11:00 A.M. (New York time) on any Business Day, any Participant required to fund
a payment under a Letter of Credit, such Participant shall make available to the
Issuing Bank in Dollars such Participant's RL Percentage of the amount of such
payment on such Business Day in same day funds. If and to the extent such
Participant shall not have so made its RL Percentage of the amount of such
payment available to the Issuing Bank, such Participant agrees to pay to the
Issuing Bank, forthwith on demand such amount, together with interest thereon,
for each day from such date until the date such amount is paid to the Issuing
Bank at the overnight Federal Funds Rate for the first three
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days and at the interest rate applicable to Revolving Loans maintained as Base
Rate Loans for each day thereafter. The failure of any Participant to make
available to the Issuing Bank its RL Percentage of any payment under any Letter
of Credit shall not relieve any other Participant of its obligation hereunder to
make available to the Issuing Bank its RL Percentage of any Letter of Credit on
the date required, as specified above, but no Participant shall be responsible
for the failure of any other Participant to make available to the Issuing Bank
such other Participant's RL Percentage of any such payment.
(d) Whenever the Issuing Bank receives a payment of a
reimbursement obligation as to which it has received any payments from the
Participants pursuant to clause (c) above, the Issuing Bank shall pay to each
Participant which has paid its RL Percentage thereof, in Dollars and in same day
funds, an amount equal to such Participant's share (based upon the proportionate
aggregate amount originally funded by such Participant to the aggregate amount
funded by all Participants) of the principal amount of such reimbursement
obligation and interest thereon accruing after the purchase of the respective
participations.
(e) Upon the request of any Participant, the Issuing Bank
shall furnish to such Participant copies of any Letter of Credit issued by it
and such other documentation as may reasonably be requested by such Participant.
(f) The obligations of the Participants to make payments to
the Issuing Bank with respect to Letters of Credit issued by it shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, setoff, defense or other
right which the Borrower or any of its Subsidiaries may have at any
time against a beneficiary named in a Letter of Credit, any transferee
of any Letter of Credit (or any Person for whom any such transferee may
be acting), the Agent, any Participant, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transaction between the Borrower or any Subsidiary of the
Borrower and the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Agreement to Repay Letter of Credit Drawings. (a) The Borrower agrees
to reimburse the Issuing Bank, by making payment to the Agent in immediately
available funds at the Payment Office, for any payment or disbursement made by
the Issuing Bank under any Letter of Credit (each such amount, so paid until
reimbursed, an "Unpaid Drawing"), not later than one Business Day following
receipt by the Borrower of notice of such payment or disbursement (provided that
no such notice shall be required to be given if a Default or an Event of Default
under Section 10.05 shall have occurred and be continuing, in which case the
Unpaid Drawing shall be due and payable immediately without presentment, demand,
protest or notice of any kind (all of which are hereby waived by the Borrower)),
with interest on the amount so paid or disbursed by the Issuing Bank, to the
extent not reimbursed prior to 12:00 Noon (New York time) on the date of such
payment or disbursement, from and including the date paid or disbursed to but
excluding the date the Issuing Bank was reimbursed by the Borrower therefor at a
rate per annum which shall be the Base Rate in effect from time to time plus the
Applicable Base Rate Margin for Revolving Loans; provided, however, to the
extent such amounts are not reimbursed prior to 12:00 Noon (New York time) on
the third Business Day following the receipt by the Borrower of notice of such
payment or disbursement or following the occurrence of a Default or an Event of
Default under Section 10.05, interest shall thereafter accrue on the amounts so
paid or disbursed by the Issuing Bank (and until reimbursed by the Borrower) at
a rate per annum which shall be the Base Rate in effect from time to time plus
the Applicable Base Rate Margin for Revolving Loans plus 2%, in each such case,
with interest to be payable on demand. The Issuing Bank shall give the Borrower
prompt written notice of each Drawing under any Letter of Credit, provided that
the failure to give any such notice shall in no way affect, impair or diminish
the Borrower's obligations hereunder.
(b) The obligations of the Borrower under this Section 2.05 to
reimburse the Issuing Bank with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower may have or have had against any Bank (including in its
capacity as issuer of the Letter of Credit or as Participant), including,
without limitation, any defense based upon the failure of any drawing under a
Letter of Credit (each a "Drawing") to conform to the terms of the Letter of
Credit or any nonapplication or misapplication by the beneficiary of the
proceeds of such Drawing; provided, however, that the Borrower shall not be
obligated to reimburse the Issuing Bank for any wrongful payment made by the
Issuing Bank under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of the Issuing
Bank (as finally determined by a court of competent jurisdiction).
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2.06 Increased Costs. (a) If at any time after the date of this Agreement,
the introduction of or any change in any applicable law, rule, regulation,
order, guideline or request or in the interpretation or administration thereof
by any governmental authority charged with the interpretation or administration
thereof, or compliance by the Issuing Bank or any Participant with any request
or directive by any such authority (whether or not having the force of law),
shall either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against letters of credit issued by the Issuing
Bank or participated in by any Participant, or (ii) impose on the Issuing Bank
or any Participant any other conditions relating, directly or indirectly, to
this Agreement; and the result of any of the foregoing is to increase the cost
to the Issuing Bank or any Participant of issuing, maintaining or participating
in any Letter of Credit, or reduce the amount of any sum received or receivable
by the Issuing Bank or any Participant hereunder or reduce the rate of return on
its capital with respect to Letters of Credit (except for changes in the rate of
tax on, or determined by reference to, the net income or profits of the Issuing
Bank or such Participant pursuant to the laws of the jurisdiction in which it is
organized or in which its principal office or applicable lending office is
located or any subdivision thereof or therein), then, upon the delivery of the
certificate referred to below to the Borrower by the Issuing Bank or any
Participant (a copy of which certificate shall be sent by the Issuing Bank or
such Participant to the Agent), the Borrower shall pay to the Issuing Bank or
such Participant such additional amount or amounts as will compensate such Bank
for such increased cost or reduction in the amount receivable or reduction on
the rate of return on its capital. The Issuing Bank or any Participant, upon
determining that any additional amounts will be payable pursuant to this Section
2.06, will give prompt written notice thereof to the Borrower, which notice
shall include a certificate submitted to the Borrower by the Issuing Bank or
such Participant (a copy of which certificate shall be sent by the Issuing Bank
or such Participant to the Agent), setting forth in reasonable detail the basis
for the calculation of such additional amount or amounts necessary to compensate
the Issuing Bank or such Participant. The certificate required to be delivered
pursuant to this Section 2.06 shall, absent manifest error, be final and
conclusive and binding on the Borrower.
(b) Notwithstanding anything to the contrary contained in this
Section 2.06, unless the Issuing Bank or a Participant gives notice to the
Borrower that the Borrower is obligated to pay any amount under this Section
2.06 within 180 days after the later of (x) the date the Issuing Bank or such
Participant incurs the respective increased costs or reduction in return the
rate of return or (y) the date the Issuing Bank or such Participant has
acknowledge of its incurrence of the respective increased costs or reduction in
the rate of return, then the Issuing Bank or such Participant shall only be
entitled to be compensated for such amount by the Borrower pursuant to this
Section 2.06 to the extent the respective increased costs or reduction in the
rate of return are incurred or suffered on or after the date which occurs 180
days prior to the Issuing Bank or such Participant giving notice to the Borrower
that it is obligated to pay the respective amounts pursuant to this Section
2.06.
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SECTION 3. Commitment Commission; Fees; Reductions of
Commitment.
3.01 Fees. (a) The Borrower agrees to pay to the Agent for distribution to
each Non-Defaulting Bank with a Term Loan Commitment, a commitment commission
(the "Term Loan Commitment Commission") for the period from and including the
Effective Date to but excluding the date on which the Total Term Loan Commitment
shall have been terminated, computed at a rate for each day equal to the
Applicable Commitment Commission Percentage on the daily Term Loan Commitment of
such Non-Defaulting Bank. Accrued Term Loan Commitment Commission shall be due
and payable quarterly in arrears on each Quarterly Payment Date and on the date
on which the Total Term Loan Commitment shall have been terminated.
(b) The Borrower agrees to pay to the Agent for distribution
to each Non-Defaulting Bank with a Revolving Loan Commitment, a commitment
commission (the "Revolving Loan Commitment Commission") for the period from and
including the Effective Date to but excluding the Revolving Loan Maturity Date
(or such earlier date on which the Total Revolving Loan Commitment shall have
been terminated), computed at a rate for each day equal to the Applicable
Commitment Commission Percentage on the daily average Unutilized Revolving Loan
Commitment of such Non-Defaulting Bank. Accrued Revolving Loan Commitment
Commission shall be due and payable quarterly in arrears on each Quarterly
Payment Date and on the Revolving Loan Maturity Date (or such earlier date on
which the Total Revolving Loan Commitment shall have been terminated).
(c) The Borrower agrees to pay to the Agent for distribution
to each Bank with a Revolving Loan Commitment (based on each such Bank's
respective RL Percentage) a fee in respect of each Letter of Credit issued
hereunder (the "Letter of Credit Fee") for the period from and including the
date of issuance of such Letter of Credit to and including the date of
termination or expiration of such Letter of Credit, computed at a rate per annum
equal to the Applicable Eurodollar Rate Margin then in effect with respect to
Revolving Loans on the daily Stated Amount of such Letter of Credit. Accrued
Letter of Credit Fees shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the first day after the termination of the Total
Revolving Loan Commitment upon which no Letters of Credit remain outstanding.
(d) The Borrower agrees to pay to the Issuing Bank, for its
own account, a facing fee in respect of each Letter of Credit issued hereunder
(the "Facing Fee") for the period from and including the date of issuance of
such Letter of Credit to and including the date of the termination of such
Letter of Credit, computed at a rate equal to 1/4 of 1% per annum on the daily
Stated Amount of such Letter of Credit, provided that in any event the minimum
amount of the Facing Fee payable in any 12 month period for each Letter of
Credit shall be $500; it being agreed that, on the date of issuance of any
Letter of Credit
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and on each anniversary thereof prior to the termination of such Letter of
Credit, if $500 will exceed the amount of Facing Fees that will accrue with
respect to such Letter of Credit for the immediately succeeding 12 month period,
the full $500 shall be payable on the date of issuance of such Letter of Credit
and on each such anniversary thereof. Except as otherwise provided in the
proviso to the immediately preceding sentence, accrued Facing Fees shall be due
and payable quarterly in arrears on each Quarterly Payment Date and upon the
first day after the termination of the Total Revolving Loan Commitment upon
which no Letters of Credit remain outstanding.
(e) The Borrower agrees to pay to the Issuing Bank, for its
own account, upon each payment under, issuance of, or amendment to, any Letter
of Credit, such amount as shall at the time of such event be the administrative
charge and the reasonable expenses which the Issuing Bank is generally imposing
in connection with such occurrence with respect to letters of credit issued by
it.
(f) The Borrower agrees to pay to the Agent, for its own
account, such other fees as have been agreed to in writing by the Borrower and
the Agent.
3.02 Voluntary Termination of Unutilized Revolving Loan Commitments. (a)
Upon at least one Business Day's prior written notice to the Agent at the Notice
Office (which notice the Agent shall promptly transmit to each of the Banks),
the Borrower shall have the right, at any time or from time to time, without
premium or penalty, to terminate the Total Unutilized Revolving Loan Commitment,
in whole or in part, pursuant to this Section 3.02(a), in an integral multiple
of $500,000, in the case of partial reductions to the Total Unutilized Revolving
Loan Commitment, which notice shall specify the portion of the specified
reduction which shall apply to the Unutilized Acquisition Sub-Limit and the
Unutilized Working Capital Sub-Limit, respectively, provided that each such
reduction shall apply proportionately to permanently reduce the Revolving Loan
Commitment of each Bank with such a Commitment.
(b) In the event of a refusal by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as (and to the extent)
provided in Section 13.12(b), the Borrower may, subject to its compliance with
the requirements of Section 13.12(b), upon five Business Days' prior written
notice to the Agent at the Notice Office (which notice the Agent shall promptly
transmit to each of the Banks) terminate all of the Commitments of such Bank, so
long as all Loans, together with accrued and unpaid interest, Fees and all other
amounts, owing to such Bank are repaid concurrently with the effectiveness of
such termination pursuant to Section 4.01(b) (at which time Schedule I shall be
deemed modified to reflect such changed amounts), and at such time, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement, except with
respect to
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indemnifications under this Agreement (including, without limitation, Sections
1.10, 1.11, 2.06, 4.04, 12.06 and 13.01), which shall survive as to such repaid
Bank.
3.03 Mandatory Reduction of Commitments. (a) The Total Commitment (and
each of the Commitments of each Bank) shall terminate in its entirety on March
31, 1998 unless the Initial Borrowing Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment of each Bank) shall terminate in its entirety on the earlier of (i)
the date on which a Change of Control occurs and (ii) the Initial Borrowing Date
(after giving effect to the incurrence of the Term Loans on the Initial
Borrowing Date).
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Bank) shall terminate in its entirety on the
earlier of (i) the date on which a Change of Control occurs and (ii) the
Revolving Loan Maturity Date.
(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Term Loan Commitment shall be
permanently reduced on the dates, and in the amounts, required by Sections
4.02(c), (d), (e) and (g). Each reduction to the Total Term Loan Commitment
pursuant to this Section 3.03(d) shall be applied proportionately to permanently
reduce the Term Loan Commitment of each Bank with such a Commitment.
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date after the Effective Date upon which
a mandatory repayment of Term Loans (or a mandatory reduction to the Total Term
Loan Commitment, as the case may be) pursuant to any of Sections 4.02(c) through
(g), inclusive, is required (and exceeds in amount the aggregate principal
amount of Term Loans then outstanding (or the Total Term Loan Commitment was
then in effect, as the case may be)) or would be required if Term Loans were
then outstanding (or the Total Term Commitment as then in effect, as the case
may be), the Total Revolving Loan Commitment shall be permanently reduced by the
amount, if any, by which the amount required to be applied pursuant to said
Sections (determined as if an unlimited amount of Term Loans were actually
outstanding (or the Total Term Loan Commitment was then in effect, as the case
may be)) exceeds the aggregate principal amount of Term Loans then outstanding
(or the Total Term Loan Commitment as then in effect, as the case may be).
Each reduction to the Total Revolving Loan Commitment pursuant to this Section
3.03(e) shall be applied proportionately to permanently reduce the Revolving
Loan Commitment of each Bank with such a Commitment.
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SECTION 4. Prepayments; Payments; Taxes.
4.01 Voluntary Prepayments. (a) The Borrower shall have the right to prepay
the Loans, without premium or penalty, in whole or in part at any time and from
time to time on the following terms and conditions: (i) the Borrower shall give
the Agent prior to 12:00 Noon (New York time) at the Notice Office (x) at least
one Business Day's prior written notice (or telephonic notice promptly confirmed
in writing) of its intent to prepay Base Rate Loans (or same day notice in the
case of a prepayment of Swingline Loans) and (y) at least three Business Days'
prior written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay Eurodollar Loans, whether Term Loans, Revolving Loans or
Swingline Loans shall be prepaid, the amount of such prepayment and the Types of
Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing
or Borrowings pursuant to which made, which notice the Agent shall, except in
the case of Swingline Loans, promptly transmit to each of the Banks; (ii) (x)
each partial prepayment of Term Loans pursuant to this Section 4.01(a) shall be
in an aggregate principal amount of at least $500,000 and in integral multiples
of $100,000 in excess thereof, (y) each partial prepayment of Revolving Loans
pursuant to this Section 4.01(a) shall be in an aggregate principal amount of at
least $250,000 and in integral multiples of $100,000 in excess thereof, and (z)
each partial prepayment of Swingline Loans pursuant to this Section 4.01(a)
shall be in an aggregate principal amount of at least $50,000 and in integral
multiples of $50,000 in excess thereof, provided that if any partial prepayment
of Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding
principal amount of Eurodollar Loans made pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount applicable thereto, then such
Borrowing may not be continued as a Borrowing of Eurodollar Loans and any
election of an Interest Period with respect thereto given by the Borrower shall
have no force or effect; (iii) each prepayment pursuant to this Section 4.01(a)
in respect of any Loans made pursuant to a Borrowing shall be applied pro rata
among such Loans, provided that at the Borrower's election in connection with
any prepayment of Revolving Loans pursuant to this Section 4.01(a), such
prepayment shall not, so long as no Default or Event of Default then exists, be
applied to any Revolving Loan of a Defaulting Bank; (iv) each voluntary
prepayment of Term Loans pursuant to this Section 4.01(a) shall be applied to
reduce the then remaining Scheduled Repayments of Term Loans on a pro rata basis
(based upon the then remaining unpaid principal amounts of such Scheduled
Repayments after giving effect to all prior reductions thereto); and (v) with
respect to each prepayment of any Revolving Loans made pursuant to this Section
4.01(a), such prepayment shall, unless otherwise directed by the Borrower at the
time of prepayment, first be deemed applied to any outstanding Working Capital
Loans and then to any outstanding Acquisition Loans.
(b) In the event of a refusal by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as (and to the extent)
provided in Section 13.12(b),
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the Borrower may, upon five Business Days' prior written notice to the Agent at
the Notice Office (which notice the Agent shall promptly transmit to each of the
Banks) repay all Loans of, together with accrued and unpaid interest, Fees and
other amounts owing to, such Bank in accordance with, and subject to the
requirements of, said Section 13.12(b) so long as (A) in the case of the
repayment of Revolving Loans of any Bank pursuant to this Section 4.01(b) the
Revolving Loan Commitment of such Bank is terminated concurrently with such
repayment pursuant to Section 3.02(b) (at which time Schedule I shall be deemed
modified to reflect the changed Revolving Loan Commitments) and (B) the
consents, if any, required under Section 13.12(b) in connection with the
repayment pursuant to this clause (b) have been obtained.
4.02 Mandatory Repayments and Commitment Reductions. (a) (i) On any day on
which the sum of the aggregate outstanding principal amount of the Revolving
Loans, Swingline Loans and the Letter of Credit Outstandings exceeds the Total
Revolving Loan Commitment as then in effect, the Borrower shall prepay on such
day the principal of Swingline Loans and, after all Swingline Loans have been
repaid in full (or if no Swingline Loans are outstanding), Revolving Loans in an
amount equal to such excess. If, after giving effect to the prepayment of all
outstanding Swingline Loans and Revolving Loans, the aggregate amount of the
Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as
then in effect, the Borrower shall pay to the Agent at the Payment Office on
such day an amount of cash and/or Cash Equivalents equal to the amount of such
excess (up to a maximum amount equal to the Letter of Credit Outstandings at
such time), such cash and/or Cash Equivalents to be held as security for all
obligations of the Borrower to the Issuing Bank and the Banks hereunder in a
cash collateral account to be established by the Agent. All repayments of
Revolving Loans pursuant to this Section 4.02(a)(i) shall be applied to repay
outstanding Acquisition Loans and Working Capital Loans in proportion to their
respective outstanding amounts except to the extent that such repayment would
result in the outstanding principal amount of (x) Acquisition Loans exceeding
the Acquisition Sub-Limit as then in effect or (y) Working Capital Loans
exceeding the Working Capital Sub-Limit as then in effect, in which case such
repayment will be applied to Acquisition Loans and/or Working Capital Loans in
such allocation as will best result in the respective Sub-Limit not being
exceeded.
(ii) If, after giving effect to any prepayment then being made
pursuant to Section 4.02(a)(i), on any day on which the aggregate outstanding
principal amount of Working Capital Loans exceeds the Working Capital Sub-Limit
as then in effect, the Borrower shall prepay on such day the principal of
Working Capital Loans in an amount equal to such excess.
(iii) If, after giving effect to any prepayment then being
made pursuant to Section 4.02(a)(i), on any day on which the aggregate
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outstanding principal amount of Acquisition Loans exceeds the Acquisition
Sub-Limit as then in effect, the Borrower shall prepay on such day the principal
of Acquisition Loans in an amount equal to such excess.
(b) In addition to any other mandatory repayments pursuant to
this Section 4.02, on each date set forth below, the Borrower shall be required
to repay that principal amount of Term Loans, to the extent then outstanding, as
is set forth opposite such date below (each such repayment, as the same may be
reduced as provided in Sections 4.01(a) and 4.02(h), a "Scheduled Repayment"):
Scheduled Repayment Date Amount
- ------------------------ --------
February 28, 1999 $750,000
May 31, 1999 $750,000
August 31, 1999 $750,000
November 30, 1999 $750,000
February 29, 2000 $1,000,000
May 31, 2000 $1,000,000
August 31, 2000 $1,000,000
November 30, 2000 $1,000,000
February 28, 2001 $1,500,000
May 31, 2001 $1,500,000
August 31, 2001 $1,500,000
November 30, 2001 $1,500,000
February 28, 2002 $1,750,000
May 31, 2002 $1,750,000
November 30, 2002 $1,750,000
Term Loan Maturity Date $1,750,000
(c) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on each date after the
Effective Date upon which Holdings or any of its Subsidiaries receives any cash
proceeds from any capital contribution or any sale or issuance of its equity
(other than cash proceeds received (i) as part of the Equity Financing, (ii)
from the issuance by Holdings of shares of its common stock (including as a
result of the exercise of any options with regard thereto), or options to
purchase to shares of its common stock, to officers, directors and employees of
Holdings and its Subsidiaries in an aggregate amount not to exceed $500,000 in
any fiscal year of Holdings or (iii) from equity contributions to any Subsidiary
of Holdings to the extent made by Holdings or another Subsidiary of Holdings),
an amount equal to 50% of the Net Equity
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Proceeds of such capital contribution or sale or issuance of equity shall be
applied as a mandatory repayment of principal of outstanding Term (or, if the
Initial Borrowing Date has not yet occurred, as a mandatory reduction to the
Total Term Loan Commitment) Loans in accordance with the requirements of
Sections 4.02(h) and (i).
(d) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on each date on or after
the Effective Date upon which Holdings or any of its Subsidiaries receives any
cash proceeds from any incurrence by Holdings or any of its Subsidiaries of
Indebtedness for borrowed money (other than Indebtedness for borrowed money
permitted to be incurred pursuant to Section 9.04 as such Section is in effect
on the Effective Date), an amount equal to 100% of the Net Debt Proceeds of the
respective incurrence of Indebtedness shall be applied as a mandatory repayment
of principal of outstanding Term Loans (or, if the Initial Borrowing Date has
not yet occurred, as a mandatory reduction to the Total Term Loan Commitment) in
accordance with the requirements of Sections 4.02(h) and (i).
(e) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on each date on or after
the Effective Date upon which Holdings or any of its Subsidiaries receives any
cash proceeds from any Asset Sale, an amount equal to 100% of the Net Sale
Proceeds from such Asset Sale shall be applied as a mandatory repayment of
principal of outstanding Term Loans (or, if the Initial Borrowing Date has not
yet occurred, as a mandatory reduction to the Total Term Loan Commitment) in
accordance with the requirements of Sections 4.02(h) and (i); provided that with
respect to no more than $1,500,000 in the aggregate of cash proceeds from Asset
Sales in any fiscal year of Holdings, such Net Sale Proceeds therefrom shall not
be required to be so applied on such date so long as no Default under Section
10.01 or 10.05 then exists or no Event of Default then exists and Holdings has
delivered a certificate to the Agent on or prior to such date stating that such
Net Sale Proceeds shall be used to purchase replacement assets within 300 days
following the date of such Asset Sale (which certificate shall set forth the
estimates of the proceeds to be so expended), and provided further, that if all
or any portion of such Net Sale Proceeds not required to be applied to the
repayment of outstanding Term Loans (or to reduce the Total Term Loan
Commitment, as the case may be) are not so reinvested in replacement assets
within such 300 day period, such remaining portion shall be applied on the last
day of such period as a mandatory repayment of principal of outstanding Term
Loans as provided above in this Section 4.02(e) without regard to the
immediately preceding proviso.
(f) In addition to any other mandatory repayments pursuant to
this Section 4.02, on each Excess Cash Payment Date, an amount equal to the
Applicable Excess Cash Flow Percentage of the Excess Cash Flow for the relevant
Excess Cash Payment Period shall be applied as a mandatory repayment of
principal of outstanding Term Loans in accordance with the requirements of
Sections 4.02(h) and (i).
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(g) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, within 10 days following
each date on or after the Effective Date upon which Holdings or any of its
Subsidiaries receives any cash proceeds from any Recovery Event, an amount equal
to 100% of the Net Insurance Proceeds from such Recovery Event shall be applied
as a mandatory repayment of principal of outstanding Term Loans (or, if the
Initial Borrowing Date has not yet occurred, as a mandatory reduction to the
Total Term Loan Commitment) in accordance with the requirements of Sections
4.02(h) and (i), provided that so long as no Default under Section 10.01 or
10.05 then exists or no Event of Default then exists and such Net Insurance
Proceeds do not exceed $2,500,000, such Net Insurance Proceeds shall not be
required to be so applied on such date to the extent that Holdings has delivered
a certificate to the Agent on or prior to such date stating that such Net
Insurance Proceeds shall be used to replace or restore any properties or assets
in respect of which such Net Insurance Proceeds were paid within 300 days
following the date of the receipt of such Net Insurance Proceeds (which
certificate shall set forth the estimates of the proceeds to be so expended),
and provided further, that (i) if the amount of such Net Insurance Proceeds
exceeds $2,500,000, then the entire amount of such Net Insurance Proceeds, and
not just the portion of such Net Insurance Proceeds in excess of $2,500,000,
shall be applied as a mandatory repayment of Term Loans (or, if the Initial
Borrowing Date has not yet occurred, as a mandatory reduction to the Total Term
Loan Commitment) as provided above in this Section 4.02(g) without regard to the
immediately preceding proviso and (ii) if all or any portion of such Net
Insurance Proceeds not required to be applied to the repayment of outstanding
Term Loans (or to reduce the Total Term Loan Commitment, as the case may) be
pursuant to the immediately preceding proviso are not so used within 300 days
after the date of the receipt of such Net Insurance Proceeds, such remaining
portion shall be applied on the last day of such period as a mandatory repayment
of principal of outstanding Term Loans as provided above in this Section 4.02(g)
without regard to the immediately preceding proviso.
(h) Each amount required to be applied to repay outstanding
Term Loans (or, if the Initial Borrowing Date has not yet occurred, to reduce
the Total Term Loan Commitment, as the case may be) pursuant to Sections
4.02(c), (d), (e), (f) and (g) shall be applied to reduce the then remaining
Scheduled Repayments on a pro rata basis (based upon the then remaining unpaid
principal amounts of such Scheduled Repayments after giving effect to all prior
reductions thereto).
(i) With respect to each repayment of Loans required by this
Section 4.02, the Borrower may designate the Types of Loans of the respective
Tranche which are to be repaid and, in the case of Eurodollar Loans, the
specific Borrowing or Borrowings of the respective Tranche pursuant to which
made, provided that: (i) repayments of Eurodollar Loans pursuant to this Section
4.02 may only be made on the last day of an Interest Period applicable thereto
unless all Eurodollar Loans of the respective Tranche with Interest Periods
ending on such date of required repayment and all Base Rate Loans of the respec-
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tive Tranche have been paid in full; (ii) if any repayment of Eurodollar Loans
made pursuant to a single Borrowing shall reduce the outstanding Eurodollar
Loans made pursuant to such Borrowing to an amount less than the Minimum
Borrowing Amount applicable thereto, such Borrowing shall be converted at the
end of the then current Interest Period into a Borrowing of Base Rate Loans; and
(iii) each repayment of any Loans made pursuant to a Borrowing shall be applied
pro rata among such Loans. In the absence of a designation by the Borrower as
described in the preceding sentence, the Agent shall, subject to the above, make
such designation in its sole discretion.
(j) Notwithstanding anything to the contrary contained in this
Agreement or in any other Credit Document, (i) all then outstanding Loans of any
Tranche shall be repaid in full on the respective Maturity Date for such Tranche
of Loans and (ii) all then outstanding Loans shall be repaid in full on the date
on which a Change of Control occurs.
4.03 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments under this Agreement or under any Note shall be made to the
Agent for the account of the Bank or Banks entitled thereto not later than 12:00
Noon (New York time) on the date when due and shall be made in Dollars in
immediately available funds at the Payment Office. Whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is not
a Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder or under
any Note will be made without setoff, counterclaim or other defense. Except as
provided in Section 4.04(b), all such payments will be made free and clear of,
and without deduction or withholding for, any present or future taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein with respect to such payments (but excluding,
except as provided in the second succeeding sentence, any tax imposed on or
measured by the net income or profits of a Bank, or any franchise tax based on
the net income or profits of a Bank, in either case pursuant to the laws of the
jurisdiction in which it is organized or the jurisdiction in which the principal
office or applicable lending office of such Bank is located or any subdivision
thereof or therein) and all interest, penalties or similar liabilities with
respect to such non-excluded taxes, levies, imposts, duties, fees, assessments
or other charges (all such non-excluded taxes, levies, imposts, duties, fees,
assessments or other charges being referred to collectively as "Taxes"). If any
Taxes are so levied or imposed, the Borrower agrees to pay the full amount of
such Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein or in such Note. If any amounts are payable in
respect of Taxes pursuant to the pre-
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ceding sentence, the Borrower agrees to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income or
profits of such Bank pursuant to the laws of the jurisdiction in which such Bank
is organized or in which the principal office or applicable lending office of
such Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which such Bank is organized or in which
the principal office or applicable lending office of such Bank is located and
for any withholding of taxes as such Bank shall determine are payable by, or
withheld from, such Bank, in respect of such amounts so paid to or on behalf of
such Bank pursuant to the preceding sentence and in respect of any amounts paid
to or on behalf of such Bank pursuant to this sentence. The Borrower will
furnish to the Agent within 45 days after the date the payment of any Taxes is
due pursuant to applicable law certified copies of tax receipts evidencing such
payment by the Borrower. The Borrower agrees to indemnify and hold harmless each
Bank, and reimburse such Bank within 15 days of its written request, for the
amount of any Taxes so levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Borrower and the Agent on or prior to the
Effective Date, or in the case of a Bank that is an assignee or transferee of an
interest under this Agreement pursuant to Section 1.13 or 13.04 (unless the
respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or (ii)
if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 (or
successor forms) pursuant to clause (i) above, (x) a certificate substantially
in the form of Exhibit D (any such certificate, a "Section 4.04(b)(ii)
Certificate") and (y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8 (or successor form) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this Agreement and under any
Note. In addition, each Bank agrees that from time to time after the Effective
Date, when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, such Bank will
deliver to the Borrower and the Agent two new accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor
forms), or Form W-8 (or successor form) and a Section 4.04(b)(ii) Certificate,
as the case may be, and such other forms as may be required in order to confirm
or establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement and any Note, or such Bank shall immediately notify the Borrower and
the Agent of its inability to deliver any such Form or Certificate, in which
case such Bank shall not be required to deliver any such Form or Certificate
pursuant to this Section
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4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a),
but subject to Section 13.04(b) and the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
Fees or other amounts payable hereunder for the account of any Bank which is not
a United States person (as such term is defined in Section 7701(a)(30) of the
Code) for U.S. Federal income tax purposes to the extent that such Bank has not
provided to the Borrower U.S. Internal Revenue Service Forms that establish a
complete exemption from such deduction or withholding and (y) the Borrower shall
not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be
made to a Bank in respect of income or similar taxes imposed by the United
States if (I) such Bank has not provided to the Borrower the Internal Revenue
Service Forms required to be provided to the Borrower pursuant to this Section
4.04(b) or (II) in the case of a payment, other than interest, to a Bank
described in clause (ii) above, to the extent that such Forms do not establish a
complete exemption from withholding of such taxes. Notwithstanding anything to
the contrary contained in the preceding sentence or elsewhere in this Section
4.04 and except as set forth in Section 13.04(b), the Borrower agrees to pay any
additional amounts and to indemnify each Bank in the manner set forth in Section
4.04(a) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any Taxes deducted or withheld by it as
described in the immediately preceding sentence as a result of any changes after
the Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of such Taxes.
SECTION 5. Conditions Precedent to Credit Events on the
Initial Borrowing Date. The obligation of each Bank to make Loans, and the
obligation of the Issuing Bank to issue Letters of Credit, on the Initial
Borrowing Date, is subject at the time of the making of such Loans or the
issuance of such Letters of Credit to the satisfaction of the following
conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial Borrowing
Date, (i) the Effective Date shall have occurred and (ii) there shall have been
delivered to the Agent for the account of each of the Banks the appropriate Term
Note and/or Revolving Note executed by the Borrower and to the Swingline Bank,
the Swingline Note executed by the Borrower, in each case, in the amount,
maturity and as otherwise provided herein.
5.02 Officer's Certificate. On the Initial Borrowing Date, the Agent shall
have received a certificate, dated the Initial Borrowing Date and signed on
behalf of the Borrower by the Chairman of the Board, the President or any Vice
President of the Borrower, stating on behalf of the Borrower that all of the
conditions in Sections 5.06, 5.07, 5.08, 5.10, 5.11 and 6.01 have been satisfied
on such date.
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5.03 Opinions of Counsel. On the Initial Borrowing Date, the Agent shall
have received from (i) Chadbourne & Parke LLP, special counsel to the Credit
Parties, an opinion addressed to the Agent, the Collateral Agent and each of the
Banks and dated the Initial Borrowing Date covering the matters set forth in
Exhibit E-1 and such other matters incident to the transaction contemplated
herein as the Agent may reasonably request, and (ii) John J. Smith, Esq.,
general counsel to the Borrower, an opinion addressed to the Agent, the
Collateral Agent and each of the Banks and dated the Initial Borrowing Date,
covering the matters set forth in Exhibit E-2 and such other matters incident to
the transaction contemplated herein as the Agent may reasonably request.
5.04 Corporate Documents; Proceedings; etc. (a) On the Initial Borrowing
Date, the Agent shall have received a certificate from each Credit Party, dated
the Initial Borrowing Date, signed by the Chairman of the Board, the President
or any Vice President of such Credit Party, and attested to by the Secretary or
any Assistant Secretary of such Credit Party, in the form of Exhibit F with
appropriate insertions, together with copies of the certificate of incorporation
(or equivalent organizational document) and by-laws of such Credit Party and the
resolutions of such Credit Party referred to in such certificate, and the
foregoing shall be in form and substance reasonably acceptable to the Agent.
(b) All corporate and legal proceedings and all instruments
and agreements in connection with the transactions contemplated by this
Agreement and the other Documents shall be reasonably satisfactory in form and
substance to the Agent and the Required Banks, and the Agent shall have received
all information and copies of all documents and papers, including records of
corporate proceedings, governmental approvals, good standing certificates and
bring-down telegrams or facsimiles, if any, which the Agent reasonably may have
requested in connection therewith, such documents and papers where appropriate
to be certified by proper corporate or governmental authorities.
(c) On the Initial Borrowing Date, the corporate, ownership
and capital structure (including, without limitation, the terms of any capital
stock, options, warrants or other securities issued by Holdings or any of its
Subsidiaries) of Holdings and its Subsidiaries shall be in form and substance
reasonably satisfactory to the Agent and the Required Banks.
5.05 Plans; Shareholders' Agreements; Management Agreements; Employment
Agreements; Non-Compete Agreements; Collective Bargaining Agreements; Tax
Sharing Agreements; Existing Indebtedness Agreements. On or prior to the Initial
Borrowing Date, there shall have been delivered to the Agent true and correct
copies of the following documents (if any):
(i) all Plans (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500-series, a copy of
the most recent such
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report (including, to the extent required, the related financial and
actuarial statements and opinions and other supporting statements,
certifications, schedules and information), and for each Plan that is
a "single-employer plan," as defined in Section 4001(a)(15) of ERISA,
the most recently prepared actuarial valuation therefor) and any other
"employee benefit plans," as defined in Section 3(3) of ERISA, and any
other material agreements with or for the benefit of current or former
employees of Holdings or any of its Subsidiaries or any ERISA Affiliate
(provided that the foregoing shall apply in the case of any
multiemployer plan, as defined in 4001(a)(3) of ERISA, only to the
extent that any document described therein is in the possession of
Holdings or any Subsidiary of Holdings or any ERISA Affiliate or
reasonably available thereto from the sponsor or trustee of any such
plan);
(ii) all collective bargaining agreements applying or
relating to any employee of Holdings or any of its Subsidiaries
(collectively, the "Collective Bargaining Agreements");
(iii) all agreements entered into by Holdings or any of its
Subsidiaries governing the terms and relative rights of its capital
stock and any agreements entered into by shareholders relating to any
such entity with respect to its capital stock (collectively, the
"Shareholders' Agreements");
(iv) all material agreements with members of, or with respect
to, the management of Holdings or any of its Subsidiaries to which
Holdings or any of its Subsidiaries are parties (collectively, the
"Management Agreements");
(v) all material employment agreements entered into by
Holdings or any of its Subsidiaries (collectively, the "Employment
Agreements");
(vi) any non-compete agreement entered into by Holdings or any
of its Subsidiaries which restrict or limit the ability of Holdings or
any of its Subsidiaries to engage in any line of business in any
geographic area (collectively, the "Non-Compete Agreements");
(vii) all tax sharing, tax allocation and other similar
agreements entered into by Holdings or any of its Subsidiaries
(collectively, the "Tax Sharing Agreements"); and
(viii) all agreements evidencing or relating to Indebtedness of
(including all existing Seller Notes issued by) Holdings or any of its
Subsidiaries which is to remain outstanding after giving effect to the
incurrence of Loans on the Initial Borrowing Date (collectively, the
"Existing Indebtedness Agreements");
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all of which Plans, Collective Bargaining Agreements, Shareholders' Agreements,
Management Agreements, Employment Agreements, Non-Compete Agreements, Tax
Sharing Agreement and Existing Indebtedness Agreements shall be in form and
substance reasonably satisfactory to the Agent and the Required Banks and shall
be in full force and effect on the Initial Borrowing Date.
5.06 Financings; etc. (a) On or prior to the Initial Borrowing Date, (i)
Holdings shall have received gross cash proceeds of at least $32,500,000 from
the Equity Financing (of which no more than (x) $10,000,000 may be received from
the issuance to JNL and Old Hickory of Qualified Preferred Stock of Holdings and
warrants to purchase common stock of Holdings and (y) $2,500,000 may be in the
form of rollover equity by existing management of ATC), (ii) Holdings shall have
contributed the full amount of the gross cash proceeds received by it from the
Equity Financing to the capital of the Borrower as a common equity contribution
in exchange for 100% of the issued and outstanding shares of common stock of the
Borrower and (iii) the Borrower shall have utilized the full amount of such cash
contribution to make payments owing in connection with the Transaction.
(b) On or prior to the Initial Borrowing Date, the Borrower
shall have received gross cash proceeds of $100,000,000 from the issuance by it
of a like principal amount of the Senior Subordinated Notes and (ii) the
Borrower shall have utilized the full amount of the net cash proceeds received
from the issuance of the Senior Subordinated Notes to make payments owing in
connection with the Transaction.
(c) On or prior to the Initial Borrowing Date, there shall
have been delivered to the Agent true and correct copies of the Equity Financing
Documents and the Senior Subordinated Note Documents (including (x) the
supplemental indenture to the Senior Subordinated Note Indenture evidencing
ATC's assumption of the obligations of Acquisition Corp. in respect of the
Senior Subordinated Notes and (y) the guarantees executed by the Subsidiary
Guarantors in respect of the Senior Subordinated Notes), and all of the terms
and conditions of the Equity Financing Documents and the Senior Subordinated
Note Documents shall be reasonably satisfactory in form and substance to the
Agent and the Required Banks. The Equity Financing and the issuance of the
Senior Subordinated Notes shall have been consummated, in each case in all
material respects in accordance with the terms and conditions of the applicable
Documents therefor and all applicable laws.
(d) On the Initial Borrowing Date (but before giving effect to
the Merger and the incurrence of any Loans on such date) ATC and its
Subsidiaries shall have cash on hand of at least $4,500,000.
5.07 Tender Offer; Merger; etc. (a) On or prior to the Initial Borrowing
Date, there shall have been delivered to the Agent true and correct copies of
the Tender
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Offer Documents, which Tender Offer Documents shall be in form and substance
reasonably satisfactory to the Agent and the Required Banks.
(b) On or prior to the Initial Borrowing Date, the Tender
Offer shall have been consummated in all material respects in accordance with
the Tender Offer Documents and all applicable laws. At the time of the
consummation of the Tender Offer, neither the fair price provisions under
applicable law nor the fair price provisions of ATC's articles of incorporation
shall require a higher price be paid for Shares in the Merger than that paid in
the Tender Offer, which price, in any event, shall not exceed that amount set
forth in the Offer to Purchase and the Merger Agreement as in effect on the
Effective Date.
(c) On or prior to the Initial Borrowing Date, there shall
have been delivered to the Agent true and correct copies of the Merger Agreement
and the other Merger Documents, all of which Merger Documents shall be in form
and substance reasonably satisfactory to the Agent and the Required Banks and in
full force and effect. All material conditions precedent to the consummation of
the Merger as contained in the Merger Agreement shall have been satisfied (and
not waived without the consent of the Agent and the Required Banks (which
consent shall not be unreasonably withheld or delayed)), and any amendment to
the Merger Documents shall be required to be reasonably satisfactory in form and
substance to the Agent and the Required Banks.
(d) On or prior to the Initial Borrowing Date, the Merger
shall have been consummated in all material respects in accordance with the
Merger Documents and all applicable laws. After giving effect to the
consummation of the Merger, Holdings shall own 100% of the issued and
outstanding shares of capital stock of ATC.
(e) On or prior to the Initial Borrowing Date, there shall
have been delivered to the Agent true and correct copies of all Proxy Materials,
if any, and all such Proxy Materials shall be required to be in form and
substance reasonably satisfactory to the Agent and the Required Banks.
5.08 Refinancing. (a) On the Initial Borrowing Date, the total commitments
in respect of the Indebtedness to be Refinanced shall have been terminated, and
all loans and notes with respect thereto shall have been repaid in full,
together with interest thereon, all letters of credit issued thereunder shall
have been terminated and all other amounts (including premiums) owing pursuant
to the Indebtedness to be Refinanced shall have been repaid in full and all
documents in respect of the Indebtedness to be Refinanced and all guarantees
with respect thereto shall have been terminated (except as to indemnification
provisions, which may survive to the extent provided therein) and be of no
further force and effect.
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(b) On the Initial Borrowing Date, the creditors in respect of
the Indebtedness to be Refinanced shall have terminated and released any and all
security interests and Liens on the assets owned by ATC and its Subsidiaries.
The Agent shall have received such releases of security interests in and Liens
on the assets owned by ATC and its Subsidiaries as may have been requested by
the Agent, which releases shall be in form and substance reasonably satisfactory
to the Agent. Without limiting the foregoing, there shall have been delivered
(i) proper termination statements (Form UCC-3 or the appropriate equivalent) for
filing under the UCC of each jurisdiction where a financing statement (Form
UCC-1 or the appropriate equivalent) was filed with respect to ATC or any of its
Subsidiaries in connection with the security interests created with respect to
the Indebtedness to be Refinanced and the documentation related thereto, (ii)
termination or reassignment of any security interest in, or Lien on, any
patents, trademarks, copyrights, or similar interests of ATC or any of its
Subsidiaries on which filings have been made, (iii) terminations of all
mortgages, leasehold mortgages, deeds of trust and leasehold deeds of trust
created with respect to property of ATC or any of its Subsidiaries, in each
case, to secure the obligations in respect of the Indebtedness to be Refinanced,
all of which shall be in form and substance reasonably satisfactory to the
Agent, and (iv) all collateral owned by ATC and its Subsidiaries in the
possession of any of the creditors in respect of the Indebtedness to be
Refinanced or any collateral agent or trustee under any related security
document shall have been returned to ATC or its respective Subsidiary, as the
case may be.
(c) The Agent shall have received evidence, in form and
substance reasonably satisfactory to it, that the matters set forth in this
Section 5.08 have been satisfied as of the Initial Borrowing Date.
5.09 ATEC Subordination Agreement. On or prior to the Initial Borrowing
Date, the Agent shall have received a duly executed Subordination Agreement
among ATC, ATEC and Gerald D. Mann (as amended, modified or supplemented from
time to time in accordance with the terms hereof and thereof, the "ATEC
Subordination Agreement"), which ATEC Subordination Agreement shall be in form
and substance reasonably satisfactory to the Agent and shall be in full force
and effect on the Initial Borrowing Date.
5.10 Adverse Change, etc. (a) Since February 28, 1997, nothing shall have
occurred (and neither the Agent nor the Banks shall have become aware of any
facts or conditions not previously known, whether as a result of their due
diligence investigations or otherwise) which the Agent or the Required Banks
shall reasonably determine (a) has had, or could reasonably be expected to have,
a material adverse effect on the rights or remedies of the Banks or the Agent,
or on the ability of any Credit Party to perform its obligations to them
hereunder or under any other Credit Document or (b) has had, or could reasonably
be expected to have, a material adverse effect on the Transaction or on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.
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(b) On or prior to the Initial Borrowing Date, all necessary
governmental (domestic and foreign) and third party approvals and/or consents in
connection with the Transaction and the other transactions contemplated by the
Documents and otherwise referred to herein or therein shall have been obtained
and remain in effect (other than certain third party approvals and consents with
respect to the Acquisition the failure to obtain could not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
Acquisition or on the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of Holdings and its Subsidiaries
taken as a whole) and all applicable waiting periods with respect thereto shall
have expired without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon, the
consummation of the Transaction or the other transactions contemplated by the
Documents or otherwise referred to herein or therein. Additionally, there shall
not exist any judgment, order, injunction or other restraint issued or filed or
a hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon, or materially
delaying, or making economically unfeasible, the consummation of the Transaction
or the other transactions contemplated by the Documents or otherwise required to
be consummated herein or therein.
5.11 Litigation. On the Initial Borrowing Date, there shall be no actions,
suits or proceedings pending or threatened (i) with respect to the Transaction,
this Agreement or any other Document except as disclosed on Schedule XI or (ii)
which the Agent or the Required Banks shall reasonably determine could
reasonably be expected to have a material adverse effect on (a) the Transaction
or on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries taken as
a whole, (b) the rights or remedies of the Banks or the Agent hereunder or under
any other Credit Document or (c) the ability of any Credit Party to perform its
respective obligations to the Banks or the Agent hereunder or under any other
Credit Document.
5.12 Pledge Agreement. On the Initial Borrowing Date, each Credit Party
shall have duly authorized, executed and delivered the Pledge Agreement in the
form of Exhibit G (as amended, modified or supplemented from time to time, the
"Pledge Agreement") and shall have delivered to the Collateral Agent, as pledgee
thereunder, all of the Pledged Securities, if any, referred to therein and owned
by such Credit Party, (x) endorsed in blank in the case of promissory notes
constituting Pledged Securities and (y) together with executed and undated stock
powers in the case of capital stock constituting Pledged Securities.
5.13 Security Agreement. On the Initial Borrowing Date, each Credit Party
shall have duly authorized, executed and delivered the Security Agreement in the
form of Exhibit H (as modified, supplemented or amended from time to time, the
"Security
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Agreement") covering all of such Credit Party's present and future
Security Agreement Collateral, together with:
(i) proper Financing Statements (Form UCC-1 or the
equivalent) fully executed for filing under the UCC or other
appropriate filing offices of each jurisdiction as may be necessary or,
in the reasonable opinion of the Collateral Agent, desirable to perfect
the security interests purported to be created by the Security
Agreement;
(ii) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, listing all effective financing
statements that name any Credit Party or any of its Subsidiaries as
debtor and that are filed in the jurisdictions referred to in clause
(i) above, together with copies of such other financing statements that
name any Credit Party or any of its Subsidiaries as debtor (none of
which shall cover the Collateral except to the extent evidencing
Permitted Liens or in respect of which the Collateral Agent shall have
received termination statements (Form UCC-3 or the equivalent) as shall
be required by local law fully executed for filing);
(iii) evidence of the completion of all other recordings and
filings of, or with respect to, the Security Agreement as may be
necessary or, in the reasonable opinion of the Collateral Agent,
desirable to perfect the security interests intended to be created by
the Security Agreement; and
(iv) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and
protect the security interests purported to be created by the Security
Agreement have been taken.
5.14 Subsidiaries Guaranty. On the Initial Borrowing Date, each Subsidiary
Guarantor shall have duly authorized, executed and delivered the Subsidiaries
Guaranty in the form of Exhibit I (as amended, modified or supplemented from
time to time, the "Subsidiaries Guaranty").
5.15 Acknowledgment and Joinder Agreement. On the Initial Borrowing Date,
ATC, as the surviving corporation of the Merger, shall have duly authorized,
executed and delivered to the Agent the Acknowledgment and Joinder Agreement in
the form of Exhibit J (the "Acknowledgment and Joinder Agreement").
5.16 Financial Statements; Pro Forma Financial Statements, Projections.
On or prior to the Initial Borrowing Date, the Agent shall have received true
and correct copies of the historical financial statements, the pro forma
financial statements and the Projections referred to in Sections 7.05(a) and
(d), which historical financial statements, pro
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forma financial statements and Projections shall be in form and substance
reasonably satisfactory to the Agent and the Required Banks. On or prior to the
Initial Borrowing Date, the Agent shall have received evidence, in form and
substance reasonably satisfactory to the Agent and the Required Banks, that
ATC's pro forma EBITDA for the twelve month period ended February 28, 1997 was
at least $22,491,000 (with such pro forma EBITDA to give pro forma effect to any
acquisitions consummated by ATC on and after March 1, 1996 and prior to the
Initial Borrowing Date, including the Bing Yen Acquisition and the EWI
Acquisition).
5.17 Solvency Opinion; Insurance Certificates. On or prior to the Initial
Borrowing Date, the Agent shall have received:
(i) a solvency opinion from Houlihan, Lokey, Howard & Zukin
Financial Advisors, Inc., which solvency opinion shall be in form and
substance reasonably satisfactory to the Agent; and
(ii) certificates of insurance complying with the requirements
of Section 8.03 for the business and properties of Holdings and its
Subsidiaries, in form and substance reasonably satisfactory to the
Agent and naming the Collateral Agent as an additional insured and as
loss payee, and stating that such insurance shall not be cancelled
without at least 30 days prior written notice by the insurer to the
Collateral Agent (or such shorter period of time as a particular
insurance company generally provides).
5.18 Fees, etc. On the Initial Borrowing Date, the Borrower shall have
paid to the Agent and each Bank all costs, fees and expenses (including, without
limitation, legal fees and expenses) payable to the Agent and such Bank to the
extent then due.
SECTION 6. Conditions Precedent to All Credit Events. The
obligation of each Bank to make Loans (including Loans made on the Initial
Borrowing Date), and the obligation of the Issuing Bank to issue Letters of
Credit, is subject, at the time of each such Credit Event (except as
hereinafter indicated), to the satisfaction of the following conditions:
6.01 No Default; Representations and Warranties. At the time of each such
Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of such Credit Event (it being understood
and agreed that any representation or warranty which by its terms is made
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as of a specified date shall be required to be true and correct in all material
respects only as of such specified date).
6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the
making of each Loan (other than a Swingline Loan and a Revolving Loan made
pursuant to a Mandatory Borrowing), the Agent shall have received a Notice of
Borrowing meeting the requirements of Section 1.03(a). Prior to the making of
each Swingline Loan, the Swingline Bank shall have received the notice referred
to in Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Agent
and the Issuing Bank shall have received a Letter of Credit Request meeting the
requirements of Section 2.03.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by Holdings and the Borrower to the
Agent and each of the Banks that all the conditions specified in Section 5 (with
respect to Credit Events on the Initial Borrowing Date) and in this Section 6
(with respect to Credit Events on or after the Initial Borrowing Date) and
applicable to such Credit Event exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Agent at the Notice Office for the account of each of the Banks and,
except for the Notes, in sufficient counterparts or copies for each of the Banks
and shall be in form and substance reasonably satisfactory to the Agent and the
Required Banks.
SECTION 7 Representations, Warranties and Agreements. In
order to induce the Banks to enter into this Agreement and to make the Loans,
and issue (or participate in) the Letters of Credit as provided herein, each of
Holdings and the Borrower makes the following representations, warranties and
agreements, in each case after giving effect to the Transaction, all of which
shall survive the execution and delivery of this Agreement and the Notes and the
making of the Loans and issuance of the Letters of Credit, and with the
occurrence of each Credit Event on or after the Initial Borrowing Date being
deemed to constitute a representation and warranty that the matters specified in
this Section 7 are true and correct in all material respects on and as of the
Initial Borrowing Date and on the date of each such Credit Event (it being
understood and agreed that any representation or warranty which by its terms is
made as of a specified date shall be required to be true and correct in all
material respects only as of such specified date).
7.01 Corporate Status. Each Credit Party and each of its Subsidiaries (i)
is a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction of its organization, (ii) has the corporate power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes
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to engage and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where the ownership, leasing or operation of
its property or the conduct of its business requires such qualifications except
for failures to be so qualified which, individually or in the aggregate, could
not reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.
7.02 Corporate and Other Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Documents to which it is party and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of each of such Documents. Each Credit Party has duly executed and
delivered each of the Documents to which it is party, and each of such Documents
constitutes its legal, valid and binding obligation enforceable in accordance
with its terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law).
7.03 No Violation. Neither the execution, delivery or performance by any
Credit Party of the Documents to which it is a party, nor compliance by it with
the terms and provisions thereof, (i) will contravene any provision of any law,
statute, rule or regulation or any order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except pursuant to the Security
Documents) upon any of the property or assets of Holdings or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
credit agreement or loan agreement, or any other material agreement, contract or
instrument, to which Holdings or any of its Subsidiaries is a party or by which
it or any of its property or assets is bound or to which it may be subject
(including, without limitation, any Seller Note), except for the violation of
certain lease and other agreements as a result of Acquisition, which violations
could not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the Acquisition or on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole, or (iii) will violate any
provision of the certificate of incorporation or by-laws (or equivalent
organizational documents) of Holdings or any of its Subsidiaries.
7.04 Approvals. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except for (x) those
that have otherwise been obtained or made on or prior to the Initial Borrowing
Date and which remain in full force and effect on the Initial Borrowing Date,
(y) those required to register the Senior Subordinated Notes with the SEC and
(z) the filing of continuation statements
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in connection with the Liens granted pursuant to the Security Agreement), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of any Document or (ii) the legality,
validity, binding effect or enforceability of any such Document.
7.05 Financial Statements; Financial Condition; Undisclosed Liabilities;
Projections; etc. (a) The consolidated balance sheets of ATC for the fiscal year
and nine month period ended on February 28, 1997 and November 30, 1997,
respectively, and the related consolidated statements of income, cash flows and
shareholders' equity of ATC for the fiscal year or nine month period, as the
case may be, ended on such dates, copies of which have been furnished to the
Banks prior to the Initial Borrowing Date, present fairly in all material
respects the consolidated financial position of ATC at the dates of such balance
sheets and the consolidated results of the operations of ATC for the periods
covered thereby. The consolidated balance sheet of each of Bing Yen and EWI for
the fiscal years ended on December 31, 1996 and June 30, 1997, respectively, and
the related consolidated statements of income, cash flows and shareholders'
equity of each of Bing Yen and EWI for the respective fiscal years ended on such
dates, copies of which have been furnished to the Banks prior to the Initial
Borrowing Date, present fairly in all material respects the consolidated
financial position of each of Bing Yen and EWI at the dates of such balance
sheets and the consolidated results of operations of each of Bing Yen and EWI
for the periods covered thereby. All of the foregoing historical financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied. The pro forma consolidated financial statements
of Holdings and its Subsidiaries as of November 30, 1997, in each case after
giving effect to the Transaction and the financing therefor, copies of which
have been furnished to the Banks prior to the Initial Borrowing Date, present
fairly in all material respects the pro forma consolidated financial position of
Holdings and its Subsidiaries as of November 30, 1997 and the pro forma
consolidated results of operations of Holdings and its Subsidiaries for the
twelve month and nine month periods covered thereby, as the case may be. After
giving effect to the Transaction (but for this purpose assuming that the
Transaction, the Bing Yen Acquisition, the EWI Acquisition and the related
financing had occurred prior to February 28, 1997), since February 28, 1997,
there has been no material adverse change in the business, operations, property,
assets, liabilities, condition (financial or otherwise) or prospects of Holdings
and its Subsidiaries taken as a whole.
(b) On and as of the Initial Borrowing Date and after giving
effect to the Transaction and to all Indebtedness (including the Loans) being
incurred or assumed and Liens created by the Credit Parties in connection
therewith (a) the sum of the assets, at a fair valuation, of each of the
Borrower on a stand-alone basis and of Holdings and its Subsidiaries taken as a
whole will exceed its debts; (b) each of the Borrower on a stand-alone basis and
Holdings and its Subsidiaries taken as a whole has not incurred and does
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not intend to incur, and does not believe that it will incur, debts beyond its
ability to pay such debts as such debts mature; and (c) each of the Borrower on
a stand alone basis and Holdings and its Subsidiaries taken as a whole will have
sufficient capital with which to conduct its business. For purposes of this
Section 7.05(b), "debt" means any liability on a claim, and "claim" means (i)
right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured. The amount of contingent liabilities at any time shall be computed
as the amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
(c) Except as disclosed in the financial statements delivered
pursuant to Section 7.05(a) (including in the notes thereto) or as set forth on
Schedule XII, there were as of the Initial Borrowing Date no liabilities or
obligations with respect to Holdings or any of its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) which, either individually or in aggregate, could reasonably be
expected to be material to Holdings and its Subsidiaries taken as a whole. As of
the Initial Borrowing Date, neither Holdings nor the Borrower knows of any basis
for the assertion against it or any of its Subsidiaries of any liability or
obligation of any nature whatsoever that is not disclosed in the financial
statements delivered pursuant to Section 7.05(a) or on Schedule XII which,
either individually or in the aggregate, could reasonably be expected to be
material to Holdings and its Subsidiaries taken as a whole.
(d) On and as of the Initial Borrowing Date, the Projections
delivered to the Agent and the Banks prior to the Initial Borrowing Date have
been prepared in good faith and are based on reasonable assumptions, and there
are no statements or conclusions in the Projections which are based upon or
include information known to Holdings or the Borrower to be misleading in any
material respect or which fail to take into account material information known
to Holdings or the Borrower regarding the matters reported therein. On the
Initial Borrowing Date, Holdings and the Borrower believe that the Projections
are reasonable and attainable, it being recognized by the Banks, however, that
projections as to future events are not to be viewed as facts and are subject to
various contingencies (many of which may be outside the Borrower's control) and
that the actual results during the period or periods covered by the Projections
may differ from the projected results and that the differences may be material.
7.06 Litigation. There are no actions, suits or proceedings pending or, to
the best knowledge of Holdings and the Borrower, threatened (i) with respect to
the Transaction or any Document except as disclosed on Schedule XI, (ii) with
respect to any
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material Indebtedness of Holdings or any of its Subsidiaries or (iii) that are
reasonably likely to materially and adversely affect the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole.
7.07 True and Complete Disclosure. All factual information (taken as a
whole) furnished by or on behalf of any Credit Party in writing to the Agent or
any Bank (including, without limitation, all information contained in the
Documents) for purposes of or in connection with this Agreement, the other
Credit Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of any Credit Party in writing to the Agent or any Bank will be, true and
accurate in all material respects on the date as of which such information was
or is dated or certified and not incomplete by omitting to state any fact
necessary to make such information (taken as a whole) not misleading in any
material respect at such time in light of the circumstances under which such
information was provided.
7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the
Term Loans will be used by the Borrower (i) to effect the Refinancing and (ii)
to pay fees and expenses related to this Agreement.
(b) All proceeds of the Working Capital Loans and the
Swingline Loans shall be used for the working capital and general corporate
purposes of the Borrower and its Subsidiaries (it being understood and agreed
that such purposes shall include payments to effect the repayment of working
capital indebtedness of entities that become Subsidiaries of the Borrower that
is outstanding at the time of the acquisition thereof pursuant to a Permitted
Acquisition), provided that up to $9,000,000 of Working Capital Loans in the
aggregate may be incurred on the Initial Borrowing Date to effect the
Refinancing and to pay fees and expenses in connection with this Agreement. The
proceeds of all Acquisition Loans shall be utilized to make Permitted
Acquisitions.
(c) No part of any Credit Event (or the proceeds thereof) will
be used to purchase or carry any Margin Stock (including any Shares tendered
pursuant to the Tender Offer or to pay the merger consideration pursuant to the
Merger) or to extend credit for the purpose of purchasing or carrying any Margin
Stock. Neither the making of any Loan nor the use of the proceeds thereof nor
the occurrence of any other Credit Event will violate or be inconsistent with
the provisions of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
7.09 Tax Returns and Payments. Except as set forth on Schedule XIII, each
of Holdings and each of its Subsidiaries has filed all federal and state income
tax returns and all other material tax returns, domestic and foreign, required
to be filed by it and has paid all taxes and assessments payable by it which
have become due, except for
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those contested in good faith and adequately disclosed and fully provided for on
the financial statements of Holdings and its Subsidiaries in accordance with
generally accepted accounting principles. Holdings and each of its Subsidiaries
have at all times paid, or have provided adequate reserves (in the good faith
judgment of the management of Holdings) for the payment of, all federal, state
and other material income taxes applicable for all prior fiscal years and for
the current fiscal year to date. There is no material action, suit, proceeding,
investigation, audit or claim now pending or, to the best knowledge of Holdings
and the Borrower threatened, by any authority regarding any taxes relating to
Holdings or any of its Subsidiaries. As of the Initial Borrowing Date, neither
Holdings nor any of its Subsidiaries has entered into an agreement or waiver or
been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of Holdings or any of
its Subsidiaries, or is aware of any circumstances that would cause the taxable
years or other taxable periods of Holdings or any of its Subsidiaries not to be
subject to the normally applicable statute of limitations.
7.10 Compliance with ERISA. (a) Schedule IV sets forth, as of the Initial
Borrowing Date, each Plan; except as set forth on Schedule IV, each Plan (and
each related trust, insurance contract or fund) is in substantial compliance
with its terms and with all applicable laws, including, without limitation,
ERISA and the Code; each Plan (and each related trust, if any) which is intended
to be qualified under Section 401(a) of the Code has received a determination
letter from the Internal Revenue Service to the effect that it meets the
requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has
occurred; no Plan which is a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded
Current Liability; no Plan which is subject to Section 412 of the Code or
Section 302 of ERISA has an accumulated funding deficiency, within the meaning
of such sections of the Code or ERISA, or has applied for or received a waiver
of an accumulated funding deficiency or an extension of any amortization period,
within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA;
all contributions required to be made with respect to a Plan have been timely
made; neither Holdings nor any Subsidiary of Holdings nor any ERISA Affiliate
has incurred any material liability (including any indirect, contingent or
secondary liability) to or on account of a Plan pursuant to Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971 or 4975 of the Code or expects to incur any such material
liability under any of the foregoing sections with respect to any Plan; no
condition exists which presents a material risk to Holdings or any Subsidiary of
Holdings or any ERISA Affiliate of incurring a material liability to or on
account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no
proceedings have been instituted to terminate or appoint a trustee to administer
any Plan which is subject to Title IV of ERISA; no action, suit, proceeding,
hearing, audit or investigation with respect to the administration, operation or
the investment of assets of any Plan (other than routine claims for benefits) is
pending, expected or threatened; using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title
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IV of ERISA, the aggregate liabilities of Holdings and its Subsidiaries and its
ERISA Affiliates to all Plans which are multiemployer plans (as defined in
Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as
of the close of the most recent fiscal year of each such Plan ended prior to the
date of the most recent Credit Event, would not exceed $500,000; each group
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the
Code) which covers or has covered employees or former employees of Holdings, any
Subsidiary of Holdings or any ERISA Affiliate has at all times been operated in
material compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on
the assets of Holdings or any Subsidiary of Holdings or any ERISA Affiliate
exists or is likely to arise on account of any Plan; and Holdings and its
Subsidiaries may cease contributions to or terminate any employee benefit plan
maintained by any of them without incurring any material liability.
(b) Each Foreign Pension Plan has been maintained in material
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. All
contributions required to be made with respect to a Foreign Pension Plan have
been timely made. Neither Holdings nor any of its Subsidiaries has incurred any
material obligation in connection with the termination of or withdrawal from any
Foreign Pension Plan. The present value of the accrued benefit liabilities
(whether or not vested) under each Foreign Pension Plan, determined as of the
end of Holdings most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
7.11 The Security Documents. (a) The provisions of the Security Agreement
are effective to create in favor of the Collateral Agent for the benefit of the
Secured Creditors a legal, valid and enforceable security interest in all right,
title and interest of the Credit Parties in the Security Agreement Collateral
described therein, and the Collateral Agent, for the benefit of the Secured
Creditors, has a fully perfected first lien on, and security interest in, all
right, title and interest of the Credit Parties in all of the Security Agreement
Collateral described therein, in each case subject to no other Liens other than
Permitted Liens. The recordation of the Grant of Security Interest in U.S.
Patents and Trademarks in the form attached to the Security Agreement in the
United States Patent and Trademark Office, together with filings on Form UCC-1
made pursuant to the Security Agreement, will create, as may be perfected by
such filing and recordation, a perfected security interest in the United States
trademarks and patents covered by the Security Agreement. The recordation of
the Grant of Security Interest in U.S. Copyrights in the form attached to the
Security Agreement with the United States Copyright Office, together with
filings on Form UCC-1 made pursuant to the Security Agreement, will create,
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as may be perfected by such filing and recordation, a perfected security
interest in the United States copyrights covered by the Security Agreement.
(b) The security interests created in favor of the Collateral
Agent, as pledgee, for the benefit of the Secured Creditors, under the Pledge
Agreement constitute first priority perfected security interests in the Pledged
Securities described in the Pledge Agreement, subject to no security interests
of any other Person. So long as the Collateral Agent has control (as defined in
Section 9-115 of the New York UCC) of the Pledged Securities, no filings or
recordings are required to perfect (or maintain the perfection or priority of)
the security interests created in the Pledged Securities under the Pledge
Agreement.
(c) After the execution and deliver thereof pursuant to
Section 811, the Mortgages create, for the obligations purported to be secured
thereby, a valid and enforceable perfected security interest in and mortgage
lien on all of the Mortgaged Properties in favor of the Collateral Agent (or
such other trustee as may be required or desired under local law) for the
benefit of the Secured Creditors, superior to and prior to the rights of all
third persons (except that the security interest and mortgage lien created in
the Mortgaged Properties may be subject to the Permitted Encumbrances related
thereto) and subject to no other Liens (other than Liens permitted under Section
9.01). Schedule III contains a true and complete list of each parcel of Real
Property owned or leased by Holdings and its Subsidiaries on the Initial
Borrowing Date, and the type of interest therein held by Holdings or such
Subsidiary. Holdings and each of its Subsidiaries have good and marketable title
to all fee-owned Real Property and valid leasehold title to all Leaseholds, in
each case free and clear of all Liens except those described in the first
sentence of this subsection (c).
7.12 Representations and Warranties in the Documents. All representations
and warranties set forth in the other Documents were true and correct in all
material respects at the time as of which such representations and warranties
were made (or deemed made) and shall be true and correct in all material
respects as of the Initial Borrowing Date as if such representations and
warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date.
7.13 Properties. Holdings and each of its Subsidiaries have good title to
all material properties owned by them, including all property reflected in the
balance sheets referred to in Section 7.05(a) (except as sold or otherwise
disposed of since the date of such balance sheet in the ordinary course of
business or as permitted by the terms of this Agreement), free and clear of all
Liens, other than Permitted Liens.
7.14 Capitalization. (a) On the Initial Borrowing Date and after giving
effect to the Transaction and the other transactions contemplated hereby, the
authorized
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capital stock of Holdings shall consist of (i) 15,000,000 shares of common
stock, $.01 par value per share, and (ii) 2,000,000 shares of preferred stock,
$.01 par value per share, of which 100,000 shares of series A Preferred Stock
shall be issued and outstanding. All outstanding shares of capital stock of
Holdings have been duly and validly issued and are fully paid and
non-assessable. Holdings does not have outstanding any securities convertible
into or exchangeable for its capital stock or outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock, except
(i) for options to purchase shares of Holdings' common stock which may be issued
from time to time to directors, officers and employees of Holdings or any of its
Subsidiaries, (ii) warrants to purchase shares of Holdings' common stock issued
to JNL and Old Hickory as part of the Equity Financing, (iii) Qualified
Preferred Stock of Holdings which may be convertible into shares of common stock
of Holdings, and (iv) as may be set forth in the Shareholders' Agreements
delivered pursuant to Section 5.05(iii).
(b) On the Initial Borrowing Date and after giving effect to
the Transaction and the other transactions contemplated hereby, the authorized
capital stock of the Borrower shall consist of one share of common stock, $0.01
par value per share, which shall be owned by Holdings. All outstanding shares of
capital stock of the Borrower have been duly and validly issued, are fully paid
and nonassessable. The Borrower does not have outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.
7.15 Subsidiaries. As of the Initial Borrowing Date, Holdings has no
Subsidiaries other than the Borrower and its Subsidiaries and the Borrower has
no Subsidiaries other than those Subsidiaries listed on Schedule V. Schedule V
correctly sets forth, as of the Initial Borrowing Date, the percentage ownership
(direct or indirect) of Holdings in each class of capital stock or other equity
of each of its Subsidiaries and also identifies the direct owner thereof.
7.16 Compliance with Statutes, etc. Each of Holdings and each of its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls), except such
noncompliances as could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of Holdings and its Subsidiaries taken as a whole.
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7.17 Investment Company Act. Neither Holdings nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
7.18 Public Utility Holding Company Act. Neither Holdings nor any of its
Subsidiaries is 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.
7.19 Environmental Matters. (a) Holdings and each of its Subsidiaries have
complied with, and on the date of each Credit Event are in compliance with, all
applicable Environmental Laws and the requirements of any permits issued under
such Environmental Laws. There are no pending or, to the best knowledge of
Holdings and the Borrower, threatened Environmental Claims against Holdings or
any of its Subsidiaries (including any such claim arising out of the ownership,
lease or operation by Holdings or any of its Subsidiaries of any Real Property
no longer owned, leased or operated by Holdings or any of its Subsidiaries) or
any Real Property owned, leased or operated by Holdings or any of its
Subsidiaries. There are no facts, circumstances, conditions or occurrences with
respect to the business or operations of Holdings or any of its Subsidiaries, or
any Real Property owned, leased or operated by Holdings or any of its
Subsidiaries (including any Real Property formerly owned, leased or operated by
Holdings or any of its Subsidiaries but no longer owned, leased or operated by
Holdings or any of its Subsidiaries) or, to the knowledge of Holdings or the
Borrower, any property adjoining or adjacent to any such Real Property, that
could reasonably be expected (i) to form the basis of an Environmental Claim
against Holdings or any of its Subsidiaries or any Real Property owned, leased
or operated by Holdings or any of its Subsidiaries or (ii) to cause any Real
Property owned, leased or operated by Holdings or any of its Subsidiaries to be
subject to any restrictions on the ownership, occupancy or transferability of
such Real Property by Holdings or any of its Subsidiaries under any applicable
Environmental Law.
(b) Hazardous Materials have not at any time been generated,
used, treated or stored on, or transported to or from, any Real Property owned,
leased or operated by Holdings or any of its Subsidiaries where such generation,
use, treatment or storage has violated or has given rise to an Environmental
Claim under, or could reasonably be expected to violate or give rise to an
Environmental Claim under, any applicable Environmental Law. Hazardous Materials
have not at any time been Released or disposed of on or from any Real Property
owned, leased or operated by Holdings or any of its Subsidiaries where such
Release or disposal has violated or given rise to an Environmental Claim under,
or could reasonably be expected to violate or give rise to an Environmental
Claim under, any applicable Environmental Law.
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(c) Notwithstanding anything to the contrary in this Section
7.19, the representations and warranties made in this Section 7.19 shall not be
untrue unless the effect of any or all violations, claims, restrictions,
failures and noncompliances of the types described above in this Section 7.19
could reasonably be expected to, either individually or in the aggregate, have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.
7.20 Labor Relations. Neither Holdings nor any of its Subsidiaries is
engaged in any unfair labor practice that could reasonably be expected to have a
material adverse effect on Holdings and its Subsidiaries taken as a whole. There
is (i) no unfair labor practice complaint pending against Holdings or any of its
Subsidiaries or, to the best knowledge of Holdings or the Borrower, threatened
against any of them, before the National Labor Relations Board, and no grievance
or arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against Holdings or any of its Subsidiaries or, to the
best knowledge of Holdings and the Borrower, threatened against any of them,
(ii) no strike, labor dispute, slowdown or stoppage pending against Holdings or
any of its Subsidiaries or, to the best knowledge of Holdings and the Borrower,
threatened against Holdings or any of its Subsidiaries and (iii) no union
representation question exists with respect to the employees of Holdings or any
of its Subsidiaries, except (with respect to any matter specified in clause (i),
(ii) or (iii) above, either individually or in the aggregate) such as could not
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.
7.21 Patents, Licenses, Franchises and Formulas. Each of Holdings and each
of its Subsidiaries owns or has the right to use all the patents, trademarks,
permits, service marks, trade names, copyrights, licenses, franchises,
proprietary information (including but not limited to rights in computer
programs and databases) and formulas, or rights with respect to the foregoing,
and has obtained assignments of all leases and other rights of whatever nature,
necessary for the present conduct of its business, without any known conflict
with the rights of others which, or the failure to obtain which, as the case may
be, could reasonably be expected to result in a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries taken as a whole.
7.22 Indebtedness. Schedule VI sets forth a true and complete list of all
Indebtedness (including Contingent Obligations and Seller Notes) of Holdings and
its Subsidiaries as of the Initial Borrowing Date and which is to remain
outstanding after giving effect to the Transaction (excluding the Loans, the
Letters of Credit and the Senior Subordinated Notes, the "Existing
Indebtedness"), in each case showing the aggregate
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principal amount thereof and the name of the respective borrower and any Credit
Party or any of its Subsidiaries which directly or indirectly guarantees such
debt.
7.23 Tender Offer. At the time of consummation thereof, the Tender Offer
shall have been consummated in all material respects in accordance with the
terms of the Tender Offer Documents and all applicable laws. At the time of
consummation of the Tender Offer, all third party approvals and all consents and
approvals of, and filings and registrations with, and all other actions in
respect of, all governmental agencies, authorities or instrumentalities required
in order to make or consummate the Tender Offer (or otherwise referred to in the
Offer to Purchase) will have been obtained, given, filed or taken and are or
will be in full force and effect (or effective judicial relief with respect
thereto has been obtained). All actions taken by Holdings or any of its
Subsidiaries pursuant to or in furtherance of the Tender Offer have been taken
in all material respects in compliance with the Tender Offer Documents and all
applicable laws.
7.24 Merger. At the time of consummation thereof, the Merger shall have
been consummated in all material respects in accordance with the terms of the
Merger Documents and all applicable laws. At the time of consummation of the
Merger, all third party approvals and all consents (other than certain third
party approvals and consents with respect to the Acquisition the failure to
obtain could not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the Acquisition or on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole) and approvals of,
and filings and registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required in order to
make or consummate the Merger will have been obtained, given, filed or taken and
are or will be in full force and effect (or effective judicial relief with
respect thereto has been obtained). All applicable waiting periods with respect
thereto have or, prior to the time when required, will have, expired without, in
all such cases, any action being taken by any competent authority which
restrains, prevents, or imposes material adverse conditions upon the Merger.
Additionally, there does not exist any judgment, order or injunction prohibiting
the Merger or the performance by Holdings or any of its Subsidiaries of their
respective obligations under the Merger Documents. As of the Initial Borrowing
Date, all actions taken by Holdings or any of its Subsidiaries pursuant to or in
furtherance of the Merger have been taken in all material respects in compliance
with the Merger Documents and all applicable laws.
7.25 Issuance of the Senior Subordinated Notes. At the time of the issuance
thereof, the Senior Subordinated Notes shall have been issued in all material
respects in accordance with the terms of the Senior Subordinated Note Documents
and all applicable laws. At the time of the issuance thereof, all consents,
approvals of and permits for, and filings and registrations with, and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required in order to issue the Senior Subordinated
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Notes have been (or will, within the time frame required, be) obtained, given,
filed or taken and are or will be in full force and effect (or effective
judicial relief with respect thereto has been obtained). Additionally, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the issuance of the Senior Subordinated Notes
or the performance by Acquisition Corp. or any of its Subsidiaries of their
obligations under the Senior Subordinated Note Documents. All actions taken by
the Borrower or any of its Subsidiaries pursuant to or in furtherance of the
issuance of Senior Subordinated Notes have been taken in all material respects
in compliance with the Senior Subordinated Note Documents and all applicable
laws.
7.26 Special Purpose Corporations. (a) Holdings and Acquisition Corp. were
formed to effect the Transaction. Prior to the consummation of the Tender
Offer, (i) Holdings had no significant assets (other than the capital stock of
Acquisition Corp.) or liabilities (other than those liabilities under the
Documents) and (ii) Acquisition Corp. had no significant assets or liabilities
(other than those liabilities under the Documents).
(b) After the consummation of the Transaction, Holdings has no
significant assets (other than the capital stock of the Borrower)) or material
liabilities (other than those liabilities under this Agreement and the other
Documents to which it is a party).
(c) Prior to the consummation of the Merger, Acquisition Corp.
has no significant assets (other than the Shares of ATC tendered to it pursuant
to the Tender Offer) or material liabilities (other than those liabilities under
this Agreement and the other Documents to which it is party).
7.27 Insurance. Schedule VII sets forth a true and complete listing of all
insurance maintained by Holdings and its Subsidiaries as of the Initial
Borrowing Date, and with the amounts insured (and any deductibles) set forth
therein.
7.28 Senior Subordinated Notes. The subordination provisions contained in
the Senior Subordinated Notes and in the other Senior Subordinated Note
Documents are enforceable against the respective Credit Parties party thereto
and the holders of the Senior Subordinated Notes, and all Obligations and
Guaranteed Obligations (as defined in the Subsidiaries Guaranty) are within the
definition of "Senior Indebtedness" or "Guarantor Senior Indebtedness", as the
case may be, included in such subordination provisions.
SECTION 8. Affirmative Covenants. Each of Holdings and the
Borrower hereby covenants and agrees that on and after the Effective Date and
until the Total Commitment and all Letters of Credit have terminated and the
Loans, Notes and Unpaid Drawings, together with interest, Fees and all other
Obligations (other than indemnities
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described in Section 13.13 which are not then due and payable) incurred
hereunder and thereunder, are paid in full:
8.01 Information Covenants. Holdings will furnish to each Bank:
(a) Monthly Reports. Within 50 days after the end of each fiscal
month of Holdings (commencing with its fiscal month ending on March 31,
1998), the consolidated balance sheet of Holdings and its Subsidiaries
as at the end of such fiscal month and the related consolidated
statements of income and retained earnings and statement of cash flows
for such fiscal month and for the elapsed portion of the fiscal year
ended with the last day of such fiscal month, in each case setting
forth comparative figures for the corresponding fiscal month in the
prior fiscal year and comparable budgeted figures for such fiscal
month.
(b) QuarterlyFinancial Statements. Within 50 days after the close
of the first three quarterly accounting periods in each fiscal year of
Holdings (commencing with its quarterly accounting period ending on May
31, 1998), the consolidated balance sheet of Holdings and its
Subsidiaries as at the end of such quarterly accounting period and the
related consolidated statements of income and retained earnings and
statement of cash flows for such quarterly accounting period and for
the elapsed portion of the fiscal year ended with the last day of such
quarterly accounting period, in each case setting forth comparative
figures for the related periods in the prior fiscal year, all of which
shall be certified by the Chief Financial Officer of Holdings, subject
to normal year-end audit adjustments and the absence of footnotes.
(c) Annual Financial Statements. Within 95 days after the
close of each fiscal year of Holdings, (i) the consolidated balance
sheet of Holdings and its Subsidiaries as at the end of such fiscal
year and the related consolidated statements of income and retained
earnings and statement of cash flows for such fiscal year setting
forth comparative figures for the preceding fiscal year and certified
by Deloitte & Touche LLP or such other independent certified public
accountants of recognized national standing reasonably acceptable to
the Agent, together with a report of such accounting firm stating that
in the course of its regular audit of the financial statements of
Holdings and its Subsidiaries, which audit was conducted in accordance
with generally accepted auditing standards, such accounting firm
obtained no knowledge of any Default or an Event of Default relating
to accounting matters which has occurred and is continuing or, 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
and (ii) management's discussion and analysis of the material
operational and financial developments during such fiscal year.
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(d) Management Letters. Promptly after Holdings' or any of its
Subsidiaries' receipt thereof, a copy of any "management letter"
received from its certified public accountants and management's
response thereto.
(e) Budgets and Projections. No later than 30 days following the
first day of each fiscal year of Holdings (commencing with its fiscal
year ending February 28, 1999), a budget in form reasonably
satisfactory to the Agent (including budgeted statements of income and
sources and uses of cash and balance sheets) prepared by Holdings (i)
for each of the twelve months of such fiscal year prepared in detail
and (ii) for each of the immediately three succeeding fiscal years
prepared in summary form, in each case setting forth, with appropriate
discussion, the principal assumptions upon which such budgets are
based.
(f) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 8.01(b) and (c), a
certificate of the Chief Financial Officer of Holdings to the effect
that, to the best of such officer's knowledge, no Default or Event of
Default has occurred and is continuing or, if any Default or Event of
Default has occurred and is continuing, specifying the nature and
extent thereof, which certificate shall (x) set forth in reasonable
detail the calculations required to establish (A) whether Holdings and
its Subsidiaries were in compliance with the provisions of Sections
4.02(e), 4.02(g), 9.04 and 9.07 through 9.09, inclusive, at the end of
such fiscal quarter or year, as the case may be, and (B) the Applicable
Eurodollar Rate Margin and the Applicable Base Rate Margin for the
Applicable Margin Period commencing with the date of the delivery of
such financial statements, and (y) if delivered with the financial
statements required by Section 8.01(c), set forth in reasonable detail
the amount of (and the calculations required to establish the amount
of) Excess Cash Flow for the respective Excess Cash Payment Period.
(g) Notice of Default or Litigation. Promptly upon, and in any
event within three Business Days after, any officer of any Credit Party
obtains knowledge thereof, notice of (i) the occurrence of any event
which constitutes a Default or an Event of Default and (ii) any
litigation or governmental investigation or proceeding pending (x)
against Holdings or any of its Subsidiaries which could reasonably be
expected to materially and adversely affect the business, operations,
property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole, (y) with
respect to any material Indebtedness of Holdings or any of its
Subsidiaries or (z) with respect to the Transaction or any Document.
(h) Other Reports and Filings. Promptly after the filing or
delivery thereof, copies of all financial information, proxy materials
and reports, if any, which
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Holdings or any of its Subsidiaries shall publicly file with the
Securities and Exchange Commission or any successor thereto (the "SEC")
or deliver to holders of its material Indebtedness pursuant to the
terms of the documentation governing such Indebtedness (or any trustee,
agent or other representative therefor).
(i) Environmental Matters. Promptly after any officer of any
Credit Party obtains knowledge thereof, notice of one or more of the
following environmental matters, unless such environmental matters
could not, individually or when aggregated with all other such
environmental matters, be reasonably expected to materially and
adversely affect the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of
Holdings and its Subsidiaries taken as a whole:
(i) any pending or threatened Environmental Claim
against Holdings or any of its Subsidiaries or any Real
Property owned, leased or operated by Holdings or any of its
Subsidiaries;
(ii) any condition or occurrence on or arising from
any Real Property owned, leased or operated by Holdings or
any of its Subsidiaries that (a) results in noncompliance by
Holdings or any of its Subsidiaries with any applicable
Environmental Law or (b) could be expected to form the basis
of an Environmental Claim against Holdings or any of its
Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property
owned, leased or operated by Holdings or any of its
Subsidiaries that could be expected to cause such Real
Property to be subject to any restrictions on the ownership,
occupancy, use or transferability by Holdings or any of its
Subsidiaries of such Real Property under any Environmental
Law; and
(iv) the taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous
Material on any Real Property owned, leased or operated by
Holdings or any of its Subsidiaries as required by any
Environmental Law or any governmental or other administrative
agency; provided, that in any event Holdings shall deliver to
each Bank all notices received by Holdings or any of its
Subsidiaries from any government or governmental agency
under, or pursuant to, CERCLA which identify Holdings or any
of its Subsidiaries as potentially responsible parties for
remediation costs or which otherwise notify Holdings or any
of its Subsidiaries of potential liability under CERCLA.
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All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and Holdings'
or such Subsidiary's response thereto.
(j) Other Information. From time to time, such other information
or documents (financial or otherwise) with respect to Holdings or any of its
Subsidiaries as the Agent or any Bank may reasonably request.
8.02 Books, Records, Inspections and Annual Meetings. (a) Holdings will,
and will cause each of its Subsidiaries to, keep proper books of record and
accounts in which full, true and correct entries in conformity with generally
accepted accounting principles and all requirements of law shall be made of all
dealings and transactions in relation to its business and activities. Holdings
will, and will cause each of its Subsidiaries to, permit officers and designated
representatives of the Agent or any Bank to visit and inspect, under guidance of
officers of Holdings or such Subsidiary, any of the properties of Holdings or
such Subsidiary, and to examine the books of account of Holdings or such
Subsidiary and discuss the affairs, finances and accounts of Holdings or such
Subsidiary with, and be advised as to the same by, its and their officers and
independent accountants, all upon reasonable prior notice and at such reasonable
times and intervals and to such reasonable extent as the Agent or such Bank may
reasonably request.
(b) At a date to be mutually agreed upon between the Agent and
Holdings occurring on or prior to the 120th day after the close of each fiscal
year of Holdings, Holdings shall, at the request of the Agent, hold a meeting
with all of the Banks at which meeting shall be reviewed the financial results
of Holdings and its Subsidiaries for the previous fiscal year and the budgets
presented for the current fiscal year of Holdings.
8.03 Maintenance of Property; Insurance. (a) Holdings will, and will cause
each of its Subsidiaries to, (i) keep all property necessary to the business of
Holdings and its Subsidiaries in reasonably good working order and condition,
ordinary wear and tear excepted, (ii) maintain insurance on all such property in
at least such amounts and against at least such risks as is consistent and in
accordance with industry practice for companies similarly situated owning
similar properties in the same general areas in which Holdings or any of its
Subsidiaries operates, and (iii) furnish to the Agent, upon written request,
full information as to the insurance carried. At any time that insurance at or
above the levels described on Schedule VII is not being maintained by Holdings
or any Subsidiary of Holdings, Holdings will, or will cause one of its
Subsidiaries to, promptly notify the Agent in writing and, if thereafter
reasonably requested by the Agent or the Required Banks to do so, Holdings or
any such Subsidiary, as the case may be, shall obtain such insurance at such
levels and coverage which are at least as great as to the extent such insurance
is reasonably available at a reasonable expense.
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(b) Holdings will, and will cause each of its Subsidiaries to,
at all times keep its property insured in favor of the Collateral Agent, and all
policies (including Mortgage Policies) or certificates (or certified copies
thereof) with respect to such insurance (and any other insurance maintained by
Holdings and/or such Subsidiaries) (i) shall be endorsed to the Collateral
Agent's satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as loss payee and/or additional
insured), (ii) shall state that such insurance policies shall not be cancelled
without at least 30 days' prior written notice thereof by the respective insurer
to the Collateral Agent (or such shorter period of time as a particular
insurance company policy generally provides), (iii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Collateral Agent and the Secured Creditors, (iv) shall contain
the standard non-contributing mortgage clause endorsement in favor of the
Collateral Agent with respect to hazard liability insurance, (v) shall, except
in the case of public liability insurance, provide that any losses shall be
payable notwithstanding (A) any act or neglect of Holdings or any of its
Subsidiaries, (B) the occupation or use of the properties for purposes more
hazardous than those permitted by the terms of the respective policy if such
coverage is obtainable at commercially reasonable rates and is of the kind from
time to time customarily insured against by Persons owning or using similar
property and in such amounts as are customary, (C) any foreclosure or other
proceeding relating to the insured properties or (D) any change in the title to
or ownership or possession of the insured properties and (vi) shall be deposited
with the Collateral Agent.
(c) If Holdings or any of its Subsidiaries shall fail to
insure its property in accordance with this Section 8.03, or if Holdings or any
of its Subsidiaries shall fail to so endorse and deposit all policies or
certificates with respect thereto, the Collateral Agent shall have the right
(but shall be under no obligation) to procure such insurance and Holdings and
the Borrower agree to reimburse the Collateral Agent for all reasonable costs
and expenses of procuring such insurance.
8.04 Corporate Franchises. Holdings will, and will cause each of its
Subsidiaries to, do or cause to be done, all things necessary to preserve and
keep in full force and effect its existence and its material rights, franchises,
licenses and patents; provided, however, that nothing in this Section 8.04 shall
prevent (i) sales of assets and other transactions by Holdings or any of its
Subsidiaries in accordance with Section 9.02 or (ii) the withdrawal by Holdings
or any of its Subsidiaries of its qualification as a foreign corporation in any
jurisdiction where such withdrawal could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.
8.05 Compliance with Statutes, etc. Holdings will, and will cause each of
its Subsidiaries to, comply with all applicable statutes, regulations and orders
of, and all
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applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls), except such noncompliances as
could not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.
8.06 Compliance with Environmental Laws. (a) Holdings will comply, and will
cause each of its Subsidiaries to comply, in all material respects with all
Environmental Laws applicable to the ownership or use of its Real Property now
or hereafter owned, leased or operated by Holdings or any of its Subsidiaries,
will promptly pay or cause to be paid all costs and expenses incurred in
connection with such compliance, and will keep or cause to be kept all such Real
Property free and clear of any Liens imposed pursuant to such Environmental
Laws. Neither Holdings nor any of its Subsidiaries will generate, use, treat,
store, Release or dispose of, or permit the generation, use, treatment, storage,
Release or disposal of Hazardous Materials on any Real Property now or hereafter
owned, leased or operated by Holdings or any of its Subsidiaries, or transport
or permit the transportation of Hazardous Materials to or from any such Real
Property, except for Hazardous Materials generated, used, treated, stored,
Released or disposed of at any such Real Properties in compliance in all
material respects with all applicable Environmental Laws and reasonably required
in connection with the operation, use and maintenance of the business or
operations of Holdings or any of its Subsidiaries.
(b) At the reasonable written request of the Agent or the
Required Banks, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time, Holdings and the Borrower will
provide, at the sole expense of Holdings and the Borrower, an environmental site
assessment report concerning any Real Property owned, leased or operated by
Holdings or any of its Subsidiaries, prepared by an environmental consulting
firm reasonably approved by the Agent, indicating the presence or absence of
Hazardous Materials and the potential cost of any removal or remedial action in
connection with such Hazardous Materials on such Real Property, provided that
(i) unless the Banks or the Agent has received any notice of the type described
in Section 8.01(i) or (ii) the Banks have exercised any of the remedies pursuant
to the last paragraph of Section 10, such request may not be made more than once
every two years in respect of any parcel of Real Property. If Holdings or the
Borrower fails to provide the same within 90 days after such request was made,
the Agent may order the same, the cost of which shall be borne by Holdings and
the Borrower, and Holdings and the Borrower shall grant and hereby grant to the
Agent and the Banks and their agents access to such Real Property and
specifically grants the Agent and the Banks an irrevocable non-exclusive
license, subject to the rights of tenants, to undertake such an assessment at
any reasonable time upon rea-
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sonable notice to Holdings, all at the sole and reasonable expense of Holdings
and the Borrower.
8.07 ERISA. As soon as possible and, in any event, within ten (10) days
after Holdings, any Subsidiary of Holdings or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following, Holdings will deliver
to each of the Banks a certificate of the Chief Financial Officer of Holdings
setting forth the full details as to such occurrence and the action, if any,
that Holdings, such Subsidiary or such ERISA Affiliate is required or proposes
to take, together with any notices required or proposed to be given to or filed
with or by Holdings, any Subsidiary, any ERISA Affiliate, the PBGC, a Plan
participant or the Plan administrator with respect thereto: that a Reportable
Event has occurred (except to the extent that Holdings has previously delivered
to the Banks a certificate and notices (if any) concerning such event pursuant
to the next clause hereof); that a contributing sponsor (as defined in Section
4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the
advance reporting requirement of PBGC Regulation Section 4043.61 (without regard
to subparagraph (b)(1) thereof), and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected
to occur with respect to such Plan within the following 30 days; that an
accumulated funding deficiency, within the meaning of Section 412 of the Code or
Section 302 of ERISA, has been incurred or an application is reasonably likely
to be or has been made for a waiver or modification of the minimum funding
standard (including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 303 or 304 of ERISA
with respect to a Plan; that any contribution required to be made with respect
to a Plan or Foreign Pension Plan has not been timely made; that a Plan has been
or may be terminated, reorganized, partitioned or declared insolvent under Title
IV of ERISA; that a Plan has an Unfunded Current Liability in excess of $150,000
or all Plans in the aggregate have an Unfunded Current Liability in excess of
$500,000; that proceedings are reasonably likely to be or have been instituted
to terminate or appoint a trustee to administer a Plan which is subject to Title
IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of
ERISA to collect a delinquent contribution to a Plan; that Holdings, any
Subsidiary of Holdings or any ERISA Affiliate will or may incur any material
liability (including any indirect, contingent, or secondary liability) to or on
account of the termination of or withdrawal from a Plan under Section 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under
Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409, 502(i) or
502(l) of ERISA or with respect to a group health plan (as defined in Section
607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the
Code; or that Holdings or any Subsidiary of Holdings may incur any material
liability pursuant to any employee welfare benefit plan (as defined in Section
3(1) of ERISA) that provides benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or any Plan or any
Foreign Pension Plan. Holdings will deliver to each of the Banks (i) a complete
copy of the annual report (on Internal Revenue Service Form 5500-series) of each
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Plan (including, to the extent required, the related financial and actuarial
statements and opinions and other supporting statements, certifications,
schedules and information) required to be filed with the Internal Revenue
Service and (ii) copies of any records, documents or other information that must
be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of
ERISA. In addition to any certificates or notices delivered to the Banks
pursuant to the first sentence hereof, copies of annual reports and any records,
documents or other information required to be furnished to the PBGC, and any
material notices received by Holdings, any Subsidiary of Holdings or any ERISA
Affiliate with respect to any Plan or Foreign Pension Plan shall be delivered to
the Banks no later than ten (10) days after the date such annual report has been
filed with the Internal Revenue Service or such records, documents and/or
information has been furnished to the PBGC or such notice has been received by
Holdings, any Subsidiary or any ERISA Affiliate, as applicable.
8.08 End of Fiscal Years; Fiscal Quarters. Holdings will cause (i) each of
its, and each of its Subsidiaries', fiscal years to end on February 28 or
February 29, as the case may be, and (ii) each of its, and each of its
Subsidiaries', fiscal quarters to end on February 28 (or February 29, as the
case may be), May 31, August 31 and November 30.
8.09 Performance of Obligations. Holdings will, and will cause each of its
Subsidiaries to, perform all of its obligations under the terms of each
mortgage, indenture, security agreement, loan agreement or credit agreement and
each other material agreement, contract or instrument by which it is bound,
except such non-performances as could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.
8.10 Payment of Taxes. Holdings will pay and discharge, and will cause
each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims for sums that have become due and payable which,
if unpaid, might become a Lien not otherwise permitted under Section 9.01(i);
provided, that neither Holdings nor any of its Subsidiaries shall be required to
pay any such tax, assessment, charge, levy or claim which is being contested in
good faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with generally accepted accounting principles.
8.11 Additional Security; Further Assurances. (a) Holdings will, and will
cause each of its Subsidiaries to, grant to the Collateral Agent security
interests and Mortgages in such assets and properties of Holdings and its
Subsidiaries as are not covered by the original Security Documents, and as may
be reasonably requested from time to time by the Agent or the Required Banks
(collectively, the "Additional Security Documents"). All such security interests
and Mortgages shall be granted pursuant to documentation reasonably
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satisfactory in form and substance to the Agent and shall constitute valid and
enforceable perfected security interests and Mortgages superior to and prior to
the rights of all third Persons and subject to no other Liens except for
Permitted Liens. The Additional Security Documents or instruments related
thereto shall have been duly recorded or filed in such manner and in such places
as are required by law to establish, perfect, preserve and protect the Liens in
favor of the Collateral Agent required to be granted pursuant to the Additional
Security Documents and all taxes, fees and other charges payable in connection
therewith shall have been paid in full.
(b) Holdings will, and will cause each of its Subsidiaries to,
at the expense of Holdings and the Borrower, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys on new Mortgaged Properties, reports and other assurances or
instruments and take such further steps relating to the Collateral covered by
any of the Security Documents as the Collateral Agent may reasonably require.
Furthermore, Holdings and the Borrower will cause to be delivered to the
Collateral Agent such opinions of counsel, title insurance and other related
documents as may be reasonably requested by the Agent to assure itself that this
Section 8.11 has been complied with.
(c) If the Agent or the Required Banks reasonably determine
that they are required by law or regulation to have appraisals prepared in
respect of the Mortgaged Properties, the Borrower will provide, at its own
expense, to the Agent appraisals which satisfy the applicable requirements of
the Real Estate Appraisal Reform Amendments of the Financial Institution Reform,
Recovery and Enforcement Act of 1989, as amended, and which otherwise shall be
in form and substance reasonably satisfactory to the Agent.
(d) Holdings and the Borrower agree that each action required
above by this Section 8.11 shall be completed as soon as possible, but in no
event later than 90 days after such action is either requested to be taken by
the Agent or the Required Banks or required to be taken by Holdings and/or its
Subsidiaries pursuant to the terms of this Section 8.11; provided that, in no
event will Holdings or any of its Subsidiaries be required to take any action,
other than using its reasonable efforts, to obtain consents from third parties
with respect to its compliance with this Section 8.11.
8.12 Contributions. Holdings will contribute as a common equity
contribution to the capital of the Borrower upon its receipt thereof, any cash
proceeds received by Holdings after the Effective Date from any asset sale, any
incurrence of Indebtedness, any Recovery Event, any sale or issuance of its
equity or any cash capital contributions received by Holdings.
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SECTION 9. Negative Covenants. Each of Holdings and the
Borrower hereby covenants and agrees that on and after the Effective Date and
until the Total Commitment and all Letters of Credit have terminated and the
Loans, Notes and Unpaid Drawings, together with interest, Fees and all other
Obligations (other than any indemnities described in Section 13.13 which are not
then due and payable) incurred hereunder and thereunder, are paid in full:
9.01 Liens. Holdings will not, and will not permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Lien upon or with respect to
any property or assets (real or personal, tangible or intangible) of Holdings or
any of its Subsidiaries, whether now owned or hereafter acquired, or sell any
such property or assets subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including sales of accounts
receivable with recourse to Holdings or any of its Subsidiaries), or assign any
right to receive income or permit the filing of any financing statement under
the UCC or any other similar notice of Lien under any similar recording or
notice statute; provided that the provisions of this Section 9.01 shall not
prevent the creation, incurrence, assumption or existence of the following
(Liens described below are herein referred to as "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting
principles;
(ii) Liens in respect of property or assets of the Borrower
or any of its Subsidiaries imposed by law, which were incurred in the
ordinary course of business and do not secure Indebtedness for borrowed
money, such as carriers', warehousemen's, materialmen's and mechanics'
liens and other similar Liens (including any right of set-off by a bank
in connection with any deposit accounts maintained with such bank)
arising in the ordinary course of business, and (x) which do not in the
aggregate materially detract from the value of the Borrower's or such
Subsidiary's property or assets or materially impair the use thereof in
the operation of the business of the Borrower or such Subsidiary or (y)
which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of removing such Lien or preventing
the forfeiture or sale of the property or assets subject to any such
Lien;
(iii) Liens in existence on the Initial Borrowing Date which
are listed, and the property subject thereto described, in Schedule
VIII, but only to the respective date, if any, set forth in such
Schedule VIII for the removal, replacement and termination of any such
Liens, plus renewals, replacements and extensions of such
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Liens to the extent set forth on Schedule VIII, provided that (x) the
aggregate principal amount of the Indebtedness, if any, secured by
such Liens does not increase from that amount outstanding at the time
of any such renewal, replacement or extension and (y) any such
renewal, replacement or extension does not encumber any additional
assets or properties of Holdings or any of its Subsidiaries;
(iv) Permitted Encumbrances;
(v) Liens created pursuant to the Security Documents;
(vi) leases or subleases granted to other Persons not
materially interfering with the conduct of the business of Holdings or
any of its Subsidiaries;
(vii) Liens upon assets of the Borrower or any of its
Subsidiaries subject to Capitalized Lease Obligations to the extent
such Capitalized Lease Obligations are permitted by Section 9.04(iv),
provided that (x) such Liens only serve to secure the payment of
Indebtedness arising under such Capitalized Lease Obligation and (y)
the Lien encumbering the asset giving rise to the Capitalized Lease
Obligation does not encumber any other asset of the Borrower or any
Subsidiary of the Borrower;
(viii) Liens placed upon Real Property, fixtures, equipment or
machinery acquired after the Effective Date and used in the ordinary
course of business of the Borrower or any of its Subsidiaries at the
time of the acquisition thereof by the Borrower or any such Subsidiary
or within 90 days thereafter to secure Indebtedness incurred to pay all
or a portion of the purchase price thereof or to secure Indebtedness
incurred solely for the purpose of financing the acquisition of any
such Real Property, fixtures, equipment or machinery or extensions,
renewals or replacements of any of the foregoing for the same or a
lesser amount, provided that (x) the aggregate outstanding principal
amount of all Indebtedness secured by Liens permitted by this clause
(viii) shall not at any time exceed $1,000,000 and (y) in all events,
the Lien encumbering the Real Property, fixtures, equipment or
machinery so acquired does not encumber any other asset of the Borrower
or such Subsidiary;
(ix) easements, rights-of-way, restrictions, encroachments
and other similar charges or encumbrances, and minor title
deficiencies, in each case not securing Indebtedness and not materially
interfering with the conduct of the business of Holdings or any of its
Subsidiaries;
(x) Liens arising from precautionary UCC financing
statement filings regarding operating leases;
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(xi) Liens arising out of the existence of judgments or
awards in respect of which Holdings or any of its Subsidiaries shall in
good faith be prosecuting an appeal or proceedings for review in
respect of which there shall have been secured a subsisting stay of
execution pending such appeal or proceedings, provided that the
aggregate amount of any cash and the fair market value of any property
subject to such Liens do not exceed $1,000,000 at any time outstanding;
(xii) statutory and common law landlords' liens under leases
to which Holdings or any of its Subsidiaries is a party;
(xiii) Liens (other than Liens imposed under ERISA) incurred in
the ordinary course of business in connection with workers compensation
claims, unemployment insurance and social security benefits and Liens
securing the performance of bids, tenders, leases and contracts in the
ordinary course of business, statutory obligations, surety bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business (exclusive of obligations in respect of
the payment for borrowed money);
(xiv) Liens on property or assets acquired pursuant to a
Permitted Acquisition, or on property or assets of a Subsidiary of the
Borrower in existence at the time such Subsidiary is acquired pursuant
to a Permitted Acquisition, provided that (x) any Indebtedness that is
secured by such Liens is permitted to exist under Section 9.04(viii),
and (y) such Liens are not incurred in connection with, or in
contemplation or anticipation of, such Permitted Acquisition and do not
attach to any other asset of the Borrower or any of its Subsidiaries;
(xv) Liens securing the Indebtedness to be Refinanced,
provided that such Liens shall only be permitted to remain outstanding
until the consummation of the Merger; and
(xvi) Liens on the proceeds (plus investment earnings thereon)
from the issuance of the Senior Subordinated Notes (to the extent such
proceeds were not used to pay for the Shares tendered pursuant to the
Tender Offer) in favor of the holders thereof to be held by the trustee
for such holders to pay the merger consideration pursuant to the
Merger, provided that such Liens only shall be permitted to remain
outstanding through the consummation of the Merger.
In connection with the granting of Liens of the type described in clauses (vii)
and (viii) of this Section 9.01 by the Borrower or any of its Subsidiaries, the
Agent and the Collateral Agent shall be authorized to take any actions deemed
appropriate by it in connection therewith (including, without limitation, by
executing appropriate lien releases or lien subordination agreements in favor of
the holder or holders of such Liens, in either case solely with
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respect to the item or items of equipment or other assets (including Real
Property) subject to such Liens).
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. Holdings will
not, and will not permit any of its Subsidiaries to, wind up, liquidate or
dissolve its affairs or enter into any transaction of merger or consolidation,
or convey, sell, lease or otherwise dispose of all or any part of its property
or assets, or enter into any sale-leaseback transactions, or purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property or assets (other than purchases or other acquisitions of inventory,
materials and equipment in the ordinary course of business) of any Person (or
agree to do any of the foregoing at any future time), except that:
(i) Capital Expenditures by the Borrower and its
Subsidiaries shall be permitted to the extent not in violation of
Section 9.08;
(ii) each of the Borrower and its Subsidiaries may make sales
of inventory in the ordinary course of business;
(iii) each of the Borrower and its Subsidiaries may sell
obsolete, uneconomic or worn-out equipment or materials in the ordinary
course of business or other equipment or materials in the ordinary
course of business which are no longer useful in the business of the
Borrower or such Subsidiary, provided that the aggregate amount of the
proceeds received from all assets sold pursuant to this clause (iii)
shall not exceed $250,000 in any fiscal year of the Borrower;
(iv) each of the Borrower and its Subsidiaries may sell assets
(other than the capital stock of any Subsidiary Guarantor), so long as
(u) no Default or Event of Default then exists or would result
therefrom, (w) each such sale is in an arm's-length transaction and the
Borrower or the respective Subsidiary receives at least fair market
value (as determined in good faith by the Borrower or such Subsidiary,
as the case may be), (x) the total consideration received by the
Borrower or such Subsidiary is at least 90% cash and is paid at the
time of the closing of such sale, (y) the Net Sale Proceeds therefrom
are applied and/or reinvested as (and to the extent) required by
Section 4.02(e) and (z) the aggregate amount of the proceeds received
from all assets sold pursuant to this clause (iv) shall not exceed
$1,500,000 in any fiscal year of the Borrower;
(v) Investments may be made to the extent permitted by
Section 9.05;
(vi) each of the Borrower and its Subsidiaries may lease (as
lessee) real or personal property (so long as any such lease does not
create a Capitalized Lease Obligation except to the extent permitted by
Section 9.04(iv));
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(vii) each of the Borrower and its Subsidiaries may sell or
discount, in each case without recourse and in the ordinary course of
business, accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection
thereof;
(viii) the Acquisition shall be permitted;
(ix) each of the Borrower and its Subsidiaries may grant
leases or subleases to other Persons not materially interfering with
the conduct of the business of the Borrower or any of its Subsidiaries;
(x) any Subsidiary of the Borrower (x) may be merged,
consolidated or liquidated with or into the Borrower so long as the
Borrower is the surviving corporation of such merger, consolidation or
liquidation and (y) may transfer all or any portion of its assets to
the Borrower;
(xi) any Subsidiary of the Borrower (x) may be merged,
consolidated or liquidated with or into any other Subsidiary of the
Borrower so long as (i) in the case of any such merger, consolidation
or liquidation involving a Subsidiary Guarantor, the Subsidiary
Guarantor is the surviving corporation of such merger, consolidation or
liquidation and (ii) in addition to the requirements or preceding
clause (i), in the case of any such merger, consolidation or
liquidation involving a Wholly-Owned Subsidiary of the Borrower, the
Wholly-Owned Subsidiary is the surviving corporation of such merger,
consolidation or liquidation, (y) may transfer all or any portion of
its assets to any Subsidiary Guarantor and (z) may, so long as such
Subsidiary is not a Subsidiary Guarantor, (i) be merged, consolidated
or liquidated with or into any other Subsidiary of the Borrower that is
not a Subsidiary Guarantor and (ii) transfer all or any portion of its
assets to any other Subsidiary of the Borrower that is not a Subsidiary
Guarantor; and
(xii) after the consummation of the Merger, each of the
Borrower and the Subsidiary Guarantors may acquire all or substantially
all of the assets of any Person (or all or substantially all of the
assets of a product line or division of any Person) or 100% (or, to the
extent permitted below, at least 90%) of the capital stock of any
Person (including by the merger or consolidation of such Person with
and into the Borrower or such Subsidiary Guarantor so long as the
Borrower or such Subsidiary Guarantor is the surviving corporation of
such merger or consolidation) (any such acquisition, merger or
consolidation permitted by this clause (xii), a "Permitted
Acquisition"), so long as (i) no Default or Event of Default then
exists or would result therefrom, (ii) each of the representations and
warranties contained in Section 7 shall be true and correct in all
material respects both before and after giving effect to such Permitted
Acquisition (provided that any
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representation or warranty which is made as of specified shall solely
be required to be true and correct in all material respects as of such
date), (iii) any Liens or Indebtedness assumed or issued (including
any Seller Notes) in connection with such acquisition are otherwise
permitted under Section 9.01 or 9.04, as the case may be, (iv) the
only consideration paid by the Borrower or any Subsidiary Guarantor in
connection with any Permitted Acquisition consists solely of cash,
Seller Notes, common stock of Holdings and/or Qualified Preferred
Stock of Holdings, (v) at least 10 Business Days prior to the
consummation of any Permitted Acquisition, the Borrower shall have
delivered to the Agent and each of the Banks a certificate of
Holdings' Chief Financial Officer certifying (and showing the
calculations therefor in reasonable detail) that (x) the assets or
Person acquired pursuant to such Permitted Acquisition will have pro
forma positive earnings (before interest expense and taxes and adding
back any amortization of intangibles and depreciation) and (y)
Holding's and its Subsidiaries would have been in compliance with the
financial covenants set forth in Sections 9.08 and 9.09 for the Test
Period then most recently ended prior to the date of the consummation
of such Permitted Acquisition, in each case with such earnings and
financial covenants to be determined on a pro forma basis as if such
Permitted Acquisition had been consummated on the first day of such
Test Period (and assuming that any Indebtedness incurred, issued or
assumed in connection therewith had been incurred, issued or assumed
on the first day of, and had remained outstanding throughout, such
Test Period), it being understood, however, (A) that with respect to
any Permitted Acquisition consummated prior to May 31, 1998, the
Borrower shall be in pro forma compliance with the financial ratios
set forth in Sections 9.08 and 9.09 in respect of the Test Period
ending May 31, 1998 but utilizing the Borrower's Consolidated EBITDA
for its fourth quarter ended February 28, 1998 (and annualized in
connection with determining compliance with Section 9.09), and (B)
that with respect to any Permitted Acquisition consummated on or prior
to January 29, 2000, the Borrower's pro forma Leverage Ratio for the
respective Test period shall be at least .25 below the maximum
permitted Leverage Ratio for such Test Period as set forth in Section
9.09 (provided that this clause (B) shall not apply to any Permitted
Acquisition in which the aggregate consideration (determined as
provided below in this Section 9.02(xii)) is $1,000,000 or less so
long as no more than one such $1,000,000 or less Permitted Acquisition
is consummated in any six month period), (vi) the aggregate
consideration paid in connection with any Permitted Acquisition or
group of related Permitted Acquisitions (including, without
limitation, any earn-out, non-compete or deferred compensation
arrangements, the aggregate principal amount of any Indebtedness
issued and/or assumed in connection therewith and the fair market
value of any capital stock of Holdings issued in connection therewith
(as determined in good faith by the Board of Directors of Holdings))
does not exceed $10,000,000, (vii) the aggregate cash consideration
paid in connection with all Permitted Acquisitions in which less than
100% of the capital stock of the acquired Person is
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purchased (including, without limitation, any earn-out, non-compete or
deferred compensation arrangements, the aggregate principal amount of
any Indebtedness issued and/or assumed in connection therewith and the
fair market value of any capital stock of Holdings issued in
connection therewith) does not exceed $5,000,000 and (viii) the assets
acquired pursuant to each such Permitted Acquisition are engaged in a
business permitted by Section 9.13 and are employed principally in the
United States and Canada.
To the extent the Required Banks waive the provisions of this Section 9.02 with
respect to the sale of any Collateral, or any Collateral is sold as permitted by
this Section 9.02 (other than to Holdings or a Subsidiary thereof), such
Collateral shall be sold free and clear of the Liens created by the Security
Documents, and the Agent and the Collateral Agent shall be authorized to take
any actions deemed appropriate in order to effect the foregoing.
9.03 Dividends. Holdings will not, and will not permit any of its
Subsidiaries to, authorize, declare or pay any Dividends with respect to
Holdings or any of its Subsidiaries, except that:
(i) (x) any Subsidiary of the Borrower may pay cash
Dividends to the Borrower or to any Wholly-Owned Subsidiary of the
Borrower, provided that, prior to the consummation of the Merger, ATC
may not pay cash Dividends and (y) so long as no Default under Section
10.01 or 10.05 then exists or would result therefrom or no Event of
Default then exists or would result therefrom, any non-Wholly-Owned
Subsidiary of the Borrower may pay cash Dividends to its shareholders
generally so long as the Borrower or its respective Subsidiary which
owns the equity interest or interests in the Subsidiary paying such
Dividends receives at least its proportionate share thereof (based upon
its relative holdings of equity interests in the Subsidiary paying such
Dividends and taking into account the relative preferences, if any, of
the various classes of equity interests in such Subsidiary);
(ii) so long as no Default or Event of Default then exists or
would result therefrom, after the consummation of the Merger, Holdings
may repurchase outstanding shares of its common stock (or options to
purchase such common stock) following the death, disability, hardship
or termination of employment of officers or employees of Holdings or
any of its Subsidiaries, provided that the aggregate amount of
Dividends paid by Holdings pursuant to this clause (ii) shall not
exceed $500,000 in any fiscal year of Holdings;
(iii) so long as no Default or Event of Default then exists or
would result therefrom, after the consummation of the Merger, the
Borrower may pay cash
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Dividends to Holdings so long as Holdings promptly uses such proceeds
for the purposes described in clause (ii) of this Section 9.03;
(iv) after the consummation of the Merger, the Borrower may
pay cash Dividends to Holdings so long as the proceeds thereof are
promptly used by Holdings to pay operating expenses in the ordinary
course of business (including, without limitation, director fees,
professional fees and expenses) and other similar corporate overhead
costs and expenses, provided that the aggregate amount of cash
Dividends paid pursuant to this clause (iv) during any fiscal year of
the Borrower shall not exceed $250,000;
(v) after the consummation of the Merger, the Borrower may
pay cash Dividends to Holdings in the amounts and at the times of any
payment by Holdings in respect of taxes, provided that (x) the amount
of cash Dividends paid pursuant to this clause (v) to enable Holdings
to pay federal and state income taxes at any time shall not exceed the
amount of such federal and state income taxes actually owing by
Holdings at such time for the respective period and (y) any refunds
received by Holdings shall promptly be returned by Holdings to the
Borrower;
(vi) Holdings may pay Dividends on its Qualified Preferred
Stock solely through the issuance of additional shares of Qualified
Preferred Stock of Holdings; and
(vii) the merger consideration may be paid in connection with
the consummation of the Merger.
9.04 Indebtedness. Holdings will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and
the other Credit Documents;
(ii) Existing Indebtedness outstanding on the Initial
Borrowing Date and listed on Schedule VI, without giving effect to any
subsequent extension, renewal or refinancing thereof except to the
extent set forth on Schedule VI, provided that the aggregate principal
amount of the Indebtedness to be extended, renewed or refinanced shall
not increase from that amount outstanding at the time of any such
extension, renewal or refinancing;
(iii) Indebtedness under Interest Rate Protection Agreements
entered into with respect to other Indebtedness permitted under this
Section 9.04;
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(iv) Indebtedness of the Borrower and its Subsidiaries
evidenced by Capitalized Lease Obligations to the extent permitted
pursuant to Section 9.08, provided that in no event shall the aggregate
principal amount of Capitalized Lease Obligations permitted by this
clause (iv) exceed $1,000,000 at any time outstanding;
(v) Indebtedness subject to Liens permitted under Sections
9.01(viii);
(vi) intercompany Indebtedness among the Borrower and its
Subsidiaries to the extent permitted by Section 9.05(ix);
(vii) Indebtedness of the Borrower and the Subsidiary
Guarantors under the Senior Subordinated Notes and the other Senior
Subordinated Note Documents in an aggregate principal amount not to
exceed $100,000,000 (as reduced by any repayments of principal
thereof), provided that, prior to the consummation of the Merger, ATC
and its Subsidiaries may not have any obligations in respect of the
Senior Subordinated Notes;
(viii) Indebtedness of a Subsidiary acquired pursuant to a
Permitted Acquisition (or Indebtedness assumed at the time of a
Permitted Acquisition of an asset securing such Indebtedness), provided
that (x) such Indebtedness was not incurred in connection with, or in
anticipation or contemplation of, such Permitted Acquisition, (y) such
Indebtedness does not constitute debt for borrowed money (other than
debt for borrowed money incurred in connection with industrial revenue
or industrial development bond financings), it being understood and
agreed that Capitalized Lease Obligations and purchase money
Indebtedness shall not constitute debt for borrowed money for purposes
of this clause (viii), and (z) at the time of such Permitted
Acquisition such Indebtedness does not exceed 10% of the total value of
the assets of the Subsidiary so acquired, or of the asset so acquired,
as the case may be;
(ix) Indebtedness of ATC and its Subsidiaries in respect of
the Indebtedness to be Refinanced, provided that such Indebtedness
shall only be permitted to remain outstanding until the consummation of
the Merger;
(x) guaranties by the Borrower and its Subsidiaries of each
other's Indebtedness otherwise permitted under this Section 9.04;
(xi) unsecured Indebtedness of the Borrower and its
Subsidiaries in connection with their financing of their insurance
premiums in the ordinary course of business and consistent with past
practices so long as no more than $2,000,000 of such Indebtedness is
outstanding at any time and the Borrower or such Subsidiary
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is permitted to incur such Indebtedness under the Senior Subordinated
Note Indenture; and
(xii) unsecured Indebtedness incurred by the Borrower and its
Subsidiaries in the form of Seller Notes in an aggregate principal
amount not to exceed $10,000,000 at any one time outstanding.
9.05 Advances, Investments and Loans. Holdings will not, and will not
permit any of its Subsidiaries to, directly or indirectly, lend money or credit
or make advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any other Person, or purchase or own a futures contract or otherwise become
liable for the purchase or sale of currency or other commodities at a future
date in the nature of a futures contract, or hold any cash or Cash Equivalents
(each of the foregoing an "Investment" and, collectively, "Investments"), except
that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold
accounts receivables owing to any of them, if created or acquired in
the ordinary course of business and payable or dischargeable in
accordance with customary trade terms of the Borrower or such
Subsidiary;
(ii) the Borrower and its Subsidiaries may acquire and hold
cash and Cash Equivalents, provided that during any time that Revolving
Loans or Swingline Loans are outstanding the aggregate amount of cash
and Cash Equivalents permitted to be held by the Borrower and its
Subsidiaries shall not exceed $1,000,000 for any period of five
consecutive Business Days;
(iii) Holdings and its Subsidiaries may hold the Investments
held by them on the Initial Borrowing Date and described on Schedule
IX, provided that any additional Investments made with respect thereto
shall be permitted only if independently justified under the other
provisions of this Section 9.05;
(iv) the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in good
faith settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(v) the Borrower and its Subsidiaries may make loans and
advances in the ordinary course of business to their respective
officers and employees so long as the aggregate principal amount
thereof at any time outstanding (determined
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without regard to any write-downs or write-offs of such loans and
advances) shall not exceed $500,000;
(vi) Holdings may acquire and hold obligations of one or more
officers or other employees of Holdings or any of its Subsidiaries in
connection with such officers' or employees' acquisition of shares of
common stock of Holdings (or options to purchase such common stock) so
long as no cash is paid by Holdings or any of its Subsidiaries to such
officers or employees in connection with the acquisition of any such
obligations;
(vii) the Borrower may enter into Interest Protection
Agreements to the extent permitted by Section 9.04(iii);
(viii) (x) Holdings may make cash common equity contributions
to the capital of the Borrower, (y) until the consummation of the
Merger, Acquisition Corp. may make cash common equity contributions to
the capital of ATC, and (z) the Borrower and the Subsidiary Guarantors
may make cash common equity contributions to the capital of their
respective Subsidiaries which are Subsidiary Guarantors;
(ix) the Borrower and the Subsidiary Guarantors may make
intercompany loans and advances between or among one another
(collectively, "Intercompany Loans"), so long as each Intercompany Loan
shall not be evidenced by a promissory note other than by an
Intercompany Note that is pledged to the Collateral Agent pursuant to
the Pledge Agreement;
(x) guaranties by the Borrower and its Subsidiaries of each
other's Indebtedness otherwise permitted under this Section 9.04;
(xi) Permitted Acquisitions shall be permitted in accordance
with Section 9.02(xii); and
(xii) the Borrower and its Subsidiaries may acquire and hold
non-cash consideration issued by the purchaser of assets in connection
with a sale of such assets to the extent permitted by Section 9.02(iv).
9.06 Transactions with Affiliates. Holdings will not, and will not permit
any of its Subsidiaries to, enter into any transaction or series of related
transactions, whether or not in the ordinary course of business, with any
Affiliate of Holdings or any of its Subsidiaries, other than in the ordinary
course of business and on terms and conditions substantially as favorable to
Holdings or such Subsidiary as would reasonably be obtained
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by Holdings or such Subsidiary at that time in a comparable arm's-length
transaction with a Person other than an Affiliate, except that the following in
any event shall be permitted:
(i) Dividends may be paid to the extent provided in Section
9.03;
(ii) loans may be made and other transactions may be entered
into by Holdings and its Subsidiaries to the extent permitted by
Sections 9.02, 9.04 and 9.05;
(iii) customary fees may be paid to non-officer directors of
Holdings and its Subsidiaries;
(iv) the Borrower and its Subsidiaries may pay ordinary and
reasonable compensation to their respective officers (including
compensation in the form of options to purchase shares of common stock
of Holdings, insurance and other employee benefits) and may enter into
employment agreements with such officers in connection therewith
(including those employment agreements described in the Offering
Memorandum relating to the Senior Subordinated Notes); and
(v) Holdings and its Subsidiaries may enter and perform
their obligations under any Tax Sharing Agreement entered into among
themselves in accordance with the terms of this Agreement.
9.07 Capital Expenditures. (a) Holdings will not, and will not permit any
of its Subsidiaries to, make any Capital Expenditures, except that (i) during
the period from the Effective Date through and including February 28, 1999, the
Borrower and its Subsidiaries may make Capital Expenditures in an aggregate
amount not to exceed $3,400,000 and (ii) during any fiscal year of Holdings set
forth below (taken as one accounting period), the Borrower and its Subsidiaries
may make Capital Expenditures so long as the aggregate amount of all such
Capital Expenditures does not exceed in any fiscal year of Holdings set forth
below the amount set forth opposite such fiscal year below:
Fiscal Year Ending Amount
------------------ ------
February 29, 2000 $3,500,000
February 28, 2001 $5,200,000
February 28, 2002 $4,500,000
February 28, 2003 $5,000,000
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(b) In addition to the foregoing, in the event that the amount
of Capital Expenditures permitted to be made by the Borrower and its
Subsidiaries pursuant to clause (a) above in any fiscal year of the Borrower
(before giving effect to any increase in such permitted Capital Expenditure
amount pursuant to this clause (b)) is greater than the amount of Capital
Expenditures actually made by the Borrower and its Subsidiaries during such
fiscal year, the lesser of (x) such excess and (y) 25% of the applicable
permitted scheduled Capital Expenditure amount as set forth in such clause (a)
above may be carried forward and utilized to make Capital Expenditures in the
immediately succeeding fiscal year, provided that no amounts once carried
forward pursuant to this Section 9.07(b) may be carried forward to any fiscal
year thereafter and such amounts may only be utilized after the Borrower and its
Subsidiaries have utilized in full the permitted Capital Expenditure amount for
such fiscal year as set forth in the table in clause (a) above (without giving
effect to any increase in such amount by operation of this clause (b)).
(c) In addition to the foregoing, the Borrower and it
Subsidiaries may make Capital Expenditures with the amount of Net Sale Proceeds
received by the Borrower or any of its Subsidiaries from any Asset Sale so long
as such Net Sale Proceeds are reinvested in replacement assets within 300 days
following the date of such Asset Sale to the extent such Net Sale Proceeds are
not otherwise required to be applied to repay outstanding Term Loans (or reduce
the Total Term Loan Commitment, as the case may be) pursuant to Section 4.02(e)
or reduce the Total Revolving Loan Commitment pursuant to Section 3.03(d), as
the case may be.
(d) In addition to the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures with the amount of Net Insurance
Proceeds received by the Borrower or any of its Subsidiaries from any Recovery
Event so long as such Net Insurance Proceeds are used to replace or restore any
properties or assets in respect of which such Net Insurance Proceeds were paid
within 300 days following the date of receipt of such Net Insurance Proceeds
from such Recovery Event to the extent such Net Insurance Proceeds are not
otherwise required to be applied to repay outstanding Term Loans (or reduce the
Total Term Loan Commitment, as the case may be) pursuant to Section 4.02(g) or
reduce the Total Revolving Loan Commitment pursuant to Section 3.03(d), as the
case may be.
(e) In addition to the foregoing, the Borrower and the
Subsidiary Guarantors may make Capital Expenditures consisting of Permitted
Acquisitions to the extent permitted by Section 9.02(xii).
9.08 Consolidated Interest Coverage Ratio. Holdings will not permit the
Consolidated Interest Coverage Ratio for any Test Period ending on the last day
of a fiscal quarter set forth below to be less than the ratio set forth opposite
such fiscal quarter below:
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Fiscal Quarter Ending Ratio
--------------------- -----
May 31, 1998 1.60:1.00
August 31, 1998 1.70:1.00
November 30, 1998 1.70:1.00
February 28, 1999 1.70:1.00
May 31, 1999 1.80:1.00
August 31, 1999 1.80:1.00
November 30, 1999 1.80:1.00
February 29, 2000 1.80:1.00
May 31, 2000 2.00:1.00
August 31, 2000 2.00:1.00
November 30, 2000 2.00:1.00
February 28, 2001 2.00:1.00
May 31, 2001 2.10:1.00
August 31, 2001 2.10:1.00
November 30, 2001 2.10:1.00
February 28, 2002 2.10:1.00
May 31, 2002 2.20:1.00
August 31, 2002 2.20:1.00
November 30, 2002 2.20:1.00
9.09 Maximum Leverage Ratio. Holdings will not permit the Leverage Ratio
at any time during a period set forth below to be greater than the ratio set
forth opposite such period below:
Period Ratio
------ -----
Initial Borrowing Date through and including
May 31, 1998 5.60:100
June 1, 1998 through and including August
31, 1998 5.50:1.00
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September 1, 1998 through and including
February 28, 1999 5.30:1.00
March 1, 1999 through and including February
29, 2000 5.00:1.00
March 1, 2000 through and including February
29, 2001 4.50:1.00
March 1, 2001 through and including February
28, 2002 4.00:1.00
Thereafter 3.50:1.00
9.10 Limitation on Payments of Certain Indebtedness,;Modifications of
Certain 0.1 Limitation on Payments of Certain Indebtedness,; Modifications of
Certain Indebtedness; ents; etc. Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements; etc. Holdings will not, and will not
permit any of its Subsidiaries to, (i) make (or give any notice in respect of)
any voluntary or optional payment or prepayment on or redemption or acquisition
for value of, or any prepayment or redemption as a result of any asset sale,
change of control or similar event of (including in each case, without
limitation, by way of depositing with the trustee with respect thereto or any
other Person money or securities before due for the purpose of paying when due)
the Senior Subordinated Notes, (ii) amend or modify, or permit the amendment or
modification of, any provision of the Senior Subordinated Note Documents, (iii)
make (or give any notice in respect of) any voluntary or optional payment or
prepayment on or redemption or acquisition for value of, or any prepayment or
redemption as a result of any asset sale, change of control or similar event of,
any Seller Note, provided that the Borrower and its Subsidiaries may voluntarily
prepay certain of the ATEC Obligations in an amount not to exceed $75,000 on or
prior to the Initial Borrowing Date and may voluntarily prepay any Seller Note
(including the ATEC Obligations) after March 1, 1999 so long as no Default or
Event of Default then exists or would result therefrom, (iv) after the execution
and delivery thereof, amend, modify or change any provision of any Seller Note
(including the ATEC Obligations) to the extent that any such amendment,
modification or change could be more restrictive on the Borrower or any of its
Subsidiaries or could be adverse to the interests of the Banks in any material
respect, (v) amend, modify or change its certificate of incorporation
(including, without limitation, by the filing or modification of any certificate
of designation) or by-laws (or the equivalent organizational documents) or any
agreement entered into by it with respect to its capital stock (including any
Shareholders' Agreement), or enter into any new agreement with respect to its
capital stock, unless such amendment, modification, change or other action
contemplated by this clause (v) would not violate or be inconsistent with any of
the terms or provisions of this Agreement or could not reasonably be expected to
be adverse to the interests of the Banks in any material respect, (vi) amend,
modify or change any provision of (x) any Management Agreement
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or enter into any new management agreement, financial advisory agreement or
similar agreement with any Affiliate of Holdings or any of its Subsidiaries or
(y) any Tax Sharing Agreement or enter into any new tax sharing agreement, tax
allocation agreement or similar agreements without the prior written consent of
the Agent in the case of this clause (y) or (vii) amend, modify or change any
provision of the ATEC Subordination Agreement.
9.11 Limitation on Certain Restrictions on Subsidiaries. Holdings will not,
and will not permit any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Subsidiary to (a) pay dividends or make
any other distributions on its capital stock or any other interest or
participation in its profits owned by Holdings or any Subsidiary Holdings, or
pay any Indebtedness owed to Holdings or any Subsidiary of Holdings, (b) make
loans or advances to Holdings or any Subsidiary of Holdings or (c) transfer any
of its properties or assets to Holdings or any Subsidiary of Holdings, except
for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) this Agreement and the other Credit Documents, (iii) the
Senior Subordinated Note Documents, (iv) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of Holdings
or any Subsidiary of Holdings, (v) customary provisions restricting assignment
of any licensing agreement or other contract entered into by Holdings or any
Subsidiary of Holdings in the ordinary course of business and (vi) restrictions
on the transfer of any asset subject to a Lien permitted by Sections 9.01(vii),
(viii), (xiv) and (xv).
9.13 Limitation on Issuance of Capital Stock. (a) Holdings will not, and
will not permit any of its Subsidiaries to, issue (i) any preferred stock other
than Qualified Preferred Stock of Holdings or (ii) any redeemable common stock
(other than common stock that is redeemable at the sole option of Holdings or
such Subsidiary).
(b) Holdings will not permit any of its Subsidiaries to issue
any capital stock (including by way of sales of treasury stock) or any options
or warrants to purchase, or securities convertible into, capital stock, except
(i) for transfers and replacements of then outstanding shares of capital stock,
(ii) for stock splits, stock dividends and issuances which do not decrease the
percentage ownership of Holdings or any of its Subsidiaries in any class of the
capital stock of such Subsidiary, (iii) to qualify directors to the extent
required by applicable law, (iv) for issuances by newly created or acquired
Subsidiaries in accordance with the terms of this Agreement or (v) for the
common stock to be issued by the Borrower to Holdings as part of the Merger.
9.13 Business. (a) Holdings and its Subsidiaries will not engage in any
business other than the businesses engaged in by the Borrower and its
Subsidiaries as of the Initial Borrowing Date and reasonable extensions thereof
and businesses complimentary thereto, provided that in no event shall Holdings
or any of its Subsidiaries engage in any
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business related to insurance other than as an insurance broker in each case
without the incurrence of any underwriting risk.
(b) Notwithstanding the foregoing or anything else in this
Agreement, Holdings will not engage in any business and will not own any
significant assets or have any material liabilities other than its ownership of
the capital stock of the Borrower and having those liabilities which it is
responsible for under this Agreement and the other Documents to which it is a
party, provided that Holdings may engage in those activities that are incidental
to (x) the maintenance of its corporate existence in compliance with applicable
law, (y) legal, tax and accounting matters in connection with any of the
foregoing activities and (z) the entering into, and performing its obligations
under, this Agreement and the other Documents to which it is a party.
(c) Notwithstanding the foregoing or anything else in this
Agreement, Acquisition Corp. will not engage in any business and will not have
any significant assets or material liabilities other than its ownership of the
capital stock of ATC and having those liabilities which it is responsible for
under this Agreement and the other Documents to which it is a party; provided
that Acquisition Corp. may engage in those activities that are incidental to (i)
the maintenance of its corporate existence in compliance with applicable law,
(ii) legal, tax and accounting matters in connection with the foregoing
activities and (iii) the entering into, and performance of its obligations
under, this Agreement and the other Documents to which it is a party.
9.14 Limitation on Creation of Subsidiaries. Notwithstanding anything to
the contrary contained in this Agreement, Holdings will not, and will not permit
any of its Subsidiaries to, establish, create or acquire after the Effective
Date any Subsidiary, provided that, after the consummation of the Merger, the
Borrower and its Wholly-Owned Subsidiaries shall be permitted to establish,
create or, to the extent permitted by this Agreement, acquire Wholly-Owned
Subsidiaries (or, to the extent permitted by clause (vii) of Section 9.02(xii),
non-Wholly-Owned Subsidiaries) so long as (i) the capital stock or other equity
interests of each such new Subsidiary is pledged pursuant to, and to the extent
required by, the Pledge Agreement and the certificates representing such stock
or other equity interests, together with stock or other powers duly executed in
blank, are delivered to the Collateral Agent for the benefit of the Secured
Creditors, (ii) each such new Subsidiary executes and delivers to the Agent a
counterpart of the Subsidiaries Guaranty, the Pledge Agreement and the Security
Agreement, and (iii) each such new Subsidiary, to the extent requested by the
Agent or the Required Banks, takes all actions required pursuant to Section
8.11. In addition, each new Subsidiary shall execute and deliver, or cause to be
executed and delivered, to the Agent all other relevant documentation of the
type described in Section 5 as such new Subsidiary would have had to deliver if
such new Subsidiary were a Credit Party on the Initial Borrowing Date.
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9.15 Senior Subordinated Notes. Neither Holdings nor any of its
Subsidiaries shall designate any Indebtedness, other than the Obligations, as
"Designated Senior Debt" for purposes of the Senior Subordinated Notes and the
other Senior Subordinated Note Documents.
SECTION 10. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
10.01 Payments. The Borrower shall (i) default in the payment when due of
any principal of any Loan or any Note or (ii) default, and such default shall
continue unremedied for three or more Business Days, in the payment when due of
any interest on any Loan or Note, any Unpaid Drawing or any Fees or any other
amounts owing hereunder or thereunder; or
10.02 Representations, etc. Any representation, warranty or statement made
(or deemed made) by any Credit Party herein or in any other Credit Document or
in any certificate delivered to the Agent or any Bank pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made or
deemed made; or
10.03 Covenants. Any Credit Party shall (i) default in the due performance
or observance by it of any term, covenant or agreement contained in Section
8.01(g)(i), 8.08, 8.12 or Section 9 or (ii) default in the due performance or
observance by it of any other term, covenant or agreement contained in this
Agreement or any other Credit Document (other than those set forth in Sections
10.01 and 10.02) and such default shall continue unremedied for a period of 30
days after written notice thereof to the defaulting party by the Agent or the
Required Banks; or
10.04 Default Under Other Agreements. (i) Holdings or any of its
Subsidiaries shall (x) default in any payment of any Indebtedness (other than
the Obligations) beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created or (y) default in the
observance or performance of any agreement or condition relating to any
Indebtedness (other than the Obligations) or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause (determined
without regard to whether any notice is required), any such Indebtedness to
become due prior to its stated maturity, or (ii) any Indebtedness (other than
the Obligations) of Holdings or any of its Subsidiaries shall be declared to be
(or shall become) due and payable, or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated maturity thereof,
provided that it shall not be a Default or an Event of Default under this
Section 10.04 unless the
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aggregate principal amount of all Indebtedness as described in preceding
clauses (i) and (ii) is at least $2,000,000; or
10.05 Bankruptcy, etc. Holdings or any of its Subsidiaries shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against Holdings or
any of its Subsidiaries, and the petition is not controverted within 10 days, or
is not dismissed within 60 days, after commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Holdings or any of its Subsidiaries, or
Holdings or any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to Holdings or any of its Subsidiaries, or there is
commenced against Holdings or any of its Subsidiaries any such proceeding which
remains undismissed for a period of 60 days, or Holdings or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or Holdings or any
of its Subsidiaries suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed for
a period of 60 days; or Holdings or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by
Holdings or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof under Section 412 of the
Code or Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
with respect to such Plan within the following 30 days, any Plan which is
subject to Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan which is subject to Title IV of
ERISA is, shall have been or is likely to be terminated or to be the subject of
termination proceedings under ERISA, any Plan shall have an Unfunded Current
Liability, a contribution required to be made with respect to a Plan or a
Foreign Pension Plan has not been timely made, Holdings or any Subsidiary of
Holdings or any ERISA Affiliate has incurred or is likely to incur any liability
to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of
the Code or on account of a group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) under
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Section 4980B of the Code, or Holdings or any Subsidiary of Holdings has
incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) that provide
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or Plans or Foreign Pension Plans; (b) there shall
result from any such event or events the imposition of a lien, the granting of a
security interest, or a liability or a material risk of incurring a liability;
and (c) such lien, security interest or liability, individually, and/or in the
aggregate, in the reasonable opinion of the Required Banks, has had, or could
reasonably be expected to have, a material adverse effect on the business,
operations, properties, assets, liabilities, condition (financial or otherwise)
or prospects of Holdings and its Subsidiaries taken as a whole; or
10.07 Security Documents. At any time after the execution and delivery
thereof, any of the Security Documents shall cease to be in full force and
effect, or shall cease to give the Collateral Agent for the benefit of the
Secured Creditors the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a perfected security interest
in, and Lien on, all of the Collateral (other than an immaterial portion of the
Security Agreement Collateral), in favor of the Collateral Agent, superior to
and prior to the rights of all third Persons (except as permitted by Section
9.01), and subject to no other Liens (except as permitted by Section 9.01); or
10.08 Guaranties. At any time after the execution and delivery thereof, any
Guaranty or any provision thereof shall cease to be in full force or effect as
to any Guarantor, or any Guarantor or any Person acting by or on behalf of such
Guarantor shall deny or disaffirm such Guarantor's obligations under its
Guaranty or any Guarantor shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to its Guaranty; or
10.09 Judgments. One or more judgments or decrees shall be entered against
Holdings or any Subsidiary of Holdings involving in the aggregate for Holdings
and its Subsidiaries a liability (not paid or fully covered by a reputable and
solvent insurance company) and such judgments and decrees either shall be final
and non-appealable or shall not be vacated, discharged or stayed or bonded
pending appeal for any period of 30 consecutive days, and the aggregate amount
of all such judgments equals or exceeds $2,000,000; or
10.10 Change of Control. A Change of Control shall occur; or
10.11 ATEC Subordination Agreement. The ATEC Subordination Agreement or
material any provision thereof shall cease to be in full force and effect, or
any party to the ATEC Subordination Agreement shall default in the performance
or observance of any term, covenant or agreement on its part to be performed or
observed pursuant thereto;
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then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent, upon the written request of the Required
Banks, shall by written notice to the Borrower, take any or all of the following
actions, without prejudice to the rights of any Agent, any Bank or the holder of
any Note to enforce its claims against any Credit Party (provided, that, if an
Event of Default specified in Section 10.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Agent as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Commitment
terminated, whereupon all Commitments of each Bank shall forthwith terminate
immediately and any Commitment Commission shall forthwith become due and payable
without any other notice of any kind; (ii) declare the principal of and any
accrued interest in respect of all Loans and the Notes and all Obligations owing
hereunder and thereunder to be, whereupon the same shall become, forthwith due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Credit Party; (iii) terminate any Letter
of Credit which may be terminated in accordance with its terms; (iv) direct the
Borrower to pay (and the Borrower agrees that upon receipt of such notice, or
upon the occurrence of an Event of Default specified in Section 10.05 with
respect to the Borrower, it will pay) to the Collateral Agent at the Payment
Office such additional amount of cash or Cash Equivalents, to be held as
security by the Collateral Agent, as is equal to the aggregate Stated Amount of
all Letters of Credit issued for the account of the Borrower and then
outstanding; (v) enforce, as Collateral Agent, all of the Liens and security
interests created pursuant to the Security Documents; and (vi) apply any cash
collateral held by the Agent pursuant to Section 4.02 to the repayment of the
Obligations.
SECTION 11. Definitions and Accounting Terms.ions and
Accounting Terms
11.01 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Acknowledgment and Joinder Agreement" shall have the meaning
provided in Section 5.15.
"Acquired Entity or Business" shall have the meaning provided
in the definition of Consolidated Net Income.
"Acquisition" shall mean, collectively, (x) the purchase by
Acquisition Corp. for cash of the outstanding Shares pursuant to the Offer to
Purchase and (y) the Merger.
"Acquisition Corp." shall have the meaning provided in the
first paragraph of this Agreement.
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"Acquisition Documents" shall mean and include the Tender
Offer Documents and the Merger Documents.
"Acquisition Loan" shall mean any Revolving Loan incurred by
the Borrower to finance the consideration paid to, or on behalf of, a Seller in
connection with a Permitted Acquisition.
"Additional Security Documents" shall have the meaning
provided in Section 8.11.
"Acquisition Sub-Limit" shall mean, at any time (x)
$23,000,000 less (y)(i) except as otherwise provided in clause (ii) below, 77%
of the aggregate reductions to the Total Revolving Loan Commitment theretofore
effected or (ii) with respect to reductions effected pursuant to Section
3.02(a), such other amount as may be specified by the Borrower pursuant to such
Section.
"Adjusted Consolidated Net Income" shall mean, for any period,
Consolidated Net Income for such period plus, without duplication, the sum of
the amount of all net non-cash charges (including, without limitation,
depreciation, amortization, deferred tax expense and non-cash interest expense)
and net non-cash losses which were included in arriving at Consolidated Net
Income for such period, less the amount of all net non-cash gains (exclusive of
items reflected in Adjusted Consolidated Working Capital) which were included in
arriving at Consolidated Net Income for such period.
"Adjusted Consolidated Working Capital" shall mean, at any
time, Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities at such time.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including, but not limited to, all
directors and officers of such Person), controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power (i)
to vote 10% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agent" shall mean BTCo, in its capacity as Agent for the
Banks hereunder, and shall include any successor to the Agent appointed pursuant
to Section 12.09.
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"Agreement" shall mean this Credit Agreement, as modified,
supplemented, amended, restated (including any amendment and restatement
hereof), extended, renewed, refinanced or replaced from time to time.
"Applicable Base Rate Margin" shall mean (i) for the period
from the Initial Borrowing Date through but not including the first Start Date
after the Initial Borrowing Date, 1.25% and (ii) from and after any Start Date
to and including the corresponding End Date, the respective percentage per annum
set forth in clause (A), (B) or (C) below if, but only if, as of the Test Date
for such Start Date the applicable condition set forth in clause (A), (B) or (C)
below, as the case may be, is met:
(A) 1.25% if, but only if, as of the Test Date for such Start
Date the Leverage Ratio for the Test Period ended on such Test Date
shall be greater than or equal to 3.50:1:00;
(B) 1.00% if, but only if, as of the Test Date for such Start
Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 3.50:1.00 and greater than or equal to 3.00:1.00;
and
(C) 0.75% if, but only if, as of the Test Date for such Start
Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 3.00:1.00.
Notwithstanding anything to the contrary above in this definition, the
Applicable Base Rate Margin shall be 1.25% at all times when a Default or an
Event of Default shall exist.
"Applicable Commitment Commission Percentage" shall mean
.500%.
"Applicable Eurodollar Rate Margin" shall mean (i) for the
period from the Initial Borrowing Date through but not including the first Start
Date after the Initial Borrowing Date, 2.25%, and (ii) from and after any Start
Date to and including the corresponding End Date, the respective percentage per
annum set forth in clause (A), (B) or (C) below if, but only if, as of the Test
Date for such Start Date the applicable condition set forth in clause (A), (B)
or (C) below, as the case may be, is met:
(A) 2.25% if, but only if, as of the Test Date for such Start
Date the Leverage Ratio for the Test period ended on such Test Date
shall be greater than or equal to 3.50:1:00;
(B) 2.00% if, but only if, as of the Test Date for such Start
Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 3.50:1.00 and greater than or equal to 3.00:1.00;
and
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(C) 1.75% if, but only if, as of the Test Date for such Start
Date the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 3.00:1.00.
Notwithstanding anything to the contrary above in this definition, the
Applicable Eurodollar Rate Margin shall be 2.25% at all times when a Default or
an Event of Default shall exist.
"Applicable Excess Cash Flow Percentage" shall mean (i) in
respect of the Excess Cash Payment Period ending on February 28, 1999, 75%, and
(ii) in respect of each Excess Cash Payment Period thereafter, 50%.
"Applicable Margin Period" shall mean each period which shall
commence on a date on which the financial statements are delivered pursuant to
Section 8.01(b) or (c), as the case may be, and which shall end on the earlier
of (i) the date of the actual delivery of the next financial statements pursuant
to Section 8.01(b) or (c), as the case may be, and (ii) the latest date on which
the next financial statements are required to be delivered pursuant to Section
8.01(b) or (c), as the case may be, provided that the first Applicable Margin
Period shall commence with the delivery of Holdings' financial statements for
the Test Period ending on February 28, 1999.
"Asset Sale" shall mean any sale, transfer or other
disposition by Holdings or any of its Subsidiaries to any Person (including
by-way-of redemption by such Person) other than to Holdings or a Wholly-Owned
Subsidiary of Holdings of any asset (including, without limitation, any capital
stock or other securities of, or equity interests in, another Person) other than
sales of assets pursuant to Sections 9.02 (ii), (iii), (vii) and (ix).
"Assignment and Assumption Agreement" shall mean an Assignment
and Assumption Agreement substantially in the form of Exhibit K (appropriately
completed).
"ATC" shall mean ATC Group Services Inc., a Delaware
corporation.
"ATEC" shall mean American Testing and Engineering
Corporation, an Indiana corporation.
"ATEC Obligation" shall mean the obligations currently owing
by the Borrower to American Testing and Engineering Corporation, an Indiana
corporation, which obligations were originally incurred as part of the
acquisition by the Borrower of certain assets of American Testing and
Engineering Corporation.
"ATEC Subordination Agreement" shall have the meaning
provided in Section 5.09.
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"Bank" shall mean each financial institution listed on
Schedule I, as well as any Person which becomes a "Bank" hereunder pursuant to
Section 1.13 or 13.04(b).
"Bank Default" shall mean (i) the refusal (which has not been
retracted) or the failure of a Bank to make available its portion of any
Borrowing (including any Mandatory Borrowing) or to fund its portion of any
unreimbursed payment under Section 2.04(c) or (ii) a Bank having notified in
writing the Borrower and/or the Agent that such Bank does not intend to comply
with its obligations under Section 1.01(a), 1.01(b), 1.01(d) or 2, in the case
of either clause (i) or (ii) as a result of any takeover or control (including,
without limitation, as a result of the occurrence of any event of the type
described in Section 10.05 with respect to such Bank) of such Bank by any
regulatory authority or agency.
"Bankruptcy Code" shall have the meaning provided in Section
10.05.
"Base Rate" shall mean, at any time, the higher of (i) the
Prime Lending Rate and (ii) 1/2 of 1% in excess of the Federal Funds Rate.
"Base Rate Loan" shall mean (i) each Swingline Loan and (ii)
each other Loan designated or deemed designated as such by the Borrower at the
time of the incurrence thereof or conversion thereto.
"Bing Yen" shall mean Bing Yen & Associates, Inc., a
California corporation.
"Bing Yen Acquisition" shall mean the acquisition by ATC of
all of the outstanding shares of capital stock of Bing Yen pursuant to, and in
accordance with the terms set forth in, the Bing Yen Acquisition Agreement.
"Bing Yen Acquisition Agreement" shall mean the Stock Purchase
Agreement dated as of November 26, 1997 by and among Bing Yen Associates, Inc.,
Bing Yen, Glenn Tofani and ATC.
"Borrower" shall mean (i) prior to the consummation of the
Merger, Acquisition Corp., and (ii) from and after the consummation of the
Merger, ATC as the surviving corporation of the Merger.
"Borrowing" shall mean the borrowing of one Type of Loan of a
single Tranche from all the Banks having Commitments of the respective Tranche
(or from the Swingline Bank in the case of Swingline Loans) on a given date (or
resulting from a conversion or conversions on such date) having in the case of
Eurodollar Loans the same
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Interest Period, provided that Base Rate Loans incurred pursuant to Section
1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual
capacity, and any successor corporation thereto by merger, consolidation or
otherwise.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day which
shall be in New York City, New York, a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day which
is a Business Day described in clause (i) above and which is also a day for
trading by and between banks in the New York interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person,
all expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles and, without duplication, the amount of
Capitalized Lease Obligations incurred by such Person.
"Capitalized Lease Obligations" shall mean, with respect to
any Person, all rental obligations of such Person which, under generally
accepted accounting principles, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount thereof accounted for as
indebtedness in accordance with such principles.
"Cash Equivalents" shall mean, as to any Person, (i)
securities issued or directly and fully guaranteed or insured by the United
States or any agency or instrumentality thereof (provided that the full faith
and credit of the United States is pledged in support thereof) having maturities
of not more than six months from the date of acquisition, (ii) marketable direct
obligations issued by any state of the United States or any political
subdivision or public instrumentality of such state, in each case having
maturities of not more than six months from the date of acquisition and, at the
time of acquisition thereof, having one of the two highest ratings obtainable
from either Standard & Poor's Ratings Services or Moody's Investors Service,
Inc., (iii) Dollar denominated time deposits and certificates of deposit of any
commercial bank having, or which is the principal banking subsidiary of a bank
holding company having, a long-term unsecured debt rating of at least "A" or the
equivalent thereof from Standard & Poor's Ratings Services or "A2" or the
equivalent thereof from Moody's Investors Service, Inc. with maturities of not
more than six months from the date of acquisition by such Person, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iii) above, (v) commercial paper
issued by any Person incorporated in the United States rated
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at least A-1 or the equivalent thereof by Standard & Poor's Ratings Services or
at least P-1 or the equivalent thereof by Moody's Investors Service, Inc. and in
each case maturing not more than six months after the date of acquisition by
such Person and (vi) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses (i)
through (v) above.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.C. ss. 9601 et seq.
"Change of Control" shall mean (i) WPG and its Affiliates
shall cease to own on a fully diluted basis in the aggregate at least 51% of the
economic and voting interest in Holdings' capital stock, (ii) Holdings shall
cease to own 100% of the economic and voting interest in the Borrower's capital
stock or (iii) a "change of control" or similar event shall occur under, and as
defined in, the Senior Subordinated Note Documents.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or
personal) with respect to which any security interests have been granted (or
purported to be granted) pursuant to any Security Document, including, without
limitation, all Pledge Agreement Collateral, all Security Agreement Collateral,
the Mortgaged Properties and all cash and Cash Equivalents delivered as
collateral pursuant to Section 4.02 or 10.
"Collateral Agent" shall mean the Agent acting as collateral
agent for the Secured Creditors pursuant to the Security Documents.
"Collective Bargaining Agreements" shall have the meaning
provided in Section 5.05.
"Commitment" shall mean any of the commitments of any Bank,
i.e., whether the Term Loan Commitment or the Revolving Loan Commitment.
"Commitment Commission" shall mean the Revolving Loan
Commitment Commission and the Term Loan Commitment Commission.
"Consolidated Current Assets" shall mean, at any time, the
consolidated current assets of Holdings and its Subsidiaries at such time.
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"Consolidated Current Liabilities" shall mean, at any time,
the consolidated current liabilities of Holdings and its Subsidiaries at such
time, but excluding the current portion of any Indebtedness under this Agreement
and the current portion of any other long-term Indebtedness which would
otherwise be included therein.
"Consolidated EBIT" shall mean, for any period, Consolidated
Net Income for such period before Consolidated Interest Expense and provision
for taxes for such period and without giving effect (x) to any extraordinary
gains or losses and (y) to any gains or losses from sales of assets other than
from sales of inventory sold in the ordinary course of business.
"Consolidated EBITDA" shall mean, for any period, Consolidated
EBIT for such period, adjusted by adding thereto (i) the amount of all
amortization of intangibles and depreciation that were deducted in arriving at
Consolidated EBIT for such period and (ii) the amount of all amortization of
non-compete and consulting payments made to George Rubin and Morry F. Rubin that
were deducted in arriving at Consolidated EBIT for such period, which amount
shall not exceed $346,500 in the aggregate in any fiscal quarter of Holdings or
$4,714,000 in the aggregate during the term of this Agreement and with such
amortization and any cash payments made in connection with such non-compete and
consulting arrangements to be consistent with that set forth in the Projections.
"Consolidated Indebtedness" shall mean, at any time, the
principal amount of all Indebtedness of Holdings and its Subsidiaries at such
time as determined on a consolidated basis (excluding, for this purpose,
Indebtedness permitted by Section 9.04(x)).
"Consolidated Interest Coverage Ratio" shall mean, for any
period, the ratio of Consolidated EBITDA to Consolidated Interest Expense for
such period.
"Consolidated Interest Expense" shall mean, for any period,
the total consolidated interest expense of Holdings and its Subsidiaries for
such period (calculated without regard to any limitations on the payment
thereof) plus, without duplication, that portion of Capitalized Lease
Obligations of Holdings and its Subsidiaries representing the interest factor
for such period, provided that the amortization of deferred financing, legal and
accounting costs with respect to the Transaction shall be excluded from
Consolidated Interest Expense to the extent same would otherwise have been
included therein.
"Consolidated Net Income" shall mean, for any period, the net
income (or loss) of Holdings and its Subsidiaries for such period, determined on
a consolidated basis (after any deduction for minority interests), provided that
in determining Consolidated Net Income, (i) the net income of any other Person
which is not a Subsidiary of Holdings or is accounted for by Holdings by the
equity method of accounting shall be included only to the extent of the payment
of cash dividends or distributions by such other Person to
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Holdings or a Subsidiary thereof during such period, (ii) the net income (or
loss) of any other Person acquired by such specified Person or a Subsidiary of
such Person in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded and (iii) the net income of any
Subsidiary of the Borrower shall be excluded to the extent that the declaration
or payment of dividends or similar distributions by that Subsidiary of its
income is not at the time permitted by operation of the terms of its charter or
any agreement, instrument or law applicable to such Subsidiary; provided that
for purposes of Section 9.09 and the definitions of Applicable Base Rate Margin
and Applicable Eurodollar Rate Margin, there shall be included (to the extent
not already included) in determining Consolidated Net Income for any period the
net income (or loss) of any Person, business, property or asset acquired during
such period pursuant to a Permitted Acquisition and not subsequently sold or
otherwise disposed of by the Borrower or one of its Subsidiaries during such
period (each such Person, business, property or asset acquired and not
subsequently disposed of during such period, an "Acquired Entity or Business"),
in each case based on the actual net income (or loss) of such Acquired Entity or
Business for the entire period (including the portion thereof occurring prior to
such acquisition).
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person as a result of such Person being a general partner of
the other Person, unless the underlying obligation is expressly made
non-recourse as to such general partner, and any obligation of such Person
guaranteeing or intended to guarantee any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase
or payment of any such primary obligation or (y) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the holder of such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof pursuant to the terms of this Agreement, each
Note, the Acknowledgment and Joinder Agreement, the Subsidiaries Guaranty and
each Security Document.
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"Credit Event" shall mean the making of any Loan or the
issuance of any Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and each
Subsidiary Guarantor.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"Dividend" shall mean, with respect to any Person, that such
Person has declared or paid a dividend or returned any equity capital to its
stockholders or partners or authorized or made any other distribution, payment
or delivery of property (other than common stock of such Person) or cash to its
stockholders or partners as such, or redeemed, retired, purchased or otherwise
acquired, directly or indirectly, for a consideration any shares of any class of
its capital stock or any partnership interests outstanding on or after the
Effective Date (or any options or warrants issued by such Person with respect to
its capital stock), or set aside any funds for any of the foregoing purposes, or
shall have permitted any of its Subsidiaries to purchase or otherwise acquire
for a consideration any shares of any class of the capital stock or any
partnership interests of such Person outstanding on or after the Effective Date
(or any options or warrants issued by such Person with respect to its capital
stock). Without limiting the foregoing, "Dividends" with respect to any Person
shall also include all payments made or required to be made by such Person with
respect to any stock appreciation rights, plans, equity incentive or achievement
plans or any similar plans or setting aside of any funds for the foregoing
purposes.
"Documents" shall mean and include (i) the Credit Documents,
(ii) the Tender Offer Documents, (iii) the Refinancing Documents, (iv) the
Equity Financing Documents, (v) the Merger Documents and (vi) the Senior
Subordinated Note Documents.
"Dollars" and the sign "$" shall each mean freely
transferable lawful money of the United States.
"Drawing" shall have the meaning provided in Section 2.05(b).
"Effective Date" shall have the meaning provided in Section
13.10.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution, any fund that invests in loans or any other
"accredited investor" (as defined in Regulation D of the Securities Act).
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"Employment Agreements" shall have the meaning provided in
Section 5.05.
"End Date" shall mean, for any Applicable Margin Period, the
last day of such Applicable Margin Period.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued,
or any approval given, under any such Environmental Law (hereafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief in connection
with alleged injury or threat of injury to health, safety or the environment due
to the presence of Hazardous Materials.
"Environmental Law" shall mean any Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guideline, written policy
and rule of common law now or hereafter in effect and in each case as amended,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. ss. 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.
2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of
1986, 42 U.S.C. ss. 11001 et seq.; the Hazardous Material Transportation Act, 49
U.S.C. ss. 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C.
ss. 651 et seq.; and any state and local or foreign counterparts or equivalents,
in each case as amended from time to time.
"Equity Financing" shall mean the issuance by Holdings of (x)
shares of its common stock (or options to purchase shares of its common stock)
to WPG Corporate Development, JNL, Old Hickory and existing management of ATC
and (y) shares of its Qualified Preferred Stock and warrants to purchase shares
of its common stock to JNL and Old Hickory, in each case pursuant to the Equity
Financing Documents.
"Equity Financing Documents" shall mean each of the documents
and agreements entered into in connection with the consummation of the Equity
Financing.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974,
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as amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with Holdings or a Subsidiary of Holdings
would be deemed to be a "single employer" (i) within the meaning of Section
414(b), (c), (m) or (o) of the Code or (ii) as a result of Holdings or a
Subsidiary of Holdings being or having been a general partner of such person.
"Eurodollar Loan" shall mean each Loan (other than a Swingline
Loan) designated as such by the Borrower at the time of the incurrence thereof
or conversion thereto.
"Eurodollar Rate" shall mean (a) the offered quotation to
first-class banks in the New York interbank Eurodollar market by BTCo for Dollar
deposits of amounts in immediately available funds comparable to the outstanding
principal amount of the Eurodollar Loan of BTCo with maturities comparable to
the Interest Period applicable to such Eurodollar Loan commencing two Business
Days thereafter as of 11:00 A.M. (New York time) on the date which is two
Business Days prior to the commencement of such Interest Period, divided (and
rounded upward to the nearest 1/16 of 1%) by (b) a percentage equal to 100%
minus the then stated maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves required by applicable law) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency funding or liabilities as
defined in Regulation D (or any successor category of liabilities under
Regulation D).
"Event of Default" shall have the meaning provided in Section
10.
"Excess Cash Flow" shall mean, for any period, the remainder
of (a) the sum of (i) Adjusted Consolidated Net Income for such period and (ii)
the decrease, if any, in Adjusted Consolidated Working Capital from the first
day to the last day of such period, minus (b) the sum of (i) the amount of all
Capital Expenditures made by Holdings and its Subsidiaries during such period
pursuant to Sections 9.07(a) and (b) (other than Capital Expenditures to the
extent financed with equity proceeds or Indebtedness (other than with Revolving
Loans or Swingline Loans)), (ii) the amount of all Permitted Acquisitions made
by the Borrower and its Subsidiaries during such period (other than Permitted
Acquisitions to the extent financed through the issuance of capital stock, with
equity proceeds or Indebtedness (other than with Revolving Loans or Swingline
Loans), (iii) the aggregate amount of permanent principal payments of
Indebtedness for borrowed money of Holdings and its Subsidiaries during such
period (other than repayments of Loans, provided that
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repayments of Loans shall be deducted in determining Excess Cash Flow if such
repayments were (x) required as a result of a Scheduled Repayment under Section
4.02(b) or (y) made as a voluntary prepayment with internally generated funds
(but in the case of a voluntary prepayment of Revolving Loans or Swingline
Loans, only to the extent accompanied by a voluntary reduction to the Total
Revolving Loan Commitment)) and (iv) the increase, if any, in Adjusted
Consolidated Working Capital from the first day to the last day of such period.
"Excess Cash Payment Date" shall mean the date occurring 95
days after the last day of each fiscal year of Holdings (beginning with its
fiscal year ending on February 28, 1999).
"Excess Cash Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the Borrower.
"Existing Indebtedness" shall have the meaning provided in
Section 7.22.
"Existing Indebtedness Agreements" shall have the meaning
provided in Section 5.05.
"EWI" shall mean Environmental Warranty Inc., a Connecticut
corporation.
"EWI Acquisition" shall mean the acquisition by ATC of 90.1%
of the outstanding shares of capital stock of EWI pursuant to, and in accordance
with the terms set forth in, the EWI Acquisition Agreement.
"EWI Acquisition Agreement" shall mean the Stock Purchase
Agreement dated as of November 4, 1997, by and among Conning Insurance Capital
Limited Partnership II, Conning Insurance Capital International Partners II,
Cullinane and Donnelly Venture Partners, Limited Partnership, Lawyers Title
Environmental Insurance Services Agency, Inc., Charles L. Perry, Jr. and ATC.
"Facing Fee" shall have the meaning provided in Section
3.01(d).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to 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, if such rate is not so published for any
day which is a Business Day, the average of the quota-
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tions for such day on such transactions received by the Agent from three Federal
Funds brokers of recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or referred
to in Section 3.01.
"Foreign Pension Plan" shall mean any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by Holdings or
any one or more of its Subsidiaries primarily for the benefit of employees of
Holdings or such Subsidiaries residing outside the United States of America,
which plan, fund or other similar program provides, or results in, retirement
income, a deferral of income in contemplation of retirement or payments to be
made upon termination of employment, and which plan is not subject to ERISA or
the Code.
"Guaranteed Creditors" shall mean and include each of the
Agent, the Collateral Agent, the Issuing Bank, the Banks and each party (other
than any Credit Party) party to an Interest Rate Protection Agreement or Other
Hedging Agreement to the extent such party constitutes a Secured Creditor under
the Security Documents.
"Guaranteed Obligations" shall mean (i) the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of the principal and interest on each Note issued by, and Loans made to, the
Borrower under this Agreement and all reimbursement obligations and Unpaid
Drawings with respect to Letters of Credit, together with all the other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities
(including, without limitation, indemnities, fees and interest thereon) of the
Borrower to the Banks, the Agent, the Issuing Bank and the Collateral Agent now
existing or hereafter incurred under, arising out of or in connection with this
Agreement or any other Credit Document and the due performance and compliance by
the Borrower with all the terms, conditions and agreements contained in the
Credit Documents and (ii) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) of the Borrower owing under any Interest Rate
Protection Agreement or Other Hedging Agreement entered into by the Borrower
with any Bank or any affiliate thereof (even if such Bank subsequently ceases to
be a Bank under this Agreement for any reason) so long as such Bank or affiliate
participates in such Interest Rate Protection Agreement or Other Hedging
Agreement, and their subsequent assigns, if any, whether now in existence or
hereafter arising, and the due performance and compliance with all terms,
conditions and agreements contained therein.
"Guarantor" shall mean Holdings and each Subsidiary Guarantor.
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"Guaranty" shall mean and include the Parent Guaranty and the
Subsidiaries Guaranty.
"Hazardous Materials" shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous substances," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, the Release of which is prohibited, limited or
regulated by any governmental authority.
"Holdings" shall have the meaning provided in the first
paragraph of this Agreement.
"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money or for the deferred purchase price of
property or services, (ii) the maximum amount available to be drawn under all
letters of credit issued for the account of such Person and all unpaid drawings
in respect of such letters of credit, (iii) all Indebtedness of the types
described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition
secured by any Lien on any property owned by such Person, whether or not such
Indebtedness has been assumed by such Person (provided, that, if the Person has
not assumed or otherwise become liable in respect of such Indebtedness, such
Indebtedness shall be deemed to be in an amount equal to the fair market value
of the property to which such Lien relates as determined in good faith by such
Person), (iv) the aggregate amount required to be capitalized under leases under
which such Person is the lessee, (v) all obligations of such Person to pay a
specified purchase price for goods or services, whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person and (vii) all obligations under any Interest Rate
Protection Agreement, any Other Hedging Agreement or under any similar type of
agreement. Notwithstanding the foregoing, Indebtedness shall not include trade
payables and accrued expenses incurred by any Person in accordance with
customary practices and in the ordinary course of business of such Person.
"Indebtedness to be Refinanced" shall mean all Indebtedness
set forth on Schedule X which is to be repaid in full on the Initial Borrowing
Date.
"Initial Borrowing Date" shall mean the date occurring on or
after the Effective Date on which the initial Borrowing of Loans occurs.
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"Intercompany Loan" shall have the meaning provided in
Section 9.05(ix).
"Intercompany Note" shall mean a promissory note, in the form
of Exhibit L, evidencing Intercompany Loans.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section
1.09.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, interest collar agreement,
interest rate hedging agreement or other similar agreement or arrangement.
"Investments" shall have the meaning provided in Section 9.05.
"Issuing Bank" shall mean BTCo.
"JNL" shall mean Jackson National Life Insurance Company.
"L/C Supportable Obligations" shall mean (i) obligations of
the Borrower or any of its Subsidiaries with respect to workers compensation,
surety bonds and other similar statutory obligations and (ii) such other
obligations of the Borrower or any of its Subsidiaries as are reasonably
acceptable to the Issuing Bank and otherwise permitted to exist pursuant to the
terms of this Agreement.
"Leaseholds" of any Person shall mean all the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(c).
"Letter of Credit Outstandings" shall mean, at any time, the
sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and
(ii) the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).
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"Leverage Ratio" shall mean, at any time, the ratio of
Consolidated Indebtedness at such time to Consolidated EBITDA for the Test
Period then most recently ended, provided that, (x) in the case of the Test
Period ending on May 31, 1998, Consolidated EBITDA for such Test Period shall be
the actual Consolidated EBITDA for such Test Period multiplied by 4, (y) in the
case of the Test Period ending on August 31, 1998, Consolidated EBITDA for such
Test Period shall be the actual Consolidated EBITDA for such Test Period
multiplied by 2, and (z) in the case of the Test Period ending November 30,
1998, Consolidated EBITDA for such Test Period shall be the actual Consolidated
EBITDA for such Test Period multiplied by a fraction the numerator of which is 4
and the denominator of which is 3.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
the UCC or any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Term Loan, each Revolving Loan and
each Swingline Loan.
"Management Agreements" shall have the meaning provided in
Section 5.05.
"Mandatory Borrowing" shall have the meaning provided in
Section 1.01(d).
"Margin Stock" shall have the meaning provided in
Regulation U.
"Maturity Date" shall mean, with respect to any Tranche of
Loans, the Term Loan Maturity Date, the Revolving Loan Maturity Date or the
Swingline Expiry Date, as the case may be.
"Maximum Swingline Amount" shall mean $2,000,000.
"Merger" shall mean the merger of Acquisition Corp. with and
into ATC, with ATC being the surviving corporation of such merger.
"Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of November 26, 1997, among Holdings, Acquisition Corp.
and ATC.
"Merger Documents" shall mean the Merger Agreement, the
certificate of merger attached thereto as an exhibit and all other agreements
and documents related to the Merger.
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"Minimum Borrowing Amount" shall mean (i) for Term Loans,
$5,000,000, (ii) for Revolving Loans, $500,000 and (iii) for Swingline Loans,
$100,000.
"Mortgage" shall mean each mortgage, deed to secure debt or
deed of trust pursuant to which any Credit Party shall have granted to the
Collateral Agent a mortgage lien on such Credit Party's Mortgaged Property.
"Mortgaged Property" shall mean each parcel of Real Property
owned or leased by any Credit Party which is encumbered by a Mortgage.
"Net Debt Proceeds" shall mean, with respect to any incurrence
of Indebtedness for borrowed money, the cash proceeds (net of underwriting
discounts and commissions and other costs associated therewith) received by the
respective Person from the respective incurrence of such Indebtedness for
borrowed money.
"Net Equity Proceeds" shall mean, with respect to each
issuance or sale of any equity by any Person or any capital contribution to such
Person, the cash proceeds (net of underwriting discounts and commissions and
other costs associated therewith) received by such Person from the respective
sale or issuance of its equity or from the respective capital contribution.
"Net Insurance Proceeds" shall mean, with respect to any
Recovery Event, the cash proceeds (net of costs, expenses and taxes incurred in
connection with such Recovery Event) received by the respective Person in
connection with the respective Recovery Event.
"Net Sale Proceeds" shall mean, for any Asset Sale, the gross
cash proceeds (including any cash received by way of deferred payment pursuant
to a promissory note, receivable or otherwise, but only as and when received)
received from such sale of assets, net of the costs, expenses of such sale
(including fees and commissions, payments of unassumed liabilities relating to
the assets sold and required payments of any Indebtedness (other than
Indebtedness secured pursuant to the Security Documents) which is secured by the
respective assets which were sold), and the incremental taxes paid or payable as
a result of such Asset Sale.
"Non-Compete Agreements" shall have the meaning provided in
Section 5.05.
"Non-Defaulting Bank" shall mean and include each Bank other
than a Defaulting Bank.
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"Note" shall mean each Term Note, each Revolving Note and the
Swingline Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03(a).
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Agent located at
One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006,
Attention: Greg Perry or such other office as the Agent may hereafter designate
in writing as such to the other parties hereto.
"Obligations" shall mean all amounts owing to the Agent, the
Collateral Agent, the Issuing Bank or any Bank pursuant to the terms of this
Agreement or any other Credit Document.
"Offer to Purchase" shall mean the Offer to Purchase, dated
December 4, 1997, issued by Acquisition Corp. in connection with the Tender
Offer.
"Old Hickory" shall mean Old Hickory Fund I, L.L.C.
"Other Hedging Agreement" shall mean any foreign exchange
contracts, currency swap agreements, commodity agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values.
"Parent Guaranty" shall mean the guaranty of Holdings
pursuant to Section 14.
"Participant" shall have the meaning provided in Section
2.04(a).
"Payment Office" shall mean the office of the Agent located at
One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall have the meaning provided in
Section 9.02(xii).
"Permitted Encumbrance" shall mean, with respect to any
Mortgaged Property, such exceptions to title as are set forth in the Mortgage
Policy delivered with
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respect thereto, all of which exceptions must be reasonably acceptable to the
Agent in its reasonable discretion.
"Permitted Liens" shall have the meaning provided in Section
9.01.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, limited liability company, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) Holdings or a Subsidiary of Holdings or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which the Holdings, or a Subsidiary of Holdings or an ERISA
Affiliate maintained, contributed to or had an obligation to contribute to such
plan.
"Pledge Agreement" shall have the meaning provided in Section
5.12.
"Pledge Agreement Collateral" shall mean all "Collateral"
as defined in the Pledge Agreement.
"Pledged Securities" shall mean all "Pledged Securities" as
defined in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
"Projections" shall mean the projections prepared by Holdings,
dated January 28, 1998 and furnished to the Banks prior to the Initial Borrowing
Date.
"Proxy Materials" shall mean all proxy materials sent by
Acquisition Corp. and ATC to the shareholders of ATC in connection with the
Acquisition.
"Qualified Preferred Stock" shall mean the preferred stock of
Holdings issued to JNL as part of the Equity Financing (as constituted on the
Effective Date) and any other preferred stock of Holdings so long as the terms
of any such preferred stock (i) do not contain any mandatory put, redemption,
repayment, sinking fund or other similar provision occurring before December 31,
2005, (ii) do not require the cash payment of dividends, (iii) do not contain
any covenants other than those covenants of the type (but no
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more restrictive than those) set forth in the preferred stock issued to JNL as
part of the Equity Financing (as constituted on the Effective Date), (iv) do not
grant the holders thereof any voting rights except for (x) voting rights
required to be granted to such holders under applicable law and (y) limited
customary voting rights on fundamental matters such as mergers, consolidations,
sales of all or substantially all of the assets of Holdings, liquidations
involving Holdings or the creation of any class of equity on a parity with, or
prior to, such Qualified Preferred Stock, and (v) are otherwise reasonably
satisfactory to the Agent.
"Quarterly Payment Date" shall mean each February 28, May 31,
August 31 and November 30 occurring after the Initial Borrowing Date.
"RCRA" shall mean the Resource Conservation and Recovery
Act, as the same may be amended from time to time, 42 U.S.C. ss. 6901 et seq.
"Real Property" of any Person shall mean all the right, title
and interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by Holdings or any of
its Subsidiaries of any cash insurance proceeds or condemnation awards payable
by reason of theft, loss, physical destruction, damage, taking or any other
similar event with respect to any property or assets of Holdings or any of its
Subsidiaries.
"Refinancing" shall mean the repayment in full by the
Borrower of the Indebtedness to be Refinanced.
"Refinancing Documents" shall mean all agreements and
documents related to the Refinancing.
"Register" shall have the meaning provided in Section 13.15.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
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"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Release" shall mean the disposing, discharging, injecting,
spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying,
pouring or migrating, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section
1.13.
"Replacement Bank" shall have the meaning provided in Section
1.13.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the 30-day notice period is waived under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Banks" shall mean Non-Defaulting Banks the sum of
whose outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term
Loan Commitments) and Revolving Loan Commitments (or after the termination
thereof, outstanding Revolving Loans and RL Percentages of outstanding Swingline
Loans and Letter of Credit Outstandings) represent an amount greater than 50% of
the sum of all outstanding Term Loans of Non-Defaulting Banks (or, if prior to
the Initial Borrowing Date, the Total Term Loan Commitment less the Term Loan
Commitments of all Defaulting Banks) and the Total Revolving Loan Commitment
less the Revolving Loan Commitments of all Defaulting Banks (or after the
termination thereof, the sum of the then total outstanding Revolving Loans of
Non-Defaulting Banks and the aggregate RL Percentages of all Non-Defaulting
Banks of the total outstanding Swingline Loans and Letter of Credit Outstandings
Swingline Loans at such time).
"Revolving Loan" shall have the meaning provided in Section
1.01(b)(A).
"Revolving Loan Commitment" shall mean, for each Bank, the
amount set forth opposite such Bank's name in Schedule I directly below the
column entitled "Revolving Loan Commitment," as same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03 and/or 10 or (y) adjusted from time
to time as a result of assignments to or from such Bank pursuant to Section 1.13
or 13.04(b).
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"Revolving Loan Commitment Commission" shall have the meaning
provided in Section 3.01(b).
"Revolving Loan Maturity Date" shall mean January 29, 2003.
"Revolving Note" shall have the meaning provided in Section
1.05(a).
"RL Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the denominator of which is the Total
Revolving Loan Commitment at such time, provided that if the RL Percentage of
any Bank is to be determined after the Total Revolving Loan Commitment has been
terminated, then the RL Percentages of the Banks shall be determined immediately
prior (and without giving effect) to such termination.
"Scheduled Repayments" shall have the meaning provided in
Section 4.02(b).
"SEC" shall have the meaning provided in Section 8.01(h).
"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning assigned that term
in the respective Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Security Agreement" shall have the meaning provided in
Section 5.13.
"Security Agreement Collateral" shall mean all "Collateral"
as defined in the Security Agreement.
"Security Document" shall mean and include each of the
Security Agreement, the Pledge Agreement, each Mortgage and, after the execution
and delivery thereof, each Additional Security Document.
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"Seller Notes" shall mean and include (i) each of the notes
issued (and other deferred consideration owing) by the Borrower or any of its
Subsidiaries as partial consideration for acquisitions consummated prior to the
Initial Borrowing Date and designated as such on Schedule VI (including the ATEC
Obligations) and (ii) each of the unsecured notes that may be issued (and other
deferred consideration owing) by the Borrower or any of its Subsidiaries from
time to time after the Initial Borrowing Date in connection with Permitted
Acquisitions to the extent such notes are permitted to be issued in accordance
with the terms of Sections 9.02(xii) and 9.04.
"Senior Subordinated Documents" shall mean the Senior
Subordinated Note Indenture, the Senior Subordinated Notes and each other
document or agreement relating to the issuance of the Senior Subordinated Notes.
"Senior Subordinated Note Indenture" shall mean the Indenture,
dated as of January 29, 1998, between the Borrower and State Street Bank and
Trust Company, as Trustee.
"Senior Subordinated Notes" shall mean the Borrower's 12%
Senior Subordinated Notes due 2008 (which term shall include the Series A Senior
Subordinated Notes and the Series B Senior Subordinated Notes issued in exchange
therefor pursuant to the Senior Subordinated Note Documents).
"Shareholders' Agreements" shall have the meaning provided in
Section 5.05.
"Shares" shall mean all outstanding shares of common stock of
ATC.
"Start Date" shall mean, with respect to any Applicable Margin
Period, the first day of such Applicable Margin Period.
"Stated Amount" of each Letter of Credit shall mean, at any
time, the maximum amount available to be drawn thereunder (in each case
determined without regard to whether any conditions to drawing could then be
met).
"Sub-Limit" shall mean and include each of the Acquisition
Sub-Limit and the Working Capital Sub-Limit.
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such
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Person and/or one or more Subsidiaries of such Person and (ii) any partnership,
limited liability company, association, joint venture or other entity in which
such Person and/or one or more Subsidiaries of such Person has more than a 50%
equity interest at the time.
"Subsidiary Guarantor" shall mean each Subsidiary of the
Borrower.
"Subsidiaries Guaranty" shall have the meaning provided in
Section 5.14.
"Supermajority Banks" shall mean those Non-Defaulting Banks
which would constitute the Required Banks under, and as defined in, this
Agreement if (x) all outstanding Obligations in respect of the Revolving Loan
Commitment were repaid in full and the Total Revolving Loan Commitment was
terminated and (y) the percentage "50%" contained therein were changed to
"66-2/3%."
"Swingline Bank" shall mean BTCo.
"Swingline Expiry Date" shall mean that date which is five
Business Days prior to the Revolving Loan Maturity Date.
"Swingline Loan" shall have the meaning provided in Section
1.01(c).
"Swingline Note" shall have the meaning provided in Section
1.05(a).
"Syndication Date" shall mean that date upon which the Agent
determines (and notifies the Borrower) that the primary syndication (and
resultant addition of Persons as Banks pursuant to Section 13.04(b)) has been
completed.
"Tax Sharing Agreements" shall have the meaning provided in
Section 5.05.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Tender Offer" shall mean the tender offer commenced by
Acquisition Corp. pursuant to the Offer to Purchase.
"Tender Offer Documents" shall mean the Offer to Purchase, the
Schedule 14D-1 filed by Acquisition Corp. and all amendments and exhibits
thereto and related documents filed with the SEC or distributed to the
shareholders of the Borrower in connection with the Tender Offer.
"Term Loan" shall have the meaning provided in Section
1.01(a).
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"Term Loan Commitment" shall mean, for each Bank, the amount
set forth opposite such Bank's name in Schedule I directly below the column
entitled "Term Loan Commitment," as same may be (x) reduced from time to time
pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a
result of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b).
"Term Loan Commitment Commission" shall have the meaning
provided in Section 3.01(a).
"Term Loan Maturity Date" shall mean January 29, 2003.
"Test Date" shall mean, with respect to any Start Date, the
last day of the most recent fiscal quarter of Holdings ended immediately prior
to such Start Date.
"Test Period" shall mean (i) for any determination made on or
prior to November 30, 1998, the period from March 1, 1998 to the last day of the
fiscal quarter of Holdings then last ended (in each case taken as one accounting
period), provided that the first Test Period shall end on May 31, 1998, and (ii)
for any determination made thereafter, each period of four consecutive fiscal
quarters of Holdings then last ended (in each case taken as one accounting
period).
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.
"Total Revolving Loan Commitment" shall mean, at any time, the
sum of the Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean, at any time, the sum
of the Term Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at
any time, an amount equal to the remainder of (x) the Total Revolving Loan
Commitment then in effect less (y) the sum of the aggregate principal amount of
all Revolving Loans and Swingline Loans then outstanding plus the then aggregate
amount of all Letter of Credit Outstandings.
"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being three separate Tranches,
i.e., Term Loans, Revolving Loans and Swingline Loans.
"Transaction" shall mean, collectively, (i) the consummation
of the Tender Offer, (ii) the issuance of the Senior Subordinated Notes, (iii)
the consummation of the
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Equity Financing, (iv) the consummation of the Refinancing, (v) the entering
into of the Credit Documents and the incurrence of all Loans on the Initial
Borrowing Date, (vi) the consummation of the Merger and (vii) the payment of
fees and expenses in connection with the foregoing.
"Type" shall mean the type of Loan determined with regard to
the interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year, determined
in accordance with actuarial assumptions at such time consistent with Statement
of Financial Accounting Standards No. 87, exceeds the market value of the assets
allocable thereto.
"United States" and "U.S." shall each mean the United States
of America.
"Unpaid Drawing" shall have the meaning provided for in
Section 2.05(a).
"Unutilized Acquisition Sub-Limit" shall mean, at any time,
(i) the Acquisition Sub-Limit at such time less (ii) the sum of the aggregate
outstanding principal amount of all Acquisition Loans at such time.
"Unutilized Revolving Loan Commitment" shall mean, with
respect to any Bank at any time, such Bank's Revolving Loan Commitment at such
time less the sum of (i) the aggregate outstanding principal amount of all
Revolving Loans made by such Bank at such time and (ii) such Bank's RL
Percentage of the Letter of Credit Outstandings at such time.
"Unutilized Working Capital Sub-Limit" shall mean, at any
time, (i) the Working Capital Sub-Limit at such time less (ii) the sum of the
aggregate principal amount of all Working Capital Loans at such time.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i)
any corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, limited liability company,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
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"Working Capital Loan" shall mean each Revolving Loan incurred
by the Borrower which does not constitute an Acquisition Loan.
"Working Capital Sub-Limit" shall mean, at any time, (x)
$15,000,000 less (y)(i) except as otherwise provided in clause (ii) below, 23%
of the aggregate reduction to the Total Revolving Loan Commitment theretofore
effected or (ii) with respect to the reductions effected pursuant to Section
3.02(a), such other amount as may be specified by the Borrower pursuant to such
Section, it being understood and agreed that in no event may the Borrower elect
a reduction of the Working Capital Sub-Limit pursuant to Section 3.02(a) to an
amount less than $10,000,000.
"WPG" shall mean Weiss, Peck & Greer, L.L.C., a Delaware
limited liability company.
SECTION 12. The Agent.
12.01 Appointment. The Banks hereby irrevocably designate BTCo as Agent
(for purposes of this Section 12, the term "Agent" also shall include BTCo in
its capacity as Collateral Agent pursuant to the Security Documents) to act as
specified herein and in the other Credit Documents. Each Bank hereby irrevocably
authorizes, and each holder of any Note by the acceptance of such Note shall be
deemed irrevocably to authorize, the Agent to take such action on their behalf
under the provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Agent may perform any of
its duties hereunder by or through its officers, directors, agents, employees or
affiliates.
12.02 Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and in the
other Credit Documents. Neither the Agent nor any of its officers, directors,
agents, employees or affiliates shall be liable for any action taken or omitted
by them hereunder or under any other Credit Document or in connection herewith
or therewith, unless caused by its or their gross negligence or willful
misconduct. The duties of the Agent shall be mechanical and administrative in
nature; the Agent shall not have by reason of this Agreement or any other Credit
Document a fiduciary relationship in respect of any Bank or the holder of any
Note; and nothing in this Agreement or any other Credit Document, expressed or
implied, is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement or any other Credit Document except as
expressly set forth herein or therein.
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12.03 Lack of Reliance on the Agent. Independently and without reliance
upon the Agent, each Bank and the holder of each Note, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of Holdings and its
Subsidiaries in connection with the making and the continuance of the Loans and
the taking or not taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of Holdings and its Subsidiaries and, except
as expressly provided in this Agreement, the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any Bank
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter. The Agent shall not be responsible to any Bank or
the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectability, priority or
sufficiency of this Agreement or any other Credit Document or the financial
condition of Holdings or any of its Subsidiaries or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document, or the
financial condition of Holdings or any of its Subsidiaries or the existence or
possible existence of any Default or Event of Default.
12.04 Certain Rights of the Agent. If the Agent shall request instructions
from the Required Banks with respect to any act or action (including failure to
act) in connection with this Agreement or any other Credit Document, the Agent
shall be entitled to refrain from such act or taking such action unless and
until the Agent shall have received instructions from the Required Banks; and
the Agent shall not incur liability to any Bank by reason of so refraining.
Without limiting the foregoing, no Bank or the holder of any Note shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Banks.
12.05 Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by any Person that
the Agent believed to be the proper Person, and, with respect to all legal
matters pertaining to this Agreement and any other Credit Document and its
duties hereunder and thereunder, upon advice of counsel selected by the Agent.
12.06 Indemnification. To the extent the Agent is not reimbursed and
indemnified by the Credit Parties, the Banks will reimburse and indemnify the
Agent in proportion to their respective "percentage" as used in determining the
Required Banks (determined as if there were no Defaulting Banks) for and against
any and all liabilities,
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obligations, losses, damages, penalties, claims, actions, judgments, costs,
expenses or disbursements of whatsoever kind or nature which may be imposed on,
asserted against or incurred by the Agent in performing its duties hereunder or
under any other Credit Document or in any way relating to or arising out of this
Agreement or any other Credit Document; provided that no Bank shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
resulting from the Agent's gross negligence or willful misconduct (as finally
determined by a court of competent jurisdiction).
12.07 The Agent in its Individual Capacity. With respect to its obligation
to make Loans, or issue or participate in Letters of Credit, under this
Agreement, the Agent shall have the rights and powers specified herein for a
"Bank" and may exercise the same rights and powers as though it were not
performing the duties specified herein; and the term "Banks," "Required Banks,"
"Supermajority Banks," "holders of Notes" or any similar terms shall, unless the
context clearly otherwise indicates, include the Agent in its respective
individual capacities. The Agent and its affiliates may accept deposits from,
lend money to, and generally engage in any kind of banking, investment banking,
trust or other business with, or provide debt financing, equity capital or other
services (including financial advisory services) to, any Credit Party or any
Affiliate of any Credit Party (or any Person engaged in a similar business with
any Credit Party or any Affiliate thereof) as if they were not performing the
duties specified herein, and may accept fees and other consideration from any
Credit Party or any Affiliate of any Credit Party for services in connection
with this Agreement and otherwise without having to account for the same to the
Banks.
12.08 Holders. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.
12.09 Resignation by the Agent. (a) The Agent may resign from the
performance of all its respective functions and duties hereunder and/or under
the other Credit Documents at any time by giving 15 Business Days' prior written
notice to the Banks. Such resignation shall take effect upon the appointment of
a successor Agent pursuant to clauses (b) and (c) below or as otherwise provided
below.
(b) Upon any such notice of resignation by the Agent, the
Required Banks shall appoint a successor Agent hereunder or thereunder who shall
be a commercial bank or trust company reasonably acceptable to the Borrower.
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(c) If a successor Agent shall not have been so appointed
within such 15 Business Day period, the Agent with the consent of the Borrower
(which consent shall not be unreasonably withheld or delayed), shall then
appoint a successor Agent who shall serve as Agent hereunder or thereunder until
such time, if any, as the Required Banks appoint a successor Agent as provided
above.
(d) If no successor Agent has been appointed pursuant to
clause (b) or (c) above by the 20th Business Day after the date such notice of
resignation was given by the Agent, the Agent's resignation shall become
effective and the Required Banks shall thereafter perform all the duties of the
Agent hereunder and/or under any other Credit Document until such time, if any,
as the Required Banks appoint a successor Agent as provided above.
SECTION 13. Miscellaneous.
13.01 Payment of Expenses, etc. The Borrower shall: (i) whether or not the
transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agent (including, without limitation,
the reasonable fees and disbursements of White & Case LLP and of the Agent's
local counsel and consultants) in connection with the preparation, execution and
delivery of this Agreement and the other Credit Documents and the documents and
instruments referred to herein and therein and any amendment, waiver or consent
relating hereto or thereto, of the Agent in connection with its syndication
efforts with respect to this Agreement and of the Agent and, after the
occurrence and during the continuance of an Event of Default, each of the Banks
in connection with the enforcement of this Agreement and the other Credit
Documents and the documents and instruments referred to herein and therein or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy proceedings (including, without limitation, in each
case the reasonable fees and disbursements of counsel for the Agent and, after
the occurrence of an Event of Default, for each of the Banks); (ii) pay and hold
each of the Banks harmless from and against any and all present and future
stamp, excise and other similar documentary taxes with respect to the foregoing
matters and save each of the Banks harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Bank) to pay such taxes; and (iii) indemnify
the Agent and each Bank, and each of their respective officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all liabilities, obligations (including removal or remedial
actions), losses, damages, penalties, claims, actions, judgments, suits, costs,
expenses and disbursements (including reasonable attorneys' and consultants'
fees and disbursements) incurred by, imposed on or assessed against any of them
as a result of, or arising out of, or in any way related to, or by reason of,
(a) any investigation, litigation or other proceeding (whether or not the Agent
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or any Bank is a party thereto and whether or not such investigation, litigation
or other proceeding is brought by or on behalf of any Credit Party) related to
the entering into and/or performance of this Agreement or any other Credit
Document or the use of any Letter of Credit or the proceeds of any Loans
hereunder or the consummation of the Transaction or any other transactions
contemplated herein or in any other Credit Document or the exercise of any of
their rights or remedies provided herein or in the other Credit Documents, or
(b) the actual or alleged presence of Hazardous Materials in the air, surface
water or groundwater or on the surface or subsurface of any Real Property owned
or at any time operated by Holdings or any of its Subsidiaries, the generation,
storage, transportation, handling or disposal of Hazardous Materials by Holdings
or any of its Subsidiaries at any location, whether or not owned or operated by
Holdings or any of its Subsidiaries, the non-compliance of any Real Property
with any Environmental Law (including applicable permits thereunder) applicable
to any Real Property, or any Environmental Claim asserted against Holdings, any
of its Subsidiaries or any Real Property owned or at any time operated by
Holdings or any of its Subsidiaries, including, in each case, without
limitation, the reasonable fees and disbursements of counsel and other
consultants incurred in connection with any such investigation, litigation or
other proceeding (but excluding, in each case any losses, liabilities, claims,
damages or expenses to the extent incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified (as finally determined by a
court of competent jurisdiction)). To the extent that the undertaking to
indemnify, pay or hold harmless the Agent or any Bank set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which is permissible under
applicable law.
13.02 Right of Setoff. (a) In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank wherever located) to
or for the credit or the account of any Credit Party against and on account of
the Obligations and liabilities of the Credit Parties to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Bank pursuant to
Section 13.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit Document, irrespective
of whether or not such Bank shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
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(b) NOTWITHSTANDING THE FOREGOING SUBSECTION (a), AT ANY TIME
THAT THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED
IN CALIFORNIA, NO BANK SHALL EXERCISE A RIGHT OF SETOFF, BANKER'S LIEN OR
COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY
PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY NOTE THAT IS NOT
TAKEN BY THE REQUIRED BANKS OR APPROVED IN WRITING BY THE REQUIRED BANKS IF SUCH
SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b,
580d AND 726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE
CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE
VALIDITY, PRIORITY OR ENFORCEABILITY OF THE LIENS GRANTED TO THE COLLATERAL
AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND
OTHER OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY BANK OF ANY SUCH
RIGHT WITHOUT OBTAINING SUCH CONSENT OF THE REQUIRED BANKS SHALL BE NULL AND
VOID. THIS SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF THE BANKS
HEREUNDER AND MAY BE AMENDED, MODIFIED OR WAIVED IN ANY RESPECT BY THE REQUIRED
BANKS WITHOUT THE REQUIREMENT OF PRIOR NOTICE TO OR CONSENT BY ANY CREDIT PARTY
AND DOES NOT CONSTITUTE A WAIVER OF ANY RIGHTS AGAINST ANY CREDIT PARTY OR
AGAINST ANY COLLATERAL.
13.03 Notices. Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
telegraphic, telex, telecopier or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered: if to any Credit Party, at the address
specified opposite its signature below or in the other relevant Credit
Documents; if to the Bank, at its address specified on Schedule II; and if to
the Agent, at the Notice Office; or, as to any Credit Party or the Agent, at
such other address as shall be designated by such party in a written notice to
the other parties hereto and, as to each Bank, at such other address as shall be
designated by such Bank in a written notice to the Borrower and the Agent. All
such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, be effective when deposited
in the mails, delivered to the telegraph company, cable company or overnight
courier, as the case may be, or sent by telex or telecopier, except that notices
and communications to the Agent and the Borrower shall not be effective until
received by the Agent or the Borrower, as the case may be.
13.04 Benefit of Agreement; Assignments; Participations. (a) This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto; provided,
however, the Borrower may not assign or transfer any of its rights, obligations
or interest hereunder without the
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prior written consent of the Banks and, provided further, that, although any
Bank may transfer, assign or grant participations in its rights hereunder, such
Bank shall remain a "Bank" for all purposes hereunder (and may not transfer or
assign all or any portion of its Commitments hereunder except as provided in
Sections 1.13 and 13.04(b)) and the transferee, assignee or participant, as the
case may be, shall not constitute a "Bank" hereunder and, provided further, that
no Bank shall transfer or grant any participation under which the participant
shall have rights to approve any amendment to or waiver of this Agreement or any
other Credit Document except to the extent such amendment or waiver would (i)
extend the final scheduled maturity of any Loan, Note or Letter of Credit
(unless such Letter of Credit is not extended beyond the Revolving Loan Maturity
Date) in which such participant is participating, or reduce the rate or extend
the time of payment of interest or Fees thereon (except in connection with a
waiver of applicability of any post-default increase in interest rates) or
reduce the principal amount thereof, or increase the amount of the participant's
participation over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or of a mandatory reduction in the
Total Commitment, shall not constitute a change in the terms of such
participation, and that an increase in any Commitment or Loan shall be permitted
without the consent of any participant if the participant's participation is not
increased as a result thereof), (ii) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement or (iii)
release all or substantially all of the Collateral under all of the Security
Documents (except as expressly provided in the Credit Documents) supporting the
Loans hereunder in which such participant is participating. In the case of any
such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights against
such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) assign all or a portion of its
Commitments and related outstanding Obligations (or, if the Commitments with
respect to the relevant Tranche have terminated, outstanding Obligations)
hereunder to (i) its parent company and/or any affiliate of such Bank which is
at least 50% owned by such Bank or its parent company or to one or more Banks or
(ii) in the case of any Bank that is a fund that invests in loans, any other
fund that invests in loans and is managed or advised by the same investment
advisor of such Bank or by an Affiliate of such investment advisor or (y) assign
all, or if less than all, a portion equal to at least $2,500,000 in the
aggregate for the assigning Bank or assigning Banks, of such Commitments and
related outstanding Obligations (or, if the Commitments with respect to the
relevant Tranche have terminated, outstanding Obligations) hereunder to one or
more Eligible Transferees (treating any fund that invests in loans and any other
fund that invests in loans and is managed or advised by the same investment
advisor of such fund or by an Affiliate of such investment advisor as a single
Eligible Transferee), each of
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which assignees shall become a party to this Agreement as a Bank by execution of
an Assignment and Assumption Agreement, provided that, (i) at such time Schedule
I shall be deemed modified to reflect the Commitments and/or outstanding Loans,
as the case may be, of such new Bank and of the existing Banks, (ii) upon the
surrender of the relevant Notes by the assigning Bank (or, upon such assigning
Bank's indemnifying the Borrower for any lost Note pursuant to a customary
indemnification agreement) new Notes will be issued, at the Borrower's expense,
to such new Bank and to the assigning Bank upon the request of such new Bank or
assigning Bank, such new Notes to be in conformity with the requirements of
Section 1.05 (with appropriate modifications) to the extent needed to reflect
the revised Commitments and/or outstanding Loans, as the case may be, (iii) the
consent of the Agent and, so long as no Default under Section 10.01 or 10.05
then exists or no Event of Default then exists, the consent of the Borrower,
shall be required in connection with any assignment to an Eligible Transferee
pursuant to clause (y) above (each of which consents shall not be unreasonably
withheld or delayed), (iv) the Agent shall receive at the time of each such
assignment, from the assigning or assignee Bank, the payment of a non-refundable
assignment fee of $3,500 and (v) no such transfer or assignment will be
effective until recorded by the Agent on the Register pursuant to Section 13.15.
To the extent of any assignment pursuant to this Section 13.04(b), the assigning
Bank shall be relieved of its obligations hereunder with respect to its assigned
Commitments and outstanding Loans. At the time of each assignment pursuant to
this Section 13.04(b) to a Person which is not already a Bank hereunder and
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall, to the extent legally entitled to do so, provide to the
Borrower the appropriate Internal Revenue Service Forms (and, if applicable, a
Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent
that an assignment of all or any portion of a Bank's Commitments and related
outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would,
at the time of such assignment, result in increased costs under Section 1.10,
2.06 or 4.04 from those being charged by the respective assigning Bank prior to
such assignment, then the Borrower shall not be obligated to pay such increased
costs (although the Borrower, in accordance with and pursuant to the other
provisions of this Agreement, shall be obligated to pay any other increased
costs of the type described above resulting from changes after the date of the
respective assignment).
(c) Nothing in this Agreement shall prevent or prohibit any
Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank and, with
the consent of the Agent, any Bank which is a fund may pledge all or any portion
of its Loans and Notes to its trustee in support of its obligations to its
trustee. No pledge pursuant to this clause (c) shall release the transferor Bank
from any of its obligations hereunder.
13.05 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Agent, the Collateral Agent, the Issuing Bank or any Bank in exercising any
right,
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power or privilege hereunder or under any other Credit Document and no course of
dealing between the Borrower or any other Credit Party and the Agent, the
Collateral Agent, the Issuing Bank or any Bank shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which the Agent, the Collateral Agent, the Issuing
Bank or any Bank would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the Agent, the Collateral Agent, the Issuing Bank or any Bank to any other or
further action in any circumstances without notice or demand.
13.06 Payments Pro Rata. (a) Except as otherwise provided in this
Agreement, the Agent agrees that promptly after its receipt of each payment from
or on behalf of the Borrower in respect of any Obligations hereunder, it shall
distribute such payment to the Banks (other than any Bank that has consented in
writing to waive its pro rata share of any such payment) pro rata based upon
their respective shares, if any, of the Obligations with respect to which such
payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees,
of a sum which with respect to the related sum or sums received by other Banks
is in a greater proportion than the total of such Obligation then owed and due
to such Bank bears to the total of such Obligation then owed and due to all of
the Banks immediately prior to such receipt, then such Bank receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Banks an interest in the Obligations of the respective Credit Party to
such Banks in such amount as shall result in a proportional participation by all
the Banks in such amount; provided that if all or any portion of such excess
amount is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 13.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
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13.07 Calculations; Computations; Accounting Terms. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with generally accepted accounting principles in the
United States consistently applied throughout the periods involved (except as
set forth in the notes thereto or as otherwise disclosed in writing by the
Borrower to the Banks); provided that, except as otherwise specifically provided
herein, all computations of Excess Cash Flow, the Applicable Base Rate Margin
and the Applicable Eurodollar Rate Margin, and all computations and all
definitions used in determining compliance with Sections 9.07 through 9.09,
inclusive, shall utilize accounting principles and policies in conformity with
those used to prepare the historical financial statements of ATC referred to in
Section 7.05(a).
(b) All computations of interest (other than in respect of
Base Rate Loans), Commitment Commission and other Fees hereunder shall be made
on the basis of a year of 360 days for the actual number of days (including the
first day but excluding the last day; except that in the case of Letter of
Credit Fees, the last day shall be included) occurring in the period for which
such interest, Commitment Commission or Fees are payable. All computations of
interest on Base Rate Loans hereunder shall be made on the basis of a year of
365/366 days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest is
payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE
PROVIDED IN THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT,
EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH OF HOLDINGS AND THE BORROWER HEREBY FURTHER IRREVOCABLY
WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH
CREDIT PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENTS BROUGHT IN ANY OF
THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH
CREDIT PARTY. EACH OF HOLDINGS AND THE BORROWER FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF
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PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO SUCH CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE
BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH OF
HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH
SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT
DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, ANY BANK OR THE HOLDER OF ANY NOTE
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST HOLDINGS OR THE BORROWER IN ANY OTHER
JURISDICTION.
(b) EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED
TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Agent.
13.10 Effectiveness. This Agreement shall become effective on the date
the "Effective Date") on which Holdings, the Borrower, the Agent and each of the
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall
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have delivered the same to the Agent at the Notice Office or, in the case of the
Banks, shall have given to the Agent telephonic (confirmed in writing), written
or telex notice (actually received) at such office that the same has been signed
and mailed to it. The Agent will give Holdings, the Borrower and each Bank
prompt written notice of the occurrence of the Effective Date.
13.11 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
expiration date of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof (except to the extent repaid in cash) (it
being understood that any amendment or modification to the financial definitions
in this Agreement or to Section 13.07(a) shall not constitute a reduction in the
rate of interest or Fees for the purposes of this clause (i)), (ii) release all
or substantially all of the Collateral (except as expressly provided in the
Credit Documents) under all the Security Documents, (iii) amend, modify or waive
any provision of this Section 13.12, (iv) reduce the percentage specified in the
definition of Required Banks (it being understood that, with the consent of the
Required Banks, additional extensions of credit pursuant to this Agreement may
be included in the determination of the Required Banks on substantially the same
basis as the extensions of Term Loan Commitments and Revolving Loan Commitments
are included on the Effective Date) or (v) consent to the assignment or transfer
by the Borrower of any of its rights and obligations under this Agreement;
provided further, that no such change, waiver, discharge or termination shall
(u) increase the Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Commitment shall not constitute an
increase of the Commitment of any Bank, and that an increase in the available
portion of any Commitment of any Bank shall not constitute an increase of the
Commitment of such Bank), (v) without the consent of the Issuing Bank, amend,
modify or waive any provision of Section 2 or alter its rights or obligations
with respect to Letters of Credit, (w) without the consent of the Swingline
Bank, alter the Swingline Bank's rights or obligations with respect to Swingline
Loans, (x) without the consent of the Agent, amend, modify or waive any
provision of Section 12 or any other provision as same relates to the rights or
obligations
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of the Agent, (y) without the consent of the Collateral Agent, amend, modify or
waive any provision relating to the rights or obligations of the Collateral
Agent, or (z) without the consent of the Supermajority Banks, reduce the amount
of, or extend the date of, any Scheduled Repayment, or amend the definition of
Supermajority Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Supermajority Banks on substantially the
same basis as the extensions of Term Loan Commitments and Revolving Loan
Commitments are included on the Effective Date).
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clauses (i) through (v), inclusive, of the first proviso to
Section 13.12(a), the consent of the Required Banks is obtained but the consent
of one or more of such other Banks whose consent is required is not obtained,
then the Borrower shall have the right, so long as all non-consenting Banks
whose individual consent is required are treated as described in either clauses
(A) or (B) below, to either (A) replace each such non-consenting Bank or Banks
with one or more Replacement Banks pursuant to Section 1.13 so long as at the
time of such replacement, each such Replacement Bank consents to the proposed
change, waiver, discharge or termination or (B) terminate such non-consenting
Bank's Commitments and/or repay each Tranche of outstanding Loans of such Bank
in accordance with Sections 3.02(b) and/or 4.01(b), provided that, unless the
Commitments that are terminated, and Loans repaid, pursuant to preceding clause
(B) are immediately replaced in full at such time through the addition of new
Banks or the increase of the Commitments and/or outstanding Loans of existing
Banks (who in each case must specifically consent thereto), then in the case of
any action pursuant to preceding clause (B) the Required Banks (determined after
giving effect to the proposed action) shall specifically consent thereto,
provided further, that in any event the Borrower shall not have the right to
replace a Bank, terminate its Commitments or repay its Loans solely as a result
of the exercise of such Bank's rights (and the withholding of any required
consent by such Bank) pursuant to the second proviso to Section 13.12(a).
13.13 Survival. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01 shall survive
the execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Obligations.
13.14 Domicile of Loans. Each Bank may transfer and carry its Loans at, to
or for the account of any office, Subsidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the extent that a
transfer of Loans pursuant to this Section 13.14 would, at the time of such
transfer, result in increased costs under Section 1.10, 2.06 or 4.04 from those
being charged by the respective Bank prior to such transfer, then the Borrower
shall not be obligated to pay such increased costs (although the
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Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
transfer).
13.15 Register. The Borrower hereby designates the Agent to serve as the
Borrower's agent, solely for purposes of this Section 13.15, to maintain a
register (the "Register") on which it will record the Commitments from time to
time of each of the Banks, the Loans made by each of the Banks and each
repayment in respect of the principal amount of the Loans of each Bank. Failure
to make any such recordation, or any error in such recordation shall not affect
the Borrower's obligations in respect of such Loans. With respect to any Bank,
the transfer of the Commitments of such Bank and the rights to the principal of,
and interest on, any Loan made pursuant to such Commitments shall not be
effective until such transfer is recorded on the Register maintained by the
Agent with respect to ownership of such Commitments and Loans and prior to such
recordation all amounts owing to the transferor with respect to such Commitments
and Loans shall remain owing to the transferor. The registration of assignment
or transfer of all or part of any Commitments and Loans shall be recorded by the
Agent on the Register only upon the acceptance by the Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
13.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Agent for acceptance and registration of assignment or transfer
of all or part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Agent in performing its duties under this Section 13.15.
13.16 Confidentiality. (a) Subject to the provisions of clause (b) of this
Section 13.16, each Bank agrees that it will not disclose without the prior
consent of the Borrower (other than to its employees, auditors, advisors or
counsel or to another Bank if the Bank or such Bank's holding or parent company
in its reasonable discretion determines that any such party should have access
to such information, provided such Persons shall be subject to the provisions of
this Section 13.16 to the same extent as such Bank) any information with respect
to Holdings or any of its Subsidiaries which is now or in the future furnished
pursuant to this Agreement or any other Credit Document and which is designated
by the Borrower to the Banks in writing as confidential, provided that any Bank
may disclose any such information (i) as has become generally available to the
public other than by virtue of a breach of this Section 13.16(a) by the
respective Bank, (ii) as may be required or appropriate in any report, statement
or testimony submitted to any municipal, state or Federal regulatory body having
or claiming to have jurisdiction over such Bank or to the Federal Reserve Board,
the Federal Deposit Insurance Corporation or the NAIC or similar organizations
(whether in the United States or elsewhere) or their successors, (iii)
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as may be required or appropriate in respect to any summons or subpoena or in
connection with any litigation, (iv) in order to comply with any law, order,
regulation or ruling applicable to such Bank, (v) to the Agent or the Collateral
Agent and (vi) to any prospective or actual transferee or participant in
connection with any contemplated transfer or participation of any of the Notes
or Commitments or any interest therein by such Bank, provided that such
prospective transferee agrees to be bound by the confidentiality provisions
contained in this Section 13.16.
(b) Each of Holdings and the Borrower hereby acknowledges and
agrees that each Bank may share with any of its affiliates any information
related to Holdings or any of its Subsidiaries (including, without limitation,
any nonpublic customer information regarding the creditworthiness of Holdings
and its Subsidiaries), provided such Persons shall be subject to the provisions
of this Section 13.16 to the same extent as such Bank).
SECTION 14. Parent Guaranty.
14.01 Guaranty. In order to induce the Agent, the Collateral Agent, the
Issuing Bank and the Banks to enter into this Agreement and to extend credit
hereunder, and to induce the other Guaranteed Creditors to enter into Interest
Rate Protection Agreements or Other Hedging Agreements, and in recognition of
the direct benefits to be received by Holdings from the proceeds of the Loans,
the issuance of the Letters of Credit and the entering into of such Interest
Rate Protection Agreements or Other Hedging Agreements, Holdings hereby agrees
with the Guaranteed Creditors as follows: hereby unconditionally and irrevocably
guarantees as primary obligor and not merely as surety the full and prompt
payment when due, whether upon maturity, acceleration or otherwise, of any and
all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors.
If any or all of the Guaranteed Obligations of the Borrower to the Guaranteed
Creditors becomes due and payable hereunder, Holdings unconditionally and
irrevocably promises to pay such indebtedness to the Agent and/or the other
Guaranteed Creditors, or order, on demand, together with any and all expenses
which may be incurred by the Agent or the other Guaranteed Creditors in
collecting any of the Guaranteed Obligations. If claim is ever made upon any
Guaranteed Creditor for repayment or recovery of any amount or amounts received
in payment or on account of any of the Guaranteed Obligations and any of the
aforesaid payees repays all or part of said amount by reason of (i) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower), then and in such event Holdings agrees that any such
judgment, decree, order, settlement or compromise shall be binding upon
Holdings, notwithstanding any revocation of this Guaranty or other instrument
evidencing any liability of the Borrower, and Holdings shall be and remain
liable to the afore-
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said payees hereunder for the amount so repaid or recovered to the same extent
as if such amount had never originally been received by any such payee.
14.02 Bankruptcy. Additionally, Holdings unconditionally and irrevocably
guarantees the payment of any and all of the Guaranteed Obligations of the
Borrower to the Guaranteed Creditors whether or not due or payable by the
Borrower upon the occurrence of any of the events specified in Section 10.05,
and irrevocably and unconditionally, and jointly and severally, promises to pay
such indebtedness to the Guaranteed Creditors, or order, on demand, in lawful
money of the United States.
14.03 Nature of Liability. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder shall
not be affected or impaired by any circumstance or occurrence whatsoever (other
than the indefeasible payment in full in cash of the Guaranteed Obligations),
including, without limitation, (a) any direction as to application of payment by
the Borrower or by any other party, (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
Guaranteed Obligations of the Borrower, (c) any payment on or in reduction of
any such other guaranty or undertaking, (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower, (e) any payment made
to any Guaranteed Creditor on the Guaranteed Obligations which any such
Guaranteed Creditor repays to the Borrower pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and Holdings waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding, (f) any action or
inaction by the Guaranteed Creditors as contemplated in Section 14.05 or (g) any
invalidity, irregularity or unenforceability of all or any part of the
Guaranteed Obligations or any security therefor.
14.04 Independent Obligation. The obligations of Holdings hereunder are
independent of the obligations of any other guarantor, any other party or the
Borrower, and a separate action or actions may be brought and prosecuted against
Holdings whether or not action is brought against any other guarantor, any other
party or the Borrower and whether or not any other guarantor, any other party or
the Borrower be joined in any such action or actions. Holdings waives, to the
fullest extent permitted by law, the benefit of any statute of limitations
affecting its liability hereunder or the enforcement thereof. Any payment by the
Borrower or other circumstance which operates to toll any statute of limitations
as to the Borrower shall operate to toll the statute of limitations as to
Holdings.
14.05 Authorization. Holdings authorizes the Guaranteed Creditors without
notice or demand (except as shall be required by applicable statute and cannot
be waived), and without affecting or impairing its liability hereunder, from
time to time to:
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(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest or fees thereon), any security
therefor, or any liability incurred directly or indirectly in respect
thereof, and the Guaranty herein made shall apply to the Guaranteed
Obligations as so changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, impair, surrender, realize
upon or otherwise deal with in any manner and in any order any property
by whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower, any other Credit Party or others or otherwise act or refrain
from acting;
(d) release or substitute any one or more endorsers,
guarantors, the Borrower, other Credit Parties or other obligors;
(e) settle or compromise any of the Guaranteed Obligations,
any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to
the payment of any liability (whether due or not) of the Borrower to
its creditors other than the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Guaranteed
Creditors regardless of what liability or liabilities of the Borrower
remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of the
instruments or agreements referred to herein or therein, or otherwise
amend, modify or supplement this Agreement, any other Credit Document
or any of such other instruments or agreements;
(h) act or fail to act in any manner which may deprive
Holdings of its right to subrogation against the Borrower to recover
full indemnity for any payments made pursuant to this Guaranty; and/or
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(i) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable discharge
of Holdings from its liabilities under this Guaranty.
14.06 Reliance. It is not necessary for any Guaranteed Creditor to inquire
into the capacity or powers of Holdings or any of its Subsidiaries or the
officers, directors, partners or agents acting or purporting to act on their
behalf, and any Guaranteed Obligations made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
14.07 Subordination. Any indebtedness of the Borrower now or hereafter
owing to Holdings is hereby subordinated to the Guaranteed Obligations of the
Borrower owing to the Guaranteed Creditors; and if the Agent so requests at a
time when an Event of Default exists, all such indebtedness of the Borrower to
Holdings shall be collected, enforced and received by Holdings for the benefit
of the Guaranteed Creditors and be paid over to the Agent on behalf of the
Guaranteed Creditors on account of the Guaranteed Obligations of the Borrower to
the Guaranteed Creditors, but without affecting or impairing in any manner the
liability of Holdings under the other provisions of this Guaranty. Prior to the
transfer by Holdings of any note or negotiable instrument evidencing any such
indebtedness of the Borrower to Holdings, Holdings shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, Holdings hereby
agrees with the Guaranteed Creditors that it will not exercise any right of
subrogation which it may at any time otherwise have as a result of this Guaranty
(whether contractual, under Section 509 of the Bankruptcy Code or otherwise)
until all Guaranteed Obligations have been irrevocably paid in full in cash.
14.08 Waiver. (a) Holdings waives any right (except as shall be required by
applicable statute and cannot be waived) to require any Guaranteed Creditor to
(i) proceed against the Borrower, any other guarantor or any other party, (ii)
proceed against or exhaust any security held from the Borrower, any other
guarantor or any other party or (iii) pursue any other remedy in any Guaranteed
Creditor's power whatsoever. Holdings waives any defense based on or arising out
of any defense of the Borrower, any other guarantor or any other party, other
than payment in full of the Guaranteed Obligations, based on or arising out of
the disability of the Borrower, any other guarantor or any other party, or the
validity, legality or unenforceability of the Guaranteed Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of the
Borrower other than payment in full of the Guaranteed Obligations. The
Guaranteed Creditors may, at their election, foreclose on any security held by
the Agent, the Collateral Agent or any other Guaranteed Creditor by one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Guaranteed Creditors may have
against the Borrower or any other party, or any security, without affecting or
impairing in
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any way the liability of Holdings hereunder except to the extent the Guaranteed
Obligations have been paid. Holdings waives any defense arising out of any such
election by the Guaranteed Creditors, even though such election operates to
impair or extinguish any right of reimbursement or subrogation or other right or
remedy of Holdings against the Borrower or any other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations. Holdings assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which Holdings assumes
and incurs hereunder, and agrees that the Agent and the Banks shall have no duty
to advise Holdings of information known to them regarding such circumstances or
risks.
(c) Holdings hereby acknowledges and affirms that it
understands that to the extent the Guaranteed Obligations are secured by Real
Property located in California, Holdings shall be liable for the full amount of
the liability hereunder notwithstanding the foreclosure on such Real Property by
trustee sale or any other reason impairing Holdings' or any Guaranteed
Creditor's right to proceed against the Borrower or any other guarantor of the
Guaranteed Obligations. In accordance with Section 2856 of the California Civil
Code, Holdings hereby waives:
(i) all rights of subrogation, reimbursement,
indemnification, and contribution and any other rights and defenses
that are or may become available to Holdings by reason of Sections 2787
to 2855, inclusive, 2899 and 3433 of the California Civil Code;
(ii) all rights and defenses that Holdings may have because
the Guaranteed Obligations are secured by Real Property located in
California. This means, among other things: (A) the Guaranteed
Creditors may collect from Holdings without first foreclosing on any
real or personal property collateral pledged by the Borrower or any
other Credit Party; and (B) if the Guaranteed Creditors foreclose on
any Real Property collateral pledged by the Borrower or any other
Credit Party, (1) the amount of the Guaranteed Obligations may be
reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale
price, and (2) the Guaranteed Creditors may collect from Holdings even
if the Guaranteed Creditors, by foreclosing on the Real Property
collateral, have destroyed any right Holdings may have to collect from
the Borrower. This is an unconditional and irrevocable waiver of any
rights and defenses Holdings may have because the Guaranteed
Obligations are secured by
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Real Property. These rights and defenses include, but are not limited
to, any rights or defenses based upon Section 580a, 580b, 580d or 726
of the California Code of Civil Procedure; and
(iii) all rights and defenses arising out of an election of
remedies by the Guaranteed Creditors, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security
for the Guaranteed Obligations, has destroyed Holdings' rights of
subrogation and reimbursement against the Borrower by the operation of
Section 580d of the Code of Civil Procedure or otherwise.
Holdings warrants and agrees that each of the waivers set forth above is made
with full knowledge of its significance and consequences and that if any of such
waivers are determined to be contrary to any applicable law or public policy,
such waivers shall be effective only to the maximum extent permitted by law.
14.09 Nature of Liability. It is the desire and intent of Holdings and the
Guaranteed Creditors that this Guaranty shall be enforced against Holdings to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. If, however, and to the extent
that, the obligations of Holdings under this Guaranty shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation, because
of any applicable state or federal law relating to fraudulent conveyances or
transfers), then the amount of Holdings obligations under this Guaranty shall be
deemed to be reduced and Holdings shall pay the maximum amount of the Guaranteed
Obligations which would be permissible under applicable law.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
c/o Weiss, Peck and Greer ACQUISITION HOLDINGS, INC.
Private Equity Group
One New York Plaza
New York, New York 10004-1950 By /s/ Wesley Lang
Attention: President --------------------
Telephone No.: (212) 908-9890 Title: President
Telecopier No.: (212) 908-0112
104 East 25th Street ACQUISITION CORP.
10th Floor
New York, New York 10010
Attention: President By /s/ Wesley Lang
Telephone No.: (212) 353-8280 ---------------------
Telecopier No.: (212) 598-4283 Title: President
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Patricia Hogan
---------------------
Title: Principal
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of February 5,
1998, among Acquisition Holdings, Inc. ("Holdings"), ATC Group Services Inc.
(the "Borrower"), the lenders party to the Credit Agreement referred to below
(the "Banks"), and Bankers Trust Company, as Agent (the "Agent"). All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, Holdings, the Borrower (as successor-by-merger to
Acquisition Corp.), the Banks and the Agent are parties to a Credit Agreement,
dated as of January 29, 1998 (the "Credit Agreement");
WHEREAS, the Borrower has requested certain amendments to the
Credit Agreement; and
WHEREAS, subject to the terms and conditions of this
Amendment, the Banks are willing to grant such amendments;
NOW, THEREFORE, it is agreed:
I. Amendments
1. On and after the First Amendment Effective Date (as
defined in Section II(1) below), Section 9.07(a) of the Credit Agreement shall
be amended by deleting the table appearing therein in its entirety and inserting
the following new table in lieu thereof:
"Fiscal Year Ending Amount
------------------ ------
February 29, 2000 $3,500,000
February 28, 2001 $4,000,000
February 28, 2002 $5,200,000
February 28, 2003 $5,000,000".
2. Section 9.02(xii) of the Credit Agreement is hereby
amended by inserting the following language after the words ", in each case with
such earnings and financial covenants to be determined on a pro forma basis":
<PAGE>
"consistent with Regulation S-X under the Securities Act (as
in effect on the Effective Date) (except that pro forma
adjustments of the type described on Schedule XIV need not be
done on a basis consistent with Regulation S-X) and".
3. On and after the First Amendment Effective Date, the
definition of "Consolidated Net Income" appearing in Section 11.01 of the Credit
Agreement shall be amended by inserting the following language at the end
thereof:
"but adjusted for the factually supportable and identifiable
pro forma adjustments of the type described on Schedule XIV
for such period that are directly attributable to the
acquisition of such Acquired Entity or Business pursuant to a
Permitted Acquisition (which pro forma adjustments need not be
done on a basis consistent with Regulation S-X under the
Securities Act)".
4. On and after the First Amendment Effective Date,
the Credit Agreement shall be further amended by adding a new Schedule XIV
thereto in the form of Schedule XIV attached hereto.
II. Miscellaneous Provisions
1. This Amendment shall become effective on the date (the
"First Amendment Effective Date") when Holdings, the Borrower and the Required
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Agent at the Notice Office.
2. In order to induce the Banks to enter into this
Amendment, each of Holdings and the Borrower hereby represents and warrants
that:
(a) no Default or Event of Default exists on the First
Amendment Effective Date, both before and after giving effect to
this Amendment;and
(b) on the First Amendment Effective Date, both before and
after giving effect to this Amendment, all representations and
warranties contained in the Credit Agreement and in the other
Credit Documents are true and correct in all
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material respects as though such representations and warranties
were made on the First Amendment Effective Date.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be delivered to Holdings, the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
5. From and after the First Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
modified hereby.
6. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
ACQUISITION HOLDINGS, INC.
By /s/ Wesley Lang
------------------------
Title: President
ATC GROUP SERVICES INC.
By /s/ Nicholas Malino
------------------------
Title: President
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Patricia Hogan
------------------------
Title: Principal
<PAGE>
SCHEDULE XIV
PRO FORMA ADJUSTMENTS
(a) Adjustments to revenues to reflect customers not likely
to be retained;
(b) adjustments to labor and other direct costs to reflect
application of the Borrower's utilization rate (the billable
hours of the Borrower's employees divided by such employees'
available hours) to the Acquired Entity or Business and to
reflect the additional costs or savings, as the case may be,
from the continued use or elimination of outside laboratory
and technical personnel utilized by the Acquired Entity or
Business;
(c) adjustments to reflect home office functions of the Acquired
Entity or Business such as accounting, payroll and legal that
will be provided by the Borrower, including any adjustments
to eliminate outside professional services if such functions
are to be assumed by then existing Borrower personnel;
(d) adjustments with respect to savings that will be realized by
including the Acquired Entity or Business under the
Borrower's insurance coverage and adjustments to reflect
costs, if any, of transferring or termination duplicate
insurance policies of the Acquired Entity or Business;
(e) adjustments to reflect savings associated with the
elimination of duplicate facilities and adjustments to
reflect costs associated with such elimination (such as lease
termination costs, moving and storage, etc.);
(f) adjustments to employee benefit costs to
reflect the Borrower's actual employee benefit cost
structure, to the extent the Acquired Entity or Business'
employee benefits will be replaced with the Borrower's
employee benefits;
(g) adjustments to reflect the actual
impact of the departure or retention of highly compensated
executives of the Acquired Entity or Business (including
elimination of compensation, benefits and revenues
attributable to such executives, if departing, and any
increases to compensation or benefits for such executives
continuing);
<PAGE>
(h) adjustments to replace the Acquired
Entity or Business' then-current goodwill depreciation and
amortization with such amounts as are derived from the
application to the Acquired Entity or Business of purchase
accounting, if applicable, under generally accepted
accounting principles; and
(i) interest expense adjustments to reflect refinancing of
existing debt or increase in borrowings used to effect the
subject Permitted Acquisition.
The pro forma adjustments described above also may be used,
to the extent factually supportable and identifiable, to determine whether the
Acquired Entity or Business had pro forma positive earnings (before interest
expense and taxes and adding back any amortization of intangibles and
depreciation) as required by Section 9.02(xii) of the Credit Agreement.
In addition, to the extent that any of the pro forma
adjustments described above are utilized for any Permitted Acquisition, the
Borrower also shall have delivered to the Banks a statement of its independent
accountants confirming that such pro forma adjustments are made on a basis
consistent with this Schedule XIV.
Further, as required by Section 9.02(xii) of the Credit
Agreement, all pro forma calculations shall be made as if the subject Permitted
Acquisition had been consummated on the first day of the respective Test Period
(and assuming that any Indebtedness incurred, issued or assumed in connection
therewith had been incurred, issued or assumed on the first day of, and had
remained outstanding throughout, such Test Period).
<PAGE>
EXHIBIT 10.5
SECOND AMENDMENT
SECOND AMENDMENT (this "Amendment"), dated as of February 27,
1998, among ACQUISITION HOLDINGS, INC., a Delaware corporation ("Holdings"), ATC
GROUP SERVICES, INC., a Delaware corporation (the "Borrower"), the bank party to
the Credit Agreement referred to below on the date hereof and immediately before
giving effect to this Amendment (the "Existing Bank"), BANKERS TRUST COMPANY, as
Agent (the "Agent") for the Banks, and each of the lenders listed on Schedule A
hereto (each, a "New Bank" and, collectively, the "New Banks"). All capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower (as successor by merger to
Acquisition Corp.), the Existing Bank and the Agent are parties to a Credit
Agreement, dated as of January 29, 1998 (as in effect on the date hereof, the
"Credit Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement
as herein provided;
NOW, THEREFORE, it is agreed:
1. The Existing Bank hereby sells and assigns to each New Bank
without recourse and without representation or warranty (other than as expressly
provided herein), and each New Bank hereby purchases and assumes from the
Existing Bank, that interest in and to the Existing Bank's rights and
obligations under the Credit Agreement as of the date hereof which represents
such New Bank's pro rata share (for each such New Bank, its "Pro Rata Share") as
set forth on, and in respect of the credit facilities listed on, Annex A hereto
(calculated after giving affect to this Amendment), and such Pro Rata Share
represents all of the outstanding rights and obligations under the Credit
Agreement that are being sold and assigned to each such New Bank pursuant to
this Amendment.
2. In accordance with the requirements of Section 13.04(b) of
the Credit Agreement, (i) on the Second Amendment Effective Date (as defined
below), the Credit Agreement shall be amended by deleting Schedule I thereto in
its entirety and by inserting in lieu thereof a new Schedule I in the form of
Annex B hereto and (ii) the
<PAGE>
Borrower agrees that it will, promptly following the Second Amendment Effective
Date, issue appropriate Notes to each Bank in conformity with the requirements
of Section 1.05 of the Credit Agreement.
3. On and after the Second Amendment Effective Date, the
Credit Agreement shall be further amended by deleting Schedule II thereto in its
entirety and inserting in lieu thereof a new Schedule II in the form of Annex C
hereto.
4. The Existing Bank (i) represents and warrants that it is
the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Holdings or
any of its Subsidiaries or the performance or observance by Holdings or any of
its Subsidiaries of any of their respective obligations under the Credit
Agreement or the other Credit Documents to which they are a party or any other
instrument or document furnished pursuant thereto.
5. Each New Bank (i) confirms that it has received a copy of
the Credit Agreement and the other Credit Documents, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Amendment; (ii) agrees that it will, independently
and without reliance upon the Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Transferee under Section
13.04(b) of the Credit Agreement; (iv) appoints and authorizes the Agent and the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under the Credit Agreement and the other Credit Documents as are
delegated to the Agent and the Collateral Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Bank; and (vi)
to the extent relevant, agrees to promptly submit to the Borrower and the Agent
the appropriate Internal Revenue Service Forms described in Section 13.04(b) of
the Credit Agreement.
6. The Existing Bank, the New Banks and the Agent hereby agree
that (x) all amounts accrued with respect to the outstanding Term Loans,
outstanding Revolving
2
<PAGE>
Loans and the Total Revolving Loan Commitment prior to the delivery by such New
Bank of the amount referred to in clause (ii) of Section 12 of this Amendment
shall be for the account of the Existing Bank and (y) all such amounts accrued
on and after the delivery of the amount referred to in clause (ii) of such
Section 12 shall be for the account of such New Bank based upon its relevant Pro
Rata Share.
7. In accordance with Section 13.04(b) of the Credit
Agreement, on and as of the date upon which each New Bank delivers the amount
referred to in clause (ii) of Section 12 of this Amendment, such New Bank shall
become a "Bank" under, and for all purposes of, the Credit Agreement and the
other Credit Documents and, notwithstanding anything to the contrary in Section
13.15 of the Credit Agreement, the Agent shall record the transfers contemplated
hereby in the Register.
8. In order to induce the Banks to enter into this Amendment,
each of Holdings and the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Second
Amendment Effective Date, both before and after giving effect to this Amendment;
and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct in all
material respects as of the Second Amendment Effective Date, both before and
after giving effect to this Amendment, with the same effect as though such
representations and warranties had been made on and as of the Second Amendment
Effective Date (it being understood that any representations or warranty made as
of a specific date shall be true and correct in all material respects as of such
specific date).
9. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
10. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with Holdings, the Borrower and the Agent.
11. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
3
<PAGE>
12. Subject to Section 13 of this Amendment, this Amendment
shall become effective on the date (the "Second Amendment Effective Date") when
(i) Holdings, the Borrower, the Agent, the Existing Bank and each New Bank shall
have signed a counterpart hereof (whether the same or different counterparts)
and shall have delivered (including by way of facsimile transmission) the same
to the Agent at the Notice Office and (ii) each New Bank shall have delivered to
the Agent for the account of the Existing Bank, an amount equal to such New
Bank's relevant Pro Rata Share of the principal amount of the outstanding Loans.
13.. Notwithstanding Section 12 of this Amendment, if for any
reason any New Bank shall not have (i) signed a counterpart hereof and delivered
the same to the Agent at the Notice Office and (ii) delivered to the Agent an
amount equal to such New Bank's Pro Rata Share of the principal amount of the
outstanding Loans, in each case on or prior to February 27, 1998, then, if the
Existing Bank agrees, this Amendment shall become effective notwithstanding such
failure, provided that (x) Annexes A, B and C hereto shall be modified to delete
any such New Bank and such New Bank's Pro Rata Share shall be retained by the
Existing Bank and (y) the signature pages of this Amendment shall be deemed
revised to delete such New Bank's name therefrom.
14. From and after the Second Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
amended hereby.
* * *
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
ACQUISITION HOLDINGS, INC.
By /s/ Wesley W. Lang, Jr.
---------------------------
Name: Wesley W. Lang, Jr.
Title: President
ATC GROUP SERVICES, INC.
By /s/ Nicholas J. Malino
---------------------------
Name: Nicholas J. Malino
Title: President
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Patricia Hogan
---------------------------
Name: Patricia Hogan
Title: Principal
BANKBOSTON, N.A.
By /s/ Gregory R. D. Clark
---------------------------
Name: Gregory R. D. Clark
Title: Managing Director
CREDITANSTALT CORPORATE
FINANCE, INC.
By /s/ Ridgley Cromwell
---------------------------
Name: Ridgley Cromwell
Title: Associate
By /s/ Clifford L. Wells
---------------------------
Name: Clifford L. Wells
Title: Vice President
5
<PAGE>
FLEET CAPITAL CORPORATION
By /s/ Timothy J. Broderick
---------------------------
Name: Timothy J. Broderick
Title: Senior Vice President
LASALLE NATIONAL BANK
By /s/ Henry J. M.
---------------------------
Name: Henry J. M
Title: Commercial Lending
Officer
BANK POLSKAKASOPIEKISA
PEKAO SA GROUP
By /s/ Harvey Winter
---------------------------
Name: Harvey Winter
Title: Vice President
6
<PAGE>
ANNEX A TO
SECOND AMENDMENT
NEW BANKS PERCENTAGES (1)
BankBoston, N.A. 18.00000000%
Creditanstalt Corporate Finance, Inc. 18.00000000%
Fleet Capital Corporation 18.00000000%
LaSalle National Bank 18.00000000%
Bank Polskakasaopiekisa Pekao SA Group 8.00000000%
- ----------------------------------------------------------------------
(1) Represents the percentage interest in each of the aggregate
outstanding Term Loans and the Total Revolving Loan Commitment.
<PAGE>
ANNEX B TO
SECOND AMENDMENT
COMMITMENTS
Term Loans Revolving Loan
BANK Commitment Commitment
- ---- ---------- ----------
Bankers Trust Company $4,000,000 $6,000,000
BankBoston, N.A. $3,600,000 $5,400,000
Creditanstalt Corporate Finance, Inc. $3,600,000 $5,400,000
Fleet Capital Corporation $3,600,000 $5,400,000
LaSalle National Bank $3,600,000 $5,400,000
Bank Polskakasaopiekisa Pekao SA Group $1,600,000 $2,400,000
------------ ------------
TOTAL: $20,000,000 $30,000,000
<PAGE>
ANNEX C TO
SECOND AMENDMENT
BANK ADDRESSES
Bank Addresses
Bankers Trust Company 130 Liberty Street
New York, NY 10006
Attention: Patricia Hogan
Tel No.: (212) 250-5175
Fax No.: (212) 250-7218
Bank Polskakasaopiekisa 470 Park Avenue South
Pekao Sa Group 15th Floor
New York, New York 10016
Attn: Harry Winter
Tel. No.: (212) 251-1222
Fax No.: (212) 679-5910
BankBoston, N.A. 100 Federal Street
MS 01-08-05
Boston, Massachusetts 02110-2016
Attn: Tim Barns
Tel. No.: (617) 434-7976
Fax No.: (617) 434-4929
Creditanstalt Corporate Finance, Inc. 2 Greenwich Plaza
4th Floor
Greenwich, Connecticut 06830
Attn: David Yewer
Tel. No.: (203) 861-1499
Fax No.: (203) 861-6581
Fleet Capital Corporation 200 Glastonbury Blvd.
Glastonbury, Connecticut 06033
Attn: Tim Broderick
Tel. No.: (860) 657-7774
Fax No.: (860) 657-7759
LaSalle National Bank 135 S. LaSalle Street
Chicago, Illinois 60603
Attn: Henry Munez
Tel. No.: (312) 904-7295
Fax No.: (312) 904-6242
<PAGE>
EXHIBIT 10.6
SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT
THIS SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT (this
"Agreement"), dated as of February 5, 1998 is by and between ATC Group Services
Inc. with its principal office at 104 East 25th Street, 10th Floor, New York,
New York 10010 (the "Company") and George Rubin, #30A, 200 Central Park South,
New York, New York ("Employee").
RECITALS
WHEREAS, Employee is employed by the Company as Secretary;
WHEREAS, Employee is currently compensated at the rate of
$300,000 per year with a bonus equal to 2.5% of the Company's pre-tax profits
(in the aggregate, the "Compensation");
WHEREAS, the Employee desires to resign his employment with
the Company as of the effective date of the proposed merger between Acquisition
Holdings, Inc. or an affiliate thereof and the Company (the "Effective Date");
WHEREAS, the parties desire to set forth their respective
rights and obligations in respect of Employee's resignation from the above
positions; and
WHEREAS, the Company and Employee desire to enter into a
consulting agreement as set forth herein.
NOW, THEREFORE, in consideration of the covenants and
conditions set forth herein, the parties, intending to be legally bound, agree
as follows:
AGREEMENT
1. Resignation. Employee hereby resigns from his employment
with the Company with effect on and as of the Effective Date. It is agreed by
the parties that, on and as of the Effective Date, all rights and obligations of
Employee and the Company with respect to such employment shall terminate.
2. Consulting Services. For a period of three (3) years after
the Effective Date, Employee agrees to make himself available at reasonable
times and locations (taking necessary account of Employee's business
commitments) to perform consulting services as reasonably requested by the
Company provided, (i) the Employee shall be given at least 48 hours prior
written notice of the requested services, (ii) all such consulting services
shall be rendered in The City of New
<PAGE>
York and (iii) Employee shall not be required to devote more than 10 hours per
month to the business of the Company. All consulting services rendered to the
Company by Employee shall be performed as an independent contractor, and
Employee shall not for any purpose be deemed to be an employee of the Company.
3. Benefits.
(a) Payment. In consideration of the agreements of Employee in
Sections 1 and 2 hereof, and without diminution because of the ability or
inability of Employee to perform any consulting services that may be requested
by the Company, the Company agrees to pay Employee (or his assigns or, in the
event of his death, his executor), on the Effective Date, the aggregate sum of
$860,290, less applicable withholdings for federal, state and local taxes, as
follows: $260,290 as a pro rata bonus for the fiscal year ending February 28,
1998 and $600,000 as a severance payment. Any tax liability incurred by Employee
in respect of consideration received hereunder shall be borne by him.
(b) Health Insurance. For the three (3) year period commencing
on the Effective Date, Employee and the members of his immediate family shall be
entitled to participate in and receive benefits under: (i) ATC Management Inc.'s
health coverage plan with Unicare or any health insurance plan subsequently
adopted by the Company in its place; and (ii) the Executive Supplement Plan to
ATC Management Inc.'s health coverage plan with Unicare as long as the Company
is able to obtain coverage for Employee under the supplemental plan; provided,
that, the Company shall use commercially reasonable efforts to maintain
substantially similar coverage during the term of this Agreement. During such
period, Employee shall pay all premiums, deductibles and other charges arising
out of or associated with the coverage of Employee and his immediate family
under the insurance plans described in clauses (i) and (ii) hereof; provided,
that, such premiums, deductibles and other charges do not increase
disproportionately for Employee as compared with other senior executives of the
Company.
(c) Car Lease. On or about February 18, 1998, Employee shall
return to the Company the Range Rover vehicle leased by the Company and used by
the Employee.
4. Expenses. All reasonable expenses incurred by Employee in
connection with the provision of consulting services requested hereunder,
including for airfare, hotel accommodations, meals and the like, shall be
reimbursed by the Company within seven (7) days after presentation by Employee
of receipts and other supporting documentation, provided that such expense had
been approved in advance by the Company.
2
<PAGE>
5. No Solicitation of Employees. Employee hereby represents
and warrants that he has not solicited for employment or induced any person
employed by the Company to terminate employment during the sixty-day period
preceding the date hereof.
6. Covenant Not to Compete.
(a) Employee hereby covenants and agrees that Employee shall
not, alone or in conjunction with any other person or entity, whether as a
principal, agent, stockholder, director, officer, manager, trustee,
representative, employee, executive or consultant or in any other capacity, for
whatever reason, directly or indirectly: (i) for a period of four (4) years
after the Effective Date, compete or assist any person or entity in competing
with the Company in all aspects of the business as conducted by the Company on
the Effective Date in any manner in the United States, except as permitted in
clauses (iii) and (iv) below; provided, that, upon written notice by the Company
of Employee's breach of this Section 6(a)(i), Employee shall have 10 (ten)
business days from the date of notice to cure any such breach; (ii) for a period
of four (4) years after the Effective Date, request or cause any person employed
by the Company on or after the date hereof to terminate employment, subject to
clauses (iii) and (iv) below; (iii) for a period three (3) years after the
Effective Date, compete or assist any person or entity in competing with ATC
InSys Technology Inc. ("InSys") or 3D Information Services Inc. ("3D") or assist
any person or entity in competing with InSys or 3D anywhere within the legal
boundaries of the State of New Jersey; or (iv) for a period three (3) years
after the Effective Date, solicit on behalf of himself or any other person or
entity, within The City of New York, any of the following customers of InSys:
(A) J.P. Morgan & Co. Incorporated, (B) Merrill, Lynch & Co. (C) The Long Island
Rail Road Co. and (D) The Chase Manhattan Bank; provided, however, that the
immediately preceding clause (iv) shall apply only to products or services that
are competitive with those of InSys. This Section 6 shall not be deemed to
prohibit the Employee from owning up to 5% of the outstanding voting securities
of any issuer whose securities are listed or traded on a U.S. national stock
exchange, the Nasdaq National Market System or a comparable foreign exchange or
system.
(b) If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to its fullest
extent, then such restriction shall be enforced to the maximum extent permitted
by law, and Employee hereby consents and agrees that such scope may be
judicially modified accordingly in any proceeding brought to enforce such
restriction. Employee acknowledges and agrees that the covenants contained
herein are necessary for the protection of the Company's legitimate business
interests and are reasonable in scope and content. Employee further acknowledges
and understands that the remedy at law for any breach by him of this Section 6
will be inadequate, and that the damages flowing from such breach are not
readily
3
<PAGE>
susceptible to being measured in monetary terms. Accordingly, it is acknowledged
that upon Employee's violation of any provision of this Section 6, the Company
shall be entitled to immediate injunctive relief and may obtain a temporary
order restraining any threatened or further breach. Nothing in this Section 6
shall be deemed to limit the Company's remedies at law or in equity for any
breach by Employee of any of the provisions of Section 6 which may be pursued or
availed of by the Company.
(c) The Company is concurrently entering into a Severance,
Consulting and Non-Competition Agreement with Morry F. Rubin containing covenant
not to compete arrangements substantially identical with those of this Section
6, except that the applicable period is four years (the "Other Agreement"). It
is of material significance to the Company that these arrangements are being
entered into with both the Employee and Morry F. Rubin simultaneously and that
they will be enforced on a joint basis. Accordingly, it is understood that the
obligations of the Company and the Employee pursuant to this Section 6 and those
of the Company and Morry F. Rubin pursuant to Section 6 of the Other Agreement
are to be construed jointly, such that any breach by the Employee or Morry F.
Rubin of their respective non-compete agreements will be considered a breach by
both, and any default by the Company under either agreement will be considered a
default by the Company under both this Agreement and the Other Agreement.
(d) The Company has agreed to pay an aggregate total of
$4,700,000 in consideration of the joint covenants not to compete of the
Employee and Morry F. Rubin, of which it will pay to the Employee the aggregate
sum of $940,000, as follows: $156,667 shall be paid on each January 1, April 1,
July 1, and October 1, commencing on the first such day that occurs at least one
month following the Effective Date and ending with the sixth such payment. Any
tax liability incurred by Employee in respect of the payment hereunder shall be
borne by him.
7. Release. The Company hereby releases the Employee and the
Employee hereby releases the Company and its affiliates and its and their
present and former stockholders, directors, officers, employees, agents,
attorneys, successors and assigns (together, the "Company Released Parties"),
from any and all claims that each of the Employee or the Company Released
Parties has or may have arising in any way out of Employee's employment with the
Company and service as Director and Chairman of the Board and the cessation
thereof, including, but not limited to, any and all claims each of the Employee
or the Company had, has or may have with respect to the Compensation.
Notwithstanding the above, this provision is not intended to release any claims
that may arise after the date Employee executes this Agreement, including claims
to enforce this Agreement.
4
<PAGE>
8. Retained Property. Employee represents that he has returned
all property of the Company in his possession, including but not limited to
credit cards, security key cards, telephone cards, car service cards, computer
software or hardware, company identification cards, Company records and copies
of records, correspondence and copies of correspondence and other books or
manuals issued by the Company. Employee also warrants that he has no debts to or
loans from the Company. Notwithstanding the foregoing, Employee shall have the
right to retain (i) duplicate photocopies of books and records of the Company
that do not fall within the category of "Confidential Information" (as defined
below) and (ii) all personal property of the Employee located on the premises of
the Company.
9. Confidentiality. Employee acknowledges that he has had and
may in the performance of consulting services hereunder continue to have access
to Confidential Information (as hereinafter defined) of the Company. Employee
agrees not to disclose, communicate or divulge to, or use for the direct or
indirect benefit of, any person (including Employee), firm, association or other
entity (other than the Company or its affiliates) any Confidential Information.
"Confidential Information" includes, but is not limited to, business methods,
business policies, procedures, techniques, research or development projects or
results, trade secrets (which Employee agrees include the Company's customer and
prospective customer lists), pricing policies, business plans, computer
software, intellectual property, and other such information not otherwise
available to the general public, unless the information is disclosed to Employee
without confidential or proprietary restriction by the Company or a third party
who rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
If any person (including any government employee) requests the disclosure or
release of Confidential Information, Employee shall (i) promptly notify the
Company of such request so that the Company may pursue any available remedies to
prevent the disclosure or release of such Confidential Information and (ii)
furnish the Company a copy of all written materials pertaining to such request
for Confidential Information as the Company shall deem appropriate.
10. No Claims. Employee represents and warrants that he has
not filed any charges, claims or complaints against the Company Released
Parties, and he represents and warrants that he will not initiate or voluntarily
participate or assist in any charge, claim, or complaint against the Company
Released Parties, it being understood that this provision does not affect
Employee's right to enforce this Agreement, or legal obligation, if any, to
appear as a witness if subpoenaed for examination before trial or subpoenaed for
trial or hearing or, if required, to provide information to
5
<PAGE>
the Equal Employment Opportunity Commission or to an equivalent state or local
administrative agency in response to a demand for information.
11. Benefits Terminated. Employee acknowledges that he is not
entitled to receive benefits from the Company other than as set forth in Section
3 of this Agreement, except for any vested benefits to which Employee is
entitled in the Company's 401(k) Plan and except for any other benefits afforded
Employee by applicable law.
12. No Inducements. Employee warrants that he is entering into
this Agreement voluntarily, and that, except as set forth herein, no promises or
inducements for this Agreement have been made, and he is entering into this
Agreement without reliance upon any statement or representation by any of the
Company Released Parties or any other person, concerning any fact material
hereto.
13. Integration. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes any and all prior agreements or understandings between the parties
arising out of or relating to the Employee's employment and the cessation
thereof. This Agreement may only be changed by written agreement executed by the
parties.
14. Governing Law. This Agreement shall be governed by the
laws of the State of New York, without giving effect to the conflicts of law
principles thereof.
15. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same instrument
and shall become effective when executed and delivered by each of the parties.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ATC GROUP SERVICES INC.
/s/ Nicholas J. Malino
--------------------------
By: Nicholas J. Malino
Title: President
EMPLOYEE
/s/ George Rubin
--------------------------
George Rubin
7
<PAGE>
EXHIBIT 10.7
SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT
THIS SEVERANCE, CONSULTING AND NON-COMPETITION AGREEMENT (this
"Agreement"), dated as of February 5, 1998 is by and between ATC Group Services
Inc. with its principal office at 104 East 25th Street, 10th Floor, New York,
New York 10010 (the "Company") and Morry F. Rubin, #22H, 1965 Broadway, New
York, New York ("Employee").
RECITALS
WHEREAS, Employee is employed by the Company as President and
Chief Executive Officer;
WHEREAS, Employee is currently compensated at the rate of
$300,000 per year with a bonus equal to 2.5% of the Company's pre-tax profits
(in the aggregate, the "Compensation");
WHEREAS, the Employee desires to resign his employment with
the Company as of the effective date of the proposed merger between Acquisition
Holdings, Inc. or an affiliate thereof and the Company (the "Effective Date");
WHEREAS, the parties desire to set forth their respective
rights and obligations in respect of Employee's resignation from the above
positions; and
WHEREAS, the Company and Employee desire to enter into a
consulting agreement as set forth herein.
NOW, THEREFORE, in consideration of the covenants and
conditions set forth herein, the parties, intending to be legally bound, agree
as follows:
AGREEMENT
1. Resignation. Employee hereby resigns from his employment
with the Company with effect on and as of the Effective Date. It is agreed by
the parties that, on and as of the Effective Date, all rights and obligations of
Employee and the Company with respect to such employment shall terminate.
2. Consulting Services. For a period of three (3) years after
the Effective Date, Employee agrees to make himself available at reasonable
times and locations (taking necessary account of Employee's business
commitments) to perform consulting services as reasonably requested by the
Company provided, (i) the Employee shall be given at least 48 hours prior
written notice of the requested services, (ii) all such consulting services
shall be rendered in The City of New
<PAGE>
York and (iii) Employee shall not be required to devote more than 10 hours per
month to the business of the Company. All consulting services rendered to the
Company by Employee shall be performed as an independent contractor, and
Employee shall not for any purpose be deemed to be an employee of the Company.
3. Benefits.
(a) Payment. In consideration of the agreements of Employee in
Sections 1 and 2 hereof, and without diminution because of the ability or
inability of Employee to perform any consulting services that may be requested
by the Company, the Company agrees to pay Employee (or his assigns or, in the
event of his death, his executor), on the Effective Date, the aggregate sum of
$860,290, less applicable withholdings for federal, state and local taxes, as
follows: $260,290 as a pro rata bonus for the fiscal year ending February 28,
1998 and $600,000 as a severance payment. Any tax liability incurred by Employee
in respect of consideration received hereunder shall be borne by him.
(b) Health Insurance. For the three (3) year period commencing
on the Effective Date, Employee and the members of his immediate family shall be
entitled to participate in and receive benefits under: (i) ATC Management Inc.'s
health coverage plan with Unicare or any health insurance plan subsequently
adopted by the Company in its place; and (ii) the Executive Supplement Plan to
ATC Management Inc.'s health coverage plan with Unicare as long as the Company
is able to obtain coverage for Employee under the supplemental plan; provided,
that, the Company shall use commercially reasonable efforts to maintain
substantially similar coverage during the term of this Agreement. During such
period, Employee shall pay all premiums, deductibles and other charges arising
out of or associated with the coverage of Employee and his immediate family
under the insurance plans described in clauses (i) and (ii) hereof; provided,
that, such premiums, deductibles and other charges do not increase
disproportionately for Employee as compared with other senior executives of the
Company.
(c) Car Lease. On or about February 18, 1998, Employee shall
return to the Company the BMW automobile leased by the Company and used by the
Employee.
4. Expenses. All reasonable expenses incurred by Employee in
connection with the provision of consulting services requested hereunder,
including for airfare, hotel accommodations, meals and the like, shall be
reimbursed by the Company within seven (7) days after presentation by Employee
of receipts and other supporting documentation, provided that such expense had
been approved in advance by the Company.
2
<PAGE>
5. No Solicitation of Employees. Employee hereby represents
and warrants that he has not solicited for employment or induced any person
employed by the Company to terminate employment during the sixty-day period
preceding the date hereof.
6. Covenant Not to Compete.
(a) Employee hereby covenants and agrees that Employee shall
not, for a period of three (3) years after the Effective Date, alone or in
conjunction with any other person or entity, whether as a principal, agent,
stockholder, director, officer, manager, trustee, representative, employee,
executive or consultant or in any other capacity, for whatever reason, directly
or indirectly: (i) compete or assist any person or entity in competing with the
Company in all aspects of the business as conducted by the Company on the
Effective Date in any manner in the United States, except as permitted in
clauses (iii) and (iv) below; provided, that, upon written notice by the Company
of Employee's breach of this Section 6(a)(i), Employee shall have 10 (ten)
business days from the date of notice to cure any such breach; (ii) request or
cause any person employed by the Company on or after the date hereof to
terminate employment; (iii) compete or assist any person or entity in competing
with ATC InSys Technology Inc. ("InSys") or 3D Information Services Inc. ("3D")
or assist any person or entity in competing with InSys or 3D anywhere within the
legal boundaries of the State of New Jersey; or (iv) solicit on behalf of
himself or any other person or entity, within The City of New York, any of the
following customers of InSys: (A) J.P. Morgan & Co. Incorporated, (B) Merrill,
Lynch & Co. (C) The Long Island Rail Road Co. and (D) The Chase Manhattan Bank;
provided, however, that the immediately preceding clause (iv) shall apply only
to products or services that are competitive with those of InSys. This Section 6
shall not be deemed to prohibit the Employee from owning up to 5% of the
outstanding voting securities of any issuer whose securities are listed or
traded on a U.S. national stock exchange, the Nasdaq National Market System or a
comparable foreign exchange or system.
(b) If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to its fullest
extent, then such restriction shall be enforced to the maximum extent permitted
by law, and Employee hereby consents and agrees that such scope may be
judicially modified accordingly in any proceeding brought to enforce such
restriction. Employee acknowledges and agrees that the covenants contained
herein are necessary for the protection of the Company's legitimate business
interests and are reasonable in scope and content. Employee further acknowledges
and understands that the remedy at law for any breach by him of this Section 6
will be inadequate, and that the damages flowing from such breach are not
readily
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susceptible to being measured in monetary terms. Accordingly, it is acknowledged
that upon Employee's violation of any provision of this Section 6, the Company
shall be entitled to immediate injunctive relief and may obtain a temporary
order restraining any threatened or further breach. Nothing in this Section 6
shall be deemed to limit the Company's remedies at law or in equity for any
breach by Employee of any of the provisions of Section 6 which may be pursued or
availed of by the Company.
(c) The Company is concurrently entering into a Severance,
Consulting and Non-Competition Agreement with George Rubin containing covenant
not to compete arrangements substantially identical with those of this Section
6, except that the applicable period is four years (the "Other Agreement"). It
is of material significance to the Company that these arrangements are being
entered into with both the Employee and George Rubin simultaneously and that
they will be enforced on a joint basis. Accordingly, it is understood that the
obligations of the Company and the Employee pursuant to this Section 6 and those
of the Company and George Rubin pursuant to Section 6 of the Other Agreement are
to be construed jointly, such that any breach by the Employee or George Rubin of
their respective non-compete agreements will be considered a breach by both, and
any default by the Company under either agreement will be considered a default
by the Company under both this Agreement and the Other Agreement.
(d) The Company has agreed to pay an aggregate total of
$4,700,000 in consideration of the joint covenants not to compete of the
Employee and George Rubin, of which it will pay to the Employee the aggregate
sum of $3,760,000, as follows: (i) $1,379,422 shall be paid on the Effective
Date; and (ii) $396,763 shall be paid on each January 1, April 1, July 1, and
October 1, commencing on the first such day that occurs at least one month
following the Effective Date and ending with the sixth such payment. Any tax
liability incurred by Employee in respect of the payment hereunder shall be
borne by him.
7. Release. The Company hereby releases the Employee and the
Employee hereby releases the Company and its affiliates and its and their
present and former stockholders, directors, officers, employees, agents,
attorneys, successors and assigns (together, the "Company Released Parties"),
from any and all claims that each of the Employee or the Company Released
Parties has or may have arising in any way out of Employee's employment with the
Company and service as Director and the cessation thereof, including, but not
limited to, any and all claims each of the Employee or the Company had, has or
may have with respect to the Compensation. Notwithstanding the above, this
provision is not intended to release any claims that may arise after the date
Employee executes this Agreement, including claims to enforce this Agreement.
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8. Retained Property. Employee represents that he has returned
all property of the Company in his possession, including but not limited to
credit cards, security key cards, telephone cards, car service cards, computer
software or hardware, company identification cards, Company records and copies
of records, correspondence and copies of correspondence and other books or
manuals issued by the Company. Employee also warrants that he has no debts to or
loans from the Company. Notwithstanding the foregoing, Employee shall have the
right to retain (i) duplicate photocopies of books and records of the Company
that do not fall within the category of "Confidential Information" (as defined
below) and (ii) all personal property of the Employee located on the premises of
the Company.
9. Confidentiality. Employee acknowledges that he has had and
may in the performance of consulting services hereunder continue to have access
to Confidential Information (as hereinafter defined) of the Company. Employee
agrees not to disclose, communicate or divulge to, or use for the direct or
indirect benefit of, any person (including Employee), firm, association or other
entity (other than the Company or its affiliates) any Confidential Information.
"Confidential Information" includes, but is not limited to, business methods,
business policies, procedures, techniques, research or development projects or
results, trade secrets (which Employee agrees include the Company's customer and
prospective customer lists), pricing policies, business plans, computer
software, intellectual property, and other such information not otherwise
available to the general public, unless the information is disclosed to Employee
without confidential or proprietary restriction by the Company or a third party
who rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
If any person (including any government employee) requests the disclosure or
release of Confidential Information, Employee shall (i) promptly notify the
Company of such request so that the Company may pursue any available remedies to
prevent the disclosure or release of such Confidential Information and (ii)
furnish the Company a copy of all written materials pertaining to such request
for Confidential Information as the Company shall deem appropriate.
10. No Claims. Employee represents and warrants that he has
not filed any charges, claims or complaints against the Company Released
Parties, and he represents and warrants that he will not initiate or voluntarily
participate or assist in any charge, claim, or complaint against the Company
Released Parties, it being understood that this provision does not affect
Employee's right to enforce this Agreement, or legal obligation, if any, to
appear as a witness if subpoenaed for examination before trial or subpoenaed for
trial or hearing or, if required, to provide information to
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the Equal Employment Opportunity Commission or to an equivalent state or local
administrative agency in response to a demand for information.
11. Benefits Terminated. Employee acknowledges that he is not
entitled to receive benefits from the Company other than as set forth in Section
3 of this Agreement, except for any vested benefits to which Employee is
entitled in the Company's 401(k) Plan and except for any other benefits afforded
Employee by applicable law.
12. No Inducements. Employee warrants that he is entering into
this Agreement voluntarily, and that, except as set forth herein, no promises or
inducements for this Agreement have been made, and he is entering into this
Agreement without reliance upon any statement or representation by any of the
Company Released Parties or any other person, concerning any fact material
hereto.
13. Integration. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes any and all prior agreements or understandings between the parties
arising out of or relating to the Employee's employment and the cessation
thereof. This Agreement may only be changed by written agreement executed by the
parties.
14. Governing Law. This Agreement shall be governed by the
laws of the State of New York, without giving effect to the conflicts of law
principles thereof.
15. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same instrument
and shall become effective when executed and delivered by each of the parties.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ATC GROUP SERVICES INC.
/s/ Nicholas J. Malino
--------------------------
By: Nicholas J. Malino
Title: President
EMPLOYEE
/s/ Morry F. Rubin
--------------------------
Morry F. Rubin
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EXHIBIT 10.8
AGREEMENT
FOR SALE AND PURCHASE
OF BUSINESS ASSETS
This AGREEMENT (the "Agreement"), dated the 18th day of
August, 1997, is entered into by and among ATC GROUP SERVICES INC., a Delaware
corporation with its principal office at 104 East 25th Street, New York, New
York 10010 (the "Purchaser"); SMITH TECHNOLOGY CORPORATION, a Delaware
corporation with its principal office at 3501 Jamboree Road, Suite 304, Newport
Beach, CA 92660 ("Smith"); BCM ENGINEERS INC., a Delaware corporation with its
principal office at One Plymouth Meeting, Plymouth Meeting, PA 19462 ("BCMD");
BCM ENGINEERS INC., a Pennsylvania corporation with its principal office at One
Plymouth Meeting, Plymouth Meeting, PA 19462 ("BCMP"); BCM ENGINEERS INC., an
Alabama corporation with its principal office at 63 South Royal Street, Suite
200, Mobile, AL 36633 ("BCMA"); and BCM ENGINEERS INC., a West Virginia
corporation with its principal office at One Plymouth Meeting, Plymouth Meeting,
PA 19462 ("BCMWV") (Smith, BCMD, BCMP, BCMA, and BCMWV are collectively referred
to as the "Sellers").
The Purchaser desires to purchase certain
business assets of Sellers in exchange for cash and other consideration as
hereinafter provided, and Sellers desire to effect such asset purchase through
sale in accordance with the covenants and terms of this Agreement.
I. SALE AND PURCHASE OF ASSETS
1.01 Basic Terms of Sale and Purchase of Assets
On the basis of the representations, warranties, covenants and
agreements in this Agreement and subject to the terms and conditions of this
Agreement:
(a) At Closing, Sellers agree to sell, convey, assign, deliver
and transfer to Purchaser, and Purchaser agrees to acquire, accept and purchase
from Sellers, all of the properties and assets of Sellers, tangible and
intangible, personal, real and mixed, known or unknown, vested or contingent,
which constitute Sellers' Engineering Division (the "Engineering Division"),
which includes all of the assets of Sellers based in or out of Sellers'
Burlington, New Jersey, Dallas, Texas, Fairhope, Alabama, Fort Walton, Florida,
Gulfport, Mississippi, Jackson, Mississippi, Meridian, Mississippi, Mobile,
Alabama, Modesto, California, Norristown, Pennsylvania, Panama City, Florida,
Pascagoula, Mississippi, Pittsburgh, Pennsylvania, Pleasanton, California,
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Pocono Summit, Pennsylvania, Sandia Laboratories, New Mexico, and Washington,
D.C., offices and Sellers' assets used primarily by or associated primarily with
the Engineering Division at Sellers' Plymouth Meeting, Pennsylvania, Livonia,
Michigan, and Mt. Prospect, Illinois offices. The Engineering Division consists
of the operations of Sellers engaged in the functions of (i) testing, (ii)
consulting, (iii) engineering, (iv) design, (v) project management and (vi)
training. For purposes of defining what assets are to be conveyed as assets of
the Engineering Division under this 1.01(a), the Engineering Division does not
include the operations and assets, regardless of function or service fields, of
Sellers' Denver, Colorado and Porter, Indiana offices. The assets to be sold and
purchased under this Agreement are all of the Engineering Division assets of all
of the Sellers (the Engineering Division assets to be purchased by Purchaser
from Sellers, whether or not itemized below, are collectively referred to as the
"Purchased Assets"). The Purchased Assets do not include those assets of Sellers
excluded by 1.01(d). The Purchased Assets include, but are not necessarily
limited to:
(1) All of the Engineering Division's supply inventory,
including but not limited to field supplies, laboratory supplies,
office supplies, processing supplies, labeling supplies, packing and
shipping materials and selling and promotional materials.
(2) All of Seller's right, title and interest in the
telephone and fax numbers set forth on Schedule 1.01(a)(2). Purchaser
shall have the exclusive right to apply for changes in such numbers or
in their location.
(3) All of the Engineering Division's fixed assets,
including all furniture, fixtures, vehicles, office, field and
production equipment, including computer equipment, and inventory
(Schedule 1.01(a)(3) sets forth a substantially complete list of all
fixed assets of the Engineering Division).
(4) All of Sellers' interest in real property leases which
are assumed as Assumed Liabilities (as defined in 1.02) ("Assumed
Premises Leases") and all rights to pre-payments, deposits and
leasehold improvements pertaining to the Assumed Premises Leases. The
Assumed Premises Leases are listed on Scheduled 1.02. Sellers' real
property leases other than Assumed Premises Leases are referred to as
"Non-Assumed Premises Leases."
(5) All right, title and interest in and to all of the
Engineering Division's customer contracts and agreements, whether
written or oral ("Customer Contracts") and customer business
arrangements and relationships. At Closing, Sellers shall deliver all
of the Customer Contracts by surrendering
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possession of them to Purchaser at closing at their then current
location.
(6) All right, title and interest in (i) all subcontracts of
the Engineering Division (the "Subcontracts"); and (ii) all contracts
of the Engineering Division other than Customer Contracts or
Subcontracts which are assumed by Purchaser as Assumed Liabilities by
inclusion on Schedule 1.02 ("Assumed Contracts").
(7) All of Sellers' right, title, and interest in the names
"BCM Engineers Inc.," "BCM," and any other names or any customarily
utilized portion or abbreviation thereof, either alone or in
conjunction with other words, utilized as business names by Sellers
primarily in connection with the Engineering Division's operations; and
all right, title and interest in any trademarks, logos, service marks,
the goodwill associated therewith and all registrations and
applications in connection with such names. As set forth with
particularity in 4.09(d), Smith also grants Purchaser a one (1) year
limited license to use the names "Smith Technology Corporation,"
"Reidel Environmental Services Inc.," and "Canonie Environmental
Services Corp." on a transitional basis to enable Purchaser to use,
obtain the benefits from, including payment, and effect the transfer
of, the Purchased Assets. Purchaser agrees to indemnify Smith pursuant
to 1.03 for Third Party Claims against Sellers arising from Purchaser's
use of such names or for any breach by Purchaser of the limitations on
use contained in 4.09(d).
(8) At Sellers' election, either originals or copies of the
business records of the Engineering Division, including all such
business records of Sellers pertaining to the Purchased Assets or the
Assumed Liabilities as Purchaser reasonably determines are necessary to
enable Purchaser to obtain possession of and title to the Purchased
Assets, to realize the value of and benefits from the Purchased Assets,
to carry out its obligations under the Assumed Liabilities and to
conduct the business associated with the Purchased Assets and Assumed
Liabilities ("Records"). The Records include (but are not necessarily
limited to) documents of title, accounting records, job files,
invoices, correspondence, sales records, technical records, customer,
records and other data and records relating to sales, customers, the
Purchased Assets and the Assumed Liabilities, and include those which
exist on paper, on film, tape, videotape or other storage media and on
any and all electronic media such as computer hard drives, diskettes or
magnetic tape. The Records do not include any of the financial records
of Sellers or records not primarily related to the Engineering
Division, but Purchaser shall have access to such records under 4.06.
Sellers shall deliver the Records located at premises which are Assumed
Premises Leases
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at Closing (as defined in 6.01) at their then current location and the
Records located at Sellers' other offices or premises promptly as such
times, from time to time, after Closing and at Purchaser's sole
expense, as records in Sellers' possession are reasonably determined by
Purchaser to constitute Records as defined in this section. In
conjunction with the delivery of the Closing ED Financial Statements,
Sellers shall deliver to Purchaser a copy of the job and financial
accounting computer systems back-up tapes for the Engineering division
as of the Effective time.
(9) All of Sellers' right, title, interest or proprietary
interest claims in and to any patents or unpatented proprietary
technology or processes primarily used by or sold or licensed to third
parties by the Engineering Division (listed on Schedule 1.01(a)(9)).
(10) All of Sellers' right, title, interest or proprietary
interest claims in and to all copyrights used primarily by or sold or
licensed to third parties by the Engineering Division (listed on
Schedule 1.01(a)(10)) and all reports, forms, archives, data bases,
studies, methods, research, technical and other books, manuals, videos,
scripts, recordings, training materials, journals, handbooks, and all
other intellectual property in whatever form primarily used by the
Engineering Division, whether or not copyrighted or proprietary to
Sellers.
(11) All of Sellers' right, title, interest or proprietary
interest claims in and to any and all business or technical computer
software associated primarily with, primarily used by or sold by the
Engineering Division and all system manuals and supporting materials
related to such software (each such software system is listed on
Schedule 1.01(a)(11)); provided that any such software for which any
Seller is obligated to pay royalties, lease payments or license fees or
which contains assignability restrictions shall be acquired by
Purchaser only to the extent assumed as an Assumed Liability.
(12) Sellers' complete Engineering Division customer list(s),
prospect contract list(s) or log(s), order backlog and proposals
outstanding and under development. At Closing, Sellers shall deliver
their list(s) or data base(s) of all known past (within previous three
years) and current Engineering Division customers or clients and the
Engineering Division's sales prospect contact list(s), data base(s) or
log(s), to the extent that such lists, data bases or logs are presently
stored and available on Sellers' current data management systems,
whether manual or electronic. At Closing, Sellers will also provide as
Schedule 1.01(a)(12) a detail of its order backlog. This schedule will
include the customer's
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name, project name, order amount, amount billed to date and backlog
amount.
(13) Sellers' vendor list applicable to the Engineering
Division and all of Sellers' right, title and interest in contracts
with vendors which are assumed by Purchaser as Assumed Liabilities.
(14) All accounts receivable and all unbilled work in process
(whether or not such work in process has been booked as revenue or
included on any schedule) attributable to services performed by or
contracts of the Engineering Division, including associated retainages.
The aging report of accounts receivable recorded on the Interim ED
Balance Sheet (see 2.03) shall be provided at Closing as Schedule
1.01(a)(14)(i). An aging report of the work in process recorded on the
Interim ED Balance Sheet shall be provided at Closing as Schedule
1.01(a)(14)(ii). Final aging reports of both accounts receivable and
work in process, current to the Effective Time and including all
accounts receivable and work in process recorded on the Closing ED
Balance Sheet, shall be delivered in connection with the Closing ED
Financial Statements (see 1.01(b)(4) and 2.03).
(15) All deposits, bonds, bond collateral, proceeds, refunds,
and prepaid expenses (including any refunds thereof) associated with
the Purchased Assets, the Assumed Premises Leases, the Assumed
Equipment Leases or the Assumed Liabilities (listed on Schedule
1.01(a)(15)).
(16) All of Sellers' right, title and interest in those
specific personal property leases assumed as Assumed Liabilities
("Assumed Equipment Leases").
(17) To the extent assignable, all licenses, permits,
accreditations, registrations, approvals and the like of governmental
agencies and other licensing or accrediting entities used exclusively
or primarily by the Engineering Division.
(18) The real estate set forth on Schedule 1.01(a)(18) to the
extent that Purchaser accepts the conveyance thereof following its
environmental due diligence with respect thereto (the "Purchased Real
Estate"). Upon Purchaser's request after Closing, Sellers will deliver
a recordable special warranty deed for each parcel of Purchased Real
Estate.
(19) All right to the Sellers' lock box no. 35053 maintained
with Chase Manhattan Bank of New York for receipt and deposit of the
Engineering Division's collections, proceeds and other cash receipts.
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(20) The Marion Bank claim.
Sellers agree to use their best efforts to provide complete
information on the schedules provided for in this 1.01(a) on the date
provided. However, the omission of any item shall not operate to
exclude the omitted item from the sale, delivery and assignment thereof
(except in those cases where the asset is to be acquired only to the
extent a coupled liability is to be assumed as an Assumed Liability in
which case it will be deemed included only if the liability is
specifically assumed as an Assumed Liability), and the omission of any
item shall abridge neither Sellers' obligation to deliver possession
and title thereto nor Purchaser's obligation to pay the purchase price
provided Purchaser acquires actual possession and beneficial ownership
of the omitted item.
(b) As consideration for the Purchased Assets and the other
promises, agreements, warranties, and covenants hereof, the Purchaser shall:
(1) Pay to Smith at Closing the sum of Five Million Four
Hundred Twenty-Five Thousand Five Hundred Thirty-Nine Dollars
($5,425,539). Such payment shall be paid by wire transfer of
immediately available funds to the accounts in the amounts specified by
Sellers in Schedule 1.01(b)(1).
(2) At closing, deliver to Smith a six (6) month conditional,
non-negotiable promissory note in the form of Exhibit 1.01(b)(2) (the
"Note") evidencing Purchaser's obligation to pay to Smith the sum of
Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000), with no
interest thereon, payable on the date seven (7) days after the date six
(6) months after the Closing Date (the seven day delay is to enable the
parties to settle the accounts receivable and work in process
collection adjustment set forth below). The Note shall be subject to
the condition that Purchaser shall have available to it the right of
set-off against payments to be made under the Note in accordance with
the provisions of 1.04, including specifically the right of set-off for
uncollected accounts receivable and work in process (see 2.06 and 4.01)
and for any other purpose for which the right of set-off may be
exercised under 1.04, but not including any right of set-off for any
overstatement of Adjusted Equity Value on the Interim ED Balance Sheet
(including any reduction in Adjusted Equity Value which occurs between
the Interim ED Balance Sheet and the Closing ED Balance Sheet) which
shall be adjusted in accordance with 1.01(b)(3), (4) and (5). Purchaser
acknowledges that the Note will be assigned to Sellers' senior lender,
The Chase Manhattan Bank, pursuant to a collateral assignment of even
date herewith, subject to Purchaser's set-off rights in 1.04 hereof.
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(3) Conditionally assume at Closing those Closing ED Balance
Sheet liabilities of the Sellers related to the Engineering Division,
in an aggregate amount not to exceed Four Million Three Hundred One
Thousand Dollars ($4,301,000), which are set forth on Schedule
1.012(b)(3) (the "Assumed Balance Sheet Liabilities"). The aggregate
amount of, and the specific liabilities included in, the Assumed
Balance Sheet Liabilities shall be adjusted, and Scheduled 1.01(b)(3)
shall be revised accordingly, to reflect the difference between the
Adjusted Equity Value of the Engineering Division on the Interim and
Closing ED Balance Sheets in accordance with 1.01(b)(4).
(4) Within ten (10) days following the Closing Date, Sellers
shall provide to Purchaser the Closing ED Financial Statements (as
defined in 2.03). Any disagreements between Purchaser and Sellers
concerning the Engineering Division's final Adjusted Equity Value as
shown on the Closing ED Balance Sheet shall be resolved in accordance
with 2.03(c) during the twenty (20) day period thereafter. At such time
as the Closing ED Balance Sheet has been finally determined between the
parties within thirty (30) days after Closing, a final adjustment to
the amount of Assumed Balance Sheet Liabilities to be assumed under
1.01(b)(3) shall be made and Schedule 1.01(b)(3) shall be amended to
reflect such adjustment, equal to the amount, if any, by which the
Engineering Division's Adjusted Equity Value as of the Effective Time
as set forth on the finally determined Closing ED Balance Sheet exceeds
or is less than the warranted Adjusted Equity Value set forth on the
Interim ED Financial Statements, net of any set-off for such purpose
taken by Purchaser against the Short Term Note under 1.01(b)(5). If the
Engineering Division's Adjusted Equity Value as of the Effective Time
is less than the Interim ED Balance Sheet value, the aggregate amount
of Assumed Balance Sheet Liabilities assumed by Purchaser shall be
reduced by such difference less any amount which Purchaser has elected
to take as a set-off for such purpose against the Short Term Note as
provided in 1.01(b)(5)(B). If the Adjusted Equity Value is greater than
the Interim ED Balance Sheet value, the aggregate amount of Assumed
Balance Sheet Liabilities assumed by Purchaser shall be increased by
such difference. Purchaser shall have the right to select which Closing
ED Balance Sheet liabilities are added to or deleted from Schedule
1.01(b)(3) to reflect the adjustment effected by this paragraph.
Purchaser shall be given credit for any Assumed Balance Sheet
Liabilities which it discharges prior to the amendment of Schedule
1.01(b)(3).
(5) At Closing, deliver to Smith a thirty (30) day
conditional, non-negotiable promissory note in the form of Exhibit
1.01(b)(5) (the "Short Term Note") evidencing Purchaser's obligation to
pay to Smith the sum of Two Hundred Thousand Dollars ($200,000), with
interest thereon at
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the Chase Manhattan Bank prime rate as of the Closing Date, payable on
the date thirty (30) days after the Closing Date. The Short Term Note
shall be subject to the condition that Purchaser shall have available
to it the right of set-off against payments to be made under the Short
Term Note for:
(A) Any payment which Purchaser elects to make on
behalf of Sellers of any liability of the Engineering
Division: (i) which is not set forth as an account payable of
the Engineering Division on Schedule 1.01(b)(5) (Schedule
1.01(b)(5) is the ledger of trade accounts payable included as
liabilities of the Engineering Division recorded on the
Interim ED Balance Sheet); (ii) which is not an Assumed
Liability; and (iii) which Sellers do not pay within seven (7)
days after being requested by Purchaser in writing to do so in
accordance with 4.14; or
(B) The amount, if any, by which the Engineering
Division's Adjusted Equity Value as of the Effective Time as
set forth on the finally determined Closing ED Balance Sheet
is less than the Interim ED Balance Sheet value, determined in
accordance with 1.01(b)(4), to the extent that Purchaser
elects to take such adjustment as a set-off against the Short
Term Note instead of a reduction in Assumed Balance Sheet
Liabilities.
Purchaser acknowledges that the Short Term Note will be
assigned to Sellers' senior lender, The Chase Manhattan Bank, pursuant
to a collateral assignment of even date herewith, subject to
Purchaser's set-off rights in this 1.01(b)(5).
(c) The purchase price shall be allocated to the Purchased
Assets by agreement of the parties as set forth on Schedule 1.01(c),
with final adjustments to conform to the Closing ED Balance Sheet made
by agreement between the parties within 45 days after Closing.
(d) The Purchased Assets will not include the following
(collectively, the "Excluded Assets"):
(1) All cash bank accounts or cash equivalents of
Sellers on hand on the Closing Date, except as provided in
1.01(a)(15).
(2) All insurance policies of the Sellers, in respect
of the Purchased Assets or otherwise.
(3) Sellers' interest in that certain Technical
Services Agreement dated May 1, 1993, between Schlumberger
Technology Corporation and Canonie Environmental Services
Corp., including the right of any proceeds, accounts
receivable, claims for payment or other rights arising from or
related to such agreement.
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(4) All rights of Sellers arising from or related to
the lawsuit filed in the Superior Court of California, County
of Alemeda, Case No. V-013711-1 against Locus Technologies,
Neno Duplancic and other unidentified defendants.
(5) Any permits, licenses, agreements, leases,
instruments, contracts and contract rights which would be
Purchased Assets but for this 1.01(d)(5), but which require
the consent, approval, novation or waiver of a third person if
the transfer of such would constitute a breach of such
contract or a violation of any law and if such consent,
approval, novation or waiver is not obtained, provided,
however, that the benefits of any such agreement, lease,
instrument, contract or contract right, including the right to
payment arising therefrom, shall nevertheless constitute
Purchased Assets to the extent that such benefits can be
afforded to Purchaser by means of the covenants set forth in
4.09, 6.02(1) and 7.02 or any other covenant of this Agreement
whose purpose is to assure to Purchaser the benefits of the
Purchased Assets for which Purchaser is paying the
consideration provided for in this Agreement.
(6) All of Seller's assets of every type and
description which are not primarily used by or related to the
Engineering Division.
(7) All real estate owned or leased by Sellers except
for any: (i) owned real estate expressly itemized on Schedule
1.01(a)(18) as a Purchased Asset; or (ii) interests in leased
real estate which are Assumed Premises Leases.
(8) All claims of Sellers, including those related to
the Engineering Division, arising prior to the Effective Time,
except for the Marion Bank claim (the "Retained Claims").
(9) All rights in former accounts receivable of the
Engineering Division which were charged off prior to the
Effective Time.
(10) Deposits, pre-payments, fixtures, and tenant
improvements associated with Non-Assumed Leases.
(11) Records related to Sellers' pending or threatened
litigation, proceedings, investigations or claims.
(12) All of Sellers' recorded goodwill.
(13) Sellers' computer network equipment and licensed
network software, including those components used by the
Engineering Division prior to Closing.
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(14) All of Sellers' leased real and personal
properties other than those assumed by Purchaser as Assumed
Premises or Assumed Equipment Leases.
1.02 Liabilities of Seller and Purchaser
(a) Purchaser has not, and shall not be construed to have,
assumed, adopted or taken over any obligations, debts, liabilities or
responsibilities of Sellers whatsoever, including (but not limited to)
liabilities for local, state or federal taxes, except for: (i) the liabilities
itemized on Schedule 1.02; (ii) the Assumed Balance Sheet Liabilities set forth
on Schedule 1.01(b)(3) as adjusted; and (iii) such future (i.e. post-Effective
Time) performance as is obligated under the terms and conditions of those
Customer Contracts or Subcontracts which constitute Purchased Assets
(collectively the "Assumed Liabilities"). Purchaser shall use its diligent
efforts to secure the assignment to Purchaser or novation of contracts which are
Assumed Liabilities. Purchaser shall be free to seek the amendment or
renegotiation of terms of Customer Contracts, Subcontracts or Assumed
Liabilities in its sole discretion provided that Purchaser shall indemnify
Sellers from any adverse effect on Sellers arising from such actions. Purchaser
shall cooperate with Sellers in attempting to obtain the release and waiver or
settlement of claims of parties under the Customer Contracts in favor of Sellers
for any damages or losses alleged to have been incurred by such parties arising
from performance prior to the Effective Time. Notwithstanding Purchaser's
acceptance of a Customer Contract and the obligation of future performance,
Sellers, as their interests are defined by such contracts or by law (which shall
not be altered or enlarged with respect to third parties by virtue of this
Agreement), shall retain responsibility and liability, except as such are
expressly assumed as Assumed Liabilities, for all obligations, performance and
liability due, occurring or accruing under all Customer Contracts or
Subcontracts prior to the Effective Time, with Purchaser assuming all
responsibility and liability for obligations and performance due and performed
after the Effective Time and all liabilities arising out of such post-Effective
Time performance.
(b) Except for the Assumed Liabilities, Sellers agree, jointly
and severally, to retain or assume full liability and responsibility for
satisfaction of all of Sellers' debts or liabilities of any kind, whether known
or unknown, fixed or contingent, including any and all liability for trade
payables and other accounts payable, federal, state or local taxes, employment
taxes, tort or contract claims, and employee compensation, benefits or claims.
(c) The disclosure by Sellers of any liability or any item or
matter that creates a liability in the future on the schedules to this Agreement
or otherwise shall not result in an assumption by, or shifting to, Purchaser of
liability with respect to such matter
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except to the extent that Purchaser has expressly agreed to the assumption of
such liability as an Assumed Liability.
1.03 Indemnity Against Liabilities, etc.
(a) Sellers, jointly and severally, agree to indemnify and
hold harmless the Purchaser, its subsidiaries, their employees and their
successors against and in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or informal),
governmental investigations, judgments, deficiencies, set-offs,
damages, settlements, liabilities, and reasonable legal and other
expenses (including reasonable attorneys' fees) as and when incurred
arising out of or based upon any breach of any representation,
warranty, covenant, or agreement of Sellers or any person other than
Purchaser contained in this Agreement or any of the Related Agreements;
(2) Debts or liabilities of any kind and claims, liens,
set-offs, suits, actions, and proceedings (formal and informal) of
persons or entities and related judgments, deficiencies, damages,
settlements, set-offs, liens, liabilities, and legal and other expenses
(including reasonable attorneys' fees) as and when incurred arising (i)
out of the Purchased Assets or the business associated therewith prior
to the Effective Time except to the extent expressly assumed by
Purchaser as Assumed Liabilities or (ii) out of or based upon the acts,
omissions, contractual performance or conduct of the business of
Sellers whether before or after the Effective Time, except to the
extent expressly assumed by purchaser as Assumed Liabilities; and
(3) Any loss, damage or cost for which Sellers or any of them
have agreed to indemnify Purchaser under any provision of this
Agreement or any Related Agreement.
(b) Purchaser agrees to indemnify and hold harmless Sellers,
their affiliated corporations, their employees and their successors, against and
in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or informal),
governmental investigations, judgments, deficiencies, set-offs,
damages, settlements, liabilities, and reasonable legal and other
expenses (including reasonable attorneys' fees) as and when incurred
arising out of or based upon any breach of any representation,
warranty, covenant, or agreement of Purchaser contained in this
Agreement or any of the Related Agreements;
(2) Debts or liabilities of any kind and claims, liens,
set-offs, suits, actions, and proceedings (formal and informal) of
persons or entities and related judgments, deficiencies,
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damages, settlements, set-offs, liens, liabilities, and reasonable
legal and other expenses (including reasonable attorneys' fees) as and
when incurred arising (i) out of the Purchased Assets or the business
associated therewith after the Effective time, except for Sellers'
debts or liabilities not expressly assumed by Purchaser as Assumed
Liabilities; (ii) out of or based upon the acts, omission, contractual
performance or conduct of the business of Purchaser whether before or
after the Effective Time; or (iii) out of the Assumed Liabilities after
the Effective Time; and
(3) Any loss, damage or cost for which Purchaser has agreed to
indemnify Sellers or any of them under any provision of this Agreement
or any Related Agreement.
(c) If any party to be indemnified hereunder (the
"indemnitee") receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement or an affiliate of such party (a "Third Party Claim") against
such indemnitee, against which any person or entity that may be required to
provide indemnification therefor under this Agreement (the "indemnitor"), the
indemnitee will give such indemnitor reasonably prompt written notice thereof
after receipt of such notice of such Third Party Claim in reasonable detail, and
will indicate the estimated amount, if reasonably practicable, of the loss that
has been or may be sustained by the indemnitee. The indemnitor will have the
right to participate in or, by written notice to the indemnitee no later than
thirty (30) calendar days after receipt of the above-described notice of such
Third Party Claim, to elect to assume the defense of such Third Party Claim at
such indemnitor's own expense and by such indemnitor's own counsel, and the
indemnitee will cooperate in good faith in such defense. If within the 30
calendar days set forth in this paragraph, an indemnitee receives written notice
from an indemnitor that such indemnitor has elected to assume the defense of any
Third Party Claim, the indemnitor will not be liable for any legal expenses
subsequently incurred by the indemnitee in connection with the defense thereof
(except as provided in this paragraph or paragraph (d) or (f) below). The
indemnitee will, however, have the right to participate in the defense of any
Third Party Claim assisted by counsel of its own choosing at its own expense. If
the indemnitee has not received written notice within such thirty (30) calendar
day period that the indemnitor has elected to assume the defense of such Third
Party Claim, the indemnitee may, at its option, elect to settle, subject to
paragraphs (e) and (f), or assume such defense, assisted by counsel of its own
choosing, the cost of which shall constitute an indemnified loss.
(d) An indemnitor shall not be entitled to control, and the
indemnitee shall be entitled to have sole control over, the defense or
settlement of any claim against such indemnitee to the extent
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that (i) such claim seeks an order, injunction or other equitable relief against
the indemnitee which if successful, could reasonably be expected to materially
interfere with the business, operations, assets or condition (financial or
otherwise) of the indemnitee or (ii) such claim arises out of a Customer
Contract and seeks recovery against both Sellers and Purchaser under
circumstances subjecting the claim to liability and indemnity apportionment
under paragraph (j)(1) of this section, in which event indemnitor and indemnitee
shall have control over their respective defenses.
(e) Without the prior written consent of the other,
indemnitor will not enter into any settlement of any Third Party Claim or cease
to defend against such claim, if pursuant to or as a result of such settlement
or cessation: (i) injunctive or other equitable relief would be imposed against
the indemnitee; or (ii) such settlement or cessation would lead to liability or
create any financial or other obligation on the part of the indemnitee for which
it is not entitled to or is unlikely to receive full indemnification hereunder
(exclusive of the Indemnity Deductible, or any portion thereof). Indemnitor
shall not consent to the entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to each indemnitee of a release from all liability in respect of such
claim.
(f) If a firm offer is made to settle a Third Party Claim and
either indemnitor or indemnitee desires to accept and agree to such offer, such
party will given written notice to the other to that effect. If the other party
fails to consent to such firm offer within 30 calendar days after its receipt of
notice, the party desiring to so settle may continue to contest or defend such
Third Party Claim and, in such event: (i) if the party desiring to settle is the
indemnitor, the maximum liability of the indemnitor as to such Third Party claim
will not exceed the amount of such settlement offer, plus costs and expenses
paid or incurred by the indemnitee through the end of such 30-day period to the
extent otherwise indemnifiable hereunder; or (ii) if the party desiring to
settle is the indemnitee, the indemnitee is participating in the defense of such
Third Party Claim at its cost and the final judgment or settlement is equal to
or greater than the firm offer, the indemnitee's costs and expenses incurred
after such 30-day period shall constitute an indemnified loss.
(g) Any claim by an indemnitee for indemnification other than
indemnification against a Third Party Claim (a "Direct Claim") will be asserted
by giving the indemnitor reasonably prompt written notice thereof, and the
indemnitor will have a period of 15 calendar days within which to respond in
writing to such Direct Claim. If the indemnitor does not so respond within such
15 calendar day period, the indemnitor will be deemed to have rejected such
claim, in which event the indemnitee will be free to pursue
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such remedies as may be available to the indemnitee under this Agreement.
(h) With regard to claims for which indemnification is payable
hereunder, such indemnification shall be paid by the indemnitor promptly upon
(i) the entry of a judgment against the indemnitee and the expiration of any
applicable appeal period; (ii) the entry of an unappealable judgment of final
appellate decision against the indemnitee; or (iii) a settlement permitted under
1.03. In the event that the indemnitee has taken a provisional set-off against
amounts due to the indemnitor for the indemnified claim pursuant to 1.04(c) and
the amount finally determined to be payable as provided in this paragraph is
less than the amount so set-off, the excess shall thereupon be payable to the
indemnitor together with interest on such excess at the Chase Bank prime rate
quoted for the date on which the payment against which the set-off was taken
would have otherwise been due. This provision shall not apply to Purchaser's
set-off rights against the Note for uncollected accounts receivable and work in
process and against the Short Term Note for Purchaser's payment of unscheduled
accounts payable under 1.01(b)(5) which shall be governed by 1.04 and
1.01(b)(5), respectively, and shall be finally determined in accordance with the
procedure set forth for resolution of accounting issues in 2.03.
(i) If the Purchaser is the indemnitee, payment of an
indemnification claim shall first be made by a set-off against the principal
amount of the Note remaining unpaid, subject to paragraphs (j)(3) and (5) of
this section.
(j) The parties' respective indemnity obligations hereunder
shall be further subject to the following:
(1) In the event any contracting party of a Customer Contract
(other than Purchaser) asserts any claim for damages, failure or
inadequacy of performance, breach of warranty or breach of contract
relating to the Customer Contract and such claim is founded on
allegations of breach of contract, negligence or other legal fault of
both a Seller and Purchaser, then, and in that event, Purchaser and
Sellers indemnification obligations contained herein shall apply only
to the extent of their respective actual comparative negligence or
other legal fault as determined by the dispute resolution procedures
set forth in this Agreement, by a court or by agreement of the parties.
A determination of liability on the part of Purchaser based upon the
assignment or novation to, or undertaking of performance by, Purchaser
of any Customer Contract or based upon successor liability or similar
theory shall not constitute legal fault of the Purchaser, it being the
intention of this section to apportion liability to the party whose act
or omission was actually responsible for creating the liability.
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(2) Except with respect to claims arising from performance
under Customer Contracts prior to closing or claims of breach of any
contract by any Seller prior to Closing, rights to indemnification
pursuant to 1.03(a) hereof shall survive Closing for a period of thirty
(30) months. Rights to indemnification for claims arising from any
Seller's performance under any Customer Contract or breach of contract
by any Seller prior to Closing shall survive for a period of six (6)
years after the date of the making of the contract. All such
non-excepted claims for indemnification hereunder shall be forever
barred unless made by notifying the Sellers in writing of such claim
within the time period set forth in this paragraph.
(3) The Sellers' and Purchaser's respective indemnity
obligations hereunder shall be limited to: (i) individual losses,
claims, etc. having a value of $2,500.00 or more (an "Indemnified
Claim"); and (ii) losses, claims, etc. after the first $100,000.00, in
the aggregate, of Indemnified Claims (the "Indemnity Deductible"), in
which event only the aggregate amount of Indemnified Claim(s) in excess
of the Indemnity Deductible shall be subject to indemnification
hereunder. Sellers shall not be responsible for any loss or claim to
the extent that a reserve exists therefor on the Closing ED Balance
Sheet and remains available. The following are not subject to either
the Indemnified Claim threshold or the Indemnity Deductible and are
covered from the first dollar over the reserved amount: (iii) Sellers'
warranty that accounts receivable and recorded work in process recorded
on the Closing ED Balance Sheet, net of reserves, will be collected as
specified in 2.06(a); (iv) Sellers' warranty that there are no unearned
billings or receipts net of reserves for such purpose as set forth in
2.06(a) and 2.07(b); (v) Sellers' warranty that both the Interim and
Closing Balance Sheets correctly stated tangible net equity for the
Engineering Division as of the Effective Time; (vi) Sellers' warranty
that Hazardous Materials have been removed from the Assumed Premises
Leases and Purchased Real Estate prior to Closing; (vii) Sellers'
covenants to pay unrecorded accounts payable of the Engineering
Division under 4.14 and to pay insurance premiums under 4.12; and
(viii) Purchaser's covenant to make payments required in the ordinary
course under Assumed Balance Sheet Liabilities or leases assumed as
Assumed Liabilities.
(4) The terms "loss" or "cost" as used in 1.03(a) include
corrective services performed by Purchaser (including its
subcontractors) to remedy a deficiency in Sellers' performance under
any contract for the performance of services by a Seller to the extent
that Purchaser reasonably determines: (i) that such corrective services
are in fact necessary to remedy a defective performance by a Seller;
and (ii) that Purchaser
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must perform such corrective services in order to preserve its
relationship with (x) any customer under a Customer Contract or other
engagement for services having remaining billings of $20,000 or more in
excess of the cost of such corrective services, (y) any pre-existing
customer from which Purchaser accrued revenue in excess of $30,000
within the previous year or (z) any customer from which the Engineering
Division accrued more than $50,000 in revenue in either of the two
years prior to Closing. corrective services performed by Purchaser at
the request of Sellers shall not be subject to any threshold.
(5) The maximum aggregate liability of the Sellers for
indemnification under this Agreement and set-offs under 1.04 and
1.01(b)(5), exclusive of liability covered by Sellers' insurance
coverage for any indemnified claim, shall be equal to Two Million Seven
Hundred Fifty Thousand Dollars ($2,750,000) (the "Maximum Aggregate
Indemnity Amount"), and the obligations of the Sellers for
indemnification hereunder will terminate when the Maximum Aggregate
Liability Amount has been paid or set-off, except that if Purchaser
exercises set-off rights against the Note and the Short Term Note in
excess of $1,250,000 in the aggregate for uncollected accounts
receivable and work in process and for payments of unrecorded accounts
payable, the maximum aggregate liability of the Sellers for
indemnification shall nevertheless be equal to $1,500,000 for other
indemnified matters regardless of the amount set-off for the foregoing
purposes.
(6) To the extent that an indemnitee actually receives
proceeds of insurance or any other recovery of amounts claimed as an
indemnified loss or cost hereunder, the indemnification obligation of
the indemnifying party shall be reduced to the extent of the net
insurance proceeds or other recovery received by the indemnitee. If the
amount of any indemnifiable loss at any time subsequent to the making
of a payment in respect thereof (an "indemnity Payment") is reduced by
recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment,
the amount so received will be promptly repaid by the indemnitee to the
indemnitor, together with interest thereon from the date of payment
thereof at a rate equal to the then current prime rate.
(7) Upon making any Indemnity Payment, the indemnitor will, to
the extent of such Indemnity Payment, be subrogated to all rights of
the indemnitee against any third party that is not an affiliate of the
indemnitee in respect of the loss to which the Indemnity Payment
relates. Without limiting the generality or effect of any other
provision hereof, each such indemnitee and indemnitor will duly execute
upon request all
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instruments which fairly reflect, and are reasonably necessary to
evidence and perfect, the above-described rights.
(8) Sellers and Purchaser, or any indemnitee claiming under
them, shall each give the other prompt notice as provided in this
section of any allegedly indemnified item incurred, asserted or
threatened on the basis of which an indemnitee intends to seek
indemnification from an indemnitor as provided herein; provided,
however, that the obligation of an indemnitor shall be reduced for the
failure to give notice at any particular time only to the extent that
the indemnitor has been actually prejudiced thereby.
(9) The indemnity agreements contained in this Agreement shall
inure only to the benefit of Purchaser and Sellers, respectively (and
their respective subsidiaries, affiliates employees and successors to
the extent they are indemnitees), and shall not be for the benefit of
any other person or entity. These indemnity provisions shall not be
construed to abrogate the corporate liability shield as provided by
law, to extend a right of action to any third party not otherwise
available, or to enlarge the underlying liability of any indemnitor or
indemnitee to any third party.
(k) Notwithstanding any other provision contained in this
Agreement to the contrary, neither Sellers nor Purchaser shall have any
liability to the other or to any other indemnitee under this Agreement, or under
any Related Agreement, document or instrument delivered pursuant to this
Agreement, or in connection with the transactions contemplated hereby or
thereby, for any indirect, consequential or incidental damages of any kind or
nature. The following shall not constitute indirect, consequential or incidental
damages: (i) amounts that an indemnitee is required to pay to a Third Party even
if such amounts are for indirect, incidental or consequential damages sustained
by such Third Party; or (ii) attorneys' fees and defense costs and expenses for
which a right to indemnification is provided in this 1.03.
(l) The indemnification obligation of an indemnitor shall be
adjusted so as to give credit to the indemnitor for any tax benefits available
to the indemnitee by virtue of or as a result of the matter for which the
indemnitee is being indemnified (net of tax detriments resulting to the
indemnitee by virtue of such indemnification).
(m) Purchaser and Sellers each agree that the remedies
provided to each party in this 1.03 shall be the sole and exclusive remedies of
such party (or any person claiming by or through such party) for breach,
misrepresentation or default by the other party under or with respect to this
Agreement or any Related Agreement except for the following: (i) the parties
shall be entitled to equitable remedies with respect to matters where an
equitable remedy is
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provided in this Agreement or where such relief is available under principles
of equity generally; and (ii) the parties shall not be limited as to remedy
under circumstances constituting fraud in the inducement.
1.04 Rights of Set-Off
(a) Without limiting such other rights as it may have at law
or equity or by agreement, the Purchaser shall have the right, subject to the
procedures of this 1.04, to set off against, and withhold from, any payment
otherwise due to Sellers under the Note: (i) the amount of any account
receivable or work in process which is a Purchased Asset and is determined to be
uncollected pursuant to 2.06(a) and 4.01; (ii) any amount for which Purchaser is
entitled to an indemnification payment as provided in 1.03 (subject to the
limitations of 1.03(j)(3) and 1.03(j)(5)); and (iii) as provided in paragraph
(c) below. In-kind goods or services provided by Purchaser for which Purchaser
would be entitled to set off if paid by Purchaser in money shall be valued at
Standard Rates (as defined in 4.11).
(b) Without limiting such other rights as they may have at law
or equity or by agreement, Sellers shall have the right, subject to the
procedures of this 1.04, to set off against, and withhold from, any payment
otherwise due to Purchaser under this Agreement or under any Related Agreement
any amount for which Sellers are entitled to an indemnification payment under
1.03 (subject to the limitations of 1.03(j)(3) and 1.03(j)(5)); and (iii) as
provided in paragraph (c) below. In-kind goods or services provided by a Seller
for which Sellers would be entitled to set off if paid by Sellers in money shall
be valued at Standard Rates (as defined in 4.11).
(c) Subject to the procedures set forth below, but only with
respect to Third Party Claims, it shall not be necessary that a Third Party
Claim or a threatened Third Party Claim has resulted in actual damage to a party
having set-off rights under this section for the party to exercise its set-off
rights under this section, but rather such party shall have the right to
provisionally withhold payment to cover the future effects of any Third Party
Claim or threatened Third Party Claim pending actual conclusion of the matter,
provided that the party asserting the right of set-off for a threatened Third
Party Claim shall have produced sufficient objective evidence of facts and
sufficient supporting legal authority for a competent, experienced attorney to
conclude that:
(1) A written notice of the claim or threatened claim has been
received by the party seeking to withhold;
(2) Either the loss-threatening event has occurred or there is
a substantial probability that it will occur;
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(3) There is a substantial probability that the occurrence or
probable occurrence will cause a loss;
(4) An action to hold the party liable for the loss could
withstand a motion to dismiss or a motion for summary judgment;
(5) There is a substantial probability that the loss,
including associated attorneys' fees and costs of defense, will be as
great as the amount asserted for set-off;
(6) Either there is a substantial issue as to whether an
available insurance policy provides coverage for the claim or there is
a substantial potential that the insurance coverage available will not
be adequate in amount to pay the portion of the loss asserted as a
set-off; and
(7) If the set-off is not asserted at the present time,
insufficient funds will remain subject to set-off following the next
payment to enable the asserting party to protect its interests.
If (i) any of the above findings becomes no longer true, (ii)
a formal proceeding has not been commenced with respect to such Third-Party
Claim within one (1) year after the notice of intent to set off, (iii)
settlement negotiations are not actively in progress to resolve such Third Party
Claim after one (1) year from the notice of intent to set off, or (iv) such loss
or damage does not in fact occur, then upon the earlier to occur of such events
such party shall then pay the withheld amount to the other party together with
interest on such amount from the payment due date at the Chemical Bank prime
rate in effect on the due date for such payment.
(d) Purchaser may not set off any amounts under this section
except to the extent that any reserve recorded on the Closing Balance Sheet for
such liability or class of liabilities is not available or is inadequate to
cover the asserted amount.
(e) If the parties have a dispute involving the exercise of
set-off rights, including any issue as to insurance coverage or liability
exposure, then within ten (10) days, Sellers and Purchaser shall confer in good
faith in an effort to resolve the dispute. If the parties are unable to agree
within thirty (30) days after the issue is first asserted, then such issue shall
be submitted to non-binding mediation as provided in 7.15. Pending agreement or
determination of a charge against available reserves and/or a set-off, the
amount asserted for set-off may be withheld by the asserting party (subject to
the provisions of paragraph (c) above) and shall not constitute a breach or
default under this Agreement, provided that the withholding is reasonable as to
amount and is undertaken in good faith with a reasonable belief as to the
entitlement to the set-off.
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II. REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Purchaser to enter into this
Agreement, Sellers represent and warrant to Purchaser as follows:
2.01 Organization and Qualification
(a) Sellers are each corporations which are validly existing
under the laws of their state of incorporation with the full corporate power and
authority to enter into contracts, to sell their assets and to perform the other
agreements and covenants as provided in this agreement. Sellers are authorized
to do business and are in good standing in each jurisdiction in which the
Engineering Division maintains an office or is required to be qualified except
where the failure to be so qualified could not reasonably be expected to have a
material adverse effect on the Engineering Division. Schedule 2.01(a) lists each
such jurisdiction in which the Engineering Division maintains an office and
Sellers are authorized to do business. Sellers will not be, as a result of
executing and performing this Agreement and related agreements, in violation or
breach of, or in default with respect to, any term of their respective
certificates of incorporation, by-laws or other charter documents.
(b) Sellers have no subsidiary or affiliated corporations or
entities other than those listed on Schedule 2.01(b).
2.02 Capitalization and Shareholder Action
Except as set forth on Schedule 2.02, the stock or equity
interests of Sellers are not encumbered or restricted in any way or subject to
any agreement that will interfere with this transaction, affect Purchaser's
title to or beneficial use of the Purchased Assets or subject Purchaser to
liability to any stockholder. Stockholder approval of this sale of assets either
has been duly obtained prior to Closing or is not required by law or under
Sellers' respective certificates or articles of incorporation or by-laws.
2.03 Financial Condition
(a) Sellers have delivered to the Purchaser and attached
hereto as Schedule 2.03 true and correct copies of the following: (i) audited
balance sheets, statements of income, statements of retained earnings, and
statements of cash flow of Smith or its predecessors for the fiscal year ended
February 28, 1995, and the seven months ended September 30, 1995; (ii) unaudited
balance sheet, statement of income, statement of retained earnings and statement
of cash flow of Smith for the fiscal year ended September 30, 1996; (iii)
unaudited selected balance sheet accounts and statements of income for the
Engineering Division for the twelve
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(12) months ended September 30, 1996; (iv) unaudited selected balance sheet
accounts and statements of income for the Engineering Division for the ten (10)
months ended July 31, 1997 (the "Interim ED Financial Statements"). Within ten
(10) days following the Closing Date, Sellers shall provide (v) final unaudited
selected balance sheet accounts ("Closing Balance Sheet") and statements of
income, retained earnings and cash flows of Sellers for the period beginning
October 1, 1996, and ending on the Effective Time (the "Closing Financial
Statements"); and (vi) final unaudited balance sheet ("Closing ED Balance
Sheet") and statements of income, retained earnings and cash flows of the
Engineering Division for the period beginning October 1, 1996, and ending on the
Effective Time (the "Closing ED Financial Statements").
(b) The Smith financial statements referred to in 2.03 have
been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied throughout the periods involved. The balance sheet
and financial statements of the Engineering Division have been prepared
consistent with the accounting principles used in preparing the financial
statements of Smith for contemporaneous periods and are representative of
stand-alone financial statements except as follows: corporate costs were not
allocated; there were no footnote disclosures; intercompany accounts were
excluded; common area maintenance was excluded; cash was excluded; shutdown
expenses for Norristown laboratory facility were excluded; $542,000 of accounts
payable was excluded in exchange for the addition of a $542,000 employment
agreement liability; legal expenses were excluded. Purchaser and Sellers have
agreed to the value for fixed assets on the Interim ED Balance Sheet, and there
shall be no post-Closing adjustment for fixed assets.
(c) Purchaser's in-house and independent accountants shall be
afforded free and full access to the non-proprietary working papers and records
used by Sellers' independent accountants and the working papers and records used
by Sellers' in-house accountants in conducting their audits and in preparing
their audited financial statements and unaudited Interim and Closing Financial
Statements. If there is a difference of opinion between the two accounting firms
as to the general acceptability of any of the accounting principles followed in
connection with preparing or reviewing the unaudited Interim or Closing ED
Financial Statements, the respective accountants shall immediately confer in an
effort to resolve such differences. If the firms are unable to resolve a
difference involving Closing Financial Statements delivered after Closing, the
difference shall be resolved by submitting the dispute to a third firm of
accountants who shall summarily decide the issue following a conference among
the three firms at which the parties' respective accounting firms shall each be
afforded the opportunity to present its position and the evidence supporting
such position.
2.04 Tax and Other Liabilities
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(a) Sellers have filed all payroll and other federal, state,
local and foreign tax returns required to be filed by them and have duly paid
the trust portion of all employee-related taxes and have duly paid or
established adequate reserves for the proper payment of all taxes and other
governmental charges which may in any way result in a Lien on or claim against
the Purchased Assets or on Purchaser's other assets or a liability or claim of
liability against Purchaser for such taxes. Except for any specifically Assumed
Liabilities for taxes, Purchaser shall incur no liability, cost or expense in
connection with Sellers' federal, state, local or employee-related taxes,
including any cost or expense arising from investigations, audits, proceedings
or actions taken by taxing authorities.
(b) Sellers have paid or will pay all Sellers' expenses, taxes
(except sales taxes), and other liabilities, resulting from the preparation of,
or the transactions contemplated by, this Agreement. These costs will not be
assumed by Purchaser except to the extent they are included on the Closing ED
Balance Sheet and expressly assumed as Assumed Balance Sheet Liabilities.
(c) Except for the Assumed Liabilities, Sellers retain and
Purchaser will incur no liability as a result of environmental conditions
associated with any acts, omissions, or real property ownership, leasing or use
by Sellers prior to the Effective Time.
2.05 Litigation and Claims
(a) Except as set forth on Schedule 2.05: (i) there is no
material litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation pending or, to the knowledge of Sellers,
threatened (or any basis therefor known to Sellers) which, if adversely
determined, could reasonably be expected to have a material adverse effect on
the Engineering Division or the Purchased Assets; (ii) within the last two
years, the Engineering Division has not been subject to any union activity or
organized labor dispute; (iii) Sellers are not in violation of, or in default
with respect to, any law, rule, regulation, order, judgment, or decree,
including any environmental laws or regulations which could reasonably be
expected to have a material adverse effect on the Engineering Division taken as
a whole. Schedule 2.05 shall set forth, among other matters, all past (previous
three years) and current material citations, violations, fines, judgments,
decrees, orders, consent decrees or orders, and pending proceedings of any type
arising out of the alleged violation of any federal, state or local criminal,
bidding or procurement, environmental, health and safety, licensing or labor law
or regulation or out of alleged deficiencies, negligence, intentionally wrongful
act or breach of contract in the performance of services known to Sellers.
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(b) Purchaser will incur no liability, loss or cost as a
result of claims, proceedings or litigation arising from Sellers' alleged acts
or omissions.
2.06 Accounts Receivable and Properties
(a) All accounts receivable and work in process of the
Engineering Division recorded on the Closing Balance Sheet are set forth on the
agings delivered in connection with the Closing Financial Statements, will have
arisen from valid transactions in the ordinary course of Sellers' business and
will be collected by Purchaser, net of reserves for uncollectible accounts,
within six (6) months of the Closing Date utilizing reasonable and customary
collection procedures (i.e. measures such as legal action, referral to outside
collection agency or mechanics lien shall not be required of Purchaser to
conform to this standard). All accounts receivable and work in process of the
Engineering Division recorded on the Closing ED Balance Sheet were fully earned
as of the Effective Time, net of the reserve for billings in excess (no account
receivable or work in process entry represents a prebilling except to the extent
an allowance is reserved for it). 4.01 sets forth certain covenants of the
parties with respect to the collection of accounts receivable.
(b) Except as disclosed on Schedule 2.06(b), each physical
asset whose value is recorded on the Closing ED Balance Sheet will be in fully
operational condition as of the Effective Time (except for normal wear and tear
which is not such as to affect their operability).
(c) Except as noted on Schedule 2.06(c), no parcel of the
Purchased Real Estate nor any property covered by any Assumed Premises Lease is
encumbered by any liability arising from the presence of Hazardous Materials or
pollutants on such property. Purchaser will incur no liability as a result of
environmental conditions associated with any Purchased Real Estate, Assumed
Premises Lease, or real property ownership, leasing or use by Sellers prior to
the Effective Time.
2.07 Contracts and Other Instruments
(a) The Customer Contracts delivered at Closing pursuant to
1.01(a)(5) are all of the Customer Contracts of the Engineering Division.
Schedule 2.07(a) or the other schedules to this Agreement set forth a true and
correct listing of all material contracts, other than Customer Contracts and
contracts with subcontractors, to which any Seller is a party for the use or
benefit of the Engineering Division, including material leases and licenses and
all supply, distribution, agency, financing or other arrangements and
understandings. Any of the foregoing not
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disclosed on the other schedules to this Agreement are listed on Schedule
2.07(a). For purposes of this 2.07(a) only, "material contract" means a
contract, including Customer Contracts, which provides for the provision or
purchase of goods or services in excess of $20,000 per annum or requires
performance by Seller for a period of more than twelve months. With respect to
Customer Contracts, "material arrangement or understanding" includes any
relationship between Seller and any customer or group of related customers,
whether formalized by binding written contract or not, from which Sellers
derived more than $50,000 in the twelve months preceding the Closing Date.
Neither Sellers nor, to Sellers' knowledge, any other party to any material
contract, agreement, instrument, lease, or license is now or is expected by
Sellers as of Closing to be in the future in violation or breach of, or in
default with respect to complying with, any material provision thereof, and to
Sellers' knowledge, each such material contract, agreement, instrument, lease,
or license is in full force and is the legal, valid, and binding obligation of
the parties thereto and is enforceable as to them in accordance with its terms,
except as disclosed on Schedule 2.07(a). Neither any Seller nor, to Sellers'
knowledge, any other party to any material contract, arrangement or
understanding has given notice of termination or taken any action inconsistent
with the continuance of such material contract, arrangement or understanding.
(b) Except for situations disclosed on Schedule 2.07(b) and
for the cost of correction of which an adequate reserve is or will be recorded
on the Closing ED Balance Sheet as a liability: all services rendered and
products supplied by the Engineering Division prior to the Effective Time have
been in conformity with the scope of performance defined by the contract or
arrangement, and to the reasonable satisfaction of the customer; no curative or
corrective work, replacements or payments are necessary to render such
performance legally or contractually sufficient; and all costs for performance
completed prior to Closing shall have been duly recorded as liabilities on the
Closing ED Balance Sheet. Billings by Sellers on each Customer Contract to be
acquired by Purchaser as a Purchased Asset shall not, as of the Effective Time,
have constituted a greater percentage of total allowable billings under such
contract than the percentage of work performed prior to the Effective Time shall
have constituted of total work to be performed under such contract.
(c) Sellers enjoy peaceful and undisturbed possession under
all Assumed Premises Leases and licenses under which the Engineering Division is
operating. No Seller is a party to or bound by any contract, agreement,
instrument, lease, license, arrangement, or understanding, or subject to any
charter or other restriction, which, to the knowledge of Sellers, could
reasonably be expected to have a material and adverse affect on the Purchased
Assets or the operations or business of the Engineering Division. Sellers have
no contract, agreement, lease, license, arrangement, or
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understanding related to, or which could reasonably be expected to have a
material adverse effect upon, the Purchased Assets or Purchaser's title thereto
or the operations of the Engineering Division with, any shareholder, any
director, officer, or employee of any Seller, or any other corporation or
enterprise in which any Seller, or any shareholder, any director, officer, or
employee of any Seller, has a five percent (5%) or greater equity or voting or
other substantial interest, other than such contracts and agreements as so
listed and specified on Schedule 2.07(c). There exists no contract, agreement,
right or understanding material to the business of the Engineering Division
which is in the name of any principal, officer, director, shareholder or any
other person or entity other than a Seller except as disclosed and so identified
on Schedule 2.07(c).
(d) The backlog schedule provided as Schedule 1.01(a)(12) is
correct to Sellers' knowledge as of the Effective Time, and, to Sellers'
knowledge, the backlog items listed on such schedule all represent actual
commitments by customers for the performance of services by the Engineering
Division which are either actual contractual commitments or actual written or
verbal communications of commitment received by a Seller from the customers to
hire a Seller for the performance of such services in such amounts as are shown
on the schedule.
2.08 Employees and Employee Liabilities
Except for the Assumed Liabilities and as provided in 4.04
hereof, Purchaser will not incur any liability to any governmental authority, to
any third person (including employee benefit plans of Sellers or to or on behalf
of Sellers' employees, any of which arise out of the employees' employment with
Sellers, out of the employees' participation in any employee benefit plans of
Sellers or out of Sellers' acts or omissions (as distinguished from Purchaser's
acts or omissions, including without limitation its decision to hire or not hire
any particular employee of Sellers), including (but not limited to) any
liability: under ERISA or the Internal Revenue Code; for obligations to, or
arrangements with employees for wages, salary, bonuses, incentive compensation,
vacation pay, severance pay, insurance, or other benefits; for employee-related
taxes; for personal injury or property damage; or for discrimination,
harassment, or wrongful discharge under federal, state or local laws.
2.09 Patents, Trademarks, Copyrights, etc.
Sellers neither own, nor have pending or are licensed under
any patent, patent application, trademark, trademark application, trade name,
service mark, copyright, franchise, or other intangible property or asset used
by or sold or licensed to others by the Engineering Division and material to the
Engineering Division's operations ("Intangibles"), other than as described in
the
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Schedules to 1.01(a) or on Schedule 2.09, all of which are in good standing
and uncontested. Except as disclosed on such schedules, no person other than
Sellers owns any interest in any such Intangible.
2.10 Questionable Payments and Activities
Except to the extent assumed as an Assumed Liability,
Purchaser will not be subject to any action, proceeding or liability or any
debarment or other limitation on bidding or contracting and will not incur any
costs in connection with ethics or contractor integrity rehabilitation programs
as a result of any investigation or proceeding by a governmental agency based
upon any bribe, ethics violation, or improper conduct by Sellers or persons for
whose acts or omissions Sellers are responsible.
2.11 Authority to Sell
Sellers have all requisite corporate power and authority to
execute, deliver, and perform this Agreement. All necessary corporate
proceedings of Sellers, including all shareholder notice and approvals required
by law or the certificates or articles of incorporation or by-laws of Sellers,
have been or as of the Closing Date will have been duly taken to authorize the
execution, delivery, and performance of this Agreement by Sellers. This
Agreement has been duly authorized, executed, and delivered by Sellers,
constitutes the legal, valid, and binding obligation of Sellers, and is
enforceable as to them in accordance with its terms, except as enforceability
may be limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditor's rights generally. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing with, any
governmental authority, court or other tribunal or entity or individual is
required by Sellers for the execution, delivery, or performance of this
Agreement by them. The execution, delivery, and performance of this Agreement
will not materially violate or result in a breach of any term of the certificate
of incorporation, by-laws or other charter document of any Seller or violate,
result in a breach of, or conflict with any law, rule, regulation, order,
judgment, or decree binding on any Seller or to which any of their operations,
business, properties, or assets are subject.
2.12 Fictitious Names
Schedule 2.12 sets forth each fictitious name utilized by
Sellers within the past two years.
2.13 Absence of Undisclosed Liabilities
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Except as set forth in the schedules to this Agreement or the
Closing ED Balance Sheet, Sellers have no obligations or liabilities of any
kind, fixed, accrued or contingent which would materially affect the value of
the Purchased Assets or Purchaser's title to the Purchased Assets or the
business associated therewith.
2.14 Assets Free and Clear of Liens
Except as set forth on Schedule 2.14, Sellers have, prior to
Closing, good title to all of the Purchased Assets, free and clear of all liens,
mortgages, security interests, pledges, charges, encumbrances, shareholders'
agreements, or claims (collectively, "Liens"). Except for the Assumed
Liabilities or as set forth on Schedule 2.14, at Closing the Purchased Assets
will be free and clear of all Liens, and Sellers will have procured and
delivered at or prior to the Closing proof of release and satisfaction of each
and every Lien which is not assumed as an Assumed Liability or, but only to the
extent that Purchaser consents in writing thereto at or prior to Closing,
Sellers will have procured the written agreement of the holder of any such Lien
to so release its Lien(s) as soon as the preparation and filing of the release
can be completed, not to exceed ten (10) days after the Closing. Upon the
Closing, Purchaser will have good title to the Purchased Assets, free and clear
of all Liens except those expressly assumed as Assumed Liabilities.
2.15 Hazardous Materials - Lab and Field Samples
Prior to the Effective Time, Sellers have disposed of or moved
to locations which are not Assumed Premises Leases or Purchased Real Estate: (i)
all hazardous substances, pollutants or contaminants (as those terms are defined
in 42 U.S.C. 9601 or under any similar, applicable state or local law); (ii) all
petroleum wastes; (iii) all asbestos-containing materials, except for those
incorporated in building materials in premises; (iv) all obsolete, discarded or
off-specification laboratory or other commercially packaged chemicals or nuclear
source materials (but not unconsumed laboratory chemicals, nuclear source
materials which are components of equipment or other commercially packaged
supplies conveyed as Purchased Assets and currently used in the Engineering
Division's business); and (v) all laboratory or field samples upon which work
has been completed prior to Closing (collectively "Hazardous Materials"). The
foregoing warranty applies to all Hazardous Materials which, if not so disposed
of or moved (vi) would be located in or on the Purchased Real Estate or in
premises to be assumed by Purchaser under the Assumed Premises Leases or (vii)
would be in the possession of the Engineering Division; or for which (viii) the
Engineering Division could be held responsible for the care, custody or
disposal.
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III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Sellers to enter into this
Agreement, Purchaser represents and warrants as follows:
3.01 Organization and Good Standing
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and duly qualified
to engage in business in the state of Pennsylvania, with full power and
authority to enter into and perform each of the transactions contemplated by
this Agreement.
3.02 Execution and Performance Authorized
This Agreement and all other documents and agreements
contemplated hereunder have been duly executed and delivered by the Purchaser,
such execution and delivery and the consummation by Purchaser of the
transactions contemplated hereunder have been duly authorized by all necessary
corporate action, and no further action is required by law, its corporate
charter, by-laws or otherwise to authorize all action to be taken by Purchaser
with respect to this Agreement and the consummation of the transactions
contemplated hereunder. The Agreement and the other documents contemplated
hereunder are binding and are enforceable against Purchaser in accordance with
their terms, except as enforceability may be limited by applicable equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting the enforcement of creditors' rights generally.
3.03 Absence of Litigation
Except as set forth on Schedule 3.03, there is no action,
lawsuit, proceeding or investigation of any kind or nature pending or threatened
against Purchaser before any court, tribunal or administrative agency or board
which might, individually or in the aggregate, materially and adversely (i)
affect Purchaser's solvency or its ability to perform hereunder, or (ii) render
any one or more of the transactions contemplated hereunder void or voidable.
3.04 No Other Default
The execution and delivery of this Agreement by Purchaser and
the consummation of the transactions contemplated hereunder will not conflict
with or violate or require any consent under and will not result in any breach
or termination of Purchaser's corporate articles, by-laws or minutes or any
agreement to which Purchaser is a party or by which any of its property is
subject or by which it is bound, except for the agreements set forth on Schedule
3.04 for which Purchaser has obtained such waivers or consents as are required
by such agreements.
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3.05 Permits and Filings
There is no requirement applicable to Purchaser to make any
filing with, or to obtain any permit, authorization, consent or approval of any
third party or any governmental or other regulatory authority as a condition of
the lawful consummation of the transactions contemplated under this Agreement.
3.06 Absence of Lien
Except for the conditions specified elsewhere in this
Agreement, the monies to be paid by Purchaser under 1.01 shall be paid by
Purchaser and received by Sellers free and clear of any lien, charge or
encumbrance arising out of any agreement or instrument to which Purchaser is
subject or by which their properties are bound.
3.07 Solvency
At the Closing and after payment of the purchase price as
required under 1.01, Purchaser will be and will remain solvent under all
applicable federal and state laws and regulations. Purchaser also agrees that it
will not intentionally cause its business to be conducted in a manner that
results in its becoming insolvent; provided, however, that consistent with the
foregoing, this covenant shall not restrict the future business decisions of
Purchaser which relate to the Purchased Assets or the business associated
therewith.
3.08 Corporate Documents
Purchaser has furnished to Sellers its certificate of
incorporation and a certificate of good standing in Delaware and a good standing
certificate evidencing Purchaser's qualification as a foreign corporation in
good standing in Pennsylvania, each dated within thirty (30) days of the
Closing.
3.09 Disclosure of Discovered Facts
Prior to Closing, Purchaser shall have disclosed to Sellers
the existence of any facts discovered by Purchaser in the course of its due
diligence which would render any of Sellers' representations or warranties
materially untrue as of Closing.
IV. COVENANTS
In addition to the other covenants of this Agreement, Sellers
and Purchaser agree as follows:
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4.01 Collection of Accounts Receivable
(a) In the event that any account receivable or work in
process which is a Purchased Asset and subject to 2.06(a) has not been collected
by Purchaser within six (6) months, Purchaser may deem such account receivable
or work in process to be uncollectible and transfer such account receivable or
work in process to Sellers by written notice within seven (7) days after the end
of such six (6) month period. Accounts or work in process may also be deemed
uncollectible by agreement of the parties as provided in 4.01(c) and shall
thereupon be transferred to Sellers. Purchaser may recover from the Sellers the
amount of any such uncollected accounts and work in process, net of the reserve
for such purpose on the Closing ED Balance Sheet, by set-off against the Note
under 1.04.
(b) Purchaser shall provide Sellers with a monthly aging
report of the purchased accounts receivable and work in process together with
contact log summary of problem accounts. If at any time Purchaser determines
that measures in addition to Purchaser's customary collection procedures (e.g.
measures such as mechanics lien, legal action or referral to collection agency)
should be employed on a specific account to obtain collection, Purchaser shall
notify Sellers in writing of the measures proposed to be taken. If Sellers agree
in writing that the proposed extraordinary measures should be taken or if
Sellers themselves deem such action to be necessary without notice from
Purchaser, Sellers shall notify Purchaser in writing of their agreement to such
measures. Sellers' agreement to the taking of extraordinary collection measures
shall constitute their agreement to having the reasonable cost of such measures
actually incurred, first charged against the reserve for uncollectible accounts
and the excess, if any, set off under 1.04.
(c) At any time the parties may by mutual written agreement
deem an account uncollectible, Purchaser shall re-assign it to Sellers and
charge it off of available reserves and set off the excess, if any. Purchaser
shall not unreasonably deny such request. Such request by Sellers for
reassignment shall constitute Sellers' agreement to a reduction in the reserve
for uncollectible accounts by such amount or, to the extent that the remaining
reserve balance is thereby exceeded, to a set-off in such excess amount, which
Purchaser shall exercise at the time of its payment on the Note.
(d) Purchaser agrees to use its best efforts to bill all work
in process which is a Purchased Asset as soon as is possible under the contract
giving rise to the work in process and within the administrative capabilities of
Purchaser in the transition after Closing. Within 30 days after Closing,
Purchaser shall deliver an opening ledger of work in process billings which
documents amount billed on each account, amounts charged off as unbillable and
amounts for which billing is not yet possible or has not yet been completed.
Within 10 days after its receipt of such ledger, Sellers shall object to any of
Purchaser's determinations that all
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or a portion of any work in process account is not billable or is not yet able
to be billed.
(e) The parties agree to confer in good faith to resolve any
disputes concerning the covenants set forth in 4.01, and if a dispute cannot be
so resolved, to follow the procedure set forth in 2.03(c) for resolution of
disputes involving accounting issues to determine the matter.
4.02 Public Statements
Before Sellers or Purchaser shall release any information
concerning this Agreement or the transactions contemplated by this Agreement
which is intended for or may result in public dissemination thereof, they shall
cooperate with the other party hereto and shall furnish drafts of all documents
or proposed oral statements for comments, and shall not release any such
information without the written consent of the other party hereto. Nothing
contained herein shall prevent Purchaser or Sellers from making any release or
furnishing any information if required to do so by law or regulation, but even
in such case, the other party shall be given notice of the release and an
opportunity to comment on the contents.
4.03 Non-Competition
(a) In consideration of the payments to be made and the
Purchaser's other covenants hereunder, Sellers agree to strictly abide by the
following covenants. Sellers agree that for a period of two (2) years after
Closing, they will not:
(1) Non-Competition. Within the regulated zone, either
directly or indirectly, perform for hire services in the same fields in
which the Engineering Division has been engaged or own, or participate
in, be employed by, or serve as a consultant or other agent or
contractor to or for any business or enterprise, other than Purchaser,
engaged in such fields of services in which the Engineering Division
has been engaged, without the express written consent of Purchaser. The
"regulated zone" means all area within one hundred miles of the city
limits of an Engineering Division office as listed in 1.01(a) during
the year prior to Closing. The "fields in which the Engineering
Division has been engaged" means the service types and functions with
respect thereto performed by the Engineering Division within the two
(2) year period prior to Closing, including (but are not necessarily
limited to) the functions set forth in 1.01(a). Notwithstanding the
foregoing, Sellers shall not be precluded from performing the following
services in the regulated zone: (i) turn-key remediation design and
construction contracts; or (ii) after giving at least five (5) days
prior written notice to Purchaser, sole source contracts for clients
which were, prior
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to Closing, clients of the Sellers' operations other than the
Engineering Division and were not actively solicited by Sellers for
such contract in violation of (4) (i.e. the client was the initiator of
the request for Sellers to perform such services on a sole source
basis). Furthermore, in the event of an acquisition by any of the
Sellers of, the acquisition of any of the Sellers by, or a merger of
any of the Sellers with another entity providing services in the fields
in which the Engineering Division has been actively engaged
(individually or collectively "M&A Transaction"), nothing herein shall
prevent the Sellers or such entity from continuing to provide such
services in the regulated zone, provided that to the extent that the
acquired or acquiring entity does not maintain an office within the
regulated zone as of the closing of such M&A Transaction, neither the
Sellers nor any such entity shall establish an office within the
regulated zone within the two (2) year period following Closing.
(2) Non-Disclosure. Use for their benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit
of, any person, firm, association or company other than Purchaser or
its affiliates, any information regarding the business methods,
business policies, procedures, techniques, research or development
projects or results, trade secrets, customers or clients or any other
confidential information relating to or dealing with the business
operations of the Engineering Division. The covenants in this clause
(2) shall not apply to (i) information that is generally known in the
industry, (ii) information that is in the public domain not as a result
of the violation of the Sellers' undertakings herein, or (iii) any
disclosure or use required by law or court order.
(3) Non-Solicitation - Employees. Either directly or
indirectly, for themselves or any person or entity other than
Purchaser, hire, or induce or attempt to influence to terminate his
employment, any employee or former employee of the Engineering Division
to which Purchaser extended an offer of employment conforming to 4.04.
An "employee" shall be considered a "former employee" for a period of
one (1) year following termination of employment with the Engineering
Division, Purchaser or Purchaser's subsidiaries or affiliates.
(4) Non-Solicitation - Customers. Directly or indirectly on
behalf of themselves or any third party, make any sales contact with,
or solicit or accept business from, any customer or prospective
customer of the Engineering Division for the purpose of securing a
commitment from such customer or prospect to purchase services in the
fields in which the Engineering Division has been engaged, unless such
customers were also customers of any entity involved in M&A Transaction
with Sellers.
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(5) Use of Names. Except for the benefit of Purchaser or its
subsidiaries or affiliates, use the names included as Purchased Assets
by 1.01(a)(7).
(b) Except as otherwise defined in this section or as the
context otherwise plainly requires, terms used in this section shall have the
same meaning as elsewhere in this Agreement. Undefined terms shall have their
ordinary meaning.
(1) The term "participate in" means "directly or indirectly,
for their own benefit or for, with, or through any other person or
entity, own, manage, operate, control, loan money to, give money to, or
participate in the ownership (except as a non-controlling owner of less
than 5% of the stock of a publicly-held corporation), management,
operation, or control of, or be connected as a director, officer,
employee, partner, consultant, agent, independent contractor, or
otherwise with, or acquiesce in the use of their names in."
(2) The term "customer" means any entity with whom Sellers had
entered into a contract or engagement, either written or oral, for the
performance of a service by the Engineering Division or from whom
Sellers recorded revenue for Engineering Division services, within the
two (2) year period prior to Closing.
(3) The term "customer prospect" means any person or entity
who had a potential need for services of a type provided by the
Engineering Division (i) to whom Sellers submitted a written proposal
for either specific services by the Engineering Division or for a
master or general services arrangement with the Engineering Division
within the two (2) years prior to Closing or (ii) with whom the
Engineering Division, within the two (2) years prior to Closing,
developed or maintained a business relationship or about whom Sellers
acquired knowledge of its desire to purchase Engineering Division
services.
(4) The term "indirectly" includes, but is not limited to,
means such as acting through or on behalf of, assisting, arranging,
encouraging, making a loan or gift to, owning or having an ownership
interest in (except for passive investments in publicly traded
securities of less than five percent of the outstanding voting stock
of) or entering into a partnership or similar arrangement with.
(5) The term "turn-key" means a contract where the contractor
is required by the terms of the contract to undertake all of the
services of design and construction of a remediation system as a
condition of entering into the contract.
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(6) The term "sole source" means a contract which is awarded
to Sellers on the basis of a relationship which pre-existed the
decision to award such contract to Sellers and which was offered to
Sellers alone because of such relationship on a non-competitive basis.
(c) Sellers agree that the restrictive covenants of this 4.03
are reasonable in scope and duration and are necessary to protect the bona fide
confidential business information purchased by Purchaser from Sellers and to
protect the value for Purchaser of the Purchased Assets, the associated good
will, and Purchaser's employee, customer and business relationships. Sellers
agree that the Engineering Division has either had offices or has actively and
substantially performed services throughout the entire United States and that
the regulated zone limiting the applicability of (a) hereof is therefore a
necessary and reasonable coverage area. Sellers expressly agree that the
customer list and other customer and business information purchased by Purchaser
as Purchased Assets are proprietary, and they agree that a breach of any of
these provisions will cause immediate and irreparable harm for which money
damages alone will not be an adequate remedy and that Purchaser shall have
available to it, in addition to any other remedies available by law, equitable
remedies, including the remedies of specific performance, preliminary injunction
and injunction, to compel performance of and to enjoin the breach or threatened
breach of the provisions of this section, without the necessity of proof of
immediate and irreparable harm and of providing any injunction bond.
(d) If any restrictive covenant contained in this 4.03 shall
be deemed by a court or arbitrator to be invalid, illegal, or unenforceable
under the laws of any jurisdiction by reason of the extent, duration, or
geographical scope thereof or otherwise, the balance of this section shall
remain in effect in such jurisdiction and the entire agreement shall remain in
effect in all jurisdictions in which such provision is lawful and enforceable.
If any such provision is unenforceable as to any circumstance, it shall
nevertheless remain applicable to all other circumstances. Sellers and Purchaser
agree that the court or arbitrator shall be authorized to reform such provision
by reducing such extent, duration, geographical scope, or other provision
hereof, or otherwise modifying or limiting such provision to the minimum extent
necessary to render such provision enforceable, and in its reformed form such
restriction shall be enforceable in the manner contemplated hereby.
4.04 Hiring of Engineering Division Employees
(a) Effective as of the Closing, the Purchaser shall offer
employment, on an "at will" basis, at their then current rates of base pay and
employment status to all employees who are employed by the Sellers in the
Engineering Division listed on Schedule 4.04
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("Offerees"). Such Offerees who accept employment with the Purchaser shall be
referred to herein as the "Hired Employees." Purchaser shall provide the Hired
Employees the same benefits and benefit options, including health insurance
coverage, provided to the other employees of Purchaser. Purchaser's health plan
shall not impose any limitation or exclusion with respect to any pre-existing
condition that affects coverage for the Hired Employees or their spouses or
dependents, and Purchaser shall make such coverage available to all of the Hired
Employees, spouses and dependents who were eligible as of the Closing Date to
receive such coverage under Sellers' plan. In addition, Purchaser shall provide
to the Hired Employees the same benefits provided to Purchaser's other
employees. Subject to the preceding two sentences, Purchaser may modify, alter
or terminate any of the terms and conditions of employment of the Hired
Employees. Nothing in this Agreement shall prevent the Purchaser from
terminating the employment of any Hired Employee at any time after the Closing
Date. Purchaser represents to Seller that it does not intend to implement a
"plant closing" or a "mass layoff", as those terms are defined in the Worker
Adjustment and Retraining Notification Act ("WARN"), in respect of the
Engineering Division within 150 days after the Closing Date. Purchaser further
agrees to assume responsibility for giving any and all notices required by WARN
and to assume liability for any alleged failure to give a WARN Notice.
(b) The Sellers agree to cause the release of the Hired
Employees from any contractual provision with the Sellers which would impair the
utility of such employees' services to Purchaser or which would impose upon such
employees any monetary or other obligation to the Sellers which otherwise would
be occasioned by the termination of such employees' employment or relationship
including, without limitation, any agreements of noncompetition or
confidentiality.
(c) At the Closing, Purchaser shall assume all liabilities of
Sellers to the extent included in the Assumed Balance Sheet Liabilities relating
to the payment of all accrued but unpaid overtime, vacation and holiday pay,
sick pay and short-term disability pay of the Hired Employees, regardless of
whether such individuals are actively at work on the Closing Date or are on a
leave of absence. For purposes of this Agreement the term "leave of absence"
shall include medical leave of absence, military leave of absence and workers'
compensation leave of absence. Effective as of the Closing Date, Purchaser shall
assume liability for all post-Closing claims (including, without limitation,
claims arising under the health care continuation coverage requirements of
Section 4980B of the Code and Sections 601 through 608 of ERISA) which are
properly payable with respect to the Hired Employees under each of Purchaser's
benefit plans, including without limitation, all life insurance, medical,
dental, accident and disability plans, programs, policies or arrangements.
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(d) Purchaser shall offer all Hired Employees the option to
participate from and after the Closing Date in Purchaser's 401(k) plan
("Purchaser's Plan") on the same terms as Purchaser's other employees. Purchaser
shall permit all Hired Employees who were participants in the Smith
Environmental Technologies Corporation Profit-sharing and 401(k) Plan ("Sellers'
Plan") as of the day immediately preceding the Closing Date to roll over their
shares in Sellers' Plan into Purchaser's Plan. Purchaser's Plan shall, for
purposes of vesting and eligibility, recognize all service of Hired Employees
that was recognized under Sellers' 401(k) Plan as of the day immediately
preceding the Closing Date.
(e) Following the Closing Date, the Sellers shall take such
action as may be necessary to cause the account balances of all Hired Employees
in the BCM Engineers Inc. Employee Stock Ownership and Profit Sharing Plan to be
distributed pursuant to the terms of such plan, and Purchaser shall permit Hired
Employees to roll over such distributions into Purchaser's Plan to the extent
such rollover is allowable under Purchaser's Plan.
4.05 Transaction Costs and Expenses
Except as otherwise expressly agreed herein, Sellers and
Purchaser shall each bear and pay all of their respective costs, fees, expenses
and taxes incurred in connection with bringing about this transaction including,
without limitation, all legal, accounting, auditing and appraisal fees in
negotiating and preparing the documents and in consummating, closing and
carrying out the transactions contemplated hereby. Any costs to be charged to
the Engineering Division shall be included on the Closing ED Balance Sheet.
4.06 Information, Books and Records
(a) Each party shall provide to the other, with reasonable
promptness following a request in writing (not to exceed ten (10) business
days), such information and data with respect to the Engineering Division
business before the Effective Time and/or the Purchased Assets as may from time
to time be requested by the other party. In the event either Purchaser or
Sellers are required or desire to prepare audited statements for any reasonable
purpose including the desire to verify any information provided to the other
party relative to this Agreement or in connection with future financings or
transactions desired by either party, the parties agree to allow the other party
reasonable access to documents and records, including the non-proprietary
working papers of the other party's accountants, subject to standard hold
harmless agreements which may be required by such accountants, and to provide
reasonable cooperative assistance in the preparation of reports, documents, etc.
(including the signing of management representation letters and the like)
without charge except for reimbursement of any actual, out-of-pocket expenses,
exclusive of the cost of in-
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house staff time. Notwithstanding the foregoing, in the event that a party is or
anticipates becoming a party to litigation, neither this 4.06 nor any other
provision of this Agreement shall be construed to require such party to provide
information to the other which could prevent such party from making a bona fide
claim of attorney/client privilege or such other privileges as may be applicable
with respect to such information.
(b) Neither party shall intentionally dispose of or destroy
any of the Records in its possession except in conformity with the procedures
set forth in this section. If a party wishes to dispose of or destroy any of
such Records, it shall first give thirty (30) days prior written notice to the
other party of the action it intends to take, and the other party shall have the
right, at its option and expense, upon prior written notice to the notifying
party within such 30-day period, to take possession of such affected Records
within 30 days after the date of the notice of intent to take possession.
(c) Each party shall exercise reasonable care in the care,
custody and maintenance of the Records and records of Sellers pertaining to the
Engineering Division or the Purchased Assets in its possession. A party shall be
responsible for actual damage caused to the other party only as a result of its
intentionally wrongful act in maintaining the records. Neither party shall have
liability to the other party or any other person as a consequence of the
nonexistence of any record or such party's inability to locate any record unless
the loss or destruction of the record is proven, by clear and convincing
affirmative evidence, to have been due to the allegedly possessing party's
intentionally wrongful act.
4.07 Addresses, Mail and Deliveries
Purchaser shall have the right to receive and open for
inspection any mail or deliveries received at any of its offices, including any
office that is an Assumed Premises Lease, which is addressed to any name in
which the Engineering Division did business prior to Closing or to any person
who was an employee or former employee of the Engineering Division or which
otherwise reasonably appears to potentially contain Purchased Assets or
correspondence or documents which would customarily be received by the owner of
the Purchased Assets unless it is clear from the envelope that the contents
relate to the business of Sellers other than the Engineering Division or are
personal in nature. Purchaser and Sellers agree to cooperate in good faith to
achieve the prompt delivery to each other of mail and deliveries, to use their
best efforts to avoid opening mail or deliveries which rightfully belong to the
other and to turn over to the other any property, including checks or money,
belonging to the other within three (3) days after determining its rightful
ownership. Purchaser shall have the exclusive right to apply for change of
address, change of telephone numbers or location of telephone numbers applicable
to
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the purchased names or Purchased Assets. Sellers agree to execute and return
to Purchaser within three (3) days after receipt thereof such assignment or
consent forms as Purchaser requests to effect such changes of address, telephone
number location or telephone numbers.
4.08 Related Agreements
Sellers and Purchaser each agree to execute and deliver at
Closing the Related Agreements to which they are a party referenced in 5.01.
4.09 Assignment of Agreements - Benefits of Ownership to be
Provided Where Assignment or Novation Not Possible
(a) Sellers shall use their best efforts to attempt to secure
(and to assist Purchaser in securing) all consents and approvals required to
effect the assignment of the Customer Contracts and other agreements to be
transferred to Purchaser hereunder. Use of best efforts shall not require
Sellers to pay funds to third parties for their agreement to provide such a
consent. Sellers agree that, upon the written request of Purchaser, they will
execute and return to Purchaser each and every assignment, consent to assignment
or novation, or other document reasonably necessary to effect the transfer or
execution of any Customer Contract or other contract, asset or benefit to be
conveyed hereunder within two (2) business days after receipt of such document.
Sellers' covenant in this regard shall be absolute and not subject to any right
of non-performance for any reason, including breach by Purchaser, and Sellers
expressly acknowledge and agree: (i) that this covenant is of critical
importance to Purchaser; (ii) that its breach will cause Purchaser immediate and
irreparable harm for which money damages alone will be difficult of
ascertainment and inadequate; and (iii) that in the event of a breach hereof,
Purchaser shall be entitled to immediate equitable relief in the form of an
emergency, preliminary injunction or decree on a summary basis for specific
performance or mandatory injunction without any requirement for the posting of
any bond or undertaking or proof of immediate and irreparable harm.
(b) Sellers agree that, as of the Closing Date, they will
appoint and authorize one or more persons to execute after Closing assignments,
novations, consents to assignment and other documents necessary to effect the
transfer of contracts, the Purchased Assets or the benefits thereof to Purchaser
in cases where such documents, in addition to those executed and delivered at
Closing, are required by a customer, a title registration officer or other third
party as a condition of permitting the transfer or conferring the benefit.
Sellers shall provide such persons the corporate seals of Sellers to be used for
the purpose of executing transfer documents. Sellers will promptly notify
Purchaser in writing of any changes
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from time to time in the identity of the persons so authorized. If the persons
appointed under this section are employees of Purchaser or its affiliate,
Purchaser shall indemnify Seller pursuant to 1.03 for any damage caused to
Sellers as a result of such appointed persons' acts or omissions.
(c) With respect to any Customer Contract, Subcontract or
Assumed Liability which Sellers and Purchaser are not able to promptly obtain a
consent to assign or novate, which are otherwise not capable of assignment or
novation or which Purchaser is precluded from performing on a stand-alone basis
because of a transitional licensing issue, Purchaser shall nevertheless be
deemed to be entitled to all beneficial interest in such Customer Contract,
Subcontract, or Assumed Liability as against Sellers, and Sellers shall use
their best efforts to: (i) subcontract such Customer Contract or Assumed
Liability to Purchaser on the same terms and conditions as the original (except
that Sellers shall retain all pre-closing liability as provided in 1.02 except
as assumed as an Assumed Liability); and/or (ii) cooperate in any reasonable and
lawful arrangement to provide to the Purchaser all the benefits of such Customer
Contract or Assumed Liability, such as (but not limited to) re-hiring such of
Purchaser's employees on a part-time, temporary basis as are necessary to
perform such contractual obligations on Purchaser's behalf, provided Purchaser
pays all Sellers' direct costs and expenses associated with such re-hiring and
work and assumes and indemnifies Sellers against all direct costs and liability
associated with such re-hiring and performance of services. Similarly, Purchaser
shall cooperate with Sellers to ensure that Sellers receive the benefit of the
assumption of the Assumed Liabilities by Purchaser.
(d) Sellers hereby grant to Purchaser a one-year limited
license to use the names "Smith Technology Corporation," "Reidel Environmental
Services Inc.," and "Canonie Environmental Services Corp." on a transitional
basis to enable Purchaser to use, obtain the benefits from (including payment),
and effect the transfer of, the Purchased Assets. Sellers authorize Purchaser to
endorse checks payable to any of these names where the check is delivered in
payment of amounts due under a Customer Contract, an account receivable or work
in process, any deposit, bond, bond collateral, proceeds, refund, or prepaid
expenses which are Purchased Assets. Purchaser agrees to strictly restrict its
use of such names to the minimum extent necessary to achieve the purposes set
forth in this section. Purchaser shall not conduct any sales or marketing
activities under such licensed names. Purchaser agrees to indemnify Smith
pursuant to 1.03 for Third Party Claims against Sellers arising from Purchaser's
use of such names or for any breach by Purchaser of the limitations on use
contained in 4.09(d).
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4.10 Reserves and Allowances
To the extent such reserves or allowances are assumed as
Assumed Balance Sheet Liabilities, Purchaser shall be obligated to make payments
or reimbursements to or on behalf of Sellers for amounts recorded on the Closing
ED Balance Sheet as reserves or allowances for anticipated expenses or
liabilities. Such payments shall be paid by Purchaser up to the recorded amount
of the reserve or allowance upon presentation of vendor invoices or proof of
payment approved in writing by a person designated by Sellers in writing as
authorized to submit invoices for such purpose on Sellers' behalf. Purchaser
shall have no liability to Sellers as a result of paying any expense so
approved. Purchaser's payment or reimbursement of expenses covered by Seller's
reserves or allowances which are Assumed Balance Sheet Liabilities shall not be
construed as any indication whatsoever that Purchaser has assumed liability for
Sellers' debts, liabilities or administrative responsibility, either for the
specific class covered by such reserve or in general, beyond the amount of the
recorded reserve except as such are themselves assumed specifically as Assumed
Liabilities.
4.11 Standard Rates
Whenever any goods or services are provided or procured by
Sellers or Purchaser to correct or remedy the other party's breach, default, or
deficiency of performance under any representation, warranty, or covenant of
this Agreement, such goods or services shall be valued at Purchaser's or
Sellers' Standard Rates, respectively. "Standard Rates" means the rate which
Purchaser or Sellers would charge an ordinary commercial customer for the
particular class of services being performed or the retail market price for
goods supplied. Such rates shall not exceed the rates which similar firms would
charge for such goods or services in the location in which they are being
delivered.
4.12 Insurance after Closing
Sellers shall either: (i) for a three (3) year period after
Closing, maintain in full force and effect, and timely pay all premiums on, each
policy of insurance in effect prior to Closing which was written on a claims
made basis or procure other policies of equal coverage and financial strength
covering such three (3) year period in order to ensure coverage for a three year
period of claims or losses arising from Sellers' alleged professional or other
acts, omissions and negligence; or (ii) prior to the Closing or prior to the
expiration of any policy referred to in (i), procure an extended reporting
period under such policy which shall not expire sooner than the date three (3)
years after the Closing Date. Such insurance shall have limits of not less than
$2,000,000 per occurrence and $5,000,000 in the aggregate with a deductible not
to exceed $150,000. Purchaser shall be named as an additional
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insured under each such policy. At Closing and thereafter, Sellers shall deliver
certificates evidencing the continuing existence and adequacy of the insurance
required by this section and, on request by Purchaser, a copy of each such
policy.
4.13 Successor Payroll Issues
Purchaser shall be the successor employer to Sellers, with
respect to the Hired Employees, for purposes of post-Closing FICA taxes and
reporting, FUTA taxes and reporting, and corresponding state payroll laws and
regulations. Purchaser agrees to perform the obligations of a successor employer
for such taxes and reporting purposes and will indemnify, defend and hold
Sellers harmless from and against any and all liabilities or obligations arising
out of Purchaser's election to be treated as a successor employer for such
purposes or its failure to perform or properly perform all of Purchaser's
obligations as a successor employer of Sellers for the purposes set forth in
this section, including but not limited to completing accurately and completely
all Forms 941, 940, W-2 and W-3 related to obligations accruing after Closing
required of Purchaser in its status as successor employer. Sellers shall perform
such obligations for pre-Closing accruals. This section shall not be construed
to imply that Purchaser is liable as a successor employer or otherwise as a
successor to Sellers for any purpose except for the limited purposes set forth
in this section.
4.14 Unrecorded Payables
The parties anticipate that Sellers will incur trade payables
in the ordinary course after Closing which relate to goods delivered to or
services performed for the Engineering Division prior to Closing but which were
not recorded on Schedule 1.01(b)(5) and the Interim ED Balance Sheet because of
non-receipt of invoice or delay in Sellers' internal routing and recording of
such payables. Sellers agree that prompt payment of certain of accounts payable
that are from utility services (including telephone) or from vendors,
subcontractors or suppliers of direct materials related to purchased accounts
receivable or work in process (the "Payables in Process") are of material
importance to Purchaser, and Sellers accordingly agree to either: (i) pay any
Payable in Process within seven (7) days after receipt; or (ii) provide notice
to Purchaser within seven (7) days of Sellers' receipt of such Payable in
Process and of its intention not to pay it within seven (7) days. If Purchaser
then requests Sellers to pay such Payable in Process, Sellers shall use their
best efforts to pay the same within seven (7) days. If Sellers are unable to, or
otherwise do not, so pay, Purchaser shall be authorized to pursue its rights
under 1.01(b)(5), and if such remedy is not available, its other rights and
remedies under this Agreement. Any dispute between the parties under this
section or 1.01(b)(5) shall be resolved as provided in 2.03(c).
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V. RELATED AGREEMENTS
5.01 Related Agreements
The following related agreements (the "Related Agreements")
shall be executed at Closing by the applicable parties:
(a) The Smith Non-Competition Agreement between Brian Smith
and Purchaser.
(b) The Joint Services Agreement providing for the joint
occupancy of shared premises and temporary access to information, data
processing, computer systems and other services which were, prior to
Closing, used by both the Engineering Division and Sellers' other
operations.
(c) Audit Representation Letter Agreements of Brian Smith,
Thomas Campbell and W. D. Nelson pursuant to which Mr. Smith, Mr.
Campbell and Mr. Nelson will each agree to provide a standard
representation of liabilities and contingent liabilities letter in
connection with any audit which Purchaser elects to perform or
auditor's consent which Purchaser requires.
VI. CLOSING
6.01 Closing, Closing Date and Effective Time
The closing of the transactions contemplated hereunder took
place at 3:00 p.m. on August 19, 1997, at the offices of Smith Technology
Corporation, at One Plymouth Meeting, Plymouth Meeting, PA. The effective time
for the consummation of the transactions contemplated in this Agreement to occur
"at Closing" or "on the Closing Date" shall be 12:00 a.m. EST on August 20, 1997
(the "Effective Time").
6.02 Sellers' Obligations at Closing
At or prior to the Closing, Sellers shall deliver or cause to
be delivered to Purchaser, in form reasonably satisfactory to Purchaser, the
following:
(a) A Bill of Sale and Assignment substantially in the form
set forth in Exhibit 6.02(a), sufficient to effect and evidence the
transfer, conveyance and delivery of the Purchased Assets.
(b) A fully executed assignment of each Assumed Premises
Lease.
(c) The fully executed Smith Non-Competition Agreement between
Purchaser and Brian Smith and the Audit Representations Letter
Agreements of Brian Smith, Thomas Campbell and W. D. Nelson.
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(d) A certificate of title duly assigned and a bill of sale
for each vehicle which is a Purchased Asset.
(e) A fully executed UCC-3 in the case of security interests
governed by the Uniform Commercial Code and, in other cases, a fully
executed release and satisfaction of each security interest, lien or
encumbrance against any of the Purchased Assets except: (i) those for
which Purchaser has expressly assumed in full as an Assumed Liability
either the obligation underlying such security interest or the
responsibility for obtaining the release of such interest or (ii) as
provided in 2.14.
(f) Certificates of insurance naming Purchaser as an
additional insured evidencing the insurance policy(ies) under 4.12.
(g) A resolution of Sellers' Board of Directors authorizing
the execution, delivery and performance of this Agreement and all
Related Agreements by Sellers, to the extent they are parties thereto.
(h) Fully executed appointment or appointments of one or more
officers or agents to act on behalf of Sellers to execute assignments
and novations of contracts as provided in 4.09(b).
(i) An opinion of counsel to Sellers, satisfactory to counsel
for the Purchaser.
(j) All material approvals, consents and/or waivers that are
necessary to effect the transactions contemplated hereby.
(k) Such other documents (including certificates of officers
of Sellers) as the Purchaser may reasonably request in order to enable
the Purchaser to determine whether the conditions to their obligations
under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
(l) All other schedules, certificates and other documents
required by this Agreement to be delivered on or before Closing.
(m) At any time or times on or after the Closing, Sellers
shall execute, acknowledge, and deliver any and all further assurances,
documents, and instruments reasonably requested by Purchaser in order
to effectively convey the Purchased Assets and all ownership of such
assets free and clear of encumbrances or title defects except as
expressly authorized herein and shall take all other actions consistent
with the terms of this Agreement that may reasonably be requested by
Purchaser in order to effectuate the purposes and intent hereof.
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6.03 Purchaser's Obligations at Closing
At or prior to the Closing, Purchaser shall deliver or cause
to be delivered to Sellers, in form reasonably satisfactory to Sellers, the
following:
(a) The cash payable at Closing under 1.01(b)(1).
(b) The Note deliverable at Closing under 1.01(b)(2).
(c) The Short Term Note deliverable at Closing under
1.01(b)(5).
(d) A resolution of the Board of Directors of Purchaser
authorizing its execution, delivery and performance of this Agreement.
(e) An opinion of counsel to Purchaser, satisfactory to
counsel for the Sellers.
(f) All material approvals, consents and/or waivers that are
necessary to effect the transactions contemplated hereby.
(g) Such other documents (including certificates of officers
of Purchaser) as the Sellers may reasonably request in order to enable
the Sellers to determine whether the conditions to their obligations
under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
(h) At any time or times on or after the Closing, Purchaser
shall execute, acknowledge, and deliver any and all further assurances,
documents, and instruments reasonably requested by Sellers in order to
effectively convey or assure payment for the Purchased Assets and shall
take any other action consistent with the terms of this Agreement that
may reasonably be requested by Sellers in order to effectuate the
purposes and intent hereof.
VII. MISCELLANEOUS
7.01 Brokerage Fees
(a) Sellers acknowledge that The Environmental Financial
Consulting Group, Inc. ("EFCG") acted as a broker for Sellers relative to this
transaction, and Sellers further acknowledge that they are obligated to pay EFCG
a commission for such services. Sellers agree to pay such amounts and to hold
Purchaser harmless from any liability for the obligation to pay such finders fee
to EFCG.
(b) Except for such brokerage arrangement specified in (a),
neither the Purchaser nor Sellers have consented to or authorized any broker, or
third party to act on its behalf, directly or
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indirectly, as a broker or finder in connection with the transaction
contemplated by this Agreement. In the event any claim is made for a broker's or
finder's fee other than that described in (a) in connection with the
transactions contemplated hereunder, the party responsible for retaining or
securing said broker or finder shall be solely responsible for the payment of
any broker's or finder's fees incurred as a result thereof. Further, the
responsible party shall indemnify the other party against any loss or
liabilities by reason of such broker's or finder's fees.
7.02 Further Actions
At any time and from time to time, each party agrees, at its
or his expense, to take such actions and to execute and deliver such documents
as may be reasonably necessary to effectuate the transfer of the assets
hereunder and the purposes of this Agreement.
7.03 Availability of Equitable Remedies
Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages and would cause immediate and
irreparable harm, either party shall be entitled, either before or after the
Closing, in addition to any other right or remedy available to it, to an
injunction restraining such breach or a threatened breach and to specific
performance of any such provision of this Agreement, and the parties hereby
consent to the issuance of such an injunction and to the ordering of specific
performance to compel performance hereof without proof of immediate and
irreparable injury or uniqueness of the assets to be conveyed or without the
necessity of the posting of a bond for such relief.
7.04 Survival
Except as otherwise provided herein, the covenants,
agreements, representations, and warranties contained in, made or undertaken
pursuant to this Agreement or any Related Agreement are (i) material, (ii) have
been relied upon by the party to whom given, irrespective of any investigation
made by or on behalf of such party, (iii) shall survive the Closing and any
delivery of the purchase price by the Purchaser and Purchased Assets by Sellers,
and (iv) shall not merge in the performance of any obligation by any party to
this Agreement or any Related Agreement.
7.05 Entire Agreement - Modification
The Agreement and the exhibits, schedules and Related
Agreements hereto set forth the entire understanding of the parties with respect
to the subject matter hereof, supersede all existing agreements among them
concerning such subject matter, and may be modified only by a written instrument
duly executed by each party.
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7.06 Notices
All notices, elections, payments, reports or other
correspondence required or permitted hereunder shall be in writing and deemed to
have been properly given or delivered when personally delivered, mailed by
certified mail or delivered by a nationally recognized overnight express
courier, postage or delivery fees prepaid, to the party to whom directed at the
below specified addresses:
A. If to Sellers:
Thomas F. Herlihy
President and CEO
The Smith Technology Corporation
One Plymouth Meeting
Plymouth Meeting, PA 19462
with a copy sent in one of the prescribed manners to:
John E. Zamer, Esq.
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peach Street
Atlanta, GA 30308-3242
B. If to Purchaser:
Mr. Morry F. Rubin, President
ATC Group Services Inc.
104 East 25th Street, 10th Floor
New York, NY 10010
with a copy sent in one of the prescribed manners to:
John Smith, Esq.
ATC Group Services Inc.
1515 East 10th Street
Sioux Falls, South Dakota 57103-1721
Any such notice shall be deemed given at the time of personal delivery, three
days after deposit with the mail or one day following deposit with an overnight
express courier. The address of a party may be changed in accordance with the
notice provisions of this section.
7.07 Waiver
Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of
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any other breach of that provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions will not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
7.08 Binding Effect
The provisions of this Agreement shall be binding upon and
inure to the benefit of Sellers, Purchaser, and their respective successors and
assigns, and shall inure to the benefit of the indemnitees and their respective
successors, assigns, heirs, and personal representatives.
7.09 No Third-Party Beneficiaries
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in 7.08).
7.10 Separability
If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances unless the result
thereof would result in an unjust modification of the balance of rights and
obligations hereunder.
7.11 Headings
The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
7.12 Governing Law
To the extent permitted by law, this Agreement shall be
governed by and construed in accordance with the laws of the state of Delaware
without giving effect to conflict of laws. Each of the parties hereby consents
to the jurisdiction of the courts of the state of Delaware, agrees to submit to
service therefrom and waives any claim it may have as to forum non conveniens in
connection with any action brought in the state of Delaware.
7.13 Separate Counterparts
This Agreement is being executed in several identical
counterparts, each one of which shall be considered an original and
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all of which when taken together shall constitute but one instrument.
7.14 Incorporation of Recitals, Exhibits and Schedules
All exhibits, schedules and Related Agreements attached hereto
are incorporated herein by reference and expressly made a part of this
Agreement.
7.15 Mediation
Except in cases where the remedy of preliminary injunction is
reasonably sought by a party because of the irreparability and immediacy of the
harm alleged to be caused or threatened, in the event there shall arise any
dispute or claim in law or equity arising out of this Agreement or any breach
thereof or any resulting transaction between the parties under this Agreement
and if such dispute cannot be resolved through negotiation or, in the case of
those matters to be resolved under this Agreement by the procedure specified for
settlement of accounting and collection related issues in 2.03(c), the parties
agree that such dispute shall be submitted to non-binding mediation under the
Commercial Mediation Rules of the American Arbitration Association before
resorting to litigation. The mediation shall be held in Dover, Delaware before a
single mediator selected by the American Arbitration Association.
7.16 Non-Working Dates
When any date on which payment or any other performance is due
under this agreement falls on a Saturday, Sunday or national holiday, such
payment or performance shall be due on the next business day following such
date.
7.17 Opportunity to Cure
All parties to this Agreement shall be afforded a period of
ten (10) days following written notice thereof to cure any alleged breach of
this Agreement unless the loss threatened by such breach is of such gravity to
require immediate action.
VIII. DEFINED WORDS AND PHRASES
8.01 Convention for Definition of Terms
Words used in this Agreement shall have their ordinary meaning
unless specifically defined in this Agreement. Where a word or phrase appears in
quotation marks within parentheses (whether or not listed in 8.02), the word or
phrase in quotation marks shall have the meaning throughout this Agreement
(unless a more limited scope is specified or is obvious from the context)
defined by the
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definition immediately preceding and in apposition to the quoted word or
phrase. Most (but not all) defined words or phrases are delineated as such by
the use of capitalized first letters.
8.02 Certain Definitions
(a) Unless otherwise expressly stated in a particular case,
the term "including" shall mean "including, but not limited to."
(b) Unless otherwise expressly stated in a particular case,
the term "knowledge of the Sellers" means the knowledge of an officer, director,
regional manager or branch manager of Smith or of any director, regional officer
or regional or branch manager of any Seller other than Smith.
(c) Unless otherwise expressly stated in a particular case,
the term "Sellers" means the "Sellers, jointly and severally."
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date set forth in the opening paragraph hereof.
ATC GROUP SERVICES INC. SMITH TECHNOLOGY CORPORATION
By /s/ Nicholas J Malino By /s/ Thomas F. Herlihy
---------------------- ----------------------
Nicholas J. Malino Thomas F. Herlihy
Senior Vice President President and CEO
BCM ENGINEERS INC., Delaware BCM ENGINEERS INC., Alabama
By /s/ William T. Campbell By /s/ William T. Campbell
------------------------ ------------------------
BCM ENGINEERS INC., Penn. BCM ENGINEERS INC., West V.
By /s/ William T. Campbell By /s/ William T. Campbell
------------------------ ------------------------
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EXHIBIT 10.9
STOCK PURCHASE AGREEMENT
BETWEEN
ATC GROUP SERVICES INC.
AND
BING YEN & ASSOCIATES, INC.
and
GLENN TOFANI
November 26, 1997
<PAGE>
TABLE OF CONTENTS
Page No.
I. SALE AND PURCHASE..........................................................1
ss. 1.01 Terms of Sale and Purchase..............................1
ss. 1.02 Indemnity Against Debts and Liabilities.................3
ss. 1.03 Right of Set-Off........................................6
II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS............................6
ss. 2.01 Organization and Qualification..........................7
ss. 2.02 Capitalization..........................................7
ss. 2.03 Financial Condition.....................................8
ss. 2.04 Tax and Other Liabilities...............................8
ss. 2.05 Litigation and Claims...................................9
ss. 2.06 Properties and Accounts Receivable......................9
ss. 2.07 Contracts and Other Instruments........................10
ss. 2.08 Employees..............................................12
ss. 2.09 Patents, Trademarks, Etc...............................12
ss. 2.10 Questionable Payments..................................13
ss. 2.11 Authority to Sell......................................13
ss. 2.12 Restricted Professional and Small
Business Set-Aside Revenues............................14
ss. 2.13 Loans to be Repaid.....................................14
ss. 2.14 Fictitious Names.......................................14
ss. 2.15 Absence of Undisclosed Liabilities.....................14
ss. 2.16 Hazardous Materials....................................14
ss. 2.17 Completeness of Disclosure.............................15
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................15
ss. 3.01 Organization And Good Standing.........................15
ss. 3.02 Execution and Performance Authorized...................15
ss. 3.03 Absence of Litigation..................................16
ss. 3.04 No Other Default.......................................16
ss. 3.05 Permits and Filings....................................16
ss. 3.06 Absence of Lien........................................16
ss. 3.07 Solvency...............................................16
ss. 3.08 Corporate Documents....................................16
ss. 3.09 Purchase for Investment Purposes Only..................17
ss. 3.10 Reliance on ATC Public Information.....................17
ss. 3.11 Springing Representation and Warranty..................17
IV. COVENANTS................................................................17
ss. 4.01 Insurance..............................................17
ss. 4.02 Release by Shareholders................................18
ss. 4.03 Collection of Accounts Receivable......................18
ss. 4.04 Noncompetition.........................................18
ss. 4.05 Public Statements......................................21
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ss. 4.06 Books, Records, Access to Information, Cooperation.....21
ss. 4.07 Bankruptcy.............................................22
ss. 4.08 Transaction Costs and Expenses.........................22
ss. 4.09 Delivery of Property...................................22
ss. 4.10 Related Agreements.....................................22
ss. 4.11 Continuing Cooperation, Reporting of Changes,
Breaches and Status....................................22
ss. 4.12 Profit Sharing Plan....................................23
ss. 4.13 Cooperation Regarding Contingent Achievement...........23
ss. 4.14 BYA Employee Bonuses...................................24
ss. 4.15 Receipt of Notices.....................................24
ss. 4.16 Transaction Notes Are Senior Indebtedness..............24
ss. 4.17 Acceleration of Tofani Note, Transaction Note..........24
V. RELATED ARGUMENTS.........................................................26
ss. 5.01 Related Agreements.....................................26
VI. CLOSING................................................................26
ss. 6.01 Closing, the Closing Date, and Effective Time..........26
ss. 6.02 Shareholders' Obligations at Closing...................26
ss. 6.03 Purchaser's Obligations at Closing.....................27
VII. MISCELLANEOUS...........................................................27
ss. 7.01 Brokerage Fees and Shareholders' Legal Fees............27
ss. 7.02 Further Actions........................................28
ss. 7.03 Availability of Equitable Remedies.....................28
ss. 7.04 Limitation on Survival of Representations
and Warranties.........................................28
ss. 7.05 Modification...........................................28
ss. 7.06 Notices................................................28
ss. 7.07 Waiver.................................................29
ss. 7.08 Binding Effect.........................................29
ss. 7.09 No Third-Party Beneficiaries...........................29
ss. 7.10 Severability...........................................29
ss. 7.11 Headings; Gender.......................................30
ss. 7.12 Governing Law..........................................30
ss. 7.13 Separate Counterparts..................................30
ss. 7.14 Incorporation of Recitals, Exhibits and Schedules......30
ss. 7.15 Obligations in Payment Ratio...........................30
ss. 7.16 Arbitration; Attorneys' Fees; Undisputed
Actions for Payment....................................30
ss. 7.17 Opportunity to Cure....................................31
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<PAGE>
EXHIBITS AND SCHEDULES
Exhibit 1.01B(2)
Exhibit 1.01B(3)
Exhibit 1.01B(4)
Exhibit 3.11-A
Exhibit 3.11-B
Schedule 2.01A
Schedule 2.01B
Schedule 2.02A
Schedule 2.02B
Schedule 2.03
Schedule 2.04
Schedule 2.05
Schedule 2.06A
Schedule 2.06B
Schedule 2.06C
Schedule 2.06D
Schedule 2.07
Schedule 2.07B
Schedule 2.07C
Schedule 2.07D
Schedule 2.07E
Schedule 2.08A
Schedule 2.09
Schedule 2.1
Schedule 2.12
Schedule 2.14
Schedule 2.16A
Schedule 3.03
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<PAGE>
STOCK PURCHASE
AGREEMENT
This Agreement (including the exhibits and schedules hereto)
(collectively, the "Agreement") is entered into as of ____________, 1997 by and
between ATC GROUP SERVICES INC., a Delaware corporation with its principal
office at 104 East 25th Street, New York, New York 10010 ("Purchaser"), BING YEN
& ASSOCIATES, INC. (a California corporation with its principal office at 17701
Mitchell North, Irvine, California 92714 ("BYA"), and Bing Yen and Glenn Tofani
(collectively, "Shareholders").
Purchaser desires to acquire all of the issued and outstanding
shares of stock of BYA and certain noncompetition covenants in exchange for
cash, contingent and noncontingent promissory notes and other consideration
potentially totaling approximately Five Million Four Hundred Thousand Dollars
($5,400,000), as hereinafter provided, Shareholders desire to effect such
exchange and BYA desires to implement such transaction. Now, therefore, in
consideration of the mutual covenants set forth below, and for reliance of each
other, the parties agree as follows.
I. SALE AND PURCHASE
1.01 Terms of Sale and Purchase
Subject to the terms and conditions set forth below:
A. At Closing (as defined in ss. 6.01 below), Shareholders
shall sell to Purchaser all issued and outstanding shares of common
stock of BYA (the "Shares") and shall deliver to Purchaser certificates
evidencing all the Shares properly endorsed to effect the assignment of
the Shares to Purchaser.
B. Purchaser shall at Closing:
(1) As partial consideration for the Shares, pay to
Shareholders an aggregate of $2,750,000 in the ratio to 4/5 to
Mr. Yen and 1/5 to Mr. Tofani (the "Payment Ratio"), as
follows: wire transfer $2,200,000 to Mr. Yen to the wire
address to be supplied by Mr. Yen and deliver to Mr. Tofani a
promissory note (the "Tofani Note") in the amount of $550,000
in the form of Exhibit 1.01B(1).
(2) As additional consideration for the Shares,
execute and deliver to Shareholders in the Payment Ratio
promissory notes in the form of Exhibit 1.01B(2) (the "Notes")
evidencing Purchaser's obligation to pay to Shareholders the
aggregate sum of Three Hundred Fifty Thousand Dollars
($350,000) in three equal annual installments of One Hundred
Sixteen Thousand Six Hundred Sixty-Six Dollars and Sixty-Seven
Cents ($116,666.67) with eight percent (8%) interest on the
unpaid balance on the first business days of January 1999,
2000 and 2001.
<PAGE>
(3) Execute and deliver to Shareholders in the
Payment Ratio unsecured promissory notes in the form of
Exhibit 1.01B(3) (the "Non-Compete Notes") evidencing
Purchaser's obligation to pay to Shareholders the aggregate
sum of Eight Hundred Thousand Dollars ($800,000) in three (3)
equal annual installments of Two Hundred Sixty-Six Thousand
Six Hundred Sixty-Six Dollars and Sixty-Seven Cents
($266,666.67) with eight percent (8%) interest on the unpaid
principal on each of the first business days of January 1999,
2000 and 2001.
(4) Execute and deliver to Shareholders in the
Payment Ratio the Contingent Achievement Promissory Notes in
the form of Exhibit 1.01B(4) (the "Contingent Notes") in the
maximum aggregate principal amount of One Million Five Hundred
Thousand Dollars ($1,500,000).
Shareholders shall have the right to assign or redirect to others any
portion or all of the amounts otherwise payable to Shareholders under
any or all of the promissory notes described in B(2),(3) and (4) above
(collectively the "Transaction Notes").
C. Within ninety (90) days following the Closing Date, BYA
shall provide to Shareholders a draft unaudited compiled balance sheet
(the "Closing Balance Sheet") and statements of income, retained
earnings and cash flows of BYA for the period beginning January 1, 1997
ending at the Effective Time (as defined in ss. 6.01 below) (the
"Closing Financial Statements"). The Closing Financial Statements shall
be prepared in accordance with generally accepted accounting principles
(GAAP) consistently applied throughout the period involved (except for
the absence of cash and reserves (unless expressly approved by
Shareholders in writing), and except for such other adjustments thereto
which are known to and are expressly approved in writing by Purchaser
and Shareholders) (the "Agreed Accounting Method"). At such time as the
Closing Balance Sheet has been finally determined between the parties,
a final adjustment to the principal amount of the Transaction Notes
shall be made equal to the amount by which the total assets less the
total liabilities of BYA (the "Equity Value") as of the Effective Time
(as defined in ss. 6.01 below) as shown on the Closing Balance Sheet
exceeds or is less than Two Million Three Hundred Forty-Seven Thousand
Dollars ($2,347,000). If BYA's Equity Value as of the Effective Time as
so finally determined is less than Two Million Three Hundred
Forty-Seven Thousand Dollars ($2,347,000), Purchaser shall offset such
amount, in the Payment Ratio, and against the next available cash
payments to be made, first against the Non-Compete Notes, then against
the Contingent Notes, and finally against the Notes (the "Set-Off
Order"). By the foregoing the parties intend that if an offset is
required under this paragraph (or under ss. 1.03 below), all payments
on all of said notes shall be subject to offset as soon as possible in
the order due and payable but not before January 4, 1999, using all
such notes as sources of setoff, but if less than all cash payments to
be made thereunder are necessary to satisfy the setoff, then the setoff
shall be effected from cash payments to be made only in the Set-Off
Order. If the final Equity Value is greater than Two Million Three
Hundred Forty-Seven Thousand Dollars ($2,347,000), Purchaser shall add
such amount in the Payment Ratio to the Notes. In such case,
Shareholders shall cancel and return to Purchaser the previously
executed Notes, and Purchaser shall issue new Notes to reflect the
increased principal amount owing thereunder.
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<PAGE>
After Closing Shareholders' independent accountants shall be
afforded free and full access to the nonproprietary working papers and records
used by independent accountants and in-house accountants in preparing the
Closing Financial Statements. In addition, Purchaser shall cause BYA's
independent accountants and in-house accountants promptly to advise Shareholders
as soon as any of them becomes aware of any items in BYA's draft of the Closing
Financial Statements that may be different from the Interim Financial Statements
(as defined in ss. 2.03). If Shareholders notify Purchaser of any difference of
opinion as to the general acceptability or consistency of any of the accounting
principles followed under the Agreed Accounting Method in connection with such
review and preparation of the Closing Financial Statements, or the results
indicated thereby, then they and/or their accountants shall promptly confer in
an effort to resolve such difference within thirty (30) days. If they are unable
to resolve any difference within thirty (30) days, then the difference shall be
resolved by the dispute resolution provisions of ss. 7.16.
1.02 Indemnity Against Debts and Liabilities
A. In addition to Purchaser's other rights and remedies
available at law or in equity (and not by way of limitation), Shareholders
shall, in the Payment Ratio, protect, defend, indemnify and hold harmless
Purchaser, BYA, and their successors against, and in respect of, any and all:
(1) Claims, suits, actions, proceedings (formal or informal),
governmental investigations, judgments, deficiencies, set-offs,
damages, settlements, liabilities, and reasonable legal and other
expenses (including reasonable attorneys' fees and defense costs), as
and when incurred, arising out of, or based upon, any breach of any
representation, warranty or covenant of Shareholders contained in this
Agreement, but excluding any Related Agreements (as defined in ss. 5.01
below), and
(2) Debts or liabilities of any kind, whether known or
unknown, asserted or unasserted, and claims, liens, set-offs, suits,
actions, and proceedings (formal and informal) of persons or entities
and related judgments, deficiencies, damages, settlements, set-offs,
liens, liabilities, and legal and other expenses (including reasonable
attorneys' fees), as and when incurred, arising out of, or based upon,
the acts, omissions, contractual performance, or conduct of the
business of BYA before the Effective Time.
B. In addition to Shareholders' other rights and remedies
available at law or in equity (and not by way of limitation), Purchaser shall
protect, defend, indemnify and hold harmless Shareholders and their successors
against and in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or informal),
governmental investigations, judgments, deficiencies, set-offs,
damages, settlements, liabilities, and reasonable legal and other
expenses (including reasonable attorneys' fees and costs of defense),
as and when incurred, arising out of, or based upon, any breach of any
representation, warranty or covenant of Purchaser contained in this
Agreement; and
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<PAGE>
(2) Debts or liabilities of any kind, whether known or
unknown, asserted or unasserted, and claims, liens, set-offs, suits,
actions, and proceedings (formal and informal) of persons or entities
and related judgments, deficiencies, damages, settlements, set-offs,
liens, liabilities, and reasonable legal and other expenses (including
reasonable attorneys' fees), as and when incurred, arising out of: (i)
the acts, omissions, contractual performance or conduct of the business
of BYA after the Effective Time, except for BYA's debts or liabilities
caused or continuing from items described in 1.02A above so long as
Purchaser does not directly or indirectly cause or materially
exacerbate the continuation of such debts or liabilities; or (ii) or
based upon, the acts, omissions, contractual performance or conduct of
the business of Purchaser whether before or after the Effective Time.
C. The parties' respective indemnity and other obligations
under this Agreement for debts and liabilities shall be subject to the following
terms, limitations and conditions:
(1) Purchaser and Shareholders shall each give the other
prompt notice of any allegedly indemnifiable item incurred, asserted or
threatened on the basis of which an indemnitee intends to seek
indemnification from an indemnitor as provided herein; provided,
however, that the obligation of an indemnitee shall be reduced for the
failure to give notice at any particular time only to the extent that
the ability of the indemnitor to defend or settle the item has been
actually monetarily prejudiced thereby. Any indemnitee shall have the
right (but not the obligation) to select and be represented by counsel
of its or his choice, to manage its or his own legal representation or
defense and to settle any claim, debt or other indemnified matter
hereunder. In the following cases, an indemnitee's expenses associated
with electing to provide his or its own defense shall constitute
indemnified costs: (i) when the indemnitor has failed to assume the
defense of the claim within ten days following receipt of the
indemnitee's notice of the claim; (ii) when the claim involves
assertions of liability against both the indemnitee and indemnitor,
including a cross claim or other assertion by the indemnitor that
indemnitee is liable for all or a portion of such claim, under
circumstances where the indemnitee's and indemnitor's interests are
sufficiently adverse in the proceeding to result in a conflict of
interest in representation under the rules of professional conduct for
attorneys; (iii) when the claim is one directly between an indemnitee
and the indemnitor involving a matter arising under this Agreement; and
(iv) when the claim seeks an order, injunction or other equitable
relief against the indemnitee which if successful, could reasonably be
expected to materially interfere with the business, operations, assets
or condition (financial or otherwise) of the indemnitee. With respect
to (ii) and (iii) that proportion of the costs of the indemnitee's own
defense shall be borne by indemnitee in the same proportion as
comparative liability for the claim is ultimately apportioned to lie
with indemnitee.
(2) With respect to any claim for which an indemnitor shall
indemnify any indemnitee, the indemnitor shall be subrogated to all
rights of indemnitees against any and all third parties up to the
amount paid by indemnitor to indemnitees or set off against an
indemnitor.
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(3) Notwithstanding anything in this Agreement to the
contrary, Shareholders shall be liable to Purchaser under this
Agreement (including, without limitation, under ss.ss. 1.02 and 1.03
hereof) for any claim that would be covered by the Continuing Insurance
or the E&O Insurance only after Purchaser has filed such claim with the
carrier providing such coverage and then only to the extent that: (i)
with respect to defense of the claim and the costs thereof, defense of
the claim is not assumed by the insurer; (ii) the insurer denies
coverage; or (iii) the insurance proceeds are less than the total
amount of indemnified loss and expense from the claim. Without limiting
the generality of the foregoing, no party shall be liable for that
portion of any claim for which the other party actually receives the
cost of defense or insurance proceeds covering such claim. (The
deductible pertaining to any such insurance shall not be considered to
be cost of defense or insurance proceeds.) Furthermore, in no event
shall Shareholders be liable for any claim that would have been covered
by the Continuing Insurance if Purchaser had maintained it in
accordance with ss. 4.01.
(4) The indemnity covenants contained in this Agreement shall
inure only to the benefit of Purchaser, BYA and Shareholders,
respectively (and their respective employees and successors to the
extent they are indemnitees), and shall not be for the benefit of any
other person or entity. These indemnity provisions shall not be
construed to abrogate the corporate liability shield as provided by
law, to extend a right of action to any third party not otherwise
available, or to enlarge the underlying liability of any indemnitor or
indemnitee to any third party.
(5) Subject to (7) below, the maximum aggregate liability of
Shareholders under this Agreement shall not exceed the sum of
$2,750,000 plus the amounts paid and yet to be paid under the Notes,
the Non-Compete Notes and the Contingent Notes (the "Total Maximum
Purchase Price"), and Shareholders shall not be liable to Purchaser
under this Agreement until and to the extent such liability exceeds
$25,000 in the aggregate for all liability other than liability based
upon the breach of Shareholders' warranty under ss. 2.06B with respect
to collectibility of accounts receivable and work-in-process or based
upon breach of the covenant set forth in ss. 4.12.
(6) Notwithstanding anything in this Agreement to the
contrary, in no event shall Shareholders be liable under this Agreement
for any liabilities quantified and reserved on the Closing Balance
Sheet.
(7) Notwithstanding anything in this Agreement to the
contrary, Shareholders shall not be obligated to make any payments
under ss. 1.02 of this Agreement until January 4, 1999. Then and
thereafter all obligations, if any, payable pursuant to ss. 1.02 shall
be satisfied first by exercise of set-off rights under ss. 1.03 below
and only after all set-off rights have been exhausted against the
unpaid principal balance of the Transaction Notes in the Set-Off Order
shall Purchaser have the right to demand, and Shareholder have the duty
to pay, cash in an amount up to the cash amount paid at Closing
($2,750,000), plus cash payments made in satisfaction of the
5
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principal amounts of the Transaction Notes. For this purpose the
principal balance of the Contingent Notes shall not be deemed to exist,
except to the extent any portion or all of the principal thereof is no
longer contingent.
1.03 Right of Set-Off
A. Without limiting such other rights as it may have at law or
equity or by agreement (but subject to the limitations described in ss. 1.02C
and this ss.1.03), Purchaser shall have the right upon fifteen (15) days' notice
to Shareholders and in the Payment Ratio to set off against, and withhold from,
any payment otherwise due to Shareholders as set forth in this Agreement and the
Transaction Notes in the Set-Off Order: (i) any amount necessary to cure or
remedy any breach, default or deficiency of performance or warranty by
Shareholders under this Agreement; (ii) any amount for which Purchaser or BYA
(or their employees or successors) is entitled to indemnification under ss.
1.02A; and (iii) Purchaser's or BYA's reasonable costs or expenses (including
reasonable attorneys' fees) related to (i), (ii) or (iii).
B. Purchaser shall have the right to redirect temporarily as
described below in ss. 1.03C all payments due and payable under the Transaction
Notes in the event (i) it determines in good faith with a reasonable belief that
its right to set-off has matured or will imminently mature with respect to any
particular matter, event or condition and, (ii) within the time limits set forth
in the following sentence it commences and diligently pursues an arbitration
proceeding in accordance with ss. 7.16 below to determine whether there is a
substantial probability that an event or condition will occur or has occurred
and will cause or has caused Purchaser to be entitled to exercise its set-off
rights hereunder. If the parties have a dispute involving the exercise of
set-off rights, including any issue as to insurance coverage or liability
exposure, then Shareholders and Purchaser shall within three (3) days of
commencement of any such dispute confer in good faith in an effort to resolve
the dispute; and if the parties are unable to reach agreement within ten (10)
days following commencement of any such dispute, then such dispute shall be
resolved by binding arbitration as provided under ss. 7.16 of this Agreement.
C. Pending delivery of an award in the arbitration described
in ss. 1.03B, Purchaser shall have the right, in lieu of making payments
directly to the Shareholders, to make all payments then due under the
Transaction Notes to the registry of a court, arbitration panel or joint bank
account (accessible only by the joint signatures of Purchaser and the subject
Shareholder(s)), or otherwise as agreed in writing by the subject parties.
II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
As a material inducement to Purchaser to enter into this
Agreement, and subject to the following sentence, Shareholders represent in the
Payment Ratio, and, also, Shareholders warrant in the Payment Ratio, to
Purchaser the truth, correctness and completeness of the matters stated or
described in this Article II. The phrase "to the knowledge of Shareholders"
shall be deemed to modify each and every representation given by Shareholders in
ss.ss. 2.03-2.18 of this Article II; provided, however, that in each such
instance it shall modify and limit only the representation made by
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Shareholders, but in no way does the phrase modify, limit or otherwise affect
the concurrent warranty being made by Shareholders.
2.01 Organization and Qualification
A. Except as listed in Schedule 2.01A, BYA has no subsidiary
or affiliated corporations or business enterprises of any type. Schedule 2.01A
sets forth as to BYA: its place of incorporation, principal place(s) of
business, jurisdictions in which it is qualified to do business, and locations
in which it currently maintains a place of business. BYA is a corporation duly
organized, validly existing, and in good standing under the laws of California,
with all requisite power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits of and
from, and declarations and filings with, all federal, state, local, and other
governmental authorities and all courts and other tribunals, to own, lease,
license, and use its properties and assets and to carry on the business in which
it is now engaged. BYA is duly qualified to transact the business in which it is
engaged and is in good standing as a foreign corporation in every jurisdiction
in which its ownership, leasing, licensing, or use of property or assets or the
conduct of the business makes such qualification necessary.
B. BYA has furnished to Purchaser its Articles of
Incorporation and Bylaws and all amendments thereto, as presently in effect. BYA
is not in violation or breach of, or in default with respect to, any term of its
Articles of Incorporation or Bylaws in a manner which would have a material and
adverse effect on BYA's business or operations and/or except as described on
Schedule 2.01B.
2.02 Capitalization
A. Schedule 2.02A correctly sets forth: (i) all authorized,
issued and outstanding capital stock and all ownership interests of BYA of any
type, including all options, warrants or other rights under which an ownership
right of any type may be acquired; and (ii) the name and address of each owner
of, or claimant to, any such right. The Shares constitute all of the issued and
outstanding shares of capital stock of all classes of BYA. Except as set forth
on Schedule 2.02A, each of such outstanding Shares or rights is validly
authorized, validly issued, fully paid, and nonassessable, has not been issued
and is not owned or held in violation of any preemptive right of Shareholders,
and is owned of record and beneficially by the person so listed. There is no
commitment, plan, arrangement to issue, option, warrant, security, or other
right calling for the issuance of, any share of capital stock or other ownership
interest in BYA or any security or other instrument convertible into,
exercisable for, or exchangeable for, capital stock of, or ownership in, BYA,
except as set forth in Schedule 2.02A.
B. Schedule 2.02B sets forth, with respect to all stock and
other ownership interests or rights in BYA, all liens, security interests,
pledges, charges, encumbrances, Shareholders' agreements, voting trusts, or
other restriction or covenant respecting any such interest. Except as set forth
on Schedule 2.02B, all the Shares are free and clear of such encumbrances or
restrictions.
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2.03 Financial Condition
Attached hereto as Schedule 2.03 are true and correct copies
of the following: (i) unaudited, compiled balance sheets, statements of income
and statements of retained earnings of BYA for the last three completed fiscal
years and (ii) the unaudited, compiled balance sheet (the "Interim Balance
Sheet") and statements of income and retained earnings of BYA for the period
from January 1, 1997 through October 31, 1997 (collectively, the "Interim
Financial Statements").
The Interim Financial Statements have been prepared in
accordance with the Agreed Accounting Method, are correct and complete in all
respects, and are in accordance with the books and records of BYA.
There is no fact presently known to BYA which could materially
and adversely affect the financial condition, results of operations, business,
properties, assets, liabilities, or future business prospects of BYA, except as
otherwise agreed in this Agreement or as recorded on Schedule 2.03 or the other
schedules to this Agreement and as will be quantified and reserved on the
Closing Financial Statements; provided, however, that Shareholders express no
representation or warranty as to political or economic matters of general
applicability (except as to adverse market conditions or client relations of
which either has present knowledge).
2.04 Tax and Other Liabilities67
A. Except as disclosed on Schedule 2.04, or another schedule
to this Agreement dealing with liabilities, BYA has no liability of any nature,
accrued or contingent, including, without limitation, liabilities for payroll
and other employee taxes, federal, state, local, or foreign taxes or liabilities
to customers or suppliers, other than liabilities which are reflected on the
Interim Balance Sheet or will be reflected on the Closing Balance Sheet or which
are incurred in the ordinary and usual course of business and/or in connection
with this transaction.
B. Without limiting the generality of the foregoing, the
amounts reserved for taxes on the Interim Balance Sheet and the Closing Balance
Sheet are and will be as of their dates sufficient for all accrued and unpaid
federal, state, local, employee-related and foreign taxes of BYA, whether or not
due and payable, and whether or not disputed, under tax laws in effect on the
Closing Date for the period ended on such date and for all fiscal years prior
thereto. BYA has filed all payroll and other federal, state, local, and foreign
tax returns required to be filed by it, has delivered to Purchaser a true and
correct copy thereof; has paid all taxes, assessments, and other governmental
charges payable or remittable by it, or levied upon it or its properties,
assets, income, or franchises which are due and payable; and has delivered to
Purchaser a true and correct copy of any report as to any audit or adjustments
received by BYA (or any of BYA's officers concerning BYA) from any taxing
authority during the past five (5) years and a statement as to any litigation,
governmental or other proceeding (formal or informal), or audit or investigation
pending, threatened or in prospect, with respect to any such report or the
subject matter of such report.
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C. Except otherwise provided in this Agreement, Shareholders
have paid or will pay all taxes, other liabilities and Shareholders' and BYA's
expenses accrued as of the Closing Date resulting from the preparation of, or
the transactions contemplated by, this Agreement.
D. Purchaser will incur no liability as a result of
environmental or geotechnical conditions associated with any acts, omissions, or
real property ownership or leasing by BYA prior to the Effective Time.
2.05 Litigation and Claims
A. Except as set forth on Schedule 2.05: (i) there is no
material litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation pending or threatened (or any basis
therefor known to Shareholders) with respect to BYA or any of its business,
properties, or assets; (ii) BYA is not affected by any present or threatened
strike, or other labor disturbance, or is any union currently representing, or
attempting to represent, any employee of BYA as collective bargaining agent;
(iii) BYA is not in violation of, or in default with respect to, any law, rule,
regulation, order, judgment, or decree, including any insurance or environmental
laws or regulations. Schedule 2.05 sets forth with respect to BYA, among other
matters, all past and current citations, violations, fines, judgments, decrees,
orders, consent decrees or orders, and pending proceedings of any type issued
since January 1, 1987, arising out of the alleged violation of any federal,
state or local criminal, bidding or procurement, environmental, health and
safety, insurance, licensing or labor law or regulation, or out of any alleged
act or omission, negligence, intentionally wrongful act or breach of contract in
the performance of services or otherwise.
B. Except for the liabilities included on the Closing Balance
Sheet, neither BYA, nor Purchaser will incur any liability, including any
environmental liability, as a result of BYA's acts, omissions, sales, litigation
support services, consulting services or contractual performance prior to the
Effective Time.
2.06 Properties and Accounts Receivable
A. Except as set forth on Schedule 2.06A or Schedule 2.07, BYA
has good title to all properties and assets used in its business, or owned by
it, free and clear of all liens, mortgages, security interests, pledges,
charges, and encumbrances.
B. All accounts receivable and work-in-process of BYA recorded
on the interim Balance Sheet are described on Schedule 2.06B, and those
reflected on the Closing Balance Sheet have or will have arisen from valid
transactions in the ordinary course of BYA's business, have been fully earned
prior to Closing, and except as described on Schedule 2.06B, will be collected
by BYA within twelve (12) months after the Closing Date, employing reasonable
and customary collection procedures (i.e., the cost of measures such as legal
action, referral to outside collection agency or liens shall be a charge against
collections from such accounts) and any extraordinary measures agreed upon as
contemplated by ss. 4.03B below. All accounts receivable and work in process of
BYA recorded on the Interim Balance Sheet and the Closing Balance Sheet as of
their dates were or will be fully earned as of the Effective
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Time, and Purchaser will have no performance obligations for which it will not
be entitled to bill (no account receivable or work in process entry represents a
pre-billing except to the extent an allowance is reserved for it).
C. Schedule 2.06C sets forth a ledger of all properties and
assets, owned, leased, or licensed by BYA, for which a value is recorded on the
Interim Balance Sheet, detailing estimated value with respect to all such
properties current as of the Effective Time; all such properties and assets
owned by BYA as of the date of the Interim Balance Sheet are reflected on the
Interim Balance Sheet; and all assets and properties owned by BYA as of the date
of the Closing Balance Sheet will be reflected on the Closing Balance Sheet.
D. Except as noted on Schedule 2.06D, no real property owned,
leased, licensed, or used by BYA lies in an area which is subject to zoning use,
environmental or building code restrictions which would prohibit, and no state
of facts relating to the condition of any building or property or action or
inaction of a person or entity or the ownership, leasing, licensing, use or
regulation or any real or personal property exists or, to BYA's knowledge will
or is likely to exist which would prevent the continued leasing of such real
property by Purchaser in the business in which BYA is now engaged. Purchaser
will incur no environmental liability as a result of this transaction associated
with any real property owned, leased or used by BYA prior to Closing.
2.07 Contracts and Other Instruments
A. Schedule 2.07 sets forth a true and correct listing of all
material contracts to which BYA is a party, including leases and licenses and
all supply, distribution agency, financing or other arrangements and
understandings. Shareholders have provided to Purchaser, or at Purchaser's
election made available for its review, all of the items so listed and
described, including, but not limited to, the following: (i) true and correct
copies of all written contracts, agreements, and instruments; (ii) true and
correct copies of all leases and licenses; and (iii) true and correct written
descriptions of all supply, distribution, agency, financing, or other
arrangements or understandings. Except as disclosed in Schedule 2.07 or Schedule
2.11, neither BYA, nor any other party to any such contract, agreement,
instrument, lease, or license is now, or expects in the future to be, in
violation or breach of, or in default with respect to complying with any
material provision thereof and each such contract, agreement, instrument, lease,
or license is in full force and is the legal, valid, and binding obligation of
the parties thereto and is enforceable as to them in accordance with its terms.
Except as is disclosed on Schedule 2.07, neither BYA, nor any other party to any
such arrangement or understanding has given notice of termination or taken any
action inconsistent with the continuance of such arrangement or understanding;
and the execution, delivery, and performance of this Agreement will not
materially violate any such arrangement or understanding.
B. Except for situations disclosed on Schedule 2.07B and for
the cost of correction of which an adequate reserve is, or will be, recorded on
the Interim Balance Sheet (except for those incurred in the ordinary and usual
course of business) and the Closing Balance Sheet as a liability: all services
rendered and products supplied by BYA prior to the Effective Time will have been
in conformity with the scope of performance defined by the
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contract or arrangement; and no BYA client is dissatisfied with such service or
products, and, no curative or corrective work, replacements or payments are
necessary to render such performance legally or contractually sufficient; and,
all costs for performance completed prior to Closing shall have been and will be
duly recorded as of their respective dates as liabilities on the Interim Balance
Sheet (except for those incurred in the ordinary and usual course of business),
and the Closing Balance Sheet. Billings by BYA on each contract or arrangement
shall not, as of the Effective Time, have constituted a greater percentage of
total allowable billings under such contract than the percentage of work
performed, or other costs accrued prior to the Effective Time, shall have
constituted, of total work to be performed, or costs to be incurred, under such
contracts. Except as so disclosed, no contract entered into by BYA prior to the
Effective Time will be a "Loss Contract." "Loss Contract" means a contract for
which fully-burdened costs to be incurred after the Effective Time in completing
the contract, utilizing performance at industry standards of skill, efficiency
and competence billable at Purchaser's standard rate, exceeds amounts remaining
to be billed under such contract after the Effective Time.
C. Schedule 2.07C sets forth a description of each agreement,
or understanding entered into, by any Shareholders or BYA as a condition for
obtaining any consent, authorization, approval, order, license, certificate, or
permit required for the consummation of the transactions contemplated by this
Agreement.
D. Schedule 2.07D sets forth a list of BYA's order backlog as
of the Effective Time. This schedule includes the customer's name, project name,
dollar amount and anticipated performance dates. The backlog items listed on
such schedule represent written commitments or expressions of interest by
customers for the performance of services by BYA.
F. BYA enjoys peaceful and undisturbed possession under all
leases and licenses under which it is operating. BYA is not a party to or bound
by any contract, agreement, instrument, lease, license, arrangement, or
understanding, or subject to any charter or other restriction, which has had, or
to the knowledge of BYA is likely in the future to have, a material adverse
affect on BYA's operations or business. BYA has neither engaged within the last
five years in, is engaging in, nor intends to engage in any transaction with,
nor has had within the last five years, now has, or intends to have any
contract, agreement, lease, license, arrangement, or understanding with, any
Shareholders, any director, officer, or employee of BYA, any relative or
affiliate of any Shareholders or of any such director, officer, or employee, or
any other corporation or enterprise in which BYA, any such director, officer, or
employee, or any such relative or affiliate then had or now has a five percent
(5%) or greater equity or voting or other substantial interest, other than such
contracts and agreements as so listed and specified on Schedule 2.07E. There
exists no contract, agreement, right or understanding material to the business
or officers of BYA which is in the name of any principal, officer, director,
Shareholders or any other person or entity other than Seller except as disclosed
and so identified on Schedule 2.07F. Shareholders, on behalf of themselves and
as authorized representatives of the lessor of the premises in Irvine,
California in which BYA maintains its principal office, hereby represent and
warrant that the lease for such premises is in full force and effect, rent has
been paid through November 1997 and BYA does not owe or has not incurred any
unpaid debt or liability to said lessor, and said lessor hereby consents to the
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change of control of BYA and the deemed assignment thereby of said lease. The
foregoing sentence is not intended to expand any duty or obligation of
Shareholders otherwise provided for in this Agreement.
2.08 Employees
A. Schedule 2.08A sets forth a description of all of BYA's
pension, profit-sharing, option, other incentive plans, or any other type of
employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA")), and all material obligations to, or
arrangements with, employees for wages, salary, bonuses, incentive compensation,
vacations, severance pay, insurance, or other benefits. BYA has furnished, or
made available, to Purchaser true and correct copies of all documents evidencing
such plans, obligations or arrangements referred to in Schedule 2.08A (or
written summaries of such plans, obligations, or arrangements to the extent not
evidenced by documents) and true and correct copies of all documents evidencing
trusts relating to any such plans. Schedule 2.08A includes a true and correct
ledger containing the name, position/title, and present rate of compensation
(whether in the form of salary, bonuses, commissions, or other supplemental
compensation now or hereafter payable) of each director, officer, employee or
sales agent of BYA. All material notices and performance required under COBRA
and other ERISA plans prior to the Effective Time have been properly given and
performed. Except for BYA's pension plan, all obligations, debts and liabilities
associated with BYA's employees or agents, including all of the above-referenced
matters have been paid or discharged in full by BYA prior to Effective Time or
will be properly reflected as liabilities on Closing Balance Sheet in accordance
with ss. 2.03.
B. Except as described on Schedule 2.05, there is no
litigation, arbitration, claim, governmental or other proceedings (formal or
informal), or investigation pending, or to Shareholders' knowledge threatened
(or any basis for such known to Shareholders), with respect to any such employee
benefit plan, compensation arrangement or BYA's acts or omissions with respect
to its employees or its work environment.
C. Except for BYA's pension plan and except for the
liabilities recorded on the Closing Balance Sheet, neither BYA, nor Purchaser
will incur any liability to, or on behalf of, BYA's employees arising out of
their employment with BYA prior to the Effective Time or out of BYA's acts or
omission prior to the Effective Time, including (but not limited to) any
liability under ERISA or the Internal Revenue Code for obligations to, or
arrangements with, employees for wages, salary, bonuses, incentive compensation,
vacation pay, severance pay, insurance or other benefits, or employee taxes; for
personal injury or property damage; or for discrimination, harassment, or
wrongful discharge under federal, state or local laws.
2.09 Patents, Trademarks, Etc.67
Except as described in Schedule 2.09, BYA neither owns nor has
pending, or is licensed under, any patent, patent application, trademark,
trademark application, trade name, service mark, copyright, franchise, or other
intangible property or asset (all of the foregoing being herein called
"Intangibles"), and neither any Shareholder, any director, officer, or
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employee of BYA, any relative or affiliate of any Shareholders or of any such
director, officer, or employee, nor any other corporation or enterprise in which
any Shareholders, any such director, officer, or employee, or any such relative
or affiliate had or now has a five percent (5%) or greater equity or voting or
other substantial interest, possesses any Intangible which relates to the
business of BYA. There is no right, under any Intangible, necessary to the
business of BYA as presently conducted or as it contemplates conducting. BYA has
neither infringed, is infringing, nor has received notice of infringement of
Intangibles of others. As far as Shareholders can foresee, there is no
Intangible of others which may materially adversely affect the financial
condition, results of operations, business, properties, assets, liabilities, or
future prospects of BYA.
2.10 Questionable Payments
Neither BYA, nor any director, officer, agent, employee,
Shareholders or other person associated with, or acting on behalf of, BYA has,
directly or indirectly: (a) used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity,
(b) made any unlawful payment to foreign or domestic governmental officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; (c) violated any provision of the Foreign Corrupt Practices Act
of 1977, (d) established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; (e) made any false or fictitious entry on the
books or records of BYA; (f) made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment; (g) given any favor or gift which is not
deductible for federal income tax purposes; or (h) made any bribe, kickback, or
other payment of a similar or comparable nature, whether lawful or not, to any
person or entity, private or public, regardless of form, whether in money,
property, or services, to obtain favorable treatment in securing business or to
obtain special concessions, or to pay for favorable treatment for business
secured or for special concessions already obtained.
2.11 Authority to Sell
Shareholders and BYA have all requisite power and authority to
execute, deliver, and perform this Agreement. All necessary corporate
proceedings of BYA have been, or as of the Closing Date will have been, duly
taken to authorize the execution, delivery, and performance of this Agreement by
BYA. This Agreement has been duly authorized, executed, and delivered by
Shareholders, constitutes the legal, valid, and binding obligation of
Shareholders, and, except for the duration of the noncompetition covenant of Mr.
Yen in ss. 4.04 hereof, is enforceable as to them in accordance with its terms.
No consent, authorization, approval, order, license, certificate, or permit of
or from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by
Shareholders for the execution, delivery, or performance of this Agreement by
them. Except as described in Schedule 2.11 hereof, no consent of any party to
any material contract, agreement, instrument, lease, license, arrangement, or
understanding to which BYA or Shareholders is a party, or to which it or they,
or any of its or their properties or assets, are subject, is required for the
execution, delivery, or performance of this Agreement (except such consents as
have been obtained at or prior to the date of this Agreement, true and correct
copies of which have been delivered to Purchaser). Except as described in
Schedule 2.11, the execution, delivery,
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and performance of this Agreement will not violate, result in a material breach
of, conflict with, or (with or without the giving of notice or the passage of
time or both) entitle any party to terminate or call a default under any term of
any such contract, agreement, instrument, lease, license, arrangement, or
understanding, or materially violate or result in a breach of any term of the
Articles of Incorporation or Bylaws of BYA, or violate, result in a breach of,
or conflict with, any law, rule, regulation, order, judgment, or decree binding
on BYA or any Shareholders, or to which any of their operations, business,
properties, or assets are subject. Upon Closing, Purchaser will have good title
to the Shares, free and clear of all liens, security interests, pledges,
charges, Shareholders' agreements, and encumbrances except those, if any,
expressly consented to by Purchaser in writing.
2.12 Restricted Professional
and Small Business Set-Aside Revenues
Schedule 2.12 sets forth the gross revenues of BYA for each of
the previous two (2) fiscal years and for the period covered by the Interim
Financial Statements, received from: (a) services of any type which BYA would be
precluded from performing after Closing because of Purchaser's ownership of the
Shares, Bylaws or regulations pertaining to the licensing or regulation of
persons or corporations engaging in such business; or, (b) from contracts or
subcontracts (or services otherwise performed) under Small Business Set Aside or
comparable business size or racial, gender or other class-restricted programs of
the Small Business Administration or other federal or state agency.
2.13 Loans to be Repaid
BYA has not made any loans to Shareholders, officers,
directors, employees or any other affiliated person or entity other than the
loans set forth on Schedule 2.03 or 2.07.
2.14 Fictitious Names
Schedule 2.14 sets forth each name, other than its corporate
name, under which BYA has done business or registered in any jurisdiction,
together with the jurisdiction of registration of each such name.
2.15 Absence of Undisclosed Liabilities
Except as set forth in the Schedules to this Agreement or
incurred in the usual and ordinary course of business, and quantified and
reserved on the Closing Balance Sheet, BYA has no obligations or liabilities of
any kind, fixed, accrued or contingent, including, but not limited to,
obligations to perform after Closing under contracts or other commitments which
would adversely affect BYA's financial condition or business.
2.16 Hazardous Materials
A. Except as disclosed on Schedule 2.16A, as of the Closing
Date BYA is not in possession of, or responsible for the care, custody or
disposal of, any hazardous substances, pollutants or contaminants (as those
terms are defined in 42 U.S.C. ss. 9601 or under any
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applicable state or local law) or of any petroleum wastes or asbestos-containing
materials, except for soil or groundwater samples, unused laboratory chemicals
or commercially packaged supplies used in BYA's business.
B. In BYA's files, books and records are materially complete
descriptions of all laboratory samples upon which work has been completed,
including the location, composition, quantity, method of storage, intended
disposal or management plan for the particular material, any contractual
commitments related to continuing custody, and all costs related to BYA's
responsibilities thereto.
2.17 Completeness of Disclosure
No representation or warranty by Shareholders in this
Agreement contains any materially untrue statement of a material fact, or omits
or will omit, to state a material fact necessary to make the statements made not
misleading.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Shareholders to enter into this
Agreement, Purchaser hereby makes the following representations and warranties:
3.01 Organization And Good Standing
Purchaser is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware with full power and
authority to enter into and perform each of the transactions contemplated by
this Agreement.
3.02 Execution and Performance Authorized
The execution, delivery and performance of this Agreement, and
all other documents and Related Agreements contemplated hereunder, have been
duly approved by Purchaser's board of directors and at Closing will have been
executed and delivered by Purchaser's duly authorized officers. Such execution
and delivery, and the consummation by Purchaser of the transactions contemplated
hereunder have been duly authorized by all necessary corporate action, and no
further action is required by law, its corporate charter, Bylaws, or otherwise
to authorize all action to be taken by Purchaser with respect to this Agreement
and the consummation of the transactions contemplated hereunder. The Agreement
and the other documents contemplated hereunder are binding and are enforceable
against Purchaser in accordance with their terms.
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3.03 Absence of Litigation
Except as set forth on Schedule 3.03, there is no action,
lawsuit, proceeding, or investigation of any kind or nature pending or
threatened against Purchaser before any court, tribunal, or administrative
agency or board which Purchaser reasonably expects, individually or in the
aggregate, to materially and adversely affect (i) Purchaser's solvency, (ii) its
ability to perform hereunder, or (iii) to render any one or more of the
transactions contemplated hereunder void or voidable.
3.04 No Other Default
The execution and delivery of this Agreement by Purchaser, and
the consummation of the transactions contemplated hereunder, will not conflict
with, or violate, or require any consent under, and will not result in any
breach or termination of Purchaser's corporate charter, Bylaws or minutes, or
any agreement to which Purchaser is a party, or by which any of its property is
subject, or by which it is bound.
3.05 Permits and Filings
There is no requirement applicable to Purchaser to make any
further filing with, or to obtain any permit, authorization, consent or approval
of any governmental or other regulatory authority as a condition of the lawful
consummation of the transactions contemplated under this Agreement.
3.06 Absence of Lien
The monies and promissory notes to be paid or delivered by
Purchaser under ss. 1.01 shall be paid by Purchaser and received by Shareholders
free and clear of any lien, charge or encumbrance arising out of any agreement
or instrument to which Purchaser is subject or by which its properties are
bound.
3.07 Solvency
At Closing and after payment of the purchase price as required
under ss. 1.01, Purchaser will be, and will remain, solvent under all applicable
federal and state laws and regulations. Purchaser will not intentionally cause
its business to be conducted in a manner that results in its becoming insolvent;
provided, however, that consistent with the foregoing, this covenant shall not
restrict the future business decisions of Purchaser which relate to its or to
BYA's business.
3.08 Corporate Documents
Purchaser has furnished to Shareholders its Certificate of
Incorporation and a Certificate of Good Standing in Delaware dated within thirty
(30) days of Closing and evidence of Purchaser's qualification as a foreign
corporation in California.
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3.09 Purchase for Investment Purposes Only
Purchaser is acquiring the Shares from Shareholders for
investment purposes only and not with the view to the resale or distribution
thereof. Purchaser is an "accredited investor" under the regulations promulgated
under the Securities Act of 1933 as amended. Purchaser has not received any
representations or warranties from BYA or Shareholders other than those
contained in this Agreement and the attached schedules and/or exhibits hereto.
Purchaser represents and warrants that it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment. Purchaser understands and acknowledges that the Shares
have not been registered under the Act or under any state securities acts as may
be applicable and are being sold to Purchaser pursuant to an exemption from
registration under said Act. Shareholders' reliance upon such exemption, is
predicated upon Purchaser's representations and warranties contained herein. In
this regard, Purchaser understands and agrees that there may be affixed to the
certificates representing the Shares a legend advising of the unregistered,
restricted nature of the Shares.
3.10 Reliance on ATC Public Information
The information filed since February 27, 1997, by Purchaser
with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 are materially accurate, complete and not
misleading.
3.11 Springing Representation and Warranty
The information set forth in the draft Offering Memorandum,
subject to completion, with respect to $100,000,000 in Senior Subordinated Notes
due 2007, in the form attached hereto as Exhibit 3.11-A and supplemented by the
information attached hereto as Exhibit 3.11-B is materially accurate, complete
and not misleading. The merger (the "Acquisition Merger") of Purchaser and
Acquisition Corp., a Delaware corporation referred to in said Offering
Memorandum, shall not be completed prior to January 3, 1998.
IV. COVENANTS
4.01 Insurance
For a period of at least three (3) years following Closing,
Purchaser shall cause BYA to continue to carry insurance against risks similar
to that provided in BYA's insurance coverage as of the date of Closing and with
coverage limits not less than $10,000,000 and a deductible not greater than
$250,000 (the "Continuing Insurance"). Prior to or concurrent with Closing,
Shareholders shall purchase and maintain in force an extended period of BYA's
current Errors and Omissions (Professional) Liability Policy ("E&O Insurance")
for a period of three (3) years following Closing.
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4.02 Release by Shareholders
Effective at Closing, each Shareholder hereby releases and
waives all claims he now has against BYA, or the Shares for any past
compensation, bonus, distribution, dividend, or other consideration or claim for
payment from any cause that may have otherwise been due such Shareholders at the
time of Closing, except that Glenn Tofani does not waive his right to payment
under the BYA 401(k) profit sharing plan and neither of the Shareholders waives
any right to payment under BYA's pension plan.
4.03 Collection of Accounts Receivable
A. Any account receivable recorded on the Closing Balance
Sheet or work in process for which revenue is recorded on the Closing Balance
Sheet and warranted as collectible under ss. 2.06B, which has not been collected
by Purchaser within twelve (12) months after Closing, shall be deemed to be
uncollected and uncollectible by Purchaser or BYA, except as Purchaser shall
otherwise agree in writing. Accounts or work-in-process may also be deemed
uncollectible by agreement of the parties as provided in ss. 4.03B. All
uncollected accounts and work-in-process shall be subject to Purchaser's set-off
rights under ss. 1.03 (or, if set-off is not available, then by Purchaser's
indemnification and repayment rights under ss. 1.02). Purchaser's set-off rights
shall be applicable for uncollected accounts or work in process at the earlier
of: (i) twelve (12) months after the Closing Date; or, (ii) such earlier time as
the account is agreed to be uncollectible by Shareholders under this ss. 4.03.
Upon such remedy, the account shall be assigned to Shareholders.
B. Purchaser shall provide Shareholders with a monthly aging
report of the purchased accounts receivable and work-in-process, together with
contact log summary of problem accounts. If, at any time, Purchaser determines
that measures in addition to Purchaser's customary collection procedures (e.g.,
measures, such as mechanics lien, legal action, or referral to collection
agency) should be employed on a specific account to obtain collection, Purchaser
shall notify Shareholders in writing of the measures proposed to be taken. If
Shareholders agree in writing that the proposed extraordinary measures should be
taken, or if Shareholders deem such action to be necessary without notice from
Purchaser, Shareholders shall notify Purchaser in writing of their agreement to
such measures. Shareholders' agreement to the employment of extraordinary
collection measures shall constitute their agreement to having the cost of such
measures subject to remedy by set-off or refund, if set-off is not available
pursuant to this Agreement.
C. At any time the parties may, by mutual written agreement,
deem an account uncollectible, Purchaser shall assign it to Shareholders and
subject it to remedy under ss. 1.03 or, if set-off is not available, a claim for
refund under ss. 1.02. Upon written notice to Purchaser, Shareholders may
request to have any account receivable which is uncollected assigned to
Shareholders. Purchaser shall not unreasonably deny such request. Such request
by Shareholders for assignment shall constitute Shareholders' agreement to
subject it to remedy under ss. 1.03 or, if set-off is not available, a claim for
refund under ss. 1.02.
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4.04 Noncompetition
A. As consideration for the Notes, the Non-Compete Notes and
the Contingent Notes, for a period of twenty (20) years after Closing Date Mr.
Yen shall not, and for a period commencing on the Closing Date and ending two
(2) years after the Closing Date, Mr. Tofani shall not:
(1) Noncompetition. Within the regulated zone, either directly
or indirectly, perform-for-hire or participate in any business or
enterprise (including a sole proprietorship consisting of only Messrs.
Yen or Tofani), which performs the same or similar services in which
BYA has been engaged within one (1) year prior to the Effective Time,
other than for BYA or Purchaser, without the express written consent of
Purchaser. The "regulated zone" means Orange, Los Angeles, San Diego
and Ventura Counties. The services which BYA has been performing,
within one (1) year prior to the Effective Time include (but are not
necessarily limited to): all specialties and subspecialties associated
with any and all geotechnical and environmental services and
capabilities.
(2) Nondisclosure. Use for his benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of
any person, firm, association or company other than BYA or its
affiliates, any confidential information regarding the business
methods, business policies, procedures, techniques, research, or
development projects or results, trade secrets, customers, clients, or
any other confidential information relating to, or dealing with, the
business operations of BYA, Purchaser or their affiliates.
(3) Nonsolicitation - Employees. Either directly or
indirectly, for himself or any person or entity other than BYA or
Purchaser hire or induce or attempt to induce any employee or former
employee of BYA, Purchaser or their affiliates to terminate such
employment. An "employee" shall be considered a "former employee" for a
period of one (1) year following termination of employment with BYA,
Purchaser or their affiliates.
(4) Nonsolicitation - Customers. Within the regulated zone,
and with respect to any customer with whom he has developed a
relationship, or about whom he acquired knowledge of its needs,
preferences, pricing or other information of material competitive value
while associated with BYA, within any location where anyone BYA
performed services for or sent a proposal to is doing business:
directly or indirectly, on behalf of himself or any third parry, make
any sales contact with, or solicit, or accept business from, any
customers, provided, however, that this restriction shall apply only to
products or services which are competitive with those of BYA within one
(1) year prior to the Effective Time.
(5) Use of Names. Within the regulated zone, except for the
benefit of BYA, Purchaser, or their affiliates, use the name "Bing Yen
& Associates" or "BYA" or any customarily utilized portion or
abbreviation thereof as a business name, either
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alone, or in conjunction with, other words, or represent to any
potential client that they are the "old" or "real" BYA or Bing Yen &
Associates.
B. Except as otherwise defined in this section, or as the
context otherwise plainly requires, terms used in this section shall have the
same meaning as elsewhere in this Agreement. Undefined terms shall have their
ordinary meaning. The term "participate in" means "directly or indirectly, for
his or their own benefit, or for, with, or through any other person or entity,
own, manage, operate, control, loan money to, give money to, or participate in
the ownership (except as a noncontrolling owner of less than 5 percent of the
stock of a publicly held corporation), management, operation, or control of, or
be connected as a director, shareholder, officer, employee, partner, member,
advisor, joint venturer, consultant, agent, independent contractor, or otherwise
with, or acquiesce in the use of his name in."
C. Messrs. Yen and Tofani agree that the restrictive covenants
of this ss. 4.04 are reasonable in scope and duration and are necessary to
protect the bona fide confidential business information of BYA, its contracts,
its customer and employee relationships, its assets, its good will and the value
of the Shares. They expressly agree that the customer names and other customer
and business information, both developed by BYA before Closing, or developed by
BYA or Purchaser after Closing, is proprietary, and Messrs. Yen and Tofani agree
that a breach of any of these provisions will be subject to ss.ss. 1.03, 7.03
and 7.16 of this Agreement.
D. If any restrictive covenant contained in this ss. 4.04
shall be deemed by a court or arbitrator to be invalid, illegal, or
unenforceable under the laws of any jurisdiction, by reason of the extent,
duration, or geographical scope thereof or otherwise, the balance of this
section shall remain in effect in such jurisdiction, and the entire agreement
shall remain in effect in all jurisdictions in which such provision is lawful
and enforceable. If any such provision is unenforceable as to any circumstance,
it shall nevertheless remain applicable to all other circumstances. The court or
arbitrator shall be authorized to reform such provision by reducing such extent,
duration, geographical scope, or other provisions hereof, or otherwise modifying
or limiting such provision to the minimum extent necessary to render such
provision enforceable, and in its reformed form such restriction shall be
enforceable in the manner contemplated hereby.
E. The covenants, restrictions and limitations imposed upon
Messrs. Yen and Tofani under this ss. 4.04 are conditioned upon, and shall
remain in effect, only so long as there shall be no failure by Purchaser, its
successors and assigns, to make any one or more of the payments as and when due
and within any applicable grace periods under the Transaction Notes, provided
that Purchaser's recourse to the set-off provisions of ss. 1.03 or to any
provision of law which permits a party to withhold performance following a
material first breach by the other parry shall not constitute breaches or
violations of this Agreement under this paragraph. Without limiting the
generality of the foregoing, any breach by a Shareholder of this ss. 4.04 shall
be subject to arbitration as provided in ss. 7.16 to determine the extent of
damage suffered by Purchaser and/or BYA and the application of all applicable
indemnification and set-off rights under ss.ss. 1.02 and 1.03 hereof.
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F. Nothing contained in this ss. 4.04 shall be construed to
prohibit Shareholders from teaching in, or otherwise being retained or employed
by, a university, college or high school to teach geotechnical, environmental,
engineering and related subjects.
4.05 Public Statements
Before Shareholders, or either of them shall release any
information concerning this Agreement or the transactions contemplated by this
Agreement which is intended for, or may result in, public dissemination thereof,
they shall cooperate with Purchaser, shall furnish drafts of all documents or
proposed oral statements to Purchaser for comments, and shall not release any
such statement or information without the written consent of Purchaser. Nothing
contained herein shall prevent Shareholders from furnishing any information to
any governmental authority, if required to do so by law.
4.06 Books, Records, Access to Information, Cooperation
A. Each party shall provide to the other, with reasonable
promptness following a request in writing not to exceed ten (10) business days,
such information and data with respect to (1) BYA's business before the
Effective Time, (2) this transaction and (3) the parties' ongoing
representations, warranties, covenants and agreements after the Effective Time
pursuant to this Agreement, as may from time-to-time reasonably be requested by
the other party. In the event either Purchaser, or any Shareholder is required
to prepare audited statements, or to produce or compile information for a
government agency which requires access to information or for any other
reasonable purpose, including the verification of any information provided to
the other party relative to this Agreement, the parties shall allow the other
party reasonable access to records, including the nonproprietary working papers
of the other party's accountants, and to provide reasonable cooperative
assistance in the preparation of reports, documents, etc. without charge, except
for reimbursement of any actual out-of-pocket expenses, exclusive of the cost of
in-house staff time. Notwithstanding the foregoing, in the event that a party
is, or anticipates becoming, a party to litigation, this ss. 4.06 or any other
provision of this Agreement shall not be construed to require such party to
provide information to the other which could prevent such party from making a
bona fide claim of attorney/client privilege or such other privileges as may be
applicable with respect to such information.
B. Except for archived job files, neither party shall
intentionally dispose of or destroy any of the records of BYA in its possession,
except in conformity with the procedures set forth in this section. If a party
wishes to dispose of or destroy any of such records, it shall first give thirty
(30) days' prior written notice to the other party of the action it intends to
take, and the other party shall have the right, at its option and expense, upon
prior written notice to the notifying party within such thirty-day period, to
take possession of such affected records within thirty (30) days after the date
of the notice of intent to take possession.
C. Each party shall exercise reasonable care in the care,
custody and maintenance of the records of BYA in its possession. A party shall
be responsible for actual damage caused to the other party only as a result of
its negligence or intentionally wrongful act in maintaining
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the records. Neither party shall have liability to the other party or any other
person as a consequence of the nonexistence of any record, or such party's
inability to locate any record, unless the loss or destruction of the record is
proven, by clear and convincing affirmative evidence, to have been due to the
allegedly possessing party's negligence or intentionally wrongful act.
4.07 Bankruptcy
For a period of one (1) year after Closing, no party to this
Agreement shall file an application or petition for voluntary bankruptcy under
the United States Bankruptcy Code or any application under any similar state or
federal statute.
4.08 Transaction Costs and Expenses
Purchaser, on the one hand, and Shareholders and/or BYA, on
the other hand, shall each pay or cause to be paid their own respective costs
incurred in connection with this transaction, including, without limitation, all
brokerage, finders, legal, accounting, auditing and appraisal fees in
negotiating and preparing this Agreement and in consummating, closing and
carrying out the transactions contemplated hereby. Any costs to be charged to
BYA shall be included on the Closing Balance Sheet and included in the Equity
Value determination.
4.09 Delivery of Property
Purchaser and Shareholders shall each use their best efforts
to avoid opening mail or deliveries which rightfully belong to the other and
shall turn over to the other any property received by the party, including
checks or money, belonging to the other within twenty-four (24) hours after
determining its rightful ownership.
4.10 Related Agreements
Mr. Tofani and BYA shall execute and deliver at Closing the
Related Agreements referenced in ss. 5.01 which require execution by them in
accordance with their terms.
4.11 Continuing Cooperation, Reporting of Changes, Breaches
and Status
The parties shall cooperate in good faith following Closing to
secure to each other the benefits and performance to be provided by this
Agreement and to promptly execute such documents or instruments as shall be
reasonably requested by another party, without charge, to that end. At any time
or times on or after Closing, Shareholders, BYA, and Purchaser shall execute,
acknowledge, and deliver any and all further assurances, documents, and
instruments reasonably requested by the other in order to effectively convey the
Shares and all ownership thereof free and clear of encumbrances or title
defects, except as expressly authorized herein and shall take any other action
consistent with the terms of this Agreement that may reasonably be requested by
the other party in order to effectuate the purposes and intent hereof. Promptly
after becoming aware, the parties shall each advise the other in writing of (i)
the occurrence of any event which renders any of the representations or
warranties set forth herein inaccurate in
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any material respect, and (ii) the failure of the party to comply with or
accomplish any of the covenants or agreements set forth herein in any material
respect.
4.12 Profit Sharing Plan
Shareholders assume all cost, expense and liability for
correcting any underfunding of BYA's pension plan. Shareholders waive any and
all statutes of limitation with respect to this covenant. The limitations
imposed by ss.ss. 7.04 and 1.02C(5) shall not apply to this section ss. 4.12.
4.13 Cooperation Regarding Contingent Achievement
A. Until an average of at least Three Million Dollars
($3,000,000) in "Net Revenue" in any one or more twelve-month period (as
described in the Contingent Notes) has been achieved (the "Net Revenue Target"),
or three (3) years after the Closing Date has passed, whichever occurs first
(collectively, the "Achievement Period"), Purchaser shall cause Mr. Yen to be
employed as BYA's president and CEO at an annual salary of One Hundred Forty
Thousand Dollars ($140,000). In such capacities Mr. Yen shall report to
Purchaser's president, or, in his absence, Purchaser's president's designee. BYA
shall pay to Mr. Yen for a period of three (3) years so long as Mr. Yen is an
employee of BYA, $300 per month as a car allowance. Notwithstanding the
foregoing, Mr. Yen's employment as BYA's president and CEO is subject to the
provisions of ss. 4.13B. During the Achievement Period, Purchaser covenants that
it shall not, and that it shall cause BYA's board of directors to not, interfere
with BYA's business or business operations as conducted by Mr. Yen and the other
BYA officers, including, without limitation, efforts to achieve the Net Revenue
Target, as long as such business and business operations are conducted in a
manner which is consistent with BYA's past practices. Notwithstanding the
foregoing provisions of this ss. 4.13A, Mr. Yen agrees that all fixed fee
contracts over $150,000 and other contracts estimable in good faith to exceed
$150,000 must be approved by the president of Purchaser or the president's
designee, which approval shall not be unreasonably withheld or delayed. Without
limiting the general applicability of ss. 7.03 below, Purchaser acknowledges the
applicability of said ss. 7.03 to this ss. 4.13.
B. Notwithstanding the foregoing provisions of this ss. 4.13A:
(1) Mr. Yen's employment with BYA shall be on an "at will" basis terminable by
BYA or by Mr. Yen at any time without affecting the terms and conditions of the
Contingent Notes; provided, however, that upon any noncompliance by Purchaser of
its covenants under ss. 4.13A, or termination by BYA of Mr. Yen's employment for
reasons other than as described in ss. 4.13(B)(2) or for Mr. Yen's noncompliance
with ss. 4.13C(1), the entire unpaid maximum principal amount of the Contingent
Notes shall be immediately paid to Shareholders irrespective of whether or not
the Net Revenue Target has been achieved; and (2) should Mr. Yen die or become
disabled for a period of six (6) or more consecutive months during the
Achievement Period, he and his beneficiaries and heirs shall still be paid the
entire unpaid principal amount due to him under the Contingent Notes, but only
if and when owed thereunder.
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C. Notwithstanding the foregoing provisions of this ss. 4.13,
(1) Mr. Yen shall be required while employed by BYA to work at least forty (40)
hours per month for one full year from the Closing Date, and (2) if Mr. Yen
terminates his employment at any time during the first year after the Closing
Date for reasons other than as described in ss. 4.13B or other than any
noncompliance by Purchaser under ss. 4.13A, Mr. Yen shall no longer be eligible
for payments under the Contingent Notes issued to him, such Contingent Note
shall thereupon terminate and Mr. Yen shall cancel and assign such Contingent
Note back to Purchaser.
4.14 BYA Employee Bonuses
On or before December 13, 1997, Purchaser shall cause BYA to
pay to its employees the sum of $50,000 as a December bonus. Mr. Yen in
consultation with other officers of BYA shall determine who such bonus will be
paid to and in what amounts. Such bonus will not be used to provide additional
compensation to the Shareholders.
4.15 Receipt of Notices
Purchaser shall deliver or cause to be delivered to
Shareholders all notices delivered or to be delivered to holders of the Senior
Subordinated Notes identified in Exhibit 3.11-A within the time frames required
for the delivery of such notices to the holders of such Senior Subordinated
Notes.
4.16 Transaction Notes Are Senior Indebtedness
Subject only to the effectiveness of the Acquisition Merger,
Purchaser hereby represents, warrants and covenants for all purposes that the
Transaction Notes are Senior Indebtedness as referred to in Exhibit 3.11-A
hereto.
4.17 Acceleration of Tofani Note, Transaction Notes
A. Shareholders are accepting the Transaction Notes, including
without limitation their amount, terms and conditions, based in material part on
the material accuracy and completeness of the information set forth in the
Offering Memorandum, subject to completion, with respect to $100,000,000 in
principal amount of Senior Subordinated Notes due 2007, in the form attached
hereto as Exhibit 3.11-A and supplemented by the information attached hereto as
Exhibit 3.11-B. In the event both the Acquisition Merger is effected and either
(a) such Senior Subordinated Notes as finally issued, or the information in such
Offering Memorandum as finally distributed, are/is different from the form and
description attached as Exhibits 3.11-A and 3.11-B hereto in a manner which
materially and adversely affects Purchaser's ability to meet its obligations as
set forth in the Transaction Notes or (b) there is any unwaived or uncured
default under said Senior Subordinated Notes subsequent to any applicable grace
period, then either of the Shareholders or other holders of the Transaction
Notes shall have the right to give ten (10) calendar days written notice of
default under the Transaction Notes to Purchaser, whereupon the entire principal
balance of the Transaction Notes and all accrued and unpaid interest thereon
shall become immediately due and payable at the option of the applicable
Shareholder or the then holder of the Transaction Notes.
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B. Shareholders are accepting the Transaction Notes, including
without limitation their amount, terms and conditions, based in material part on
the material accuracy and completeness of the information filed by Purchaser
since February 28, 1997, with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. In the event such
information is inaccurate, incomplete or misleading in a manner which materially
and adversely affects Purchaser's ability to meet its obligations as set forth
in the Transaction Notes, then either of the Shareholders or other holders of
the Transaction Notes shall have the right to give ten (10) calendar days
written notice of default thereof to Purchaser, whereupon the entire principal
balance of the Transaction Notes and all accrued and unpaid interest thereon
shall become immediately due and payable at the option of the applicable
Shareholder or the then holder of the Transaction Notes.
C. If Purchaser fails to pay in full when due any installment
of principal and interest under the Tofani Note or any of the Transaction Notes,
or in the event of Purchaser's insolvency or bankruptcy under any applicable
federal or state laws or regulations, or in the event Purchaser materially
defaults or breaches its warranty, performance or obligation under any material
provision of Articles III or IV of this Agreement, undertaken, made or to be
performed by Purchaser hereunder, then either of the Shareholders or other
holders of the Tofani Note or any of the Transaction Notes shall have the right
to give written notice of default thereof to Purchaser. In the event Purchaser
fails to cure any such default within ten (10) calendar days following delivery
of such written notice to Purchaser, the entire principal balance of the Tofani
Note and the Transaction Notes and all accrued and unpaid interest thereon shall
become immediately due and payable at the option of the applicable Shareholder
or the then current holder of the Tofani Note and the Transaction Notes,
respectively.
D. Subject to the limitations described in the following
sentence, following the Acquisition Merger the entire principal balance of the
Transaction Notes and all accrued and unpaid interest thereon shall be paid
prior to payment of any principal on the Senior Subordinated Notes described in
Exhibit 3.11-A hereto. Any principal or interest on the Non-Compete Notes and
the Contingent Notes not otherwise then due and payable at the time of principal
prepayment on said Senior Subordinated Notes shall be paid by Purchaser into a
trust (administered by a bank or trust company licensed in California with the
cost to be paid by Purchaser) for the benefit of Shareholders and Purchaser to
disburse the amounts paid into said trust to Shareholders and Purchaser in
accordance with the conditions precedent and subsequent, and subject to the
rights of acceleration, set-off, withholding and arbitration in this Agreement
and the Non-Compete Notes and Contingent Notes in the same manner as though no
prepayment of principal on said Senior Subordinated Notes had been made.
Notwithstanding the foregoing sentences, Purchaser shall have no duty to pay or
prepay any principal or interest on the Transaction Notes not then due and
payable in the event principal on said Senior Subordinated Notes is (i)
refinanced to reduce the interest rate thereon (and therewith other minor
revisions to the provisions thereof may be made which do not materially
adversely affect Purchaser's
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ability to pay the Transaction Notes) or (ii) reduced in whole or in part with
the proceeds of an offering of equity securities by Purchaser.
V. RELATED AGREEMENTS
5.01 Related Agreements
The following related agreements (the "Related Agreements")
shall be executed at Closing by the applicable parties:
A. An Employment Agreement between Glenn Tofani and BYA; and
B. An Employment Agreement between Larry Taylor and BYA.
VI. CLOSING
6.01 Closing, the Closing Date, and Effective Time
Closing of the transactions contemplated hereunder ("Closing")
shall take place at the offices of McDermott, Will & Emery, 2049 Century Park
East, 34th floor, Los Angeles, California, 8:30 a.m., November 26, 1997 unless
otherwise agreed in writing among the parties hereto (the "Closing Date"). The
effective time for the consummation of the transactions contemplated in this
Agreement to occur "at Closing" or "on the Closing Date" shall be 11:59 p.m. on
the Closing Date (the "Effective Time").
6.02 Shareholders' Obligations at Closing
At or prior to Closing, Shareholders shall deliver, or cause
to be delivered, to Purchaser, in form satisfactory to Purchaser, the following:
A. Stock certificates for all of the Shares, duly assigned to
Purchaser by Shareholders and their spouses, if any.
B. A true copy of the Minutes of the Meeting of BYA's Board of
Directors authorizing the execution, delivery, and performance of this
Agreement and any Related Agreement to which BYA is a party and
designating the officers entitled to execute it.
C. A Certificate of Good Standing for BYA issued within
twenty (20) days prior to the Closing Date by the Secretary of State
of California.
D. All other schedules, certificates, and other documents
required by this Agreement to be delivered by Shareholders on or
before Closing.
E. Their resignations as directors of BYA.
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6.03 Purchaser's Obligations at Closing
At or prior to Closing, Purchaser shall deliver or cause to be
delivered to Shareholders, in executed form satisfactory to Shareholders, the
following:
A. The cash payable pursuant to ss. 1.01B(1).
B. The Notes, Non-Compete Notes and Contingent Notes.
C. A Certificate of Good Standing for Purchaser from the
Secretary of State of Delaware as of a date not more than twenty (20)
days prior to the Closing Date.
D. A true copy of the Minutes of the Meeting of the Board of
Directors of Purchaser authorizing its execution, delivery, and
performance of this Agreement and designating the office entitled to
execute it.
E. All other schedules, certificates, and other documents
required by this Agreement to be delivered by Purchaser on or before
Closing.
VII. MISCELLANEOUS
7.01 Brokerage Fees and Shareholders' Legal Fees
A. BYA acknowledges that Global Capital Markets, Incorporated
acted as a broker for BYA relative to this transaction. Subsequent to the
Closing, Shareholders shall indemnify and hold harmless BYA and Purchaser from
any liability for any commission to Global Capital Markets, Incorporated,
regardless of when such commission was or will be earned. BYA and Shareholders
acknowledge that Carlsmith Ball, Wichman, Case & Ichiki acted as legal counsel
for BYA and Shareholders relative to this transaction. Subsequent to the Closing
Shareholders shall indemnify and hold harmless BYA and Purchaser from any
liability for the obligation to pay any fee to Carlsmith, Ball, Wichman, Case &
Ichiki.
B. Purchaser acknowledges that Goldmark Advisers, Inc. acted
as a broker for Purchaser relative to this transaction, and Purchaser further
acknowledges that it is obligated to pay Goldmark Advisers, Inc. a commission
for such services. Purchaser agrees to pay such commission and to indemnify and
hold harmless Shareholders from any liability for the obligation to pay such
commission to Goldmark Advisers, Inc.
C. Except for such brokerage arrangements specified in ss.ss.
7.01A and B, neither Purchaser nor BYA nor Shareholders have consented to or
authorized any broker or third party to act on their behalf, directly or
indirectly, as a broker or finder in connection with the transaction
contemplated by this Agreement. In the event any claim is made for a broker's or
finder's fee other than that described in ss.ss. 7.01A and B in connection with
the transactions contemplated hereunder, the party responsible for retaining or
securing said broker or finder shall be solely responsible for the payment of
any broker's or finder's fees incurred as a result
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thereof. Further, the responsible party shall indemnify the other party against
any loss or liabilities by reason of such broker's or finder's fees.
7.02 Further Actions
At any time and from time to time, each party shall, at its or
his expense, take such actions and to execute and deliver such documents as may
be reasonably necessary to effectuate the purposes of this Agreement.
7.03 Availability of Equitable Remedies
Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages, either Purchaser, or either of
Shareholders shall be entitled, in addition to any other right or remedy
available to it or them, to a temporary restraining order, preliminary
injunction and an injunction restraining such breach or threatened breach and to
specific performance of any such provision of this Agreement, and the parties
hereby consent to the issuance of such an injunction and to the ordering of
specific performance without the requirement of a bond or proof of immediate and
irreparable harm.
7.04 Limitation on Survival of Representations and Warranties
Except as otherwise provided in this Agreement or construed by
its context, the representations and warranties contained in, or made pursuant
to, this Agreement shall survive the Closing Date for a period of three (3)
years, irrespective of any investigation made by or on behalf of any party.
7.05 Modification
The Agreement and the Exhibits, Schedules, and Related
Agreements hereto set forth the entire understanding of the parties with respect
to the subject matter hereof, supersede all existing agreements among them
concerning such subject matter, and may be modified only by a written instrument
duly executed by each party.
7.06 Notices
All notices, elections, reports or other correspondence
required or permitted hereunder shall be in writing and given or delivered by
certified mail, postage prepaid, delivered by overnight express courier,
delivery fees prepaid, or transmitted by fax with receipt confirmed, to the
party to whom directed at the below specified addresses:
If to Purchaser:
ATC GROUP SERVICES INC.
104 E. 25th Street, Tenth Floor
New York, New York 10010-2917
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If to Shareholders:
Mr. Bing Yen
17701 Mitchell North
Irvine, California 92614
Mr. Glenn Tofani
17701 Mitchell North
Irvine, California 92614
Any such notice shall be deemed given one (1) business day
following receipt thereof. The address of a party may be changed in accordance
with the notice provisions of this section.
7.07 Waiver
Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
7.08 Binding Effect
The provisions of this Agreement shall be binding upon, and
inure to, the benefit of Purchaser and its respective successors and assigns,
and Shareholders and their assigns, heirs, and personal representatives, and
shall inure to the benefit of the indemnitees and their respective successors,
assigns, heirs, and personal representatives.
7.09 No Third-Party Beneficiaries
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in ss. 7.08).
7.10 Severability
If any provision of this Agreement is invalid, illegal or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
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7.11 Headings; Gender
The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement. Each reference to the masculine, feminine or neuter gender shall
include reference to all other genders unless the context otherwise requires.
7.12 Governing Law
To the extent permitted by law, this Agreement shall be
governed by and construed in accordance with the laws of the State of California
without giving effect to conflict of laws. To the maximum extent permitted by
law, any action or proceeding initiated by Purchaser, any Shareholders, any
indemnitee, or any other party claiming rights under this Agreement shall be
brought in an appropriate state or federal court in Orange County, California,
and any person claiming rights under this Agreement consents to the jurisdiction
and proper venue of such forum.
7.13 Separate Counterparts
This Agreement is being executed in several identical
counterparts, each one of which shall be considered an original and all of which
when taken together shall constitute but one instrument.
7.14 Incorporation of Recitals, Exhibits and Schedules
All exhibits and schedules attached hereto are incorporated
herein by this reference and expressly made a part of this Agreement.
7.15 Obligations in Payment Ratio
Notwithstanding anything in this Agreement to the contrary,
the representations, warranties, covenants, and agreements of Shareholders in
this Agreement are made in proportion to the Payment Ratio, and Shareholders
shall only be liable to Purchaser in the Payment Ratio for any liability under
this Agreement.
7.16 Arbitration; Attorneys' Fees; Undisputed Actions for
Payment
In the event there shall arise any dispute or claim in law or
equity arising out of this Agreement, or any breach thereof, or any resulting
transaction between the parties under this Agreement, the parties specifically
agree that such dispute shall be submitted to and decided by a neutral, binding
arbitration of three (3) arbitrators selected in accordance with the procedures
of the American Arbitration Association at a location mutually agreed to in
writing by the parties, or if they cannot agree, at the office of McDermott,
Will & Emery, Newport Beach, California and in accordance with the Commercial
Arbitration Rules of the American Arbitration
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Association and not by court action, except as provided by California law for
judicial review of arbitration proceedings, with appropriate recovery of costs,
escrow fees, attorneys' and arbitration fees being awarded and apportioned by
the arbitrators in accordance with the comparative fault awarded by the
arbitrators. Judgment of the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. Anything in the foregoing
notwithstanding, in the event either of the Shareholders or the holder thereof
has given written notice of default to Purchaser under the Tofani Note or any of
the Transaction Notes and Purchaser fails to dispute the merits of such written
demand within ten (10) calendar days following delivery of such written notice
to Purchaser, then such Shareholder or holder shall have the right to proceed to
enforce his or its rights under the subject instrument(s) in any court of
competent jurisdiction without proceeding to arbitration in accordance with this
paragraph.
7.17 Opportunity to Cure
All parties to this agreement shall be afforded a period of
ten (l0) days following notice thereof to cure any alleged breach of this
Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first set forth above.
ATC GROUP SERVICES INC. BING YEN & ASSOCIATES, INC.
By: /s/ Nicholas J. Malino By: /s/ Bing Yen
------------------------- ----------------------
Name: Nicholas J. Malino Bing Yen
Title: Senior Vice President President and CEO
/s/ Bing Yen
----------------------
BING YEN
/s/ Glen Tofani
----------------------
GLEN TOFANI
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EXHIBIR 10.10
STOCK PURCHASE AGREEMENT
This agreement (the "Agreement") is entered into as of the 4th day of
November, 1997, by and among ATC GROUP SERVICES INC., a Delaware corporation
with its principal office at 104 East 25th Street, New York, New York 10010 (the
"Purchaser"); CONNING INSURANCE CAPITAL LIMITED PARTNERSHIP II, a Delaware
limited partnership with its principal office at City Place II, 185 Asylum
Street, Hartford, CT 06103 ("Conning II"); CONNING INSURANCE CAPITAL
INTERNATIONAL PARTNERS II, a Cayman Island limited partnership with its
principal office at City Place II, 185 Asylum Street, Hartford, CT 06103
("Conning Intl. II"); CULLINANE & DONNELLY VENTURE PARTNERS, LIMITED
PARTNERSHIP, a Connecticut limited partnership with its principal office at One
Century Tower, 265 Church Street, New Haven, CT 06510 ("Cullinane"); LAWYERS
TITLE ENVIRONMENTAL INSURANCE SERVICES AGENCY, INC., a Virginia corporation with
its principal office at 6630 West Broad Street, Richmond, VA ("LTEISA");and
CHARLES L. PERRY, JR., a Connecticut resident residing at 61 High Farms Road,
West Hartford, CT 06107 ("Perry") (Conning II, Conning Intl. II, Cullinane, and
LTEISA are referred to collectively as the "Preferred Shareholders" and with
Perry are referred to collectively as the "Qualified Stockholders."
RECITALS
Environmental Warranty, Inc. is a Connecticut corporation with its
principal office at 970 Farmington Avenue, West Hartford, CT 06107 ("EWI"). EWI
has authorized 20,000 shares of capital stock consisting of 15,000 shares, no
par value, designated as Common Stock and 5,000 shares, no par value, designated
as Preferred Stock, of which 2,668 are designated Series A Preferred Stock
("Series A"), 1334 are designated Series B Preferred Stock ("Series B") and 998
are undesignated (and unissued). The Series A and Series B are all issued and
outstanding and are held by the Preferred Shareholders in the numbers indicated
on Exhibit A attached hereto. The Preferred Shareholders have invested
$4,000,000 in EWI, and, as of June 30, 1997, had an aggregate liquidation
preference in excess of $5,300,000, taking into account accrued and unpaid
dividends.
EWI has 1,100 shares of Common Stock issued and outstanding which are
held by seven (7) individuals (the "Common Shareholders") as set forth on
Exhibit A attached hereto.
The Purchaser desires to acquire all of the issued and outstanding
shares of stock and ownership rights in any form of EWI in exchange for cash,
stock and other consideration as hereinafter provided, and Qualified
Stockholders desire to sell the EWI stock which they own, and, on or before the
Closing Date, Preferred Shareholders will seek to cause the 1100 outstanding
shares of Common Stock to be tendered (the "Tendered Common Shares") by the
holders thereof
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(the "Tendering Common Shareholders"), so that at Closing Escrow Agent, on
behalf of the Preferred Shareholders and Tendering Common Shareholders, will be
able to deliver to Purchaser stock certificates, duly endorsed for transfer, in
blank or to Purchaser, representing substantially all of the issued and
outstanding capital stock of EWI. The Preferred Shareholders and the Tendering
Common Shareholders are referred to herein as the "Tendering Shareholders."
Qualified Stockholders and Pepe & Hazard LLP have entered into a
certain escrow agreement dated as of October 1, 1997, pursuant to which Pepe &
Hazard LLP, as escrow agent ("Escrow Agent"), on behalf of the Qualified
Stockholders, will (i) deliver the certificates representing the issued and
outstanding Preferred Stock of EWI to the Purchaser, (ii) deliver the
certificates representing the Tendered Common Shares to the Purchaser, and (iii)
distribute the consideration received from the Purchaser hereunder for such
capital stock (the "Escrow Agreement").
On the basis of the representations, warranties, covenants, and
agreements contained in this Agreement and subject to the terms and conditions
of this Agreement, the parties agree as follows:
I. SALE AND PURCHASE
1.01 Terms of Sale and Purchase
(a) At Closing, Qualified Stockholders shall sell and deliver to
Purchaser certificates for the shares set forth after their names in Schedule A
attached hereto, endorsed to effect the assignment to Purchaser, and shall have
Escrow Agent deliver to Purchaser certificates evidencing the Tendered Common
Shares, all endorsed for transfer; provided that tender of 1000 shares of the
Common Stock of EWI, which exclude the 100 shares of EWI Common Stock owned by
Thomas S. Lux, shall satisfy the obligation of the Qualified Stockholders with
respect to the delivery of shares of EWI. All shares of the capital stock of EWI
so tendered or delivered are referred to as the "Shares."
(1) At Closing Date, Qualified Stockholders shall provide to
Purchaser the Closing Financial Statements (as defined in ss.2.03). Any
disagreements between Purchaser and Qualified Stockholders concerning
EWI's final net tangible book value shall be resolved in accordance
with Section 2.03(c).
(b) As consideration for the Shares, the Tendered Common Shares and the
other promises, agreements, warranties, and covenants hereof, the Purchaser
shall:
(1) Transfer and pay to Escrow Agent, as agent of and for the
benefit of the Qualified Stockholders, at Closing, the sum of Eight
Hundred Twenty-Eight Thousand Dollars ($828,000.00) payable as follows:
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(a) One Hundred Fifty Thousand and 00/100 Dollars
($150,000.00) by money order, cashier's check or
wire transfer of immediately available funds
payable to Escrow Agent pursuant to Escrow
Agent's instructions, and
(b) the Purchaser's conditional, non-negotiable
promissory note evidencing Purchaser's obligation
to pay to the Escrow Agent, as agent of and for
the benefit of Qualified Stockholders, the sum of
Six Hundred Seventy-Eight Thousand and 00/100
Dollars ($678,000.00), with no interest thereon,
substantially in the form of Exhibit B (the
"Note"). The Note shall provide for the payment
of three substantially equal annual installments
of principal without interest on the three
successive anniversary dates of the Closing Date.
The Note shall be subject to the condition that
Purchaser shall have available to it the rights
of set-off against payments to be made under the
Note in accordance with the provisions of Section
1.03.
(2) Issue Thirty-Three Thousand (33,000) shares of Purchaser's
unregistered, restricted common stock (the "ATC Stock") in the names
and for the number of shares set forth in Schedule 1.01(b)(2) attached
hereto. Within thirty (30) days after Closing, Purchaser shall deliver
to the Escrow Agent the certificates for the ATC Stock, marked with
ATC's customary securities legend reflecting the fact that the shares
are unregistered and that their transfer is subject to restrictions, in
the names and for the number of shares set forth in Schedule 1.01(b)(2)
attached hereto.
(c) On behalf of the Tendering Shareholders, Robert E. Clifford
("Clifford") and William A. Gildea, Jr. ("Gildea"), Escrow Agent shall be
responsible for the distribution of the cash paid under Section 1.01(b)(1)(a),
the cash payments made under the Note, and the ATC Stock transferred under
Section 1.01(b)(2), in accordance with the Escrow Agreement. The Qualified
Stockholders acknowledge that payment and delivery to the Escrow Agent of the
items set forth in Section 1.01(b) hereof satisfies the Purchaser's obligations
to the Qualified Stockholders under that section.
1.02 Indemnity Against Debts and Liabilities
(a) Subject to the limitation to the value of the Consideration
received or receivable provided for in Section 1.02(c)(2), in addition to
Purchaser's other rights and remedies available at law or in equity (and not by
way of limitation), each of the Qualified Stockholders, severally, agrees to
indemnify and hold harmless EWI, the Purchaser, and their employees and
successors against and in respect of any and all:
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(1) Claims, suits, actions, proceedings (formal or informal),
governmental investigations, judgments, deficiencies, set-offs,
damages, settlements, liabilities, and reasonable legal and other
expenses (including reasonable attorneys' fees and defense costs) as
and when incurred, arising out of, or based upon, any breach of any
representation, warranty, covenant, or agreement of such Qualified
Stockholder contained in this Agreement or under any of the Related
Agreements;
(2) Debts or liabilities of any kind and claims, liens,
set-offs, suits, actions, and proceedings (formal and informal) of
persons or entities and related judgments, deficiencies, damages,
settlements, set-offs, liens, liabilities, and legal and other expenses
(including reasonable attorneys' fees) as and when incurred arising out
of or based upon the acts, omissions, contractual performance or
conduct of the business of EWI before the Effective Time, except to the
extent expressly assumed by Purchaser and as more fully set forth on
Schedule 1.02(a) (the "Assumed Liabilities");
(a) The indemnity provided by this Section 1.02(a)(2)
shall explicitly include (but is not limited to)
the excess of (I) the sum of (X) the expense of
resolving all claims in connection with the
litigation concerning severance compensation with
EWI's former employee, Thomas S. Lux (including
claims under the $50,000 litigation bond which
has been posted by EWI) and (Y) the expense of
purchasing the EWI Common Stock held by Thomas S.
Lux (if any), over (II) the reserve therefor
listed on the Closing Balance Sheet; and
(b) Any loss, damage or cost for which the Qualified
Stockholders have agreed to indemnify Purchaser,
EWI or their employees under any provision of
this Agreement.
(b) In addition to Qualified Stockholders' other rights and remedies
available at law or in equity (and not by way of limitation), Purchaser agrees
to indemnify and hold harmless the Qualified Stockholders and their employees
and successors against and in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or informal),
governmental investigations, judgments, deficiencies, set-offs,
damages, settlements, liabilities, and reasonable legal and other
expenses (including reasonable attorneys' fees and costs of defense) as
and when incurred, arising out of, or based upon, any breach of any
representation, warranty, covenant, or agreement of Purchaser contained
in this Agreement or any of the Related Agreements;
(2) Debts or liabilities of any kind and claims, liens,
set-offs, suits, actions, and proceedings (formal and informal) of
persons or entities and related judgments,
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deficiencies, damages, settlements, set-offs, liens, liabilities, and
reasonable legal and other expenses (including reasonable attorneys'
fees) as and when incurred arising out of (i) the business of EWI after
the Effective Time, except for EWI's debts or liabilities not expressly
assumed by Purchaser as Assumed Liabilities; (ii) based upon the acts,
omissions, contractual performance or conduct of the business of
Purchaser, whether before or after the Effective Time; or (iii) out of
the Assumed Liabilities;
(a) The indemnity provided by this Section 1.02(b)(2)
shall explicitly include (but is not limited to)
the sum of (X) the expense of resolving all
claims in connection with the litigation with
EWI's former employee, Thomas S. Lux (including
claims under the $50,000 litigation bond which
has been posted by EWI), including all settlement
amounts, all attorneys' fees and other defense
costs relating thereto and (Y) the expense of
purchasing the EWI Common Stock held by Thomas S.
Lux (if any), as limited in Section 1.02(c)(8)
below; and
(b) Any loss, damage or cost for which the Purchaser
has agreed to indemnify Qualified Stockholders
under any provision of this Agreement.
(c) The parties' respective indemnity obligations hereunder shall be
subject to the following terms, limitations and conditions:
(1) Purchaser and the Qualified Stockholders shall each give
the other prompt notice of any allegedly indemnified item incurred,
asserted or threatened on the basis of which an indemnitee intends to
seek indemnification from an indemnitor as provided herein; provided,
however, that the obligation of an indemnitor shall be reduced for the
failure to give notice at any particular time only to the extent that
the indemnitor has been actually prejudiced thereby. Each indemnitor
shall have the right (but not the obligation) to select and be
represented by counsel of its choice, to manage its own legal
representation or defense and to settle any claim, debt or other
indemnified matter hereunder; provided, however, that if any such
settlement would not accomplish a complete release or satisfaction of
such claim, debt or other matter, then the indemnitor shall be required
to obtain the indemnitee's prior written consent to such settlement.
(2) With the exception of claims covered by insurance to the
extent of such coverage (including the deductible), each Qualified
Stockholders' indemnity obligation hereunder shall be limited to the
value of his or its allocable share of the amount of consideration,
including the value of the ATC Stock (valued as of the date received),
cash
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and amounts payable under the Note, which Purchaser either has paid or
is obligated to pay under this Agreement to such Qualified Stockholder.
(3) The parties' respective indemnity obligations hereunder
(i) are limited to individual losses, claims, etc., having a value of
$1,000.00 or more (an "Indemnified Claim"); and (ii) only arise when
Indemnified Claims, in the aggregate, exceed $10,000.00 (the "Indemnity
Claim Threshold").
(4) The following are not subject to the Indemnified Claim
Threshold and are covered from the first dollar over any amount
reserved therefor on the Closing Balance Sheet: (i) Qualified
Stockholders' warranty that accounts receivable and recorded work in
process, net of reserves, will be collected as specified in Section
2.06(b); and (ii) Qualified Stockholders' warranty in Sections 2.06(b)
or 2.07(b) that there are no unearned billings or receipts in excess of
reserves for such purpose on the Closing Balance Sheet.
(5) With respect to any claim for which an indemnitor shall
indemnify any indemnitee, the indemnitor shall be subrogated to all
rights of indemnitees against any and all third parties up to the
amount paid by indemnitor to, or on behalf of, indemnitees or set-off
against an indemnitor.
(6) No party shall be liable for that portion of any claim for
which an indemnitee actually receives the cost of defense or insurance
proceeds covering such claim (the deductible pertaining to any such
insurance shall not be considered to be insurance proceeds or cost of
defense).
(7) The indemnity agreements contained in this Agreement shall
inure only to the benefit of Purchaser, EWI and Qualified Stockholders,
respectively, (and their respective successors and employees to the
extent they are indemnitees), and shall not be for the benefit of any
other person or entity. These indemnity provisions shall not be
construed to abrogate the corporate liability shield as provided by
law, to extend a right of action to any third party not otherwise
available, or to enlarge the underlying liability of any indemnitor or
indemnitee to any third party.
(8) The indemnity obligation contained in Section
1.02(b)(2)(a) is limited to the reserve therefor set forth on the
Closing Balance Sheet (the "Lux Reserve"); provided, however, that the
Purchaser is obligated to defend the Lux litigation in good faith and
to mitigate damages thereunder and agrees not to settle such litigation
for an amount exceeding the Lux Reserve without the consent of the
Qualified Stockholders, which consent will not be unreasonably
withheld.
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1.03 Right of Set-Off
(a) Without limiting such other rights as it may have at law or equity
or by agreement, the Purchaser shall have the right to set-off against, and
withhold from, any payment due to Escrow Agent as Holder under the Note: (i) any
amount necessary to cure or remedy any breach, default or deficiency of
performance or warranty by Qualified Stockholders under this Agreement; (ii) any
amount for which Purchaser or EWI (or their successors) is entitled to
indemnification under Section 1.02(a); and (iii) Purchaser's or EWI's reasonable
costs or expenses (including reasonable attorneys' fees) related to (i) or (ii).
Purchaser shall have no right to set-off against salary or commission payments
to Perry under Perry's Employment Agreement.
(b) Subject to the procedures of Section 1.03(c) below, it shall not be
necessary that a breach, default or Indemnified Claim or a threatened breach,
default or Indemnified Claim has resulted in actual damage to Purchaser, EWI or
their successors or employees for Purchaser to exercise its set-off rights
provisionally under this section, but rather Purchaser shall have the right to
withhold payment provisionally to cover the future effects of any breach,
default, or Indemnified Claim or threatened breach, default or Indemnified Claim
pending actual conclusion of the matter, provided that Purchaser shall have
produced sufficient objective evidence of facts and sufficient supporting legal
authority for a competent, experienced attorney to conclude that:
(1) Either the loss-threatening event has occurred or there is
a substantial probability that it will occur;
(2) There is a substantial probability that the occurrence or
probable occurrence will cause a loss;
(3) An action to hold the party liable for the loss could
withstand a motion to dismiss or a motion for summary judgment;
(4) There is a substantial probability that the loss,
including associated attorney fees and costs of defense, will be as
great as the amount asserted for provisional set-off;
(5) Either there is a substantial issue as to whether an
available insurance policy provides coverage for the claim, there is a
substantial potential that the insurance coverage available will not be
adequate in amount to pay the portion of the loss asserted as a set-off
or there is a deductible to be satisfied with respect to such
insurance; and
(6) If the set-off is not asserted at the present time,
insufficient funds may remain following the next payment to enable the
Purchaser to protect its interests through the exercise of its set off
rights.
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If such loss or damage does not, in fact, occur, Purchaser shall then pay the
provisionally withheld amount to Escrow Agent, on behalf of the Qualified
Stockholders.
(c) Prior to exercising its right of set-off under this Section 1.03,
Purchaser must give written notice to Qualified Stockholders of the facts which
Purchaser asserts give rise to such right and the amount Purchaser intends to
set-off (the "Set-Off Notice").
(1) If within fifteen (15) days after any Set-Off Notice
Purchaser does not receive notice from any Qualified Stockholder of his
or its intention to contest such set-off ("Set-Off Contest Notice"),
Purchaser may exercise its right of set-off under this Section 1.03
with respect to the next installment due under the Note.
(2) If within fifteen (15) days after any Set-Off Notice,
Purchaser receives a Set-Off Contest Notice from any Qualified
Stockholder, Purchaser shall submit its claim for set-off, and each
Qualified Stockholder opposing such set-off shall submit the basis for
his or its opposition to such set-off, to Mediation Consultants LLC, 1
Long Wharf, New Haven, Connecticut 06511, with all facts supporting
their respective positions.
(3) The parties agree to proceed with such mediation process
in good faith and without delay in accordance with the directives of
the mediator.
(a) The decision of the mediator shall be binding and
effective upon the parties and shall be
non-appealable.
(b) If the mediator decides in favor of Purchaser,
Purchaser may exercise its right of set-off under
this Section 1.03 with respect to the next
installment or successive installments due under
the Note for the amount awarded by the mediator
which may include expenses incurred in connection
with the mediation process.
(c) If the mediator decides in favor of the opposing
Qualified Stockholder(s), Purchaser may not
exercise its right of set-off under this Section
1.03 with respect to the amount claimed in the
Set-Off Notice and will pay such Qualified
Stockholders the expenses they incurred in
connection with the mediation process.
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(d) If while such mediation process is pending, an
installment payment under the Note comes due, the
Purchaser shall pay such installment payment net
of its claimed set-off. If thereafter the
mediator decides in favor of the opposing
Qualified Stockholder(s), the Purchaser shall,
within three (3) days of date on which the
mediator issues his decision, make a payment of
the difference between the amount of the
installment which was due under the Note and the
amount which was previously paid plus interest in
the amount of 10% per annum, compounded daily,
for the period during which such partial payment
was due but not paid.
(d) Subject to the provisions of this Section 1.03, the Purchaser's
right of set-off, provided for in this Section 1.03, shall not be contingent in
any way upon or subject to allocation of the amount of such set-off, severally,
among the Qualified Stockholders by Purchaser. Any such allocation shall be the
responsibility of the Qualified Stockholders and shall be handled by separate
agreement with the Escrow Agent.
II. REPRESENTATIONS AND WARRANTIES OF QUALIFIED STOCKHOLDERS
As a material inducement to Purchaser to enter into this Agreement,
Qualified Stockholders, severally, represent and warrant to the Purchaser as
follows:
2.01 Organization and Qualification
(a) EWI has no subsidiary or affiliated corporations or business
enterprises of any type. Schedule 2.01 sets forth as to EWI: its place of
incorporation, principal place(s) of business, jurisdictions in which it is
qualified to do business, and locations in which it currently maintains a place
of business. EWI is a corporation duly organized, validly existing, and in good
standing under the laws of Connecticut, with all requisite power and authority,
and all necessary consents, authorizations, approvals, orders, licenses,
certificates, and permits of and from, and declarations and filings with, all
federal, state, local, and other governmental authorities and all courts and
other tribunals, to own, lease, license, and use its properties and assets and
to carry on the business in which it is now engaged. EWI is duly qualified to
transact the business in which it is engaged and is in good standing as a
foreign corporation in every jurisdiction in which its ownership, leasing,
licensing, or use of property or assets or the conduct of the business makes
such qualification necessary.
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(b) EWI has furnished to the Purchaser its certificate of incorporation
(or other charter document) and by-laws and all amendments thereto, as presently
in effect, certified by the Secretary of the corporation. EWI is not in
violation or breach of, or in default with respect to, any term of its
certificate of incorporation (or other charter document) or by-laws. The
corporate minute book of EWI, as furnished to Purchaser, is true and complete
and accurately reflects all proceedings to date of EWI's directors and
shareholders.
2.02 Capitalization
(a) Schedule 2.02 correctly sets forth: (i) all authorized, issued and
outstanding capital stock and all ownership interests in EWI of any type,
including all options, warrants or other rights under which an ownership right
of any type may be acquired; (ii) the name and address of each owner of, or
claimant to, any such right. Except as set forth on Schedule 2.02, each of such
outstanding shares or rights is validly authorized, validly issued, fully paid,
and nonassessable, has not been issued and is not owned or held in violation of
any federal or state securities law or regulation or any preemptive right of
stockholders, and is owned of record and beneficially by the person so listed.
There is no commitment, plan, arrangement to issue, option, warrant, security,
or other right calling for the issuance of, any share of capital stock or other
ownership interest in EWI or any security or other instrument convertible into,
exercisable for, or exchangeable for capital stock of or ownership in EWI other
than as set forth in Schedule 2.02.
(b) Schedule 2.02 sets forth with respect to all stock and other
ownership interests or rights in EWI all liens, security interests, pledges,
charges, encumbrances, stockholders' agreements, voting trusts, or other
restriction or covenant respecting any such interest, if any (collectively the
"Encumbrances"). Except as set forth on Schedule 2.02, all shares are free and
clear of all Encumbrances.
2.03 Financial Condition
(a) Qualified Stockholders have delivered to the Purchaser and attached
hereto as Schedule 2.03 true and correct copies of the unaudited balance sheet
("Interim Balance Sheet") and statements of income, retained earnings and cash
flows of EWI for the period from July 1, 1996 through June 30, 1997 ("Interim
Financial Statements"). At Closing, Qualified Stockholders shall provide final
unaudited balance sheet ("Closing Balance Sheet") and statements of income,
retained earnings and cash flows of EWI for the period beginning July 1, 1997
and ending on the Effective Time (the "Closing Financial Statements").
The financial statements referred to in this ss.2.03 have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved (except for adjustments
thereto which are known to and expressly
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approved by Purchaser in writing), are correct and complete in all respects,
and are in accordance with the books and records of EWI.
There is no fact presently known to EWI which could materially and
adversely affect the financial condition, results of operations, business,
properties, assets, liabilities, or future business prospects of the EWI except
as disclosed or recorded on Schedule 2.03, the Closing Financial Statements or
the other schedules to this Agreement; provided, however, that Qualified
Stockholders express no opinion as to political or economic matters of general
applicability (except as to market conditions of which a Qualified Stockholder
has present knowledge).
(b) As of the Effective Time, the net tangible book value, as set
forth on the Closing Financial Statements, will be correct.
(c) After Closing, Purchaser's in-house and independent accountants
shall be afforded free and full access to the non-proprietary working papers and
records used by EWI's independent accountants and in-house accountants in
preparing their unaudited last completed fiscal year, Interim and Closing
Financial Statements. If there is a difference of opinion between the
Purchaser's and EWI's accountants as to the general acceptability or consistency
of any of the accounting principles followed in connection with such review and
report or preparation of financial statements or the results indicated thereby,
the parties or their accountants shall promptly confer in an effort to resolve
such differences. If they are unable to resolve a difference, the difference
shall be resolved by the indemnity, set-off and dispute resolution provisions of
Sections 1.02 and 1.03.
2.04 Tax and Other Liabilities
(a) Except as disclosed on Schedule 2.04, EWI has no liability of any
nature, accrued or contingent, including, without limitation, liabilities for
payroll and other employee taxes, federal, state, local, or foreign taxes or
liabilities to customers or suppliers, other than liabilities which are
reflected on the Closing Balance Sheet.
(b) Without limiting the generality of the foregoing, the amounts
reserved for taxes on the Closing Balance Sheet are sufficient for all accrued
and unpaid federal, state, local, employee-related and foreign taxes of EWI,
whether or not due and payable and whether or not disputed, under tax laws in
effect on the Closing Date for the period ended on such date and for all fiscal
years prior thereto. EWI has filed all payroll and other federal, state, local,
and foreign tax returns required to be filed by it; has delivered to the
Purchaser a true and correct copy thereof; has paid all taxes, assessments, and
other governmental charges payable or remittable by it or levied upon it or its
properties, assets, income, or franchises which are due and payable; and has
delivered to the Purchaser a true and correct copy of any report as to any audit
or adjustments received by EWI (or any of EWI's officers concerning EWI) from
any taxing authority during the past five years and
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a statement as to any litigation, governmental or other proceeding (formal or
informal), or audit or investigation pending, threatened, or in prospect with
respect to any such report or the subject matter of such report.
(c) The Closing Balance Sheet contains an adequate reserve for vendor
or supplier invoices in process, including any taxes or expenses in connection
with this transaction which are to be paid or charged to EWI.
(d) EWI has engaged in no act, omission, ownership or operation of a
property or facility or contractual or professional performance prior to the
Effective Time which will render it liable in the future for personal, economic,
environmental, or natural resource damage, except as may be set forth in
Schedule 2.05.
2.05 Litigation and Claims
(a) Except as set forth on Schedule 2.05: (i) there is no litigation,
arbitration, claim, governmental or other proceeding (formal or informal), or
investigation pending or threatened (or any basis therefore known to Qualified
Stockholders) with respect to EWI or any of its business, properties, or assets;
(ii) EWI is not affected by any present or threatened strike or other labor
disturbance nor to the knowledge of Qualified Stockholders is any union
currently representing or attempting to represent any employee of EWI as
collective bargaining agent; (iii) EWI is not in violation of, or in default
with respect to, any law, rule, regulation, order, judgment, or decree,
including any insurance or environmental laws or regulations. Schedule 2.05 sets
forth with respect to EWI, among other matters, all past (previous three years)
and current citations, violations, fines, judgments, decrees, orders, consent
decrees or orders, and, to the best knowledge of each of the Qualified
Stockholders, all pending proceedings of any type arising out of the alleged
violation of any federal, state or local criminal, bidding or procurement,
environmental, health and safety, insurance, licensing or labor or other law or
regulation or out of any alleged act or omission, negligence, intentionally
wrongful act or breach of contract in the performance of services or otherwise.
(b) Except for the liabilities included on the Closing Balance Sheet,
neither EWI nor Purchaser will incur any liability, including any environmental
liability, as a result of EWI's acts, omissions, sales, underwriting, consulting
services or contractual performance prior to the Effective Time.
(c) In consideration of a payment from the cash proceeds set forth in
Section 1.01(b)(1)(a) by the Escrow Agent, on behalf of the Preferred
Shareholders, the holders of the Tendered Common Shares have given the following
release to the Preferred Shareholders in connection with the tendering of their
shares to the Escrow Agent:
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"Satisfaction. Each of the Tendering Common Shareholders hereby accepts
the cash distributed pursuant to Section 1.01, in consideration for their
shares, and in full satisfaction of and in release of all claims they may have
as shareholders of EWI against EWI, its directors, officers, and shareholders
and each of their affiliates, employees, agents, representatives, heirs,
successors and assigns."
2.06 Properties
(a) Except as set forth on Schedule 2.06 or on the list of leases set
forth on Schedule 2.07, EWI has good title to all properties and assets used in
its business or owned by it free and clear of all liens, mortgages, security
interests, pledges, charges, and encumbrances.
(b) All accounts receivable and work in process of EWI recorded on the
Closing Balance Sheet have arisen from valid transactions in the ordinary course
of EWI's business and will be collected by EWI within six (6) months after the
Closing Date, net of any reserve amount on the Closing Balance Sheet which is
excess of reserves that EWI will be required to maintain after such six (6)
month period to conform with GAAP (the "Excess Reserve"), employing reasonable
and customary collection procedures (i.e. the cost of measures such as legal
action, referral to outside collection agency or liens shall be a charge against
collections from such accounts). All accounts receivable of EWI recorded on the
Closing Balance Sheet were fully earned as of the Effective Time, there are no
existing set-offs or counterclaims available against EWI or Purchaser, and
Purchaser will have no performance obligations for which it will not be entitled
to bill (no account receivable entry represents a pre-billing except to the
extent an allowance is reserved for it).
(c) Schedule 2.06 sets forth a ledger of all properties and assets,
including Intangibles, owned, leased, or licensed by EWI for which a value is
recorded on the Closing Balance Sheet, detailing location, cost and net book
value with respect to all such properties current as of the Effective Time. All
such properties and assets owned by EWI are reflected on the Closing Balance
Sheet. Except as disclosed on Schedule 2.06, each physical asset having a
depreciated value on EWI's books greater than Five Hundred Dollars ($500.00)
will be in fully operational condition as of the Effective Time (except for
normal wear and tear which is not such as to affect their operability).
2.07 Contracts and Other Instruments
(a) Schedule 2.07 lists and describes all material contracts to which
EWI is a party including leases and licenses and all supply, distribution,
agency, financing or other arrangements and understandings. Qualified
Stockholders have provided to Purchaser, or at Purchaser's election made
available for its review, all of the items so listed and described, including,
but not limited to, the following: (i) true and correct copies of all
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material written contracts, agreements, and instruments; (ii) true and correct
copies of all leases and licenses; and (iii) true and correct written
descriptions of all supply, distribution, agency, financing, or other
arrangements or understandings. Any of the foregoing not disclosed on a schedule
elsewhere in this agreement are listed and described on Schedule 2.07. Neither
EWI nor any other party to any such contract, agreement, instrument, lease, or
license is now or, to the knowledge of Qualified Stockholders, expects in the
future to be in violation or breach of, or in default with respect to complying
with, any material provision thereof, and each such contract, agreement,
instrument, lease, or license is in full force and is the legal, valid, and
binding obligation of the parties thereto and is enforceable as to them in
accordance with its terms, except as is disclosed on Schedule 2.07. Neither EWI
nor any other party to any such arrangement or understanding has given notice of
termination or taken any action inconsistent with the continuance of such
arrangement or understanding; and the execution, delivery, and performance of
this Agreement will not materially violate any such arrangement or
understanding. EWI enjoys peaceful and undisturbed possession under all leases
and licenses under which it is operating. EWI is not a party to or bound by any
contract, agreement, instrument, lease, license, arrangement, or understanding,
or subject to any charter or other restriction, which has had, or to the
knowledge of EWI is likely in the future to have, a material adverse affect on
EWI's operations or business. EWI has neither engaged within the last five years
in, is engaging in, nor intends to engage in any transaction with, nor has had
within the last five years, now has, or intends to have any contract, agreement,
lease, license, arrangement, or understanding with, any stockholder, any
director, officer, or employee of EWI, any relative or affiliate of any
Stockholder or of any such director, officer, or employee, or any other
corporation or enterprise in which EWI, any such director, officer, or employee,
or any such relative or affiliate then had or now has a five percent (5%) or
greater equity or voting or other substantial interest, other than such
contracts and agreements as listed and so identified on Schedule 2.07. There
exists no contract, agreement, right or understanding material to the business
or officers of EWI which is in the name of any principal, officer, director,
stockholder or any other person or entity other than EWI except as disclosed and
so identified on Schedule 2.07. Schedule 2.07 describes EWI's membership in any
customer or user organization or trade association.
(b) Schedule 2.07(b) sets forth a description of each agreement or
understanding entered into by any Stockholder or EWI as a condition for
obtaining any consent, authorization, approval, order, license, certificate, or
permit required for the consummation of the transactions contemplated by this
Agreement.
(c) To the best of each Qualified Stockholder's knowledge, Schedule
2.07(c) sets forth a list of EWI's backlog as of the Effective Time.
(d) To the best of each Qualified Stockholder's knowledge,
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(1) the Qualified Stockholders have no reason to believe that
business relations currently maintained with EWI's significant
customers will not be similarly maintained in all substantial respects
after the date hereof and the Effective Time; without limiting the
generality of the foregoing, no customer of EWI has notified EWI that
it intends to discontinue its relationship with EWI;
(2) EWI has all properties and rights necessary to conduct its
business and operations in all material respects in substantially the
same manner as such business has been conducted by it prior to the date
hereof;
(3) except as disclosed on Schedule 2.07, EWI is not required
by any person or governmental authority to obtain any consents,
authorizations, licenses, permits, order certificates, registrations,
qualifications or clearances for the conduct of EWI's business
(including qualifications to transact business as a foreign corporation
in various states);
(4) except as set forth on Schedule 2.07, EWI has obtained all
such consents, authorizations, licenses, permits, orders, certificates,
registrations, qualifications and clearances; the same are valid and
subsisting and, the consummation of this Agreement will not invalidate
the same;
(5) the business and operations of the Company have been, and
are being conducted in compliance with all applicable statutes,
ordinances, orders, rules and regulations of any federal, state or
local governmental authority.
2.08 Employees
(a) Set forth on Schedule 2.08 is a list of (i) all of EWI's pension,
profit-sharing, option, other incentive plans, or any other type of employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA")), and (ii) all obligations to, or arrangements
with, EWI's employees for wages, salary, bonuses, incentive compensation,
vacations, severance pay, insurance, or other benefits. EWI has furnished or
made available to the Purchaser true and correct copies of all documents
evidencing such plans, obligations or arrangements referred to in Schedule 2.08
(or written summaries of such plans, obligations, or arrangements to the extent
not evidenced by documents) and true and correct copies of all documents
evidencing trusts relating to any such plans. Schedule 2.08 includes a true and
correct ledger containing the name, position/title, and present rate of
compensation (whether in the form of salary, bonuses, commissions, or other
supplemental compensation now or hereafter payable) of each director, officer,
employee or sales agent of EWI. All notices and performance required under COBRA
and other ERISA plans prior to the Effective Time have been properly given and
performed. All obligations, debts and liabilities associated with EWI's
employees or agents, including all of the above-referenced matters have been
paid or
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discharged in full by EWI prior to Effective Time or will be properly reflected
as liabilities on the Closing Balance Sheet in accordance with ss.2.03. Except
as set forth on Schedule 2.08 (i) EWI has made all payments due to date under or
with respect to each plan set forth on Schedule 2.08 and all amounts properly
accrued to date due as liabilities of EWI, under or with respect to each such
plan, for the current plan years, have been recorded on the books of EWI; (ii)
EWI has performed all material obligations required to be performed, and is not
in material default under, or in material violation of any such plan; (iii) EWI
is in compliance in all material aspects with the requirements prescribed by all
statutes, orders or governmental rules or regulations applicable to each such
plan, and each trust related to each such plan, and, neither EWI, any such plan
nor any related trust is required to take any action to avoid violation of any
of such requirements; and (v) there are no unfunded or underfunded obligations
under any such plan nor has any such plan incurred any accumulated funding
deficiencies as defined in ERISA or the Internal Revenue Code.
(b) Except as set forth on Schedule 2.05, there is no litigation,
arbitration, claim, governmental or other proceedings (formal or informal), or
investigation pending, or to Stockholder's knowledge threatened, (or any basis
for such known to Qualified Stockholders) with respect to any such employee
benefit plan, compensation arrangement or EWI's acts or omissions with respect
to its employees or its work environment.
(c) Except for the liabilities recorded on the Closing Balance Sheet,
neither EWI nor Purchaser will incur, any liability to or on behalf of EWI's
employees arising out of their employment with EWI prior to the Effective Time
or out of EWI's acts or omissions prior the Effective Time, including (but not
limited to) any liability: under ERISA or the Internal Revenue Code; for
obligations to, or arrangements with employees for wages, salary, bonuses,
incentive compensation, vacation pay, severance pay, insurance, or other
benefits, or employee taxes; for personal injury or property damage; or for
discrimination, harassment, or wrongful discharge under federal, state or local
laws.
2.09 Patents, Trademarks, Et Cetera
Except as set forth and described in Schedule 2.09, EWI neither owns
nor has pending, or is licensed under, any patent, patent application,
trademark, trademark application, trade name, service mark, copyright,
franchise, or other intangible property or asset (all of the foregoing being
herein called "Intangibles"), all of which are in good standing and uncontested.
Schedule 2.09 accurately sets forth with respect to Intangibles owned by EWI a
statement of cost, book value and reserve for depreciation of each item for tax
purposes, and net book value of each item for financial reporting purposes, and
with respect to Intangibles licensed by EWI from or to a third party, a
description of such license. Neither any stockholder, any director, officer, or
employee of EWI, any relative or affiliate of any stockholder or of any such
director, officer, or employee, nor any other corporation or enterprise in which
any stockholder, any such director, officer, or employee, or any such relative
or affiliate had or now has a five percent (5%) or greater
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equity or voting or other substantial interest, possesses any Intangible which
relates to the business of EWI except as such interest is disclosed on Schedule
2.09. There is no right under any Intangible necessary to the business of EWI as
presently conducted or as it contemplates conducting, except such as are so
designated in Schedule 2.09. EWI has neither infringed, is infringing, or has
received notice of infringement of Intangibles of others. To the knowledge of
Qualified Stockholders there is no infringement by others of Intangibles of EWI.
As far as Qualified Stockholders can foresee, there is no Intangible of others
which may materially adversely affect the financial condition, results of
operations, business, properties, assets, liabilities, or future prospects of
EWI.
2.10 Questionable Payments
To the knowledge of Qualified Stockholders, neither EWI, nor any
director, officer, agent, employee, stockholder or other person associated with
or acting on behalf of EWI has, directly or indirectly: (a) used any corporate
funds for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; (c) violated any provision
of the Foreign Corrupt Practices Act of 1977; (d) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; (e) made any
false of fictitious entry on the books or records of EWI; (f) made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment; (g)
given any favor or gift which is not deductible for federal income tax purposes;
or (h) made any bribe, kickback, or other payment of a similar or comparable
nature, whether lawful or not, to any person or entity, private of public,
regardless of form, whether in money, property, or services, to obtain favorable
treatment in securing business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained.
2.11 Authority to Sell
The Qualified Stockholders have all requisite power and authority to
execute, deliver, and perform this Agreement. All necessary corporate
proceedings of EWI have been or as of the Closing Date will have been duly taken
to authorize the execution, delivery, and performance of this Agreement by EWI.
This Agreement has been duly authorized, executed, and delivered by Qualified
Stockholders, constitutes the legal, valid, and binding obligation of Qualified
Stockholders, and is enforceable as to them in accordance with its terms. No
consent, authorization, approval, order, license, certificate, or permit of or
from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by Qualified
Stockholders for the execution, delivery, or
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performance of this Agreement by them. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to which
EWI or any Qualified Stockholder is a party, or to which it or they or any of
its or their properties or assets are subject, is required for the execution,
delivery, or performance of this Agreement (except such consents as have been
obtained at or prior to the date of this Agreement, true and correct copies of
which have been delivered to the Purchaser). The execution, delivery, and
performance of this Agreement will not violate, result in a material breach of,
conflict with, or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default under any term of any
such contract, agreement, instrument, lease, license, arrangement, or
understanding, or materially violate or result in a breach of any term of the
certificate of incorporation (or other charter document) or by-laws of EWI or
violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment, or decree binding on EWI or any Stockholder or to which any of
their operations, business, properties, or assets are subject. Upon the Closing,
Purchaser will have good title to the Shares, free and clear of all liens,
security interests, pledges, charges, stockholders' agreements, preemptive
rights and encumbrances except those, if any, expressly consented to by
Purchaser in writing.
2.12 Qualified Stockholders. Exchange for Investment Purposes Only
Except for Clifford and Gildea, no Stockholder who is not a Qualified
Stockholder will receive any of the ATC Stock. Each Stockholder who is acquiring
part of the ATC Stock from Purchaser is acquiring such stock for investment
purposes only and not with the view to the resale or distribution thereof. Each
Stockholder receiving ATC Stock under ss.1.01(b)(3) or any distribution to them
of such ATC Stock pursuant to the Escrow Agreement or any other agreement or
rights expressly represents and warrants that:
(a) He or it has received a copy of Purchaser's report to the United
States Securities Exchange Commission ("SEC") on Form 10-K for Purchaser's
fiscal year ended February 28, 1997;
(b) Purchaser has provided access to all information which he or it has
requested to verify or investigate the matters referred to in such Form 10-K and
all other matters related to the Purchaser, its business or the ATC Stock;
(c) He or it has had the opportunity to communicate with such officers,
employees, accountants or other representatives of Purchaser as he or it has
deemed necessary or prudent to fully inform himself or itself concerning the
Purchaser, its business, the ATC Stock and the risks associated therewith;
(d) Except as contained in this Agreement, no representations or
warranties from Purchaser have been made to any Stockholder, Qualified
Stockholder or other person in connection with the ATC Stock;
(e) He or it fully understands that the Shares have not been registered
under the Securities Act of 1933, as amended (the "Act"), or under any state
securities acts as may
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be applicable and are being delivered to him or it pursuant to an exemption
from registration under the Act;
(f) Purchaser's reliance upon such exemption is predicated upon each
Qualified Stockholder's representations and warranties contained in this
section;
(g) He or it fully understands that due to the unregistered status of
the ATC Stock, it will be subject to a prohibition imposed by law and regulation
on transfer, pledge or hypothecation during a one-year restriction period which
will prevent liquidation of the investment during such period, and the ATC Stock
may only be sold after such one-year restriction period upon compliance with
Rule 144, as promulgated by the Securities and Exchange Commission under the
Act;
(h) He or it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of such an
investment;
(i) He or it is either an "accredited investor" within the meaning Rule
501 of Regulation D promulgated under the Act or represents and warrants that
each of the statements contained in subsections (h) and (i) are true with
respect to him or it;
(j) He or it has such knowledge and experience in financial and
business matters that he or it is capable of evaluating the merits and risks of
an investment in Purchaser and of making an informed investment decision; and
(k) He or it has had significant prior investment experience and
recognizes the speculative nature of this unregistered investment and the
additional risks resulting from the lack of liquidity attending unregistered,
restricted stock.
2.13 Loans to be Repaid
EWI has not made any loans to stockholders, officers, directors,
employees or any other affiliated person or entity other than the loans set
forth on Schedules 2.03, 2.07 or 2.13.
2.14 Fictitious Names
EWI has not done business or registered in any jurisdiction under any
name, other than its corporate name.
2.15 Absence of Undisclosed Liabilities
Except as set forth in the Schedules to this Agreement or on the
Closing Balance Sheet, EWI has no obligations or liabilities of any kind, fixed,
accrued or contingent,
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including but not limited to, obligations to perform after the Closing under
contracts or other commitments which would adversely affect EWI's financial
condition or business.
2.16 Books and Records
Except as described in Schedule 2.16, the books and records of EWI,
including its corporate minute book, are in all material respects complete and
correct.
2.17 Completeness of Disclosure
No representation or warranty by Qualified Stockholders in this
Agreement contains or on the date of the Closing will contain any materially
untrue statement of a material fact or omits, or on the Closing Date will omit,
to state a material fact necessary to make the statements made not misleading.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Qualified Stockholders to enter into this
Agreement, Purchaser hereby makes the following representations and warranties:
3.01 Organization and Good Standing
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full power and authority
to enter into and perform each of the transactions contemplated by this
Agreement.
3.02 Execution and Performance Authorized
The execution, delivery and performance of this Agreement and all other
documents and Related Agreements contemplated hereunder have been duly approved
by Purchaser's board of directors, at Closing will have been executed and
delivered by Purchaser's duly authorized officers, such execution and delivery
and the consummation by Purchaser of the transactions contemplated hereunder
have been duly authorized by all necessary corporate action, and no further
action is required by law, its corporate charter, bylaws or otherwise to
authorize all action to be taken by Purchaser with respect to this Agreement and
the consummation of the transactions contemplated hereunder. The Agreement and
the other documents contemplated hereunder are binding and are enforceable
against Purchaser in accordance with their terms.
3.03 Absence of Litigation
Except as set forth on Schedule 3.03, there is no action, lawsuit,
proceeding or investigation of any kind or nature pending or threatened against
Purchaser before any
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court, tribunal or administrative agency or board which Purchaser reasonably
expects, individually or in the aggregate, to materially and adversely affect
(i) Purchaser's solvency, (ii) its ability to perform hereunder, or (iii) to
render any one or more of the transactions contemplated hereunder void or
voidable.
3.04 No Other Default
The execution and delivery of this Agreement by Purchaser and the
consummation of the transactions contemplated hereunder will not conflict with
or violate or require any consent under and will not result in any breach or
termination of Purchaser's corporate articles, by-laws or minutes or any
agreement to which Purchaser is a party or by which any of its property is
subject or by which it is bound.
3.05 Permits and Filings
There is no requirement applicable to Purchaser to make any further
filing with, or to obtain any permit, authorization, consent or approval of any
governmental or other regulatory authority as a condition of the lawful
consummation of the transactions contemplated under this Agreement.
3.06 Absence of Lien
The monies and ATC Stock to be paid or delivered by Purchaser under
Section 1.01 shall be paid by Purchaser and received by Escrow Agent free and
clear of any lien, charge or encumbrance arising out of any agreement or
instrument to which Purchaser is subject or by which their properties are bound.
3.07 Solvency
At the Closing and after payment of the purchase price as required
under Section 1.01, Purchaser will be and will remain solvent under all
applicable federal and state laws and regulations. Purchaser also agrees that it
will not intentionally cause its business to be conducted in a manner that
results in its becoming insolvent; provided, however, that consistent with the
foregoing, this covenant shall not restrict the future business decisions of
Purchaser which relate to its or to EWI's business. Purchaser acknowledges that
EWI may require working capital in the short-term in order to continue
operations.
3.08 Corporate Documents
Purchaser has furnished to Qualified Stockholders its certificate of
incorporation and a certificate of good standing in Delaware dated within thirty
(30) days of the closing.
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3.09 Purchase for Investment Purposes Only
Purchaser is acquiring the Shares from Qualified Stockholders for
investment purposes only and not with the view to the resale or distribution
thereof. Purchaser is an "accredited investor" under the regulations promulgated
under the Act. Purchaser has not received any representations or warranties from
EWI or Qualified Stockholders other than those contained in this Agreement and
the attached schedules and/or exhibits hereto. Purchaser represents and warrants
that it has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment. Purchaser
understands and acknowledges that the Shares have not been registered under the
Act or under any state securities acts as may be applicable and are being sold
to Purchaser pursuant to exemptions from registration under the Act and any
pertinent state securities acts. Qualified Stockholders' reliance upon such
exemption is predicated upon Purchaser's representations and warranties
contained herein. In this regard, Purchaser understands and agrees that there
may be affixed to the certificates representing the Shares a legend advising of
the unregistered, restricted nature of the Shares.
IV. COVENANTS
4.01 Insurance
Purchaser shall cause EWI to continue to carry insurance against risks
similar to that provided in EWI's insurance coverage as of the date of Closing
and with coverage limits not less than $2,000,000 and a deductible not greater
than $100,000.
4.02 Release by Qualified Stockholders
Each Qualified Stockholder agrees to release and waive all claims he or
it now has against EWI or the Shares for any past compensation, bonus,
distribution, dividend or other consideration or claim for payment from any
cause that may have otherwise been due such Qualified Stockholder at the time of
Closing, except to the extent such obligations are reaffirmed in this Agreement
or any Related Agreement.
4.03 Collection of Accounts Receivable
(a) Any EWI account receivable or work in process for which revenue is
recorded on the Closing Balance Sheet and warranted as collectible under Section
2.06(b), which has not been collected by Purchaser within six (6) months, shall
be deemed to be uncollected and uncollectible by Purchaser except as Purchaser
shall otherwise agree in writing. Accounts or work in process may also be deemed
uncollectible by agreement of the parties as provided in Section 5.03(b). All
uncollected accounts and work in process, net of reserves therefor, shall be
remedied by set-off under Section 1.03 (or if set-off is not available, then by
indemnification and repayment). Set-off shall be available to the
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Purchaser for uncollected accounts or work in process at the earlier of: (i) six
(6) months after the Closing Date or (ii) such earlier time as the account is
agreed to be uncollectible by the Escrow Agent under this section. Upon such
remedy, the account shall be assigned to the Escrow Agent.
(b) Purchaser shall provide the Escrow Agent with a monthly aging
report of the purchased accounts receivable and work in process together with
contact log summary of problem accounts. If at any time Purchaser determines
that measures in addition to Purchaser's customary collection procedures (e.g.,
measures such as mechanics lien, legal action or referral to collection agency)
should be employed on a specific account to obtain collection, Purchaser shall
notify the Escrow Agent in writing of the measures proposed to be taken. If the
Escrow Agent agrees in writing that the proposed extraordinary measures should
be taken or if the Escrow Agent itself deems such action to be necessary without
notice from Purchaser, the Escrow Agent shall notify Purchaser in writing of its
agreement to such measures. The Escrow Agent's agreement to the employment of
extraordinary collection measures shall constitute its agreement to having the
cost of such measures first charged against the Excess Reserve for uncollectible
accounts and the remainder, if any, remedied by set-off or refund if set-off is
not available.
(c) At any time the parties may by mutual written agreement deem an
account uncollectible, Purchaser shall assign it to the Escrow Agent and charge
it off of the Excess Reserve and set off the remainder, if any, under Section
1.03 or make a claim for refund under Section 1.02. Upon written notice to
Purchaser, the Escrow Agent may request to have any account receivable which is
uncollected assigned to the Escrow Agent. Purchaser shall not unreasonably deny
such request. Such request by the Escrow Agent for assignment shall constitute
Qualified Stockholders' agreement to a charge against the Excess Reserve for
uncollectible accounts by such amount or, to the extent that the remaining
Excess Reserve balance is thereby exceeded, to a set-off or indemnity claim in
such excess amount, which Purchaser may exercise immediately.
4.04 Public Statements
Before the Escrow Agent or Qualified Stockholders or any of them shall
release any information concerning this Agreement or the transactions
contemplated by this Agreement which is intended for or may result in public
dissemination thereof, they shall cooperate with the Purchaser, shall furnish
drafts of all documents or proposed oral statements to the Purchaser for
comments, and shall not release any such statement or information without the
written consent of the Purchaser. Nothing contained herein shall prevent the
Escrow Agent or Qualified Stockholders from furnishing any information to any
governmental authority if required to do so by law.
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4.05 Books, Records, Access to Information
(a) Each party shall provide to the other, with reasonable promptness
following a request in writing (not to exceed ten (10) business days), such
information and data with respect to EWI's business before the Effective Time
and this transaction as may from time to time be requested by the other party.
In the event either Purchaser or any Qualified Stockholder is required to
prepare audited statements or to produce or compile information for a government
agency which requires access to information or for any other reasonable purpose,
including the verification of any information provided to the other party
relative to this agreement, the parties agree to allow the other party
reasonable access to records, including the non-proprietary working papers of
the other party's accountants, and to provide reasonable cooperative assistance
in the preparation of reports, documents, etc. without charge except for
reimbursement of any actual, out-of-pocket expenses, exclusive of the cost of
in-house staff time. Notwithstanding the foregoing, in the event that a party is
or anticipates becoming a party to litigation, this Section 5.06 or any other
provision of this Agreement shall not be construed to require such party to
provide information to the other which could prevent such party from making a
bona fide claim of attorney/client privilege or such other privileges as may be
applicable with respect to such information.
(b) Neither party shall intentionally dispose of or destroy any of the
records of EWI in its possession except in conformity with the procedures set
forth in this section. If a party wishes to dispose of or destroy any of such
records, it shall first give thirty (30) days prior written notice to the other
party of the action it intends to take, and the other party shall have the
right, at its option and expense, upon prior written notice to the notifying
party within such 30-day period, to take possession of such affected records
within 30 days after the date of the notice of intent to take possession.
(c) Each party shall exercise reasonable care in the care, custody and
maintenance of the records of EWI in its possession. A party shall be
responsible for actual damage caused to the other party only as a result of its
negligence or intentionally wrongful act in maintaining the records. Neither
party shall have liability to the other party or any other person as a
consequence of the non-existence of any record or such party's inability to
locate any record unless the loss or destruction of the record is proven, by
clear and convincing affirmative evidence, to have been due to the allegedly
possessing party's negligence or intentionally wrongful act.
4.06 Transaction Costs and Expenses
The Purchaser on the one hand and Qualified Stockholders and/or EWI on
the other hand shall each pay their own respective costs incurred in connection
with this transaction including, without limitation, all legal, accounting,
auditing and appraisal fees in negotiating and preparing this Agreement and in
consummating, closing and carrying out
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the transactions contemplated hereby. Any costs to be charged to EWI shall be
included on the Closing Balance Sheet.
4.07 Conduct of Business After Closing
Until such time as Purchaser has had the opportunity in accordance with
EWI's certificate of incorporation and by-laws to duly call and hold a general
or special meeting of the stockholders of EWI for the purpose of electing a new
board of directors, Perry agrees, as sole director and President of EWI, that,
without the written consent of Purchaser, he will:
(a) Take no action in respect of its business, assets or management
other than continuing to conduct business in the ordinary course;
(b) Issue no shares or other securities or make any distribution or
other like payment to any person or entity;
(c) Borrow any money;
(d) Sell any assets.
4.08 Delivery of Property
Purchaser and Qualified Stockholders shall each use their best efforts
to avoid opening mail or deliveries which rightfully belongs to the other and
shall turn over to the other any property received by the party, including
checks or money, belonging to the other within twenty-four hours after
determining its rightful ownership.
4.09 Related Agreements
Qualified Stockholders and Purchaser each agree to execute and deliver
at Closing the Related Agreements referenced in Section 7.01 which require
execution by them in accordance with their terms.
4.10 Continuing Cooperation, Reporting of Changes, Breaches and Status
The parties agree to cooperate in good faith following Closing to
secure to each other the benefits and performance to be provided by this
Agreement and to promptly execute such documents or instruments as shall be
reasonably requested by another party, without charge, to that end. At any time
or times on or after the Closing, Qualified Stockholders and Purchaser shall
execute, acknowledge, and deliver any and all further assurances, documents, and
instruments reasonably requested by the other in order to effectively convey the
Shares, the ATC Stock and all ownership thereof free and clear of
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encumbrances or title defects except as expressly authorized herein and shall
take any other action consistent with the terms of this Agreement that may
reasonably be requested by the other party in order to effectuate the purposes
and intent hereof. The parties shall each promptly advise the other in writing
of (i) the occurrence of any event which renders any of the representations or
warranties set forth herein inaccurate in any material respect, and (ii) the
failure of the party to comply with or accomplish any of the covenants or
agreements set forth herein in any material respect.
4.11 Tax Returns
In consideration for its ability to utilize EWI's net operating losses
(subject to any limits thereon), Purchaser agrees to prepare and file all
required federal, state and local tax returns required for the period which
ended June 30, 1997.
4.12 ATC Acquisition Proposal
The parties acknowledge that Purchaser has received an offer for the
acquisition of any and all outstanding shares of the Purchaser's stock from a
group led by senior members of Purchaser's management and WPG Corporate
Development Associates V, L.P., a financial investor group, (collectively, the
"Offerors") pursuant to the terms and conditions of a proposed merger agreement
(the "Merger Agreement") in the form attached to the letter dated October 17,
1997 from Weiss, Peck & Greer, L.L.C. to the Purchaser (as the same may be
negotiated and entered into by the Purchaser) (the "Acquisition Proposal"). If
(i) the tender offer contemplated in the Acquisition Proposal is consummated and
(ii) the persons listed on Schedule 1.01(b)(2) (the "ATC Stockholders") have not
been issued the ATC Stock, as provided for in this Agreement, prior to the
record date (the "Record Date") established for the merger contemplated in the
Acquisition Proposal, in lieu of issuing such shares of ATC Stock following the
Record Date, the Purchaser shall pay to each of the ATC Stockholders cash in an
amount per share equal to the amount paid per share to holders of Purchaser's
stock in connection with the consummation of the Acquisition Proposal. Such
price shall be paid to the Escrow Agent on the same schedule as payment is made
to the other holders of Purchaser's stock whose shares are being canceled in
connection with the merger contemplated in the Acquisition Proposal.
V. CONDITIONS PRECEDENT TO QUALIFIED STOCKHOLDERS' OBLIGATION TO CLOSE
The obligation of Qualified Stockholders to close and to perform the
covenants and actions required of them on the Closing Date shall be subject to
the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions precedent:
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5.01 Truth of Representations and Warranties
Purchaser's representations and warranties contained in this Agreement
shall be true in all material respects at and as of the Closing Date.
5.02 Performance
Purchaser shall have performed and complied in all material respects
with its obligations under this Agreement which are to be performed or complied
with by it prior to or on the Closing Date.
5.03 Documents
Purchaser shall provide to Escrow Agent all of the documents and shall
perform such acts as are prescribed in Section 7.03. Purchaser shall have
delivered to the Escrow Agent at or prior to the Closing such other documents
(including certificates of officers of Purchaser) as the Escrow Agent, the
Qualified Stockholders or their counsel may reasonably request in order to
enable the Qualified Stockholders to determine whether the conditions to their
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
5.04 Authorization
Any consent, approval, authorization, order or filing with any court or
governmental agency or administrative body required for the consummation of the
transactions contemplated by this Agreement shall have been obtained or made and
shall be in effect on the Closing Date.
5.05 Absence of Suit
No action, suit or proceeding before any court or any governmental or
regulatory authority shall have been commenced or threatened against Purchaser
or any of Purchaser's officers or directors, and no investigation by any
governmental or regulatory authority shall have been commenced, against
Purchaser or any affiliate, seeking to restrain, prevent or change the
transactions contemplated hereby or challenging the validity or legality of any
such transactions, or seeking damages in connection with any of such
transactions.
5.06 Payment of Purchase Price
Purchaser shall have tendered the cash and other consideration required
to be paid or delivered at closing under Section l.0l(b).
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5.07 Documents
Qualified Stockholders shall have received all of the documents
required to be delivered to them pursuant to Section 7.03 and elsewhere in this
Agreement. Purchaser shall have delivered to the Qualified Stockholders at or
prior to the Closing such other documents (including certificates of officers of
Purchaser) as the Escrow Agent, the Qualified Stockholders or their counsel may
reasonably request in order to enable the Qualified Stockholders to determine
whether the conditions to their obligations under this Agreement have been met
and otherwise to carry out the provisions of this Agreement.
5.08 Opinion of Counsel
Purchaser shall have delivered to the Qualified Stockholders before
Closing the opinion of counsel to Purchaser, satisfactory to counsel for the
Qualified Stockholders.
5.09 Receipt of Approvals, Etc.
All material approvals, consents and/or waivers that are necessary to
effect the transactions contemplated hereby shall have been received.
5.10 Review of Proceedings
All actions, proceedings, instruments, and documents required to carry
out this Agreement or incidental thereto and all other related legal matters
shall be subject to the reasonable approval of the counsel to Qualified
Stockholders, and Purchaser shall have furnished such counsel such documents as
such counsel may have reasonably requested for the purpose of enabling him to
pass upon such matters.
5.11 Approval by Lenders
Unless exempted pursuant to Schedule 5.11, prior to Closing, Purchaser
shall have obtained written consent from its banks and the holders of its senior
secured notes for Purchaser to execute this Agreement and the Note.
5.12 No Governmental Action
There shall not have been any action taken, or any law, rule,
regulation, order, or decree proposed, promulgated, enacted, entered, enforced,
or deemed applicable to the transactions contemplated by this Agreement by any
federal, state, local, or other governmental authority or by any court or other
tribunal, including the entry of a preliminary or permanent injunction, which,
in the reasonable judgment of the Qualified Stockholders, (a) makes any of the
transactions contemplated by this Agreement illegal, (b) results in a delay in
the ability of the Qualified Stockholders to consummate any of the
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transactions contemplated by this Agreement, (c) imposes material limitations on
the ability of Qualified Stockholders effectively to exercise their rights
hereunder or (d) otherwise prohibits, materially restricts, or delays
consummation of any of the transactions contemplated by this Agreement or
impairs the contemplated benefits to Qualified Stockholders of the transactions
contemplated by this Agreement.
VI. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to close and to perform the covenants
and actions required of it on the Closing Date are subject to the satisfaction
or waiver, on or prior to the Closing Date, of the following conditions
precedent:
6.01 Truth of Representations and Warranties
Qualified Stockholders' representations and warranties contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date as though such representations and warranties were made at and
as of the Closing Date.
6.02 Performance
As of the Closing, Qualified Stockholders and EWI shall have performed
and complied with all covenants and agreements and satisfied all conditions
required to be performed and complied with by any of them at or before the
Closing Date by this Agreement or any of the Related Agreements.
6.03 Absence of Suit
No action, suit or proceeding before any court or any governmental or
regulatory authority shall have been commenced or threatened against the
Qualified Stockholders, EWI, or any affiliate, associate, officer or director of
any of them, and no investigation by any governmental or regulatory authority
shall have been commenced, against Qualified Stockholders, EWI or any affiliate,
associate, officer or director of any of them, seeking to restrain, prevent or
change the transactions contemplated hereby, or challenging the validity or
legality of any such transactions, or seeking damages in connection with any of
such transactions.
6.04 Receipt of Approvals, Etc.
All material approvals, consents and/or waivers that are necessary to
effect the transactions contemplated hereby shall have been delivered to
Purchaser by Qualified Stockholders.
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6.05 Authorization
Any consent, approval, authorization, order or filing with any court or
governmental agency or administrative body required for the consummation of the
transactions contemplated by this Agreement shall have been obtained or made by
the Qualified Stockholders or EWI, as appropriate, and shall be in effect on the
Closing Date.
6.06 Documents
Purchaser shall have received all of the documents required to be
delivered to it pursuant to Section 7.02 and elsewhere in this Agreement.
Qualified Stockholders shall have delivered to the Purchaser at or prior to the
Closing such other documents (including certificates of officers of Qualified
Stockholders or EWI) as the Purchaser may reasonably request in order to enable
the Purchaser to determine whether the conditions to their obligations under
this Agreement have been met and otherwise to carry out the provisions of this
Agreement.
6.07 Completion of Due Diligence Investigation
Purchaser shall have completed its investigation of EWI prior to the
Closing Date with Purchaser's accountants, attorneys and officers having been
afforded free access to perform due diligence investigations of the books,
records and operations of EWI and interviews with EWI's sales and project
management employees.
6.08 Opinion of Counsel
Qualified Stockholders shall have delivered to the Purchaser before
Closing the opinion of counsel to Qualified Stockholders, satisfactory to
counsel for the Purchaser.
6.09 Review of Proceedings
All actions, proceedings, instruments, and documents required to carry
out this Agreement or incidental thereto and all other related legal matters
shall be subject to the reasonable approval of the counsel to the Purchaser, and
Qualified Stockholders shall have furnished such counsel such documents as such
counsel may have reasonably requested for the purpose of enabling him to pass
upon such matters.
6.10 No Governmental Action
There shall not have been any action taken, or any law, rule,
regulation, order, or decree proposed, promulgated, enacted, entered, enforced,
or deemed applicable to the transactions contemplated by this Agreement by any
federal, state, local, or other governmental authority or by any court or other
tribunal including the entry of a
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preliminary or permanent injunction, which, in the reasonable judgment of the
Purchaser, (a) makes any of the transactions contemplated by this Agreement
illegal, (b) results in a delay in the ability of the Purchaser to consummate
any of the transactions contemplated by this Agreement, (c) requires the
divestiture by the Purchaser of any of the Shares or of the assets or of a
material portion of the business of EWI or Purchaser, (d) imposes material
limitations on the ability of the Purchaser effectively to exercise full rights
of ownership of the Shares or (e) otherwise prohibits, restricts, or delays
consummation of any of the transactions contemplated by this Agreement or
impairs the contemplated benefits to the Purchaser of the transactions
contemplated by this Agreement.
6.11 Restricted Business
The percentages of EWI's gross revenues attributable to professional
services which EWI would be precluded from performing after Closing by law,
regulation or order shall not exceed such as Purchaser shall reasonably
determine will materially negatively affect the future viability and
profitability of EWI's business following Closing.
6.12 Personnel
EWI shall have secured on terms acceptable to Purchaser, including in
appropriate cases the securing of written employment agreements, the continuing
employment of the key employees of EWI listed on Schedule 6.12 attached hereto.
6.13 Execution of Related Agreements
Qualified Stockholders shall have executed and delivered to Purchaser
the Related Agreements referenced in Section 7.01 which by their terms require
such execution.
6.14 Repayment of Loans
Principal and interest on the loans identified in Schedule 2.13 owed to
EWI shall have been repaid at or prior to the Closing in full or the Purchaser,
in its sole discretion, shall have consented to arrangements for the repayment
thereof.
VII. CLOSING
7.01 Closing, Closing Date and Effective Time
The closing of the transactions contemplated hereunder (the "Closing")
shall take place at the office of Pepe & Hazard LLP at a.m. on November_, 1997
(the "Closing Date"). The effective time for the consummation of the
transactions contemplated in this Agreement to occur "at Closing" or "on the
Closing Date" shall be 12:00 a.m. EST on the Closing Date (the "Effective
Time").
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7.02 Qualified Stockholders' Obligations at Closing
At or prior to the Closing, Qualified Stockholders shall deliver or
cause to be delivered to Purchaser, in form satisfactory to Purchaser, the
following:
(a) Stock certificates for all of the Shares duly assigned to
Purchaser.
(b) A release and satisfaction (or agreement to provide the same) of
each security interest, lien or encumbrance against any of the Shares except
those to which Purchaser has expressly consented in writing.
(c) A certificate of good standing for EWI issued within thirty (30)
days prior to the Closing Date by the Secretary of State of Connecticut.
(d) A certificate or certificates, executed by a duly authorized
officer of each Qualified Stockholder certifying that all representations and
warranties of Qualified Stockholders contained in this Agreement are true and
correct in all material respects in accordance with their terms at and as if
made as of the Closing Date, provided that such certificates will not be
required if this Agreement is executed by the Qualified Stockholders on the
Closing Date.
(e) A certificate as to the incumbency of officers and genuineness of
signatures covering all officers of EWI, the Escrow Agent or any Qualified
Stockholder executing any document delivered by any of them at the Closing.
(f) Resignations of all members of EWI's Board of Directors other than
Perry.
(g) Satisfactory evidence of the termination of all outstanding options
or rights to purchase the capital stock of EWI.
(h) All other schedules, certificates and other documents required by
this Agreement to be delivered by Qualified Stockholders on or before Closing.
7.03 Purchaser's Obligations at Closing
At or prior to the Closing, Purchaser shall deliver or cause to be
delivered to the Escrow Agent, in form satisfactory to Qualified Stockholders,
the following:
(a) The cash payable at Closing pursuant to Section 1.01(b)(1).
(b) The Note deliverable at Closing pursuant to Section 1.01(b)(2).
(c) An employment agreement by and between EWI and Perry.
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(d) Its certificate, executed by an authorized officer, certifying that
all representations and warranties of Purchaser contained in this Agreement are
true and correct in all material respects in accordance with their terms at and
as if made as of the Closing Date, provided that such certificates will not be
required if this Agreement is executed by the Purchaser on the Closing Date.
(e) A certificate of good standing for Purchaser from the Secretary of
State of Delaware as of a date not more than thirty (30) days prior to the
Closing Date.
(f) A true copy of the minutes of the meeting of the Board of Directors
of Purchaser authorizing its execution, delivery and performance of this
Agreement, the Note and the ATC Stock.
(g) A certificate as to the incumbency of officers and genuineness of
signatures of all of the officers of Purchaser executing any document delivered
by Purchaser at the Closing.
(h) An instrument, effective at Closing, appointing a new agent for the
service of process in Connecticut for EWI who shall be designated in advance by
Purchaser.
(i) An instrument pursuant to which Purchaser assumes LTEISA's
obligations as Guarantor of certain performance bonds issued to EWI as set forth
on Schedule 7.03(i).
(j) Written consent from its banks and the holders of its senior
secured notes of its execution of this Agreement and of the Note.
(k) An Opinion of Purchaser's counsel substantially as to the matters
set forth in Schedule 7.03(k).
(1) All other schedules, certificates and other documents required by
this Agreement to be delivered by Purchaser on or before Closing.
VIII. MISCELLANEOUS
8.01 Brokerage Fees
Neither the Purchaser, EWI or any Qualified Stockholder has consented
to or authorized any broker or agent to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transaction
contemplated by this Agreement. In the event any claim is made for a broker's or
finder's fee in connection with the transactions contemplated hereunder, the
party responsible for retaining or securing said broker or finder shall be
solely responsible for the payment of any broker's or finder's fees incurred
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as a result thereof. Further, the responsible individuals shall indemnify the
other parties against any loss or liabilities by reason of such broker's or
finder's fees.
8.02 Further Actions
At any time and from time to time, each party agrees, at its or his
expense, to take such actions and to execute and deliver such documents as may
be reasonably necessary to effectuate the purposes of this Agreement.
8.03 Availability of Equitable Remedies
Since a breach of the provisions of this Agreement could not adequately
be compensated by money damages, either Purchaser or Qualified Stockholders
acting jointly shall be entitled, in addition to any other right or remedy
available to it, to a preliminary injunction and an injunction restraining such
breach or a threatened breach and to specific performance of any such provision
of this Agreement, and the parties hereby consent to the issuance of such an
injunction and to the ordering of specific performance without the requirement
of bond.
8.04 Survival
Except as otherwise provided herein, the covenants, agreements,
representations, and warranties contained in or made pursuant to this Agreement
shall survive the Closing and any delivery of the purchase price by the
Purchaser irrespective of any investigation made by or on behalf of any party
and shall continue until the later of (i) the Maturity Date specified in the
Note and (ii) the last date on which any necessary action is taken by a party in
connection with the resolution of a controversy under Section 1.03 pursuant to a
decision of the mediator.
8.05 Modification
The Agreement and the exhibits, schedules and Related Agreements hereto
set forth the entire understanding of the parties with respect to the subject
matter hereof, supersede all existing agreements among them concerning such
subject matter, and may be modified only by a written instrument duly executed
by each party.
8.06 Notices
All notices, elections, reports or other correspondence required or
permitted hereunder shall be in writing and deemed to have been properly given
or delivered when mailed by certified mail, postage prepaid, delivered by
overnight express courier, delivery fees prepaid, or transmitted by fax with
receipt confirmed, to the party to whom directed
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at the below specified addresses or at such other address for which any party
shall give the other parties written notice:
If to EWI (prior to Closing):
Mr. Charles L. Perry, President
Environmental Warranty, Inc.
970 Farmington Avenue
West Hartford, CT 06107
Fax (860) 521-5810
If to Purchaser:
Mr. Nicholas J. Malino, Senior Vice President
ATC Group Services Inc.
104 East 25th Street, 10th Floor
New York, NY 10010
Fax (212) 598-4283
with a copy to:
Alexander W. Samor, Esq.
Kleban & Samor
2425 Post Road
P.O. Box 763
Southport, CT 06490
If to Perry:
Mr. Charles L. Perry
61 High Farm Road
West Hartford, CT 06107
If to Preferred Shareholders:
Pepe & Hazard LLP
Goodwin Square
Hartford, CT 06103
Fax: (860) 522-2796
Attn.: Stephen B. Hazard, Esq.
Any such notice shall be deemed given three days after deposit with the mail,
one day following delivery thereof to an overnight express courier or upon
receipt when sent by
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confirmed fax. The address of a party may be changed in accordance with the
notice provisions of this section.
8.07 Waiver
Any waiver by any party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions will not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
8.08 Binding Effect
The provisions of this Agreement shall be binding upon and inure to the
benefit of the Purchaser, and its respective successors and assigns, and
Qualified Stockholders and their assigns, heirs, and personal representatives,
and shall inure to the benefit of the indemnitees and their respective
successors, assigns, heirs, and personal representatives.
8.09 No Third-Party Beneficiaries
This Agreement does not create, and shall not be construed as creating,
any rights enforceable by any person not a party to this Agreement (except as
provided in Section 8.08).
8.10 Severability; Reformation
If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
8.11 Headings
The headings of this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
8.12 Governing Law
To the extent permitted by law, this Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut, without
giving effect to conflict of laws. To the maximum extent permitted by law, any
action or proceeding initiated by Purchaser, any Stockholder, the Escrow Agent,
any indemnitee or any other party claiming rights
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under this agreement shall be brought in an appropriate state or federal court
in Hartford County, Connecticut, and any person claiming rights under this
agreement consents to the jurisdiction and proper venue of such forum.
8.13 Separate Counterparts
This Agreement is being executed in several identical counterparts,
each one of which shall be considered an original and all of which when taken
together shall constitute but one instrument.
8.14 Incorporation of Recital, Exhibits and Schedules
All exhibits, schedules and Related Agreements attached hereto are
incorporated herein by this reference and expressly made a part of this
Agreement.
8.15 Several Obligations
The representations, warranties, covenants, and agreements of EWI and
Qualified Stockholders in this Agreement are several.
8.16 Mediation
In the event there shall arise any dispute or claim in law or equity
arising out of this Agreement or any breach thereof or any resulting transaction
between the parties under this Agreement, the parties specifically agree that
such dispute shall be submitted to mediation pursuant to the provisions provided
in Section 1.03. Judgment of any award rendered by the mediator may be entered
in any court having jurisdiction thereof.
8.17 Opportunity to Cure
All parties to this agreement shall be afforded a period of ten (10)
days following notice thereof to cure any alleged breach of this agreement.
[The remainder of this page has been left blank intentionally.]
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[This page has been left blank intentionally.]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date of this day of , 1997.
ATC GROUP SERVICES INC.
/s/ Nicholas J. Malino
-----------------------------
Nicholas J. Malino
Senior Vice President
CONNING INSURANCE CAPITAL
LIMITED PARTNERSHIP II
By: Conning & Company,
General Partner
/s/ John Clinton
-----------------------------
By: John Clinton
Senior Vice President
CONNING INSURANCE CAPITAL
INTERNATIONAL PARTNERS II
By: Conning & Company,
General Partner
/s/ John Clinton
-----------------------------
By: John Clinton
Senior Vice President
CULLINANE & DONNELLY VENTURE
PARTNERS,LIMITED PARTNERSHIP
By: Marsh Point Partners,
General Partner
/s/ J. Donnelly
-----------------------------
By: a General Partner
LAWYERS TITLE ENVIRONMENTAL
INSURANCE SERVICES AGENCY,
INC.
/s/ Jeffrey D. Vaughan
-----------------------------
By: Jeffrey D. Vaughan
President
<PAGE>
/s/ Charles L. Perry
-----------------------------
CHARLES L. PERRY
The undersigned are executing this agreement with respect to the representations
found in Section 2.12 only:
/s/ Robert E. Clifford
-----------------------------
Robert E. Clifford
/s/ William A. Gildea, Jr.
-----------------------------
William A. Gildea, Jr.
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EXHIBIT 21.1
ATC Subsidiaries
ATC Blattert Inc.
ATC Construction Services Inc.
ATC Environmental Inc.
ATC InSysTechnology Inc.
ATC Management Inc.
Bing Yen & Associates, Inc.
ATC New England Corp.
Environmental Warranty, Inc.
Hygeia Laboratories Inc.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
To the Board of Directors and Stockholders of
ATC Group Services Inc.
New York, New York
We consent to the use in this Registration Statement of ATC Group Services Inc.
on Form S-4 of our reports dated May 22, 1997 (May 29, 1997 as to Notes B and D)
with respect to ATC Group Services Inc., January 31, 1997 (June 25, 1997 as to
Note 11) with respect to American Testing and Engineering Corporation, and
November 18, 1997 with respect to Bing Yen & Associates, appearing in the
Prospectus, which is a part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
with respect to ATC Group Services Inc. also included the financial statement
schedule of ATC Group Services Inc., listed in Item 21. This financial statement
schedule is the responsibility of the Corporation's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
March 27, 1998
<PAGE>
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated November 17, 1997, with respect to the financial
statements of the Engineering Division of Smith Technology Corporation included
in the Registration Statement (Form S-4 No. 333-00000) and related Prospectus of
ATC Group Services, Inc. for the registration of $100,000,000 of 12% Senior
Subordinated Notes due 2008.
/s/ Ernst & Young LLP
Philadelphia, PA
March 27, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report on
the Environmental Warranty, Inc. financial statements and schedule as of and for
the years ended June 30, 1997 and 1996 (and to all references to our Firm)
included in or made a part of this ATC Group Services Inc. registration
statement on Form S-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
March 26, 1998
<PAGE>
SCHEDULE II
Supplemental Analysis of Valuation and Qualifying Accounts - Changes in the
allowance for doubtful accounts for the three years ended February 28, 1997 are
as follows:
1995 1996 1997
---- ---- ----
BALANCE, beginning of year ..................$167,344 $535,886 $383,220
Provisions for bad debts ...................188,819 290,165 1,021,631
Amounts written-off, net of recoveries ....(136,350) (309,932) (452,836)
Adjustment for allowance for doubtful
accounts recorded on net
acquired (rescinded) accounts receivable...316,073 (132,899) 503,701
---------------------------------------- ------- --------- -------
BALANCE, end of year ...................... $535,886 $383,220 $1,455,716
==================== ========== ========= ===========
