<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1997
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
JORDAN INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
ILLINOIS 3678 36-3598114
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NUMBER)
</TABLE>
JORDAN INDUSTRIES, INC.
ARBORLAKE CENTRE, SUITE 550
1751 LAKE COOK ROAD
DEERFIELD, ILLINOIS 60015
847-945-5591
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
G. ROBERT FISHER, SECRETARY
JORDAN INDUSTRIES, INC.
ARBORLAKE CENTRE, SUITE 550
1751 LAKE COOK ROAD
DEERFIELD, ILLINOIS 60015
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
WITH A COPY TO:
PHILIP J. NIEHOFF
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 701-7843
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
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 MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- ---------------------------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
10 3/8% Series B Senior Notes Due
2007.............................. $120,000,000 100% $120,000,000 $36,363.64
- ---------------------------------- -------------- -------------- --------------- --------------
11 3/4% Series B Senior
Subordinated Discount Debentures
Due 2009.......................... $214,036,493 56.52% $120,973,426 $36,658.61
- ---------------------------------- -------------- -------------- --------------- --------------
</TABLE>
- -----------------------------------------------------------------------------
(1) Estimated solely for the purposes of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<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 AUGUST 28, 1997
PROSPECTUS
[JORDAN INDUSTRIES, INC.LOGO]
JORDAN INDUSTRIES, INC.
OFFER TO EXCHANGE ITS 10 3/8% SERIES B SENIOR NOTES DUE 2007 AND ITS 11 3/4%
SERIES B SENIOR SUBORDINATED DISCOUNT DEBENTURES DUE 2009, WHICH HAVE EACH
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY AND ALL OF ITS
OUTSTANDING 10 3/8% SERIES A SENIOR NOTES DUE 2007 AND ITS 11 3/4% SERIES A
SENIOR SUBORDINATED DISCOUNT DEBENTURES DUE 2009
Jordan Industries, Inc., an Illinois corporation ("Jordan" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (the
"Letter of Transmittal") (which together constitute the "Exchange Offer"), to
exchange up to $120 million aggregate principal amount of 10 3/8% Series B
Senior Notes due 2007 (the "New Senior Notes") and $214,036,493 aggregate
principal amount of 11 3/4% Series B Senior Subordinated Discount Debentures
due 2009 (the "New Discount Debentures") of the Company for a like principal
amount of the Company's issued and outstanding 10 3/8% Series A Senior Notes
due 2007 (the "Old Senior Notes" and, together with the New Senior Notes, the
"Senior Notes") and its issued and outstanding 11 3/4% Series A Senior
Subordinated Discount Debentures due 2009 (the "Old Discount Debentures" and,
together with the New Discount Debentures, the "Discount Debentures") with
the holders (each holder of Old Senior Notes and Old Discount Debentures, a
"Holder") thereof. The New Senior Notes and New Discount Debentures are
sometimes referred to as the "New Securities" and the Old Senior Notes and
Old Discount Debentures are sometimes referred to as the "Old Securities."
The New Securities and the Old Securities are sometimes referred to as the
"Exchange Securities." The terms of the New Senior Notes and New Discount
Debentures are substantially identical to the terms of the Old Senior Notes
and Old Discount Debentures that are to be exchanged therefor. See
"Description of the Exchange Securities." Upon the occurrence of a Change of
Control, the Company will be required, subject to certain conditions, to make
an offer to purchase the Senior Notes and Discount Debentures at a price
equal to 101% of the principal amount or the accreted value thereof, as
applicable, plus accrued and unpaid interest to the date of purchase. In the
event of a Change of Control, there can be no assurance that the Company will
have, or will have access to, sufficient funds to repurchase the Exchange
Securities or to pay the holders of the Exchange Securities. See "Risk
Factors--Change of Control Provisions; Limitations on Rights of Repayment"
and "Description of Exchange Securities--Certain Covenants," "--Certain
Definitions" and "--Mandatory Offers to Purchase Exchange Securities--Change
of Control."
Prior to the Exchange Offer, there has been no established trading market
for the Old Securities or the New Securities. The Company does not intend to
apply for listing or quotation of the New Securities on any securities
exchange or stock market. Therefore, there can be no assurance as to the
existence or liquidity of any trading market for the New Securities or that
an active public market for the New Securities will develop. Any Old
Securities not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent that Old Securities are tendered and accepted in
the Exchange Offer, a Holder's ability to sell untendered, or tendered but
unaccepted, Old Securities could be adversely affected. Following the
consummation of the Exchange Offer, the Holders of Old Securities will
continue to be subject to the existing restrictions on transfer thereof and
the Company will have no further obligations to such Holders to provide for
the registration of the Old Securities under the Securities Act. See
"Exchange Offer--Consequences of Not Exchanging Old Securities."
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON SEPTEMBER , 1997, UNLESS EXTENDED.
(Cover continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS
OF OLD SECURITIES WHO TENDER THEIR OLD SECURITIES IN THE EXCHANGE OFFER, SEE
"RISK FACTORS" ON PAGE 12 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE>
The New Senior Notes will be senior unsecured obligations of the Company,
will rank pari passu in right of payment with all existing and future senior
indebtedness of the Company, subordinated in right of payment to all existing
and future senior indebtedness of the Company, including indebtedness under
the New Credit Agreement, to the extent of the assets securing such
indebtedness and to all indebtedness and claims of creditors of the Company's
subsidiaries, and senior in right of payment of any future subordinated
indebtedness of the Company. The Discount Debentures will be general
unsecured senior subordinated obligations of the Company, will rank junior in
right of payment with all existing and future senior indebtedness of the
Company, including the Senior Notes, indebtedness under the New Credit
Agreement and to all indebtedness and claims of creditors of the Company's
subsidiaries, will rank pari passu in right of payment with all existing and
future senior subordinated indebtedness of the Company and will rank senior
in right of payment to all existing and future subordinated indebtedness of
the Company. At July 31, 1997, on a pro forma basis, the aggregate amount of
indebtedness of the Company's Restricted Subsidiaries would have been
approximately $16.9 million. At July 31, 1997, on a pro forma basis, the
aggregate amount of indebtedness of the Company's Non Restricted Subsidiaries
would have been approximately $510.1 million. The Exchange Indentures (as
defined herein) will permit the Company and its subsidiaries to incur
additional indebtedness, subject to certain limitations. See "Description of
Exchange Securities."
The Company will accept for exchange any and all Old Securities that are
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City
time, on September , 1997, or such later time and date to which the
Exchange Offer is extended (the "Expiration Date"). Tenders of Old Securities
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Securities being tendered for exchange. However, the
Exchange Offer is subject to certain customary conditions which may be waived
by the Company. The Company has agreed to pay the expenses of the Exchange
Offer. There will be no cash proceeds to the Company from the Exchange Offer.
See "Use of Proceeds."
The Old Senior Notes were issued and sold on July 25, 1997 (the "Old
Senior Notes Offering") and the Old Discount Debentures were issued and
exchanged for the Company's 11 3/4% Senior Subordinated Discount Debentures
due 2005 on April 2, 1997 (the "Old Discount Debentures Offering" and,
together with the Old Senior Notes Offering, the "Old Offerings"), in
transactions that were not registered under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon the exemption provided in
Section 4(2) of the Securities Act. Accordingly, the Old Securities may not
be reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. The New
Securities are being offered for exchange in order to satisfy certain
obligations of the Company under Registration Rights Agreements (as defined
herein) between the Company and the Initial Purchasers (as defined herein)
and the Holders of the Old Discount Debentures. The New Senior Notes and New
Discount Debentures will be obligations of the Company evidencing the same
indebtedness and equity interests as the Old Senior Notes and Old Discount
Debentures, respectively, and will be entitled to the benefits of the same
Indentures which govern both the Old Securities and the New Securities. The
form and terms (including principal amount, interest rate, dividend payment,
maturity and ranking) of the New Senior Notes and New Discount Debentures are
the same as the form and terms of the Old Senior Notes and Old Discount
Debentures, except that the New Senior Notes and New Discount Debentures (i)
have been registered under the Securities Act and therefore are not subject
to certain restrictions on transfer applicable to the Old Senior Notes and
Old Discount Debentures; (ii) will not be entitled to registration rights;
and (iii) will not provide for any Liquidated Damages (as defined herein).
See "The Exchange Offer--Registration Rights; Liquidated Damages."
The Company is making the Exchange Offer pursuant to the registration
statement of which this Prospectus is a part in reliance upon the position of
the staff of the Securities and Exchange Commission (the "Commission") set
forth in certain no-action letters addressed to other parties in other
transactions. However, the Company has not sought its own no-action letter
and there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer. Based on these
interpretations by the staff of the Commission, the Company believes that the
New Securities issued
i
<PAGE>
pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than (i) any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act; (ii) an Initial Purchaser or Holder of Old Discount
Debentures who acquired the Old Securities directly from the Company solely
in order to resell pursuant to Rule 144A of the Securities Act or any other
available exemption under the Securities Act; or (iii) a broker-dealer who
acquired the Old Securities as a result of market making or other trading
activities) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New
Securities are acquired in the ordinary course of such holder's business and
such holder is not participating and has no arrangement or understanding with
any person to participate in a distribution (within the meaning of the
Securities Act) of such New Securities. Each broker-dealer that receives New
Securities for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale
of such New Securities. 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
New Securities received in exchange for Old Securities where such Old
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
AVAILABLE INFORMATION
The Company has filed with the Commission the Registration Statement
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the New Securities being offered hereby. 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. For further information with respect to the
Company and the New Securities, reference is hereby made to the Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration
Statement are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its entirety by such reference. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information concerning the Company may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices at Room 1028, Seven World Trade Center, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661. The Commission maintains a web site
(http://www.sec.gov.) that contains reports, proxy statements and other
information regarding registrants that file electronically with the
Commission. Copies of such material can also be obtained upon written request
addressed to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
ii
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Prospective investors are urged to read this Prospectus in its entirety.
References herein to the Company's business and pro forma information give
effect to the Plan (as defined) and certain other transactions described in
the Unaudited Pro Forma Financial Information and the notes thereto, unless
the context indicates otherwise. Unless otherwise indicated or the context
otherwise requires, references in this Prospectus to the "Company" are to
Jordan Industries, Inc. and its subsidiaries, including their respective
predecessors.
THE COMPANY
The Company was organized to acquire and operate a diverse group of
businesses on a decentralized basis, with a corporate staff providing
strategic direction and support. The Company is currently comprised of 25
businesses which are divided into four strategic business units: (i) the
Specialty Printing and Labeling group ("Specialty Printing and Labeling"),
(ii) the Consumer and Industrial Products group ("Consumer and Industrial
Products"), (iii) the Motors and Gears group ("Motors and Gears") and (iv)
the Jordan Telecommunication Products group ("Jordan Telecommunication
Products"). The Company believes that its businesses are characterized by
leading positions in niche industries, high operating margins, strong
management, minimal working capital and capital expenditure requirements, and
low sensitivity to technological change and economic cycles.
The Company's business strategy is to enhance the growth and profitability
of each business unit and to build upon the strengths of those units through
product line and other strategic acquisitions. Key elements of this strategy
have been the consolidation and reorganization of acquired businesses,
increased focus on international markets, facilities expansion and the
acquisition of complementary product lines. When, through such activities,
the Company believes that critical mass is attained in a particular industry
segment, the related companies are organized as a discreet business unit. For
example, the Company acquired the Imperial Electric Company ("Imperial") in
1983 and made a series of complementary acquisitions, which resulted in the
formation of Motors & Gears, Inc. ("Motors and Gears, Inc."), a leading
domestic manufacturer of electric motors and gears. Similarly, the Company
acquired Dura-Line Corporation ("Dura-Line") in 1985 and expanded its
presence in the telecommunications industry through nine complementary
acquisitions. The organization of these companies as Jordan Telecommunication
Products created a leading global supplier of products and equipment serving
the telecommunications industry. The Company is currently evaluating various
alternatives to expand its automotive aftermarket products business and its
specialty plastics business, and is utilizing its subsidiaries DACCO
Incorporated ("DACCO") and Beemak Plastics, Inc. ("Beemak"), respectively, as
the foundation for these efforts.
Through the implementation of this strategy, the Company has demonstrated
significant and consistent growth in net sales and EBITDA (as defined). The
Company generated combined pro forma net sales and EBITDA of $649.8 million
and $114.1 million, respectively, for the year ended December 31, 1996, as
compared to historical net sales and EBITDA of $327.3 million and $45.8
million, respectively, for the year ended December 31, 1992, representing a
pro forma compounded annual growth rate ("CAGR") of 18.7% and 25.6%,
respectively. For the years ended December 31, 1995 and 1996, and the six
months ended June 30, 1997, the Company recorded a net loss of $(7.5)
million, $(55.7) million and $(12.5) million, respectively, and at June 30,
1997 the Company had a net capital deficiency of $(146.1) million. Also, upon
the fifith anniversary of the issuance of the JTP Junior Preferred Stock and
the M&G Junior Preferred Stock, or upon its earlier redemption, the Company
will no longer continue to consolidate the Jordan Telecommunication Products
subsidiaries and the Motors and Gears subsidiaries for financial reporting
purposes as subsidiaries of the Company.
Jordan Industries, Inc. was incorporated in Illinois in 1988, and its
principal executive offices are located at Arborlake Centre, 1751 Lake Cook
Road, Deerfield, Illinois 60015, and its telephone number is (847) 945-5591.
1
<PAGE>
The following chart depicts the operating subsidiaries which comprise the
Company's four strategic business units, together with the pro forma net
sales for each of the four groups for the year ended December 31, 1996. Pro
forma net sales and EBITDA, as set forth below, give effect to each of the
elements of the Plan and certain other transactions described in the
Unaudited Pro Forma Financial Information and the notes thereto.
<TABLE>
<CAPTION>
JORDAN INDUSTRIES, INC.
$649.8 Million of Net Sales
$114.1 Million of EBITDA
SPECIALTY PRINTING AND CONSUMER AND INDUSTRIAL JORDAN MOTORS AND
LABELING PRODUCTS TELECOMMUNICATION GEARS(1)
PRODUCTS(1)
$118.1 MILLION OF NET SALES $157.6 MILLION OF NET SALES $213.2 MILLION OF NET SALES $160.9 MILLION OF NET SALES
<S> <C> <C> <C> <C> <C>
o SALES PROMOTION o DACCO o BEEMAK o DURA-LINE o VIEWSONICS o IMPERIA
ASSOCIATES o SATE-LITE o RIVERSIDE o AIM o VITELEC o SCOTT
o PAMCO o CAPE o PARSONS o CAMBRIDGE o BOND o GEAR
o VALMARK CRAFTSMEN o JOHNSON o NORTHERN o MERKLE-KORFF
o SEABOARD o FIR
</TABLE>
(1) The subsidiaries comprising Jordan Telecommunication Products and |B5
BOND Motors and Gears are Non-Restricted Subsidiaries (as defined in
the |B5 NORTHERN Exchange Indentures), the common stock of which is
owned by |B5 LODAN stockholders and affiliates of the Company and
management of the respective companies. The Company's ownership in
these subsidiaries is solely in the form of JTP Junior Preferred Stock
and M&G Junior Preferred Stock (each as defined). See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--General."
2
<PAGE>
RECAPITALIZATION AND REPOSITIONING PLAN
The Company has implemented its Recapitalization and Repositioning Plan
(the "Plan") to recapitalize and reposition its subsidiaries in order to
establish them as more independent, stand-alone, industry-focused companies,
to provide the Company with additional financial and operational flexibility
and to allow the Company's stockholders to invest directly in Jordan
Telecommunication Products and Motors and Gears.
The principal elements of the Plan include the following, all of which
were completed prior to July 31, 1997:
(i) The Old Senior Notes Offering.
(ii) The formation of a subsidiary, Jordan Telecommunication Products,
Inc. ("JTP"), which acquired all of the Jordan Telecommunication
Products subsidiaries from the Company in a series of transactions
for aggregate consideration of $294.0 million (the "JTP
Recapitalization"), consisting of $284.0 million of cash proceeds
and $10.0 million of assumed obligations. As part of the JTP
Recapitalization, the Company purchased $20.0 million of aggregate
initial liquidation preference of JTP Junior Preferred Stock,
resulting in net cash proceeds to the Company of $264.0 million.
(iii) The refinancing of the indebtedness of the Company's affiliate,
Archibald Candy Corporation ("Fannie May"), which resulted in
approximately $17.4 million of net cash proceeds to the Company
(the "Fannie May Refinancing").
(iv) The establishment of a new $75.0 million credit facility (the "New
Credit Agreement"), which was effected by an amendment of the
Company's prior credit facility, by a wholly-owned subsidiary of
the Company, which was undrawn as of July 31, 1997.
(v) The reclassification of the Specialty Printing and Labeling
subsidiaries as Restricted Subsidiaries for purposes of the
Company's Indentures (as defined).
The net proceeds from the foregoing were used as follows:
(i) To repay in full approximately $73.8 million aggregate principal
amount of indebtedness under prior credit facilities of the
Company and certain of its subsidiaries (the "Old Credit
Agreements").
(ii) To repurchase substantially all of the $275.0 million principal
amount of the Company's 10 3/8% Senior Notes due 2003 pursuant to
a cash tender offer (the "Tender Offer"), and to pay certain
expenses in connection with the concurrent solicitation of
consents to certain amendments to the Company's existing
indentures (the "Old Indentures").
(iii) For general corporate purposes.
In addition, as part of the Company's strategy to make complementary
acquisitions and to divest non-core businesses, the Company has executed the
following transactions as additional elements of the Plan:
(i) The recapitalization of the Company's Non-Restricted Subsidiary,
Motors and Gears Holdings, Inc. ("M&G") in May 1997 (the "M&G
Recapitalization").
(ii) The acquisition by Jordan Telecommunication Products of the assets
of LoDan West, Inc. ("LoDan") for approximately $17.0 million in
May 1997, and the acquisition by Motors and Gears of the stock of
FIR Electromeccanica SpA ("FIR") for approximately $51.3 million
in June 1997.
(iii) The sale of Hudson Lock, Inc. ("Hudson"), in May 1997 for net cash
proceeds of approximately $35.0 million, and the sale of Paw Print
Mailing List Services, Inc. ("Paw Print"), in July 1997 to an
affiliate for approximately $10.0 million in net cash proceeds and
approximately $2.5 million of assumed debt.
3
<PAGE>
THE EXCHANGE OFFER
Securities Offered ............ $120,000,000 principal amount of 10 3/8%
Series B Senior Notes due 2007 and
$214,036,493 principal amount of 11 3/4%
Series B Senior Subordinated Discount
Debentures due 2009. The terms of the New
Senior Notes and New Discount Debentures are
identical in all material respects to those
of the Old Senior Notes and Old Discount
Debentures except for certain transfer
restrictions and registration rights
relating to the Old Securities and except
for certain Liquidated Damages provisions
relating to the Old Securities described
below under "--Summary Description of the
New Securities."
Issuance of Old Senior Notes
and Old Discount Debentures;
Registration Rights .......... The Old Senior Notes were issued on July 25,
1997 to Jefferies & Company, Inc.
("Jefferies") and Donaldson, Lufkin &
Jenrette Securities Corporation
(collectively, the "Initial Purchasers"),
which placed the Old Senior Notes with
"qualified institutional buyers" (as such
term is defined in Rule 144A promulgated
under the Securities Act) and "institutional
accredited investors" (as such term is
defined in Rule 501(A)(1), (2), (3) or (7)
under the Securities Act). In connection
therewith, the Company executed and
delivered for the benefit of the holders of
Old Senior Notes a certain registration
rights agreement (the "Senior Notes
Registration Rights Agreement"), pursuant to
which the Company agreed (i) to file a
registration statement on or prior to
September 23, 1997 with respect to the
Exchange Offer and (ii) to use its best
efforts to cause such registration statement
to be declared effective by the Commission
on or prior to November 22, 1997. The Old
Discount Debentures were issued on April 2,
1997 to certain holders of the Company's 11
3/4% Senior Subordinated Discount Debentures
due 2005, each of which was a "qualified
institutional buyer" (as such term is
defined in Rule 144A promulgated under the
Securities Act) or an "institutional
accredited investor" (as such term is
defined in Rule 501(A)(1), (2), (3) or (7)
under the Securities Act), in a series of
private transactions in exchange for the
Company's 11 3/4% Senior Subordinated
Discount Debentures due 2005. In connection
therewith, the Company executed and
delivered certain registration rights
agreements (the "Discount Debentures
Registration Rights Agreements" and,
together with the Senior Notes Registration
Rights Agreement, the "Registration Rights
Agreements"), pursuant to which the Company
agreed (i) to file a registration statement
on or prior to June 16, 1997 and (ii) to use
its best efforts to cause such registration
statement to be declared effective by the
Commission on or prior to July 16, 1997. In
certain circumstances, the Company will be
required to provide a shelf registration
statement (the "Shelf Registration
Statement") to cover resales of the Old
Senior Notes and Old Discount Debentures by
the holders thereof. If the Company
4
<PAGE>
does not comply with its obligations under
the Registration Rights Agreements, it will
be required to pay Liquidated Damages to
holders of the Old Senior Notes and Old
Discount Debentures under certain
circumstances. As of August 28, 1997,
$117,499 of Liquidated Damages had accrued
to the Holders of Old Discount Debentures.
See "The Exchange Offer--Registration
Rights; Liquidated Damages." Holders of Old
Securities do not have any appraisal rights
in connection with the Exchange Offer.
The Exchange Offer ............ The New Senior Notes are being offered in
exchange for a like principal amount of Old
Senior Notes and the New Discount Debentures
are being offered in exchange for a like
principal amount of Old Discount Debentures.
The issuance of the New Securities is
intended to satisfy the obligations of the
Company contained in the Registration Rights
Agreements. Based upon the position of the
staff of the Commission set forth in
no-action letters issued to third parties in
other transactions substantially similar to
the Exchange Offer, the Company believes
that the New Securities issued pursuant to
the Exchange Offer may be offered for
resale, resold and otherwise transferred by
holders thereof (other than (i) any such
holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the
Securities Act, (ii) an Initial Purchaser or
a holder of Old Discount Debentures who
acquired the Old Securities directly from
the Company solely in order to resell
pursuant to Rule 144A of the Securities Act
or any other available exemption under the
Securities Act, or (iii) a broker-dealer who
acquired the Old Securities as a result of
market making or other trading activities)
without further compliance with the
registration and prospectus delivery
requirements of the Securities Act, provided
that such New Securities are acquired in the
ordinary course of such holder's business
and such holder is not participating and has
no arrangement with any person to
participate in a distribution (within the
meaning of the Securities Act) of such New
Securities. Each broker-dealer that receives
New Securities for its own account pursuant
to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection
with any resale for such New Securities.
Although there has been no indication of any
change in the staff's position, there can be
no assurance that the staff of the
Commission would make a similar
determination with respect to the resale of
the New Securities. See "Risk Factors."
Procedures for Tendering ...... Tendering holders of Old Securities must
complete and sign the Letter of Transmittal
in accordance with the instructions
contained therein and forward the same by
mail, facsimile or hand delivery, together
with any other required documents, to the
Exchange Agent, either with the Old Senior
Notes or Old Discount Debentures to be
tendered or in compliance with the specified
procedures for guaranteed delivery of Old
Senior Notes or Old Discount Debentures.
Holders of the Old Secu-
5
<PAGE>
rities desiring to tender such Old
Securities in exchange for New Securities
should allow sufficient time to ensure
timely delivery. Certain brokers, dealers,
commercial banks, trust companies and other
nominees may also effect tenders by
book-entry transfer. Holders of Old
Securities registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee are urged to
contact such person promptly if they wish to
tender Old Securities pursuant to the
Exchange Offer. Letters of Transmittal and
certificates representing Old Securities
should not be sent to the Company. Such
documents should only be sent to the
Exchange Agent. Questions regarding how to
tender and requests for information should
be directed to the Exchange Agent. See "The
Exchange Offer--Procedures for Tendering Old
Securities."
Tenders, Expiration Date;
Withdrawal .................... The Exchange Offer will expire on 5:00 p.m.,
New York City time, on September , 1997,
or such later date and time to which the
Exchange Offer is extended. The tender of
Old Securities pursuant to the Exchange
Offer may be withdrawn at any time prior to
the Expiration Date. Any Old Security not
accepted for exchange for any reason will be
returned without expense to the tendering
Holder thereof as prompty as practicable
after the expiration or termination of the
Exchange Offer. See "The Exchange
Offer--Terms of the Exchange Offer; Period
for Tendering Old Securities" and
"--Withdrawal Rights."
Certain Conditions to the
Exchange Offer ................ The Exchange Offer is subject to certain
customary conditions, all of which may be
waived by the Company, including the absence
of (i) threatened or pending proceedings
seeking to restrain the Exchange Offer or
resulting in a material delay to the
Exchange Offer; (ii) a general suspension of
trading on any national securities exchange
or in the over-the-counter market; (iii) a
banking moratorium; (iv) a commencement of
war, armed hostilities or other similar
international calamity directly or
indirectly involving the United States; and
(v) change or threatened change in the
business, properties, assets, liabilities,
financial condition, operations, results of
operations or prospects of the Company and
its subsidiaries taken as a whole that, in
the sole judgment of the Company, is or may
be adverse to the Company. The Company shall
not be required to accept for exchange, or
to issue New Securities in exchange for, any
Old Securities, if at any time before the
acceptance of such Old Securities for
exchange or the exchange of the New
Securities for such Old Securities, any of
the foregoing events occurs which, in the
sole judgment of the Company, make it
inadvisable to proceed with the Exchange
Offer and/or with such acceptance for
exchange or with such exchange. If the
Company fails to consummate the Exchange
Offer because the Exchange Offer is not
permitted by applicable law or Commission
policy, it will file with the Commission a
Shelf Registration Statement
6
<PAGE>
to cover resales of the Transfer Restricted
Securities (as defined herein) by the
holders thereof who satisfy certain
conditions. If the Company fails to
consummate the Exchange Offer or file a
Shelf Registration Statement in accordance
with the Reigstration Rights Agreements, the
Company will pay Liquidated Damages to each
holder of Transfer Restricted Securities
until the cure of all defaults. The Exchange
Offer is not conditioned upon any minimum
aggregate principal amount of Old Securities
being tendered for exchange. See "The
Exchange Offer--Registration Rights;
Liquidated Damages" and "--Certain
Conditions to the Exchange Offer."
Federal Income Tax
Consequences; Original Issue
Discount ...................... For Federal income tax purposes, the
exchange pursuant to the Exchange Offer will
not result in any income, gain or loss to
the Holders or the Company. For Federal
income tax purposes, the New Discount
Debentures will be treated as having been
issued with "original issue discount." Each
holder of a New Discount Debenture will be
required to include amounts in gross income
for federal income tax purposes in advance
of the receipt of cash payments to which the
income is attributable. See "Certain Federal
Income Tax Considerations."
Use of Proceeds ............... There will be no proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Appraisal Rights .............. Holders of Old Securities will not have
dissenters' rights or appraisal rights in
connection with the Exchange Offer.
Exchange Agent ................ First Trust National Association is serving
as Exchange Agent in connection with the
Exchange Offer.
CONSEQUENCES OF NOT EXCHANGING THE OLD SECURITIES
Holders of Old Securities who do not exchange their Old Securities for New
Securities pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Securities as set forth in the legend
thereon as a consequence of the issuance of the Old Securities pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Securities may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will
register the Old Securities under the Securities Act. See "Risk
Factors--Consequences of Exchange and Failure to Exchange" and "The Exchange
Offer--Consequences of Exchanging Old Securities."
7
<PAGE>
THE NEW SENIOR NOTES AND NEW DISCOUNT DEBENTURES
Securities Offered ............ $120,000,000 aggregate principal amount of
10 3/8% Series B Senior Notes due 2007 to be
issued by the Company.
$214,036,493 aggregate principal amount of
11 3/4% Series B Senior Subordinated
Discount Debentures due 2009 to be issued by
the Company.
Maturity ...................... August 1, 2007 for the New Senior Notes and
April 1, 2009 for the New Discount
Debentures.
Interest Rate and Payment Dates
............................... The New Senior Notes will bear interest at a
rate of 10 3/8% per annum from July 25,
1997. Interest on the New Senior Notes will
be payable semi-annually in cash on February
1 and August 1 of each year, commencing
February 1, 1998.
The New Discount Debentures will not bear
interest prior to April 1, 2002. Thereafter,
interest on the New Discount Debentures will
accrue at 11 3/4% per annum and will be
payable semiannually in cash on April 1 and
October 1 of each year, commencing October
1, 2002.
Ranking ....................... The New Senior Notes will be senior
unsecured obligations of the Company, will
rank pari passu with all existing and future
senior indebtedness of the Company and will
rank senior to all existing and future
subordinated indebtedness of the Company.
The New Senior Notes will be effectively
subordinated to any secured senior
indebtedness of the Company to the extent of
the assets that secure such indebtedness.
The New Discount Debentures will be senior
subordinated unsecured obligations of the
Company, will rank junior to all existing
and future senior indebtedness of the
Company (including the Senior Notes), will
rank pari passu with all other existing and
future senior subordinated indebtedness of
the Company and will rank senior to all
subordinated indebtedness of the Company. In
addition, the New Securities will be
structurally subordinated to, and therefore
will effectively rank junior to, all
indebtedness and claims of creditors of the
Company's subsidiaries, including
indebtedness under the New Credit Agreement.
Optional Redemption ........... The New Senior Notes will be redeemable at
the option of the Company in whole or, from
time to time, in part, on or after August 1,
2002, and the New Discount Debentures will
be redeemable at the option of the Company
in whole or, from time to time, in part, on
or after April 1, 2002, each at the
redemption prices set forth herein, plus
accrued and unpaid interest to the date of
redemption. See "Description of Exchange
Securities--Redemption of Exchange
Securities."
Certain Covenants ............. The Exchange Indentures contain certain
covenants that, among other things, limit
the ability of the Company to pay dividends
or make certain other restricted payments,
and will limit the
8
<PAGE>
ability of the Company and its Restricted
Subsidiaries to incur additional
indebtedness, to encumber or sell assets, to
enter into transactions with affiliates, to
make certain investments, to merge or
consolidate with any other entity and to
transfer or lease all or substantially all
of their assets. See "Description of
Exchange Securities--Certain Covenants."
Change of Control ............. Upon the occurrence of a Change of Control,
the Company will be required to offer to
purchase all outstanding New Securities at
101% of the principal amount thereof,
together with accrued and unpaid interest,
if any, to the date of repurchase. Certain
transactions with affiliates of the Company
may not be deemed to be a Change of Control.
See "Description of Exchange
Securities--Mandatory Offers to Purchase
Exchange Securities."
For a more detailed discussion of the terms of the Exchange Securities,
see "Description of New Securities."
SUMMARY DESCRIPTION OF THE OLD SECURITIES
The terms of the New Securities and the Old Securities are identical in
all material respects, except for certain transfer restrictions and
registration rights relating to the Old Securities and except that (i) if the
Exchange Offer is not consummated by December 22, 1997, subject to certain
exceptions, with respect to the first 90-day period immediately following
thereafter, the Company will be obligated to pay Liquidated Damages to each
Holder of Old Senior Notes in an amount equal to $.05 per week for each
$1,000 principal amount of Old Senior Notes held by such Holder and (ii)
because the Registration Statement was not filed on or prior to June 16,
1997, the Company is obligated to pay Liquidated Damages to each Holder of
Old Discount Debentures in an amount equal to $.05 per week for the first
90-day period after June 16, 1997 for each $1,000 principal amount of Old
Discount Debentures held by such Holder. The amount of the Liquidated Damages
will thereafter increase to $.10 per week for each $1,000 principal amount of
Old Securities until the Exchange Offer is consummated.
RISK FACTORS
Holders of the Old Securities should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate
the factors set forth under "Risk Factors."
9
<PAGE>
SUMMARY FINANCIAL DATA
The following table presents summary (i) historical financial data of the
Company for the years ended December 31, 1994, 1995 and 1996, and for the six
months ended June 30, 1996 and 1997 and (ii) pro forma financial data of the
Company and the Restricted Subsidiaries for the year ended December 31, 1996
and the six months ended June 30, 1997. The historical financial data of the
Company for the years ended December 31, 1994, 1995 and 1996 were derived
from the audited consolidated financial statements of the Company. The
historical financial data of the Company for the six months ended June 30,
1996 and 1997 were derived from the unaudited consolidated financial
statements of the Company. The results of operations for the six months ended
June 30, 1997 are not necessarily indicative of the results of operations to
be expected for the full year. The pro forma data is unaudited, and the pro
forma statement of operations and other data give effect to the Plan and
certain other transactions as set forth in the Unaudited Pro Forma Financial
Information and the notes thereto included elsewhere in this Prospectus as if
such transactions had occurred at the beginning of the relevant period. Pro
forma balance sheet data give effect to such transactions at the date
indicated. The unaudited summary pro forma consolidated financial data do not
purport to represent what the consolidated results of operations of the
Company would have been had the Plan actually occurred on such dates and do
not purport to project the consolidated financial position or the
consolidated results of operations of the Company for the current year or any
future period. The financial data set forth below should be read in
conjunction with the historical consolidated financial statements of the
Company and the related notes thereto, "Selected Financial Data,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Unaudited Pro Forma Financial Information," all contained
elsewhere in this Offering Circular.
<TABLE>
<CAPTION>
HISTORICAL (1) PRO FORMA(2)
------------------------------------------------------ --------------------------------------------
YEARS ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS
DECEMBER 31, JUNE 30, DECEMBER 31, 1996 ENDED JUNE
30, 1997
-------------------------------- --------------------- -------------------------- -----------------
RESTRICTED
SUBSIDIARIES
1994 1995 1996 1996 1997 COMPANY(4) SUBSIDIARIES(5) COMPANY(4) (5)
---------- ---------- ---------- ---------- ---------- ---------- --------------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (3)
Net sales...................... $424,391 $507,311 $601,567 $267,220 $324,889 $649,801 $275,742 $333,396 $133,223
Gross profit, excluding
depreciation.................. 161,661 186,658 225,822 103,167 121,830 240,087 102,613 123,243 51,211
Net income (loss).............. 23,741 (7,470) (55,690) (5,584) (12,475) (30,011) (12,319) (11,462) (6,500)
OTHER DATA: (3)
EBITDA (7)..................... 55,812 66,158 80,507 42,364 54,951 114,122 34,685 57,353 16,600
Depreciation and amortization . 19,099 21,684 30,438 13,816 15,933 32,609 11,957 16,750 5,726
Adjusted operating income (6) 35,868 42,425 29,367 27,119 22,284 69,575 13,810 38,157 10,103
Capital expenditures........... 12,112 15,276 17,395 9,612 5,758 17,973 8,021 6,354 3,190
Adjusted Interest expense (8) 39,482 45,231 60,339 27,965 35,911 79,309 26,340 41,251 14,092
Cash interest expense ......... 29,938 34,539 48,352 22,143 29,145 57,036 14,353 29,489 7,326
EBITDA to cash interest
expense ...................... 1.9x 1.9x 1.7x 1.9x 1.9x 2.0x 2.4x 1.9x 2.3x
EBITDA to total interest
expense ...................... 1.4x 1.5x 1.3x 1.5x 1.5x 1.4x 1.3x 1.4x 1.2x
Ratio of earnings to fixed
charges (9)................... 1.7x -- -- -- 1.2x -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
RESTRICTED
SUBSIDIARIES
THE COMPANY AT JUNE 30,
AT JUNE 30, 1997 1997(5)
---------------- -----------------
HISTORICAL PRO FORMA (2) PRO FORMA(2)
------------ ---------------- -----------------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA: (3)
<S> <C> <C> <C>
Cash and cash equivalents..................... $ 30,887 $ 71,249 $ 30,798
Working capital............................... 145,477 201,528 79,791
Total assets.................................. 731,932 752,556 327,026
Total debt.................................... 752,995 787,216 264,918
Preferred stock (10) ......................... 1,515 1,515 --
Stockholders' equity (net capital
deficiency).................................. (146,064) (170,583) 16,860
</TABLE>
10
<PAGE>
- ------------
(1) The Company has acquired a diverse group of operating companies over
the periods presented, which significantly affects the comparability of
the following information.
(2) The pro forma data reflect consummation of each of the elements of the
Plan, the reallocation of certain expenses, the deconsolidation of the
Company's majority-owned subsidiary, Welcome Home Inc. ("Welcome
Home"), and the elimination of certain non-recurring items. See
"Unaudited Pro Forma Financial Information."
(3) The Company consolidates the results of the subsidiaries comprising
Jordan Telecommunication Products and Motors and Gears, all of which
are Non-Restricted Subsidiaries, the common stock of which is owned by
stockholders and affiliates of the Company and management of the
respective companies. The Company's investment in these subsidiaries is
in the form of JTP Junior Preferred Stock and M&G Junior Preferred
Stock. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- General."
(4) Pro forma results of operations for FIR for the year ended December 31,
1996 and the six months ended June 30, 1997 reflect its results of
operations for the twelve months ended October 31, 1996 and the six
months ended April 30, 1997, respectively.
(5) The Company's Restricted Subsidiaries will consist of the subsidiaries
of Specialty Printing and Labeling and Consumer and Industrial
Products. The statement of operations and other data for the Restricted
Subsidiaries gives effect to the allocation of corporate overhead as
described under "Certain Transactions--Services Agreements."
(6) Adjusted operating income represents operating income excluding the
results of Welcome Home, which is no longer consolidated with the
Company. See the Company's historical consolidated financial
statements.
(7) EBITDA for any relevant period represents adjusted operating income
plus depreciation, amortization of goodwill and other intangibles,
plant closing costs, management and advisory fees, SAR expense, the
loss on the purchase of an affiliated company and certain other
non-recurring items, restructuring costs, fees and other expenses. See
"Selected Financial Data" and "Unaudited Pro Forma Financial
Information." EBITDA is not included herein as operating data and
should not be construed as an alternative to operating income
(determined in accordance with generally accepted accounting
principles) as an indicator of the Company's operating performance. The
Company has included EBITDA because the Company understands that it is
one measure used by certain investors to determine the Company's
operating cash flow and historical ability to service its indebtedness.
(8) Does not include amortization of deferred financing fees, original
issue discount, and amortization of the premium paid by the Company for
the Old Discount Debentures Offering of $1.4 million, $1.7 million,
$3.0 million, $1.0 million and $1.9 million for the years ended 1994,
1995, 1996 and for the six months ended June 30, 1996 and 1997,
respectively, on an historical basis and $3.5 million and $1.8 million
for the year ended 1996 and the six months ended June 30, 1997,
respectively, for the Company on a pro forma basis, and $1.5 million
and $0.7 million for the year ended 1996 and the six months ended June
30, 1997, respectively, for the Restricted Subsidiaries on a pro forma
basis.
(9) On an historical basis, earnings were insufficient to cover fixed
charges by $11.8 million and $47.4 million for the years ended December
31, 1995 and 1996, respectively, and $5.4 million for the six months
ended June 30, 1996. On a pro forma basis earnings were insufficient to
cover fixed charges by $8.0 million and $10.0 million for the year
ended December 31, 1996 for the Company and the Restricted
Subsidiaries, respectively, and $5.2 million and $4.3 million for the
six months ended June 30, 1997 for the Company and the Restricted
Subsidiaries, respectively. Earnings were sufficient to cover fixed
charges in 1994 and the six months ended June 30, 1997 due to the
recognition of a gain on the sale of a partial interest in the
Company's currently deconsolidated subsidiary, Welcome Home in 1994,
and the recognition of a gain on the sale of a former subsidiary,
Hudson, in 1997.
(10) Includes $25.0 million liquidation preference of the JTP Senior
Preferred Stock (as defined), and $1.5 million senior, non-voting 8%
cumulative preferred stock of Motors and Gears Holdings Inc., which are
owned in each case by persons other than the Company. See "Description
of Capital Stock--Subsidiary Securities."
11
<PAGE>
RISK FACTORS
Holders of the Old Securities should consider carefully the following risk
factors, in addition to the other information set forth in this Prospectus,
before tendering their Old Securities in the Exchange Offer. This Prospectus
contains certain forward-looking statements, including statements containing
the words "believes," "anticipates," "expects" and words of similar import.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which 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: adverse changes in national or local
economic conditions, increased competition, changes in availability, cost and
terms of financing, changes in operating expenses and 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 "Management's Discussion and Analysis of Results of Operations and
Financial Condition," and "Business." Given these uncertainties, Holders of
the Old Securities 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 results of any revisions to any
of the forward-looking statements contained in this Prospectus to reflect
future events or developments.
The risk factors set forth below (other than "Consequences of Exchange and
Failure to Exchange") are generally applicable to the Old Securities as well
as the New Securities.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Issuance of the New Securities in exchange for the Old Securities pursuant
to the Exchange Offer will be made only after timely receipt by the Exchange
Agent of such Old Securities, a properly completed and duly executed Letter
of Transmittal and all other required documents. Therefore, holders of the
Old Securities desiring to tender such Old Securities in exchange for New
Securities should allow sufficient time to ensure timely delivery. The
Company is under no duty to give notification of defects or irregularities
with respect to tenders of Old Securities for exchange. Holders of Old
Securities who do not exchange their Old Securities for New Securities
pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Securities as set forth in the legend
thereon. In general, the Old Securities may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will
register the Old Securities under the Securities Act. In addition, upon the
consummation of the Exchange Offer holders of Old Securities which remain
outstanding will not be entitled to any rights to have such Old Securities
registered under the Securities Act or to any rights under the Registration
Rights Agreements. To the extent that Old Securities are tendered and
accepted in the Exchange Offer, a Holder's ability to sell untendered, or
tendered but unaccepted, Old Securities could be adversely affected. See "The
Exchange Offer--Consequences of Not Exchanging Old Notes and Old Senior
Preferred Stock."
Based on interpretations by the staff of the Commission, the Company
believes that the New Securities issued pursuant to the Exchange Offer in
exchange for Old Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, (ii) an Initial
Purchaser or Holder of Old Discount Debentures who acquired the Old
Securities directly from the Company solely in order to resell pursuant to
Rule 144A of the Securities Act or any other available exemption under the
Securities Act, or (iii) a broker-dealer who acquired the Old Securities as a
result of market making or other trading activities) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Securities. The Company has not, however, sought its own no-action
letter from the staff of the Commission. Although there has been no
indication of any change in the staff's position, there can be no assurance
that the staff of the Commission would make a similar determination with
respect to the resale of the New Securities. Any holder that cannot rely upon
such prior staff interpretations must comply with the registration and
12
<PAGE>
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction, unless such sale is made pursuant to an
exemption from such requirements. See "The Exchange Offer--Purpose of the
Exchange Offer."
LEVERAGE AND COVERAGE; NET LOSSES AND NET CAPITAL DEFICIENCY
The Company has substantial indebtedness and debt service obligations. At
June 30, 1997, the Company's total consolidated indebtedness was $753.0
million, its consolidated total assets were $731.9 million, and its net
capital deficiency was $(146.1) million. On a pro forma basis, on June 30,
1997 the Company's total consolidated indebtedness would have been $787.2
million, its consolidated total assets would have been $752.6 million and its
net capital deficiency would have been $(170.6) million. In addition, subject
to the restrictions under the New Credit Agreement, the Exchange Indentures
and indentures with respect to the Company's other debt securities
(collectively, the "Indentures"), the Company and its subsidiaries may incur
additional indebtedness (including additional secured indebtedness) from time
to time. See "Use of Proceeds," "Capitalization" and "Description of the New
Senior Notes--Certain Covenants."
On a pro forma basis for the year ended December 31, 1996 and the six
months ended June 30, 1997, giving effect to the consummation of the Plan and
certain other transactions described in the Unaudited Pro Forma Financial
Information, as if such transactions had occurred at the beginning of the
period, earnings before fixed charges would have been inadequate to cover
fixed charges by approximately $8.0 million and $5.2 million, respectively.
However, earnings before fixed charges on a pro forma basis include non-cash
charges for depreciation and amortization of $32.6 million and $16.8 million,
respectively.
The level of the Company's indebtedness could have important consequences
to holders of the Old Securities and the New Securities, including: (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 ability to obtain additional debt financing in the future for
working capital, capital expenditures, research and development or
acquisitions may be limited; and (iii) the Company's level of indebtedness
could limit its flexibility to react to changes in its operating environment
and in economic conditions generally.
To the extent that cash flow from operations is insufficient to cover the
Company's fixed charges and fund the Company's capital expenditure
requirements, the Company, in order to pay such expenses, may obtain funds
from additional borrowings, if permitted, and may seek to sell a portion of
its business or other assets, engage in sale/leaseback transactions, raise
additional equity capital and/or acquire other businesses that would provide
additional positive cash flow. No assurance can be given as to the
availability or accessibility of these or other similar transactions, or that
these or other similar transactions could be accomplished on terms favorable
to the Company.
The ability of the Company to pay principal and interest on the Senior
Notes and Discount Debentures and to meet its other debt service obligations
will depend on the future operating performance and financial results of the
Company, which will be subject in part to factors beyond the control of the
Company, such as prevailing economic conditions and financial, business, and
other factors including, possibly, the availability of revolving credit
borrowings under the New Credit Agreement. For the years ended December 31,
1995 and 1996 and for the six months ended June 30, 1997, the Company
recorded a net loss of $(7.5) million, $(55.7) million and $(12.5) million,
respectively. The Indentures and the New Credit Agreement contain certain
restrictive covenants. The highly leveraged position of the Company and the
restrictive covenants contained in the New Credit Agreement and the
Indentures could significantly limit its ability to withstand competitive
pressures or adverse economic conditions, make acquisitions, or take
advantage of business opportunities that may arise.
RANKING OF THE NEW SECURITIES
The New Securities will be effectively subordinated to all secured senior
indebtedness of the Company, to the extent of the assets which secure such
indebtedness, and all indebtedness of the Company's subsidiaries, including
borrowings under the New Credit Agreement. The New Discount
13
<PAGE>
Debentures will also be subordinated to all senior indebtedness of the
Company, including the Senior Notes. At July 31, 1997, on a pro forma basis,
the aggregate amount of indebtedness of the Company's Restricted Subsidiaries
would have been approximately $16.9 million. At July 31, 1997, on a pro forma
basis, the aggregate amount of indebtedness of the Company's Non-Restricted
Subsidiaries would have been approximately $510.1 million. The Exchange
Indentures will permit the Company and its Restricted Subsidiaries to incur
additional indebtedness, including secured indebtedness and indebtedness of
its Restricted Subsidiaries, subject to certain limitations, and will not
restrict the incurrence of indebtedness by the Company's Non-Restricted
Subsidiaries. See "Description of the New Senior Notes -- Certain Covenants."
ORIGINAL ISSUE DISCOUNT CONSEQUENCES OF THE DISCOUNT DEBENTURES
The Discount Debentures were issued at a substantial discount from their
principal amount. Consequently, the holders of the Discount Debentures
generally will be required to include amounts in gross income for federal
income tax purposes in advance of receipt of the cash payments to which the
income is attributable. See "Certain Federal Income Tax Considerations" for a
more detailed discussion of the federal income tax consequences to the
holders of the Discount Debentures of the purchase, ownership and disposition
of the Discount Debentures. If a bankruptcy case is commenced by or against
the Company under the United States Bankruptcy Code after the issuance of the
Discount Debentures, the claim of a holder of Discount Debentures may be
limited to an amount equal to the sum of (i) the price paid by the holder for
the Discount Debentures (which price may be deemed to be the closing price of
the Discount Debentures on their first day of trading); and (ii) that portion
of the original issue discount which is not deemed to constitute "unmatured
interest" for purposes of the United States Bankruptcy Code. Any original
issue discount that was not amortized as of any such bankruptcy filing would
constitute "unmatured interest." The amortization of OID (as defined herein)
for purposes of a claim in bankruptcy may be calculated differently than the
amortization of such OID for tax purposes.
HOLDING COMPANY STRUCTURE; DEPENDENCE ON SUBSIDIARIES; LIMITATIONS ON ACCESS
TO CASH FLOW OF THE SUBSIDIARIES
The Company is structured as a holding company which owns all of the stock
of JII, Inc. ("JII"), which in turn holds the stock of most of the Company's
operating subsidiaries. The Company's current operations are conducted
exclusively through its subsidiaries, and the Company's only significant
assets are the capital stock of the subsidiaries. As a holding company, the
Company is dependent on dividends or other intercompany transfers of funds
from its subsidiaries to meet the Company's debt service and other
obligations. The New Securities will be obligations exclusively of the
Company and will not be guaranteed by any of the Company's subsidiaries. Each
subsidiary's management is given broad discretion in conducting the
day-to-day operations of such subsidiary, and the performance of the
subsidiaries is largely dependent upon their individual efforts.
Consequently, the Company's cash flow and ability to service its debt,
including the New Securities, are dependent upon the earnings of the
subsidiaries and the distribution of those earnings to the Company, or upon
loans, advances or other payments made by the subsidiaries to the Company.
Furthermore, the terms of the permitted indebtedness and other agreements of
the Company and its Restricted Subsidiaries may have the effect of limiting
the ability of subsidiaries of the Company to pay dividends to the Company.
See "Description of the New Senior Notes -- Certain Covenants."
The indebtedness of JII, the Company's wholly-owned subsidiary and a
borrower under the New Credit Agreement, is secured by a pledge of certain
assets of the Company and/or certain assets of the Company's Restricted
Subsidiaries, consisting of their inventories and receivables, and possibly
their machinery, equipment, real estate, stock of subsidiaries and other
assets, and is guaranteed by the Restricted Subsidiaries and the Company.
CONSEQUENCES OF SUBSIDIARY DECONSOLIDATION
The Company's investment in Jordan Telecommunication Products and Motors
and Gears is represented solely by the JTP Junior Preferred Stock (the "JTP
Junior Preferred Stock") and the M&G
14
<PAGE>
Cumulative Preferred Stock (the "M&G Junior Preferred Stock"), respectively,
but not by common stock of either JTP or M&G, which is held by stockholders
and affiliates of the Company and management of the respective companies. So
long as the Company holds the JTP Junior Preferred Stock and the M&G Junior
Preferred Stock, the Company expects to continue to consolidate the Jordan
Telecommunication Products subsidiaries and the Motors and Gears subsidiaries
for financial reporting purposes as subsidiaries of the Company. However,
each issue of such Junior Preferred Stock discontinues its participation in
the applicable company's earnings on the fifth anniversary of issuance. In
addition, this financial consolidation and any continuing Company investment
in Jordan Telecommunication Products and Motors and Gears will be
discontinued upon the redemption of the JTP Junior Preferred Stock or the M&G
Junior Preferred Stock, as the case may be, or at such time as the JTP Junior
Preferred Stock and M&G Junior Preferred Stock ceases to represent at least a
majority of the voting power and a majority share in the earnings of the
relevant company. As long as the Junior Preferred Stock is outstanding, the
Company expects the vote test to be satisfied. Until the fifth anniversary of
the issuance of the Junior Preferred Stock, when it discontinues its
participation in the earnings of the companies, so long as the Junior
Preferred Stock is outstanding, the Company expects the earnings test to be
satisfied. The JTP Junior Preferred Stock and the M&G Junior Preferred Stock
are each mandatorily redeemable upon certain events and are redeemable at the
option of JTP and M&G, respectively, in whole or in part, at any time.
The Company also expects to include the Jordan Telecommunication Products
subsidiaries and the Motors and Gears subsidiaries in its consolidated group
for Federal income tax purposes. This consolidation would be discontinued,
however, upon the redemption of the JTP Junior Preferred Stock or the M&G
Junior Preferred Stock, as the case may be, which could result in recognition
by the Company of substantial income tax liabilities arising out of the JTP
Recapitalization and the M&G Recapitalization. If such deconsolidation had
occurred at June 30, 1997, the Company believes that the amount of taxable
income to the Company attributable to Jordan Telecommunication Products would
have been approximately $125.0 million (or approximately $50.0 million of tax
liabilities, assuming a 40% combined Federal, state and local income tax
rate) and the amount of taxable income to the Company attributable to Motors
and Gears would have been approximately $58.0 million (or approximately $23.2
million of tax liabilities, assuming a 40% combined Federal, state and local
income tax rate). The Company currently expects to offset these tax
liabilities arising from deconsolidation by using net loss carry-forwards
(approximately $27.3 million at June 30, 1997), and to pay any remaining
liability with redemption proceeds from the JTP Junior Preferred Stock and
the M&G Junior Preferred Stock, respectively. Deconsolidation would also
occur with respect to JTP and M&G, respectively, if the JTP Junior Preferred
Stock and the M&G Junior Preferred Stock, respectively, ceased to represent
at least 80% of the voting power and 80% of the stock value of the
outstanding Junior Preferred Stock and common stock combined of the relevant
company. As long as the Junior Preferred Stock is outstanding, the Company
expects the vote test to be satisfied. The value test depends on the relative
values of the Junior Preferred Stock and common stock. It is likely that by
the fifth anniversary of their issuances, the Junior Preferred Stock would
cease to represent 80% of the relevant total combined stock value. It is
entirely possible, however, that the 80% value test could fail well prior to
the fifth anniversary after issuance. In the event that deconsolidation
occurs without a redemption of the Junior Preferred Stock, the tax
liabilities discussed above would be incurred without the Company receiving
the proceeds of a redemption. The Company believes that its available cash
balances in addition to existing credit facilities would provide sufficient
resources to pay any tax liabilities that would arise if the Company did not
receive the proceeds of a redemption. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--General," "Certain
Transactions" and "Description of Capital Stock--Subsidiary Securities."
RESTRICTIVE COVENANTS LIMITING THE COMPANY'S ABILITY TO REPAY THE NEW
SECURITIES
The New Credit Agreement contains restrictive covenants and prohibits the
Company and its subsidiaries from prepaying other indebtedness, including the
New Securities. The New Credit Agreement will also require the Company to
maintain specified financial ratios and satisfy certain financial condition
tests. The Company's ability to meet those financial ratios and tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those ratios and tests. A
15
<PAGE>
breach of any of these covenants could result in a default under the New
Credit Agreement, and/or the Indentures. Upon the occurrence of an event of
default under the New Credit Agreement, the lenders thereunder could elect to
declare all amounts outstanding under the New Credit Agreement, together with
accrued interest, to be immediately due and payable. If the Company were
unable to repay those amounts, such lenders could proceed against the
collateral granted to them to secure that indebtedness. If the indebtedness
under the New Credit Agreement were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
all of its indebtedness, including the New Securities. Substantially all of
the assets of the Company's subsidiaries are pledged as security under the
New Credit Agreement. See "Description of Certain Indebtedness--New Credit
Agreement" and "Description of the Exchange Securities."
FRAUDULENT TRANSFER CONSIDERATIONS
Under fraudulent transfer law, if a court were to find, in a lawsuit by an
unpaid creditor or representative of creditors of the Company, that the
Company received less than fair consideration or reasonable equivalent value
for incurring the indebtedness represented by the New Securities, and, at the
time of such incurrence, the Company (i) was insolvent or was rendered
insolvent by reason of such incurrence, (ii) was engaged or about to engage
in a business or transaction for which its remaining property constituted
unreasonably small capital or (iii) intended to incur, or believed it would
incur, debts beyond its ability to pay as such debts mature, such court
could, among other things, (a) void all or a portion of the Company's
obligations to the holders of the New Securities and/or (b) subordinate the
Company's obligations to the holders of the New Securities to other existing
and future indebtedness of the Company, the effect of which would be to
entitle such other creditors to be paid in full before any payment could be
made on the New Securities. The measure of insolvency for purposes of
determining whether a transfer is avoidable as a fraudulent transfer varies
depending upon the law of the jurisdiction which is being applied. Generally,
however, a debtor would be considered insolvent if the sum of all of its
liabilities were greater than the value of all of its property at a fair
valuation, or if the present fair salable value of the debtor's assets were
less than the amount required to repay its probable liability on its debts as
they become absolute and mature. There can be no assurance as to what
standard a court would apply in order to determine solvency.
On the basis of its historical financial information, its recent operating
history as discussed in "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and other factors, the Company believes
that, at the time the New Senior Notes will be issued and after giving effect
to the Plan, the Company will be solvent, and will have sufficient capital
for the business in which it is engaged and did not and will not have
incurred debts beyond its ability to pay such debts as they mature. There can
be no assurance, however, that a court would agree with these conclusions.
CHANGE OF CONTROL; LIMITATIONS ON RIGHTS OF REPAYMENT
The Change of Control provisions of the Exchange Indentures will not
afford any protection in a highly leveraged transaction, including such a
transaction initiated by the Company, management of the Company or an
affiliate of the Company, if such transaction does not result in a Change of
Control. In addition, existing or future secured indebtedness of the Company
or obligations of the Company's subsidiaries may prohibit the Company from
repurchasing or redeeming any of the New Securities upon a Change of Control.
Moreover, the ability of the Company to repurchase or redeem the New
Securities will be limited by the Company's then-available resources.
Accordingly, the Change of Control provisions are likely to be of limited
usefulness in such situations. Prepayment of the New Securities pursuant to a
Change of Control would constitute a default under the New Credit Agreement.
In the event that a Change in Control occurs, the Company will likely be
required to refinance the indebtedness outstanding under the New Credit
Agreement and the New Securities. There can be no assurance that the Company
would be able to refinance such indebtedness or, if such refinancing were to
occur, that such refinancing would be on terms favorable to the Company. See
"Description of the New Securities--Mandatory Offers to Repurchase Exchange
Securities."
16
<PAGE>
The Change of Control purchase feature of the New Securities may in
certain circumstances discourage or make more difficult a sale or takeover of
the Company and, thus, the removal of incumbent management.
DEPENDENCE ON MANAGEMENT
The Company's success depends, in part, upon the continued services of
Thomas H. Quinn, President and Chief Operating Officer of the Company, and
certain other key personnel. Although incentives exist for these individuals
to remain with the Company, the loss of the services of any one of them could
have a material adverse effect on the business of the Company. The Company
maintains a $5.0 million "key man" insurance policy on Mr. Quinn under which
the Company is the beneficiary. The Company is also dependent upon John W.
Jordan II, Chairman and Chief Executive Officer and a principal stockholder
of the Company, and certain of his affiliates for strategic planning and
advice, the loss of which could have a material adverse effect on the
business of the Company. See "Management."
PRIVATE OWNERSHIP; AFFILIATED TRANSACTIONS
The principals, partners, officers, employees and affiliates of The Jordan
Company and their respective family members (collectively, the "Jordan
Group") own substantially all of the common stock of the Company. Although
the Company's Articles of Incorporation provide for cumulative voting of
common stock in the election of directors, these stockholders collectively
have sufficient votes to elect all of the directors of the Company and
control its management policy and financing decisions. The Company has paid
and will continue to pay advisory fees to TJC Management Corporation ("TJC
Management Corp."), an affiliate of The Jordan Company and the Company, and
pay investment banking fees to TJC Management Corp., including investment
banking fees in connection with the Exchange Offer. The Jordan Company is not
obligated to provide the Company with any acquisition opportunities, and
conflicts of interest in allocating various investment or acquisition
opportunities among The Jordan Company, the Jordan Group and the Company may
arise. Further, certain of the Company's subsidiaries have entered into a
number of affiliate transactions with the Company and The Jordan Company,
including the New TJC Management Consulting Agreement, the New Subsidiary
Advisory Agreements, the New Subsidiary Consulting Agreements, the JI
Properties Services Agreement and the Tax Sharing Agreement (each as defined)
and certain other agreements and transactions. See "Certain Transactions."
ABSENCE OF PUBLIC MARKET FOR THE NEW SECURITIES; RESTRICTIONS ON TRANSFERS
The New Securities are being offered to Holders of the Old Securities. The
Old Securities were issued to a small number of institutional investors and
the Old Senior Notes are eligible for trading in the Private Offering, Resale
and Trading through Automated Linkages (PORTAL) Market, the National
Association of Securities Dealers' screenbased, automated market for trading
of securities eligible for resale under Rule 144A. The New Securities are new
securities for which there currently is no market. Although the Initial
Purchasers have advised the Company that they currently intend to make a
market in the New Senior Notes, they are not obligated to do so and may
discontinue such market making at any time without notice. The Company does
not intend to list the New Securities on any national securities exchange or
to seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. Accordingly, no assurance can
be given that an active market will develop for any of the New Securities or
as to the liquidity of the trading market for any of the New Securities. If a
trading market does not develop or is not maintained, holders of the New
Securities may experience difficulty in reselling such New Securities or may
be unable to sell them at all. If a market for the New Securities develops,
any such market may be discontinued at any time. If a trading market develops
for the New Securities, future trading prices of such New Securities will
depend on many factors, including, among other things, prevailing interest
rates, the Company's results of operations and the market for similar
securities. Depending on prevailing interest rates, the market for similar
securities and other factors, including the financial condition of the
Company, the New Securities may trade at a discount from their principal
amount.
17
<PAGE>
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company's subsidiaries manufacture and assemble products at numerous
facilities, some of which are outside of the United States. Although the
Company has not experienced significant problems conducting operations in
these areas, changes in local economic or political conditions could impact
the Company's manufacturing, assembly and distribution capabilities and have
a material adverse effect on the Company's business, financial condition and
results of operations. Additional risks inherent in the Company's
international business activities generally include unexpected changes in
regulatory requirements, tariffs and other trade barriers, changes in local
economic or political conditions, longer accounts receivable payment cycles,
difficulties in managing international operations, potentially adverse tax
consequences, restrictions on repatriation of earnings and the burdens of
complying with a wide variety of foreign laws. In fiscal 1996, the Company
derived approximately 14% of its pro forma net sales from customers outside
of the United States. The Company intends to continue to expand its
operations outside the United States and to enter additional international
markets.
Most of the Company's international sales are currently denominated in
foreign currencies. Decreases in the value of foreign currencies relative to
the U.S. dollar could result in losses from foreign currency translations.
The Company does not currently hedge its foreign exchange exposure. With
respect to the Company's sales that are U.S. dollar-denominated, decreases in
the value of foreign currencies relative to the U.S. dollar could make the
Company's products less price competitive.
COMPETITION
Generally, the Company's subsidiaries are subject to competition from a
substantial number of national, international and regional competitors, many
of which have greater financial, manufacturing, engineering and other
resources than the Company's subsidiaries. Many such competitors can be
expected to continue to improve the design and performance of their products
and to introduce new products with competitive price and performance
characteristics. Although the Company believes that its subsidiaries have
certain advantages over its competitors, realizing and maintaining such
advantages will require continued investment by the Company in manufacturing,
research and development, quality standards, marketing and customer service
and support. There can be no assurance that the Company's subsidiaries will
have sufficient resources to continue to make such investments or that they
will be successful in maintaining such advantages. Failure to make such
investments or to maintain such advantages could have a material adverse
effect on the Company's business, financial condition and results of
operations. Except for SILICORE polymer pipe products, certain of its CATV
components and its fiber optic connector technology, the Company's
subsidiaries' products are generally not protected by virtue of any
proprietary rights such as patents.
PRICE FLUCTUATIONS OF RAW MATERIALS
The Company's subsidiaries purchase most of the raw materials for their
products on the open market, and the Company's subsidiaries' sales may be
affected by changes in the market price of such raw materials. The Company
does not generally engage in commodity hedging transactions for raw
materials. Although the Company's subsidiaries have generally been able to
pass on increases in the price of raw materials to their customers, there
have been delays in the subsidiaries' ability to pass on such increases in
the past and there can be no assurance that they will be able to do so in the
future, on a timely basis or at all. The results of operations for the
Company's subsidiary, Dura-Line, have in the past been affected by
fluctuations in the price of its primary raw material, HDPE. Additionally,
significant increases in the price of the Company's subsidiaries' products
due to increases in the cost of raw materials could have a negative effect on
demand for their respective products and a material adverse effect on the
Company's business, financial condition and results of operations.
18
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds in connection with the Exchange
Offer. The Company also did not receive any proceeds in connection with the
Old Subordinated Indentures Offering. The net proceeds received by the
Company from the Old Senior Notes Offering (after the deduction of discounts
and commissions, fees and other expenses in connection with the Old Senior
Notes Offering) were approximately $113.0 million. The net proceeds from the
Old Senior Notes Offering, together with the proceeds from certain other
transactions which were elements of the Plan, were used (i) to repurchase
substantially all of the Company's 10 3/8% Senior Notes due 2003 pursuant to
the Tender Offer and (ii) to repay outstanding indebtedness under the Old
Credit Agreements. To the extent the net proceeds to the Company exceeded the
amount necessary for such purposes, the remaining proceeds were used for
general corporate purposes. See "Recapitalization and Repositioning Plan."
The following table sets forth the sources of funds received by the
Company and application of funds by the Company in connection with the Plan,
as consummated on July 25, 1997.
<TABLE>
<CAPTION>
AMOUNT
-------------------
(DOLLARS IN
MILLIONS)
<S> <C>
SOURCES OF FUNDS:
The Old Senior Notes Offering .................... $120.0
JTP Recapitalization (1).......................... 264.0
Fannie May Refinancing............................ 17.4
-------------------
Total Sources.................................... $401.4
===================
USES OF FUNDS:
Repurchase of Old Senior Notes (2)................ $300.9
Repayment of Old Credit Agreements borrowings
(3).............................................. 73.8
Excess cash proceeds ............................. 19.7
Fees and expenses (4)............................. 7.0
-------------------
Total Uses....................................... $401.4
===================
</TABLE>
- ------------
(1) Consists of the cash proceeds to the Company from the JTP
Recapitalization. See "Recapitalization and Repositioning Plan."
(2) Includes accrued interest in connection with the Tender Offer and
consent solicitation with respect to the 10 3/8% Senior Notes due 2003.
See "Description of Certain Indebtedness."
(3) The Old Credit Agreements borrowings consisted of (i) $26.7 million of
revolving credit loans, and accrued interest thereon, under the
existing credit agreement with JII (the "JII Credit Agreement") that
would have matured on June 29, 1999, which at June 30, 1997, had a
weighted average interest rate of 9.0% and (ii) $47.1 million of
borrowings, and accrued interest thereon, under the SPL Credit
Agreement (as defined) that would have matured in part on December 31,
2001, which at June 30, 1997 had a weighted average interest rate of
8.85%. As of July 31, 1997, the New Credit Agreement was undrawn.
(4) Includes fees to the Initial Purchasers in connection with the Old
Senior Notes Offering, fees and expenses in connection with the
negotiation of the New Credit Agreement, consent fees with respect to
the Old Discount Debentures, fees payable to TJC Management Corp. (net
of financial advisory fees being paid to the Company by JTP), and
rating, legal, accounting, printing and other transaction expenses in
connection with the Plan. See "Certain Transactions."
19
<PAGE>
CAPITALIZATION
The following table sets forth the (i) historical consolidated
capitalization of the Company as of June 30, 1997 and (ii) (a) the pro forma
consolidated capitalization of the Company as of June 30, 1997 and (b) the
pro forma consolidated capitalization of the Company's Restricted
Subsidiaries as of June 30, 1997, both after giving effect to the Offering
and the consummation of each of the other elements of the Plan and certain
other transactions as set forth in the Unaudited Pro Forma Financial
Information and the notes thereto. The pro forma capitalization reflects the
repurchase of substantially all of the outstanding 10 3/8% Senior Notes due
2003 pursuant to the Tender Offer and related consent solicitation. The table
should be read in conjunction with the historical consolidated financial
statements of the Company and related notes and the Unaudited Pro Forma
Financial Information of the Company and related notes included elsewhere in
this Offering Circular. See "Use of Proceeds," "Selected Financial Data,"
"Recapitalization and Repositioning Plan," "Description of Certain
Indebtedness" and "Unaudited Pro Forma Financial Information."
<TABLE>
<CAPTION>
AT JUNE 30, 1997
----------------------------------
PRO FORMA
-----------------------
RESTRICTED
ACTUAL COMPANY SUBSIDIARIES
--------- --------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash and cash equivalents.......................... $ 30.9 $ 71.2 $ 30.8
========= ========= ==============
Current portion of long-term obligations .......... $ 8.5 $ 4.3 $ 2.4
========= ========= ==============
Long-term obligations (less current portion):
Credit Agreements (1)
Old Credit Agreements............................ $ 81.0 $ -- $ --
New Credit Agreement (2)......................... -- -- --
M&G Credit Agreement (3)......................... 50.0 50.0 --
JTP Credit Agreement (4) ........................ -- -- --
Debt Securities (5)
10 3/8% Senior Notes due 2005 (6)................ 275.0 3.4 3.4
Senior Notes .................................... -- 120.0 120.0
Discount Debentures ............................. 124.5 124.5 124.5
JTP Senior Notes ................................ -- 188.5 --
JTP Discount Debentures.......................... -- 85.0 --
M&G Senior Notes................................. 170.0 170.0 --
Seller Promissory Notes (7)....................... 20.0 17.5 9.5
Capital Leases and other debt (8) ................ 24.0 24.0 5.1
--------- --------- --------------
Total long-term debt (less current portion) ...... $ 744.5 $ 782.9 $262.5
========= ========= ==============
Redeemable preferred stock (9)
JTP Senior Preferred Stock........................ $ -- $ 25.0 $ --
M&G Preferred Stock............................... 1.5 1.5 --
--------- --------- --------------
Total redeemable preferred stock................ 1.5 26.5 --
Total shareholders' equity (net capital
deficiency)........................................ (146.1) (170.6) 14.9
--------- --------- --------------
Total capitalization........................... $ 608.4 $ 643.1 $279.8
========= ========= ==============
</TABLE>
- ------------
(1) For additional information, see "Description of Certain
Indebtedness--Credit Agreements."
(2) The New Credit Agreement, which consists of a $75.0 million revolving
credit facility, was undrawn as of July 31, 1997. For additional
information, see "Description of Certain Indebtedness--Credit
Agreements."
(3) In June 1997, Motors and Gears acquired FIR for approximately $51.3
million, which was financed by borrowings under the M&G Credit
Agreement. See "Description of Certain Indebtedness--Credit
Agreements--Other Credit Facilities."
(4) The JTP Credit Agreement, which consists of a $110.0 million revolving
credit facility, is undrawn as of July 31, 1997.
(5) For additional information, see "Recapitalization and Repositioning
Plan" and "Description of Certain Indebtedness."
(6) Approximately $3.4 million of the Company's 10 3/8% Senior Notes due
2005 were not tendered pursuant to the Tender Offer.
(7) For additional information, see "Description of Certain
Indebtedness--Seller Promissory Notes."
(8) For additional information, see "Description of Certain
Indebtedness--Capital Leases."
(9) For additional information, see "Description of Capital
Stock--Subsidiary Securities."
20
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected historical operating, balance sheet
and other data of the Company and its subsidiaries (i) as of and for the
years ended December 31, 1992 through 1996, and (ii) as of and for the six
months ended June 30, 1996 and 1997. The financial data of the Company and
its subsidiaries as of and for the years ended December 31, 1992 through 1996
were derived from the audited consolidated financial statements of the
Company and its subsidiaries. The financial data of the Company as of and for
the six months ended June 30, 1996 and 1997 were derived from the unaudited
consolidated financial statements of the Company which, in the opinion of the
Company, reflect all adjustments, which are of a normal and recurring nature,
necessary for a fair presentation of the results for the unaudited periods.
The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results of operations to be expected for the
full year. Results of operations of the Company's subsidiaries are reflected
in Statement of Operations Data, Other Data and financial ratios from their
date of acquisition by the Company. The financial data set forth below should
be read in conjunction with "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and the historical financial
statements of the Company and the related notes thereto contained elsewhere
in this Offering Circular.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------ ---------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
STATEMENT OF OPERATIONS DATA: (1)
Net sales.............................. $327,321 $358,611 $424,391 $507,311 $601,567 $267,220 $324,889
Cost of sales, excluding depreciation . 202,215 221,518 262,730 320,653 375,745 164,053 203,059
Gross profit, excluding depreciation .. 125,106 137,093 161,661 186,658 225,822 103,167 121,830
Selling, general and administrative
expenses, excluding depreciation ..... 75,060 80,496 97,428 121,371 150,951 64,743 67,802
Depreciation and amortization.......... 19,062 17,802 19,099 21,684 30,438 13,816 15,933
Operating income....................... 22,762 36,387 42,944 32,360 13,392 22,205 21,177
Interest expense....................... 37,024 41,049 40,887 46,974 63,340 28,975 37,775
Interest (income)...................... (963) (1,845) (1,471) (2,841) (2,538) (1,344) (1,606)
(Loss) income before income taxes,
minority interest, extraordinary
items and equity in investee.......... (13,299) (2,817) 27,689 (11,773) (47,410) (5,426) 3,020
(Loss) income before extraordinary
items................................. (14,412) (3,483) 23,741 (7,470) (51,884) (5,584) (3,112)
OTHER DATA: (1)
Adjusted operating income (2).......... $ 18,961 $ 29,806 $ 35,868 $ 42,425 $ 29,367 $ 27,119 $ 22,284
EBITDA (3)............................. 45,793 49,076 55,812 66,158 80,507 42,364 54,951
Capital expenditures................... 6,975 13,640 12,112 15,276 17,395 9,612 5,758
Ratio of earnings to fixed charges(4) . -- -- 1.7x -- -- -- 1.2x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (1)
Cash and cash equivalents......... $ 8,886 $ 68,273 $ 56,386 $ 41,253 $ 32,797 $ 12,445 $ 30,887
Working capital................... 65,694 121,490 123,395 115,387 123,479 91,869 145,477
Total assets...................... 268,674 338,509 399,445 532,384 681,885 611,497 731,932
Total debt........................ 272,329 358,883 382,862 525,921 697,544 600,348 752,995
Preferred stock .................. 1,875 1,875 1,875 1,875 1,875 1,875 1,515
Shareholders' equity (net capital
deficiency)...................... (60,873) (90,669) (66,867) (74,479) (128,406) (78,130) (146,064)
(footnotes on next page)
</TABLE>
21
<PAGE>
- ------------
(1) The Company has acquired a diversified group of operating companies
over the periods presented, which significantly affects the
comparability of the following information.
(2) Adjusted operating income represents operating income excluding the
results of Welcome Home, which is no longer consolidated with the
Company. See the Company's historical consolidated financial
statements.
(3) EBITDA for any relevant period represents (i) adjusted operating
income, plus (ii) depreciation, amortization of goodwill and other
intangibles, plus (iii) certain other non-recurring expenses as set
forth below:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Adjusted operating
income.................. $18,961 $29,806 $35,868 $42,425 $29,367 $27,119 22,284
Depreciation and
amortization(a)......... 18,610 16,862 17,775 19,563 28,342 12,862 15,814
SAR expense(b)........... -- -- -- 400 9,822 300 15,418
Loss on purchase of
affiliated company(b) . -- -- -- -- 4,488 -- --
Advisory fees and other,
net(c).................. 1,920 2,408 2,169 3,914 4,352 2,083 1,435
Write off of note
receivable from an
affiliate(b)............ 6,302 -- -- -- -- -- --
Other non-recurring
items(b)................ -- -- -- (144) 4,136 -- --
--------- --------- --------- --------- --------- --------- ---------
EBITDA................... $45,793 $49,076 $55,812 $66,158 $80,507 $42,364 $54,951
========= ========= ========= ========= ========= ========= =========
</TABLE>
- ------------
(a) Reflects historical depreciation and amortization less the portion of
depreciation and amortization recorded at Welcome Home for the
period.
(b) For additional information, see "Unaudited Pro Forma Financial
Information" and the notes thereto.
(c) Reflects historical advisory fees and other expenses, less the
portion of such expenses attributable to Welcome Home for the period.
The Company has included EBITDA because it understands that it is one
measure used by certain investors to determine the Company's
operating cash flow and historical ability to service its
indebtedness.
(4) Earnings were insufficient to cover fixed charges by $13.3 million,
$2.8 million, $11.8 million and $47.4 million for the years ended
December 31, 1992, 1993, 1995 and 1996, respectively, and by $5.4
million for the six months ended June 30, 1996. However, this
deficiency reflects non-cash charges for depreciation and amortization
of goodwill and other intangibles, and amortization of financing costs
and debt discount of $21.1 million, $19.3 million, $23.4 million, $33.4
million, and $14.8 million for the respective fiscal years and interim
period discussed above. Earnings were sufficient to cover fixed charges
in 1994 and the six months ended June 30, 1997 due to the recognition
of a gain on the sale of a partial interest in the Company's currently
deconsolidated subsidiary, Welcome Home, in 1994, and the recognition
of a gain on the sale of a former subsidiary, Hudson, in 1997. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition--Liquidity and Capital Resources."
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The Company was organized to acquire and operate a diverse group of
businesses on a decentralized basis, with a corporate staff providing
strategic direction and support. The Company is currently comprised of 25
businesses which are divided into four strategic business units: (i)
Specialty Printing and Labeling, (ii) Consumer and Industrial Products, (iii)
Motors and Gears and (iv) Jordan Telecommunication Products. The Company
believes that its businesses are characterized by leading positions in niche
industries, high operating margins, strong management, minimal working
capital and capital expenditure requirements and low sensitivity to
technological change and economic cycles. For the year ended December 31,
1996, the Company generated combined pro forma net sales and EBITDA of $649.8
million and $114.1 million, respectively.
A principal component of the Company's business strategy is to continually
seek to make strategic acquisitions. As a result, the Company's historical
financial information is not necessarily comparable from period to period. In
1994, Specialty Printing and Labeling acquired Valmark and Pamco; in 1995,
Motors and Gears acquired Merkle-Korff; and in 1996, Specialty Printing and
Labeling acquired Seaboard, Consumer and Industrial Products acquired Cape
Craftsmen and Paw Print, Motors and Gears acquired Barber-Colman, and Jordan
Telecommunication Products acquired Viewsonics, Vitelec, Diversified, Bond,
Northern and Johnson.
The Company's subsidiaries are operated and managed on a decentralized
basis. As a result, the Company's net sales and gross profit generally equal
the sum of the financial results generated by its subsidiaries. The Company's
general and administrative expense equals the administrative expense
generated at each of the Company's subsidiaries plus corporate overhead. The
purpose of the corporate administrative staff is to provide strategic,
financial and business support, which has enhanced the ability of the
Company's subsidiaries to grow beyond their historical means.
The results of each of the Company's strategic business units is
consolidated into the Company's financial results. The subsidiaries
comprising the Jordan Telecommunication Products group and the Motor and
Gears group are Non-Restricted Subsidiaries, the common stock of which will
be owned by stockholders and affiliates of the Company and management of the
respective companies. The Company's ownership in these subsidiaries will be
in the form of JTP Junior Preferred Stock and M&G Junior Preferred Stock. See
"Risk Factors--Consequences of Subsidiary Deconsolidation," "Certain
Transactions" and "Description of Capital Stock--Subsidiary Securities."
23
<PAGE>
RESULTS OF OPERATIONS
Summarized below are the historical net sales, operating income and
operating margin (as described below) for each of the Company's business
units for the fiscal years ended December 31, 1994, 1995 and 1996 and the six
months ended June 30, 1996 and 1997. This discussion should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES:
Specialty Printing and Labeling .. $ 82,828 $ 96,514 $109,587 $ 45,679 $ 54,521
Consumer and Industrial Products . 156,927 164,636 159,555 79,155 93,592
Motors and Gears.................. 36,854 54,218 117,571 59,578 66,518
Jordan Telecommunication
Products......................... 66,128 98,777 132,999 51,589 107,802
Welcome Home ..................... 81,654 93,166 81,855 31,219 2,456 (2)
---------- ---------- ---------- ---------- ------------
Total........................... $424,391 $507,311 $601,567 $267,220 $324,889
========== ========== ========== ========== ============
OPERATING INCOME (LOSS)(1):
Specialty Printing and Labeling .. $ 5,522 $ 8,067 $ 7,078 $ 2,048 $ 3,810
Consumer and Industrial Products . 22,440 21,987 18,446 10,422 12,913
Motors and Gears.................. 9,484 12,236 26,164 13,811 15,256
Jordan Telecommunication
Products......................... 11,996 17,774 12,985 9,947 86
---------- ---------- ---------- ---------- ------------
Adjusted Operating Income......... 49,442 60,064 64,673 36,228 32,065
Welcome Home...................... 7,076 (10,066) (15,975) (4,914) (1,107) (2)
---------- ---------- ---------- ---------- ------------
Total........................... $ 56,518 $ 49,998 $ 48,698 $ 31,314 $ 30,958
========== ========== ========== ========== ============
OPERATING MARGIN (DEFICIT):
Specialty Printing and Labeling .. 6.7% 8.4% 6.5% 4.5% 7.0%
Consumer and Industrial Products . 14.3 13.4 11.6 13.2 13.8
Motors and Gears.................. 25.7 22.6 22.3 23.2 22.9
Jordan Telecommunication
Products......................... 18.1 18.0 9.8 19.3 --
Welcome Home...................... 8.7 (10.8) (19.5) (15.7) (45.1) (2)
Combined ......................... 13.3 9.9 8.1 11.7 9.5
</TABLE>
- ------------
(1) Operating income does not include corporate operating income (loss) of
$(13.6) million and $(17.6) million for the years ended December 31,
1994 and 1995, respectively. For the year ended December 31, 1996
operating income does not include corporate operating income (loss) of
$(26.9) million, the write-off of $ 4.5 million in notes receivable
resulting from the Cape Craftsmen acquisition, and a charge of $3.9
million for a compensation agreement. Jordan Telecommunication
Products' operating income includes the SAR expenses for AIM and
Cambridge of $0.4 million for the year ended December 31, 1995, and
$5.4 million for the year ended December 31, 1996. See "Certain
Transactions--SAR Payments." Operating income does not include
corporate operating income (loss) of ($9.1) million and ($9.8) million
for the six months ended June 30, 1996 and 1997, respectively.
(2) Includes the results of Welcome Home for the period from January 1,
1997 to January 21, 1997, the date of its Chapter 11 filing. See the
Company's historical consolidated financial statements.
24
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Consolidated Results. For the second quarter and first six months of 1997,
consolidated net sales increased $26.9 million or 18.3% and $57.7 million or
21.6%, respectively, over the same periods last year. The increase for both
periods was primarily due to the acquisition of Seaboard in the Specialty
Printing and Labeling group, Cape, Paw Print, and Arnon-Caine in the Consumer
and Industrial Products group, Colman Motors Products in the Motors and Gears
group, and Diversified, Viewsonics, Vitelec, Bond, Northern, and LoDan in the
Telecommunications Products group, increased sales of ad specialty products
at SPAI, increased sales of gears and gear boxes at Gear, increased domestic
and international sales of Innerduct at Dura-Line, and higher sales of
aircraft parts to Boeing at Parsons. Partially offsetting the above sales
increases were lower sales of shrouds to Apple at Valmark, lower calendar and
school annual sales at SPAI, decreased sales of fractional and integral
motors at Imperial and Scott, and lower sales at Welcome Home stemming from
the company's deconsolidation effective January 21, 1997.
For the second quarter and first six months of 1997, consolidated
operating income decreased $5.9 million or 44.9% and $1.0 million or 4.6%,
respectively over the same periods last year. The decrease in operating
income for both periods is primarily due to SAR expense at Dura-Line, which
increased $15.3 million and $15.1 million for the second quarter and first
six months of 1997, respectively, over the same periods last year. Excluding
the SAR expense, operating income would have increased $9.4 million or 71.1%
and $14.1 million or 62.6%, respectively. These increases are primarily
attributed to the above-mentioned acquisitions, higher operating income at
SPAI, increased operating income at both Parsons and Beemak, and a lower
operating loss at Welcome due to the company's deconsolidation effective
January 21, 1997. Partially offsetting these increases in operating income
were decreased operating income at Pamco, lower operating income at Aim and
Johnson, and decreased operating income at Dacco. Excluding SAR expense,
consolidated operating margins improved to 13.0% and 11.2% for the second
quarter and first six months of 1997, respectively, from 9.0% and 8.4% for
the same periods last year, respectively.
Interest expense increased $4.2 million or 28.1% and $8.8 million or 30.4%
for the second quarter and first six months of 1997, respectively, over the
same periods last year. The increase is due to higher revolver borrowings at
JII, Inc. and outstanding senior debt at Motors and Gears, Inc., which was
issued in the fourth quarter of 1996. Interest income increased $.2 million
or 35.5% and $.3 million or 19.5% for the second quarter and first six months
of 1997, respectively, over the same periods last year.
Specialty Printing and Labeling. As of June 30, 1997, the Specialty
Printing and Labeling group consisted of Sales Promotion Associates, Inc.
("SPAI"), Valmark, Pamco, and Seaboard.
For the second quarter and first six months of 1997, net sales increased
$2.6 million or 8.9% and $8.8 million or 19.4%, respectively, over the same
periods last year. The second quarter increase is due to the acquisition of
Seaboard (May 31, 1996), $1.5 million, increased sales of screen print,
rollstock, and membrance switches at Valmark, $.1 million each, respectively,
increased label sales at Pamco, $.2 million, and higher sales of ad specialty
products at SPAI, $.8 million. Partially offsetting these increases were
lower sales of calendars and school annuals at SPAI, $.3 million. The
increase in net sales for the first six months of 1997 is due to the
acquisition of Seaboard, $8.3 million, higher sales of screen print, $.4
million, rollstock, $.4 million, and membrane switches, $.3 million, higher
label sales at Pamco, $.1 million, and increased sales of ad specialty
products at SPAI, $.7 million. Partially offsetting these six month increases
were lower sales of shrouds to Apple at Valmark, $.8 million, and decreased
sales of calendars and school annuals at SPAI, $.5 million. The sales gains
for both periods at Valmark reflect management's success in expanding the
company's customer base, while the gains at SPAI reflect growth in the
corporate programs segment of the ad specialty business.
For the second quarter and first six months of 1997, operating income
increased $.6 million or 22.7% and $1.8 million or 86.0%, respectively, over
the same periods last year. The second quarter increase is due to the
acquisition of Seaboard, $.3 million, and higher operating income at SPAI,
$.4 million. Partially offsetting these increases was decreased operating
income at Pamco, $.3 million. The six month increase in operating income is
due to the acquisition of Seaboard, $1.5 million, and higher operating income
at SPAI, $.6 million. Partially offsetting these increases was lower
operating income at Pamco, $.5 million. For both periods, the improved
operating income at SPAI is attributed to higher sales and lower operating
costs, primarily medical insurance and commissions. The decreased operating
income at Pamco is due to an increase in plant overhead stemming from the
Company's facility expansion in December 1996.
25
<PAGE>
For the second quarter and first six months of 1997, the operating margin
increased to 11.0% and 7.0%, respectively, from 9.7% and 4.5% for the same
periods last year, respectively. The improvement is due to the acquisition of
Seaboard, which contributes a significant portion of the group's operating
income and operates at an inherently higher margin than the other companies
in the group.
Consumer and Industrial Products. As of June 30, 1997, the Consumer and
Industrial Products consisted of DACCO, Sate-Lite, Riverside, Parsons,
Beemak, Cape Craftsmen, and Paw Print.
For the second quarter and first six months of 1997, net sales increased
$6.3 million or 15.6% and $14.4 million or 18.2%, respectively, over the same
periods last year. The second quarter increase is due to the acquisitions of
Cape and Paw Print in the second half of 1996 and Arnon-Caine (by Beemak) in
January 1997. These companies contributed $2.5 million, $3.9 million, and $.9
million to net sales, respectively, in the second quarter. Further
contributing to the rise in second quarter net sales were increased sales of
aircraft parts at Parsons, $2.3 million, of which $1.5 million is attributed
to Boeing. Partically offsetting these increases in second quarter net sales
were decreased sales of rebuilt converters at DACCO, $.4 million, lower sales
at Hudson of $1.4 million due primarily to the sale of the company on May 15,
1997, and lower sales of religious books and bibles at Riverside, $1.6
million. The increase in net sales for the first six months of 1997 is driven
by the acquisitions of Cape, $3.3 million, Paw Print, $8.2 million, and
Arnon-Caine, $1.8 million, respectively, plus higher sales of aircraft parts
at Parsons, $4.3 million, of which $3.7 million is attributed to Boeing.
Partially offsetting the above six month sales increases were lower sales of
rebuilt converters and other hard parts at DACCO, $1.0 million, decreased
sales of truck and auto emergency warning triangles at Sate-Lite, $.3
million, lower sales of bibles and religious books at Riverside, $1.3
million, and lower sales at Hudson of $.6 million due to the sale of the
company. The decrease in net sales for the second quarter and first six
months at Riverside stems from a decrease in the lower margin contract
distribution business, as management is focusing on the company's higher
margin publishing and distribution lines.
For the second quarter and first six months of 1997, operating income
increased $1.8 million or 35.8% and $2.5 million or 23.9%, respectively, over
the same periods last year. The second quarter increase is due to the
acquisitions of Paw Print and Arnon-Caine, which contributed $.6 million and
$.3 million to operating income, respectively, higher operating income at
Parsons of $1.1 million, and increased operating income at Beemak (excluding
Arnon-Caine), $.4 million. Partially offsetting these increases were lower
operating income at DACCO and Riverside, $.3 million and $.2 million,
respectively, and decreased operating income of $.4 million at Hudson
primarily due to the sale of the company. The increase in operating income
for the first six months of 1997 is driven by the acquisitions of Paw Print
and Arnon-Caine, which contributed $1.1 million and $.6 million to operating
income, respectively, increased operating income at Parsons of $1.7 million,
and increased operating income at Beemak (excluding Arnon-Caine), $.4
million. Further, Hudson added an additional $.1 million to operating income
as a higher gross margin and lower depreciation expense more than compensated
for the decrease in sales due to the divestiture of the company. Partially
offsetting the above six month increases in operating income were lower
operating results at DACCO, $1.1 million, Sate-Lite, $.3 million, and
Riverside, $.2 million. For both the second quarter and first six months,
operating income improved at Parsons due to higher sales and an improved
gross margin and operating income improved at Beemak due to lower inventory
write-downs. The decreases for the second quarter and first six months
experienced at DACCO were due to lower sales, higher material prices, and
higher selling costs, while the decrease for the first six months experienced
by Sate-Lite was due primarily to higher compensation costs. The decrease in
operating income for the second quarter and first six months at Riverside was
due to higher amortization of software installation costs. Riverside picked
up $.1 million in gross profit in the first six months as a result of
management's concentration on higher margin business.
For the second quarter and first six months of 1997, the consolidated
operating margin increased to 14.9% and 13.8%, respectively, from 12.7% and
13.2%, respectively, in the same periods last year. The improved margin in
the second quarter of 1997 is due to a better gross margin, flat depreciation
expense on increased sales, and lower inventory write-offs. The same holds
true for the first six months of 1997, but higher amortization expense at
Riverside and additional amortization expense due to the acquisitions led to
a lesser improvement.
26
<PAGE>
Motors and Gears. As of June 30, 1997, Motors and Gears consisted of
Imperial, Scott, Gear, Merkle-Korff and FIR. Effective January 1997, Colman
Motor Products became a fully integrated division of Merkle-Korff.
For the second quarter and first half of 1997, net sales increased $3.5
million or 11.1% and $6.9 million or 11.7%, respectively, as compared with
the same periods last year. Net sales of sub-fractional motors for the second
quarter and first half of 1997 increased 20% and 28%, respectively. The
strong growth in sub-fractional motors is primarily attributed to the
acquisition of Colman Motor Products on March 8, 1996, as well as continued
strength in the vending and appliance markets. Gears and gear box sales for
the second quarter and first half increased 21% and 17%, respectively,
primarily as a result of strong sales of planetary gears in the floor care
market. These increases were partially offset by reduced sales in
fractional/integral motors, 10% and 20% for the second quarter and first
half, respectively. These decreases reflect the stronger than normal sales in
the first and second quarters of 1996, principally due to a substantial
reduction in the backlog of orders for floor care motors that existed as the
end of 1995.
Operating income increased $1.1 million or 16.0% and $1.4 million or 10.5%
for the second quarter and first half, respectively, as compared with the
same periods last year. The increase in operating income is primarily due to
increased sales for the second quarter and first half over the same periods
in 1996.
Operating margins increased from 22.3% to 23.3% for the second quarter
1997, while margins decreased slightly for the first six months of 1997, from
23.2% to 22.9%.
Jordan Telecommunication Products. As of June 30, 1997, the Jordan
Telecommunication Products group consisted of Dura-Line, AIM, Cambridge,
Johnson, Diversified, Viewsonics, Vitelec, Bond, Northern and LoDan.
For the second quarter and first six months of 1997, net sales increased
$33.2 million or 122.4% and $56.2 million or 109.0%, respectively, over the
same periods last year. The second quarter sales increase is due to the
acquisitions of Viewsonics, Vitelec, Bond, Northern, and LoDan, all of which
were acquired after the second quarter of 1996, and Diversified which was
acquired near the end of June 1996. Combined, these acquisitions accounted
for approximately $22.8 million or 68.7% of the increase in sales. The
remainder of the sales increase is due to higher domestic and international
sales of Dura-Line's Innerduct products, $4.9 million and $6.2 million,
respectively. For the six months ended June 30, 1997, acquisitions accounted
for $43.2 million or 76.9% of the increase in sales. The remainder of the
sales increase is due to higher domestic and international sales of
Dura-Line's Innerduct products, $5.4 million and $7.9 million, respectively.
For the second quarter and first six months of 1997, operating income
decreased $11.3 million or 230.0% and $9.9 million or 99.1%, respectively,
over the same period last year. This decrease was primarily due to an
increase in SAR expense of $15.3 million and $15.1 million for the second
quarter and first six months of 1997, respectively. The increase in SAR
expense is due to a $15.4 million charge in April 1997 relating to the
Company's acquisition of Dura-Line in 1988. Excluding the increase in SAR
expense, operating income would have increased $4.0 million or 82.8% and $5.2
million or 52.7% for the second quarter and first six months of 1997,
respectively. For the quarter, the increase in operating income (excluding
SAR expense) was primarily due to the acquisitions, which added $3.0 million,
and increased operating income at Dura-Line of $1.5 million, both of which
were partially offset by decreases at AIM and Johnson of $.5 million and $.1
million, respectively. For the six months ended June 30, 1997, the increase
in operating income (excluding SAR expense) was primarily due to the
acquisitions, which contributed $5.8 million. Partially offsetting the
increase were decreases at AIM and Johnson of $.6 million and $.1 million,
respectively. Excluding the SAR expense, operating margins would have
decreased from 18.6% to 14.8% and from 19.9% to 14.1% for the second quarter
and first six months of 1997, respectively. These declines are due to
international expansion costs at Dura-Line, primarily under-absorbed overhead
related to the start-ups of China and Mexico and international market
development costs for new facilities in China, Mexico, Malaysia, India and
Spain, none of which were incurred in 1996. This decline is also a function
of the lower inherent operating margins of the acquired businesses, which
averaged 12.1% and 12.3% for the second quarter and first six months of 1997.
27
<PAGE>
Welcome Home. For the second quarter and first six months of 1997, net
sales decreased $18.7 million or 100% and $28.8 million or 92.1%,
respectively, over the same periods last year. For the second quarter ended
June 30, 1997, the operating loss decreased $1.9 million or 100%, and for the
first six months of 1997, the operating loss decreased $3.8 million or 77.5%.
These fluctuations are the direct result of Welcome Home's Chapter 11
bankruptcy filing on January 21, 1997. As a result of the filing, the Company
no longer has the ability to control the operations and financial affairs of
the company. Accordingly, the results of operations of Welcome Home from
January 21, 1997 to June 30, 1997, are not included in the consolidated
results of the Company. For the period ended January 21, 1997, the Company
recorded a net loss of $1.2 million related to Welcome Home. Receivables from
Welcome Home owed to the Company or its subsidiaries were $4.7 million as of
June 30, 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Consolidated Operating Results. Consolidated net sales for fiscal 1996
increased by $94.3 million, or 18.6%, to $601.6 million from $507.3 million
for fiscal 1995. The increase was primarily due to the 1996 acquisition of
Seaboard by Specialty Printing and Labeling; Johnson, Diversified,
Viewsonics, Vitelec, and Bond by Jordan Telecommunication Products; Colman
Motors by Motors and Gears; and Cape Craftsmen and Paw Print by Consumer and
Industrial Products. Sales also increased from the benefit of a full year of
sales at Merkle-Korff, increased sales of rebuilt converters and other hard
parts at DACCO, and increased sales of titanium parts to Boeing at Parsons.
Partially offsetting the sales increases were lower sales at Welcome Home,
decreased sales of shielding devices to Apple at Valmark, lower sales of
Innerduct at Dura-Line, and lower sales of connectors at AIM and Cambridge.
Operating income for fiscal 1996 decreased by $19.0 million, or 58.8%, to
$13.4 million from $32.4 million for fiscal 1995. The decrease was primarily
due to (i) increased corporate expenses, (ii) the $4.5 million loss on the
purchase of Cape Craftsmen, (iii) a $9.4 million increase in compensation
expense related to compensation agreements and stock appreciation rights
plans at Imperial, AIM and Cambridge, and Hudson, (iv) lower sales and
increased global expansion costs at Dura-Line, (v) lower sales at Valmark,
(vi) lower sales due to store closings and increased restructuring charges at
Welcome Home, (vii) lower sales and higher operating costs at Riverside, and
(viii) certain non-recurring charges at Beemak and Sate-Lite. Partially
offsetting these decreases were the 1996 acquisitions, a full year of
operations at Merkle-Korff, increased operating income at DACCO due to higher
sales, and higher operating income at Parsons due to higher sales to Boeing.
Consolidated operating margin for fiscal 1996 decreased to 2.2% from 6.4% the
prior fiscal year due to the previously discussed factors. However, operating
income would have increased by $4.9 million, or 15.1%, if the above analysis
excluded (i) the lower income at Welcome Home, which decreased by $5.9
million, (ii) the $9.4 million increase in compensation expense related to
compensation and stock appreciation right ("SAR") agreements, (iii) the $4.5
million loss on the purchase of Cape Craftsmen, and (iv) other non-recurring
charges of $4.1 million.
Interest expense for fiscal 1996 increased by $16.4 million, or 34.8%, to
$63.3 million from $46.9 million for fiscal 1995, primarily due to increased
revolver borrowings at the corporate level and at Welcome Home, and the
inclusion of a full year of interest on Merkle-Korff debt and interest on the
M&G Senior Notes issued in 1996.
Interest income for fiscal 1996 decreased by $0.3 million, or 10.6%, to
$2.5 million from $2.8 million for fiscal 1995, due to lower average cash
balances that stemmed primarily from 1996 acquisition activity.
Specialty Printing and Labeling. As of December 31, 1996, Specialty
Printing and Labeling consisted of SPAI, Valmark, Pamco, and Seaboard.
Net sales for fiscal 1996 increased by $13.1 million, or 13.6%, to $109.6
million from $96.5 million for fiscal 1995. Sales increased due to the 1996
acquisition of Seaboard, which contributed $17.8 million in sales. The
Seaboard acquisition was offset by lower sales at Valmark and Pamco, which
decreased by $4.5 and $0.3 million, respectively. The sales decline at
Valmark was primarily due to lower sales of shielding devices to Apple.
Operating income for fiscal 1996 decreased by $1.0 million or 12.2%, to
$7.1 million from $8.1 million for fiscal 1995. The decrease in operating
income was due to decreases at SPAI, Valmark, and Pamco, of $0.6 million,
$1.9 million and $0.8 million, respectively. These decreases were partially
offset by the
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<PAGE>
acquisition of Seaboard, which contributed $2.3 million in operating income
during fiscal 1996. The decrease in operating income at SPAI was due to
higher selling, general and administrative expenses, which should contribute
to future sales, and the decrease at Valmark was due to lower sales. The
decrease at Pamco resulted from lower sales and a lower gross margin due to
price pressures coupled with higher operating costs. Operating margin for
fiscal 1996 decreased from 8.4% for the prior fiscal year to 6.5% due to the
previously discussed lower gross margins and increased selling, general and
administrative expense.
Consumer and Industrial Products. As of December 31, 1996, the Consumer
and Industrial Products group consisted of DACCO, Sate-Lite, Riverside,
Parsons, Hudson, Beemak, Cape Craftsmen, and Paw Print.
Net sales for fiscal 1996 decreased by $5.1 million or 3.1%, to $159.5
million from $164.6 million for fiscal 1995. Of the decrease in net sales,
$1.5 million was from lower sales at Sate-Lite of emergency warning
triangles, mag wheels to bicycle manufacturers and colorants to the
thermoplastics industry, $8.9 million was from decreased sales of Bibles and
religious books and contract distribution sales at Riverside, $0.7 million
was from decreased lock sales at Hudson, and $2.5 million was from lower POG
sales at Beemak. Partially offsetting the decrease in net sales were the
acquisitions of Cape Craftsmen and Paw Print, which contributed sales of $1.3
million and $1.6 million during 1996, respectively, higher sales of rebuilt
converters and other hard parts at DACCO, which increased by $4.8 million and
$1.2 million, respectively, and higher sales of titanium parts at Parsons,
which increased by $1.1 million.
Factors that contributed to the sales decreases were (i) industry buying
trends, uncertainty surrounding safety regulations, and price competition
from competitors at Sate-Lite, (ii) increased competition coupled with a
downturn in the religious market at Riverside, and (iii) a new IBM product
line in 1995, coupled with lower 1996 sales to Kryptonite, at Hudson. Sales
of POGs at Beemak during 1995 were isolated to that year because Beemak took
advantage of the short-lived interest in POGs. Sales increases at DACCO were
due primarily to the company's strong market presence and generally good
market conditions, while sales increases at Parsons were due to strong
activity at Boeing, a major customer.
Operating income for fiscal 1996 decreased by $3.6 million, or 16.1%, to
$18.4 million from $22.0 million for fiscal 1995. The decrease in operating
income was due to lower operating income at Sate-Lite, Riverside, Hudson and
Beemak, which decreased by $0.8 million, $2.5 million, $1.3 million and $1.0
million, respectively. These decreases were partially offset by increased
operating income at DACCO, and Parsons, which increased by $2.0 million and
$0.8 million, respectively. Lower sales and certain non-recurring charges at
Sate-Lite and Beemak collectively contributed $1.0 million to the decrease in
operating income. Other components of the decrease included higher operating
costs at Riverside and an additional $0.5 million in compensation expense
related to a stock appreciation rights plan at Hudson. Increased operating
income at DACCO was due to higher sales and steady margins, while operating
income at Parsons increased as a result of higher sales and a higher gross
margin. Overall, the decrease in the operating margin for fiscal 1996 was
driven by lower sales and the charges discussed above.
Motors and Gears. As of December 31, 1996, Motors and Gears consisted of
Imperial, Scott, Gear, Merkle-Korff, and Colman Motors.
Net sales for fiscal 1996 increased by $63.4 million, or 116.8%, to $117.6
million from $54.2 million for fiscal 1995, and operating income for fiscal
1996 increased by $14.0 million, or 113.8%, to $26.2 million from $12.2
million for fiscal 1995. The increase in net sales was partially due to the
March 1996 acquisition of Colman Motors, which reported sales of $17.6
million from its acquisition date through the end of the year. The group also
benefitted from a full year of the results of Merkle-Korff, which was
purchased in September 1995 (Merkle-Korff had sales of $59.6 million for the
full year of 1996, as compared to $14.1 million for the period from its
acquisition date to the end of 1995.) This accounted for $45.4 million of the
1996 increase. Scott's sales increased $0.4 million due to higher motor
sales.
The increase in operating income for fiscal 1996 was partially
attributable to the acquisition of Colman Motors, which contributed $1.7
million of operating income to the current year's results. Also, operating
income for the entire year at Merkle-Korff was $15.2 million, as compared to
$2.6 million for the period from its acquisition date to the end of 1995.
This accounted for $12.6 million of the 1996
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<PAGE>
increase. Partially offsetting these increases were declines in operating
income at Imperial and Gear which decreased by $0.2 million and $0.3 million,
respectively. Operating margin for fiscal 1996 decreased from 22.6% for the
prior fiscal year to 22.3% due to the addition of Colman Motors, which
inherently operates at a lower operating margin compared to other companies
in the group.
Jordan Telecommunication Products. As of December 31, 1996, the Jordan
Telecommunication Products group consisted of Dura-Line, AIM, Cambridge,
Johnson, Diversified, Viewsonics, Vitelec, Bond, and Northern.
Net sales for fiscal 1996 increased $34.2 million, or 34.6%, to $133.0
million from $98.8 million for fiscal 1995. The increase in sales primarily
resulted from the 1996 acquisitions of Johnson, Diversified, Viewsonics,
Vitelec, and Bond, whereby each respectively contributed $16.9 million, $13.9
million, $5.1 million, $2.4 million, and $3.6 million. Partially offsetting
the sales increase were lower sales of Innerduct at Dura-Line, which
decreased by $5.9 million, and lower sales of connectors at AIM and
Cambridge, which decreased by $0.2 million and $0.8 million, respectively.
The decrease in Innerduct sales at Dura-Line was due to a general market
slowdown in the U.S. and U.K. which was mainly caused by uncertainty
surrounding the anticipated effects of the Telecommunications Act of 1996
(the "Telecom Act"). However, the decreased Innerduct sales in the U.S. and
U.K. were partially offset by increased sales of $10.7 million, which
represented a 90% increase over the prior fiscal year, in the Czech Republic,
where the Czech subsidiary has approximately an 80% share of the Czech
market, and the opening of the Mexico and China operations in 1996, which
contributed $1.1 million and $0.3 million to net sales, respectively.
Operating income for fiscal 1996 decreased by $4.8 million, or 27.0%, to
$13.0 million from $17.8 million for fiscal 1995. Of the overall decrease in
operating income, $5.0 million was from Dura-Line and $4.4 million was from
AIM. Partially offsetting the decrease in operating income were the 1996
acquisitions of Johnson, Diversified, Vitelec and Bond, whereby each
contributed $2.9 million, $0.7 million, $0.4 million and $0.2 million to
operating income, respectively. Cambridge also helped to partially offset the
decrease with a $0.3 million increase in operating income. The decrease at
AIM was due to increased compensation expense of $5.0 million related to a
SAR agreement. The decrease in operating income at Dura-Line was due to lower
sales coupled with increased operating costs related to Dura-Line's global
expansion. Excluding AIM's SAR expense, operating income for the group would
have increased $0.3 million, or 1.7%, to $18.1 million.
In addition to the effect of AIM's SAR expense, the decline in the group's
operating margin was partially attributable to (i) the acquisition of
Diversified, which inherently operates at a lower margin as compared to other
companies in the group, and (ii) a lower margin at Dura-Line due to higher
operating costs primarily associated with international expansion.
Welcome Home. Sales for fiscal 1996 decreased by $11.3 million, or 12.1%,
to $81.9 million from $93.2 million for fiscal 1995. The decrease in sales
was due to a downturn in outlet mall traffic and, related to the company's
reorganization efforts, the closing of twenty-six stores in 1996. Operating
loss for fiscal 1996 increased by $5.9 million, or 58.7%, to $(16.0) million
from $(10.1) million for fiscal 1995, due to lower sales, higher operating
costs, and non-recurring restructuring charges. The increase in the operating
loss caused by the above factors was partially offset by an improvement in
the gross margin to 40.5% from 38.3% for the prior fiscal year as a result of
fewer markdowns in 1996. The operating margin for fiscal 1996 decreased from
(10.8%) for the prior fiscal year to (19.5%).
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Consolidated Operating Results. Net sales for fiscal 1995 increased by
$82.9 million, or 19.5%, to $507.3 million from $424.4 for fiscal 1994, and
operating income for fiscal 1995 decreased by $10.6 million, or 24.6%, to
$32.4 million from $43.0 for fiscal 1994. The sales increase was primarily
due to the increased number of stores at Welcome Home, increased sales of
Innerduct at Dura-Line, increased sales of shielding devices, labels and
membrane switches at Valmark, and the acquisition of Merkle-Korff in
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<PAGE>
September 1995. The decrease in operating income was partially due to the
restructuring and other non-recurring charges at Welcome Home, while
management and other fees increased $2.1 million due to higher management
fees and the write-down of a note receivable.
Interest expense for fiscal 1995 increased by $6.1 million, or 14.9%, to
$47.0 million from $40.9 million for fiscal 1994, due to higher outstanding
debt balances from additional capital leases and new third-party debt held at
Welcome Home, Merkle-Korff and SPL Holdings, Inc.
Interest income for fiscal 1995 increased by $1.8 million to $2.8 million
from $1.0 million for fiscal 1994, due to higher average cash balances.
Specialty Printing and Labeling. Net sales for fiscal 1995 increased by
$13.7 million or 16.5% to $96.5 million from $82.8 million for fiscal 1994.
Operating income for fiscal 1995 increased by $2.5 million, or 46.1%, to $8.1
million from $5.5 million for fiscal 1994. The increase in sales was due to
higher sales of all product lines at Valmark, which increased by $8.0
million, coupled with an increase of $6.7 million that resulted from twelve
months of sales at Pamco (Pamco was acquired in May of 1994). A $1.0 million
decrease in ad-specialty sales at SPAI partially offset the previously
discussed sales increases. The operating margin for fiscal 1995 increased to
8.4% from 6.7% for the prior fiscal year, due primarily to increased sales.
Consumer and Industrial Products. Net sales for fiscal 1995 increased by
$7.7 million, or 4.9%, to $164.6 million from $156.9 million for fiscal 1994.
Operating income for fiscal 1995 decreased by $0.5 million, or 2.2%, to $22.0
million from $22.4 million for fiscal 1994. The sales increase was due to (i)
higher sales of rebuilt converters and other parts at DACCO which increased
by $1.0 million and $1.6 million, respectively, (ii) a $0.2 million increase
in foreign bicycle sales at Sate-Lite, (iii) higher sales of books, audio
tapes and music, and contract distribution at Riverside, which increased by
$0.l million, $0.4 million and $2.4 million, respectively; and (iv) higher
sales of POGs and fabricated products at Beemak, which increased by $2.0
million and $0.5 million, respectively. These increases were partially offset
by a $3.1 million decrease in domestic bicycle sales at Sate-Lite. Operating
margin for fiscal 1995 decreased to 13.4% from 14.3% for the prior fiscal
year, primarily due to higher operating costs at Riverside and lower margins
on POG sales at Beemak.
Motors and Gears. Net sales for fiscal 1995 increased by $17.4 million or
47.1%, to $54.2 million from $36.9 million for fiscal 1994. Operating income
for fiscal 1995 increased by $2.8 million, or 29.0%, to $12.2 million from
$9.5 million for fiscal 1994. The increase in sales was partially due to the
acquisition of Merkle-Korff in September 1995, which added $14.1 million to
the segment's net sales. In addition, sales of permanent magnet motors at
Imperial increased by $3.2 million. Operating margin for fiscal 1995
decreased to 22.6% from 25.7% for the prior fiscal year due to increased
material costs at Imperial and the amortization of goodwill at Merkle-Korff.
Jordan Telecommunication Products. Net sales for fiscal 1995 increased by
$32.7 million, or 49.4%, to $98.8 million from $66.1 million for fiscal 1994.
Operating income for fiscal 1995 increased by $5.8 million, or 48.2%, to
$17.8 million from $12.0 million for fiscal 1994. The sales increase was due
to higher sales of Innerduct at Dura-Line, which increased by $31.2 million,
primarily due to a full year of operations at the Company's facility in the
Czech Republic, and higher connector sales at AIM, which increased by $1.5
million. Increased sales at Dura-Line were the primary component of the
increase in operating income. The operating margin for fiscal 1995 remained
consistent at 18.0%.
Welcome Home. Net sales for fiscal 1995 increased by $11.5 million, or
14.1%, to $93.2 million from $81.7 million for fiscal 1994. Operating income
for fiscal 1995 decreased by $17.1 million to $(10.1) million from $7.1
million for fiscal 1994. The increase in net sales was due to twenty-six net
additional stores in 1995. The decrease in operating income was due to
restructuring and other non-recurring charges of $6.9 million, an 8.1%
decrease in same store sales, increased markdowns that led to lower gross
profits and higher corporate expenses. The above items also negatively
impacted operating margin, which declined to (10.8%) in fiscal 1995 from 8.7%
for the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $145.5 million in working capital at June 30, 1997,
compared to $123.5 million at the end of 1996. This represents an increase of
$22.0 million or 17.8%. The increase is due to higher net
31
<PAGE>
trade receivables, increased inventory, increased prepaids/other, lower
short-term debt and current portion of long-term debt, and lower accrued
liabilities. These increases were partially offset by higher accounts
payable, higher advance deposits, and a lower cash balance.
The Company's net cash provided by operating activities decreased $13.1
million for the six months ended June 30, 1997, versus the same period in
1996. The decrease is due to a higher net loss, $6.9 million, a higher
increase in current assets, $9.6 million, a higher decrease in current
liabilities, $.4 million, a higher increase in non-current assets, $.9
million, and a gain on the sale of a subsidiary exclusive to 1997, $18.5
million. Partially offsetting the above decreases are increased depreciation
and amortization, $2.0 million, increased provision for deferred income
taxes, $1.3 million, higher amortization of deferred financing fees, $.3
million, increased minority interest, $1.9 million, increased non-cash
interest, $.9 million, equity in investee and extraordinary items exclusive
to 1997, $4.2 million and $9.2 million, respectively, and a higher increase
in non-current liabilities, $3.2 million.
The Company's net cash used in investing activities decreased $53.3
million for the six months ended June 30, 1997, versus the same period in
1996. The decrease is due to net proceeds received from the sale of a
subsidiary in 1997, $35.2 million, lower capital expenditures, $3.8 million,
lower advances to affiliates, $3.9 million, lower acquisition of
subsidiaries, $11.5 million, and lower acquisitions of minority interests,
$.1 million. These decreases are partially offset by lower cash acquired in
the purchase of subsidiaries, $.9 million, and lower other, $.5 million.
The Company's net cash provided by financing activities decreased $13.3
million for the six months ended June 30, 1997, versus the same period in
1996. The decrease is due to lower proceeds from debt issuance, $33.0
million, which is partially offset by proceeds received from the issuance of
common stock in 1997, $1.1 million, lower repayment of long-term debt, $.7
million, and higher revolver borrowings, $17.9 million.
On July 25, 1997, JII, a subsidiary of the Company, entered into the New
Credit Agreement under which JII is able to borrow, on behalf of the Company,
to fund acquisitions, provide working capital and for other general corporate
purposes. The New Credit Agreement provides a revolving line of credit of
$75.0 million over a term of five years.
Management believes that the Company's cash on hand and anticipated funds
from operations will be sufficient to cover its working capital, capital
expenditures, debt service requirements and other fixed charge obligations
for at least the next 12 months. At July 25, 1997, the Company has available
under revolving credit agreements $75 million at JII, Inc., $110 million at
JTP Industries, Inc., and $25 million at Motors and Gears Industries, Inc.
None of the Company's subsidiaries require significant amounts of capital
spending to sustain current operations or to achieve projected growth.
In connection with its acquisitions, the Company causes its acquired
subsidiaries to enter into intercompany notes, and intercompany management
and tax sharing agreements, which permit the subsidiaries, including
majority-owned subsidiaries, substantial flexibility in moving funds to the
Company. See "Certain Transactions."
Management expects continued growth in net sales and increased operating
income in 1997. Capital spending levels in 1997 are anticipated to be
consistent with 1996 levels and, along with working capital requirements,
will be financed internally out of operating cash flow. Operating margins and
operating cash flow are expected to be favorably impacted by ongoing cost
reduction programs, improved efficiencies and sales growth. Management
believes that the Company's cash on hand and anticipated funds from
operations will be sufficient to cover its working capital, capital
expenditures, debt service requirements and other fixed charges obligations
for the next twelve months.
IMPACT OF INFLATION
During the last three fiscal years, general inflation has had only a minor
effect on the operations of the Company and its internal and external sources
for liquidity and working capital, as the Company has been able to increase
prices to reflect cost increases, and expects to be able to do so in the
future.
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<PAGE>
BUSINESS
The Company was organized to acquire and operate a diverse group of
businesses on a decentralized basis, with a corporate staff providing
strategic direction and support. The Company is currently comprised of 25
businesses which are divided into four strategic business units: (i)
Specialty Printing and Labeling, (ii) Consumer and Industrial Products, (iii)
Motors and Gears and (iv) Jordan Telecommunication Products. The Company
believes that its businesses are characterized by leading positions in niche
industries, high operating margins, strong management, minimal working
capital and capital expenditure requirements and low sensitivity to
technological change and economic cycles.
The Company's business strategy is to enhance the growth and profitability
of each business unit, and to build upon the strengths of those units through
product line and other strategic acquisitions. Key elements of this strategy
have been the consolidation and reorganization of acquired businesses,
increased focus on international markets, facilities expansion and the
acquisition of complementary product lines. When, through such activities,
the Company believes that critical mass is attained in a particular industry
segment, the related companies are organized as a discreet business unit. For
example, the Company acquired Imperial in 1983 and made a series of
complementary acquisitions, which resulted in the formation of Motors and
Gears, Inc., a leading domestic manufacturer of electric motors and gears.
Similarly, the Company acquired Dura-Line in 1985, and expanded its presence
in the telecommunications industry through nine complementary acquisitions.
The organization of these companies as Jordan Telecommunication Products
created a leading global supplier of products and equipment serving the
telecommunications industry. The Company is currently evaluating various
alternatives to expand its automotive aftermarket products business and its
specialty plastics business, and is utilizing its subsidiaries, DACCO and
Beemak, respectively, as the foundation for these efforts.
Through the implementation of this strategy, the Company has demonstrated
significant and consistent growth in net sales and EBITDA. The Company
generated combined pro forma net sales and EBITDA of $649.8 million and
$114.1 million, respectively, for the year ended December 31, 1996 as
compared to historical net sales and EBITDA of $327.3 million and $45.8
million, respectively, for the year ended December 31, 1992, representing a
pro forma CAGR of 18.7% and 25.6%, respectively.
The following chart depicts the operating subsidiaries which comprise the
Company's four strategic business units, together with the pro forma net
sales for each of the four groups for the year ended December 31, 1996. Pro
forma net sales and EBITDA, as set forth below, give effect to each of the
elements of the Plan and certain other transactions as described in the
Unaudited Pro Forma Financial Information and the notes thereto.
33
<PAGE>
JORDAN INDUSTRIES, INC.
$649.8 Million of Net Sales
$114.1 Million of EBITDA
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SPECIALTY PRINTING AND CONSUMER AND INDUSTRIAL JORDAN MOTORS AND GEARS (1)
LABELING PRODUCTS TELECOMMUNICATIONS
PRODUCTS (1)
$118.1 MILLION OF NET SALES $157.6 MILLION OF NET SALES $213.2 MILLION OF NET SALES $160.9 MILLION OF NET SALES
o SALES PROMOTION o DACCO o BEEMARK o DURA-LINE o VIEWSONICS o IMPERIAL
ASSOCIATES o SATE-LITE o RIVERSIDE o AIM o VITELEC o SCOTT
o PAMCO o CAPE o PARSONS o CAMBRIDGE o BOND o GEAR
o VALMARK CRAFTSMAN o JOHNSON o NORTHERN o MERKLE-KORFF
o SEABOARD o DIVERSIFIED o LODAN o FIR
</TABLE>
- ------------
(1) The subsidiaries comprising Jordan Telecommunication Products and
|B5 NORTHERN Motors and Gears are Non-Restricted Subsidiaries (as
defined in the
|B5 LODAN Exchange Indentures), the common stock of which is owned by
stockholders and affiliates of the Company and management of the
respective companies. The Company's ownership in these subsidiaries is
solely in the form of JTP Junior Preferred Stock and M&G Junior
Preferred Stock. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition--General."
34
<PAGE>
The Company's operations were conducted through the following business
units as of June 30, 1997:
SPECIALTY PRINTING AND LABELING
The Specialty Printing and Labeling group manufactures and markets (i)
promotional and specialty advertising products for corporate buyers, (ii)
labels, tapes and printed graphic panel overlays for electronics and other
manufacturing companies and (iii) printed folding cartons and boxes and other
shipping materials. The companies that are part of Specialty Printing and
Labeling have provided its customers with products and services for an
average of over 40 years. For the fiscal year ended December 31, 1996, the
Specialty Printing and Labeling group generated pro forma net sales and
EBITDA of $118.1 million and $13.7 million, respectively. Each of the
Specialty Printing and Labeling subsidiaries is discussed below:
SPAI. The Company's former subsidiaries, The Thos. D. Murphy Co.
("Murphy"), which was founded in 1889, and Shaw-Barton, Inc. ("Shaw-Barton"),
which was founded in 1940, merged to form JII/SPAI in March 1989. One hundred
percent of JII/SPAI's assets were sold on terms equivalent to those that
would have been obtained in an arm's length transaction to Specialty Printing
and Labeling in August 1995 and the company was renamed Sales Promotion
Associates, Inc. ("SPAI"). SPAI is a producer and distributor of calendars
for corporate buyers and is a distributor of corporate recognition, promotion
and specialty advertising products.
SPAI's net sales for fiscal 1996 were $58.8 million. Approximately 56.7%
of SPAI's 1996 net sales were derived from distributing a broad variety of
corporate recognition products, promotion and specialty advertising products.
These products include apparel, watches, crystal, luggage, writing
instruments, glassware, caps, cases, labels and other items that are printed
and identified with a particular corporate logo and/or corporate advertising
campaign. Approximately 31.4% of SPAI's 1996 net sales were derived from the
sale of a broad variety of calendars, including hanging, desktop and pocket
calendars that are used internally by corporate customers and distributed by
them to their clients and customers. High-quality artistic calendars are also
distributed. SPAI also manufactures and distributes softcover school
yearbooks for kindergarten through eighth grade.
SPAI assembles and finishes calendars that are printed both in-house as
well as by a number of outside printers. Facilities for in-house
manufacturing include a composing room, a camera room, a calendar finishing
department and a full press room. Print stock, binding material, packaging
and other materials are supplied by a number of independent companies.
Specialty advertising products are purchased from more than 900 suppliers.
Calendars and specialty advertising products are sold through a 1,350-person
sales force, most of whom are independent contractors.
Management believes that SPAI has one of the largest domestic sales forces
in the industry. With this large sales force and a broad range of calendars
and corporate recognition products available, management believes that SPAI
is a strong competitor in its market. This market is very fragmented and most
of the competition comes from smaller-scale producers and distributors.
Valmark. Valmark, which was founded in 1976 and purchased by the Company
in 1994, is a specialty printer and manufacturer of pressure sensitive label
products for the electronics Original Equipment Manufacturer ("OEM") market.
Valmark's products include adhesive-backed labels, graphic panel overlays,
multi-color membrane switches and radio frequency interference ("RFI")
shielding devices. Approximately 60% of Valmark's 1996 net sales of $17.3
million were derived from the sale of graphic panel overlays and membrane
switches, 23% from labels and 17% from shielding devices.
The specialty screen products sold in the electronics industry continue to
operate relatively free of foreign competition due to the high level of
communication and short time frame usually required to produce orders.
Currently, the majority of Valmark's customer base of approximately 850 is
located in the Northern California area.
Valmark sells to four primary markets: personal computers; general
electronics; turn-key services; and medical instrumentation. Sales to the
personal computer industry have experienced the most growth over recent years
due to Valmark's RFI shield protection capabilities. Sales to Apple of RFI
devices represented approximately 18% of net sales in 1996.
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<PAGE>
Valmark is able to provide OEMs with a broader range of products than many
of its competitors. Valmark's markets are very competitive in terms of price
and accordingly Valmark's advantage over its competitors is derived from its
diverse product line and excellent quality ratings.
Pamco. Pamco, which was founded in 1953 and purchased by the Company in
1994, is a manufacturer and distributor of a wide variety of printed tapes
and labels. Pamco offers a range of products from simple one and two-color
labels, such as basic bar codes and address labels, to seven-color,
varnish-finished labels for products such as video games and food packaging.
One hundred percent of Pamco's products are made to customers' specifications
and 92% of all sales are manufactured in-house. The remaining 8% of net sales
are purchased printed products and include business cards and stationery.
Pamco's products are marketed by a team of eighteen sales representatives
who focus on procuring new accounts. Existing accounts are serviced by nine
customer service representatives and five internal salespeople. Pamco's
customers represent several different industries with the five largest
accounting for approximately 21% of 1996 net sales of $15.7 million.
Pamco competes in a highly fragmented industry. Pamco emphasizes its
impressive 24-hour turnaround and its ability to accommodate rush orders that
other printers cannot handle. As a result of these competitive advantages,
Pamco has posted significant growth over recent years.
Seaboard. Seaboard, which was founded in 1954 and purchased by the Company
in 1996, is a manufacturer of printed folding cartons and boxes, insert
packaging and blister pack cards.
Seaboard sells directly to a broad customer base, located primarily east
of the Mississippi River, operating in a variety of industries including
hardware, personal hygiene, toys, automotive supplies, food and drugs.
Seaboard's top 10 customers accounted for approximately 36.1% of Seaboard's
1996 pro forma net sales of $26.2 million.
Seaboard has exhibited consistent sales growth and high profit margins and
has gained a reputation for exceeding industry standards, and excellent
operating capabilities. Seaboard has historically been highly successful in
buying and profitably integrating smaller acquisitions.
Seaboard's markets are very competitive in terms of price and accordingly
Seaboard's advantage over its competitors is derived from its high quality
product and excellent service.
CONSUMER AND INDUSTRIAL PRODUCTS
Consumer and Industrial Products serves many product segments. It is the
leading supplier of remanufactured torque converters to the aftermarket parts
industry and is the leading integrated manufacturer of specialty "take-one"
point of purchase displays. In addition, Consumer and Industrial Products
manufactures and markets reflectors for bicycles; publishes and markets
Bibles, religious books and audio materials; manufactures hot-formed titanium
materials for the aerospace and other industries; and manufactures and
imports gift items. The Company is currently evaluating various alternatives
to expand its automotive aftermarket products business and its specialty
plastics business, utilizing DACCO and Beemak, respectively, as the
foundation for such efforts. The companies which are part of Consumer and
Industrial Products have provided their customers with products and services
for an average of over 34 years. For the year ended December 31, 1996, the
Consumer and Industrial Products subsidiaries generated combined pro forma
net sales and EBITDA of $157.6 million and $21.0 million, respectively. Each
of the Consumer and Industrial Products subsidiaries is discussed below:
DACCO. DACCO is a producer of remanufactured torque converters, as well as
transmission sub-systems and other related products used by transmission
repair shops. DACCO was founded in 1965 and acquired by the Company in 1988.
Approximately 78% of DACCO's products are classified as "hard" products,
which primarily consist of torque converters and hydraulic pumps that have
been rebuilt or remanufactured by DACCO. The torque converter, which replaces
a clutch in an automatic transmission, transfers power from the engine to the
drive shaft. The hydraulic pump supplies oil to all the systems in the
transmission.
36
<PAGE>
DACCO's primary supply of used torque converters is its customers. As a
part of each sale, DACCO recovers the used torque converter which is being
replaced with its remanufactured converter. DACCO also purchases used torque
converters from automobile salvage companies. Other hard parts, such as
clutch plates and fly wheels, are purchased from outside suppliers.
Approximately 22% of DACCO's products are classified as "soft" products,
such as sealing rings, bushings, washers, filter kits and rubber components.
Approximately 11,000 soft products are purchased from a number of vendors and
are re-sold in a broad variety of packages, configurations and kits.
DACCO's customers are automotive transmission parts distributors and
transmission repair shops and mechanics. DACCO has fifty-one independent
sales representatives who accounted for approximately 70% of DACCO's net
sales of $62.1 million in 1996. These sales representatives sell nationwide
to independent warehouse distributors and to transmission repair shops. DACCO
also owns and operates thirty-one distribution centers which sell directly to
transmission shops. DACCO distribution centers average 4,000 square feet,
cover a 50 to 100-mile selling radius and sell approximately 42% hard
products and 58% soft products. In 1996 no single customer accounted for more
than 2% of DACCO's net sales.
The domestic market for DACCO's hard products is fragmented and DACCO's
competitors primarily consist of a number of small regional and local
rebuilders. DACCO believes that it competes strongly against these rebuilders
by offering a broader product line, quality products, and lower prices, all
of which are made possible by DACCO's size and economies of operation.
However, the market for soft products is highly competitive and several of
the competitors such as TranStar Industries and Aftermarket Technology
Corporation are larger than DACCO. DACCO competes in the soft products market
on the basis of its low prices due to volume buying, its growing distribution
network and its ability to offer one-step procurement of a broad variety of
both hard and soft products.
Sate-Lite. Sate-Lite manufactures safety reflectors for bicycle and
commercial truck manufacturers, as well as plastic parts for bicycle
manufacturers and colorants for the thermoplastics industry. Sate-Lite was
founded in 1968 and acquired by the Company in 1988. Bicycle reflectors and
plastic bicycle parts accounted for approximately 38% of Sate-Lite's net
sales of $13.2 million in 1996. Sales of triangular flares and specialty
reflectors and lenses to commercial truck customers accounted for
approximately 38% of 1996 net sales. The remainder of Sate-Lite's net sales
was derived primarily from the sale of colorants to the thermoplastics
industry.
Sate-Lite's bicycle products are sold directly to a number of OEMs. The
two largest OEM customers for bicycle products are the Huffy Corporation and
Murray/Ohio Manufacturing Company, which accounted for approximately 21% of
Sate-Lite's fiscal 1996 net sales. The triangular flares and other truck
reflector products are also sold to a broad range of OEM customers. Colorants
are sold primarily to mid-western custom molded plastic parts manufacturers.
In 1996, Sate-Lite's ten largest customers accounted for approximately 56% of
net sales.
Sate-Lite's products are marketed on a nationwide basis by its management.
Sales to foreign customers are handled directly by management and by
independent trading companies on a commission basis. In 1996, Sate-Lite's
export net sales accounted for approximately 10% of its total net sales.
Export sales were principally to China and Canada. The principal raw
materials used in manufacturing Sate-Lite's products are plastic resins,
adhesives, metal fasteners and color pigments. Sate-Lite obtains these
materials from several independent suppliers.
The markets for bicycle parts and thermoplastic colorants are highly
competitive. Sate-Lite competes in these markets by offering innovative
products and by relying on its established reputation for producing
high-quality plastic components and colorants. Sate-Lite's principal
competitors in the reflector market consist of foreign manufacturers.
Sate-Lite competes with regional companies in the colorants market.
Riverside. Riverside is a publisher of Bibles and a distributor of Bibles,
religious books and music recordings. Riverside was founded in 1943 and
acquired by the Company in 1988. Approximately 69% of Riverside's business
consists of products published by other companies. Riverside sells world-wide
to more than 12,000 wholesale, religious and trade book store customers,
utilizing an in-house telemarketing
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system, four independent sales representative groups and printed sales media.
In addition, Riverside sells a small percentage of its products through
direct mail and to retail customers. No single customer accounted for more
than 5% of Riverside's 1996 net sales of $51.5 million.
Riverside also provides Bible indexing, warehousing, inventory and
shipping services for domestic book publishers and music producers. Riverside
competes with larger firms, including the Zondervan Corporation, The Thomas
Nelson Company, Spring Arbor Distributors and Ingram Book Company, on the
basis of price, product line and customer service.
Parsons. Parsons is a diversified supplier of hot formed titanium parts,
precision machined parts and fabricated components for the U.S. aerospace
industry. Parsons was founded in 1959 and acquired by the Company in 1988.
Approximately 55% of Parsons' 1996 net sales of $7.4 million came from sales
to The Boeing Company. Parsons employs precision machining, welding/
fabrication and sheet metal forming processes to manufacture its products at
its facilities in Parsons, Kansas. Parsons continues to invest in its
titanium hot forming operation, which permits Parsons to participate in the
aerospace market for precision titanium components.
Parsons uses metals, including stainless steel, aluminum and titanium, to
fabricate its products. These materials are either supplied by Parsons'
customers or obtained from a number of outside sources.
Parsons sells its products directly to a broad base of aerospace and
military customers, relying on longstanding associations and Parsons'
reputation for high quality and service. The titanium hot forming market is
not very competitive at this time, however Parsons is striving to bring its
costs down to keep competition out.
Beemak. Beemak, which was founded in 1951 and acquired by the Company in
July 1989, is an integrated manufacturer of specialty "take-one"
point-of-purchase brochure, folder and application display holders. Beemak
sells these proprietary products to approximately 20,000 customers around the
world. In addition, Beemak produces a small amount of custom injection-molded
plastic parts for outside customers on a contract manufacturing basis.
Beemak's pro forma net sales for 1996 were $10.7 million.
Beemak's products are both injection molded and custom fabricated. Beemak
has molds made by outside suppliers. The manufacturing process consists
primarily of the injection molding of polystyrene plastic and the fabrication
of plastic sheets. Beemak also provides silk screening of decals and logos
onto the final product.
Beemak has no sales force. All sales originate from Beemak's extensive
on-going advertising campaign and reputation. Beemak sells to distributors,
major companies and competitors which resell the product under a different
name. Beemak has been very successful in providing excellent service on
orders of all sizes, especially small orders. Beemak's average order size was
approximately $400 in 1996.
The display holder industry is very fragmented, consisting of a few other
known holder and display firms and regionally based sheet fabrication shops.
Beemak has benefitted from the growth in "direct" advertising budgets at
major companies. Significant advertising dollars are spent each year on
direct-mail campaigns, point-of-purchase displays and other forms of
non-media advertising.
In January 1997, Beemak purchased the net assets of Arnon-Caine, Inc.
("Arnon-Caine"), a designer and distributor of modular storage systems
primarily for sale to wholesale home centers and hardware stores. Arnon-Caine
currently subcontracts its production to third-party injection molders
located primarily in southern California, which use materials and equipment
similar to that used by Beemak. By early 1998, Beemak will serve as
Arnon-Caine's primary supplier. The integration of Arnon-Caine into Beemak's
operations should provide for future manufacturing cost savings as well as
coordinated marketing efforts.
Cape Craftsmen. Founded in 1991 and purchased by the Company in 1996, Cape
Craftsmen is a manufacturer and importer of gifts, wooden furniture, framed
art and other accessories. Cape Craftsmen manufactures in North Carolina and
imports from Mexico and the Far East. Cape Craftsmen sells its products
through one in-house salesperson and forty independent sales representatives.
Approximately
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77% of Cape Craftsmen's pro forma net sales of $12.6 million in 1996 were to
Welcome Home, an affiliated entity. Cape Craftsmen competes in a highly
fragmented industry and has therefore found it most effective to compete on
the basis of price with most wood manufacturers and importers. Cape Craftsmen
also strives to deliver better quality and service than most of its
competitors.
MOTORS AND GEARS
Motors and Gears is a leading domestic manufacturer of specialty purpose
electric motors and gears, serving a diverse customer base. Its products are
used in a broad range of applications, including vending machines,
refrigerator ice dispensers, commercial floor care equipment, elevators and
photocopy machines. The Motors and Gears subsidiaries have sold their brand
name products to their customers for over 70 years. For the year ended
December 31, 1996, Motors and Gears' subsidiaries generated combined pro
forma net sales and EBITDA of $160.9 million and $37.8 million, respectively.
Each of Motors and Gears' subsidiaries is discussed below.
Merkle-Korff. Merkle-Korff was founded in 1911 and was purchased, along
with its wholly owned subsidiaries, Elmco Industries, Inc. and Mercury
Industries, Inc., by the Company in September 1995. Merkle-Korff is a custom
manufacturer of Alternating Current ("AC") and Direct Current ("DC") motors
and gear motors. Merkle-Korff's products are used in a wide range of products
including refrigerators, freezers, dishwashers, vending machines, business
machines, pumps and compressors. Approximately 60% of Merkle-Korff's 1996 net
sales of $81.9 million, which include Colman Motors' 1996 pro forma net sales
of $22.4 million, were derived from the home appliance and vending machine
market. Merkle-Korff's prominent customers include General Electric Company,
Whirlpool Corporation and Dixie-Narco, Inc. In fiscal 1996, the Company's top
10 customers represented approximately 61% of total sales.
Barber-Colman, founded in 1894, was purchased by Merkle-Korff in 1996 and
renamed Colman Motor Products ("Colman Motors") in January 1997. Colman
Motors is a vertically integrated manufacturer of both AC and DC
subfractional horsepower motors and gear motors. Colman Motors' products
serve a wide variety of applications, and they are used as components in such
products as vending machines, copiers, printers, ATM machines, currency
changers, X-ray machines, peristaltic pumps, HVAC activators, medical
equipment and others.
The majority of Colman Motors' products are sold directly to OEMs;
however, management has initiated an effort to direct small orders to three
distributors. Each of these distributors is fully stocked with Colman Motors'
standardized parts and equipment using a computerized catalog system which
facilitates the efficient selection of products and components at the
distributor level.
Merkle-Korff experiences limited competition across its product lines
including Colman Motor Products. Competitors are generally much smaller in
terms of revenues but also produce a much more limited product line. Examples
would include Molon Motors and ECM.
Imperial. Imperial manufactures elevator motors, floor care equipment
motors and automatic hose reel motors. Imperial was founded in 1889 and
acquired by the Company in 1988. All of Imperial's assets were sold on arm's
length terms to Motors and Gears Industries, Inc. in November 1996.
Imperial designs, manufactures and distributes specialty electric motors
for industrial and commercial use. Its products, AC and DC motors, generators
and permanent magnet motors are sold principally in the U.S. and Canada and
to a limited extent in Europe and Australia. Approximately 29% of Imperial's
1996 net sales of $29.5 million were derived from elevator motors, ranging
from 5 to 100 horsepower, sold to major domestic elevator manufacturers.
Approximately 69% of Imperial's 1996 net sales were derived from permanent
magnet motors sold primarily to domestic manufacturers of floor care
equipment. The remaining 2% of Imperial's 1996 net sales came from sales of
miscellaneous parts.
Otis Elevator Company, Westinghouse Corporation and other leading elevator
manufacturers have in recent years discontinued internal manufacturing of
motors and have turned to Imperial and other
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independent manufacturers. In 1996, Clark Industries, Inc. accounted for
approximately 11% of Imperial's net sales, and Imperial's top ten customers
accounted for 55% of total net sales. Imperial's products are marketed
domestically by its management and three independent sales representatives
and internationally by management.
Imperial manufactures specialty motors with steel, magnets, copper wire,
castings and other components supplied by a variety of firms. In the elevator
motor market, Imperial competes with several firms of varying size. The other
markets in which Imperial competes are also highly competitive. However, the
Company's management believes that Imperial is able to effectively compete
with these firms on the basis of product reliability, price and customer
service.
Scott. Scott was founded in 1982 and acquired by Imperial in August 1988.
Scott's net sales in 1996 were $ 4.7 million. All of Scott's assets were sold
on arm's-length terms to Motors and Gears Industries, Inc. in November 1996.
Scott manufactures and sells floor care machine motors; silicone controlled
rectifier motors, which are variable speed motors used in conveyers, machine
tools, treadmills, mixers and metering pumps; and low voltage DC motors.
Scott offers a number of standard motors designed for a variety of
applications. Scott also custom designs motors for special applications.
Scott manufactures many of the sub-assemblies, components and molds for its
products from raw materials, which gives it the ability to manufacture these
special application motors. Scott obtains these raw materials from a number
of independent sources.
Scott markets its products through an internal sales force. Scott serves
OEM's requiring custom designed products. Numerous competitors exist and tend
to be of similar size and scope.
Gear. Gear manufactures precision gears and gear boxes for OEMs requiring
high-precision commercial gears. Gear was founded in 1952 and acquired by
Imperial in November 1988. All of Gear's assets were sold on arm's-length
terms to Motors and Gears Industries, Inc. in November 1996. Gear
manufactures precision gears for both AC and DC electric motors in a variety
of sizes. The gears are sold primarily to the food, floor care machine and
aerospace industries and to other manufacturers of machines and hydraulic
pumps. Gear's products are nationally advertised in trade journals and are
sold by one internal salesman and one independent sales representative. Gear
precision machines its products from steel forgings and castings. Net sales
for Gear in 1996 were $9.5 million.
The gear industry is very fragmented and competitive. Gear competes
primarily on the basis of quality. In addition, the ability of Imperial,
Scott and Gear to offer both electric motors and gear boxes as a package, and
to custom design these items for customers, may allow all three subsidiaries
to gain greater market penetration.
FIR. Founded in 1925 and acquired by the Company in June 1997, FIR is a
leading European manufacturer of AC and DC motors and pumps for special-end
applications such as pumps for commercial dishwashers, motors for industrial
sewing machines, motors for industrial fans and ventilators, explosion-proof
motors for gasoline pumps and the oil industry, and asynchronous and
brushless motors for lift doors. With the exception of motors for industrial
sewing machines, FIR produces custom products only after receiving specific
customer orders. Motors for industrial sewing machines, which comprised
approximately 17.5% of FIR's pro forma 1996 net sales of $37.0 million, are
fairly standardized and are manufactured and stocked based on internal
forecasts.
FIR sells both directly to customers and through two non-exclusive
independent sales representatives located in France and Germany. The Company
enjoys long-term relationships with its customers, some of which have been
customers for over 20 years. The successful development of long-term customer
relationships is a direct result of FIR's reputation for high-quality
products and on-time delivery. Within FIR's 450-plus customer base, no single
customer accounts for more than 6% of sales. FIR's top 10 customers in 1996
accounted for approximately 28% of total sales.
FIR has many competitors across a very fragmented European motor market.
However, FIR has distinguished itself by providing highly engineered custom
products for small markets.
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FIR provides Motors and Gears with a strong foundation upon which to
expand its overseas market. Through FIR, Motors and Gears will have access to
established European markets, including Italy, Germany, France, Spain and
Great Britain, as well as emerging Eastern European markets such as Poland
the Czech Republic, and Russia. Through its European market presence and
established brand name, the Company believes FIR will enable Motors and Gears
to further develop leadership positions within market niches and expand
globally.
JORDAN TELECOMMUNICATION PRODUCTS
Jordan Telecommunication Products is a leading supplier of infrastructure
products and equipment, electronic connectors and custom cable assemblies to
the telecommunications industry. It has provided its customers with products
and services for an average of over 20 years. For the fiscal year ended
December 31, 1996, Jordan Telecommunication Products generated combined pro
forma net sales and EBITDA of $213.2 million and $40.4 million, respectively.
JTP, a Non-Restricted Subsidiary of the Company, acquired all of the
Jordan Telecommunication Products subsidiaries from the Company concurrent
with the consummation of the Old Senior Notes Offering for aggregate
consideration of $294.0 million, consisting of $284.0 million of cash
proceeds and $10.0 million of assumed obligations. As part of the JTP
Recapitalization, the Company purchased $20.0 million aggregate initial
liquidation preference of JTP Junior Preferred Stock, resulting in net cash
proceeds to the Company of $264.0 million. See "Certain Transactions." Each
of the Jordan Telecommunication Products subsidiaries is discussed below.
Dura-Line. Dura-Line is a manufacturer and supplier of "Innerduct" pipe
through which fiber optic cable is installed and housed. Dura-Line sells this
product to major telecommunications companies throughout the world. Dura-Line
also manufactures flexible polyethylene water and natural gas pipe. Dura-Line
was founded in 1971, and acquired by the Company in 1988.
In 1996, approximately 98% of Dura-Line's pro forma net sales (pro forma
for Dura-Line's divested Retube product line) of $68.7 million came from
sales of its Innerduct product. Dura-Line sells to major telecommunications
companies, such as SPT Telecom, GTE, Bell South and Pacific Telesis, each of
which accounted for less than 10% of Dura-Line's Innerduct net sales.
Innerduct is marketed worldwide by Dura-Line's management, ten manufacturing
representatives and forty in-house sales representatives. Dura-Line
negotiates long-term contracts with major telecommunications companies for
its Innerduct product line. The cable conduit market is highly competitive.
In the United States, Dura-Line faces competition from a wide range of
companies including national, international and regional suppliers of cable
conduit. In addition to other independent manufacturers of cable conduit
outside of the United States, Dura-Line's competitors include manufacturers
that produce pipe and tubing for other uses, such as gas and water
transportation. Competition within the industry is based primarily on
quality, price, production capacity, field support, technical capabilities,
service and reputation.
In addition, approximately 2% of Dura-Line's 1996 net sales came from the
sale of polyethylene water and natural gas pipe to a variety of hardware
stores, contractors, plumbing supply firms and distributors. Dura-Line
markets its water and natural gas pipe products through sixty manufacturing
representatives in the Southern and Eastern U.S. The water and natural gas
pipe market is very competitive. Dura-Line competes on the basis of quality
and price with a number of regional and local firms.
Dura-Line's products are manufactured through the plastic extrusion
process. Dura-Line procures raw plastic for extrusion from a number of
independent suppliers. In March 1989, Dura-Line opened a new manufacturing
facility in the United Kingdom to manufacture products for sale to British
Telecom and other foreign customers. Approximately 47% of Dura-Line's net
sales are foreign sales. In late 1990, Dura-Line purchased a facility in
Reno, Nevada. This facility opened in early 1991 and has increased
Dura-Line's annual capacity by approximately 50%. In 1993, Dura-Line entered
into joint venture agreements in the Czech Republic and Israel to service
Eastern Europe and the Middle East more effectively. In early and late 1995,
Dura-Line opened subsidiaries in Mexico and China to manufacture and supply
HDPE plastic conduit systems to Central and South American markets as well as
China and
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other Asian markets. Dura-Line owns 100% of the equity in both subsidiaries.
In August 1996, Dura-Line incorporated a subsidiary in India under a joint
venture agreement in which Dura-Line has the controlling interest. The
subsidiary, which has not yet commenced operations, was established to
manufacture and supply HDPE plastic conduit systems to India and neighboring
countries.
AIM. AIM, which was founded in 1981 and acquired by the Company in May
1989, is an importer and manufacturer of electronic connectors, adapters,
switches, tools and other electronic hardware products for the commercial and
consumer electronics markets. Electronic connectors are AIM's main product,
representing more than 46% of AIM's 1996 net sales of $15.7 million.
AIM's products are manufactured to its specifications overseas, primarily
in the Far East, and carry the "AIM" logo. Producers are under the
supervision of an AIM agent. The products are sold worldwide to electronics,
electrical, general line and industrial distributors. AIM has warehousing and
order processing systems that enable AIM to provide delivery on a 24-hour
basis to most customers.
AIM sells nationwide to approximately 2,000 distributors in the U.S. and
Central and South America. AIM uses a combination of fifteen manufacturers,
representative organizations and six factory direct salesmen to service
existing accounts and to locate new distributors. The customer base is very
broad, with the largest customer accounting for about 4% of sales. AIM also
mails product catalogs and other marketing pieces to current customers and
potential new accounts.
The two largest companies in the $13.0 billion domestic connector and
interconnect supply industry are AMP and Amphenol. AMP and Amphenol
specialize strictly in electronic device production. Small and mid-sized
companies such as AIM have captured significant market share during the past
10 years by offering distributors better service on orders compared to the
industry leaders.
In 1994, AIM began to market manufactured cable and harness assemblies
made at its facility in Florida. Sales of cable and harness assemblies are
estimated to be approximately 12% of AIM's 1996 net sales.
Cambridge. Cambridge, which was founded in 1972 and acquired by the
Company in September 1989, is a domestic provider of high-quality electronic
connectors, plugs, adapters and other accessories. Cambridge is primarily a
designer and marketer of approximately 300 types of specialty radio frequency
("RF") coaxial electronic connectors used in radio, mobile communications,
television and computer equipment. RF coaxial connectors are used to
integrate separate systems by connecting input-output power and signal
transmission sources. The systems in which RF connectors are used may be
complex, but RF connectors themselves serve a mechanical purpose which is
technologically straightforward. Cambridge is essentially an assembly
operation. The primary components of Cambridge's connector products are screw
machine and diecast parts which are purchased from approximately twenty
suppliers. The production process is highly automated, with direct labor
accounting for only 6% of 1996 net sales of $6.7 million. Equipment consists
of semi-automatic parts assembly and packaging equipment which has been
designed and manufactured by Cambridge.
Approximately 13% of Cambridge's connectors are manufactured according to
a design that allows users to affix the connector to the cable faster and
easier without the need for complicated tools and time-consuming soldering.
Cambridge sells its products nationwide to 450 distributors, 100 OEMs, and
approximately 150 other various end-users. Cambridge uses a combination of
six manufacturers' representative organizations and five factory direct
salesmen located throughout North America. Cambridge's two largest customers
(excluding AIM) account for approximately 26% of 1996 net sales. Cambridge
also mails a large number of catalogs to current customers and potential new
accounts. Cambridge strongly emphasizes that it is an "American" producer of
high-quality electronic connectors.
Cambridge competes in the same market as AIM. Cambridge does not offer the
product selection of its large competitors; however, it competes effectively
by targeting distributors and manufacturers which require fast service and
prefer an American-made product.
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Johnson. Purchased by the Company in 1996, Johnson was the components
division of E.F. Johnson Company, Inc., which was founded in 1953. Johnson is
a high-quality, fully integrated manufacturer of RF coaxial connectors (60%)
and electronic hardware (40%). Johnson specializes in manufacturing miniature
and sub-miniature RF connectors used primarily in telecommunication, computer
and other OEM applications which require high frequency ranges. The miniature
and sub-miniature connector area is experiencing excellent growth as the size
of electronic card products continues to shrink.
Johnson sells directly to OEMs (35%) in large orders while smaller
quantities are sold through over 80 distributors (65%) primarily in the
United States and Canada. Johnson's National Sales Manager coordinates the
selling efforts of three company employed Regional Sales Managers and 21
independent representative organizations. In 1996, Johnson generated pro
forma net sales of $17.6 million.
Vitelec. Vitelec was founded in 1987 and purchased by the Company in 1996.
Vitelec is an importer, packager and master distributor of over 700 different
connectors, plugs, jacks, sockets, adapters and terminators, cabling
convertors, cable assemblies and other accessories for data communications
and telecommunications networks sold to the commercial and consumer
electronics markets. Vitelec's RF products are subcontract manufactured for
them in Taiwan. Vitelec, through its Vidata subsidiary, also distributes LAN
and WAN cabling, connectors and converters and the accessories for data
communication networks.
Vitelec sells its products via five company-employed salespeople, four
in-house and one located in Paris, France. Vitelec has customers in 42
countries. The largest customer accounted for 10% of pro forma net sales in
1996 of $6.5 million, with the rest of the customer base being very
fragmented and no one customer accounting for more than 1% of net sales.
Aim, Cambridge, Johnson and Vitelec all supply the electronic connector
industry which is highly fragmented with more than 1,500 connector
manufacturers competing worldwide. As a result, the companies generally
compete with different suppliers in each of the various categories of the
overall market in which the companies operate, as well as with certain large
national suppliers. The companies compete within this market primarily on the
basis of quality, reliability, reputation, customer service, delivery time
and price.
Diversified. Diversified was founded in 1988 and purchased by the Company
in 1996. Diversified is a broad-line provider and value-added reseller of
wire, cable, connectors and custom cable assemblies. Diversified's product
offering is used in local area networks ("LANs"), custom cable assemblies,
cable for electrical applications, cable for sound and security, cable for
OEM applications and other miscellaneous cable applications. In 1996,
Diversified generated pro forma net sales of $26.0 million.
Diversified sells its products through a skilled direct sales force. The
sales staff consists of 20 inside and 5 outside salespeople, all of whom are
product and market specialists. Diversified markets and advertises its
products through various trade journals dependent on the marketplace.
Specialty wire and cable distribution is highly fragmented. Diversified
competes in this market by focusing on service, quality, price, value added
capabilities and reputation.
Viewsonics. Viewsonics was founded in 1974 and purchased by the Company in
1996. Viewsonics designs, manufactures and markets branded cable television
("CATV"), electronic network components, and electronic security components
mainly for the "drop" or home connection portion of the CATV infrastructure.
Viewsonics develops, warehouses and sells its products out of its Florida
facility. Viewsonics sources the majority of its products from China, 60% of
which is manufactured in Viewsonics' Shanghai facility, and the remaining 40%
is manufactured by subcontractors. Viewsonics has also developed
manufacturing capabilities in St. Petersburg, Russia. This overseas
procurement has allowed Viewsonics to lower production costs and it has also
positioned Viewsonics to exploit the overseas CATV component markets as they
develop.
Viewsonics sells 50% of its products to multisystem operations including
companies such as Time/Warner, Cencast, Continental Cablevision, and TCI.
Viewsonics also sells to a network of distributors, six of whom account for
the majority of the other 50% of sales. In 1996, Viewsonics generated pro
forma net sales of $13.1 million. Competition in the industry is focused on
quality service, engineering support and price.
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Bond. Bond was founded in 1988 and the Company acquired 80% of the
outstanding shares of Bond in 1996. Bond designs, engineers and manufacturers
high-quality custom electronic cables and connector sub-assemblies for
computer-related and telecommunications customers. All of Bond's products are
custom-made and are specifically designed to meet a customer's needs. Bond
has three fully integrated, independent manufacturing facilities. Bond has
rapidly become an industry leader due to its commitment to high quality,
competitively priced products offered in conjunction with outstanding and
dependable service.
Bond has established two separate, very profitable sales agencies in
Northern and Southern California to represent them. Bond is continuing to
actively solicit strategic new customers located throughout the United States
via an independent sales representative network. In 1996, Bond's
single-largest customer accounted for approximately 20% of its pro forma net
sales of $12.9 million.
LoDan. LoDan, founded in 1967 and acquired by the Company in May 1997,
designs, engineers, manufactures, and distributes high-quality, custom
electronic cable assemblies, sub assemblies, and electro-mechanical
assemblies to OEMs in the data and telecommunications segments of the
electronics industry. LoDan manufactures approximately 80% of the products it
sells in-house at an ISO-9001 certified manufacturing facility, with the
remaining 20% being distributed products. For fiscal 1996, LoDan's pro forma
net sales were $21.1 million.
The acquisition of LoDan will bolster the presence of Jordan
Telecommunication Products in the custom cable assembly business. LoDan's
customer base, which compliments that of Bond, was built based on providing
innovative solutions to customers' needs. The Company's largest customer,
Cisco Systems, is the world's pre-eminent networking company and provides
LoDan with access to international markets. LoDan's products are sold through
internal and external sales forces.
Bond and LoDan supply the custom cable assembly market which encounters
competition from a broad range of companies, several of which are much larger
and have greater financial resources than either Bond or Lo Dan. In addition
to other independent manufacturers of cable assemblies, offshore
manufacturers compete in this market, primarily on the basis of price.
Competition within the industry is based on quality, production, capacity,
breath of product line, engineering support capability, price, local support
capability, systems support and financial strength.
Northern. Northern was founded in 1985 and was purchased by the Company in
1996. Northern designs, manufactures and markets power conditioning and power
protection equipment for primarily telecommunication applications, such as
cellular and Personal Communication System (PCS) networks. Northern also
offers a variety of products including voltage regulators, uninterruptible
power supplies, isolation transformers, and grounding devices to protect any
power-critical application.
Northern sells on a direct basis through its own highly technical in-house
sales force of 23 employees, who are supported by seven application engineers
and four product development engineers. Northern sells to such large telecom
OEMs as Sprint, Motorola, Lucent, Erickson and Nokia. Northern's largest
customer accounted for 53.4% of pro forma net sales in 1996 of $26.3 million
and its 10 largest customers accounted for 78.0% of pro forma net sales in
1996.
BACKLOG
As of December 31, 1996, the Company had a backlog of approximately $75.0
million, compared with $53.0 million as of December 31, 1995. The current
backlog is primarily due to motor sales at Merkle-Korff and Boeing sales at
Parsons. Management believes that the backlog may not be indicative of future
sales.
SEASONALITY
The Company's aggregate business has a certain degree of seasonality.
SPAI's and Riverside's sales are somewhat stronger toward year-end due to the
nature of their products. Calendars at SPAI have an annual cycle while Bibles
and religious books at Riverside are popular as holiday gifts.
44
<PAGE>
RESEARCH AND DEVELOPMENT
As a general matter, the Company operates businesses that do not require
substantial capital or research and development expenditures. However,
development efforts are targeted at certain subsidiaries as market
opportunities are identified. None of these subsidiary development efforts
require substantial resources from the Company.
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
The Company relies on a combination of patent, copyright, trademark and
trade secret laws and contractual agreements to protect its proprietary
technology and know-how. For example, Dura-Line has a U.S. patent for
producing a form of Innerduct sold under the trademark SILICORE which is
lubricated to permit easier installation of fiber optic cable.
The Company owns and uses trademarks and brandnames to identify itself as
a source of certain goods and services, including the DURA-LINE and SILICORE
trademarks, both of which are registered in the United States and various
foreign countries, and the VIEWSONICS brandname, in which the Company has
common law rights. There can be no assurance that the Company will be granted
additional patents or that the Company's patents either will be upheld as
valid if ever challenged or will prevent the development of competitive
products. The U.S. patent with respect to the SILICORE lubricant lining
expires in 2007. The Company has not sought foreign patents for most of its
technologies, including technologies which have been patented in the United
States, which may adversely affect the Company's ability to protect its
technologies and products in foreign countries. The Company also owns and
licenses other patents, trademarks and copyrights. The Company protects its
confidential, proprietary information as trade secrets.
Except for the SILICORE polymer pipe products, certain of its CATV
components and its fiber optic connector technology, the Company's products
are generally not protected by virtue of any proprietary rights such as
patents. There can be no assurance that the steps taken by the Company to
protect its proprietary rights will be adequate to prevent misappropriation
of its technology and know-how or that the Company's competitors will not
independently develop technologies that are substantially equivalent to or
superior to the Company's technology. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent
as do the laws of the United States. In the Company's opinion, the loss of
any intellectual property asset, other than the DURA-LINE or SILICORE
trademarks, or the patent or manufacturing trade secret covering the solid
co-extruded polymer lubricant lining used in connection with the SILICORE
technology, would not have a material adverse effect on the conduct of the
Company's business.
The Company is also subject to the risk of adverse claims and litigation
alleging infringement of the proprietary rights of others. From time to time,
the Company has received notice of infringement claims from other parties.
Although the Company does not believe it infringes the valid proprietary
rights of others, there can be no assurance against future infringement
claims by third parties with respect to the Company's current or future
products. The resolution of any such infringement claims may require the
Company to enter into license arrangements or result in protracted and costly
litigation, regardless of the merits of such claims.
EMPLOYEES
As of December 31, 1996, the Company and its subsidiaries employed
approximately 6,200 people. Approximately 760 of these employees were members
of labor unions at Sate-Lite, Gear, Imperial, SPAI, Seaboard, Merkle-Korff,
and Dura-Line. The above subsidiaries have not experienced any work stoppages
in the past five years as a result of labor disruptions. The Company believes
that its subsidiaries' relations with their respective employees are good.
ENVIRONMENTAL REGULATIONS
The Company is subject to certain federal, state and local environmental
laws and regulations. DACCO is a potentially responsible party ("PRP") at the
John P. Saad & Sons site in Nashville, Tennessee (the "Saad Site").
45
<PAGE>
DACCO and a number of other PRPs have entered into a consent agreement
with the U.S. Environmental Protection Agency (the "EPA"), dated April 18,
1990, relating to the clean-up of the Saad Site (the "Consent Agreement").
All work under this Consent Agreement has been completed. DACCO's interim
allocation of expenses relating to the clean-up is currently 1.48%. Total
expenses incurred by the PRP group through January 1997 are approximately
$4.1 million. These expenses include removal costs, engineering and attorney
fees, but do not include administrative oversight costs incurred by the EPA
or the State of Tennessee. The EPA has incurred administrative oversight
costs through January 1997 of approximately $0.9 million. DACCO is not
responsible for any costs incurred by the State of Tennessee.
Additional work under the Consent Agreement proceeded under a Unilateral
Administrative Order for Removal Response Activities dated July 28, 1995.
This work has been completed and DACCO has paid in full its share of total
expenses related to the clean-up efforts. DACCO believes it is not likely
that the EPA will make any further removal requirements.
PROPERTIES
The Company leases approximately 18,950 square feet of office space for
its headquarters in Illinois. The principal properties of each subsidiary of
the Company at June 30, 1997, and the location, the primary use, the
capacity, and ownership status thereof, are set forth in the table below:
<TABLE>
<CAPTION>
COMPANY LOCATION USE SQUARE OWNED/LEASED
FEET
- --------------- ------------------------ ----------------------------------------- --------- --------------
<S> <C> <C> <C> <C>
AIM ............Sunrise, FL Manufacturing/Administration/Distribution 28,000 Leased
Beemak..........Gardena, CA Manufacturing (2 buildings) 34,500 Leased
Warehouse 12,000 Leased
Bond............Anaheim, CA Manufacturing/Administration 16,000 Leased
Fremont, CA Manufacturing/Administration 17,000 Leased
Austin, TX Manufacturing/Administration 12,000 Leased
Cambridge.......Windsor, CT Manufacturing 9,000 Leased
Cape Craftsmen Elizabethtown, NC Manufacturing 230,200 Leased
Wilmington, NC Administration 8,500 Leased
DACCO...........Cookeville, TN Administration/Manufacturing 140,000 Owned
Huntland, TN Manufacturing 65,000 Owned
Rancho Cucamonga, CA Manufacturing 40,000 Owned
Diversified.....Troy, MI Manufacturing/Administration/Distribution 45,000 Leased
Nashville, TN Distribution/Sales Office 7,100 Leased
Dura-Line.......Middlesboro, KY Manufacturing/Administration 80,000 Owned
Grimbsby, United Kingdom Manufacturing/Administration 35,000 Owned
Sparks, NV Manufacturing 35,000 Owned
Zlin, Czech Republic Manufacturing/Administration 40,000 Owned
Knoxville, TN Administration 10,000 Leased
Tel Aviv, Israel Manufacturing/Administration 10,000 Leased
Queretaro, Mexico Manufacturing/Administration 43,000 Leased
Mexico City, Mexico Sales Office/Administration 2,000 Leased
Shanghai, China Manufacturing/Administration 50,000 Owned
Shanghai, China Sales Office/Administration 1,000 Leased
Goa, India Manufacturing/Administration 48,000 Owned
New Delhi, India Administration/Sales Office 2,000 Leased
FIR.............Cremona, Italy Manufacturing/Administration 105,700 Owned
Parma, Italy Manufacturing/Administration 316,000 Owned
Parma, Italy Manufacturing/Administration 80,000 Leased
Genoa, Italy Manufacturing/Administration 357,500 Leased
Gear............Grand Rapids, MI Manufacturing/Administration/
Storage 38,000 Owned
Imperial........Akron, OH Manufacturing/Administration 43,000 Owned
Middleport, OH Manufacturing 85,000 Owned
Northampton, OH Manufacturing 60,000 Leased
Johnson ........Waseca, MN Manufacturing/Administration 70,000 Subleased
LoDan...........San Carlos, CA Manufacturing/Administration 22,500 Leased
46
<PAGE>
COMPANY LOCATION USE SQUARE OWNED/LEASED
FEET
- --------------- ------------------------ ----------------------------------------- --------- --------------
San Carlos, CA Manufacturing 13,500 Leased
Merkle-Korff ...Des Plaines, IL Manufacturing/Administration 35,000 Leased
Des Plaines, IL Manufacturing/Administration 45,000 Leased
Richland Center, WI Manufacturing/Administration 45,000 Leased
Crystal Lake, IL Manufacturing 47,000 Leased
Darlington, WI Manufacturing 68,000 Leased
Belvidere, IL Administration 12,500 Leased
Northern .......Liberty Lake, WA Manufacturing/Administration 22,600 Leased
Pamco ..........Des Plaines, IL Manufacturing/Administration 24,500 Owned
Parsons ........Parsons, KS Manufacturing/Administration 97,500 Owned
Riverside.......Iowa Falls, IA Distribution/Administration 65,900 Leased
Sparks, NV Distribution 35,000 Leased
Sate-Lite ......Niles, IL Manufacturing/Administration 120,000 Leased
Scott...........Alamogordo, NM Manufacturing/Administration/
Storage 15,000 Leased
Seaboard........Fitchburg, MA Administration/Manufacturing 260,000 Owned
Miami, FL Manufacturing 90,000 Owned
Brentwood, NY Manufacturing 35,000 Leased
Brooklyn, NY Manufacturing 35,000 Leased
Bohemia, NY Manufacturing 20,000 Leased
SPAI ...........Red Oak, IA Manufacturing/Administration
(four buildings) 136,500 Owned
Coshocton, OH Manufacturing/Administration 240,000 Leased
Valmark.........Fremont, CA Manufacturing/Administration 46,000 Leased
Fremont, CA Manufacturing/Administration 15,000 Leased
Viewsonics......Boca Raton, FL Administration/Distribution/Research
and Development 14,500 Leased
Shanghai, China Manufacturing/Administration 25,000 Leased
St. Petersburg, Russia Manufacturing/Administration 10,000 Leased
Vitelec.........Bordon, United Kingdom Distribution/Administration/Assembly 16,500 Owned
Paris, France Sales Office 1,000 Leased
</TABLE>
DACCO also owns or leases thirty-one distribution centers, which average
4,000 square feet in size. DACCO maintains four distribution centers in
Florida, California, and Tennessee, two distribution centers in each of
Illinois, Arizona, Michigan, and Alabama, and the remaining distribution
centers are located in Colorado, Indiana, Minnesota, Missouri, Nebraska, New
Jersey, West Virginia, Ohio, Oklahoma, South Carolina, and Texas.
AIM's Sunrise, Florida, facility is leased from the former vice president
of AIM, and Merkle-Korff's facilities are leased from the chairman of
Merkle-Korff. Northern's Liberty Lake, Washington, facility is leased from a
general partnership consisting of the former owners. The Company believes
that the terms of these leases are comparable to those which would have been
obtained by the Company had these leases been entered into with an
unaffiliated third party.
None of the Company's significant existing leases are scheduled to expire
in 1997. The Company believes that its existing leased facilities are
adequate for the operations of the Company and its subsidiaries.
LEGAL PROCEEDINGS
On January 21, 1997, Welcome Home filed for Chapter 11 bankruptcy
protection. As a result of the Chapter 11 filing, the results of Welcome Home
are not consolidated with the Company's results for periods subsequent to
January 21, 1997. As of June 30, 1997, the Company's aggregate investment in
Welcome Home was approximately $4.7 million.
The Company's subsidiaries are parties to various other legal actions
arising in the normal course of their business. The Company believes that the
disposition of such actions individually or in the aggregate will not have a
material adverse effect on the consolidated financial position of the
Company.
47
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth the names and ages of each of the Company's
directors and executive officers and the positions they hold at the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- -------------------- ----- ----------------------------------------------------
<S> <C> <C>
John W. Jordan II .. 49 Chairman of the Board of Directors and Chief
Executive
Officer.
Thomas H. Quinn .... 50 Director, President and Chief Operating Officer.
Joseph S. Steinberg 53 Director.
David Z. Zalaznick . 42 Director.
Jonathan F. Boucher 40 Director and Vice President.
G. Robert Fisher ... 57 Director, General Counsel and Secretary.
</TABLE>
Each of the directors and executive officers of the Company will serve
until the next annual meeting of the stockholders or until their death,
resignation or removal, whichever is earlier. Directors are elected annually
and executive officers hold office for such terms as may be determined by the
Company's board of directors (the "Board of Directors").
Set forth below is a brief description of the business experience of each
director and executive officers of the Company.
MR. JORDAN has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since 1988. Mr. Jordan is a managing partner
of The Jordan Company, a private merchant banking firm which he founded in
1982. Mr. Jordan is also a director of American Safety Razor Company,
AmeriKing, Inc., Carmike Cinemas, Inc., Welcome Home and Apparel Ventures,
Inc., as well as other privately held companies. In January 1997, Welcome
Home filed a voluntary petition for bankruptcy.
MR. QUINN has served as a director, President and Chief Operating Officer
of the Company since 1988. From November 1985 to December 1987, Mr. Quinn was
Group Vice President and a corporate officer of Baxter International
("Baxter"). From September 1970 to November 1985, Mr. Quinn was employed by
American Hospital Supply Corporation ("American Hospital"), where he was a
Group Vice President and a corporate officer when American Hospital was
acquired by Baxter. Mr. Quinn is also the Chairman of the Board and Chief
Executive Officer of American Safety Razor Company and AmeriKing, Inc., as
well as a director of Welcome Home and other privately held companies. In
January 1997, Welcome Home filed a voluntary petition for bankruptcy.
MR. STEINBERG has served as a director of the Company since 1988. Since
1979, Mr. Steinberg has been the President and a director of Leucadia
National Corporation, a bank holding company. He is also a Trustee of New
York University.
MR. ZALAZNICK has served as a director of the Company since June 1997.
Since 1982, Mr. Zalaznick has been a managing partner of The Jordan Company.
Mr. Zalaznick is also a director of Carmike Cinemas, Inc., AmeriKing, Inc.,
American Safety Razor Company, Marisa Christina, Inc. and Apparel Ventures,
Inc., as well as other privately held companies.
MR. BOUCHER has served as a Vice President and a director of the Company
since 1988. Since 1983, Mr. Boucher has been a partner of The Jordan Company.
Mr. Boucher is also a director of American Safety Razor Company, as well as
other privately held companies. In December 1996, Mr. Boucher resigned as a
director and officer of Welcome Home. In January 1997, Welcome Home filed a
voluntary petition for bankruptcy.
MR. FISHER has served as a director, General Counsel and Secretary since
1988. Since June 1995, Mr. Fisher has been a member of the law firm of Bryan
Cave LLP, a firm that represents the Company in various legal matters. For
the prior 27 years, Mr. Fisher was a member of the law firm of Smith, Gill,
Fisher & Butts, P.C., which combined with Bryan Cave LLP in June 1995.
48
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the cash compensation paid by the Company, for
the three years ended December 31, 1996, for services in all capacities to
the President and Chief Operating Officer of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL
POSITION YEAR SALARY BONUS COMPENSATION
- -------------------- ------ ---------- ------------ --------------
<S> <C> <C> <C> <C>
John W. Jordan II, 1996 -- -- --
Chief Executive 1995 -- -- --
Officer (1) 1994 -- -- --
Thomas H. Quinn, 1996 $500,000 $1,850,750 --
President and Chief 1995 500,000 1,557,650 --
Operating Officer 1994 500,000 979,137 201,480(1)
</TABLE>
- ------------
(1) Mr. Jordan derived his compensation from the Jordan Company and JZCC
for his services to the Company and its subsidiaries. He received no
compensation from the Company or its subsidiaries for his services as
Chief Executive Officer.
(2) In connection with the acquisitions completed in 1994, and the signing
of the JII Credit Agreement, this amount has been capitalized in the
Company's financial statements.
Employment Agreement. Mr. Quinn has an employment agreement with the
Company which provides for his employment as President and Chief Operating
Officer of the Company. The employment agreement can be terminated at any
time by the Company. His base salary is $500,000 per year, and he is provided
with a guaranteed bonus of $100,000 per year, which amounts are inclusive of
any compensation, fees, salary, bonuses or other payments to Mr. Quinn by any
of the subsidiaries or affiliates of the Company or affiliates of The Jordan
Company. Under the employment agreement, if Mr. Quinn's employment is
terminated for reasons other than voluntary termination, cause, disability or
death, he will be paid a severance payment equal to the greater of $350,000
or the sum of his most recent base annual salary plus $100,000. If employment
is terminated for reasons of cause or voluntary termination, no severance
payment is made. The Company maintains a $5.0 million "key man" life
insurance policy on Mr. Quinn under which the Company is the beneficiary.
Restricted Stock Agreements. The Company is a party to restricted stock
agreements, dated as of February 25, 1988, with each of Messrs. Quinn and
Boucher, pursuant to which they were issued shares of Common Stock which, for
purposes of such restricted stock agreements, were classified as "Group 1
Shares" or "Group 2 Shares." Messrs. Quinn and Boucher were issued 3,500 and
1,870.7676 Group 1 shares, respectively, and 4,000 and 1,000 Group 2 Shares,
respectively at $4.00 per share. The Group 1 Shares are not subject to
repurchase. The Group 2 Shares are subject to repurchase at cost, in the
event that Messrs. Quinn or Boucher ceases to be employed (as a partner,
officer or employee) by the Company, The Jordan Company, Jordan/Zalaznick
Capital Company ("JZCC"), or any reconstitution thereof conducting similar
business activities in which they are a partner, officer or employee. If such
person ceases to be so employed prior to January 1, 2003, the Group 2 Shares
can also be repurchased at cost, unless such person releases and terminates
such repurchase option by making a payment of $300.00 per share to the
Company. Certain adjustments to the foregoing occur in the event of the death
or disability of any of the partners of The Jordan Company or JZCC, the death
or disability of such person, or the sale of the Company. On January 1, 1992,
the Company issued Messrs. Quinn and Boucher 600 and 533.8386 shares,
respectively, at $107.00 per share, pursuant to similar Restricted Stock
Agreements, dated as of January 1, 1992, under which such shares were
effectively treated as "Group 1 Shares." On December 31, 1992, the Company
issued an additional 400 shares to Mr. Quinn for $107.00 per share pursuant
to similar Restricted Stock Agreements, under which such shares were
effectively treated as "Group 1 Shares." The purchase price per share was
based upon an independent appraiser's valuation of the shares of Common
49
<PAGE>
Stock at the time of their issuance. These shares were issued by the Company
to provide a long-term incentive to the recipients to advance the Company's
business and financial interest.
Director's Compensation. The Company compensates its directors quarterly,
at the rate of $20,000 per year in for each director. The Indentures permit
director fees of up to $250,000 per year in the aggregate. In addition, the
Company reimburses directors for their travel and other expenses incurred in
connection with attending Board meetings (and committees thereof) and
otherwise performing their duties as directors of the Company.
Phantom Share Plan. The Board of Directors has adopted a Phantom Share
Plan (the "Share Plan") which is administered by the Compensation Committee
of the Board of Directors which determines awards to be made under the Share
Plan to the Company's management and highly compensated employees. Awards
under the Share Plan vest ratably over a five-year period beginning at the
end of the employee's sixth year of employment with the Company with an
employee being fully vested at the end of 10 years of employment with the
Company. An employee also becomes fully vested upon the sale of substantially
all of the Company's capital stock or assets to any person or group of
persons other than to John W. Jordan II or any entity in which he owns,
directly or indirectly, 10% or more of the beneficial interest, but not
including a sale pursuant to a registered public offering (a "Share Plan
Change of Control"). After (i) an employee becomes fully vested or (ii) an
employee's employment relationship with the Company is terminated (other than
for cause) (the "Settlement Date"), the Company will pay to such employee in
five equal installments beginning 90 days after the Settlement Date and
continuing on each of the next four anniversaries of the Settlement Date an
aggregate amount equal to the product of the number of units awarded to such
employee in which the employee has become vested and the Unit Value (as
defined herein) plus interest. Unit Value is defined as 2.5% of (i) the
average Stockholder Value (based on a multiple of EBITDA less indebtedness
for the Company) for the last three fiscal years ending on or before such
date (or the fair market value of the Common Stock in the event of a Share
Plan Change of Control), divided by (ii) 1,000,000 (subject to adjustment to
reflect changes in the Company's capitalization). The Unit Value was
effectively $0 as of July 31, 1997. The Share Plan consists of 1,000,000
units, of which 180,000 have been granted. The Company believes that the
Share Plan provides the Company with a means of attracting, retaining and
motivating executive personnel by offering them performance-related
incentives which coincide with the interest of the stockholders. Although the
Company has not historically experienced any material difficulties in
attracting, retaining or motivating its executive personnel, there can be no
assurances that the Company will not experience any such difficulties in the
future.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table furnishes information, as of June 30, 1997, as to the
beneficial ownership of the Company's Common Stock by (i) each person known
by the Company to beneficially own more than 5% of the outstanding shares of
Common Stock, (ii) each director and executive officer of the Company, and
(iii) all officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP
--------------------------
NUMBER OF PERCENTAGE
SHARES OWNED(1)
------------- ------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
John W. Jordan II (2)(3)(4) .......................... 41,820.9087 42.5%
David W. Zalaznick (3)(5)(6) ......................... 19,965.0000 20.3%
Thomas H. Quinn (7) .................................. 10,000.0000 10.2%
Leucadia Investors, Inc. (3) ......................... 9,969.9999 10.1%
Jonathan F. Boucher (8) .............................. 5,533.8386 5.6%
G. Robert Fisher (4)(9) .............................. 624.3496 0.6%
Joseph S. Steinberg (10) ............................. 0.0000 0.0%
All directors and officers as a group (5 persons)(3) 87,914.0968 89.3%
</TABLE>
- ------------
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under
Rule 13d-3(d), shares not outstanding which are subject to options,
warrants, rights or conversion privileges exercisable within 60 days
are deemed outstanding for the purpose of calculating the number and
percentage owned by such person, but not deemed outstanding for the
purpose of calculating the percentage owned by each other person
listed. As of June 30, 1997, there were 98,501.0004 shares of Common
Stock issued and outstanding.
(2) Includes 1 share held personally and 41,819.9087 shares held by John
W. Jordan II Revocable Trust. Does not include 309.2933 shares held
by Daly Jordan O'Brien, the sister of Mr. Jordan, 309.2933 shares
held by Elizabeth O'Brien Jordan, the mother of Mr. Jordan, or
309.2933 shares held by George Cook Jordan, Jr., the brother of Mr.
Jordan.
(3) Does not include 100 shares held by The Jordan Zalaznick Capital
Company ("JZCC") or 3,500 shares of Common Stock held by Mezzanine
Capital & Income Trust 2001 PLC ("MCIT"), a publicly traded U.K.
investment trust advised by an Affiliate of The Jordan Company
(controlled by Messrs. Jordan and Zalaznick). Mr. Jordan, Mr.
Zalaznick and Leucadia, Inc. are the sole partners of JZCC. Mr.
Jordan and Mr. Zalaznick own and manage the advisor to MCIT.
(4) Does not include 3,248.3332 shares held by The Jordan Family Trust,
of which John W. Jordan II, George Cook Jordan, Jr. and G. Robert
Fisher are the trustees.
(5) Does not include 82.1697 shares held by Bruce Zalaznick, the brother
of Mr. Zalaznick.
(6) Excludes 2,541.4237 shares that are held by John W. Jordan II
Revocable Trust, but which may be purchased by Mr. Zalaznick, and
must be purchased by Mr. Zalaznick, under certain circumstances,
pursuant to an agreement, dated as of October 27, 1988, between Mr.
Jordan and Mr. Zalaznick.
(7) All of Mr. Quinn's shares are subject to the terms of a Restricted
Stock Agreement between Mr. Quinn and the Company. See
"Management--Restricted Stock Agreements."
(8) Includes 3,404.6062 shares which are the subject of a Restricted
Stock Agreement between Mr. Boucher and the Company. See
"Management--Restricted Stock Agreements."
(9) Includes 624.3496 shares held by G. Robert Fisher, as Trustee of the
G. Robert Fisher Irrevocable Gift Trust, U.T.I., dated December 26,
1990.
(10) Excludes 9,969.9999 shares held by Leucadia Investors, Inc., of which
Joseph S. Steinberg is President and a director.
51
<PAGE>
The following table furnished information, as of July 31, 1997, as to the
beneficial ownership of the common stock of JTP and M&G by (i) each person
known by the company to beneficially own more than 5% of the outstanding
Common Stock of the Company, (ii) each director and executive officer of the
Company, and (iii) all officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
----------------------------------------------------
JTP M&G
--------------------------- ------------------------
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
SHARES OWNED(1) SHARES OWNED(1)
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
John W. Jordan II (2)(3)(4) .......... 379,349.1691 38.0 118.78125 1.2
David W. Zalaznick (3)(5)(6) ......... 183,073.2676 18.3 118.78125 1.2
Thomas W. Quinn ...................... 89,804.6030 9.0 75.00000 0.7
Leucadia Investors, Inc. (3) ......... 95,566.3378 9.6 0.00000 *
Jonathan F. Boucher .................. 52,935.1436 5.3 101.81250 1.0
G. Robert Fisher (4)(6) .............. 5,606.9406 * 0.00000 *
Joseph S. Steinberg (7) .............. 0.000 * 0.00000 *
All directors and officers as a group
(5 persons)(3) ...................... 705,162.0832 70.6 414.37500 4.1
</TABLE>
- ------------
* Represents less than 1% of the outstanding shares of common stock.
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding, which are subject to options,
warrants, rights or conversion privileges exercisable within 60 days
are deemed outstanding for the purpose of calculating the number and
percentage owned by such person, but not deemed outstanding for the
purpose of calculating the percentage owned by each other person
listed. As of July 31, 1997, JTP and M&G had 999,500 and 9,850,
respectively, shares of common stock issued and outstanding.
(2) Includes 8.9820 shares of JTP held personally and 379,340.1871 shares
of JTP held by the John W. Jordan II Revocable Trust. Does not include
2,777.5927 shares of JTP held by Daly Jordan O'Brien, the sister of Mr.
Jordan, 2,777.5927 shares of JTP held by Elizabeth O'Brien Jordan, the
mother of Mr. Jordan, or 2,777.5927 shares of JTP held by George Cook
Jordan, Jr., the brother of Mr. Jordan.
(3) Does not include 898.0451 shares of JTP held by JZCC or 31,431.5758
shares of JTP held by MCIT.
(4) Does not include 29,171.4943 shares of JTP held by The Jordan Family
Trust.
(5) Does not include 737.8205 shares of JTP held by Bruce Zalaznick, the
brother of Mr. Zalaznick.
(6) Includes 5,606.9406 shares of JTP held by G. Robert Fisher, as the
Trustee of the G. Robert Fisher Irrevocable Gift Trust, U.T.I., dated
December 26, 1990.
(7) Does not include 95,566.3378 shares of JTP held by Leucadia Investors,
Inc., of which Joseph S. Steinberg is President and a director.
Stockholder Agreement. Each holder of outstanding shares of Common Stock
of the Company is a party to a Stockholder Agreement, dated as of June 1,
1988 (the "Stockholder Agreement"), by and among the Company and such
stockholders. The Stockholder Agreement subjects the transfer of shares of
Common Stock by such stockholders to a right of first refusal in favor of the
Company and "co-sale" rights in favor of the other stockholders, subject to
certain restrictions. Under certain circumstances, stockholders holding 60%
or more of the outstanding shares of Common Stock, on a fully diluted basis,
have certain rights to require the other stockholders to sell their shares of
Common Stock.
52
<PAGE>
CERTAIN TRANSACTIONS
Recapitalization and Repositioning Plan. As elements of the Plan, the
Company has recapitalized its investment in Motors and Gears and Jordan
Telecommunication Products. The Company will continue its investment in
Motors and Gears and Jordan Telecommunication Products through the M&G Junior
Preferred Stock and the JTP Junior Preferred Stock, respectively. In
connection with the M&G Recapitalization, M&G issued 16,250 shares of M&G
common stock (representing approximately 82.5% of the outstanding shares of
M&G common stock) to the Jordan Group and M&G management for total
consideration of $2.2 million (of which $1.1 million was paid in cash and
$1.1 million was paid through the delivery of 8% zero coupon notes due 2007).
In connection with the JTP Recapitalization, JTP issued 965,000 shares of JTP
common stock (representing 96.5% of the JTP common stock after consummation
of the Plan) to the Jordan Group and JTP management for total cash
consideration of $2.0 million (of which $1.0 million will be loaned to them
by the Company pursuant to 8% zero coupon notes due 2007). As a result of the
M&G and JTP Recapitalizations, the Jordan Group and such management owns
substantially all of the M&G common stock and the JTP common stock,
respectively, and the Company's investment in Motors and Gears and Jordan
Telecommunication Products is evidenced only by the M&G Junior Preferred
Stock and JTP Junior Preferred Stock, respectively, but not by the common
stock of either M&G or JTP, which is held primarily by the Jordan Group
stockholders and affiliates of the Company, and management of the respective
companies. As a matter of corporate law, the directors and majority
stockholders of M&G and JTP will owe fiduciary and other duties to M&G and
JTP common stockholders, which may conflict with the interests of the
Company. The Company has obtained an independent opinion, as to the fairness,
from a financial point of view, to the Company and its public bondholders of
M&G and JTP Recapitalizations.
In connection with the M&G Recapitalization, Messrs. Quinn, Jordan,
Zalaznick and Boucher purchased 1,649.7294, 6,899.3184 (which includes
6,899.1534 shares purchased by the John W. Jordan II Revocable Trust and does
not include 51.0250 shares purchased by Daly Jordan O'Brien, the sister of
Mr. Jordan, 51.0250 shares purchased by Elizabeth Jordan O'Brien, the mother
of Mr. Jordan, 51.0250 shares purchased by George C. Jordan, Jr., the brother
of Mr. Jordan, 16.4973 shares purchased by The Jordan Zalaznick Capital
Company and 535.8871 shares purchased by The Jordan Family Trust, of which
Mr. Jordan is a trustee), 3,293.6848 (which does not include 13.5558 shares
purchased by Bruce Zalaznick, the brother of Mr. Zalaznick, 16.4973 shares
purchased by The Jordan Zalaznick Capital Company and 6,899.1534 shares
purchased by the John W. Jordan II Revocable Trust) and 912.9337 shares of
M&G common stock, respectively, from the Company for a purchase price of
$138.38 per share.
In connection with the JTP Recapitalization, Messrs. Quinn, Jordan,
Zalaznick and Boucher purchased 89,804.50, 379,349.17 (which includes
379,340.19 shares purchased by the John W. Jordan II Revocable Trust and does
not include 2,777.59 shares purchased by Daly Jordan O'Brien, the sister of
Mr. Jordan, 2,777.59 shares purchased by Elizabeth Jordan O'Brien, the mother
of Mr. Jordan, 2,777.59 shares purchased by George C. Jordan, Jr., the
brother of Mr. Jordan, 898.05 shares purchased by The Jordan Zalaznick
Capital Company, 29,171.49 shares purchased by The Jordan Family Trust, of
which Mr. Jordan is a trustee, 40,208.33 shares purchased by JII Partners and
31,431.58 shares purchased by MCIT), 183,073.27 (which does not include
737.92 shares purchased by Bruce Zalaznick, the brother of Mr. Zalaznick,
898.05 shares purchased by The Jordan Zalaznick Capital Company, 379,340.10
shares purchased by the John W. Jordan II Revocable Trust, 40,208.33 shares
purchased by JII Partners and 31,431.58 shares purchased by MCIT) and
52,935.14 shares of JTP common stock, respectively, from the Company for a
purchase price of $2.07 per share.
The M&G and JTP Recapitalizations permit the Jordan Group, the Company's
stockholders and management of M&G and JTP, to invest directly in Motors and
Gears and Jordan Telecommunication Products, respectively, and will subject
the Company to substantial income tax liabilities resulting from the
deconsolidation from the Company's consolidated group of the Motors and Gears
subsidiaries and the Jordan Telecommunication Products subsidiaries for
Federal income tax purposes. If, in the future, the M&G Junior Preferred
Stock or the JTP Junior Preferred Stock is redeemed, as well as under certain
other circumstances, the Company could be required to pay substantial income
tax liabilities resulting from the deconsolidation of these subsidiaries from
the Company's consolidated group for Federal income tax purposes. See "Risk
Factors--Consequences of Subsidiary Deconsolidation" and "Recapitalization
and Repositioning Plan."
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Services Agreements. Prior to the completion of the Old Senior Notes
Offering, the Company and TJC Management Corp. (an affiliate of The Jordan
Company) were parties to a Management Consulting Agreement (the "Old
Consulting Agreement"). The Old Consulting Agreement provided for payment by
the Company to The Jordan Company of (i) annual consulting fees, payable
quarterly, equal to 3.0% of the Company's cash flow (which were $2.0 million,
$2.7 million, $2.5 million and $1.5 million, respectively, for the years
ended December 31, 1994, 1995 and 1996 and for the six months ended June 30,
1997, respectively); (ii) investment banking and sponsorship fees of up to
2.0% of the purchase price of acquisitions or sales involving the Company or
any of its subsidiaries or their respective businesses or properties and
financial advisory fees of up to 1.0% of any debt, equity or other financing,
in each case, arranged with the assistance of The Jordan Company (which were
$1.8 million, $2.1 million, $2.6 million and $1.5 million, respectively, for
the years ended December 31, 1994, 1995 and 1996 and for the six months ended
June 30, 1997, respectively); and (iii) reimbursement for The Jordan
Company's out-of-pocket costs incurred and indemnities in connection with
providing such services.
Since December 31, 1996, the Company has not made any payments, in respect
of such investment banking, sponsorship and consulting fees and out-of-pocket
costs in connection with the Northern, FIR and LoDan acquisitions and the
Hudson disposition pursuant to the Old Consulting Agreement. The Company
anticipates paying approximately $2.1 million in respect of these
acquisitions and the disposition following the consummation of the Offering.
Messrs. Jordan, Zalaznick and Boucher, directors and officers of the Company,
are partners of The Jordan Company.
Concurrently with the consummation of the Old Senior Notes Offering, the
Old Consulting Agreement was terminated and all other management, consulting,
investment banking, sponsorship, financial advisory fee agreements and
similar arrangements between the Company and its subsidiaries (including M&G
and JTP), on the one hand, and the Company, TJC Management Corp. or The
Jordan Company, on the other hand, were terminated. In their place on July
25, 1997, the Company entered into six new types of agreements and
arrangements.
First, each of the Company's subsidiaries (both Restricted and
Non-Restricted Subsidiaries) (other than certain of the subsidiaries of Bond
and Dura-Line) entered into new advisory agreements with the Company (and not
TJC Management Corp. or The Jordan Company) (the "New Subsidiary Advisory
Agreements"), pursuant to which such subsidiaries will pay to the Company
(and not TJC Management Corp. or The Jordan Company) (i) investment banking
and sponsorship fees of up to 2.0% of the purchase price of acquisitions,
joint ventures, minority investments or sales involving such subsidiaries or
their respective businesses or properties; (ii) financial advisory fees of up
to 1.0% of any debt, equity or other financing or refinancing involving such
subsidiary, in each case, arranged with the assistance of the Company or its
affiliates; and (iii) reimbursement for the Company's out-of-pocket costs in
connection with providing such services. The New Subsidiary Advisory
Agreements contain customary indemnities in favor of the Company, The Jordan
Company and TJC Management Corp. in connection with such services. Pursuant
to the New TJC Management Consulting Agreement, the Company, in turn, will
also pay to TJC Management Corp. one-half of such investment banking,
sponsorship and financial advisory fees and its portion of such cost
reimbursements, unless otherwise determined by the Board of Directors of the
Company. The New Subsidiary Advisory Agreements will expire in December 2007,
but are automatically renewed after such date for successive one-year terms,
unless any party provides written notice of termination 60 days prior to the
scheduled renewal date.
Second, the Company entered into a new consulting services agreement with
TJC Management Corp. (the "New TJC Management Consulting Agreement"),
pursuant to which the Company will pay to TJC Management Corp. (i) annual
consulting fees of $3.0 million, payable quarterly; (ii) one-half of the
investment banking sponsorship and financing advisory fees paid to the
Company pursuant to the New Subsidiary Advisory Agreements, unless otherwise
determined by the Board of Directors of the Company; (iii) (A) investment
banking and sponsorship fees of up to 2.0% of the purchase price of
acquisitions, joint ventures and minority investments or sales involving the
Company or its subsidiaries (other than JTP, M&G and other subsidiaries that
are a party to any of the New Subsidiary Advisory Agreements) and (B)
financial advisory fees of up to 1.0% of any debt, equity or other financing
or refinancing involving the Company or such subsidiaries, in each case,
arranged with the assistance of TJC
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Management Corp. or its affiliates, unless otherwise determined by the Board
of Directors of TJC Management Corp.; and (iv) reimbursement for TJC
Management Corp.'s and The Jordan Company's out-of-pocket costs incurred in
connection with providing such services. The New TJC Management Consulting
Agreement also contains customary indemnities in favor of TJC Management
Corp. and The Jordan Company in connection with such services. In
consideration for these fees, the services of Mr. Jordan and the investment
banking, sponsorship and advisory services of The Jordan Company will be
provided to the Company. The New TJC Management Consulting Agreement will
expire in December 2007, but is automatically renewed after such date for
successive one-year terms, unless either party provides written notice of
termination 60 days prior to the scheduled renewal date. Pursuant to this
Agreement in connection with the Old Senior Notes Offering and the JTP
Recapitalization, the Company, on behalf of the Company and its subsidiaries
(including M&G and JTP), will pay to TJC Management Corp. and The Jordan
Company fees and cost reimbursements of approximately $4.0 million.
Third, each of the Company's subsidiaries (both Restricted and
Non-Restricted Subsidiaries) (other than certain of the subsidiaries of Bond
and Dura-Line) entered into consulting agreements with the Company (the "New
Subsidiary Consulting Agreements"), pursuant to which they will pay to the
Company annual consulting fees of 1.0% of such subsidiary's net sales for
such services, payable quarterly, and will reimburse the Company for its
out-of-pocket costs related to its services. In the New Subsidiary Consulting
Agreements relating to M&G and JTP, the Company (but not the Company's
affiliates, including The Jordan Company) are obligated to present all
acquisition, business and investment opportunities that relate to
manufacturing, assembly, distribution or marketing of products and services
in the motors and gears and telecommunications and data communications
industries to M&G and JTP, respectively, and the Company is not permitted to
pursue such opportunities or present them to third parties unless either M&G
or JTP, as applicable, determine not to pursue such opportunities or M&G or
JTP, as applicable, consent thereto. The New Consulting Agreement does not
prohibit affiliates of the Company from pursuing such opportunities or
offering them to third parties without M&G's or JTP's consent, as the case
may be. The New Subsidiary Consulting Agreements expire in December 2007, but
are automatically renewed for successive one year terms, unless either party
to the agreement provides written notice of termination 60 days prior to the
scheduled renewal date.
Fourth, the Company's Non-Restricted Subsidiary, JI Properties, Inc. ("JI
Properties"), entered into a services agreement (the "JI Properties Services
Agreement") with the Company and each of its other subsidiaries (both
Restricted and Non-Restricted Subsidiaries) (other than certain subsidiaries
of Bond and Dura-Line), pursuant to which JI Properties will provide certain
real estate, other assets, transportation and related services to the Company
and such subsidiaries. JI Properties' current capital leases are guaranteed
by the Company. Pursuant to the JI Properties Services Agreement, the
Company's subsidiaries will be charged their allocable portion of such
services and related costs based upon their usage of such services and their
relative revenues as compared with other subsidiaries. The JI Properties
Services Agreement will expire in December 2007, but is automatically renewed
for successive one year terms, unless either party provides written notice of
termination 60 days prior to the scheduled renewal date.
Fifth, in connection with the Plan, the Company refined the allocation of
overhead, general and administrative charges and expenses among the Company
and its subsidiaries in order to more closely match these overhead charges
with the respective revenues and usage of corporate overhead by the Company
and its subsidiaries. In the years ended December 31, 1994, 1995 and 1996,
and the six months ended June 30, 1997, corporate and overhead charges borne
by the Company (prior to charges under the Old Consulting Agreement, the JI
Properties Services Agreement, subsidiary management and consulting fees and
the Tax Sharing Agreement) were $8.6 million, $10.3 million, $12.7 million
and $6.4 million, respectively. On a pro forma basis giving consideration to
the JI Properties Services Agreement for such periods (prior to charges under
the New TJC Management Consulting Agreement, the New Subsidiary Advisory
Agreement, and the Tax Sharing Agreement), overhead charges borne by the
Company for such periods would have been $5.4 million, $6.7 million, $8.2
million, and $3.7 million, respectively, and are expected to be about $9.6
million for fiscal 1997.
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Sixth, on July 25, 1997, the Company entered into transition agreements
(together, the "Transition Agreement") with M&G and JTP, pursuant to which
the Company will provide office space and certain administrative and
accounting services to M&G and JTP to facilitate the transition of these
subsidiaries to stand-alone companies. The subsidiaries will reimburse the
Company for services provided pursuant to the Transition Agreement on an
allocated cost basis. The Transition Agreement will expire on December 31,
1997, but is automatically renewed for successive one year periods (unless
either party provides prior written notice of non-renewal) and may be
terminated by the subsidiaries on 90 days' written notice.
Tax Sharing Agreement. The Company and each of its subsidiaries are
parties to a tax sharing agreement (the "Tax Sharing Agreement"). Pursuant to
the Tax Sharing Agreement, each of the consolidated subsidiaries of the
Company pays to the Company, on an annual basis, an amount determined by
reference to the separate return tax liability of the subsidiary as defined
in Treasury Regulation Section 1.1552-1(a)(2)(ii). The Company received
payments of $1.8 million, $3.7 million, $1.8 million, and $2.4 million,
respectively, from the Company's subsidiaries pursuant to the Tax Sharing
Agreement in the years ended December 31, 1994, 1995, 1996, and the six
months ended June 30, 1997, respectively. These income tax payments reflected
a Federal income tax rate of approximately 34% of each subsidiary's pre-tax
income.
Upon redemption of the M&G Junior Preferred Stock or JTP Junior Preferred
Stock or other circumstances that cause M&G or JTP and their respective
subsidiaries to cease to be tax-consolidated subsidiaries of the Company, M&G
or JTP, as the case may be, and their respective subsidiaries will be
released from making any further payments under the Tax Sharing Agreement.
While the release will discharge M&G or JTP and their respective subsidiaries
from making future income tax payments to the Company, M&G or JTP and their
respective subsidiaries, as the case may be, will remain contingently liable
to the Company under the Tax Sharing Agreement in respect of any increases in
their separate return tax liability for periods prior to such
deconsolidations.
Employment Agreements. On February 25, 1988, the Company entered into an
employment agreement with Thomas H. Quinn, pursuant to which Mr. Quinn became
the President and Chief Operating Officer of the Company, effective January
1, 1988. See "Management--Employment Agreement."
Fannie May. On May 15, 1995, the Company purchased from Fannie May $7.5
million aggregate principal amount of Subordinated Notes and 75.6133 shares
of Junior Class A PIK Preferred Stock of Fannie May at face value for $9.1
million. Also in 1995, the Company acquired 151.28 shares of common stock of
Fannie May (representing 15.1% of the outstanding common stock of Fannie May
on a fully-diluted basis) for $151,000. These shares of common stock were
purchased from the John W. Jordan II Revocable Trust, which purchased them in
July 1995 for $151,000. On June 28, 1995, the Company purchased from The
First National Bank of Chicago $7.0 million aggregate principal amount of
participations in term loans of a wholly-owned subsidiary of Fannie May for
$7.0 million, and agreed to purchase up to an additional $3.0 million
aggregate principal amount of such participations, depending upon the
financial performance of Fannie May. The additional $3.0 million obligation
is secured by a pledge from the Company of a $3.0 million certificate of
deposit purchased by the Company. On July 29, 1996, Mr. Jordan purchased $2.0
million of Fannie May Subordinated Notes from the Company at face value plus
accrued interest. Fannie May's Chief Executive Officer is Mr. Quinn, and its
stockholders include Messrs. Jordan, Quinn, Zalaznick and Boucher, who are
directors and stockholders of the Company, as well as other partners,
principals and associates of The Jordan Company who are also stockholders of
the Company. Fannie May, which is also known as "Fannie May Candies," is a
manufacturer and marketer of kitchen-fresh, high-end boxed chocolates through
its 337 company-owned retail stores and through third party retail and
non-retail sales channels. Its products are marketed under both the "Fannie
May" and "Fanny Farmer" brand names.
On July 2, 1997, the Company received from Fannie May, $14.3 million in
exchange for the above investments held by the Company. The amount received
also included $1.6 million of accrued interest and premium on the above
Subordinated Notes and term loans. On July 7, 1997, the Company received $3.0
million as a return of the certificate of deposit held by the Company as
security for an obligation to purchase additional participation in the
above-mentioned term loans.
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Cape Craftsmen. On July 29, 1996, the Company acquired the stock of Cape
Craftsmen, Inc. ("Cape Craftsmen") from the Jordan Company and JZCC in
exchange for $12.1 million of notes receivable from Cape Craftsmen. Since the
Company and Cape Craftsmen have common ownership, the net assets of Cape
Craftsmen were recorded at the historical basis, $7.6 million, and resulted
in a non-cash loss of $4.5 million.
Legal Counsel. Mr. G. Robert Fisher, a director of, and the general
counsel and secretary to, the Company, is also a partner of Bryan Cave, a
limited liability partnership, and was a partner in a predecessor firm,
Smith, Gill, Fisher & Butts. Mr. Fisher and his law firm have represented the
Company and The Jordan Company in the past, and expect to continue
representing them in the future. In 1996, Bryan Cave LLP was paid
approximately $1.5 million in fees and expenses by the Company.
SAR Payments. In connection with acquiring the Company's subsidiaries, the
sellers of the subsidiaries, who usually included the subsidiary's
management, often receive seller notes, stock, stock appreciation rights
("SARs") and special bonus plans in respect of those subsidiaries. In April
1997, the Company paid and purchased SARs and related interests at three
companies. At Dura-Line, the Company paid $9.4 million to purchase Dura-Line
SARs from the president and chief financial officer of Dura-Line, and agreed
to redeem $1.9 million of Dura-Line preferred stock held by the president and
chief financial officer of Dura-Line in April 1998. At AIM and Cambridge, the
Company paid $3.1 million to purchase AIM and Cambridge SARs (based upon 20%
of AIM's and Cambridge's appreciation from 1989 to 1996) from the estate of
the former president of AIM and Cambridge. Each of these payments and
purchases in respect of the SARs was expensed for financial reporting
purposes.
Sale of Paw Print. As part of the Plan, the Company sold the stock of Paw
Print on July 31, 1997 for approximately $10.0 million of net cash proceeds
(and the assumption by the purchaser of approximately $2.5 million of
indebtedness) to a newly-formed company, which is organized and owned by the
Jordan Group, but is not a subsidiary of the Company. The Company purchased
Paw Print on November 8, 1996, for a purchase price of $9.25 million and a
$2.5 million subordinated seller note. See "Recapitalization and
Repositioning Plan."
Directors and Officers Indemnification. The Company has entered into
indemnification agreements with each member of the Board of Directors whereby
the Company has agreed, subject to certain exceptions, to indemnify and hold
harmless each director from liabilities incurred as a result of such person's
status as a director of the Company. See "Management--Directors and Executive
Officers of the Company."
Future Arrangements. The Company has adopted a policy that future
transactions between the Company and its officers, directors and other
affiliates (including the Motors and Gears and the Jordan Telecommunication
Products subsidiaries) must (i) be approved by a majority of the members of
the Board of Directors and by a majority of the disinterested members of the
Board of Directors and (ii) be on terms no less favorable to the Company than
could be obtained from unaffiliated third parties.
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RECAPITALIZATION AND REPOSITIONING PLAN
The Company has implemented the Plan to recapitalize and reposition its
subsidiaries in order to establish them as more independent, stand-alone,
industry-focused companies, to provide the Company with additional financial
and operational flexibility and to allow the Company's stockholders and
management of JTP and M&G to invest directly in Jordan Telecommunication
Products and Motors and Gears.
The principal elements of the Plan include the following:
The Old Senior Notes Offering. The issuance and sale of the Old Senior
Notes for net proceeds of approximately $113 million, which was completed on
July 25, 1997.
JTP Recapitalization. The formation of JTP, which acquired all of the
Jordan Telecommunication Products subsidiaries from the Company in a series
of transactions for aggregate consideration of $294.0 million, consisting of
$284.0 million of cash proceeds and $10.0 million of assumed obligations. As
part of the JTP Recapitalization, the Company purchased $20.0 million of
aggregate initial liquidation preference of JTP Junior Preferred Stock,
resulting in net cash proceeds to the Company of $264.0 million. See "Risk
Factors--Consequences of Subsidiary Deconsolidation," "Certain
Transactions--Recapitalization and Repositioning Plan" and "Description of
Capital Stock--Subsidiary Securities--JTP Junior Preferred Stock."
JTP Offering. The issuance and sale by JTP of $190.0 million of Senior
Notes, $85.0 million of initial accreted value of Senior Discount Notes and
units consisting of Senior Preferred Stock with an aggregate liquidation
preference of $25.0 million and shares of common stock concurrent with the
Old Senior Notes Offering.
Fannie May Refinancing. The refinancing of Fannie May , including the
refinancing of notes held by the Company in an aggregate principal amount
(together with accrued interest) of $14.4 million at June 30, 1997. The
Company received net cash proceeds of approximately $17.4 million from the
Fannie May Refinancing. See "Certain Transactions--Fannie May."
New Credit Agreement. The establishment of the New Credit Agreement by
JII, a subsidiary of the Company, by amending and restating the JII Credit
Agreement. The New Credit Agreement provides the Company and certain of its
subsidiaries with a revolving credit and letter of credit facility of up to
$75.0 million, which was undrawn as of July 31, 1997. See "Description of
Certain Indebtedness--Credit Agreements."
Reclassification of Subsidiaries. The reclassification or designation of
the Specialty Printing and Labeling subsidiaries as Restricted Subsidiaries
for purposes of the Company's Indentures, which will have the effect of
subjecting Specialty Printing and Labeling subsidiaries to the restrictive
covenants of the Indentures and the reclassification or designation of JI
Properties as a Non-Restricted Subsidiary for the purposes of the Indentures.
Following this reclassification, the Company will continue to guaranty JI
Properties' current capital leases.
The net proceeds from the foregoing were used as follows:
Repayment of the Old Credit Agreements. The repayment in full of
approximately $78.0 million aggregate principal amount of indebtedness under
the Old Credit Agreements. See "Description of Certain Indebtedness--Credit
Agreements--Old Credit Agreements."
Tender Offer and Consent Solicitation for the Old Senior Notes. The
completion of a Tender Offer for substantially all of the Company's 10 3/8%
Senior Notes due 2003 and an accompanying consent solicitation to amend the
related Indenture and the payment of certain fees and expenses in connection
with the Tender Offer and the consent solicitation for the Company's 10 3/8%
Senior Notes due 2003. See "Description of Certain Indebtedness--10 3/8%
Senior Notes due 2003 and Discount Debentures--Tender Offer" and "--10 3/8%
Senior Notes due 2003 Consent Solicitation and Amendments."
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Consent Solicitation for the Discount Debentures. The completion of a
consent solicitation for the Old Discount Debentures which includes (i) the
adoption of certain amendments to the Old Discount Debentures Indenture and
(ii) the payment of certain fees and expenses relating to the consent
solicitation for the Old Discount Debentures. See "Description of Certain
Indebtedness--10 3/8% Senior Notes due 2003 and Discount Debentures--Old
Discount Debentures Consent Solicitation and Amendments."
In addition, as part of the Company's strategy to make complementary
acquisitions and to divest non-core businesses, the Company has executed the
following transactions as additional elements of the Plan:
M&G Recapitalization. The recapitalization, in May 1997, of the Company's
investment in Motors and Gears through the amendment and restatement of the
Company's preferred stock investment in M&G involving, among other things, the
increase to $42.0 million of the initial aggregate liquidation preference of
the M&G Junior Preferred Stock. In connection with the M&G Recapitalization,
M&G issued 16,250 shares of M&G common stock (representing approximately 82.5%
of the outstanding shares of M&G common stock) to the Jordan Group and M&G
management for total consideration of $2.2 million (of which $1.1 million was
paid in cash and $1.1 million was paid through the delivery of 8% zero coupon
notes due 2007). See "Risk Factors--Consequences of Subsidiary
Deconsolidation," "Certain Transactions" and "Description of Capital
Stock--Subsidiary Securities--M&G Junior Preferred Stock."
Acquisitions. The acquisition by Jordan Telecommunication Products of the
assets of LoDan for approximately $17.0 million in May 1997, and the
acquisition by Motors and Gears of the stock of FIR for approximately $51.3
million in June 1997.
Dispositions. The sale of Hudson in May 1997 for approximately $35.0
million, and the sale of Paw Print to an affiliate in July 1997 for
approximately $10.0 million in net cash proceeds and approximately $2.5
million of assumed debt. See "Certain Transactions--Sale of Paw Print."
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain terms of certain indebtedness of the
Company.
CREDIT AGREEMENTS
At July 25, 1997, the Company had borrowings outstanding under the Old
Credit Agreements totaling $73.8 million. The borrowings were at JII, $26.7
million, and SPL Holdings, $47.1 million.
Old Credit Agreements. In July 1996, the Company amended and restated its
Credit Facility among JII, the First National Bank of Boston and other banks
(the "JII Credit Agreement"), increasing the revolving facility amount from
$50.0 to $85.0 million. The JII Credit Agreement, which matures on June 29,
1999, has been primarily used for working capital and acquisitions. At July
25, 1997, the Company had outstanding borrowings of $26.7 million under the
JII Credit Agreement. The weighted average interest rate at June 30, 1997 was
9.0%. The JII Credit Agreement is secured by substantially all of the assets
of the Company's Restricted Subsidiaries, excluding Welcome Home, and is
guaranteed by the Company. The Company must comply with certain financial
covenants specified in the JII Credit Agreement, and as of the date of this
Prospectus the Company is in compliance with such covenants.
In August 1995, Specialty Printing and Labeling entered into a credit
agreement with The First National Bank of Boston (the "SPL Credit Agreement"
and together with the JII Credit Agreement, the "Old Credit Agreements"). In
May 1996, the SPL Credit Agreement was amended and restated and available
borrowings were increased from $43.9 to $63.9 million. The aggregate
outstanding amount under the SPL Credit Agreement at July 25, 1997, was $47.1
million. The SPL Credit Agreement is secured by substantially all of the
assets of the operating subsidiaries of the Specialty Printing and Labeling
Group. The applicable weighted average interest rate at June 30, 1997, was
8.85%. The Company must comply with certain financial covenants specified in
the SPL Credit Agreement, and as of the date of this Prospectus the Company
is in compliance with such covenants.
New Credit Agreement. On July 25, 1997, JII entered into the New Credit
Agreement under which JII is able to borrow, on behalf of the Company, to
fund acquisitions, provide working capital and for other general corporate
purposes. The New Credit Agreement provides for a revolving line of credit of
$75.0 million over a term of five years and the agreement is secured by a
security interest in substantially all of the assets of the Company's
Restricted Subsidiaries, including a pledge of all of the stock of the
Company's Restricted Subsidiaries, and guaranteed by the Company's Restricted
Subsidiaries. At July 31, 1997, no amounts were outstanding under the New
Credit Agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
Other Credit Facilities. Motors and Gears has available a line of credit
from Bankers Trust Company in the amount of $75.0 million (the "M&G Credit
Agreement"). The line of credit matures in November 2001. At July 31, 1997,
$38.0 million was outstanding on the M&G Credit Agreement. Outstanding
borrowings under the M&G Credit Agreement carry a floating rate of LIBOR plus
2.5% or base rate plus 1.5% at the option of M&G. The M&G Credit Agreement is
secured by substantially all of the assets of the operating subsidiaries of
the Motors and Gears group and is guaranteed by those subsidiaries.
Dura-Line has available a line of credit from ABN Amro Bank N.V. of
Prague, Czech Republic in the amount of $0.8 million. The line of credit
matures on April 15, 1998, if not renewed. At July 31, 1997, no amounts were
outstanding under this line of credit. Outstanding borrowings under the line
of credit carry an interest rate of 1.25% above PRIBOR (Prague Inter-Bank
Offered Rate). The applicable rate at June 30, 1997 was 12.18%. The facility
is secured by the assets of Dura-Line's majority owned subsidiary, Dura-Line
CT s.r.o., which is located in the Czech Republic. The facility is also
guaranteed with a standby letter of credit issued by Dura-Line.
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On July 25, 1997, JTP Industries, Inc., a subsidiary of JTP, entered into
a credit agreement (the "JTP Credit Agreement"), under which Jordan
Telecommunication Products, through JTP Industries, Inc., is able to fund
acquisitions, provide working capital and for other general corporate
purposes. The JTP Credit Agreement provides for a revolving line of credit of
$110.0 million over a term of five years and the agreement is secured by a
first priority security interest in substantially all of the assets of the
operating subsidiaries of the Jordan Telecommunication Products Group,
including a pledge of all the stock of the subsidiaries. Payments of
principal and interest on amounts borrowed under the JTP Credit Agreement is
guaranteed by JTP's operating subsidiaries.
Dura-Line Notes Payable. Dura-Line maintains $1.1 million in notes payable
due in monthly installments through 1999 bearing interest at rates ranging
from 5.7% to 8.3%. The notes are secured by an interest in certain of
Dura-Line's equipment.
Diversified Notes Payable. Diversified maintains $0.1 million in notes
payable due in monthly installments through 2001 bearing interest at rates
ranging from 7.7% to 9.9%. The notes are secured by an interest in certain of
Diversified's equipment.
CAPITAL LEASES
Interest rates on capital leases range from 8.3% to 14.5% and mature in
installments through 2001.
The future minimum lease payments as of December 31, 1996 under capital
leases (certain of which are capital leases of Non-Restricted Subsidiaries
guaranteed by the Company) consist of the following:
<TABLE>
<CAPTION>
<S> <C>
1997...........................................$ 6,525,000
1998 .......................................... 10,734,000
1999 .......................................... 3,913,000
2000 .......................................... 11,545,000
2001 .......................................... 302,000
Thereafter .................................... --
------------
Total ....................................... 33,019,000
Less amount representing interest ............. 5,525,000
------------
Present value of future minimum lease
payments...................................... $27,494,000
============
</TABLE>
The present value of the future minimum lease payments approximates the
book value of property, plant and equipment under capital leases at December
31, 1996.
SELLER PROMISSORY NOTES
In connection with the acquisition of Valmark, a Specialty Printing and
Labeling subsidiary, Valmark issued to the seller a $4.0 million, 8.0% note
(the "Valmark Seller Note"). The Valmark Seller Note is a general unsecured
obligation of Valmark, subordinated to borrowings under the SPL Credit
Agreement and, the Company expects, subordinated to borrowings under the New
Credit Agreement. Interest under the Valmark Seller Note is payable annually
in arrears and Valmark is required to pay installments of principal on the
Valmark Seller Note as follows: (i) $2.0 million in 1999 and (ii) $2.0
million in 2000. Subject to the terms and conditions of the New Credit
Agreement, Valmark may prepay the principal amount of the Valmark Seller Note
in whole or in part at any time without payment of any premium or penalty.
In connection with the acquisition of Pamco, a Specialty Printing and
Labeling subsidiary, Pamco issued to the seller a $4.0 million, 8.0% note
(the "Pamco Seller Note"). The Pamco Seller Note is a general unsecured
obligation of Pamco, subordinated to borrowings under the SPL Credit
Agreement and, the Company expects, will be subordinated to borrowings under
the New Credit Agreement. Interest under the Pamco Seller Note is payable
annually in arrears and Pamco is required to pay installments of principal on
the Pamco Seller Note as follows: (i) $2.0 million in 2000 and (ii) $2.0
million in 2001. Subject to the terms and conditions of the New Credit
Agreement, Pamco may prepay the principal amount of the Pamco Seller Note in
whole or in part at any time without payment of any premium or penalty.
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In connection with the acquisition of Merkle-Korff, a Motors and Gears
subsidiary, Merkle-Korff issued to the seller a $5.0 million, 9% seller note
(the "Merkle-Korff Seller Note") due December 31, 2003. The Merkle-Korff
Seller Note is a general unsecured obligation of Merkle-Korff, subordinated
to borrowings under the M&G Credit Agreement and, the Company expects,
subordinated to borrowings under the New Credit Agreement. Interest under the
Merkle-Korff Seller Note is payable annually in arrears and Merkle-Korff is
required to pay installments of principal on the Merkle-Korff Seller Note as
follows: (i) $1.0 million on December 31, 2000; (ii) $1.25 million on
December 31, 2001; (iii) $1.25 million on December 31, 2002; and (iv) the
entire then outstanding principal amount on December 31, 2003. Subject to the
terms and conditions of the M&G Credit Agreement, Merkle-Korff may prepay the
principal amount of the Merkle-Korff Seller Note in whole or in part at any
time without payment of any premium or penalty.
In connection with the acquisition of Diversified, a Jordan
Telecommunication Products subsidiary, Diversified issued to the sellers an
aggregate of $1.5 million of 8.0% subordinated promissory notes (the
"Diversified Seller Notes"). The Diversified Seller Notes mature in 2004.
One-half of the aggregate principal amount of the Diversified Seller Notes is
due in 2003 and the remaining one-half is due in 2004. Diversified has the
right to prepay the Diversified Seller Notes. The aggregate principal amount
of the Diversified Seller Notes is guaranteed by the Company.
In connection with the acquisition of LoDan, a Jordan Telecommunication
Products subsidiary, LoDan issued to the Seller a $1.5 million 8.0%
subordinated promissory note (the "LoDan Seller Note"). The LoDan Seller Note
matures in 1999. One-half of the principal amount of the LoDan Seller Note is
due in 1998 and the remaining one-half is due in 1999.
In connection with the acquisition of Seaboard, a Specialty Printing and
Labeling subsidiary, Seaboard issued to the seller a $1.5 million 8.0%
subordinated promissory note due in 2001.
In connection with the acquisition of Parsons, a Consumer and Industrial
Products subsidiary, Parsons issued to the seller a $0.6 million 9.0%
subordinated promissory note (the "Parsons Seller Note"). The Parsons Seller
Note matured in 1991. As of June 30, 1997, no payments have been made and no
interest has been accrued by the Company in respect of the Parsons Seller
Note.
SAR AGREEMENTS
Dura-Line Preferred Stock and SARs Redemption Agreement. Dura-Line has
outstanding 187.5 shares of its 7% cumulative preferred stock (the "Dura-Line
Preferred Stock") with an aggregate liquidation preference of $1.9 million
issued to certain former stockholders of Dura-Line. The former stockholders
were also granted SARs exercisable upon the occurrence of certain
extraordinary corporate transactions. On April 10, 1997, Dura-Line entered
into an agreement (the "Redemption Agreement"), pursuant to which Dura-Line
paid the former stockholders $9.4 million in cash and gave the former
stockholders a promissory note for $4.7 million in consideration for the
former stockholders' SARs. The promissory note bears interest at the rate of
8%, is payable in annual installments and matures on April 10, 2001.
Dura-Line is required by the Redemption Agreement to redeem the remaining
shares of Dura-Line Preferred Stock on April 10, 1998 for $1.9 million. The
holders of the Dura-Line Preferred Stock agreed to forego the payment of
accumulated and unpaid dividends of $0.7 million. If, prior to April 30,
1998, the Company receives offering proceeds from an initial public offering
of Dura-Line common stock, the Company is required to pay the former
stockholders of Dura-Line an additional $2.3 million. If the Company does not
receive proceeds from an initial public offering of Dura-Line common stock
prior to April 30, 1998, the former stockholders will receive 25% of
Dura-Line's 1997 gross profit (as defined in the Redemption Agreement) in
excess of $30.0 million. As consideration for signing the Redemption
Agreement, the former stockholders will receive total non-compete payments of
$0.4 million over the 13-month period beginning April 10, 1997.
AIM and Cambridge SARs. In April 1997, the Company paid $3.1 million to
purchase AIM and Cambridge SARs (based upon 20% of AIM and Cambridge
appreciation from 1989 to 1996) from the estate of the former president of
AIM and Cambridge.
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Each of these payments and purchases in respect of the SARs was expensed
for financial reporting purposes.
SUBSIDIARY EARN-OUT AGREEMENTS
Pursuant to earn-out agreements entered into in connection with the
acquisition of certain of the subsidiaries of Jordan Telecommunication
Products, the management of the subsidiaries has the opportunity to earn
bonuses based on the EBIT (as defined in the agreements) growth of their
respective subsidiaries for up to four fiscal years. The cumulative maximum
payout pursuant to these earn-out agreements is approximately $8.2 million.
M&G NEW SENIOR NOTES
In November 1996, M&G, a majority-owned subsidiary of the Company, through
its wholly-owned subsidiary, Motors and Gears, Inc., issued $170.0 million in
aggregate principal amount of 10 3/4% Senior Notes (the "M&G New Senior
Notes"). Interest on the M&G New Senior Notes is payable in arrears on May 15
and November 15 of each year commencing May 15, 1997. The M&G New Senior
Notes are redeemable at the option of Motors and Gears, Inc., in whole or in
part, at any time on or after November 15, 2001. Motors and Gears, Inc. may
also redeem up to 35% of the original aggregate principal amount of the M&G
New Senior Notes prior to November 15, 1999, under certain circumstances. The
fair value of the M&G New Senior Notes at June 30, 1997, was $168.3 million.
The fair value was calculated using the M&G New Senior Notes' June 30, 1997
market price multiplied by the face amount. The M&G New Senior Notes are not
secured by the assets of Motor and Gears, Inc., M&G or the Company.
The indenture relating to the M&G New Senior Notes contains certain
covenants which restrict (i) the payment of dividends; (ii) the repurchase of
stock and the making of certain other restricted payments; (iii) certain
mergers or consolidations; and (iv) the assumption of certain levels of
additional indebtedness. The Company is expected to continue to be in
compliance with the provisions of this indenture.
10 3/8% SENIOR NOTES DUE 2003 AND DISCOUNT DEBENTURES
In July 1993, the Company issued $275.0 million in aggregate principal
amount of 10 3/8% Senior Notes due 2003. These notes bear interest at a rate
of 10 3/8% per annum, payable semi-annually in cash on February 1 and August
1 of each year. The 10 3/8% Senior Notes are redeemable for 105.18750% of
their principal amount from August 1, 1998 to July 31, 1999. The fair value
of the 10 3/8% Senior Notes was $272.3 million at June 30, 1997. The fair
value was calculated using the 10 3/8% Senior Notes' June 30, 1997 market
price multiplied by the face amount. The 10 3/8% Senior Notes are not secured
by the assets of the Company.
In July 1993, the Company issued $133.1 million aggregate principal amount
of 11 3/4% Senior Subordinated Discount Debentures due 2005. The 11 3/4%
Discount Debentures due 2005 were issued at a substantial discount from their
principal amount. The 11 3/4% Discount Debentures due 2005 bore interest at a
rate of 11 3/4% per annum, payable in cash semi-annually on February 1 and
August 1 of each year beginning in 1999.
In April 1997, the Company privately placed approximately $214.0 million
aggregate principal amount of 11 3/4% Series A Senior Subordinated Discount
Debentures due 2009, at 56.52% of such principal amount. The Old Discount
Debentures are eligible for resale under Rule 144A of the Securities Act. The
Company placed the Old Discount Debentures to refinance substantially all of
the $133.1 million aggregate principal amount of its 11 3/4% Discount
Debentures due 2005. As of June 30, 1997, approximately $0.2 million of the
11 3/4% Discount Debentures due 2005 were outstanding.
Tender Offer
As part of the Plan, the Company concluded the Tender Offer for
substantially all of the aggregate principal amount of its outstanding 10
3/8% Senior Notes due 2003 (at a premium to principal amount), plus
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accrued and unpaid interest to the date of repurchase. The Company may, after
the Tender Offer, seek to repurchase 10 3/8% Senior Notes due 2003 pursuant
to open market or privately negotiated purchases or otherwise on terms that
may or may not differ from the terms of the Tender Offer and the terms of the
redemption of 10 3/8% Senior Notes due 2003 pursuant to the relevant
Indenture.
The pro forma financial information included in this Prospectus reflects
that substantially all of the outstanding 10 3/8% Senior Notes due 2003 were
tendered pursuant to the Tender Offer. To the extent that 10 3/8% Senior
Notes due 2003 remained outstanding after the consummation of the Tender
Offer, the Company will continue to be subject to interest and other payment
obligations in respect of such 10 3/8% Senior Notes due 2003 which remained
outstanding following the consummation of the Tender Offer.
10 3/8% Senior Notes due 2003 Consent Solicitation and Amendments
Also as part of the Plan, the Company concluded a consent solicitation to
effect amendments to the 10 3/8% Senior Notes due 2003 Indenture.
Old Discount Debentures Consent Solicitation and Amendments.
Concurrently with the consent solicitation with respect to the 10 3/8%
Senior Notes due 2003, and as part of the Plan, the Company concluded a
consent solicitation to effect amendments to the Old Discount Debentures
Indenture. The amendments modify the covenants in the Old Discount Debentures
Indenture to conform generally to the covenants (and related definitions) in
the Old Senior Notes Indenture. See "Description of the Exchange
Securities--Certain Covenants."
JTP SENIOR NOTES AND DISCOUNT DEBENTURES
In connection with the JTP Recapitalization, JTP issued $190.0 million in
aggregate principal amount of 9 7/8% Senior Notes due 2007 (the "JTP Senior
Notes"). The JTP Senior Notes are redeemable at the option of JTP, in whole
or in part, at any time on or after August 1, 2002.
In connection with the JTP Recapitalization, JTP issued Senior Discount
Notes due 2007 (the "JTP Discount Notes") for gross proceeds of $85.0
million. The JTP Discount Notes were issued at a substantial discount from
their principal amount. The JTP Discount Notes are redeemable at the option
of JTP in whole or in part, at any time on or after August 1, 2002.
The indentures relating to the JTP Senior Notes and the JTP Senior
Discount Notes restrict the ability of JTP to incur additional indebtedness
at its restricted subsidiaries, which are Non-Restricted Securities for the
purposes of the Company's Indentures.
CERTAIN OTHER INDEBTEDNESS
Dura-Line has available a $2.7 million term loan from Heller Financial,
Inc., which is guaranteed by the Company. The Company has also guaranteed
certain equipment leases of Dura-Line of approximately $1.1 million in the
aggregate.
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DESCRIPTION OF CAPITAL STOCK
The following summarizes certain provisions of the Articles of
Incorporation of the Company and its subsidiaries.
GENERAL
The authorized capital stock of the Company consists solely of 100,000
shares of common stock, par value $0.01 per share (the "Common Stock"). As of
June 30, 1997, 98,501.0004 shares were issued and outstanding.
Common Stock. Each holder of shares of Common Stock is entitled to one
vote per share on all matters to be voted on by stockholders. The holders of
Common Stock are entitled to dividends and other distributions if, as and
when declared by the Board of Directors out of assets legally available
therefor, subject to the restrictions, if any, imposed by other indebtedness
outstanding from time to time. Upon the liquidation, dissolution or winding
up of the Company, the holders of shares of Common Stock would be entitled to
share ratably in the distribution of all of the Company's assets. The holders
of Common Stock have certain preemptive and other subscription rights to
purchase shares of capital stock of the Company. See "Principal
Stockholders--Stockholder Agreement." As of June 30, 1997, there were 19
beneficial owners of Common Stock.
SUBSIDIARY SECURITIES
Pursuant to the Plan, the Company purchased shares of the capital stock of
JTP and M&G. In addition, the Company's stockholders, their affiliates and
third parties hold capital stock of certain of the Company's subsidiaries,
the terms of which may have a significant impact on the Company's operations.
A description of the terms of such capital stock is set forth below.
M&G Junior Preferred Stock. In connection with the M&G Recapitalization,
the Company amended and restated its preferred stock investment in M&G
resulting in the M&G Junior Preferred Stock which initially has an increased
liquidation preference of $42.0 million plus or minus 80% of M&G's net income
or losses through the fifth anniversary of the date of issuance. Following
the fifth anniversary of the date of issuance or the failure by M&G to redeem
the M&G Junior Preferred Stock following the sale of M&G or a public equity
offering by M&G, dividends will accrue on any outstanding M&G Junior
Preferred Stock at a rate of 10% per annum of the Initial M&G Junior
Preferred Liquidation Value. Absent such an event, the Company does not
anticipate receiving any cash distributions in respect of the M&G Junior
Preferred Stock prior to the fifth anniversary of the date of issuance. The
M&G Junior Preferred Stock will have voting rights equal to 82.5% of the
total combined voting power of the M&G Junior Preferred Stock and the M&G
common stock.
The M&G Junior Preferred Stock will be mandatorily redeemable on the
eleventh anniversary of the date of issuance and, if and to the extent
permitted by the covenants of M&G's then outstanding indebtedness, on the
earliest to occur of (x) the fifth anniversary of the date of issuance, (y)
the sale of M&G or (z) a public equity offering by M&G. In the event the M&G
Junior Preferred Stock is redeemed prior to the fifth anniversary of the date
of issuance, the redemption price will be equal to (i) $42.0 million, plus or
minus (ii) 80% of M&G's net income or losses through the redemption date
(collectively, the "Initial M&G Junior Preferred Liquidation Value"), plus or
minus (iii) the present value of the projected net income or losses of M&G
from the redemption date through the fifth anniversary of the date of
issuance. In the event the M&G Junior Preferred Stock is redeemed on or after
the fifth anniversary of the date of issuance, the redemption price will be
equal to the Initial M&G Junior Preferred Liquidation Value plus accrued and
unpaid dividends through the Redemption Date.
The redemption of the M&G Junior Preferred Stock could result in the
recognition by the Company of substantial income tax liabilities arising out
of the M&G Recapitalization. See "Risk Factors--Consequences of Subsidiary
Deconsolidation."
JTP Junior Preferred Stock. In connection with the JTP Recapitalization,
the Company purchased JTP Junior Preferred Stock which initially has a
liquidation preference of $20.0 million plus or minus 95%
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of JTP's net income or losses through the fifth anniversary of the date of
issuance. Following the fifth anniversary of the date of issuance, or the
failure by JTP to redeem the JTP Junior Preferred Stock following the sale of
JTP or a public equity offering by JTP, dividends will accrue on any
outstanding JTP Junior Preferred Stock at a rate of 10% per annum of the
Initial JTP Junior Preferred Liquidation Value. Absent such an event, the
Company does not anticipate receiving any cash distributions in respect of
the JTP Junior Preferred Stock prior to the fifth anniversary of the date of
issuance. The JTP Junior Preferred Stock has voting rights equal to 95% of
the total combined voting power of the JTP Junior Preferred Stock and the JTP
common stock.
The JTP Junior Preferred Stock is mandatorily redeemable on the thirteenth
anniversary of the date of issuance and, if and to the extent permitted by
the covenants of JTP's then outstanding indebtedness, on the earliest to
occur of (x) the fifth anniversary of the date of issuance, (y) the sale of
JTP or (z) a public equity offering by JTP. In the event the JTP Junior
Preferred Stock is redeemed prior to the fifth anniversary of the date of
issuance, the redemption price will be equal to (i) $20.0 million, plus or
minus (ii) 95% of JTP's net income or losses through the redemption date
(collectively, the "Initial JTP Junior Preferred Liquidation Value"), plus or
minus (iii) the present value of the projected net income or losses of JTP
from the redemption date through the fifth anniversary of the date of
issuance. In the event the JTP Junior Preferred Stock is redeemed on or after
the fifth anniversary of the date of issuance, the redemption price will be
equal to the Initial JTP Junior Preferred Liquidation Value plus accrued and
unpaid dividends through the Redemption Date.
The redemption of the JTP Junior Preferred Stock could result in the
recognition by the Company of substantial income tax liabilities arising out
of the JTP Recapitalization. See "Risk Factors--Consequences of Subsidiary
Deconsolidation."
JTP Senior Preferred Stock. As part of the JTP Recapitalization, JTP
issued units consisting of Senior Exchangeable Preferred Stock due 2009 (the
"JTP Senior Preferred Stock") and common stock of JTP to qualified
institutional buyers for net cash proceeds to JTP of approximately $25.0
million. The JTP Senior Preferred Stock ranks senior, with respect to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of JTP, to the JTP Junior Preferred Stock which is held by the
Company. Accordingly, upon a sale of JTP, which would otherwise require the
mandatory redemption of the JTP Junior Preferred Stock, the proceeds of such
sale would be applied first to pay the liquidation preference and accrued
dividends with respect to the JTP Senior Preferred Stock. The JTP Senior
Preferred Stock is mandatorily redeemable on the twelfth anniversary of the
date of issuance. The holders of the JTP Senior Preferred Stock do not have
voting rights, except under limited circumstances.
Other Subsidiary Preferred Stock. Dura-Line has outstanding 187.5 shares
of its 7% cumulative preferred stock with a liquidation preference of $1.9
million. See "Description of Certain Indebtedness--SAR Agreements--Dura-Line
Preferred Stock and SARs Redemption Agreements."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Company to satisfy its obligations
pursuant to the Registration Rights Agreements, which require the Company to
use its best efforts to effect the Exchange Offer. See "--Registration
Rights."
The Company is making the Exchange Offer in reliance upon the position of
the staff of the Commission set forth in certain no-action letters addressed
to other parties in other transactions. However, the Company has not sought
its own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Based on these interpretations by the
staff of the Commission, the New Securities issued pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by holders
thereof (other than (i) any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, (ii) an Initial
Purchaser or Holder of Old Discount Debentures who acquired the Old
Securities directly from the Company solely in order to resell pursuant to
Rule 144A of the Securities Act or any other available exemption under the
Securities Act, or (iii) a broker-dealer who acquired the Old Securities as a
result of market making or other trading activities) without compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that such New Securities are acquired in the ordinary course of such
holder's business and such holder is not participating and has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Securities. Any Holder who tenders
Old Securities in the Exchange Offer for the purpose of participating in a
distribution of the New Securities could not rely on such interpretations by
the staff of the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction, unless such sale is made pursuant to an
exemption from such requirements.
Holders of Old Securities not tendered will not have any further
registration rights and the Old Securities not exchanged will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of
the markets for the Old Securities could be adversely affected.
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD SECURITIES AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD SECURITIES PURSUANT TO
THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD SECURITIES MUST MAKE THEIR OWN DECISION
WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE
AMOUNT OF OLD SECURITIES TO TENDER AFTER READING THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING THEIR ADVISERS, IF ANY, BASED ON THEIR
OWN FINANCIAL POSITION AND REQUIREMENTS.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the issuance of the Old Securities, the Company entered
into Registration Rights Agreements.
Holders of New Securities (other than as set forth below) are not entitled
to any registration rights with respect to the New Securities. Pursuant to
the Registration Rights Agreements, Holders of Old Securities are entitled to
certain registration rights. Under the Registration Rights Agreements, the
Company has agreed, for the benefit of the Holders of the Old Securities,
that it will, at its cost, (i) within 60 days after the date of the original
issue of the Old Senior Notes with respect to the Old Senior Notes, and
within 75 days after April 2, 1997 with respect to the Old Discount
Debentures, file the Registration Statement with the Commission and (ii)
within 120 days after the date of original issuance of the Old Senior Notes
with respect to the Old Senior Notes, and within 105 days of April 2, 1997
with respect to the Old Discount Debentures, use its best efforts to cause
such Registration Statement to be declared
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effective under the Securities Act. The Registration Statement of which this
prospectus is a part constitutes the Registration Statement. If (i) the
Company is not permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy or
(ii) any Holder of Transfer Restricted Securities (as defined herein)
notifies the Company within the specified time period that (A) due to a
change in law or policy it is not entitled to participate in the Exchange
Offer, (B) due to a change in law or policy it may not resell the New
Securities acquired by it in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained in the Registration
Statement is not appropriate or available for such resales by such holder or
(C) it is a broker-dealer and acquired the Senior Notes or Discount
Debentures directly from the Company or an affiliate of the Company, the
Company will file with the Commission a Shelf Registration Statement to cover
resales of the Transfer Restricted Securities by the Holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. The Company will use its
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing. "Transfer Restricted Securities" means each Senior Note or
Discount Debenture, until (i) the date of which such Transfer Restricted
Security has been exchanged by a person other than a broker-dealer for a New
Security in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Transfer Restricted Security for a
New Security, the date on which such New Security is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy
of the prospectus contained in the Registration Statement, (iii) the date on
which such security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iv)
the date on which such security is distributed pursuant to Rule 144 under the
Act.
The Registration Rights Agreements also provide that, (i) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to
issue on or prior to 30 business days after the date on which the
Registration Statement was declared effective by the Commission, New
Securities in exchange for all Transfer Restricted Securities tendered prior
thereto in the Exchange Offer and (ii) if obligated to file the Shelf
Registration Statement, the Company will file the Shelf Registration
Statement with the Commission on or prior to 60 days after such filing
obligation arises and use its best efforts to cause the Shelf Registration to
be declared effective by the Commission on or prior to 120 days after such
obligation arises. The Company shall use its best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended until
the third anniversary of the Closing Date or such shorter period that will
terminate when all the Senior Notes or Discount Debentures covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. If (a) the Company fails to file any of the
registration statements required by the Registration Rights Agreements on or
before the date specified for such filing, (b) any of such registration
statements are not declared effective by the Commission on or prior to the
date specified for such effectiveness (the "Effectiveness Target Date"), (c)
the Company fails to consummate the Exchange Offer within 30 business days of
the Effectiveness Target Date with respect to the Registration Statement, or
(d) the Shelf Registration Statement or the Registration Statement is
declared effective but thereafter, subject to certain exceptions, ceases to
be effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreements
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then the Company will pay Liquidated Damages to each Holder of
Transfer Restricted Securities, with respect to the first 90-day period
immediately following the occurrence of such Registration Default in an
amount equal to $.05 per week for each $1,000 principal amount of Notes or
each $1,000 liquidation preference of Senior Preferred Stock held by such
Holder. The amount of the Liquidated Damages will increase to $.10 per week
for each $1,000 principal amount of Senior Notes or Discount Debentures, as
applicable until all Registration Defaults have been cured. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
Holders of Transfer Restricted Securities will be required to deliver
information to be used in connection with the Shelf Registration Statement
and to provide comments on the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreements in order to have
their Transfer Restricted Securities included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated Damages set
forth above.
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The summary herein of certain provisions of the Registration Rights
Agreements does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreements, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus constitutes a part.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD SECURITIES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Securities which
are properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York time, on , 1997; provided, however, that if the Company, in its
sole discretion, has extended the period of time for which the Exchange Offer
is open, the term "Expiration Date" means the latest time and date to which
the Exchange Offer is extended. The Company may extend the Exchange Offer at
any time and from time to time by giving oral or written notice to the
Exchange Agent and by timely public announcement. Without limiting the manner
in which the Company may choose to make any public announcement and subject
to applicable law, the Company shall have no obligation to publish, advertise
or otherwise communicate any such public announcement other than by issuing a
release to an appropriate news agency. During any extension of the Exchange
Offer, all Old Securities previously tendered pursuant to the Exchange Offer
will remain subject to the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations thereunder.
As of the date of this Prospectus, $120,000,000 aggregate principal amount
of the Old Senior Notes and $214,036,493 aggregate principal amount of Old
Discount Debentures is outstanding. This Prospectus, together with the Letter
of Transmittal, is first being sent on or about , 1997, to all Holders
of Old Securities known to the Company. The Company's obligation to accept
Old Securities for exchange pursuant to the Exchange Offer is subject to
certain conditions as set forth under "--Certain Conditions to the Exchange
Offer" below.
The terms of the New Senior Notes and the Old Senior Notes and the New
Discount Debentures and the Old Discount Debentures, respectively, are
identical in all material respects, except for certain transfer restrictions
and registration rights relating to the Old Securities and rights to receive
Liquidated Damages. See "--Registration Rights; Liquidated Damages." The Old
Securities were, and the New Securities will be, issued under the Exchange
Indentures and all such Exchange Securities are entitled to the benefits of
the Exchange Indentures.
Old Securities tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof. Any Old
Securities not accepted for exchange for any reason will be returned without
expense to the tendering Holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Securities not
theretofore accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified below under "--Certain Conditions
to the Exchange Offer." The Company will give oral or written notice of any
amendment, nonacceptance or termination to the Holders of the Old Securities
as promptly as practicable. Any amendment to the Exchange Offer will not
limit the right of Holders to withdraw tendered Old Securities prior to the
Expiration Date. See "--Withdrawal Rights."
PROCEDURES FOR TENDERING OLD SECURITIES
The tender to the Company of Old Securities by a Holder thereof as set
forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering Holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a Holder who
wishes to tender Old Securities for exchange pursuant to the Exchange Offer
must transmit a properly completed and duly
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executed Letter of Transmittal, including all other documents required by
such Letter of Transmittal, to First Trust National Association (the
"Exchange Agent") at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Securities must be received by the Exchange Agent
along with the Letter of Transmittal, or (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Old Securities, if
such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") 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 METHOD OF
DELIVERY OF OLD SECURITIES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD SECURITIES SHOULD
BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Securities surrendered for
exchange pursuant thereto are tendered (i) by a registered Holder of the Old
Securities who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution (as defined below). 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 guarantees must be by
a firm which is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the
United States (collectively, "Eligible Institutions"). If Old Securities are
registered in the name of a person other than the signer of the Letter of
Transmittal, the Old Securities surrendered for exchange must be endorsed by,
or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by the Company in its sole
discretion, duly executed by the registered Holder with the signature thereon
guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Securities tendered for exchange will be
determined by the Company in its sole discretion, which determination shall
be final and binding. The Company reserves the absolute right to reject any
and all tenders of any particular Old Securities not properly tendered or to
not accept any particular Old Securities which acceptance might, in the
judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Securities either
before or after the Expiration Date (including the right to waive the
ineligibility of any Holder who seeks to tender Old Securities in the
Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Securities either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, all defects or irregularities in connection with tenders of Old
Securities for exchange must be cured within such reasonable period of time
as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of any defect
or irregularity with respect to any tender of Old Securities for exchange,
nor shall any of them incur any liability for failure to give such
notification. The Exchange Agent intends to use reasonable efforts to give
notification of such defects and irregularities.
If the Letter of Transmittal is signed by a person or persons other than
the registered Holder or Holders of Old Securities, such Old Securities must
be endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered Holder or Holders that
appear on the Old Securities.
If the Letter of Transmittal or any Old Securities or powers of attorney
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of a corporation or others acting in a fiduciary
or representatives capacity, such persons should so indicate when signing,
and, unless waived by the Company, proper evidence satisfactory to the
Company of their authority to so act must be submitted.
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By tendering, each Holder will represent to the Company that, among other
things, the New Securities acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Securities, whether or not such person is the Holder and such person has no
arrangement with any person to participate in the distribution of the New
Securities. If any Holder or any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company, is engaged in
or intends to engage in or has an arrangement or understanding with any
person to participate in a distribution of such New Securities to be acquired
pursuant to the Exchange Offer, or acquired the Old Securities as a result of
market making or other trading activities, such Holder or any such other
person (i) could not rely on the applicable interpretations of the staff of
the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such New Securities. 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.
ACCEPTANCE OF OLD SECURITIES FOR EXCHANGE; DELIVERY OF NEW SECURITIES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will accept, promptly after the Expiration Date, all Old
Securities properly tendered and will issue the New Securities promptly after
acceptance of the Old Securities. See "--Certain Conditions to the Exchange
Offer." For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Old Securities for exchange when, as and if
the Company has given oral or written notice thereof to the Exchange Agent,
with written confirmation of any oral notice to be given promptly thereafter.
For each Old Security accepted for exchange, the Holder of such Old
Security will receive a New Security having a principal amount equal to that
of the surrendered Old Security. Accordingly, registered Holders of New
Securities on the relevant record date for the first interest payment date or
dividend payment date following the consummation of the Exchange Offer will
receive interest accruing from the most recent date to which interest has
been paid on the Old Securities, or, if no interest has been paid on the Old
Securities, from July 25, 1997 with respect to the Senior Notes, and from
April 1, 2002 with respect to the Discount Debentures. Old Securities
accepted for exchange will cease to accrue interest or dividends from and
after the date of consummation of the Exchange Offer. Holders of Old
Securities whose Old Securities are accepted for exchange will not receive
any payment in respect of accrued interest or dividends on such Old
Securities otherwise payable on any interest payment date the record date for
which occurs on or after consummation of the Exchange Offer.
In all cases, issuance of New Securities for Old Securities that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) certificates for such Old
Securities or a timely Book-Entry Confirmation of such Old Securities into
the Exchange Agent's account at the Book-Entry Transfer Facility, (ii) a
properly completed and duly executed Letter of Transmittal and (iii) all
other required documents. If any tendered Old Securities are not accepted for
any reason set forth in the terms and conditions of the Exchange Offer, or if
Old Securities are submitted for a greater amount than the Holder desires to
exchange, such unaccepted or nonexchanged Old Securities will be returned
without expense to the tendering Holder thereof (or, in the case of Old
Securities tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry procedures
described below, such nonexchanged Old Securities will be credited to an
account maintained with such Book-Entry Transfer Facility) designated by the
tendering Holder as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Old Securities at the Book-Entry Transfer Facility 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
Book-Entry Transfer Facility's systems may make book-entry delivery of Old
Securities by causing the Book-Entry Transfer
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Facility to transfer such Old Securities into the Exchange Agent's account at
the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Old
Securities may be effected through book-entry transfer at the Book-Entry
Transfer Facility, 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 one of the
addresses set forth below under "--Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Securities desires to tender such Old
Securities and the Old Securities are not immediately available, or time will
not permit such Holder's Old Securities or other required documents to reach
the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if (i) the tender is made through an Eligible Institution, (ii)
prior to the Expiration Date, the Exchange Agent has received from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form of the corresponding exhibit to the Registration
Statement of which this Prospectus constitutes a part (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the Holder of Old Securities and the amount of Old Securities
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Securities, 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 (iii) the certificates for all physically
tendered Old Securities, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within three NYSE
trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Securities may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Securities to be withdrawn, identify the Old
Securities to be withdrawn (including the amount of such Old Securities), and
(where certificates for Old Securities have been transmitted) specify the
name in which such Old Securities are registered, if different from that of
the withdrawing Holder. If certificates for Old Securities have been
delivered or otherwise identified to the Exchange Agent, then, prior to the
release of such certificates the withdrawing Holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such Holder is an Eligible Institution. If Old Securities have been
tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn Old
Securities and otherwise comply with the procedures of such facility. All
questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Securities
so withdrawn will be deemed not to have been validly tendered for exchange
for purposes of the Exchange Offer. Any Old Securities which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case
of Old Securities tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Securities will be credited to
an account with such Book-Entry Transfer Facility
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specified by the Holder) as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old
Securities may be retendered by following one of the procedures described
under "--Procedures for Tendering Old Securities" above at any time on or
prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Securities in
exchange for, any Old Securities and may terminate or amend the Exchange
Offer, if at any time before the acceptance of such Old Securities for
exchange or the exchange of the New Securities for such Old Securities, any
of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking
any damages as a result thereof, or (ii) resulting in a material delay in
the ability of the Company to accept for exchange or exchange some or all
of the Old Securities pursuant to the Exchange Offer; or any statue, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the
Company might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the sole judgment of the
Company, might result in the holders of New Securities having obligations
with respect to resales and transfers of New Securities which are greater
than those described in the interpretation of the Commission referred to
on the cover page of this Prospectus, or would otherwise make it
inadvisable to proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in
the sole judgment of the Company, is or may be adverse to the Company, or
the Company shall have become aware of facts that, in the sole judgment of
the Company, have or may have an adverse effect on the value of the Old
Securities or the New Securities.
Holders of Old Securities will have registration rights and the right to
Liquidated Damages as described under "--Registration Rights; Liquidated
Damages" if the Company fails to consummate the Exchange Offer.
To the Company's knowledge as of the date of this Prospectus, none of the
above events has occurred.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any
time and from time to time in its sole discretion. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
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In addition, the Company will not accept for exchange any Old Securities
tendered, and no New Securities will be issued in exchange for any such Old
Securities, if at such time any stop order shall be threatened or in effect
with respect to the Registration Statement of which this Prospectus
constitutes a part of the qualification of the Indentures under the Trust
Indenture Act of 1939.
EXCHANGE AGENT
First Trust National Association has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters for Transmittal and Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the addresses
set forth below. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the
Exchange Agent addressed as follows:
Deliver to: First Trust National Association, Exchange Agent:
By Mail, Overnight Courier or Hand:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Specialized Finance Corporate Trust Department
Fourth Floor
By Facsimile:
(612) 244-1537
For Senior Preferred Stock:
Deliver to: Harris Trust and Savings Bank, Exchange Agent
By Mail, Overnight Courier or Hand:
DELIVERY OF A LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Company will, however, pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Securities, and in handling tenders
for their customers. The expenses to be incurred in connection with the
Exchange Offer, including the fees and expenses of the Exchange Agent and
printing, accounting, registration, and legal fees, will be paid by the
Company and are estimated to be approximately $60,000.
TRANSFER TAXES
Holders who tender their Old Securities for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Securities in the name of, or request
that Old Securities not tendered or not accepted in the Exchange Offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
APPRAISAL RIGHTS
HOLDERS OF OLD SECURITIES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
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CONSEQUENCES OF NOT EXCHANGING OLD SECURITIES
Holders of Old Securities who do not exchange their Old Securities for New
Securities pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Securities as set forth in the legend
thereon as a consequence of the issuance of the Old Securities pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Securities may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will
register the Old Securities under the Securities Act. Based upon no-action
letters issued by the staff of the Commission to third parties, the Company
believes the New Securities issued pursuant to the Exchange Offer in exchange
for the Old Securities may be offered for resale, resold or otherwise
transferred by a Holder thereof (other than any (i) Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), (ii) an Initial Purchaser or Holder of Old Discount
Debentures who acquired the Old Securities directly from the Company solely
in order to resell pursuant to Rule 144A of the Securities Act or any other
available exemption under the Securities Act, or (iii) a broker-dealer who
acquired the Old Securities as a result of market making or other trading
activities) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Securities are
acquired in the ordinary course of such holder's business and such holder is
not participating and has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of
such New Securities. However, the Company has not sought its own no-action
letter and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each Holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of New Securities, and has no arrangement or understanding to
participate in a distribution of New Securities. If any Holder is an
affiliate of the Company, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New
Securities to be acquired pursuant to the Exchange Offer, or acquired the Old
Securities as a result of market or other trading activities, such Holder (i)
could not rely on the relevant determinations of the staff of the Commission
and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives New Securities for its own
account in exchange for Old Securities must acknowledge that such Old
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus
in connection with any resale of such New Securities. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdications, if applicable, the New Securities may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction
or an exemption from registration or qualification is available and is
complied with. The Company has agreed to register or qualify the sale of the
New Securities in such jurisdictions only in limited circumstances and
subject to certain conditions.
ACCOUNTING TREATMENT
The exchange of the New Securities for the Old Securities will have no
impact on the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized.
Expenses of the Exchange Offer and expenses related to the Old Securities
will be amortized, pro rata, over the term of the New Securities.
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DESCRIPTION OF THE NEW SECURITIES
The Old Senior Notes were and the New Senior Notes will be issued pursuant
to an indenture (the "Senior Notes Indenture"), dated as of July 25, 1997,
between the Company and First Trust National Association, as trustee (the
"Senior Notes Trustee") The Old Discount Debentures were and the New Discount
Debentures will be issued pursuant to an indenture (the "Discount Debentures
Indenture" and together with the Senior Notes Indenture, the "Exchange
Indentures"), dated as of April 2, 1997, between the Company and First Trust
National Association, as trustee (the "Discount Debentures Trustee" and
together with the Senior Notes Trustee, the "Trustee"). The terms of the
Exchange Securities include those stated in the Exchange Indentures and those
made part of the Exchange Indentures by reference to the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), as in effect on the date of
original issuance of the Senior Notes and the Discount Debentures,
respectively. The Exchange Securities are subject to all such terms, and
holders of the Exchange Securities are referred to the Exchange Indentures
and the Trust Indenture Act for a statement thereof. A copy of the form of
each Exchange Indenture and the form of the Exchange Securities have been
filed as Exhibits to the Registration Statement of which this Prospectus is a
part. The following summary of certain provisions of the Exchange Indentures
does not purport to be complete and is qualified in its entirety by reference
to the Exchange Indentures, including the definitions used therein of certain
terms used below.
GENERAL
Principal of, premium, if any, interest and Liquidated Damages on, the
Exchange Securities will be payable, and the Exchange Securities may be
presented for registration of transfer or exchange, at the respective offices
of the Paying Agent and Registrar in New York, New York. Holders of Exchange
Securities must surrender their Exchange Securities to the Paying Agent to
collect principal payments, and the Company may pay principal and interest by
check and may mail interest checks to a holder's registered address; provided
that all payments with respect to Global Securities and Certificated
Securities, the holders of whom have given wire transfer instructions to the
Company, will be required to be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof. The
Registrar may require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection with certain transfers
or exchanges. See "Transfer and Exchange." The Trustee will initially act as
Paying Agent and Registrar. The Company may change the Paying Agent or
Registrar without prior notice to holders of Exchange Securities, and,
subject to certain exceptions, the Company or any of its subsidiaries may act
as Paying Agent or Registrar under either or both Exchange Indentures.
The Company's operations are conducted exclusively through its
subsidiaries. As a consequence, the Company's ability to service its
Indebtedness (including the Exchange Securities) is dependent upon the
Company's receipt of funds from its subsidiaries. See "Risk Factors--Holding
Company Structure; Dependence on Subsidiaries; Limitation on Access to Cash
Flow of Subsidiaries."
TERMS OF THE SENIOR NOTES
The Old Senior Notes are and the New Senior Notes will be general
unsecured senior obligations of the Company, will rank senior in right of
payment to all subordinated Indebtedness of the Company (including the
Discount Debentures and the 11 3/4% Discount Debentures due 2005), and will
rank pari passu in right of payment with all senior Indebtedness of the
Company (including the 10 3/8% Senior Notes due 2003). The Senior Notes will
effectively rank junior to any secured senior Indebtedness of the Company to
the extent of the assets securing such Indebtedness and to any Indebtedness
of the Company's subsidiaries, including borrowings under the New Credit
Agreement. The Senior Notes will be limited to $120,000,000 in aggregate
principal amount. The Senior Notes will bear interest at the rate set forth
on the front cover of this Prospectus. Interest on each of the Senior Notes
is payable semi-annually in cash on February 1 and August 1 of each year to
holders of record of Senior Notes at the close of business on the January 15
and July 15 next preceding the interest payment date. Interest will initially
accrue from the date of issuance and the first interest payment date will be
February 1, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Senior Notes will mature on August 1, 2007 and will
be issued in denominations of $1,000 and integral multiples thereof.
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TERMS OF THE DISCOUNT DEBENTURES
The Old Discount Debentures are and the New Discount Debentures will be
general unsecured senior subordinated obligations of the Company, will rank
junior to all senior Indebtedness of the Company (including the Senior Notes
and the 10 3/8% Senior Notes due 2003), will rank pari passu with all other
senior subordinated Indebtedness of the Company (including the 11 3/4% Senior
Subordinated Discount Debentures due 2005) and will rank senior to all
subordinated Indebtedness of the Company. The Discount Debentures will
effectively rank junior to any Indebtedness of the Company's subsidiaries,
including borrowings under the New Credit Agreement. The Discount Debentures
will be limited to $214,036,493 in aggregate principal amount at maturity
($120,973,426 initial Accreted Value of the Old Discount Debentures that will
fully accrete to face amount on April 1, 2002). The price to the public for
the Discount Debentures represents a yield to maturity of 11 3/4%, computed
on the basis of semiannual compounding. Although for U.S. federal income tax
purposes a significant amount of original issue discount, taxable as ordinary
income, will be recognized by a holder of Discount Debentures as such
discount is amortized from the date of issuance of the Discount Debentures,
no cash interest will be payable with respect to the Discount Debentures
prior to October 1, 2002, except upon redemption or purchase of the Discount
Debentures by the Company. Commencing April 1, 2002, the Discount Debentures
will bear interest at the rate set forth on the cover page of this
Prospectus. Thereafter, interest on the Discount Debentures will be payable
semi-annually in cash on October 1 and April 1 of each year to holders of
record of Discount Debentures at the close of business on the September 15 or
March 15 next preceding the interest payment date. Interest will initially
accrue from April 1, 2002 and the first interest payment date will be October
1, 2002. Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Discount Debentures will mature on April 1, 2009 and will
be issued in denominations of $1,000 and integral multiples thereof.
REDEMPTION OF EXCHANGE SECURITIES
Optional Redemption. The Senior Notes may not be redeemed at the option of
the Company prior to August 1, 2002. During the 12-month period beginning
August 1 of the years indicated below, the Senior Notes will be redeemable,
at the option of the Company, in whole or in part, on at least 30 but not
more than 60 days' notice to each holder of Senior Notes to be redeemed, at
the redemption prices (expressed as percentages of the principal amount) set
forth below, plus any accrued and unpaid interest to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------- ------------
<S> <C>
2002 ............... 105.188%
2003................ 102.594%
2004 and
thereafter......... 100.000%
</TABLE>
The Discount Debentures may not be redeemed at the option of the Company
prior to April 1, 2002. During the 12-month period beginning April 1 of the
years indicated below, the Discount Debentures will be redeemable, at the
option of the Company, in whole or in part, on at least 30 but not more than
60 days' notice to each holder of Discount Debentures to be redeemed, at the
redemption prices (expressed as percentage of the Accreted Value) set forth
below, plus any accrued and unpaid interest and Liquidated Damages to the
date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------- ------------
<S> <C>
2002................ 105.875%
2003................ 102.937%
2004 and
thereafter......... 100.000%
</TABLE>
The restrictions on optional redemptions contained in the Exchange
Indentures do not limit the Company's right to separately make open market,
privately negotiated or other purchases of Exchange Securities from time to
time.
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Mandatory Redemption. Except as set forth below under "Mandatory Offers to
Purchase Exchange Securities--Change of Control" and "--Asset Sales," the
Company is not required to make any mandatory redemption, purchase or sinking
fund payments with respect to the Exchange Securities.
MANDATORY OFFERS TO PURCHASE EXCHANGE SECURITIES
Change of Control. Upon the occurrence of a Change of Control (such date
being the "Change of Control Trigger Date"), each holder of Exchange
Securities shall have the right to require the Company to purchase all or any
part (equal to $1,000 or an integral multiple thereof) of such holder's
Exchange Securities pursuant to an Offer (as defined herein) at a purchase
price equal to 101% of the aggregate principal amount of the Senior Notes,
plus accrued and unpaid interest, if any, to the date of purchase, and 101%
of the Accreted Value of the Discount Debentures at the date of purchase,
plus any accrued and unpaid interest and Liquidated Damages from April 1,
2002 to the purchase date if such date occurs after April 1, 2002. Prepayment
of the Exchange Securities pursuant to a Change of Control would constitute a
default under the New Credit Agreement. In the event a Change of Control
occurs, the Company will likely be required to refinance the Indebtedness
outstanding under the New Credit Agreement and the Exchange Securities.
The Discount Debenture Indenture provides that the Change of Control
Trigger Date for the Discount Debentures shall be delayed until all senior
Indebtedness that is required or entitled pursuant to its terms to be
redeemed or purchased upon a Change of Control has been redeemed or
purchased. Both Exchange Indentures provide that the Company shall not be
required or permitted to offer to purchase any Discount Debentures as a
result of a Change of Control until it shall have first redeemed or purchased
all senior Indebtedness that the Company is required by the terms of such
senior Indebtedness to redeem or purchase as a result of a Change of Control.
If there is a Change of Control, Indebtedness under the New Credit Agreement
could be accelerated. Moreover, there can be no assurance that sufficient
funds will be available at the time of any Change of Control to make any
required repurchases of the Exchange Securities.
Asset Sales. Each Exchange Indenture provides that the Company may not,
and may not permit any Restricted Subsidiary to, directly or indirectly,
consummate an Asset Sale (including the sale of any of the Capital Stock of
any Restricted Subsidiary) providing for Net Proceeds in excess of $2,500,000
unless at least 75% of the Net Proceeds from such Asset Sale are applied to
one or more of the following in such combination as the Company shall elect:
(a) an investment in another asset or business in the same line of business
as, or a line of business similar to that of, the line of business of the
Company and its Restricted Subsidiaries at that time; provided, that such
investment occurs on or prior to the 365th day following the date of such
Asset Sale (the "Asset Sale Disposition Date"), (b) the purchase, redemption
or other prepayment or repayment of outstanding senior Indebtedness on or
prior to the Asset Sale Disposition Date or (c) an Offer expiring on or prior
to the Purchase Date (as defined herein). Each Exchange Indenture also
provides that the Company may not, and may not permit any Restricted
Subsidiary to, directly or indirectly consummate an Asset Sale unless at
least 50% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash, cash equivalents or marketable
securities. Any Net Proceeds from any Asset Sale that are not applied or
invested as provided in clauses (a) or (b) shall constitute "Excess
Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10,000,000 under an
Exchange Indenture (such date being an "Asset Sale Trigger Date"), the
Company shall make an Offer to purchase the maximum principal amount of the
Exchange Securities then outstanding under such Exchange Indenture that may
be purchased out of Excess Proceeds, at an offer price in cash in an amount
equal to, in the case of Senior Notes, 100% of principal amount thereof plus
any accrued and unpaid interest, if any, to the Purchase Date and, in the
case of Discount Debentures, 100% of the Accreted Value thereof, plus any
accrued and unpaid interest and Liquidated Damages from April 1, 2002 to the
purchase date if such date occurs after April 1, 2002, in accordance with the
procedures set forth in such Exchange Indenture. Pursuant to the Discount
Debentures Indenture, Excess Proceeds under the Senior Notes Indenture will
not constitute Excess Proceeds under the Discount Debentures Indenture except
to the extent that Excess Proceeds under the Senior Notes Indenture are not
used to redeem Senior Notes pursuant to an Offer.
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<PAGE>
Notwithstanding the foregoing, to the extent that any or all of the Net
Proceeds of an Asset Sale is prohibited or delayed by applicable local law
from being repatriated to the United States, the portion of such proceeds so
affected will not be required to be applied as described in this or the
preceding paragraph, but may be retained for so long, but only for so long,
as the applicable local law prohibits repatriation to the United States.
To the extent that any Excess Proceeds remain after completion of an
Offer, the Company may use such remaining amount for general corporate
purposes.
Procedures for Offers. Within 30 days following any Change of Control or
Asset Sale Trigger Date, the Company shall mail to each holder of Exchange
Securities at such holder's registered address a notice stating: (a) that an
offer ("Offer") is being made pursuant to a Change of Control or an Asset
Sale, as the case may be, the length of time the Offer shall remain open and
the Change of Control Offer amount or the Asset Sale Offer amount, as the
case may be, and the maximum principal amount of Exchange Securities that
will be accepted for payment pursuant to such Offer, (b) the purchase price,
the amount of accrued and unpaid interest as of the Purchase Date, and the
purchase date (which shall be no earlier than 30 days or later than 60 days
from the date such notice is mailed (the "Purchase Date")), and (c) such
other information required by the Exchange Indentures and applicable law and
regulations.
On the Purchase Date for any Offer, the Company will, to the extent lawful
and required by each Exchange Indenture and such Offer, (1) in the case of an
Offer resulting from a Change of Control, accept for payment all Exchange
Securities or portions thereof tendered pursuant to such Offer and, in the
case of an Offer resulting from an Asset Sale, accept for payment the maximum
principal amount of Exchange Securities or portions thereof tendered pursuant
to such Offer that can be purchased out of Excess Proceeds from such Asset
Sale, (2) deposit with the Paying Agent the aggregate purchase price of all
Exchange Securities or portions thereof accepted for payment and any accrued
and unpaid interest, if any, on such Exchange Securities as of the Purchase
Date, and (3) deliver or cause to be delivered to the Trustee the Exchange
Securities so accepted pursuant to the Offer. The Paying Agent shall promptly
mail to each holder of Exchange Securities so accepted, payment in an amount
equal to the purchase price for such Exchange Securities and any accrued and
unpaid interest, if any, on such Exchange Securities as of the purchase date,
and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book-entry) to such holder replacement Exchange Securities
equal in principal amount to any unpurchased portion of the Exchange
Securities surrendered; provided that each such replacement Exchange
Securities shall be in a principal amount of $1,000 or integral multiples
thereof. The Company will publicly announce the results of the Offer on or as
soon as practicable after the purchase date.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations to the extent such laws and regulations
are applicable to any Offer. To the extent that the provisions of the
securities laws or regulations conflict with provisions of either Exchange
Indentures, the Company shall comply with any such securities laws and
regulations and shall not be deemed to have breached its obligations under
such Exchange Indenture by virtue thereof.
Selection and Notice. In the event of a redemption or purchase of less
than all of the Exchange Securities, the Exchange Securities to be redeemed
or purchased will be chosen by the Trustee pro rata, by lot or any other
method that the Trustee considers fair and appropriate and, if the Exchange
Securities are listed on any securities exchange, by a method that complies
with the requirements of such exchange, provided that, if less than all of a
holder's Exchange Security is to be redeemed or accepted for payment, only
principal amounts of $1,000 or multiples thereof may be selected for
redemption or accepted for payment. If the Company is not able to purchase
all of the Exchange Securities tendered pursuant to an Offer resulting form a
Change of Control, it will first purchase up to all of the Senior Notes
tendered, then up to all of the Discount Debentures tendered. Notice of any
redemption or offer to purchase will be mailed at least 30 days but not more
than 60 days before the redemption or purchase date to each holder of
Exchange Securities to be redeemed or purchased at such holder's registered
address.
RANKING
Senior Notes. The Senior Notes will rank senior in right of payment to all
senior subordinated Indebtedness of the Company (including the Discount
Debentures and the 11 3/4% Senior Subordinated
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<PAGE>
Discount Debentures due 2005) and all subordinated Indebtedness of the
Company. The New Senior Notes will rank pari passu with all senior
Indebtedness of the Company (including the 10 3/8% Senior Notes due 2003).
Discount Debentures. The Discount Debentures are subordinated as set forth
in the Discount Debentures Indenture, to the prior payment when due of the
principal of, premium, if any, and interest on, all existing and future
senior Indebtedness (including the Senior Notes and the 10 3/8% Senior Notes
due 2003). The Discount Debentures will rank pari passu with all senior
subordinated Indebtedness of the Company (including the 11 3/4 Senior
Subordinated Discount Debentures due 2005) and senior to all subordinated
Indebtedness of the Company.
The Discount Debentures Indenture will provide that, upon any payment or
distribution of the Company's assets of any kind or character, whether in
cash, property or securities, to creditors in any Insolvency or Liquidation
Proceeding, all amounts due or to become due under or with respect to all
senior Indebtedness (including any post-petition interest) will first to be
paid in full in cash before any payment is made on account of the Discount
Debentures. Except as set forth in the Discount Debentures Indenture, upon an
Insolvency or Liquidation Proceeding, any payment or distribution of the
Company's assets of any character, whether in cash, property or securities,
to which the holders of the Discount Debentures or the Discount Debenture
Trustee would be entitled to receive will 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 of the Discount
Debentures or by the Discount Debenture Trustee under the Discount Debentures
Indenture if received by them, directly to the holders of senior Indebtedness
or their representative, as their 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, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders
of senior Indebtedness.
The Discount Debentures Indenture will further provide that (a) upon and
during the continuation of any default in the payment of principal of, or
premium, if any, or interest on, any senior Indebtedness, or any Obligation
owing under or in respect of senior Indebtedness, or of any event of default
(other than a payment default) with respect to any senior Indebtedness shall
have occurred and be continuing and shall have resulted in such senior
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, or (b) if any event of
default other than as described in clause (a) with respect to any designated
senior Indebtedness will have occurred and be continuing permitting the
holders of such designated senior Indebtedness to declare such designated
senior Indebtedness due and payable prior to the date on which it would
otherwise have become due and payable, then no payment will be made by or on
behalf of the Company on account of the Discount Debentures (x) in case of
any payment or nonpayment event of default specified in clause (a) unless and
until such event of default will have been cured or waived in writing in
accordance with the instruments governing such senior Indebtedness or such
acceleration will have been rescinded or annulled, or (y) in case of any
nonpayment event of default specified in clause (b), during the period (a
"Payment Blockage Period") commencing on the date that the Company and the
Discount Debenture Trustee receive written notice (a "Payment Notice") of
such event of default (which notice will be binding on the Discount Debenture
Trustee and the holders of Discount Debentures as to the occurrence of such
an event of default) from holders of designated senior Indebtedness (or their
representative) and ending on the earliest of: (A) 179 days after such date,
(B) the date, if any, on which such designated senior Indebtedness to which
such default relates is paid in full or such default is cured or waived in
writing in accordance with the instruments governing such designated senior
Indebtedness by the holders of such designated senior Indebtedness, and (C)
the date on which the Discount Debenture Trustee receives from the holders of
designated senior Indebtedness (or their representative) that commenced the
Payment Blockage Period written notice that the Payment Blockage Period has
been terminated. During any consecutive 360-day period, the aggregate of all
Payment Blockage Periods shall not exceed 179 days and there shall be a
period of at least 181 consecutive days in each consecutive 360-day period
when no Payment Blockage Period is in effect. No event of default that
existed or was continuing with respect to the senior Indebtedness for which
notice commencing a Payment Blockage Period was given on the date such
Payment Blockage Period commenced shall be, or be made, the basis for the
commencement of any subsequent Payment Blockage Period unless such event of
default is cured or waived for a period of not less than 90 consecutive days.
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By reason of the subordination provisions described above, in the event of
an Insolvency or Liquidation Proceeding, funds and or any other property that
would otherwise be payable to holders of the Discount Debentures will be paid
to the holders of senior Indebtedness to the extent necessary to pay holders
of senior Indebtedness in full in cash, and the Company may be unable to meet
fully its obligations with respect to the Discount Debentures. Except as set
forth in the Discount Debentures Indenture, the subordination provisions
described above will cease to be applicable to the Discount Debentures upon
any defeasance of the Discount Debentures as described under "Description of
Securities--and Discharge of the Indentures."
CERTAIN COVENANTS
The Exchange Indentures contain, among other things, the following
covenants:
Limitation on Restricted Payments. Each Exchange Indenture provides that
the Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any
distribution on account of the Company's or such Restricted Subsidiary's
Capital Stock or other Equity Interests (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or a Restricted Subsidiary and other than dividends or
distributions payable by a Restricted Subsidiary to another Restricted
Subsidiary or to the Company), (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interest purchased from the Company
or any Restricted Subsidiary), (iii) voluntarily prepay Indebtedness that is
subordinated to the Exchange Securities issued under such Exchange Indenture,
whether any such subordinated Indebtedness is outstanding on, or issued
after, the date of original issuance of the Exchange Securities, or (iv) make
any Restricted Investment (all such dividends, distributions, purchases,
redemptions or other acquisitions, retirements, prepayments and Restricted
Investments being collectively referred to as "Restricted Payments"), if, at
the time of such Restricted Payment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b) immediately after such Restricted Payment and after giving effect
thereto on a Pro Forma Basis, the Company shall not be able to issue $1.00
of additional Indebtedness pursuant to the first sentence of the
"Limitation on Incurrence of Indebtedness" covenant; or
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the Issue Date, exceeds the sum, without
duplication, of (1) 50% of the aggregate Consolidated Net Income
(including, for this purpose, gains from Asset Sales and, to the extent
not included in Consolidated Net Income, any gain from a Restricted
Investment) of the Company (or, in case such aggregate is a loss, 100% of
such loss) for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing immediately after the
Issue Date and ended as of the Company's most recently ended fiscal
quarter at the time of such Restricted Payment, plus (2) 100% of the
aggregate net cash proceeds and the fair market value of any property or
securities (as determined by the Board of Directors in good faith)
received by the Company from the issue or sale of Equity Interests or
warrants, options or rights to acquire Equity Interests of the Company or
any Restricted Subsidiary subsequent to the Issue Date (other than Equity
Interests issued or sold to a Restricted Subsidiary and other than
Disqualified Stock), plus (3) $5,000,000, plus (4) the amount by which the
principal amount of and any accrued interest on either (a) senior
Indebtedness, in the case of Senior Notes, or any senior Indebtedness or
senior subordinated Indebtedness, in the case of the Discount Debentures,
of the Company or (b) any Indebtedness of the Restricted Subsidiaries (not
held by the Company or any Restricted Subsidiary) is reduced on the
Company's consolidated balance sheet upon the conversion or exchange
subsequent to the Issue Date of such Indebtedness for Equity Interests
(other than Disqualified Stock) of the Company or any Restricted
Subsidiaries (less the amount of any cash, or the fair market value of any
other property or securities (as determined by the Board of Directors in
good faith), distributed by the Company or any Restricted Subsidiary (to
persons other than the Company or any other Restricted Subsidiary) upon
such conversion or exchange), plus (5) if any Non-Restricted Subsidiary is
redesignated as a Restricted
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<PAGE>
Subsidiary, the fair market value (as determined by the Board of Directors
in good faith) of such Non-Restricted Subsidiary as of the date it is
redesignated; provided, however, that for purposes of this clause (5), the
fair market value of any redesignated Non-Restricted Subsidiary shall be
reduced by the amount that any such redesignation replenishes or increases
the amount of Restricted Investments permitted to be made pursuant to
clause (iii) of the next sentence.
Notwithstanding the foregoing, each of the Exchange Indentures shall not
prohibit as Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
comply with all covenants of such Exchange Indenture (including, but not
limited to, the "Limitation on Restricted Payment" covenant);
(ii) the retirement of any of the Company's Capital Stock or subordinated
indebtedness in exchange for, or out of the net proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary) of,
other Capital Stock (other than Disqualified Stock) and neither such
retirement nor the proceeds of any such sale or exchange shall be included
in any computation made pursuant to the preceding sentence;
(iii) making Restricted Investments at any time, and from time to time,
in an aggregate outstanding amount of $40,000,000 after the Issue Date (it
being understood that if any Restricted Investment acquired with a
Restricted Payment after the Issue Date pursuant to this clause (iii) is
sold, transferred or otherwise conveyed to any person other than the
Company or a Restricted Subsidiary, the portion of the net cash proceeds
or fair market value of securities or properties paid or transferred to
the Company and its Restricted Subsidiaries in connection with such sale,
transfer or conveyance that relates or corresponds to the repayment or
return of the original cost of such a Restricted Investment will replenish
or increase the amount of Restricted Investments permitted to be made
pursuant to this clause (iii), so that up to $40,000,000 of Restricted
Investments may be outstanding under this clause (iii) at any given time);
(iv) the repurchase or redemption of the Company's Common Stock upon the
death of Thomas H. Quinn, pursuant to the terms of an Employment
Agreement, dated as of February 25, 1988, between the Company and Thomas
H. Quinn; provided, however, that the funds necessary to satisfy the
Company's obligation to repurchase or redeem such Common Stock shall be
fully reimbursed by insurance;
(v) the repurchase or redemption of the Company's Common Stock pursuant
to the terms of the several Restricted Stock Agreements, each dated as of
February 25, 1988, between the Company and each of Thomas H. Quinn,
Jonathan F. Boucher and John R. Lowden, the Restricted Stock Agreement,
dated as of January 1, 1992, between the Company and Thomas Quinn, the
Restricted Stock Agreements, each dated as of January 1, 1992, between the
Company and each of Jonathan F. Boucher, Adam Max and Thomas Quinn, and
the Restricted Stock Agreement, dated as of May 16, 1997, between the
Company and Thomas Quinn, in each case as amended or supplemented, up to
an aggregate amount not to exceed $7,500,000;
(vi) any loans, advances, distributions or payments from the Company to
its Restricted Subsidiaries, or any loans, advances, distributions or
payments by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary, pursuant to intercompany Indebtedness, intercompany
management agreements, intercompany tax sharing agreements, and other
intercompany agreements and obligations;
(vii) the payment of directors' fees in an annual aggregate amount not to
exceed $250,000;
(viii) to the extent constituting Restricted Payments, if no Default or
Event of Default shall have occurred and be continuing or shall occur as a
consequence thereof, the payment of consulting, financial and investment
banking fees (but not limiting the payment of indemnities, expenses and
other amounts) under the New TJC Management Consulting Agreement,
provided, that the obligation of the Company to pay such fees under the
New TJC Management Consulting Agreement shall be subordinated expressly to
the Company's Obligations on the Exchange Securities;
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<PAGE>
(ix) the purchase, redemption, retirement or other acquisition of the
Discount Debentures or, in the case of Discount Debentures, senior
Indebtedness in each case, required by their terms to be purchased,
redeemed, retired or acquired with the net proceeds from asset sales (as
defined in the instrument evidencing such subordinated indebtedness) or
upon a change of control (as defined in the instrument evidencing such
subordinated indebtedness);
(x) the exchanging, refinancing or refunding of subordinated Indebtedness
through the issuance of subordinated Indebtedness so long as the
subordinated indebtedness to be issued is Refinancing Indebtedness
permitted under the "Limitation on Incurrence of Indebtedness" covenant;
(xi) to the extent constituting Restricted Payments, any payments made in
connection with the the Plan as described in the Offering Circular;
(xii) Restricted Investments received as consideration for the sale,
transfer or disposition of any business, properties or assets of the
Company or any Restricted Subsidiary, provided, that the Company complies
with the "Asset Sale" covenant;
(xiii) any Restricted Investment constituting securities or instruments
of a person issued in exchange for trade or other claims against such
person in connection with a financial reorganization or restructuring of
such person;
(xiv) any Restricted Investment constituting an equity investment in a
Receivables Subsidiary; provided, that the aggregate amount of such equity
investments does not exceed $1,000,000; and
(xv) guarantees by the Company of capital lease obligations of
Non-Restricted Subsidiaries in an aggregate principal or face amount not
exceeding the aggregate principal or face amount of capital leases of the
Non-Restricted Subsidiaries guaranteed by the Company on the Issue Date.
Limitation on Incurrence of Indebtedness. The Exchange Indentures provide
that the Company will not, and will not permit any Restricted Subsidiary to,
issue any Indebtedness (other than the Indebtedness represented by the Senior
Notes, the 10 3/8% Senior Notes due 2003 and the Discount Debentures) unless
the Company's Cash Flow Coverage Ratio for its four full fiscal quarters next
preceding the date such additional Indebtedness is issued would have been at
least: (a) 1.7 to 1, if such date is between the Issue Date and June 30,
1999, (b) 1.85 to 1, from July 1, 1999 through June 30, 2001, or (c) 2.0 to
1, from July 1, 2001 and thereafter, in each case determined on a Pro Forma
Basis as if such additional Indebtedness and any other Indebtedness issued
since the end of such four-quarter period had been issued at the beginning of
such four-quarter period.
The foregoing limitations will not apply to the issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries up to
the greater of (A) $75.0 million in aggregate principal amount pursuant to
the New Credit Agreement, and (B) an aggregate principal amount up to the
sum of: (x) 85% of the book value of the Company and its Restricted
Subsidiaries' Receivables on a consolidated basis, and (y) 65% of the book
value of the Company and its Restricted Subsidiaries' inventories on a
consolidated basis;
(ii) Indebtedness of the Company and its Restricted Subsidiaries pursuant
to any Receivables Financing;
(iii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, sale and leaseback transactions, purchase
money obligations, capital expenditures or similar financing transactions
relating to: (A) their properties, assets and rights as of the Issue Date
up to $20,000,000 in aggregate principal amount, or (B) their properties,
assets and rights acquired after the Issue Date, provided that such
Indebtedness under this clause (iii)(B) does not exceed 100% of the cost
of such properties, assets and rights;
(iv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $25,000,000 (all or
any portion of which may be issued as additional Indebtedness under the
New Credit Agreement); and
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(v) Other Permitted Indebtedness.
Limitation on Liens. The Exchange Indentures provide that the Company
shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
(other than Permitted Liens) upon any asset now owned or hereafter acquired
by them, or any income or profits therefrom or assign or convey any right to
receive income therefrom; provided, however, that in addition to creating
Permitted Liens on its properties or assets, the Company and any of its
Restricted Subsidiaries may create any Lien upon any of their properties or
assets (including, but not limited to, any Capital Stock of its Subsidiaries)
if the Exchange Securities are equally and ratably secured.
Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Exchange Indentures provide that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, create or otherwise cause or suffer to exist or become
effective, any encumbrance or restriction on the ability of any Restricted
Subsidiary to: (a) pay dividends or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits, owned by the Company or any Restricted Subsidiary, or pay any
Indebtedness owed to, the Company or any Restricted Subsidiary, (b) make
loans or advances to the Company, or (c) transfer any of its properties or
assets to the Company, except for such encumbrances or restrictions existing
under or by reason of: (i) applicable law, (ii) Indebtedness permitted (A)
under the first sentence of the "Limitation on Incurrence of Indebtedness"
covenant, (B) under clauses (i), (ii) and (iv) of the second sentence of the
"Limitation on Incurrence of Indebtedness" covenant and clauses (i), (vii)
and (ix) of the definition of Other Permitted Indebtedness, or (C) Restricted
Payments and agreements or instruments evidencing Restricted Payments
permitted under the "Limitation on Restricted Payments" covenant, (iii)
customary provisions restricting subletting or assignment of any lease or
license of the Company or any Restricted Subsidiary, (iv) customary
provisions of any franchise, distribution or similar agreement, (v) any
instrument governing Indebtedness or any other encumbrance or restriction of
a person acquired by the Company or any Restricted Subsidiary at the time of
such acquisition, which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the person, or
the property or assets of the person, so acquired, (vi) Indebtedness or other
agreements existing on the Issue Date, (vii) any Refinancing Indebtedness of
Indebtedness described in clauses (i), (ii), (iii), and (iv) of the second
sentence of the "Limitation on Incurrence of Indebtedness" covenant and
clauses (i), (vi), and (ix) of the definition of Other Permitted
Indebtedness; provided that the encumbrances and restrictions created in
connection with such Refinancing Indebtedness are no more restrictive in any
material respect with regard to the interests of the holders of Exchange
Securities than the encumbrances and restrictions in the refinanced
Indebtedness, (viii) any restrictions, with respect to a Restricted
Subsidiary, imposed pursuant to an agreement that has been entered into for
the sale or disposition of the stock, business, assets or properties of such
Restricted Subsidiary, (ix) the terms of any Indebtedness of the Company
incurred in connection with the "Limitation on Incurrence of Indebtedness"
covenant, provided that the terms of such Indebtedness constitute no greater
encumbrance or restriction on the ability of any Restricted Subsidiary to pay
dividends or make distributions, make loans or advances or transfer
properties or assets than is permitted by this covenant, and (x) the terms of
purchase money obligations, but only to the extent such purchase money
obligations restrict or prohibit the transfer of the property so acquired.
Nothing contained in this covenant shall prevent the Company from entering
into any agreement or instrument providing for the incurrence of Permitted
Liens or restricting the sale or other disposition of property or assets of
the Company or any of its Restricted Subsidiaries that are subject to
Permitted Liens.
Senior Subordinated Indebtedness. The Discount Debentures Indenture
provides that the Company shall not issue or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any senior
Indebtedness and senior in any respect in right of payment to the Discount
Debentures.
Limitation on Transactions With Affiliates. Each Exchange Indenture
provides, except as otherwise set forth in such Exchange Indenture, that
neither the Company nor any of its Restricted Subsidiaries may make any loan,
advance, guarantee or capital contribution to, or for the benefit of, or
sell, lease, transfer
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or dispose of any properties or assets to, or for the benefit of, or purchase
or lease any property or assets from, or enter into any or amend any
contract, agreement or understanding with, or for the benefit of, an
Affiliate (each such transaction or series of related transactions that are
part of a common plan an "Affiliate Transaction"), except in good faith and
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction on an arm's-length basis from an unrelated person.
Each Exchange Indenture further provides that neither the Company nor any
of its Restricted Subsidiaries may engage in any Affiliate Transaction
involving aggregate payments or other transfers by the Company and its
Restricted Subsidiaries in excess of $5.0 million (including cash and
non-cash payments and benefits valued at their fair market value by the Board
of Directors in good faith) unless the Company delivers to the Trustee (i) a
resolution of the Board of Directors stating that the Board of Directors
(including a majority of the disinterested directors, if any) has, in good
faith, determined that such Affiliate Transaction complies with the
provisions of such Exchange Indenture, and (ii) an opinion as to the fairness
of such Affiliate Transaction to the Company or such Restricted Subsidiary
and the holders of Exchange Securities, in each case, from a financial point
of view by an investment banking firm of national prominence that is not an
Affiliate of the Company.
Notwithstanding the foregoing, this covenant will not apply to: (i)
transactions between the Company and any Restricted Subsidiary or between
Restricted Subsidiaries, (ii) any Restricted Payments permitted pursuant to
the "Limitation on Restricted Payments" covenant, (iii) payments of fees and
other amounts due under any SAR agreements, the New Subsidiary Advisory
Agreements, the New Subsidiary Consulting Agreements, the Tax Sharing
Agreement, the JI Properties Services Agreement, the Transition Agreement and
the New TJC Management Consulting Agreement, provided, that any amendments,
supplements, modifications, substitutions, renewals or replacements of the
foregoing agreements are approved by a majority of the Board of Directors
(including a majority of the disinterested directors, if any) as fair to the
Company and the holders of the Exchange Securities, (iv) the payment of
reasonable and customary directors' fees to directors of the Company and its
Restricted Subsidiaries, (v) transactions in connection with a Receivables
Financing or (vi) payments and transactions in connection with the Plan as
described in this Prospectus.
Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries. The Company will not permit any Restricted Subsidiary,
directly or indirectly, to guarantee any Indebtedness (the "Other
Indebtedness") of the Company other than the Exchange Securities unless (A)
such Restricted Subsidiary contemporaneously executes and delivers a
supplemental indenture to each indenture providing for a guarantee of payment
of the Exchange Securities then outstanding by such Restricted Subsidiary to
the same extent as the guarantee (the "Other Indebtedness Guarantee") of the
Other Indebtedness (including waiver of subrogation, if any) and (B) if the
Other Indebtedness guaranteed by such Restricted Subsidiary is (i) senior
Indebtedness, the guarantee for (1) the Senior Notes shall be pari passu in
right of payment with the Other Indebtedness Guarantee and (2) the Discount
Debentures shall be subordinated in right of payment to the Other
Indebtedness Guaranty, (ii) senior subordinated Indebtedness, the guarantee
for (1) the Senior Notes shall be senior in right of payment to the Other
Indebtedness Guaranty, and (2) the Discount Debentures shall be pari passu in
right of payment with the Other Indebtedness Guaranty, and (iii) subordinated
Indebtedness, the guarantee for the Exchange Securities shall be senior in
right of payment to the Other Indebtedness Guarantee, provided that the
foregoing will not limit or restrict guarantees issued by Restricted
Subsidiaries in respect of Indebtedness of other Restricted Subsidiaries.
Each guarantee of the Exchange Securities created by a Restricted
Subsidiary pursuant to the provisions described in the foregoing paragraph
shall be in form and substance satisfactory to the Trustee and shall provide
among other things, by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer permitted by the Exchange Securities Indentures to any person not an
Affiliate of the Company of (a) all of the Company's Capital Stock in such
Restricted Subsidiary, or (b) the sale of all or substantially all of the
assets of the Restricted Subsidiary and upon the application of the Net
Proceeds from such sale in accordance with the requirements of the
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"Asset Sales" provisions described herein, or (ii) the release or discharge
of the Other Indebtedness Guarantee that resulted in the creation of such
guarantee of the Exchange Securities, except a discharge or release by or as
a result of payment under such Other Indebtedness Guarantee.
MERGER OR CONSOLIDATION
Each Exchange Indenture provides that the Company shall not consolidate or
merge with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets to, any person (any such consolidation,
merger or sale being a "Disposition") unless: (a) the successor entity of
such Disposition or the person to which such Disposition shall have been made
is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (b) the successor corporation
of such Disposition or the corporation to which such Disposition shall have
been made expressly assumes the Obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee,
under such Exchange Indenture and the related Exchange Securities; (c)
immediately after such Disposition, no Default or Event of Default shall
exist; and (d) the corporation formed by or surviving any such Disposition,
or the corporation to which such Disposition shall have been made, shall (i)
have Consolidated Net Worth (immediately after the Disposition but prior to
any purchase accounting adjustments resulting from the Disposition) equal to
or greater than the Consolidated Net Worth of the Company immediately
preceding the Disposition, (ii) be permitted immediately after the
Disposition by the terms of such Indenture to issue at least $1.00 of
additional Indebtedness determined on a Pro Forma Basis pursuant to the first
sentence under "Limitation on Incurrence of Indebtedness," and (iii) have a
Cash Flow Coverage Ratio, for the four fiscal quarters immediately preceding
the applicable Disposition, determined on a Pro Forma Basis, equal to or
greater than the actual Cash Flow Coverage Ratio of the Company for such four
quarter period. The limitations in each Exchange Indenture on the Company's
ability to make a Disposition described in this paragraph do not restrict the
Company's ability to sell less than all or substantially all of its assets,
such sales being governed by the "Asset Sales" provisions of each Exchange
Indenture as described herein.
Prior to the consummation of any proposed Disposition, the Company shall
deliver to the Trustee an officers' certificate to the foregoing effect and
an opinion of counsel stating that the proposed Disposition and such
supplemental indenture comply with the Exchange Indentures.
PROVISION OF FINANCIAL INFORMATION TO HOLDERS OF EXCHANGE SECURITIES
So long as the Exchange Securities are outstanding, whether or not the
Company is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company shall submit for filing with the Commission the
annual reports, quarterly reports and other documents that the Company would
have been required to file with the Commission pursuant to Section 13 or
15(d) if the Company were subject to such reporting requirements. The Company
will also provide to all holders of Exchange Securities and file with the
Trustee copies of such annual reports, quarterly reports and other documents
required to be furnished to stockholders generally under the Exchange Act. In
addition, the Company has agreed that, for so long as any Exchange Securities
remain outstanding, they will furnish to the holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities
Act.
EVENTS OF DEFAULT AND REMEDIES
Each Exchange Indenture will provide that an Event of Default is: (a) a
default for 30 days in payment of interest on the Exchange Securities; (b) a
default in payment when due of principal or premium, if any; (c) the failure
of the Company to comply with any of its other agreements or covenants in, or
provisions of, such Exchange Indenture or the Exchange Securities outstanding
under such Exchange Indenture and the Default continues for the period, if
applicable, and after the notice specified in the next paragraph; (d) a
default by the Company or any Restricted Subsidiary under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any Restricted Subsidiary (or the payment of which is guaranteed by the
Company or any Restricted Subsidiary), whether such Indebtedness or
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guarantee now exists or shall be created hereafter, if (1) either (A) such
default results from the failure to pay principal of or interest on any such
Indebtedness and such default continues for 30 days beyond any applicable
grace period, or (B) as a result of such default the maturity of such
Indebtedness has been accelerated prior to its expressed maturity, and (2)
the principal amount of such Indebtedness, together with the principal amount
of any other such Indebtedness in default for failure to pay principal or
interest thereon, or the maturity of which has been accelerated, aggregates
in excess of $15,000,000; (e) a failure by the Company or any Restricted
Subsidiary to pay final judgments (not covered by insurance) aggregating in
excess of $7,500,000 which judgments a court of competent jurisdiction does
not rescind, annul or stay within 45 days after their entry and the Default
continues for the period and after the notice specified in the next
paragraph; and (f) certain events of bankruptcy or insolvency involving the
Company or any Significant Subsidiary.
A Default under clause (c) (other than an Event of Default arising under
the "Merger or Consolidation," "Asset Sales" or "Change of Control"
provisions described herein or the covenants described under "Certain
Covenants," any of which shall be an Event of Default with the notice but
without the passage of time specified in this paragraph) or clause (e) is not
an Event of Default under either Exchange Indenture until the Trustee or the
holders of at least 25% in principal amount of the Exchange Securities
outstanding under such Exchange Indenture then outstanding notify the Company
of the Default and the Company does not cure the Default within 30 days after
receipt of the notice.
Upon the occurrence of an Event of Default, the Senior Notes Trustee or
the holders of at least 25% in aggregate principal amount of the then
outstanding Senior Notes may declare all Senior Notes to be due and payable
immediately and, upon such declaration, the principal of, premium, if any,
and any accrued and unpaid interest on, all Senior Notes shall be due and
payable immediately. Upon the occurrence of an Event of Default, the Discount
Debentures Trustee or the holders of at least 25% in aggregate principal
amount of the then outstanding Discount Debentures may declare all Discount
Debentures to be due and payable immediately and, upon such declaration, the
Accreted Value of the Discount Debentures, plus any accrued and unpaid
interest from April 1, 2002 to the date of any such declaration, if such
declaration occurs after April 1, 2002, shall be due and payable immediately;
provided, however, that if any Indebtedness is outstanding under the New
Credit Agreement, upon a declaration of acceleration of the Discount
Debentures, the Accreted Value of, and any accrued and unpaid interest on,
the Discount Debentures, shall not be payable until the earlier of (1) the
day that is five business days after notice of acceleration is given to the
Company and the credit agent for the New Credit Agreement, or (2) the date of
acceleration of the Indebtedness under the New Credit Agreement. In the event
of an Event of Default arising from certain events of bankruptcy or
insolvency, the principal of, and any accrued and unpaid interest on, all
Senior Notes, the Accreted Value and any such accrued and unpaid interest on
the Discount Debentures, plus any additional accrued and unpaid interest to
the date of any such event if such event occurs, shall ipso facto become and
be immediately due and payable without any declaration or other act on the
part of the Trustee or any holders of Exchange Securities. The holders of a
majority in aggregate principal amount of the Exchange Securities then
outstanding under an Exchange Indenture by notice to the Trustee for such
Exchange Indenture, may rescind any declaration of acceleration of such
Exchange Securities and its consequences (if the rescission would not
conflict with any judgment or decree) if all existing Events of Default
(other than the nonpayment of principal of or interest on such Exchange
Securities that shall have become due by such declaration) shall have been
cured or waived. In the event of a declaration of acceleration of the
Discount Debentures because of an Event of Default in clause (d) in the first
paragraph of "Events of Default and Remedies" has occurred and is continuing,
such declaration of acceleration shall be automatically annulled if the
holders of the Indebtedness described in such clause (d) have rescinded the
declaration of acceleration in respect of such Indebtedness within 30
business days thereof and if (i) the annulment of such acceleration would not
conflict with any judgement or decree of a court of competent jurisdiction,
(ii) all existing Events of Default, except non-payment of principal or
interest that shall have become due solely because of the acceleration, have
been cured or waived, and (iii) the Company has delivered an officer's
certificate to the Discount Debentures Trustee to the effect of clauses (i)
and (ii). Subject to certain limitations, holders of a majority in principal
amount of the Exchange Securities then outstanding under an Exchange
Indenture may direct the Trustee for such Exchange Indenture in its exercise
of any trust or power. Holders of the Exchange Securities may not
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enforce the Exchange Indentures, except as provided therein. The Trustee may
withhold from holders of Exchange Securities notice of any continuing Default
or Event of Default (except a Default or an Event of Default in payment of
principal, premium, if any, or interest) if the Trustee determines that
withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the Exchange
Securities then outstanding under an Exchange Indenture may on behalf of all
holders of such Exchange Securities waive any existing Default or Event of
Default under such Exchange Indenture and its consequences, except a
continuing Default in the payment of the principal of, or premium, if any, or
interest on, such Exchange Securities, which may only be waived with the
consent of each holder of the Exchange Securities affected.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Exchange Indentures and, upon an officer of the
Company becoming aware of any Default or Event of Default, a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES AND STOCKHOLDERS
No officer, employee, director or stockholder of the Company shall have
any liability for any Obligations of the Company under the Exchange
Securities or the Exchange Indentures, or for any claim based on, in respect
of, or by reason of, such Obligations or the creation of any such Obligation.
Each holder of the Exchange Securities by accepting an Exchange Security
waives and releases all such liability, and such waiver and release are part
of the consideration for issuance of the Exchange Securities. The foregoing
waiver may not be effective to waive liabilities under the Federal securities
laws, and the Commission is of the view that such a waiver is against public
policy.
SATISFACTION AND DISCHARGE OF THE EXCHANGE INDENTURES
The Company at any time may terminate all its obligations under the
Exchange Securities and the Exchange Indentures ("legal defeasance option"),
except for certain obligations (including those with respect to the
defeasance trust (as defined herein) and obligations to register the transfer
or exchange of the Exchange Securities, to replace mutilated, destroyed, lost
or stolen Exchange Securities and to maintain a registrar and paying agent in
respect of the Exchange Securities). The Company at any time may terminate
(1) its obligations under the "Change of Control" and "Asset Sales"
provisions described herein and the covenants described under "Certain
Covenants," and certain other covenants in the Exchange Indentures, (2) the
operation of clauses (c), (d), (e), and (f) contained in the first paragraph
of the "Events of Default and Remedies" provisions described herein and (3)
the limitations contained in clauses (c) and (d) under the "Merger or
Consolidation" provisions described herein (collectively, a "covenant
defeasance option").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Exchange Securities may not be
accelerated because of an Event of Default with respect thereto. If the
Company exercises its covenant defeasance option, payment of the Exchange
Securities shall not be accelerated because of an Event of Default specified
in clauses (c), (d), (e) or (f) in the first paragraph under the "Events of
Default and Remedies" provisions described herein or because of the Company's
failure to comply with clauses (c) and (d) under the "Merger or
Consolidation" provisions described herein.
To exercise either the legal or covenant defeasance option with respect to
the Exchange Securities outstanding under an Exchange Indenture, the Company
must irrevocably deposit in trust (the "defeasance trust") with the Trustee
for such Exchange Indenture money or U.S. government obligations for the
payment of principal of, and premium, if any, and interest on, such Exchange
Securities to redemption or maturity, as the case may be, and must comply
with certain other conditions, including the passage of 91 days and
delivering to such Trustee an opinion of counsel to the effect that holders
of such Exchange Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been in the case if such deposit
and defeasance had not
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occurred (and, in the case of legal defeasance only, such opinion of counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law).
TRANSFER AND EXCHANGE
Holders of Exchange Securities may transfer or exchange their Exchange
Securities in accordance with the Exchange Indentures, but the Registrar may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents, and to pay any taxes and fees required by law or
permitted by the Exchange Indentures, in connection with any such transfer or
exchange. The Registrar is not required to issue, register the transfer or
exchange (i) any Exchange Security selected for redemption or purchase, or
(ii) any Exchange Security for a period of 15 days before a selection of such
Exchange Security to be redeemed or purchased or between a record date and
the next succeeding interest payment date.
The registered holder of an Exchange Security will be treated as its owner
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, each Exchange Indenture may be amended or
supplemented with the consent of the holders of at least a majority in
aggregate principal amount of the Exchange Securities then outstanding under
such Exchange Indenture and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the holders
of a majority in aggregate principal amount of the Exchange Securities then
outstanding under such Exchange Indenture. Without the consent of any holder
of Exchange Securities, the Company and the Trustee may amend or supplement
each Exchange Indenture or the Exchange Securities to cure any ambiguity,
defect or inconsistency, to provide for uncertificated securities in addition
to or in place of certificated securities, to provide for the assumption of
the Company's obligations in the case of a Disposition, to comply with the
Trust Indenture Act, or to make any change that does not materially adversely
affect the rights of any holder of Exchange Securities.
Without the consent of each holder of Exchange Securities affected, the
Company may not (i) reduce the principal amount of Exchange Securities whose
consent is necessary to effect the amendment to or waiver under an Exchange
Indenture; (ii) reduce the rate of or change the interest payment time of
such Exchange Securities, or alter the redemption provisions with respect
thereto (other than the provisions relating to the covenants described above
under the caption " --Mandatory Offers to Purchase Exchange
Securities--Change of Control Triggering Event" and " -- Asset Sales") or the
price at which the Company is required to offer to purchase such Exchange
Securities; (iii) reduce the principal of or change the fixed maturity of
such Exchange Securities; (iv) make such Exchange Securities payable in money
other than stated in such Exchange Securities; (v) make any change in the
provisions concerning waiver of Defaults or Events of Default by holders of
such Exchange Securities, or rights of holders of such Exchange Securities to
receive payment of principal or interest; (vi) waive any default in the
payment of principal of, premium, if any, or interest on such Exchange
Securities; or (vii) with respect to the Discount Debentures, make any change
in the subordination provisions in the Discount Debentures Indenture that
adversely affects such holder.
In addition, certain amendments to the Discount Debentures Indenture will
require the consent of holders of the Senior Notes and may require the
consent of holders of any other senior Indebtedness.
CONCERNING THE TRUSTEE
Each Exchange Indenture contains certain limitations on the rights of the
Trustee, if it becomes a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of
any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting
interest (as defined in the Trust Indenture Act) it must eliminate such
conflict or resign.
The holders of a majority in principal amount of the Exchange Securities
then outstanding under an Exchange Indenture will have the right to direct
the time, method and place of conducting any proceeding
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for exercising any remedy available to the Trustee, subject to certain
exceptions. Each Exchange Indenture provides that if an Event of Default
occurs (and has not been cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in
similar circumstances in the conduct of its own affairs. Subject to the
provisions of the Exchange Indentures, the Trustee will be under no
obligation to exercise any of its rights or powers under an Exchange
Indenture at the request of any of the holders of the Exchange Securities
issued under such Exchange Indenture, unless such holders shall have offered
to the Trustee security and indemnity satisfactory to it.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the New Securities will
initially be issued in the form of one or more registered Global Securities
(the "Global Securities"), each of which will be deposited on the Expiration
Date with, or on behalf of, the Depository and registered in the name of the
Global Holder. The following are summaries of certain rules and operating
procedures of the Depository which affect the Global Securities.
The New Securities that are (i) originally issued to or transferred to
"institutional accredited investors" (as such term is defined under "Notice
to Investors" elsewhere herein) who are not QIBs or to any other persons who
are not QIBs (the "Non-Global Purchasers"); or (ii) issued as described under
"Certificated Securities," will be issued in registered form (the
"Certificated Securities"). Upon the transfer to a QIB of Certificated
Securities initially issued to a Non-Global Purchaser, such Certificated
Securities will, unless the Global Note has previously been exchanged for
Certificated Securities, be exchanged for an interest in the Global Note
representing the principal amount of New Securities being transferred. For a
description of the restrictions on the transfer of Certificated Securities,
see "Notice to Investors."
The Depository has advised the Company that a limited-purchase trust
company was created to hold securities for its participating organizations
(collectively, the "Participants" or the "Depository's Participants") and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Depository's Participants include securities brokers and
dealers, banks and trust companies, clearing corporations and certain other
organizations. Access to the Depository's system is also available to the
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depository's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants
may beneficially own securities held by or on behalf of the Depository only
through the Depository's Participants or the Depository's Indirect
Participants.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Securities, the Depository will
credit the accounts of Participants with portions of the Global Securities;
and (ii) ownership of the New Securities will be shown on, and the transfer
of ownership thereof will be effected only through, records maintained by the
Depository (with respect to the interests of the Depository's Participants),
the Depository's Participants and the Depository's Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer New Securities will be limited to such extent. For certain other
restrictions on the transferability of the New Securities, see "Notice to
Investors."
So long as the Global Holder is the registered owner of any New
Securities, the Global Holder will be considered the sole owner of such New
Securities outstanding under the Exchange Indentures. Except as provided
below, owners of beneficial interests in a Global Security will not be
entitled to have New Securities represented by such Global Securities
registered in their names, will not receive or be entitled to receive
physical delivery of Certificated Securities, and will not be considered the
owners or Holders thereof under the Exchange Indentures for any purpose. As a
result, the ability of a person having a beneficial interest in New
Securities represented by a Global Security to pledge such interest to
persons or entities that do not participate in the Depository's system or to
otherwise take actions in respect of such interest, may be affected by the
lack of a physical certificate evidencing such interest. Accordingly, each
QIB owning a beneficial interest in a Global Security must rely on the
procedures of the Depository and,
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if such QIB is not a Participant or an Indirect Participant, on the
procedures of the Participant through which such QIB owns its interest, to
exercise any rights of a holder under such Global Security or the Exchange
Indentures.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of New Securities by the Depository, or for maintaining, supervising
or reviewing any records of the Depository relating to such New Securities.
Payments in respect of the principal of, premium, if any, and interest on
any New Securities registered in the name of a Global Holder on the
applicable record date will be payable by the Trustee to or at the direction
of such Global Holder in its capacity as the registered holder under the
Exchange Indentures. Under the terms of the Exchange Indentures, the Company
and the Trustee may treat the persons in whose names the New Securities,
including the Global Securities, are registered as the owners thereof for the
purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will
have any responsibility or liability for the payment of such amounts to
beneficial owners of New Securities (including principal, premium, if any,
and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
interests in the Global Securities in principal amount of beneficial
interests in the relevant security as shown on the records of the Depository.
Payments by the Depository's Participants and the Depository's Indirect
Participants to the beneficial owners of New Securities will be governed by
standing instructions and customary practice and will be the responsibility
of the Depository's Participants or the Depository's Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository is
no longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of the Exchange Securities in definitive form under an Exchange Indenture,
then, upon surrender by the relevant Global Holder of its Global Security,
Exchange Securities in such form will be issued to each person that such
Global Holder and the Depository identifies as the beneficial owner of the
related Exchange Securities. In addition, subject to certain conditions, any
person having a beneficial interest in the Global Security may, upon request
to the Trustee, exchange such beneficial interest for Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Exchange Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). Such Exchange
Securities would be issued in fully registered form.
SAME-DAY SETTLEMENT AND PAYMENT
With respect to certificated securities, the Company will make all
payments of principal, premium and interest by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no
such account is specified, by mailing a check to each such holders registered
address.
CERTAIN DEFINITIONS
Set forth below are certain of the defined terms used in the Exchange
Indentures. Reference is made to the Exchange Indentures for the definition
of all other terms.
"Accreted Value" means with respect to any Discount Debenture (i) as of
any date prior to April 1, 2002, the sum of (a) the initial offering price of
the Discount Debentures, and (b) the portion of the original issue discount
on such Discount Debenture (which for this purpose shall be deemed to be the
excess of the principal amount over the initial offering price) that has been
amortized with respect to such Discount Debenture through such date, such
original issued discount to be amortized at the rate of 11 3/4% per annum
(such percentage being expressed as a percentage of the sum of the initial
offering price plus previously amortized original issue discount) using
semi-annual compounding of such rate on each April 1 and October 1,
commencing April 1, 1997, from the date of original issuance of the Discount
Debentures through such date, and (ii) on and after April 1, 2002, the
principal amount of such Discount Debenture.
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"Affiliate" means any of the following: (i) any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any person described in
clause (i) above, (iii) any trust in which any such persons described in
clause (i) or (ii) above has a beneficial interest, and (iv) any corporation
or other organization of which any such persons described above collectively
own 50% or more of the equity of such entity.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property (other than (i) the
sale or disposition of any Restricted Investment, (ii) the sale or lease of
inventory, equipment, receivables or other assets in the ordinary course of
business, (iii) Receivables Financings, (iv) any sale or transfer of
properties or assets by the Company or a Restricted Subsidiary to the Company
or any other Restricted Subsidiary, (v) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company as
permitted under "Merger or Consolidation," or (vi) Restricted Payments
permitted by the "Limitations on Restricted Payments" covenant).
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
preferred stock.
"Cash Flow" means, for any given period and person, the sum of, without
duplication, Consolidated Net Income, plus (a) the portion of Net Income
attributable to the minority interests in its Subsidiaries, to the extent not
included in calculating Consolidated Net Income, plus (b) provision for taxes
based on income or profits to the extent such income or profits were included
in computing Consolidated Net Income, plus (c) Consolidated Interest Expense,
to the extent deducted in computing Consolidated Net Income, plus (d) the
amortization of all intangible assets, to the extent such amortization was
deducted in computing Consolidated Net Income (including, but not limited to,
inventory write-ups, goodwill, debt and financing costs, and Incentive
Arrangements), plus (e) non-capitalized transaction costs incurred in
connection with financings, acquisitions or dispositions (including, but not
limited to, financing and refinancing fees, to the extent deducted in
computing Consolidated Net Income), plus (f) all depreciation and all other
non-cash charges (including without limitation, those charges relating to
purchase accounting adjustments to the extent deducted in computing
Consolidated Net Income), plus (g) interest income, to the extent such income
was not included in computing Consolidated Net Income, plus (h) all dividend
payments on preferred stock (whether or not paid in cash) to the extent
deducted in computing Consolidated Net Income, plus (i) any extraordinary or
non-recurring charge or expense arising out of the implementation of SFAS 106
or SFAS 109 to the extent deducted in computing Consolidated Net Income,
provided, however, that if any such calculation includes any period during
which an acquisition or sale of a person or the incurrence or repayment of
Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and person, the
ratio of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest
Expense and the amount of all dividend payments on any series of preferred
stock of such person (except for dividends paid or payable in additional
shares of Capital Stock (other than Disqualified Stock)), in each case,
without duplication; provided, however, that if any such calculation includes
any period during which an acquisition or sale of a person or the incurrence
or repayment of Indebtedness occurred, then such calculation for such period
shall be made on a Pro Forma Basis.
"Change of Control" means the occurrence of any of the following: (i) the
Jordan Stockholders shall fail to be the beneficial owners, directly or
indirectly, of at least 22% of the outstanding shares of Common Stock of the
Company on a fully-diluted basis; (provided, that the issuance of any shares
of the Company's Common Stock pursuant to a primary public offering shall not
be considered to have diluted such percentage ownership); or (ii) the Company
is merged or consolidated with another corporation, or all or substantially
all of the assets of the Company are sold, leased or conveyed to another
person, and the Jordan Stockholders are not the beneficial owners, directly
or indirectly, immediately following such
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transaction, of at least 22% of the Equity Interests (which are entitled to
vote in the election of directors or other governing body) of the corporation
surviving any such consolidation or merger, or the person to which such sale,
lease or conveyance shall have been made; or (iii) the Company is liquidated
or dissolved.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the Company's assets. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of Exchange Securities to require the
Company to repurchase such Exchange Securities as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of
the Company and its Subsidiaries to another person may be uncertain.
Furthermore, an acquisition of the Company by the Jordan Stockholders would
not constitute a Change of Control.
"Commission" means the Securities and Exchange Commission.
"Consolidated Interest Expense" means, for any given period and person,
the aggregate of the interest expense in respect of all Indebtedness of such
person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount on any such Indebtedness, all non-cash interest payments, the
interest portion of any deferred payment obligation and the interest
component of capital lease obligations, but excluding amortization of
deferred financing fees if such amortization would otherwise be included in
interest expense); provided, however, that for the purpose of the Cash Flow
Coverage Ratio (with respect to the covenants limiting the incurrence of
additional Indebtedness, mergers, consolidations and sales of assets),
Consolidated Interest Expense shall be calculated on a Pro Forma Basis;
provided further, any premiums, fees and expenses (including the amortization
thereof) payable in connection with the Plan and the Offerings and the
application of the net proceeds therefrom or any other refinancing of
Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and person, the
aggregate of the Net Income of such person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that: (i) the Net Income of any person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, and (ii) Consolidated Net Income of any person
will not include, without duplication, any deduction for: (A) increased
amortization or depreciation resulting from the write-up of assets pursuant
to Accounting Principles Board Opinion Nos. 16 and 17, as amended or
supplemented from time to time, (B) the amortization of all intangible assets
(including amortization attributable to inventory write-ups, goodwill, debt
and financing costs, and Incentive Arrangements), (C) non-capitalized
transaction costs incurred in connection with financings, acquisitions or
divestitures (including, but not limited to, financing and refinancing fees),
(D) any extraordinary or nonrecurring charges relating to any premium or
penalty paid, write-off or deferred financing costs or other financial
recapitalization charges in connection with redeeming or retiring any
Indebtedness prior to its stated maturity, and (E) any non-recurring charge
arising out of the restructuring or consolidation of the operations of any
person(s) or business either alone or together with the Company or any
Restricted Subsidiary, incurred within 18 months following the acquisition of
such person(s) or business by the Company or any Restricted Subsidiary;
provided, however, that for purposes of determining the Cash Flow Coverage
Ratio (with respect to the covenants and provisions in the Exchange
Indentures limiting the incurrence of additional Indebtedness, mergers or
consolidations, and sales of assets), Consolidated Net Income shall be
calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any person means, as of any date,
the consolidated equity of the common stockholders of such person (excluding
the cumulated foreign currency translation adjustment), all determined on a
consolidated basis in accordance with GAAP, but without any reduction in
respect of the payment of dividends on any series of such person's preferred
stock if such dividends are paid in additional shares of Capital Stock (other
than Disqualified Stock); provided, however, that Consolidated Net Worth
shall also include, without duplication: (a) the amortization of all
write-ups of inventory, (b) the amortization of all intangible assets
(including amortization of goodwill, debt and financing costs, and Incentive
Arrangements), (c) non-capitalized transaction costs incurred in connection
with financings, acquisitions or divestitures (including, but not limited to,
financing and refinancing fees),
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(d) increased amortization or depreciation resulting from the write-up of
assets pursuant to Accounting Principles Board Opinion Nos. 16 and 17, as
amended and supplemented from time to time, (e) any extraordinary or
nonrecurring charges or expenses relating to any premium or penalty paid,
write-off or deferred financing costs or other financial recapitalization
charges incurred in connection with redeeming or retiring any Indebtedness
prior to its stated maturity, (f) any non-recurring charge arising out of the
restructuring or consolidation of the operations of any person(s) or business
either alone or together with the Company or any Restricted Subsidiary,
incurred within 18 months following the acquisition of such person(s) or
business by the Company or any Restricted Subsidiary, and (g) any
extraordinary or non-recurring charge arising out of the implementation of
SFAS 106 or SFAS 109; provided, however, that for purposes of determining
Consolidated Net Worth (with respect to the covenants and provisions in the
New Senior Notes Indenture limiting the incurrence of additional
Indebtedness, mergers or consolidations, and sales of assets) Consolidated
Net Worth shall be calculated on a Pro Forma Basis.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that by its terms (or by the
terms of any security into which its 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 option of the holder thereof, in whole or in part on, or
prior to, the maturity date of (i) the Senior Notes in the case of the Senior
Notes Indenture, and (ii) the Discount Debentures in the case of the Discount
Debentures Indenture.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation); provided, however, that Equity Interests will
not include any Incentive Arrangements or obligations or payments thereunder.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the Issue Date. All financial and accounting determinations
and calculations under the Exchange Indentures will be made in accordance
with GAAP.
"Hedging Obligations" means, with respect to any person, the Obligations
of such persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such person against
fluctuations in, or otherwise to establish financial hedges in respect of,
exchange rates, currency rates or interest rates.
"Incentive Arrangements" means any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with acquisitions of
persons or businesses by the Company or the Restricted Subsidiaries or the
retention of executives, officers or employees by the Company or the
Restricted Subsidiaries.
"Indebtedness" means, with respect to any person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the deferred and
unpaid balance of the purchase price of any property (including pursuant to
capital leases), except any such balance that constitutes an accrued expense
or a trade payable, and any Hedging Obligations, if and to the extent such
indebtedness (other than a Hedging Obligation) would appear as a liability
upon a balance sheet of such person prepared on a consolidated basis in
accordance with GAAP, and also includes, to the extent not otherwise
included, the guarantee of items that would be included within this
definition; provided, however, that "Indebtedness" will not include any
Incentive Arrangements or obligations or payments thereunder.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization,
receivership, liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, or (ii) any assignment for the benefit of creditors
or any other marshalling of assets and liabilities of the Company.
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"issue" means create, issue, assume, guarantee, incur or otherwise become
directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
person existing at the time such person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed
to be issued by such Restricted Subsidiary at the time it becomes a
Restricted Subsidiary. For this definition, the terms "issuing," "issuer,"
"issuance and "issued" have meanings correlative to the foregoing.
"Issue Date" means July 25, 1997, the date on which Old Senior Notes were
first issued and the Supplemental Indenture for the Discount Debentures
Indenture was executed and delivered.
"Jordan Stockholders" means John W. Jordan, II, and/or his heirs,
executors and administrators, and/or The John W. Jordan, II Revocable Trust,
The Jordan Family Trust and/or any other trust established by John W. Jordan,
II whose beneficiaries are John W. Jordan, II and/or his lineal descendants
or other relatives.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP, excluding, however, any gain
or loss, together with any related provision for taxes, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale,
other than the portion of such deferred payment constituting interest, and
including any amounts received as disbursements or withdrawals from any
escrow or similar account established in connection with any such Asset Sale,
but, in either such case, only as and when so received) received by the
Company or any of its Restricted Subsidiaries in respect of such Asset Sale,
net of: (i) the cash expenses of such Asset Sale (including, without
limitation, the payment of principal, premium, if any, and interest on
Indebtedness required to be paid as a result of such Asset Sale (other than
the Exchange Securities) and legal, accounting, management, advisory and
investment banking fees and sales commissions), (ii) taxes paid or payable as
a result thereof, (iii) any portion of cash proceeds that the Company
determines in good faith should be reserved for post-closing adjustments, it
being understood and agreed that on the day that all such post-closing
adjustments have been determined, the amount (if any) by which the reserved
amount in respect of such Asset Sale exceeds the actual post-closing
adjustments payable by the Company or any of its Restricted Subsidiaries
shall constitute Net Proceeds on such date, (iv) any relocation expenses and
pension, severance and shutdown costs incurred as a result thereof and (v)
any deduction or appropriate amounts to be provided by the Company or any of
its Restricted Subsidiaries as a reserve in accordance with GAAP against any
liabilities associated with the asset disposed of in such transaction and
retained by the Company or such Restricted Subsidiary after such sale or
other disposition thereof, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with such
transaction.
"New Credit Agreement" means the credit agreement, dated July 25, 1997,
entered into by certain of the Company's Restricted Subsidiaries and certain
Subsidiaries and the lenders party thereto in their capacities as lenders
thereunder and Bank Boston, N.A., as agent, together with all loan documents
and instruments thereunder (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,
without limitation, increasing the amount of available borrowings thereunder,
and all Obligations with respect thereto, in each case, to the
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extent permitted by the "Limitation on Incurrence of Indebtedness" covenant,
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.
"Non-Restricted Subsidiary" means Motors and Gears Holdings, Inc. and its
Subsidiaries, Jordan Telecommunication Products, Inc. and its Subsidiaries,
JI Properties, Inc. and its Subsidiaries, and any other Subsidiary of the
Company other than a Restricted Subsidiary.
The covenants in the Exchange Indentures do not generally restrict the
Non-Restricted Subsidiaries, including their incurrence of Indebtedness.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premium, penalties, fees, indemnities, expenses (including legal
fees and expenses), reimbursement obligations and other liabilities payable
to the holder of such Indebtedness under the documentation governing such
Indebtedness, and any other claims of such holder arising in respect of such
Indebtedness.
"Offering Circular" means the Offering Circular, dated July 21, 1997,
relating to the Company's offering and placement of the Old Senior Notes.
"Other Permitted Indebtedness" means:
(i) Indebtedness of the Company and its Restricted Subsidiaries existing
as of the Issue Date and all related Obligations as in effect on such date
(including Senior Notes, 10 3/8% Senior Notes due 2003, Discount
Debentures and 11 3/4% Senior Subordinated Discount Debentures due 2005);
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers acceptances and letters of credit (including, without
limitation, letters of credit in respect of workers' compensation claims)
issued in the ordinary course of business, or other Indebtedness in
respect of reimbursement-type obligations regarding workers' compensation
claims;
(iii) Refinancing Indebtedness, provided that: (A) the principal amount
of such Refinancing Indebtedness shall not exceed the outstanding
principal amount of Indebtedness (including unused commitments) so
extended, refinanced, renewed, replaced, substituted or refunded plus any
amounts incurred to pay premiums, fees and expenses in connection
therewith, (B) the Refinancing Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed,
replaced, substituted or refunded, and (C) in the case of Refinancing
Indebtedness for subordinated Indebtedness, such Refinancing Indebtedness
shall be subordinated to the New Senior Notes at least to the same extent
as the Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted Subsidiaries
of Indebtedness of the Company not issued in compliance with "Limitation
on Guarantees of Company Indebtedness by Restricted Subsidiaries"
covenant);
(v) Indebtedness of the Company and its Restricted Subsidiaries incurred
in making permitted Restricted Payments under clauses (iv) or (v) of the
second sentence of the "Limitation on Restricted Payments" covenant and
guarantees by the Company of capital leases of the Company's
Non-Restricted Subsidiaries up to the aggregate amount permitted by clause
(xv) of the second sentence of the "Limitation and Restricted Payments"
covenant;
(vi) Indebtedness of any Non-Restricted Subsidiary; provided that such
Indebtedness is nonrecourse to the Company and its Restricted Subsidiaries
and the Company and its Restricted Subsidiaries have no Obligations with
respect to such Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries under
Hedging Obligations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
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, which will not be, and will not be deemed to be,
inadvertent) drawn against insufficient funds in the ordinary course of
business;
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(ix) Indebtedness of any person at the time it is acquired as a
Restricted Subsidiary; provided that such Indebtedness was not issued by
such person in connection with or in anticipation of such acquisition and
that such Indebtedness is nonrecourse to the Company and any other
Restricted Subsidiary and the Company and such other Restricted
Subsidiaries have no Obligations with respect to such Indebtedness;
(x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary if the Indebtedness so guaranteed is permitted under
the Exchange Indentures;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the Company
if the Indebtedness so guaranteed is permitted under the Exchange
Indentures and the Exchange Securities are guaranteed by such Restricted
Subsidiary to the extent required by the "Limitation on Guaranties of
Company Indebtedness by Restricted Subsidiaries" covenant;
(xii) guarantees by the Company of Indebtedness of any Restricted
Subsidiary if the Indebtedness so guaranteed is permitted under the
Exchange Indentures;
(xiii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with performance, surety, statutory, appeal or similar bonds in
the ordinary course of business; and
(xiv) Indebtedness of the Company and its Restricted Subsidiaries in
connection with agreements providing for indemnification, purchase price
adjustments and similar obligations in connection with the sale or
disposition of any of their business, properties or assets.
"Permitted Liens" means: (a) with respect to the Company and the
Restricted Subsidiaries, (1) Liens for taxes, assessments, governmental
charges or claims which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if a reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor; (2) statutory Liens of landlords and
carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and with
respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate provision, if any
as shall be required in conformity with GAAP shall have been made therefor;
(3) Liens incurred on deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types
of social security; (4) Liens incurred on deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, government contracts, performance and return of money bonds and
other obligations of a like nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (5)
easements, rights-of-way, zoning or other restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any
of its Restricted Subsidiaries incurred in the ordinary course of business;
(6) Liens (including extensions, renewals and replacements thereof) upon
property acquired (the "Acquired Property") after the Issue Date, provided
that: (A) any such Lien is created solely for the purpose of securing
Indebtedness representing, or issued to finance, refinance or refund, the
cost (including the cost of construction) of the Acquired Property, (B) the
principal amount of the Indebtedness secured by such Lien does not exceed
100% of the cost of the Acquired Property, (C) such Lien does not extend to
or cover any property other than the Acquired Property and any improvements
on such Acquired Property, and (D) the issuance of the Indebtedness to
purchase the Acquired Property is permitted by the "Limitation on Incurrence
of Indebtedness" covenant; (7) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (8) judgment and attachment Liens
not giving rise to an Event of Default; (9) leases or subleases granted to
others not interfering in any material respect with the business of the
Company or any of its Restricted Subsidiaries; (10) Liens encumbering
customary initial deposits and margin deposits, and other Liens incurred in
the ordinary course of business and that are within the general parameters
customary in the industry, in each case securing Indebtedness under Hedging
Obligations; (11) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of
the Company or its Restricted Subsidiaries; (12) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Company or its Restricted
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Subsidiaries in the ordinary course of business; (13) any interest or title
of a lessor in property subject to any Capital Lease Obligation or operating
lease; (14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases; (15) Liens existing on the Issue Date and any
extensions, renewals or replacements thereof; and (16) any Lien granted to
the Trustee under the Exchange Indentures and any substantially equivalent
Lien granted to any trustee or similar institution under any indenture for
senior Indebtedness permitted by the terms of the Exchange Indentures;
(b) with respect to the Restricted Subsidiaries, (1) Liens securing
Restricted Subsidiaries' reimbursement Obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (2) Liens
securing Indebtedness issued by Restricted Subsidiaries if such
Indebtedness is permitted by (A) the first sentence of the "Limitation on
Incurrence of Indebtedness" covenant, (B) clauses (i), (ii), (iii) or (iv)
of the second sentence of the "Limitation on Incurrence of Indebtedness"
covenant, or (C) clauses (i), (iii) (to the extent the Indebtedness
subject to such Refinancing Indebtedness was subject to Liens) (vii), (ix)
or (x) of the definition of Other Permitted Indebtedness; (3) Liens
securing intercompany Indebtedness issued by any Restricted Subsidiary to
the Company or another Restricted Subsidiary; (4) additional Liens at any
one time outstanding with respect to assets of the Restricted Subsidiaries
the aggregate fair market value of which does not exceed $10,000,000 (the
fair market value of any such asset is to be determined on the date such
Lien is granted on such asset); and (5) Liens securing guarantees by
Restricted Subsidiaries of Indebtedness issued by the Company if such
guarantees are permitted by clause (xi) (but only in respect of the
property, rights and assets of the Restricted Subsidiaries Issuing such
guarantees) of the definition of Other Permitted Indebtedness; and
(c) with respect to the Company, (1) Liens securing Indebtedness issued
by the Company under the New Credit Agreement if such Indebtedness is
permitted by the "Limitation on Incurrence of Indebtedness" covenant
(including, but not limited to, Indebtedness issued by the Company under
the New Credit Agreement pursuant to clause (i) and/or clause (iv) of the
second sentence of "Limitation on Incurrence of Indebtedness" covenant),
(2) Liens securing Indebtedness of the Company if such Indebtedness is
permitted by clauses (i), (iii) (to the extent the Indebtedness subject to
such Refinancing Indebtedness was subject to Liens) or (vii) of the
definition of Other Permitted Indebtedness, and (3) Liens securing
guarantees by the Company of Indebtedness issued by Restricted
Subsidiaries if such Indebtedness is permitted by the "Limitation on
Incurrence of Indebtedness" covenant (including, but not limited to,
Indebtedness issued by Restricted Subsidiaries under the New Credit
Agreement pursuant to clause (i) and/or clause (v) of the second sentence
of the "Limitation on Incurrence of Indebtedness" covenant) and if such
guarantees are permitted by clause (xii) (but only in respect of
Indebtedness issued by the Restricted Subsidiaries under the New Credit
Agreement pursuant to "Limitation on Incurrence of Indebtedness" covenant)
of the definition of Other Permitted Indebtedness;
provided, however, that, notwithstanding any of the foregoing, the
Permitted Liens referred to in clause (c) of this definition shall not
include any Lien on Capital Stock of Restricted Subsidiaries held by the
Company (as distinguished from Liens on Capital Stock of Restricted
Subsidiaries held by other Restricted Subsidiaries) other than Liens
securing (A) Indebtedness of the Company issued under the New Credit
Agreement pursuant to the "Limitation on Incurrence of Indebtedness"
covenant and any permitted Refinancing Indebtedness of such Indebtedness,
and (B) guarantees by the Company of Indebtedness issued by Restricted
Subsidiaries under the New Credit Agreement pursuant to the "Limitation on
Incurrence of Indebtedness" covenant and any permitted Refinancing
Indebtedness of such Indebtedness.
"Plan" means the Company's Recapitalization and Repositioning Plan
referenced in this Prospectus and all agreements, instruments and
transactions pursuant thereto.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income, Cash Flow, and Consolidated Interest Expense in connection with the
Cash Flow Coverage Ratio (including in connection with the "Limitation on
Restricted Payments" covenant, the incurrence of Indebtedness pursuant to the
first sentence of the "Limitation on Incurrence of Indebtedness" covenant and
Consolidated Net Worth
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for purposes of the "Merger or Consolidation" covenant), giving pro forma
effect to (x) any acquisition or sale of a person, business or asset, related
incurrence, repayment or refinancing of Indebtedness or other related
transactions, including any related restructuring charges in respect of
restructurings, consolidations, compensation or headcount reductions or other
cost savings which would otherwise be accounted for as an adjustment
permitted by Regulation S-X under the Securities Act or on a pro forma basis
under GAAP, or (y) any incurrence, repayment or refinancing of any
Indebtedness and the application of the proceeds therefrom, in each case, as
if such acquisition or sale and related transactions, restructurings,
consolidations, cost savings, reductions, incurrence, repayment or
refinancing were realized on the first day of the relevant period permitted
by Regulation S-X under the Securities Act or on a pro forma basis under
GAAP. Furthermore, in calculating the Cash Flow Coverage Ratio, (1) interest
on outstanding Indebtedness determined on a fluctuating basis as of the
determination 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 determination date; (2) if
interest on any Indebtedness actually incurred on the determination 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 determination date will be deemed to have
been in effect during the relevant 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 rate swaps
or similar interest rate protection Hedging Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation
of such agreements.
"Receivables" means, with respect to any person, all of the following
property and interests in property of such person, whether now existing or
existing in the future or hereafter acquired or arising: (i) accounts, (ii)
accounts receivable (including, without limitation, all rights to payment
created by or arising from sales of goods, leases of goods or leased or the
rendition of services rendered no matter how evidenced, whether or not earned
by performance), (iii) all unpaid seller's or lessor's rights including
without limitation, recession, replevin, reclamation and stoppage in transit,
relating to any of the foregoing or arising therefrom, (iv) all rights to any
goods or merchandise represented by any of the foregoing (including, without
limitation, returned or repossessed goods), (v) all reserves and credit
balances with respect to any such accounts receivable or account debtors,
(vi) all letters of credit, security or guarantees of any of the foregoing,
(vii) all insurance policies or reports relating to any of the foregoing,
(viii) all collection or deposit accounts relating to any of the foregoing,
(ix) all proceeds of any of the foregoing, and (x) all books and records
relating to any of the foregoing.
"Receivables Financing" means (i) the sale or other disposition of
Receivables that arise in the ordinary course of business, or (ii) the sale
or other disposition of Receivables arising in the ordinary course of
business to a Receivables Subsidiary followed by a financing transaction in
connection with such sale or disposition of such Receivables.
"Receivables Subsidiary" means a Subsidiary of the Company that is
exclusively engaged in Receivables Financings and activities reasonably
related thereto.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund
any Indebtedness permitted under the Exchange Indentures or any Indebtedness
issued to so extend, refinance, renew, replace, substitute or refund such
Indebtedness, (ii) any refinancings of Indebtedness issued under the New
Credit Agreement, and (iii) any additional Indebtedness issued to pay
premiums and fees in connection with clauses (i) and (ii).
"Restricted Investment" means any capital contribution to, or other debt
or equity investment in (other than certain investments in marketable
securities and other negotiable instruments permitted by the Exchange
Indentures) any Non-Restricted Subsidiary or any person other than a
Restricted Subsidiary or the Company; provided, that Restricted Investments
will not include Incentive Arrangements. The amount of any Restricted
Investment shall be the amount of cash and the fair market value at the time
of transfer of all other property (as determined by the Board of Directors in
good faith) included in the original Restricted Investment, plus all
additions thereto, without any adjustments for
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increases or decreases in value or write-ups, write-downs or write-offs with
respect to such Restricted Investment. Notwithstanding the foregoing, the
assignment by the Company and the assumption by a Non-Restricted Subsidiary
of all or any portion of an operating lease of the Company shall not be
deemed a Restricted Investment, so long as the obligations of the Company
under any such lease are not increased by the terms of such assignment or
assumption.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company existing
on the Issue Date other than a Non-Restricted Subsidiary, and (ii) any other
Subsidiary of the Company formed, acquired or existing after the Issue Date
that is designated as a "Restricted Subsidiary" by the Company pursuant to a
resolution approved by a majority of the Board of Directors, provided that
any Restricted Subsidiary that is organized under the laws of a foreign
jurisdiction and whose stock or ownership interests are sold or transferred
to a Non-Restricted Subsidiary may, by resolution approved by a majority of
the Board of Directors, be thereafter designated and considered as a
Non-Restricted Subsidiary.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any
persons or businesses either alone or together with the Company or any
Restricted Subsidiary, as permitted by GAAP or Regulation S-X under the
Securities Act.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Significant Subsidiary" means (i) any Restricted Subsidiary of the
Company that would be a "significant subsidiary" as defined in clause (2) of
the definition of such term in Rule 1-02 of Regulation S-X under the
Securities Act and the Exchange Act, and (ii) any other Restricted Subsidiary
of the Company that is material to the business, earnings, prospects, assets
or condition, financial or otherwise, of the Company and its Restricted
Subsidiaries taken as a whole.
"Stated Maturity" means with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" of any person means any entity of which the Equity Interests
entitled to cast at least a majority of the votes that may be cast by all
Equity Interests having ordinary voting power for the election of directors
or other governing body of such entity are owned by such person (regardless
of whether such Equity Interests are owned directly by such person or through
one or more Subsidiaries).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
then outstanding principal amount of such Indebtedness into (ii) the sum of
the product(s) obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other requirement payment of
principal, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account as a
result of market-making activities or other trading activities in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Securities received in exchange for Old
Securities where such Old Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 120 days after the Expiration Date, it will make
available a prospectus meeting the requirements of the Securities Act to any
broker-dealer for use in connection with any such resale. In addition, until
, 1997, all dealers effecting transactions in the New Securities may be
required to deliver a prospectus.
The Company will receive no proceeds in connection with the Exchange
Offer. New Securities received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Securities or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such New Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of New Securities 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.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain U.S. federal income tax
considerations relevant to the purchase, ownership and disposition of the New
Securities by the holders thereof. This summary does not purport to be a
complete analysis of all the potential federal income tax effects relating to
the purchase, ownership and disposition of the New Securities. There can be
no assurance that the Internal Revenue Service (the "IRS") will take a
similar view of such consequences. Further the discussion does not address
all aspects of taxation that may be relevant to particular purchasers in
light of their individual circumstances (including dealers in securities,
insurance companies, financial institutions, tax-exempt entities, taxpayers
who acquired New Senior Notes for an amount less than or greater than the
"issue price" of the New Senior Notes, and other taxpayers who are subject to
special treatment under U.S. federal income tax laws, including taxpayers who
hold the New Securities as part of a "straddle," "hedge" or "conversion
transaction"). The discussion below assumes that the New Securities are held
as capital assets and only addresses holders who are initial purchasers of
the New Securities.
The discussion of the U.S. federal income tax consequences set forth below
is based upon currently existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations promulgated thereunder
and judicial and administrative interpretations, all of which are subject to
change, possibly with retroactive effect. Because individual circumstances
may differ, each holder of the Exchange Securities is strongly urged to
consult its own tax advisor with respect to its particular tax situation and
the particular tax effects of any state, local, non-U.S., or other tax laws
and possible changes in the tax law.
As used herein, the term, "U.S. Holder" means a beneficial owner of New
Securities who or which is for U.S. federal income tax purposes (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of
any political subdivision thereof, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source, or (iv) a
"U.S. Trust." A U.S. Trust is (a) for taxable years beginning after December
31, 1996, or if the trustee of a trust elects to apply the following
definition to an earlier taxable year ending after August 20, 1996, any trust
if, and only if, (i) a court within the United States is able to exercise
primary supervision over the administration of the trust and (ii) one or more
U.S. persons have the authority to control all substantial decisions of the
trust and (b) for all other taxable years, any trust whose income is
includible in gross income for U.S. federal income tax purposes regardless of
its source. The term U.S. Holder also includes certain former U.S. citizens
whose income and gain on the New Securities will be subject to U.S. taxation.
As used herein, the term "Non-U.S. Holder" means a beneficial owner of a New
Senior Note that is not a U.S. Holder.
CONSEQUENCES OF EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of an Old Security for a New Security pursuant to the
Exchange Offer will not be taxable to the exchanging Holders for Federal
income tax purposes. As a result (i) an exchanging Holder will not recognize
any gain or loss on the exchange, (ii) the holding period for the New
Security will include the holding period for the Old Security, (iii) the
basis of the New Security will be the same as the basis for the Old Security
and (iv) original issue discount on the New Discount Debentures will be the
same as on the Old Discount Debentures.
The Exchange Offer will result in no Federal income tax consequences to a
nonexchanging Holder.
The treatment of interest and original issue discount described below with
respect to the Senior Notes and Discount Debentures is based in part upon the
assumption that as of the date of issuance of the Old Securities, the
possibility that liquidated damages would be paid to holders of such Old
Securities pursuant to a Registration Default was remote. The Service may
take a different position, which could affect the timing and character of
interst income by holders of such Exchange Securities.
SENIOR NOTES
Interest paid on a New Senior Note will generally be taxable to a U.S.
Holder as ordinary interest income at the time it accrues or is received in
accordance with the U.S. Holder's method of accounting for federal income tax
purposes.
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DISCOUNT DEBENTURES
Original Issue Discount. Because the Discount Debentures have been issued
at a discount from their "stated redemption price at maturity," the Discount
Debentures have original issue discount ("OID") for federal income tax
purposes. For federal income tax purposes, OID on a Discount Debenture is the
excess of the stated redemption price at maturity of the Discount Debenture
over its issue price. The issue price of each Discount Debenture was its
"stated principal amount" on April 2, 1997, which was 56.52% of the amount
payable on maturity of such Discount Debenture (other than any accrued and
unpaid interest). The stated redemption price at maturity of a Discount
Debenture will be the sum of all payments to be made on such Discount
Debenture other than "qualified stated interest" payments. Qualified stated
interest is stated interest that is unconditionally payable at least annually
at a single fixed rate that appropriately takes into account the length of
the interval between payments. The interest payments on the Discount
Debentures will not constitute qualified stated interest, and thus will be
included along with principal in the stated redemption price at maturity of
the Discount Debentures. As a result, each Discount Debenture will bear OID
in an amount equal to the excess of (i) the sum of its principal amount and
all stated interest payments over (ii) its issue price.
A holder will be required to include OID in income periodically over the
term of a Discount Debenture before receipt of the cash or other payment
attributable to such income. In general, a holder must include in gross
income for federal income tax purposes the sum of the daily portions of OID
with respect to the Discount Debentures for each day during the taxable year
or portion of a taxable year on which such holder holds the Discount
Debentures ("Accrued OID"). The daily portion is determined by allocating to
each day of any accrual period within a taxable year a pro rata portion of an
amount equal to the adjusted issue price of the Discount Debenture at the
beginning of the accrual period multiplied by the yield to maturity of the
Discount Debenture. For purposes of computing OID, the Company will use
six-month accrual periods which end on the days in the calendar year
corresponding to the maturity date of the Discount Debentures and the date
six months prior to such maturity date, with the exception of an initial
short accrual period. The adjusted issue price of a Discount Debenture at the
beginning of any accrual period is the issue price of the Discount Debenture
increased by the Accrued OID for all prior accrual periods (less any cash
payments on the Discount Debentures other than qualified stated interest).
Under these rules, holders will have to include in gross income increasingly
greater amounts of OID in each successive accrual period. Each payment made
under a Discount Debenture (except for payments of qualified stated interest)
will be treated first as a payment of OID to the extent of OID that has
accrued as of the date of payment and has not been allocated to prior
payments and second as a payment of principal.
Optional Redemption. The Company's option to redeem the Discount
Debentures at any time after April 1, 2002 should be treated as a "call
option" within the meaning of the applicable Treasury Regulations (the "OID
Regulations"). See "Description of the New Securities--Redemption of Exchange
Securities--Optional Redemption." As a result, the Company would be presumed
under the OID Regulations to exercise its option to redeem the Discount
Debentures if by utilizing the date of exercise of a call option as the
maturity date and the amount for which the Discount Debentures would be
redeemed in accordance with the terms of the redemption feature (that is, the
principal amount plus redemption premium, if any, plus accrued interest) as
the stated redemption price at maturity the yield on the Discount Debentures
would be lower than such yield would be if the option was not exercised.
Because the exercise by the Company of its call option at any time after
April 1, 2002 and before April 1, 2004 would result in higher yield than if
such call option were not exercised, such call option should be presumed to
not be exercised under the OID Regulations.
In addition to the option redemption described above, a holder will have
the right to tender Discount Debentures to the Company for redemption should
the Company experience a Change of Control. See "Description of The New
Securities--Mandatory Offers to Purchase Exchange Securities." Such
additional redemption rights should not affect, and will be treated by the
Company as not affecting, the determination of the yield or maturity of the
Discount Debentures.
TAXABLE DISPOSITION OF NEW SECURITIES
Generally, any sale or redemption of New Securities will result in taxable
gain or loss equal to the difference between the amount of cash or other
property received (except to the extent the consideration
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received is attributable to qualified stated interest not previously taken
into account, which consideration is treated as interest received) and the
holder's adjusted tax basis in the New Securities. A holder's adjusted tax
basis for determining gain or loss on the sale or other taxable disposition
of New Securities will initially equal the cost of such New Securities to
such holder and will be increased by any Accrued OID with respect to any
Discount Debentures includable in such holder's gross income and decreased by
the amount of any cash payments received with such holder regardless of
whether such payments are denominated as interest (other than payments of
qualified stated interest). Any gain or loss upon a sale or disposition of
New Securities by an original holder will generally be capital gain or loss.
The recently enacted Taxpayer Relief Act of 1997 made certain changes to the
Code with respect to taxation of capital gains of taxpayers other than
corporations. In general, the maximum tax rate for non-corporate taxpayers on
long term capital gains has been lowered to 20% from the previous 28% rate
for most capital assets (including the New Securities) held for more than 18
months. For taxpayers in the 15% regular tax bracket, the maximum tax rate on
long term capital gains is now 10%. These rate reductions are effective
retroactively to any sale made after May 6, 1997. Capital assets sold after
July 28, 1997 must be held for more than 18 months, rather than for more than
one year, in order for gain on the sale of such assets to qualify as long
term capital gain. Capital assets sold after May 6 but before July 29, 1997
qualify for the new 20% rate so long as they were held for more than a year.
Capital gain on assets sold on or after July 29, 1997, having a holding
period of more than one year but not more than 18 months will be taxed as
"mid-term gain" at a 28% rate.
NON-U.S. HOLDERS
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
U.S. taxation of Non-U.S. Holders. The 1996 Proposed Regulations are
generally proposed to be effective for payments after December 31, 1997,
regardless of the issue date of the New Securities with respect to which such
payments are made, subject to certain transition rules. It cannot be
predicted at this time whether the 1996 Proposed Regulations will become
effective as proposed or what, if any, modifications may be made to them. The
discussion under this heading and under "-Backup Withholding and Information
Reporting" below, is not intended to be a complete discussion of the
provisions of the 1996 Proposed Regulations, and prospective Non-U.S. Holders
of New Securities are urged to consult their tax advisors with respect to the
effect the 1996 Proposed Regulations may have if adopted.
Payments of interest on the New Securities by the Company or any paying
agent to a beneficial owner of New Securities that is a Non-U.S. Holder will
not be subject to U.S. federal withholding tax, provided that, (i) such
holder does not own, actually or constructively, 10 percent or more of the
total combined voting power of all classes of stock of the Company entitled
to vote, (ii) such holder is not, for U.S. federal income tax purposes, a
controlled foreign corporation related, directly or indirectly, to the
Company through stock ownership, (iii) such holder is not a bank receiving
interest described in Section 881(c)(3)(A) of the Code, and (iv) certain
certification requirements (summarized below) are met. If a Non-U.S. Holder
of New Securities is engaged in a trade or business in the United States, and
if interest on the New Securities is effectively connected with the conduct
of such trade or business (and, if certain tax treaties apply, is
attributable to a U.S. permanent establishment maintained by the Non-U.S.
Holder) the Non-U.S. Holder, although exempt from U.S. withholding tax, will
generally be subject to regular U.S. income tax on such interest in the same
manner as if it were a U.S. Holder. In addition, if such Non-U.S. Holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30%
(or such lower rate provided by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments. For purposes of the branch profits tax, interest on New
Securities will be included in the earnings and profits of such Non-U.S.
Holder if such interest is effectively connected with the conduct by the
Non-U.S. Holder of a trade or business in the United States.
Under current Treasury Regulations, in order to obtain the exemption from
withholding tax described in the first sentence of the preceding paragraph,
either (i) the beneficial owner of New Securities must certify on IRS Form
W-8 or a substitute form that is substantially similar to Form W-8, under
penalties of perjury, to the Company or paying agent, as the case may be,
that such owner is a Non-U.S. Holder and must provide such owner's name and
address or (ii) a securities clearing organization, bank
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or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution") and
holds the New Securities on behalf of the beneficial owner thereof must
certify, under penalties of perjury, to the Company or paying agent, as the
case may be, that such certificate has been received from the beneficial
owner by it or by a Financial Institution between it and the beneficial owner
and must furnish the payor with a copy thereof. A certificate described in
this paragraph is effective only with respect to payments of interest made to
the certifying Non-U.S. Holder after delivery of the certificate in the
calendar year of its delivery and the two immediately succeeding calendar
years. In lieu of the certificate described in this paragraph, a Non-U.S.
Holder engaged in a trade or business in the United States (with which
interest payments on the New Senior Note are effectively connected) must
provide to the Company a properly executed IRS Form 4224 in order to claim an
exemption from withholding tax.
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations also add "intermediary certification" options for certain
qualifying withholding agents. Under one such option, a withholding agent
would be allowed to rely on IRS Form W-8 furnished by a financial institution
or other intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution
or intermediary has entered into a withholding agreement with the IRS and
thus is a "qualified intermediary." Under another option, an authorized
foreign agent of a U.S. withholding agent would be permitted to act on behalf
of the U.S. withholding agent, provided certain conditions are met.
The 1996 Proposed Regulations, if adopted, would also provide certain
presumptions with respect to withholding for holders not providing the
required certifications to qualify for the withholding exemption described
above. In addition, the 1996 Proposed Regulations would replace a number of
current tax certification forms (including IRS Form W-8 and IRS Form 4224)
with a single, restated form (IRS Form W-8) and standardize the period of
time for which withholding agents could rely on such certifications.
Under current law, a Non-U.S. Holder of New Securities generally will not
be subject to U.S. federal income tax on any gain recognized on the sale,
exchange or other disposition of such New Securities, unless (i) the gain is
effectively connected with the conduct of a trade or business in the United
States of the non-U.S. holder (and, if certain tax treaties apply, is
attributable to a U.S. permanent establishment maintained by the Non-U.S.
Holder) or (ii) the Non-U.S. Holder is an individual who holds the New
Securities as a capital asset and is present in the United States for 183
days or more in the taxable year of the disposition and either (a) such
individual has a U.S. "tax home" (as defined for U.S. federal income tax
purposes) or (b) the gain is attributable to an office or other fixed place
of business maintained in the United States by such individual. In the case
of a Non-U.S. Holder that is described under clause (i) above, its gain will
be subject to the U.S. federal income tax on net income that applies to U.S.
persons and, in addition, if such Non-U.S. Holder is a foreign corporation,
it may be subject to the branch profits tax. An individual Non-U.S. Holder
that is described under clause (ii) above will be subject to a flat 30% on
any tax gain derived from the sale, which may be offset by U.S. capital
losses (notwithstanding the fact that he or she is not considered a U.S.
resident). Thus, individual Non-U.S. Holders who have spent 183 days or more
in the United States in the taxable year in which they contemplate a sale of
New Securities are urged to consult their tax advisers as to the tax
consequences of such sale.
New Securities held by an individual who is not a citizen or resident (as
specially defined for U.S. federal estate tax purposes) of the United States
at the date of his death will not be subject to U.S. federal estate tax as a
result of such individual's death; provided, that at the time of such
individual's death, the individual does not own, actually or constructively,
10 percent or more of the total combined voting power of all classes of stock
of the Company entitled to vote and payments with respect to such New
Securities would not have been effectively connected with the conduct by such
individual of a trade or business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current U.S. federal income tax law, information reporting
requirements apply to interest and principal payments made to, and to the
proceeds of sales before maturity by, certain non-corporate U.S.
105
<PAGE>
Holders. In addition, a 31% backup withholding tax requirement applies to
certain payments of interest on, and the proceeds of a sale, exchange or
redemption of, the New Securities.
Backup withholding will generally not apply with respect to payments made
to certain exempt recipients such as corporations or other tax-exempt
entities. In the case of a non-corporate U.S. Holder, backup withholding will
apply only if such holder (i) fails to furnish its taxpayer identification
number ("TIN") which for an individual would be his Social Security number,
(ii) furnishes an incorrect TIN, (iii) is notified by the IRS that it has
failed to properly report payments of interest and dividends or (iv) under
certain circumstances, fails to certify, under penalties of perjury, that it
has furnished a correct TIN and has not been notified by the IRS that it is
subject to backup withholding for failure to report interest and dividend
payments.
In the case of a Non-U.S. Holder, under current Treasury Regulations,
backup withholding and information reporting will not apply to payments made
by the Company or any paying agent thereof on New Securities if such holder
has provided the required certification under penalties of perjury that it is
not a U.S. Holder or has otherwise established an exemption, provided in each
case that the Company or such paying agent, as the case may be, does not have
actual knowledge that the payee is a U.S. Holder.
Under current Treasury Regulations, if payments on New Securities are made
to or through a foreign office of a custodian, nominee or other agent acting
on behalf of a beneficial owner of New Securities, such custodian, nominee or
other agent will not be required to apply backup withholding to such payments
made to such beneficial owner. However, under the 1996 Proposed Regulations,
backup withholding may apply if such custodian, nominee or other agent has
actual knowledge that the payee is a U.S. Holder. In the case of payments
made to or through the foreign office of a custodian, nominee or other agent
that is (i) a U.S. Person, (ii) a controlled foreign corporation for U.S. tax
purposes or (iii) a foreign person 50% or more of the gross income of which
for the three-year period ending with the close of its taxable year preceding
the year of payment is effectively connected with the conduct of a trade or
business within the United States, information reporting (but not backup
withholding) is required unless the custodian, nominee or other agent has
documentary evidence in its files that the payee is not a U.S. person and
certain other conditions are met, or the payee otherwise establishes an
exemption.
Under current Treasury Regulations, payments on the sale, exchange or
other disposition of New Securities made to or through a foreign office of a
broker generally will not be subject to backup withholding. However, under
the 1996 Proposed Regulations, backup withholding may apply if such broker
has actual knowledge that the payee is a U.S. Holder. In the case of proceeds
from a sale of New Securities by a Non-U.S. Holder paid to or through the
foreign office of a U.S. broker or a foreign office of a foreign broker that
is (i) a controlled foreign corporation for U.S. tax purposes or (ii) a
person 50% or more of whose gross income for the three-year period ending
with the close of the taxable year preceding the year of payment (or for the
part of that period that the broker has been in existence) is effectively
connected with the conduct of a trade or business within the United States,
information reporting (but not backup withholding) is required unless the
broker has documentary evidence in its files that the payee is not a U.S.
person and certain other conditions are met, or the payee otherwise
establishes an exemption. Payments to or through the U.S. office of a broker
will be subject to backup withholding and information reporting unless the
holder certifies, under penalties of perjury, that it is not a U.S. Holder
and that certain other conditions are met or otherwise establishes an
exemption.
The 1996 Proposed Regulations would, if adopted, alter the foregoing rules
as described above and in other certain respects. In particular, the 1996
Proposed Regulations would provide certain presumptions under which Non-U.S.
Holders may be subject to backup withholding in the absence of required
certifications.
Holders of New Securities should consult their tax advisors regarding the
application of backup withholding in their particular situations, the
availability of an exemption therefrom, and the procedure for obtaining such
an exemption, if available. Any amounts withheld from payment under the
backup withholding rules will be allowed as a credit against a holder's U.S.
Federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the IRS.
106
<PAGE>
The Company is required to furnish certain information to the Service and
will furnish annually to record holders of the Senior Notes and the Discount
Debentures information with respect to interest paid on the Senior Notes and
OID accruing on the Discount Debentures during the calendar year. The
information regarding the accrual of OID on the Discount Debentures will be
based on the adjusted issue price of the Discount Debentures and will be
applicable if the holder is an original holder of the Discount Debentures
purchasing at the issue price. Subsequent holders who purchase Discount
Debentures for an amount other than the adjusted issue price and/or on a date
other than the last day of an accrual period will be required to determine
for themselves the amount of OID, if any, they are required to include in
gross income for federal income tax purposes.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules which may affect the
treatment of purchasers that acquire the New Securities other than through
purchasing the related Old Securities at the time of original issuance at the
issue price, including those provisions of the Code relating to the treatment
of "market discount" and "acquisition premium." For example, the market
discount provisions of the Code may require a subsequent purchaser of New
Securities at a market discount to treat all or a portion of any gain
recognized upon sale or other disposition of such New Securities as ordinary
income and to defer a portion of any interest expense that would otherwise be
deductible on any indebtedness incurred or maintained to purchase or carry
such New Securities until the holder disposes of such New Securities in a
taxable transaction.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE HOLDER OF NEW SECURITIES SHOULD CONSULT ITS OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO THE PROSPECTIVE HOLDER
OF THE NEW SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL, OR NON-U.S. INCOME TAX LAWS AND ANY RECENT OR PROSPECTIVE CHANGES IN
APPLICABLE TAX LAWS.
107
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the New Securities will be passed
upon for the Company by Mayer, Brown & Platt, Chicago, Illinois.
INDEPENDENT AUDITORS
The Consolidated Financial Statements of Jordan Industries, Inc., as of
December 31, 1995 and 1996, and for each of the three years in the period
ended December 31, 1996, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon appearing in this Prospectus and
Registration Statement which, as to 1996, are based in part on the reports of
Blackman Kallick Bartelstein, LLP, independent auditors, and Mellen, Smith &
Pivoz, P.C., independent auditors. The financial statements and report
referred to above are included in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The financial statements of E.F. Johnson Company Components Division as of
December 31, 1994, November 26, 1995 and January 23, 1996 and for the year
ended December 31, 1994, the period from January 1, 1995 to November 26, 1995
and the period from November 27, 1995 to January 23, 1996, included in this
Prospectus and Registration Statement have been audited by Price Waterhouse,
LLP, independent auditors as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
The combined financial statements of Viewsonics, Inc. and Shanghai
Viewsonics Electronic Co., Ltd. as of December 31, 1995, and for the year
then ended, included in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting
and auditing.
The combined financial statements of Seaboard Folding Box Corp. and
Affiliates as of December 31, 1994 and 1995, and for each of the two years in
the period ended December 31, 1995, included in this Prospectus and
Registration Statement have been audited by Canby, Maloney & Co., Inc.,
independent auditors as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
108
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND INFORMATION
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Balance Sheet as of June 30, 1997........................................ P-2
Unaudited Pro Forma Statement of Operations for the year ended December 31, 1996 ............ P-3
Notes to Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1996 .......................................................................... P-4
Unaudited Pro Forma Statement of Operations for the six months ended June 30, 1997 ......... P-6
Notes to Unaudited Pro Forma Statement of Operations for the six months ended
June 30, 1997 .............................................................................. P-7
JORDAN INDUSTRIES, INC.
Report of Independent Auditors .............................................................. F-1
DIVERSIFIED WIRE & CABLE, INC.
Independent Auditors' Report ............................................................. F-2
PAW PRINT MAILING LIST SERVICES, INC.
Independent Auditor's Report ............................................................. F-3
Consolidated Balance Sheets as of December 31, 1995 and 1996................................. F-4
Consolidated Statements of Operations for the three years in the period ended December 31,
1996........................................................................................ F-5
Consolidated Statements of Changes in Shareholders' Equity (Net Capital Deficiency)
for the three years in the period ended December 31, 1996................................... F-6
Consolidated Statements of Cash Flows for the three years in the period ended December 31,
1996........................................................................................ F-7
Notes to Consolidated Financial Statements................................................... F-9
Condensed Consolidated Balance Sheet as of June 30, 1997 (unaudited)......................... F-29
Condensed Consolidated Statements of Operations for the six months ended
June 30, 1996 and 1997 (unaudited).......................................................... F-30
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1997 (unaudited).......................................................... F-31
Notes to Condensed Consolidated Financial Statements (unaudited)............................. F-32
E.F. JOHNSON COMPANY--COMPONENTS DIVISION (A DIVISION OF E. F. JOHNSON COMPANY)
Report of Independent Accountants............................................................ F-35
Balance Sheets as of December 31, 1994, November 26, 1995 and January 23, 1996 .............. F-36
Statements of Operations for the year ended December 31, 1994, the eleven months
ended November 26, 1995, and the two months ended January 23, 1996.......................... F-37
Statements of Cash Flows for the year ended December 31, 1994, the eleven months
ended November 26, 1995, and the two months ended January 23, 1996.......................... F-38
Notes to Financial Statements................................................................ F-39
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
Report of Independent Auditors............................................................... F-43
Combined Balance Sheets as of December 31, 1995 and (unaudited) as of July 31, 1996 ......... F-44
Combined Statements of Income for the year ended December 31, 1995 and
(unaudited) for the seven months ended July 31, 1996........................................ F-45
Combined Statements of Stockholder's Equity for the year ended December 31, 1995
and (unaudited) for the seven months ended July 31, 1996.................................... F-46
Combined Statements of Cash Flows for the year ended December 31, 1995 and
(unaudited) for the seven months ended July 31, 1996........................................ F-47
Notes to Combined Financial Statements....................................................... F-48
I-1
<PAGE>
PAGE
--------
SEABOARD FOLDING BOX CORP. AND AFFILIATES
Independent Auditors' Report ................................................................ F-52
Combined Balance Sheets as of December 31, 1994 and 1995..................................... F-53
Combined Statements of Income for the years ended December 31, 1994 and 1995 ................ F-54
Combined Statements of Stockholder's Equity for the years ended December 31, 1994
and 1995.................................................................................... F-55
Combined Statements of Cash Flows for the years ended December 31, 1994 and 1995 ............ F-56
Notes to Combined Financial Statements....................................................... F-58
Combined Balance Sheet as of May 1, 1996 (unaudited)......................................... F-61
Combined Statement of Income for the period from January 1, 1996
to May 1, 1996 (unaudited).................................................................. F-62
Combined Statement of Stockholder's Equity for the period from January 1, 1996
to May 1, 1996 (unaudited).................................................................. F-63
Combined Statement of Cash Flows for the period from January 1, 1996
to May 1, 1996 (unaudited).................................................................. F-64
Notes to Combined Financial Statements (unaudited)........................................... F-66
</TABLE>
I-2
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Unaudited
Pro Forma Financial Information") has been derived from the application of
pro forma adjustments to the Company's historical consolidated financial
statements included elsewhere herein. The Unaudited Pro Forma Financial
Information gives effect to (i) each element of the Plan, including the
disposition of Hudson and Paw Print (the "Dispositions"); (ii) the full year
impact of acquisitions of LoDan, FIR, Arnon Caine, Seaboard, Cape Craftsmen,
Colman Motors, Viewsonics, Vitelec, Diversified, Bond, Northern and Johnson
(the "Acquisitions"); and (iii) the deconsolidation of Welcome Home, as if
such events had occurred on June 30, 1997 for purposes of the unaudited pro
forma balance sheet and at the beginning of the relevant period for purposes
of the unaudited pro forma statements of operations for the year ended
December 31, 1996, and the six months ended June 30, 1997, respectively. The
pro forma results for FIR for the year ended December 31, 1996 reflect FIR's
results of operations for the twelve months ended October 31, 1996 and the
pro forma results for FIR for the six months ended June 30, 1997 reflect
FIR's results of operations for the six months ended April 30, 1997. The pro
forma adjustments are described in the accompanying notes. The Unaudited Pro
Forma Financial Information is presented for informational purposes only and
does not purport to represent what the Company's financial position or
results of operations would actually have been if the aforementioned events
had occurred on the dates specified or to project the Company's financial
position or results of operations at any future date or for any future
periods. The Unaudited Pro Forma Financial Information should be read in
conjunction with the Company's historical consolidated financial statements,
and the notes thereto, included elsewhere herein.
P-1
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AT JUNE 30, 1997
----------------------------------------------------------------------------------
JTP JII DISPOSITIONS PRO
HISTORICAL OFFERING (1) OFFERING (9) OTHER FORMA
------------ ------------ --------------- -------------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................... $ 30,887 $286,045 $(270,368)(2) $ (1,019) $ 25,704 (10)$ 71,249
Trade and other receivables-net .............. 107,122 0 0 (1,123) (1,482)(11) 104,517
Inventories .................................. 111,372 0 0 0 0 111,372
Prepaid expenses and other current assets ... 13,876 0 0 124 0 14,000
------------ ------------ --------------- -------------- -------------- -------
Total current assets ....................... 263,257 286,045 (270,368) (2,018) 24,222 301,138
Property and equipment, net .................. 100,079 0 0 (597) 0 99,482
Other assets ................................. 368,596 9,000 (1,379)(3) (10,059) (14,222)(12) 351,936
------------ ------------ --------------- -------------- -------------- -------
Total assets ............................... $ 731,932 $295,045 $(271,747) $(12,674) $ 10,000 $ 752,556
============ ============ =============== ============== ============== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ........................... $ 109,250 0 $ (12,964)(4) $ (1,018) 0 $ 95,268
Current portion of long-term obligations ..... 8,530 0 (4,188)(5) 0 0 4,342
Long-term obligations:
Old Credit Agreements ........................ 131,041 -- (81,041)(5) 0 0 50,000
Old Senior Notes ............................. 275,000 -- (271,595)(6) -- -- 3,405
M&G Senior Notes ............................. 170,000 -- -- -- -- 170,000
Old Discount Debentures....................... 124,507 -- -- -- -- 124,507
New Credit Agreements ........................ 0 0 0 0 0 0
New Senior Notes ............................. 0 -- 120,000 (7) -- -- 120,000
New JTP Senior Notes ......................... -- 188,511 -- -- -- 188,511
New JTP Discount Debentures................... 0 85,034 -- -- -- 85,034
Other debt ................................... 43,917 0 0 (2,500) 0 41,417
------------ ------------ --------------- -------------- -------------- -------
Total long-term obligations................... 744,465 273,545 (232,636) (2,500) 0 782,874
Other non-current liabilities and deferred
income taxes.................................. 14,236 0 0 (96) 0 14,140
JTP Senior Preferred Stock .................... 0 25,000 25,000
M&G Preferred Stock ........................... 1,515 -- -- -- -- 1,515
Stockholders' equity (net capital deficiency) (146,064) (3,500) (21,959)(8) (9,060) 10,000 (13)(170,583)
------------ ------------ --------------- -------------- -------------- -------
Total liabilities and stockholders' equity . $ 731,932 $295,045 $(271,747) $(12,674) $ 10,000 $ 52,556
============ ============ =============== ============== ============== ======
</TABLE>
- ------------
(1) Reflects the effects of the JTP Offering including the recording of
the proceeds from the JTP Offering, the capitalization of fees
associated with the JTP Offering, the issuance of the New JTP Senior
Notes, the New JTP Debentures and the New JTP Senior Preferred Stock.
Total fees of $14.5 million related to the JTP Offering have been
allocated to other assets, $9.0 million, and net capital deficiency
$5.5 million. The net capital deficiency related to the JTP Offering
of ($3.5 million) represents the difference between the $5.5 million
of fees allocated to net capital deficiency and $2.0 million of cash
proceeds from the sale of an aggregate of 999,500 shares of JTP
common stock to the Jordan Group, management of JTP, the purchasers
of the JTP Preferred Stock Units and Jefferies.
(2) Reflects the repayment of the Old Credit Agreements, $85.2 million,
the repurchase of the Old Senior Notes including accrued interest,
$284.6 million, the payment of the tender premium, $13.6 million, the
payment of fees incurred in connection with the Offering, $7.0
million offset by the proceeds from the Offering $120.0 million.
(3) Reflects the recording of fees paid in connection with the Offering
$7.0 million offset by the write off of deferred financing fees in
connection with the repayment of the Old Credit Agreements, $8.4
million.
(4) Reflects the payment of accrued interest on the Old Credit Agreements
and the Old Senior Notes.
(5) Reflects the repayment of the current and long term principal of the
Old Credit Agreements.
(6) Reflects the repayment of the principal portion of the Old Senior
Notes.
(7) Reflects the proceeds from the Offering.
(8) Reflects the payment of the tender premium, $13.6 million, and the
write off of deferred financing fees in connection with the repayment
of the Old Credit Agreement, $8.4 million.
(9) Reflects the disposition of Paw Print which was sold to an affiliate
on July 31, 1997.
(10) Reflects the proceeds from the sale of Paw Print, $10.0 million and
the proceeds from the sale of a portion of the Company's investment
in Fannie May, $15.7 million. In July 1997, Fannie May repurchased
from the Company it's Subordinated Notes and term loans including all
accrued interest.
(11) Reflects the receipt of interest receivable recorded in connection
with the Company's investment in Fannie May.
(12) Reflects the reduction of the Company's investment in Fannie May in
connection with the Fannie May Refinancing.
(13) Reflects the proceeds from the sale of Paw Print.
P-2
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------
PRO FORMA PRO
HISTORICAL ACQUISITIONS(1) DISPOSITIONS(2) ADJUSTMENTS FORMA
------------ --------------- --------------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $601,567 $142,905 $(98,969) $ 4,298 (3) $649,801
Cost of sales, excluding depreciation . 375,745 91,566 (58,885) 1,288 (4) 409,714
Selling, general and administrative
expenses, excluding depreciation ..... 150,951 23,305 (40,568) (6,596)(5) 127,092
Depreciation and amortization.......... 30,438 5,219 (3,048) 0 32,609
SAR expenses........................... 9,822 0 0 (9,822)(6) 0
Restructuring charges.................. 8,106 0 (8,106) 0 0
Other non-recurring charges............ 4,136 0 0 2,684 (7) 6,820
Advisory fees and other, net........... 4,489 73 (711) 140 (8) 3,991
Other (income) and expense ............ 4,488 0 0 (4,488)(9) 0
------------ --------------- --------------- ------------- -----------
Operating income....................... 13,392 22,742 12,349 21,092 69,575
Interest expense, net ................. 60,802 4,585 (1,794) 18,710 (10) 82,303
Other (income) expense ................ 0 770 (3,277) 2,989 482
------------ --------------- --------------- ------------- -----------
Income (loss) before income taxes
minortiy interest and equity in
investee ............................. (47,410) 17,387 17,420 (607) (13,210)
Income taxes (credits) ................ 4,415 884 (2,272) (70)(11) 2,957
Minority interest...................... 59 372 0 (11)(12) 420
Equity in investee..................... 0 0 0 13,424 (13) 13,424
------------ --------------- --------------- ------------- -----------
Net income (loss) before extraordinary
items................................. (51,884) 16,131 19,692 (13,950) (30,011)
Extraordinary items.................... 3,806 0 0 (3,806)(14) 0
------------ --------------- --------------- ------------- -----------
Net income (loss)...................... $(55,690) $ 16,131 $ 19,692 $(10,144) $(30,011)
============ =============== =============== ============= ===========
OTHER DATA:
Adjusted operating income(15).......... $ 29,367 $ 22,742 $ (3,626) $ 21,092 $ 69,575
EBITDA................................. 80,507 (16) 28,034 484 5,097 114,122
Capital expenditures................... 17,395 2,325 (1,747) 0 17,973
Cash interest expense(17).............. 48,352 4,611 (1,800) 5,873 57,036
Senior Preferred Stock dividends(18) . -- -- -- 3,481 3,481
</TABLE>
- ------------
(footnotes on following page)
P-3
<PAGE>
(1) Represents the results of operations of Bond, Diversified, Johnson,
LoDan, Northern, Viewsonics, Vitelec, Seaboard, Cape, Arnon Caine and
FIR prior to their acquisition by JII or its Subsidiary. The results
of operations also include purchase accounting adjustments for
additional depreciation and amortization related to the write up of
property and equipment and the excess of purchase price over the
value of the net assets acquired (goodwill).
(2) Reflects the disposition of Hudson and Paw Print which were sold in
May 1997 and July 1997 respectively, and the deconsolidation of
Welcome Home.
(3) Includes the recognition of previously eliminated sales between Cape
and Welcome Home, $5.7 million, offset by the elimination of sales
relating to Dura-Line's divested Retube product line, $1.4 million.
Due to the deconsolidation of Welcome Home, sales between Cape and
Welcome Home, which were initially treated as intercompany, and
eliminated in consolidation, are now treated as third party sales.
(4) Reflects the recognition of costs associated with sales between Cape
and Welcome Home, $4.9 million, offset by the elimination of
nonrecurring purchase accounting adjustments to the inventories of
Seaboard, $0.9 million and Viewsonics, $1.9 million, and the
elimination of the costs relating to Dura-Line's divested Retube
product line, $0.8 million.
(5) Adjustments to "Selling, general and administrative expenses"
include: (i) the reclassification to "Advisory fees and other"
expenses relating to start-up of new facilities in Mexico, India,
China, Malaysia and Spain of $1.6 million, (ii) the elimination of
expenses relating to Dura-Line's divested Retube product line of $0.8
million, (iii) the reduction in expenses of $0.4 million as a result
of completed headcount reductions and administrative savings
recognized in connection with the Company's acquisition of
Barber-Colman, (iv) the reclassification to "Other non-recurring
charges," of $3.3 million related to certain transaction-based
bonuses and other nonrecurring charges and expense and (v) the
elimination of $0.5 million related to the closing of a facility.
(6) Reflects the elimination of nonrecurring SAR and other compensation
payments to the management and prior owners of certain subsidiaries.
(7) Reflects the reclassification of certain transaction-based bonuses
and nonrecurring charges and expenses from "Selling, general and
administrative expenses" in the amount of $3.3 million, offset by the
elimination of certain corporate charges consisting of $0.7 million
related to nonrecurring legal and accounting charges.
(8) Reflects the reclassification from "Selling, general and
administrative expenses" of $1.6 million relating to the startup of
new facilities in Mexico, India, China, Malaysia and Spain,
additional expense related to non competition payments paid to the
partners of Dura-Line's Czech Republic joint venture of $0.4 million,
and the implementation of directors fees of $0.1 million for the
directors of JTP, partially offset by the elimination of nonrecurring
legal fees related to Welcome Home of $0.6 million, the recording of
$1.0 million for consulting services rendered in connection with the
sale of Hudson and the elimination of $0.3 million of non-recurring
compensation expense related to AIM Electronics.
(9) Reflects the elimination of the Company's loss on the purchase of
Cape Craftsmen.
(10) Reflects (i) additional interest expense of $9.2 million related to
the M&G Senior Notes offering, (ii) incremental interest expense of
$7.5 million related to the Plan and (iii) the elimination of $1.8
million of interest income earned by the Company on its investment in
Fannie May.
(11) Reflects adjustment for state and local income taxes. No provision
for federal income taxes has been recorded due to the fact that the
Company anticipates that it will be recording a pre-tax loss for the
periods presented, and, if the Company's results generate pre-tax
income, it will have sufficient net operating loss carry-forwards to
offset any federal tax liability.
(12) Reflects adjustment to accurately reflect the Company's minority
interest in relation to certain Acquisitions.
(13) Reflects the Company's equity in the earnings of its majority-owned
subsidiary, Welcome Home. As a result of Welcome Home's bankruptcy
filing, the Company no longer has the ability to control the
P-4
<PAGE>
operations and financial affairs of Welcome Home. Accordingly, the
Company records the results of Welcome Home under the equity method
of accounting for its consolidated financial statements. The "Equity
in Investee" represents the Company's ownership percentage multiplied
by Welcome Home's net loss for the period presented.
(14) Represents the write-off of deferred financing fees as a result of
the M&G Senior Notes offering.
(15) Adjusted operating income reflects operating income excluding the
results of Welcome Home, which is no longer consolidated with the
Company.
(16) EBITDA reflects adjusted operating income plus (i) historical
depreciation and amortization net of the portion attributed to
Welcome Home of $28.3 million, (ii) SAR expense of $9.8 million,
(iii) loss on purchase of affiliated company of $4.5 million, (iv)
advisory fees and other expenses net of the portion attributable to
Welcome Home of $4.4 million, and (v) other non-recurring items of
$4.1 million consisting of $1.9 million relating to the international
expansion of Dura-line, $0.7 million of certain unusual corporate,
legal and accounting charges and $1.5 million of certain non-cash
charges.
(17) Historical cash interest expense reflects total interest expense less
$12.0 million of non-cash interest expense relating to the Company's
Discount Debentures and $3.0 million of amortization of deferred
financing fees. Pro forma cash interest expense reflects total
interest expense less $22.3 million of non-cash interest expense
relating to the Company's Discount Debentures and the JTP Discount
Notes, $2.6 million of amortization of deferred financing fees, $0.1
million of amortization of the original issue discount recorded in
connection with the JTP Offering and $0.8 million of amortization of
the premium paid by the Company for the Old Discount Debentures
Offering.
(18) Reflects paid-in-kind ("PIK") dividends on the JTP Senior Preferred
Stock assuming a PIK Dividend rate of 13.25%.
P-5
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
----------------------------------------------------------------------
PRO FORMA PRO
HISTORICAL ACQUISITIONS(1) DISPOSITIONS(2) ADJUSTMENTS FORMA
------------ --------------- --------------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATION DATA:
Net sales............................. $324,889 $27,452 $(17,346) $ (1,599)(3) $333,396
Cost of sales, excluding
depreciation......................... 203,059 19,759 (11,477) (1,188)(4) 210,153
Selling, general and administrative
expenses, excluding depreciation .... 67,802 3,293 (2,943) (1,817)(5) 66,335
Depreciation and amortization......... 15,933 1,692 (875) 0 16,750
SAR expenses.......................... 15,418 0 0 (15,418)(6) 0
Restructuring charges................. 0 0 0 0 0
Other non-recurring charges........... 0 0 0 0 0
Advisory fees and other............... 1,500 (3) (65) 569 (7) 2,001
Other (income) and expense............ 0 0 0 0 0
------------ --------------- --------------- ------------- -----------
Operating income...................... 21,177 2,711 (1,986) 16,255 38,157
Interest expense, net................. 36,169 2,250 (136) 4,049 (8) 42,332
Other (income) and expense............ (18,012) 422 (1,028) 19,658 (9) 1,040
------------ --------------- --------------- ------------- -----------
Income (loss) before income taxes
minority interest and equity in
investee............................. 3,020 39 (822) (7,452) (5,215)
Income taxes (credits)................ 1,200 302 (195) (107) (10) 1,200
Minority interest..................... 764 0 0 115 (11) 879
Equity in investee.................... 4,168 0 0 0 4,168
------------ --------------- --------------- ------------- -----------
Net income (loss) before
extraordinary items.................. (3,112) (263) (627) (7,460) (11,462)
Extraordinary items................... 9,363 0 0 (9,363) (12) 0
------------ --------------- --------------- ------------- -----------
Net income (loss) .................... $(12,475) $ (263) $ (627) $ 1,903 $(11,462)
============ =============== =============== ============= ===========
OTHER DATA:
Adjusted operating income (13) ....... $ 22,284 $ 2,711 $ (1,986) $ 15,148 $ 38,157
EBITDA................................ 54,951 (14) 4,400 (2,926) 928 57,353
Capital expenditures.................. 5,758 596 0 0 6,354
Cash interest expense (15)............ 29,145 2,250 (156) (1,750) 29,489
Senior Preferred Stock dividend (16) . -- -- -- 1,684 1,684
</TABLE>
- ------------
(footnotes on following page)
P-6
<PAGE>
(1) Reflects the results of operations for LoDan and FIR prior to their
acquisitions by JII or its subsidiary. The results of operations also
include purchase accounting adjustments for additional depreciation
and amortization related to the write up of property and equipment
and the excess of purchase price over the value of the net assets
acquired (goodwill).
(2) Reflects the disposition of Hudson and Paw Print which were sold in
May 1997 and July 1997 respectively, and the deconsolidation of
Welcome Home's operating results for the period ended January 21,
1997.
(3) Reflects the elimination of sales relating to Dura-Line's divested
Retube product line.
(4) Reflects the elimination of cost relating to Dura-Line's divested
Retube product line, $1.0 million and the elimination of non
recurring purchase accounting adjustments to the inventories of
Viewsonics, $0.2 million.
(5) Reflects the elimination of costs relating to Dura-Line's divested
Retube product line of $0.7 million, and the reclassification to
"Advisory fees and other" operating expenses relating to the start up
of new facilities in Mexico, India, China, Malaysia and Spain of $0.7
million and non compete payments paid to the partners of Dura-Line's
Czech Republic joint venture of $0.4 million.
(6) Reflects the elimination of non-recurring SAR and other compensation
payments made to the management and prior owners of certain
subsidiaries.
(7) Reflects the reclassification from "Selling, general and
administrative expenses," cost relating to the start up of new
facilities in Mexico, India, China, Malaysia and Spain of $0.7
million, additional expenses related to the implementation of
directors fees at JTP of $0.1 million, and non competition payments
paid to the partners of Dura-Line's Czech Republic joint venture of
$0.4 million, partially offset by the recording of $0.5 million for
consulting services rendered in connection with the sale of Hudson.
(8) Reflects additional interest expense related to the Plan of $3.1
million and the elimination of $0.8 million of interest earned by the
Company on its investment in Fannie May.
(9) Reflects the elimination of the $18.5 million gain recorded on the
sale of Hudson and the elimination of $1.2 million of intercompany
interest income recorded in connection with the dispositions.
(10) Reflects adjustment for state and local income taxes. No provision
for federal income taxes has been recorded due to the fact that the
Company anticipates that it will be recording a pre-tax loss for the
periods presented, and, if the Company's results generate pre-tax
income, it will have sufficient net operating loss carry-forwards to
offset any federal tax liability.
(11) Reflects the Company's minority interest recorded in relation to
certain of the Acquisitions.
(12) Reflects the write off of deferred financing fees related to the 11
3/4 Senior Subordinated Discount Debentures due 2005, $2.2 million,
the payment of the premium incurred by the Company for the Old
Discount Debentures Offering, $6.6 million, and the expenses related
to a flood at Dura-Line's Reno, NV facility, $0.5 million.
(13) Adjusted operating income reflects operating income excluding the
results of Welcome Home, which is no longer consolidated with the
Company.
(14) EBITDA reflects adjusted operating income plus (i) historical
depreciation and amortization net of the portion attributed to
Welcome Home of $15.8 million, (ii) SAR expense of $15.5 million, and
(iii) advisory fees and other expenses net of the portion
attributable to Welcome Home of $1.4 million.
(15) Historical cash interest expense reflects total interest expense less
$6.8 million of non-cash interest expense relating to the Company's
Discount Debentures and $1.9 million of amortization of deferred
financing fees. Pro forma cash interest expense reflects total
interest expense less $11.8 million of non-cash interest expense
relating to the Company's Discount Debentures and the JTP Discount
Notes, $1.3 million of amortization of deferred financing fees, $0.1
million of amortization of the original issue discount recorded in
connection with the JTP Offering and $0.4 million of amortization of
the premium paid by the Company for the Old Discount Debentures
Offering.
(16) Reflects paid-in-kind ("PIK") dividends on the JTP Senior Preferred
Stock assuming a PIK dividend rate of 13.25%.
P-7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Jordan Industries, Inc.
We have audited the accompanying consolidated balance sheets of Jordan
Industries, Inc. as of December 31, 1995 and 1996, and the related
consolidated statements of operations, shareholders' equity (net capital
deficiency), and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of certain subsidiaries whose statements reflect total assets
constituting 5% in 1996, and net sales constituting 3% in 1996 of the related
consolidated totals. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to
data included for these subsidiaries, is based solely on the reports of the
other auditors.
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 and the reports
of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Jordan Industries, Inc. at
December 31, 1995 and 1996, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
March 27, 1997
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Diversified Wire & Cable, Inc.
Troy, Michigan
We have audited the accompanying balance sheet of Diversified Wire & Cable,
Inc. as of December 31, 1996 and the related statement of operations, changes
in stockholders' equity and cash flows for the period June 25, 1996
(Commencement of Operations) through December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our 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 Diversified Wire & Cable,
Inc. as of December 31, 1996, and the results of its operations, the changes
in stockholders' equity and its cash flows for the period June 25, 1996
through December 31, 1996 in conformity with generally accepted accounting
principles.
Bingham Farms, Michigan
February 13, 1997
/s/ Mellen, Smith & Pivoz, P.C.
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Paw Print Mailing List Services, Inc.
Elk Grove Village, Illinois
We have audited the accompanying balance sheet of PAW PRINT MAILING LIST
SERVICES, INC. as of December 31, 1996 and the related statements of loss and
accumulated deficit and cash flows for the period from November 9, 1996
(inception) through December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our 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 PAW PRINT MAILING LIST
SERVICES, INC. as of December 31, 1996, and the results of its operations and
its cash flows for the period from November 9, 1996 (inception) through
December 31, 1996 in conformity with generally accepted accounting
principles.
Chicago, Illinois
February 11, 1997
/s/ Blackman, Kallick
Bartelstein, LLP
F-3
<PAGE>
JORDAN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
---------- -----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
ASSETS
- ------------------------------------------------------------------
Current assets:
Cash and cash equivalents ........................................ $ 41,253 $ 32,797
Accounts receivable, net of allowance of $1,306 and $2,683
in 1995 and 1996, respectively .................................. 72,324 89,301
Inventories ...................................................... 84,259 108,132
Prepaid expenses and other current assets ........................ 7,566 9,703
---------- -----------
Total current assets ............................................ 205,402 239,933
Property, plant and equipment, net ................................ 91,422 111,040
Investments in and advances to affiliates ......................... 23,087 14,222
Goodwill, net ..................................................... 183,441 266,436
Other assets....................................................... 29,032 50,254
---------- -----------
Total assets..................................................... $532,384 $ 681,885
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
- ------------------------------------------------------------------
Current liabilities:
Notes payable and lines of credit ................................ $ 526 $ 856
Accounts payable ................................................. 49,086 47,036
Accrued liabilities .............................................. 26,867 57,910
Advance deposits ................................................. 1,830 1,900
Current portion of long-term debt ................................ 11,705 8,752
---------- -----------
Total current liabilities ....................................... 90,015 116,454
Long-term debt .................................................... 513,690 687,936
Other noncurrent liabilities ...................................... 2,402 3,572
Deferred income taxes ............................................. -- 1,444
Minority interest.................................................. 757 885
Shareholders' equity (net capital deficiency):
7% cumulative preferred stock at liquidation value of $10,000
per share: issued and outstanding--187.5 shares.................. 1,875 1,875
Common stock $.01 par value: authorized--100,000 shares
issued and outstanding--93,501shares in 1995 and 95,001
shares in 1996 ................................................... 1 1
Additional paid-in capital ........................................ 1,097 2,557
Note receivable from officer ...................................... -- (1,460)
Retained earnings (accumulated deficit) ........................... (77,452) (131,379)
---------- -----------
Total shareholders' equity (net capital deficiency) ............. (74,479) (128,406)
---------- -----------
Total liabilities and shareholders' equity (net capital
deficiency)..................................................... $532,384 $ 681,885
========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
JORDAN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales ............................................ $424,391 $507,311 $601,567
Cost of sales, excluding depreciation ................ 262,730 320,653 375,745
Selling, general and administrative expense ......... 97,428 121,371 150,951
Depreciation ......................................... 10,568 12,891 18,939
Amortization of goodwill and other intangibles ...... 8,531 8,793 11,499
Stock appreciation right and compensation agreements -- 400 9,822
Loss on purchase of an affiliated company ............ -- -- 4,488
Management fees and other ............................ 2,190 3,914 4,489
Restructuring charges ................................ -- 5,913 8,106
Other non-recurring charges .......................... -- 1,016 4,136
---------- ---------- ----------
Operating income...................................... 42,944 32,360 13,392
Other (income) and expenses:
Interest expense .................................... 40,877 46,974 63,340
Interest income ..................................... (1,042) (2,841) (2,538)
Interest income from affiliate ...................... (429) -- --
Gain on sale of a partial interest in a subsidiary . (24,161) -- --
---------- ---------- ----------
Total other expenses................................ 15,255 44,133 60,802
---------- ---------- ----------
Income (loss) before income taxes, minority interest
and extraordinary item ............................. 27,689 (11,773) (47,410)
Provision (benefit) for income taxes................. 1,332 (2,446) 4,415
---------- ---------- ----------
Income (loss) before minority interest and
extraordinary item ................................. 26,357 (9,327) (51,825)
Minority interest ................................... 2,616 (1,857) 59
---------- ---------- ----------
Income (loss) before extraordinary item ............. 23,741 (7,470) (51,884)
Extraordinary loss .................................. -- -- 3,806
---------- ---------- ----------
Net income (loss) .................................. $ 23,741 $ (7,470) $(55,690)
========== ========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE>
JORDAN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
(Dollars in Thousands)
<TABLE>
<CAPTION>
TOTAL SHARE-
RETAINED HOLDERS'
7% CUMULATIVE NOTE EARNINGS EQUITY
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE (ACCUM- (NET
PAID-IN FROM ULATED CAPITAL
----------------- --------------------- CAPITAL OFFICER DEFICIT) DEFICIENCY)
NUMBER NUMBER
OF OF
SHARES AMOUNT SHARES AMOUNT
- ----------------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 .. 187.5 $1,875 93,501 $ 1 $1,097 $ -- $ (93,642) $ (90,669)
Net income .................. -- -- -- -- -- -- 23,741 23,741
Cumulative translation
adjustment ................ -- -- -- -- -- -- 201 201
Dividends declared on
preferred stock of
subsidiary ................ -- -- -- -- -- -- (140) (140)
-------- -------- -------- -------- ------------ ------------ ------------ --------------
Balance at December 31, 1994 187.5 1,875 93,501 1 1,097 -- (69,840) (66,867)
Net loss .................... -- -- -- -- -- -- (7,470) (7,470)
Cumulative translation
adjustment ................. -- -- -- -- -- -- (97) (97)
Dividends declared on
preferred stock of
subsidiary.................. -- -- -- -- -- -- (45) (45)
-------- -------- -------- -------- ------------ ------------ ------------ --------------
Balance at December 31, 1995 187.5 1,875 93,501 1 1,097 -- (77,452) (74,479)
Net loss .................... -- -- -- -- -- -- (55,690) (55,690)
Cumulative translation
adjustment ................ -- -- -- -- -- -- 1,763 1,763
Common stock issuance ..... -- -- 1,500 -- 1,460 (1,460) -- --
-------- -------- -------- -------- ------------ ------------ ------------ --------------
Balance at December 31, 1996 187.5 $1,875 95,001 $ 1 $2,557 $(1,460) $(131,379) $(128,406)
======== ======== ======== ======== ============ ============ ============ ==============
</TABLE>
See accompanying notes.
F-6
<PAGE>
JORDAN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................... $ 23,741 $ (7,470) $ (55,690)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gain on sale of a partial interest in a subsidiary (24,161) -- --
Restructuring charges ............................. -- 5,913 8,106
Other non-recurring charges ....................... -- 1,016 --
Amortization of deferred financing costs ......... 1,405 1,743 3,001
Depreciation and amortization ..................... 19,099 21,684 30,438
Provision for (benefit from) deferred income taxes (962) (4,247) 2,184
Loss on acquisition of affiliated company ........ -- -- 4,488
Minority interest ................................. 2,616 (1,857) 59
Extraordinary loss ................................ -- -- 3,806
Non-cash interest.................................. 9,544 10,694 11,987
Changes in operating assets and liabilities
(net of acquisitions):
Accounts receivable ............................... (6,362) (8,084) 13,894
Inventories ....................................... (13,394) (5,430) 796
Prepaid expenses and other current assets ........ (1,317) (170) (851)
Non-current assets................................. (2,495) (2,020) (1,071)
Accounts payable, accrued liabilities, and other
current liabilities .............................. 9,247 3,856 2,560
Advance deposits .................................. 303 169 69
Non-current liabilities ........................... -- 679 (526)
Other ............................................. (82) (266) (146)
---------- ----------- -----------
Net cash provided by operating activities .......... 17,182 16,210 23,104
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................... (12,112) (15,276) (17,395)
Notes receivable from affiliates ................... (2,254) (13,424) (5,263)
Acquisitions of subsidiaries ....................... (35,872) (102,125) (150,360)
Cash acquired in purchase of subsidiaries .......... 953 696 5,869
Net proceeds from sale of a partial interest in a
subsidiary ........................................ 26,544 -- --
Acquisitions of minority interests and other ...... (2,143) (6,117) (81)
Investment in Fannie May Holdings .................. -- (1,722) --
Proceeds from asset sale ........................... -- 732 --
---------- ----------- -----------
Net cash used in investing activities .............. (24,884) (137,236) (167,230)
</TABLE>
(Continued on Following Page)
See accompanying notes.
F-7
<PAGE>
JORDAN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of debt issuance--SPL Holdings, Inc. ..... $ -- $ 33,000 $ 13,000
Proceeds of debt issuance--MK Holdings, Inc. ...... -- 72,500 20,000
Proceeds of debt issuance--Motors and Gears, Inc. . -- -- 170,000
Proceeds from revolving credit facilities, net .... -- 7,213 40,909
Payment of financing costs ......................... (1,561) (2,322) (11,858)
Repayment of long-term debt ........................ (2,624) (6,020) (98,143)
Other borrowing .................................... -- 1,522 2,107
---------- ---------- ----------
Net cash (used in) provided by financing activities (4,185) 105,893 136,015
Foreign currency translation ....................... -- -- (345)
---------- ---------- ----------
Net decrease in cash and cash equivalents ......... (11,887) (15,133) (8,456)
Cash and cash equivalents at beginning of year .... 68,273 56,386 41,253
---------- ---------- ----------
Cash and cash equivalents at end of year .......... $ 56,386 $ 41,253 $ 32,797
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ......................................... $ 29,839 $ 33,360 $ 45,563
========== ========== ==========
Income taxes, net ................................ $ 2,213 $ 1,801 $ 2,603
========== ========== ==========
Noncash investing activities:
Capital leases.................................... $ 7,422 $ 19,151 $ 5,543
========== ========== ==========
</TABLE>
See accompanying notes.
F-8
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(Dollars in Thousands)
NOTE 1 -- ORGANIZATION
Jordan Industries, Inc. (the Company), an Illinois corporation, was formed
by Chicago Group Holdings, Inc. on May 26, 1988 for the purpose of combining
into one corporation certain companies in which partners and affiliates of
The Jordan Company (the Jordan Group) acquired ownership interests through
leveraged buy-outs. Chicago Group Holdings, Inc. was formed on February 8,
1988 and had no operations. The Company was merged with Chicago Group
Holdings, Inc. on May 31, 1988 with the Company being the surviving company.
The Company's business is divided into five groups. The Specialty Printing
and Labeling group consists of Sales Promotion Associates, Inc. ("SPAI"),
Valmark Industries, Inc. ("Valmark"), Pamco Printed Tape and Label Co., Inc.
("Pamco") and Seaboard Folding Box, Inc. ("Seaboard"). The Motors and Gears
group consists of The Imperial Electric Company ("Imperial") and its
subsidiaries, The Scott Motors Company ("Scott") and Gear Research, Inc.
("Gear"), and Merkle-Korff Industries, Inc. ("Merkle-Korff"), which consists
of Merkle-Korff, Inc. and Barber-Colman Motors, Inc. ("Barber-Colman"). The
Telecommunications Products Group consists of Dura-Line Corporation
("Dura-Line"), AIM Electronics Corporation ("AIM"), Cambridge Products
Corporation ("Cambridge"), Johnson Components, Inc. ("Johnson"), Diversified
Wire and Cable, Inc. ("Diversified"), Viewsonics, Inc. ("Viewsonics"),
Vitelec Electronics Ltd. ("Vitelec"), Bond Holdings, Inc. ("Bond"), and
Northern Technologies, Inc. ("Northern"). Welcome Home, Inc. ("Welcome Home")
is managed on a stand-alone basis and the remaining businesses comprise the
Company's Consumer and Industrial Products group. This group consists of
DACCO, Incorporated ("DACCO"), Sate-Lite Manufacturing Company ("Sate-Lite"),
Riverside Book and Bible House, Inc. ("Riverside"), Parsons Precision
Products, Inc. ("Parsons"), Hudson Lock, Inc. ("Hudson"), Beemak Plastics,
Inc. ("Beemak"), Cape Craftsmen, Inc. ("Cape"), and Paw Print Mailing
Services, Inc. ("Paw Print"). All of the foregoing corporations are
collectively referred to herein as the "Subsidiaries," and individually as a
"Subsidiary."
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated.
Inventories
Inventories are stated at the lower of cost or market. Inventories are
primarily valued at either average or first-in, first-out (FIFO) cost.
Depreciation and Amortization
Property, Plant and Equipment -- Depreciation and amortization of
property, plant and equipment is calculated using estimated useful lives, or
over the life of the underlying leases, if less, using the straight-line
method.
The useful lives of plant and equipment for the purpose of computing book
depreciation are as follows:
<TABLE>
<CAPTION>
<S> <C>
Machinery and equipment ........3-10 years
Buildings and improvements ....7-35 years
Furniture & fixtures ...........5-10 years
Leaseholds .....................Life of Lease
</TABLE>
F-9
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill -- Goodwill is being amortized on the straight-line basis over
periods ranging from 15 to 40 years. Goodwill at December 31, 1995 and 1996
is net of accumulated amortization of $15,845, and $22,765, respectively.
Other Assets
Patents are amortized over the remainder of their legal lives, which
approximate their useful lives, on the straight-line basis. Deferred
financing costs amounting to $9,703 and $23,008, net of accumulated
amortization of $3,686 and $6,317 at December 31, 1995 and 1996,
respectively, are amortized over the terms of the loans or, if shorter, the
period such loans are expected to be outstanding. Non-compete covenants and
customer lists amounting to $5,705 and $9,518, net of accumulated
amortization of $42,648 and $44,626 at December 31, 1995 and 1996,
respectively, are amortized on the straight-line basis over their estimated
useful lives, ranging from three to ten years. Organizational costs are
amortized over five years.
Adoption of FAS 121
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 ("FAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
FAS 121 requires, among other things, that the Company consider whether
indicators of impairment of long-lived assets held for use are present, that
if such indicators are present the Company determine whether the sum of the
estimated undiscounted future cash flows attributable to such assets is less
than their carrying amount, and if so, that the Company recognize an
impairment loss based on the excess of the carrying amount of the assets over
their fair value.
The Company adopted the provisions of FAS 121 in the fourth quarter of
1995. Accordingly, the Company evaluated the ongoing value of its long-lived
assets as of December 31, 1995, and December 31, 1996. It was determined that
in 1995, Welcome Home had certain leasehold improvements and furniture and
fixtures located in unprofitable stores with carrying values of $1,016 that
were impaired and that given the nature of such items, their estimated fair
value was insignificant. Accordingly, Welcome Home recorded an impairment
loss on such assets in the fourth quarter of 1995 of $1,016. This amount is
included in "other non-recurring charges" in the 1995 consolidated statement
of operations. The Company determined that an impairment loss was not
incurred on long-lived assets for the year ended December 31, 1996, and
therefore no such loss has been recorded during 1996. See Note 4 related to
the Welcome Home restructuring.
Income Taxes
The Company provides for deferred income taxes as temporary differences
arise in recording income and expenses between financial reporting and tax
reporting. The Company has not provided for U.S. Federal and State Income
Taxes on undistributed earnings of foreign subsidiaries to the extent the
undistributed earnings are considered to be permanently reinvested.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents.
At December 31, 1996, the Company's cash balance included $1,550 which is
being held as collateral with respect to a capital lease. A certain cash
balance is required to remain intact throughout the term of the lease which
expires on November 17, 1998. An additional $3,000 is being held as
collateral with regard to the Company's investment in Fannie May.
F-10
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassification
Certain amounts in the 1995 financial statements have been reclassified to
conform with the presentation in 1996.
Realignment of Segment Reporting
In 1995, The Company's business segments were realigned into five distinct
groups. In 1996, Dura-Line was moved from the Consumer and Industrial
Products segment to the Telecommunications Products segment. Prior period
results were also realigned into these new groups in order to provide
accurate comparisons between periods.
NOTE 3 -- WELCOME HOME CHAPTER 11 FILING
On January 21, 1997, Welcome Home filed a voluntary petition for relief
under Chapter 11 ("Chapter 11") of title 11 of the United States code in the
United States Bankruptcy Court for the Southern District of New York
("Bankruptcy Court"). In Chapter 11, Welcome Home will continue to manage its
affairs and operate its business as a debtor-in-possession while it develops
a reorganization plan that will restructure its operations and allow it to
emerge from Chapter 11. As a debtor-in-possession in Chapter 11, Welcome Home
may not engage in transactions outside of the ordinary course of business
without approval of the Bankruptcy Court.
Subsequent to the filing, Welcome Home reached an agreement with Fleet
Capital Corporation to provide secured debtor-in-possession financing in the
form of a credit facility. The credit facility provides for borrowings
dependent upon Welcome Home's level of inventory with maximum borrowings of
$12,750. The agreement grants a security interest in substantially all
assets. Advances under the facility bear interest at the prime rate plus
1.5%. The agreement will terminate on March 31, 1998.
As a result of Welcome Home's Chapter 11 filing, the Company no longer has
the ability to control the operations and financial affairs of Welcome Home.
Accordingly, the Company will no longer consolidate Welcome Home in its
financial statements as of January 21, 1997, the date of the filing.
The operating results of Welcome Home included in the consolidated results
of the Company over the last three years are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- ---------- ----------
<S> <C> <C> <C>
Net sales ........................ $81,654 $ 93,166 $ 81,855
Operating income ................. 7,076 (10,066) (15,975)
Income (loss) before income
taxes............................ 4,836 (11,586) (18,154)
</TABLE>
F-11
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 3 -- WELCOME HOME CHAPTER 11 FILING (Continued)
The assets and liabilities of Welcome Home included in the consolidated
results of the Company at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents .............................. $ 612
Inventories ............................................ 16,291
Prepaids and other assets .............................. 575
Property and equipment, net ............................ 8,563
Other assets............................................ 222
----------
Total assets........................................... 26,263
Accounts payable ....................................... 4,104
Accrued expenses ....................................... 7,723
Intercompany payable to the Company .................... 15,622
Credit line ............................................ 10,123
Capital leases.......................................... 927
----------
Total liabilities...................................... 38,499
----------
Excess of liabilities over assets at December 31, 1996 12,236
Elimination of intercompany payables.................... (15,622)
----------
Net assets included at December 31, 1996................ $ 3,386
==========
</TABLE>
The amounts listed in the table do not reflect any adjustments resulting
from the Welcome Home bankruptcy filings. Certain items, however, would be
significantly impacted by a liquidation of Welcome Home. The ultimate
disposition of the amounts are not expected to be finalized until the
resolution of the Welcome Home bankruptcy proceedings, the timing of which
cannot currently be estimated.
Cape Craftsmen, a consolidated subsidiary of the Company, would also be
adversely affected by a liquidation of Welcome Home. Currently 77% of Cape's
sales are to Welcome Home. Net assets included in the consolidated financial
statements are $2.4 million after intercompany eliminations.
NOTE 4 -- RESTRUCTURING CHARGES
In the fourth quarter of 1995, Welcome Home adopted a restructuring plan
which has continued into 1996. The major elements of the plan include a
change in Welcome Home's merchandising strategy and the liquidation of
merchandise which is not consistent with that strategy, closing unprofitable
stores, and strengthening the Company's executive management team and
information systems as necessary to successfully implement the above
strategies.
In 1995, Welcome Home recorded the following restructuring charges:
(i) A charge of $2,379 against its inventory to reflect the reduction in
the value of items owned as of December 31, 1995 which management
determined did not fit with Welcome Home's strategy and, accordingly, were
liquidated at reduced prices in 1996.
(ii) A charge of $2,816 against its recorded investment in its
information systems as of December 31, 1995. Management determined that
these systems would not support its merchandising and other strategies
and, therefore, replaced these systems in 1996.
(iii) A charge of $526 to reflect the cost of planned store closings in
1996, representing primarily its recorded investment in the related
furniture, fixtures and leasehold improvements.
F-12
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 4 -- RESTRUCTURING CHARGES (Continued)
(iv) A charge and accrued liability of $192 related to payments due to a
former executive in accordance with its employment and severance agreement
with that individual.
Restructuring charges incurred in 1996 were primarily due to store
closings. In the fourth quarter of 1996, Welcome Home recorded restructuring
charges of $8,106, of which $872 related to employee contracts, $4,266
related to leases and inventory, and $2,968 related to its investment in
furniture, fixtures, and leasehold improvements.
See Note 3 for further discussion of Welcome Home.
NOTE 5 -- INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1996
--------- ---------
<S> <C> <C>
Raw materials .. $24,251 $ 26,682
Work-in-process 5,968 12,274
Finished goods .. 54,040 69,176
--------- ---------
$84,259 $108,132
========= =========
</TABLE>
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consists of:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1996
---------- ----------
<S> <C> <C>
Land ...................................... $ 4,365 $ 5,079
Machinery and equipment ................... 105,188 136,298
Buildings and improvements ................ 33,844 38,458
Furniture and fixtures .................... 18,995 25,851
---------- ----------
162,392 205,686
Accumulated depreciation and amortization (70,970) (94,646)
---------- ----------
$ 91,422 $111,040
========== ==========
</TABLE>
NOTE 7 -- NOTES RECEIVABLE FROM AFFILIATES AND INVESTMENT IN AFFILIATE
On May 15, 1995, the Company purchased $7,500 aggregate principal amount
of Subordinated Notes and 75.6133 shares of Junior Class A PIK Preferred
Stock of Fannie May Holdings, Inc. ("Fannie May") at face value for $9,071.
The Company also acquired 151.28 shares of Common Stock of Fannie May
(representing 15.1% of the outstanding Common Stock of Fannie May on a fully
diluted basis) for $151. These shares of Fannie May Common Stock were
purchased from the John W. Jordan II Revocable Trust. On June 28, 1995, the
Company purchased from The First National Bank of Chicago $7,000 aggregate
principal amount of participation in term loans of Archibald Candy
Corporation, a wholly owned subsidiary of Fannie May, for $7,000, and agreed
to purchase up to an additional $3,000 aggregate principal amount of such
participation, depending upon the financial performance of Fannie May. The
additional $3,000 obligation is secured by a pledge from the Company with a
$3,000 certificate of deposit purchased by the Company.
F-13
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 7 -- NOTES RECEIVABLE FROM AFFILIATES AND INVESTMENT IN AFFILIATE
(Continued)
Fannie May's Chief Executive Officer is Mr. Quinn, and its stockholders
include Mr. Jordan, Mr. Quinn, Mr. Zalaznick, and Mr. Boucher, who are
directors and stockholders of the Company, as well as other partners,
principals and associates of The Jordan Company, who are also stockholders of
the Company. Fannie May, which is also known as "Fannie May Candies", is a
manufacturer and marketer of kitchen-fresh, high-end boxed chocolates through
its 375 company-owned retail stores and through specialty sales channels. Its
products are marketed under both the "Fannie May Candy" and "Fanny Farmer
Candy" names.
On July 29, 1996, Mr. Jordan purchased $2,000 of the Fannie May
Subordinated Notes from the Company at face value plus accrued interest.
On July 29, 1996, the Company acquired the stock of Cape Craftsmen, Inc.
("Cape Craftsmen") in exchange for $12,128 of notes receivable from Cape
Craftsmen. Since the Company and Cape Craftsmen have common ownership, the
net assets of Cape Craftsmen were recorded at the historical basis, $7,640,
and resulted in a non-cash loss of $4,488.
NOTE 8 -- ACCRUED LIABILITIES
Accrued liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
--------- --------
<S> <C> <C>
Accrued vacation ..................................... $ 1,516 $ 2,276
Accrued income taxes ................................. 1,874 5,470
Accrued other taxes .................................. 1,777 1,179
Accrued commissions .................................. 1,025 2,411
Accrued interest payable ............................. 13,152 15,064
Accrued payroll and payroll taxes..................... 2,621 4,458
Accrued stock appreciation rights and preferred stock
payments ............................................ -- 7,127
Restructuring reserve ................................ -- 4,906
Insurance reserve .................................... -- 2,791
Accrued other expenses ............................... 4,902 12,228
--------- --------
$26,867 $57,910
========= ========
</TABLE>
NOTE 9 -- OPERATING LEASES
Certain subsidiaries lease land, buildings, and equipment under
noncancellable operating leases.
Total minimum rental commitments under noncancellable operating leases at
December 31, 1996 are:
<TABLE>
<CAPTION>
<S> <C>
1997 ........ $13,704
1998 ........ 12,146
1999 ........ 10,466
2000......... 8,370
2001......... 6,150
Thereafter .. 15,686
---------
$66,522
=========
</TABLE>
F-14
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 9 -- OPERATING LEASES (Continued)
Rental expense amounted to $8,173, $11,378 and $14,808 for 1994, 1995 and
1996, respectively. The 1996 increase relates primarily to international
expansion at Dura-Line and additional companies purchased in 1996.
NOTE 10 -- BENEFIT PLANS
Certain subsidiaries of the Company have defined benefit pension plans.
The total expense for these plans amounted to $117 and $127 in 1995 and 1996,
respectively. The subsidiaries make contributions to the plans equal to the
amounts determined by accepted actuarial methods for the defined benefit
plans and on a cents-per-hour basis for plans covering certain hourly
employees.
Plan benefits are generally based on years of service and employee
compensation during the last years of employment.
The following table sets forth the status of the defined benefit plans of
the Company:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------------
1995 1996
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested .............................................. $2,351 $2,028
Non-vested .......................................... 18 6
-------- --------
Accumulated benefit obligation ....................... 2,369 2,034
Effect of future salary growth........................ 570 612
-------- --------
Total projected benefit obligation.................... 2,939 2,646
Assets relating to such benefits:
Market value of funded assets, primarily invested in
money market and equity securities ................. 2,392 2,306
-------- --------
Underfunded projected benefit obligation.............. (547) (340)
Net deferral ......................................... (163) (334)
-------- --------
Pension liability recorded as a long-term liability .. $ (710) $ (674)
======== ========
</TABLE>
The weighted average discount rates used in determining the actuarial
present value of the projected benefit obligation range from 6%-7.25% in 1995
and 6.5%-7.25% in 1996. The assumed long-term rates of return on plan assets
range from 7.5%-7.75% in 1995 and 1996. The assumed rates of compensation
increase range from 3.8%-4.0% in 1995 and 1996.
In January 1993 the Company established the Jordan Industries, Inc. 401(k)
Savings Plan ("the Plan"), a defined-contribution plan. The Plan covers
substantially all employees of the Company. Contributions to the Plan are
discretionary and totaled $152 in 1995 and $450 in 1996.
F-15
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 11 -- DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
---------- ---------
<S> <C> <C>
Revolving Credit Facilities (A) ............. $ 15,713 $ 56,622
Notes payable (B) ........................... 1,907 2,199
Subordinated promissory notes (C) ........... 13,000 19,100
Capital lease obligations (D) ............... 26,295 27,494
Bank Term Loans (E) ......................... 94,375 36,037
Senior Notes (F) ............................ 275,000 445,000
Senior Subordinated Discount Debentures (G) 99,105 111,092
---------- ---------
525,395 697,544
Less current portion......................... 11,705 9,608
---------- ---------
$513,690 $687,936
========== =========
</TABLE>
Aggregate maturities of long-term debt at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997 ........$ 9,608
1998 ........ 25,898
1999 ........ 45,688
2000......... 20,965
2001......... 25,701
Thereafter .. 569,684
---------
$697,544
=========
</TABLE>
A At December 31, 1996, the Company had borrowings outstanding on
lines of credit totaling $56,622. The borrowings were at Jordan
Industries, Inc., $34,000, Welcome Home, $10,122, and SPL
Holdings, $12,500.
On July 31, 1996, Jordan Industries, Inc. amended and restated
its revolving credit facility with the First National Bank of
Boston and other banks, increasing the facility amount from
$50,000 to $85,000. The facility, which matures on June 29, 1999,
will be used for working capital and acquisitions over the term
of the loan. At December 31, 1996, Jordan Industries, Inc. had
outstanding borrowings of $34,000. The applicable interest rate
at December 31, 1996, was 8.75%. The facility is secured by
substantially all of the assets of the Restricted Subsidiaries,
excluding Welcome Home. The Company must comply with certain
financial covenants as specified in the revolver agreement, and
at December 31, 1996, the Company is in compliance with such
covenants.
In May of 1995, Welcome Home entered into a Loan and Security
Agreement with Shawmut Capital Corporation. The credit facility
under this agreement provides for borrowings of up to 65% of
Welcome Home's eligible inventory, with a maximum borrowing of
$20,000. At December 31, 1996, Welcome Home had outstanding
borrowings of $10,122, which carried a weighted average interest
rate of 8.2%. The facility is secured by substantially all of
Welcome Home's assets. At December 31, 1996, Welcome Home was in
violation of certain financial covenants, however, the lender has
waived this violation in connection with the debtor in possession
financing.
F-16
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 11 -- DEBT (Continued)
In August 1995, SPL established a Revolving Credit Facility (the
"Revolver") with The First National Bank of Boston. In May of
1996, the Revolver was amended and restated and available
borrowings increased from $20,000 to $27,000. The aggregate
outstanding amount at December 31, 1996, was $12,500. This
facility bears interest at the LIBOR rate plus 2.75% payable on a
30, 60, or 90 day basis. The facility is secured by all of the
assets of SPL. The applicable interest rate at December 31, 1996,
was 9.75%. The Company must comply with certain financial
covenants as specified in the revolver agreement, and at December
31, 1996, the Company is in compliance with such covenants.
Motors and Gears, Inc. has available a line of credit from
Bankers Trust Company in the amount of $75,000. Outstanding
borrowings carry a floating rate of Libor plus 2.5% or base rate
plus 1.5%. At December 31, 1996, no amounts were outstanding on
the line of credit.
Dura-Line has available a line of credit from ABN Amro Bank N.V.
of Prague, Czech Republic in the amount of $800. The line of
credit matures on April 15, 1997, if not renewed. At December 31,
1996, no amounts were outstanding on the line of credit.
Outstanding borrowings carry an interest rate of 1.25% above
PRIBOR (Prague Inter-Bank Offered Rate). The applicable rate at
December 31, 1996 was 12.18%. The facility is secured by the
assets of Dura-Line's majority owned subsidiary, Dura-Line CT
s.r.o., which is located in the Czech Republic. The facility is
also guaranteed with a standby letter of credit.
B Notes payable are due in monthly or quarterly installments and
bear interest at rates up to 9%. Certain assets of the
subsidiaries are pledged as collateral for the loans.
C Subordinated promissory notes payable are due to minority
interest shareholders and former shareholders of the subsidiaries
in annual installments through 2004, and bear interest at 8%-9%.
The loans are unsecured.
D Interest rates on capital leases range from 8.3% to 14.5% and
mature in installments through 2001.
The future minimum lease payments as of December 31, 1996 under
capital leases consist of the following:
<TABLE>
<CAPTION>
<S> <C>
1997 ..........................................$ 6,525
1998 .......................................... 10,734
1999 .......................................... 3,913
2000........................................... 11,545
2001........................................... 302
Thereafter..................................... --
--------
Total......................................... 33,019
Less amount representing interest.............. 5,525
--------
Present value of future minimum lease
payments...................................... $27,494
========
</TABLE>
The present value of the future minimum lease payments
approximates the book value of property, plant and equipment
under capital leases at December 31, 1996.
E Bank Term Loans consist of certain indebtedness at SPL ("SPL Term
Loans").
In August 1995, SPL borrowed $25,000 under a Term Loan agreement
with The First National
F-17
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 11 -- DEBT (Continued)
Bank of Boston with a maturity date of December 31, 2001. This
debt bears interest at a rate of LIBOR plus 2.75% and is paid on
a quarterly basis. At December 31, 1996, $21,890 was outstanding.
The SPL Term Loans are secured by all of the assets of SPL. The
applicable interest rate at December 31, 1996, was 8.31%.
In May 1996, SPL borrowed $13,000 under a Term Loan agreement
with The First National Bank of Boston with a maturity date of
June 30, 2002. This debt bears interest at a rate of Prime + 2.0%
or LIBOR + 3.25%, and is paid on a quarterly basis. At December
31, 1996, $12,903 was outstanding. The applicable interest rate
at December 31, 1996 was 8.81%.
F In July of 1993, the Company issued $275,000 10 3/8% Senior Notes
("Senior Notes") due 2003. These notes bear interest at a rate of
10 3/8% per annum, payable semi-annually in cash on February 1
and August 1 of each year. The payments began on February 1,
1994.
The Senior Notes are redeemable for 105.18750% of the principal
amount from August 1, 1998 to July 31, 1999, 102.59375% from
August 1, 1999 to July 31, 2000, and 100% from August 1, 2000 and
thereafter plus any accrued and unpaid interest to the date of
redemption.
The fair value of the Senior Notes was $270,875 at December 31,
1996. The fair value was calculated using the Senior Notes'
December 31, 1996 market price multiplied by the face amount. The
Senior Notes are not secured by the assets of the Company.
On November 7, 1996, a majority owned subsidiary of the Company,
Motors and Gears Holdings, Inc., through its wholly-owned
subsidiary, Motors and Gears Inc., issued $170,000 aggregate
principal amount of 10 3/4% Senior Notes ("M&G Senior Notes").
Interest on the M&G Senior Notes is payable in arrears on May 15
and November 15 of each year commencing May 15, 1997. The M&G
Senior Notes are redeemable at the option of Motors and Gears,
Inc., in whole or in part, at any time on or after November 15,
2001. Motors and Gears, Inc. may also redeem up to 35% of the
original aggregate principal amount prior to November 15, 1999,
under certain circumstances.
The fair value of the M&G Senior Notes at December 31, 1996, was
$174,250. The fair value was calculated using the M&G Senior
Notes' December 31, 1996 market price multiplied by the face
amount. The M&G Senior Notes are not secured by the assets of
Motors and Gears, Inc., Motors and Gears Holdings, Inc., or the
Company.
G In July 1993 the Company issued $133,075 11 3/4% Senior
Subordinated Discount Debentures, ("Discount Debentures") due
2005. The Discount Debentures were issued at a substantial
discount from this principal amount. The interest on the Discount
Debentures will be payable in cash semi-annually on February 1
and August 1 of each year beginning in 1999.
The Discount Debentures are redeemable for 105.87500% of the
accreted value from August 1, 1998 to July 31, 1999, 102.93750%
from August 1, 1999 to July 31, 2000 and 100% from August 1, 2000
and thereafter plus any accrued and unpaid interest from August
1, 1998 to the redemption date if such redemption occurs after
August 1, 1998.
The fair value of the Discount Debentures was $105,795 at
December 31, 1996. The fair value was calculated using the
Discount Debentures' December 31, 1996 market price multiplied by
the face amount. The Discount Debentures are not secured by the
assets of the Company.
The Indenture relating to the Senior Notes and Discount Debentures
restricts the ability of the Company to incur additional
indebtedness at its restricted subsidiaries. The Indenture also
F-18
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 11 -- DEBT (Continued)
restricts: the payment of dividends, the repurchase of stock and
the making of certain other restricted payments; restrictions that
can be imposed on dividend payments to the Company by its
subsidiaries; significant acquisitions; and certain mergers or
consolidations. The Indenture will also require the Company to
redeem the senior notes and Discount Debentures upon a change of
control and to offer to purchase a specified percentage of the
Senior Notes and Discount Debentures if it fails to maintain a
minimum level of capital funds (as defined).
The Indenture relating to the M&G Senior Notes contains certain
covenants which restrict: the payment of dividends, the repurchase
of stock and the making of certain other restricted payments,
certain mergers or consolidations and the assumption of certain
levels of additional indebtedness.
The Company is, and expects to continue to be, in compliance with
the provisions of these Indentures.
Included in interest expense is $1,405, $1,743 and $3,001 of
amortization of debt issuance costs for the year ended December 31,
1994, 1995 and 1996, respectively.
NOTE 12 -- INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1994 1995 1996
-------- ---------- -------
<S> <C> <C> <C>
Current:
$
Federal.......... $ 356 $ 400 --
Foreign ......... 228 769 1,753
State and local 739 632 478
-------- ---------- -------
1,323 1,801 2,231
Deferred ........ 9 (4,247) 2,184
-------- ---------- -------
Total........... $1,332 $(2,446) $4,415
======== ========== =======
</TABLE>
F-19
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 12 -- INCOME TAXES (Continued)
Deferred income taxes consist of:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1996
---------- ----------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Tax over book depreciation ................... $ 7,368 $ 7,346
Basis in subsidiary .......................... 798 798
LIFO reserve ................................. 257 147
Intercompany tax gain ........................ -- 2,500
Other ........................................ 392 311
---------- ----------
Total deferred tax liabilities............... 8,815 11,102
DEFERRED TAX ASSETS:
NOL carryforwards ............................ 20,060 28,900
Stock Appreciation Rights Agreements ........ -- 3,162
Accrued interest on discount debentures ..... 8,187 12,262
Pension obligation ........................... 211 174
Vacation accrual ............................. 613 591
Uniform capitalization of inventory ......... 580 472
Allowance for doubtful accounts .............. 721 1,020
Capital lease obligations .................... 456 343
Tax asset basis over book basis at
subsidiary................................... -- 2,500
Other......................................... 193 248
---------- ----------
Total deferred tax assets..................... 31,021 49,672
Valuation allowance for deferred tax assets .. (21,466) (40,014)
---------- ----------
Net deferred tax assets...................... 9,555 9,658
---------- ----------
Net deferred tax (assets) liabilities ....... $ (740) $ 1,444
========== ==========
</TABLE>
The decrease (increase) in the valuation allowance during 1995 and 1996
was $1,962 and $(18,548), respectively.
F-20
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 12 -- INCOME TAXES (Continued)
The provision (benefit) for income taxes differs from the amount of
income tax benefit computed by applying the United States federal income tax
rate to (loss) income before income taxes, including the extraordinary loss.
A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
--------- ---------- -----------
<S> <C> <C> <C>
Computed statutory tax provision (benefit) .. $ 9,414 $(4,003) $(17,413)
Increase (decrease) resulting from:
Foreign subsidiary losses ................... -- 680 1,465
Amortization of goodwill .................... 682 756 903
Disallowed meals and entertainment ......... -- 425 645
Use of separate company net operating loss
carryforward................................ (1,329) -- --
Tax basis in excess of book basis in partial
sale of a subsidiary ........................ (8,460) -- --
State and local tax ......................... 1,010 632 478
Alternative minimum tax ..................... -- 400 --
Increase (decrease) in valuation allowance . -- (1,962) 18,548
Other items, net ............................ 15 (143) (211)
--------- ---------- -----------
Provision (benefit) for income taxes ......... $ 1,332 $(2,446) $ 4,415
========= ========== ===========
</TABLE>
As of December 31, 1996, the consolidated loss carryforwards are
approximately $59,000 and $47,000 for regular tax and alternative minimum tax
purposes, respectively, and expire in various years through 2011. In
addition, a subsidiary of the Company, which is not consolidated for tax
purposes, has approximately $26,000 of net operating loss carryforwards that
expire in various years through 2,011. A valuation reserve of $8,800 has been
recorded against the related $8,800 asset.
NOTE 13 -- RELATED PARTY TRANSACTIONS
The principals, partners, officers, employees and affiliates of The Jordan
Company (the "Jordan Group") own substantially all of the common stock of the
Company.
On July 29, 1996, the Company acquired Cape Craftsmen from a related party
in exchange for $12,128 of notes receivable from Cape Craftsmen.
On June 1, 1988, an agreement was executed, which was amended and restated
on June 29, 1994, whereby the Company will pay TJC Management Corporation
("TJC") a quarterly fee equal to .75% of the Company's Cash Flow for the four
full fiscal quarters next preceding the date of payment of such quarterly
fee. Under this agreement the Company accrued fees to TJC of $1,962, $2,691
and $2,530 in 1994, 1995 and 1996, respectively.
In addition, beginning June 1, 1988, The Jordan Company is to be paid an
investment banking fee of up to 2%, based on the aggregate consideration
paid, for its assistance in acquisitions undertaken by the Company or its
subsidiaries, and a financial consulting fee not to exceed 1% of the
aggregate debt and equity financing that is arranged by the Jordan Company,
plus the reimbursement of out-of-pocket and other expenses. The Company paid
$1,803, $2,055, and $2,610 in 1994, 1995, and 1996, respectively, to the
Jordan Company for their fees in relation to acquisition and refinancing
activities. In 1994, Welcome Home paid the Jordan Company $200 in relation to
their New Bank Credit Facility.
In February 1988, the Company entered into an employment agreement with
its President and Chief Operating Officer which provides for annual
compensation, including base salary and bonus, of not less
F-21
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 13 -- RELATED PARTY TRANSACTIONS (Continued)
than $350. The agreement also provides for severance payments in the event of
termination for reasons other than cause, voluntary termination, disability
or death; disability payments, under certain conditions, in the event of
termination due to disability; and a lump sum payment of $1,000 in the event
of death. The Company maintains a $5,000 "key man" life insurance policy on
its president under which the Company is the beneficiary.
An individual who is a shareholder, Director, General Counsel and
Secretary for the Company is also a partner in a law firm used by the
Company. The firm was paid $660, $376 and $1,462 in fees and expenses in
1994, 1995 and 1996, respectively. The rates charged to the Company were at
arms-length.
Also see Notes 7, 16, 17, and 20.
NOTE 14 -- CAPITAL STOCK
Under the terms of a restricted common stock agreement with certain
shareholders and members of management, the Company has the right, under
certain circumstances, for a specified period of time to reacquire shares
from certain shareholders and management at their original cost. Starting in
1993 or within 60 days of termination, the Company's right to repurchase may
be nullified if $1,800, in the aggregate, is paid to the Company by
management.
On January 20, 1989, the Company, in exchange for three thousand five
hundred dollars, sold warrants to acquire 3,500 shares of its common stock to
Mezzanine Capital & Income Trust 2001, PLC (MCIT), a publicly traded U.K.
investment trust, in which principal stockholders of the Company also hold
capital and income shares. These warrants were sold in conjunction with
MCIT's purchase of $7,000 of Senior Subordinated Notes. Each Warrant entitles
the holder to purchase one share of the Company's common stock at a price of
$4.00 (dollars) at any time, subject to certain events, prior to January 20,
1999. These warrants were valued at $700 based on an independent appraisal.
On November 17, 1996, the Company issued an additional 1,500 shares of
stock for $146 cash, and a promissory note of $1,314.
NOTE 15 -- BUSINESS SEGMENT INFORMATION
The Company's business operations are classified into five business
segments: Specialty Printing and Labeling, Motors and Gears,
Telecommunications Products, Welcome Home, and Consumer and Industrial
Products.
Motors and Gears includes the manufacture of electric motors for both
industrial and commercial use by Imperial; small electrical motors by Scott;
precision gears and gear boxes by Gear; AC and DC gears and gear motors for
both industrial and commercial use by Merkle-Korff; and subfractional AC and
DC motors and gear motors by Barber-Colman.
Telecommunications Products includes the manufacture and distribution of
silicon pre-lubricated plenum and other configurations of Innerduct, a
proprietary plastic pipe used in the installation of fiber optic cable, and
rigid polyethylene pipe used for transporting potable water by Dura-Line;
electronic connectors and switches by AIM and Cambridge; RF coaxial
connectors and electronic hardware by Johnson; cable TV electronic network
components and electronic security components by Viewsonics; custom
electronic cables and connectors for high technology, computer related
applications by Bond; and power conditioning and power protection equipment
by Northern. Diversified and Vitelec are not manufacturing-intensive.
Diversified is a provider and value-added reseller of wire, cable, and custom
cable assemblies, and Vitelec is an importer, packager, and master
distributor of over 400 RF connectors and other electronic components.
F-22
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 15 -- BUSINESS SEGMENT INFORMATION (Continued)
Welcome Home includes the specialty retailing of decorative home
furnishing accessories by 186 Welcome Home stores.
Consumer and Industrial Products includes the remanufacturing of
transmission sub-systems for the U.S. automotive aftermarket by DACCO;
manufacture and marketing of safety reflectors, lamp components, bicycle
reflector kits, colorants and emergency warning triangles by Sate-Lite; the
publishing of Bibles and the distribution of Bibles, religious books, and
recorded music by Riverside; precision machined titanium hot formed parts
used by the aerospace industry by Parsons; specialty-type locks by Hudson;
point-of-purchase advertising displays by Beemak; decorative home furnishing
accessories by Cape; and the provision of a full-range of direct mail
marketing services by Paw Print.
Inter-segment sales exist between Cape and Welcome Home. These sales are
eliminated in consolidation and are not presented in segment disclosures.
Foreign operations and export sales are not significant on a consolidated
basis. No single customer accounts for 10% or more of segment or consolidated
net sales.
Operating income by business segment is defined as net sales less
operating costs and expenses, excluding interest and corporate expenses.
Identifiable assets are those used by each segment in its operations.
Corporate assets consist primarily of cash and cash equivalents, equipment,
notes receivable from affiliates and deferred debt issuance costs.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
Specialty Printing & Labeling ............. $ 82,828 $ 96,514 $109,587
Motors and Gears .......................... 36,854 54,218 117,571
Telecommunications Products ............... 66,128 98,777 132,999
Welcome Home .............................. 81,654 93,166 81,855
Consumer and Industrial Products .......... 156,927 164,636 159,555
---------- ---------- ----------
Total .................................... $424,391 $507,311 $601,567
---------- ---------- ----------
Operating income:
Specialty Printing & Labeling ............. $ 5,522 $ 8,067 $ 7,078
Motors and Gears .......................... 9,484 12,236 26,164
Telecommunications Products ............... 11,996 17,774 12,985
Welcome Home .............................. 7,076 (10,066) (15,975)
Consumer and Industrial Products .......... 22,440 21,987 18,446
---------- ---------- ----------
Total business segment operating income... 56,518 49,998 48,698
Corporate expenses ........................ (13,574) (17,638) (35,306)
---------- ---------- ----------
Total consolidated operating income ...... $ 42,944 $ 32,360 $ 13,392
========== ========== ==========
Depreciation and amortization (including the
amortization of goodwill and intangibles):
Specialty Printing & Labeling ............. $ 3,252 $ 3,776 $ 4,800
Motors and Gears .......................... 1,070 2,262 7,078
Telecommunications Products ............... 5,101 5,105 7,204
Welcome Home .............................. 1,324 2,121 2,096
Consumer and Industrial Products .......... 6,560 6,248 5,785
---------- ---------- ----------
Total business segment depreciation and
amortization ............................ 17,307 19,512 26,963
Corporate ................................. 1,792 2,172 3,475
---------- ---------- ----------
</TABLE>
F-23
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 15 -- BUSINESS SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Total consolidated depreciation and
amortization ............................ $ 19,099 $ 21,684 $ 30,438
========== ========== ==========
Capital expenditures:
Specialty Printing & Labeling ............. $ 1,401 $ 1,106 $ 2,235
Motors and Gears .......................... 219 870 1,381
Telecommunications Products ............... 3,290 5,400 6,399
Welcome Home .............................. 3,434 5,022 1,403
Consumer and Industrial Products .......... 3,490 2,625 3,325
Corporate.................................. 278 253 2,652
---------- ---------- ----------
Total..................................... $ 12,112 $ 15,276 $ 17,395
========== ========== ==========
Identifiable assets:
Specialty Printing & Labeling ............. $ 76,997 $ 89,090 $107,016
Motors and Gears .......................... 27,988 142,289 173,565
Telecommunications Products ............... 50,427 62,908 175,796
Welcome Home .............................. 32,232 32,176 25,464
Consumer and Industrial Products .......... 119,767 112,804 136,021
---------- ---------- ----------
Total business segment assets............. 307,411 439,267 617,862
Corporate assets .......................... 91,063 93,117 64,023
---------- ---------- ----------
Total consolidated assets ................ $398,474 $532,384 $681,885
========== ========== ==========
</TABLE>
NOTE 16 -- ACQUISITION OF MINORITY INTEREST
In March 1992, a subsidiary of the Company entered into an agreement with
its minority shareholders whereby the shareholders would exchange their
common stock, which amounted to a 24% interest, for 7% cumulative preferred
stock. One-half of the preferred shares are redeemable in eight quarterly
installments, including the accrued but unpaid dividends, beginning on or
after April 1, 1993. As of December 31, 1996, these installments have been
paid in full.
An additional $1,875 is not redeemable and pays a cumulative dividend of
7% per year. This amount is included in the shareholders' equity section of
the balance sheet.
The shareholders entered into covenants not to compete for $2,679 which
will be paid over five years beginning in 1992. Of this amount, $528 and $324
was paid in 1995 and 1996. The remaining payment of $81 was made in January
1997.
The shareholders were granted stock appreciation rights as part of the
non-compete agreements with $5,952 to be paid over three years. The rights
were paid off in 1995 with a final payment of $2,056.
The total consideration for minority interest which was accounted for as a
purchase was $12,381.
Additionally, the former shareholders were granted stock appreciation
rights exercisable in full or in part on the occurrence of the disposition by
merger or otherwise, in one or more transactions of (a) more than 50% of the
voting power and/or value of the capital stock of the subsidiary or (b) all
or substantially all the business or assets of the subsidiary. The value of
the stock appreciation rights is based on the ultimate sales price of the
stock or assets of the subsidiary, and is essentially 15% of the ultimate
sales price, less $15,625, of the stock or assets sold. No liability has been
recorded relative to these rights.
NOTE 17 -- ACQUISITIONS OF SUBSIDIARIES
On September 22, 1995, the Company, through its newly-formed subsidiary,
M-K Holdings, Inc., acquired all of the common stock of Merkle-Korff
Industries, Inc., Mercury Industries, Inc. and Elmco
F-24
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 17 -- ACQUISITIONS OF SUBSIDIARIES (Continued)
Industries, Inc. ("Merkle-Korff"), a manufacturer of fractional horsepower
motors and gear motors. The motors are currently used in vending machines,
ice makers in refrigerators, washing machines and treadmills. M-K Holdings,
Inc., Merkle-Korff, and their subsidiaries, were designated as non-restricted
subsidiaries for purposes of the Company's Indentures relating to its Senior
Notes and Senior Subordinated Discount Debentures.
The purchase price of $107,406, including costs incurred directly related
to the transaction, was allocated to working capital of $8,201, property,
plant and equipment of $3,652, non-compete agreements of $500, deferred
financing fees of $3,791, and resulted in an excess purchase price over net
identifiable assets of $91,262. The acquisition was financed with cash of
$29,625 from the Company, $281 of cash from affiliates, a $5,000 subordinated
note issued by M-K Holdings, Inc., and a $72,500 drawdown of a newly
established credit facility.
On January 23, 1996, the Company purchased the net assets of Johnson
Components, Inc. ("Johnson"), a manufacturer of RF coaxial connectors and
electronic hardware.
The purchase price of $16,098, including costs incurred directly related
to the transaction, was allocated to working capital of $1,616, property,
plant and equipment of $4,660, and non-compete agreements of $1,050, and
resulted in an excess purchase price over net identifiable assets of $8,772.
The acquisition was financed with cash.
On March 8, 1996, Merkle-Korff, then owned by a non-restricted subsidiary,
M-K Holdings, Inc., acquired the net assets of Barber-Colman Motors Division,
a division of Barber-Colman Company, which was wholly owned by Siebe, plc.
This division consisted of Colman OEM and Colman Motor Products, wholly owned
subsidiaries of Barber-Colman Company, and the motors division of
Barber-Colman Company, collectively Barber-Colman Motors ("BCM"), and is a
vertically integrated manufacturer of sub-fractional horsepower AC and DC
motors and gear motors, with applications in such products as vending
machines, copiers, printers, ATM machines, currency changers, X-ray machines,
peristaltic pumps, HVAC actuators and other products. BCM was subsequently
merged into Merkle-Korff in January 1997.
The purchase price of $21,700, including costs incurred directly related
to the transaction, was allocated to working capital of $4,882, property,
plant and equipment of $5,843, non-compete agreements of $1,000, and other
non-current assets of $810, and resulted in an excess purchase price over net
identifiable assets of $9,165. The acquisition was financed with $21,700 of
new and existing credit facilities.
On May 1, 1996, the Company through its non-restricted subsidiary, SPL
Holdings, Inc., acquired the net assets of Seaboard Folding Box Corporation
("Seaboard"), a manufacturer of printed folding cartons and boxes, insert
packaging, and blister pack cards.
The purchase price of $27,847, including costs incurred directly related
to the transaction, was allocated to working capital of $8,745, property,
plant and equipment of $6,965, non-compete agreements of $1,000, other
non-current assets of $10, long term liabilities of $1,663, and resulted in
an excess purchase price over net identifiable assets of $12,790. The
acquisition was financed with cash of $2,000 from the Company, a $1,500
subordinated seller note, a new $13,000 term loan, and $11,000 from the
existing SPL Holdings, Inc. revolving credit facility.
On June 25, 1996, the Company purchased the stock of Diversified Wire and
Cable, Inc. ("Diversified"), a provider and value added re-seller of wire,
cable and custom cable assemblies.
The purchase price of $18,978, including costs incurred directly related
to the transaction, was allocated to working capital of $3,050 property,
plant and equipment of $607, non-compete agreements of
F-25
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 17 -- ACQUISITIONS OF SUBSIDIARIES (Continued)
$500, other assets of $27, capital leases and minority interest of $388, and
resulted in an excess purchase price over net identifiable assets of $15,174.
The acquisition was financed with cash and a $1,500 subordinated seller note.
Immediately after Diversified was purchased by the Company, the seller
acquired a 12.5% interest in Diversified.
Certain sellers of Diversified are entitled to additional payments for
their stock, contingent upon operating results as defined in the Purchase
Agreement. The maximum contingent consideration to be paid is $3,200.
On August 1, 1996, the Company purchased the net assets of Viewsonics,
Inc. and Shanghai Viewsonics Electric Co., Ltd. ("Viewsonics"), a designer
and manufacturer of cable TV electronic network components and electronic
security components.
The purchase price of $15,319, including costs incurred directly related
to the transaction was allocated to working capital of $6,697, property,
plant and equipment of $446, and resulted in an excess purchase price over
net identifiable assets of $8,176. The acquisition was financed with cash.
On August 5, 1996, the Company purchased the stock of Vitelec Electronics,
Limited ("Vitelec"), a United Kingdom based importer, packager, and master
distributor of over 400 RF connectors sold to commercial and consumer
electronic markets.
The purchase price of $14,040, including costs incurred directly related
to the transaction was allocated to working capital of $1,496, property,
plant and equipment of $1,053, and resulted in an excess purchase price over
net identifiable assets of $11,491. The acquisition was financed with cash.
On September 20, 1996, the Company, through its wholly-owned subsidiary
Bond Holdings, Inc., purchased 80% of the outstanding common stock of Bond
Technologies, Inc. ("Bond"). The remaining 20% ownership has been retained by
the sellers. Bond designs, engineers and manufactures custom electronic
cables and connectors for high technology, computer related and
telecommunication customers.
The purchase price of $8,627, which included costs incurred directly
related to the transaction, was allocated to working capital of $2,099,
property, plant and equipment of $902, non compete agreements of $800, other
assets of $52, a minority interest and debt assumed of $53, and resulted in
an excess purchase price over net identifiable assets of $4,827. The purchase
price includes $700 of cash held in escrow which will be paid to the sellers
at a pre-determined date if certain levels of EBIT (as defined) are achieved.
The acquisition was financed with cash.
On November 8, 1996, the Company purchased the net assets of Paw Print
Mailing List Services, Inc. ("Paw Print"), a value-added provider of direct
mail services.
The purchase price of $11,751, including costs incurred directly related
to the acquisition, was allocated to working capital of $679, property,
plant, and equipment of $511, non-competition agreements of $900, and
resulted in excess purchase price over net identifiable assets of $9,661. The
acquisition was financed with cash of $9,250 and a $2,500 subordinated seller
note.
On December 31, 1996, the Company purchased 100% of the stock of Northern
Technologies, Inc. ("Northern"), a manufacturer of power conditioning and
power protection equipment for telecommunications applications such as
cellular and personal communication system networks.
The purchase price of $21,500, including estimated costs incurred directly
related to the transaction, was allocated to working capital of $4,661,
property, plant, and equipment of $571, non-competition agreements of $500,
long-term assets of $425, long-term liabilities of $115, and resulted in an
excess purchase price over net identifiable assets of $15,458. The
acquisition was financed with cash.
F-26
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 17 -- ACQUISITIONS OF SUBSIDIARIES (Continued)
On January 8, 1997, Beemak purchased the net assets of Arnon-Caine, Inc.
("ACI"), a designer and distributor of modular storage systems primarily for
sale to wholesale home centers and hardware stores. ACI subcontracts its
production to third party injection molders located primarily in Southern
California, which use materials and machines similar to those used by Beemak.
By early 1998, Beemak will serve as ACI's primary supplier. The integration
of ACI into Beemak's operations will provide for future manufacturing cost
savings as well as synergistic marketing efforts.
The purchase price of $4,600, including costs incurred directly related to
the acquisition, was allocated to working capital of $300, property, plant
and equipment of $82, and excess purchase price over net identifiable assets
of $4,218. The acquisition was financed with cash.
Unaudited pro forma information with respect to the Company as if the 1995
and 1996 acquisitions had occurred on January 1, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------
1995 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales .................................... $704,723 $693,092
Net income (loss) before extraordinary items 8,066 (12,873)
Net income (loss) ............................ $ 8,066 $(16,679)
</TABLE>
NOTE 18 -- SPL HOLDINGS, INC.
On August 30, 1995, the Company sold on an arms length basis, the net
assets of Sales Promotion Associates, Inc. ("SPAI"), formerly a wholly-owned
subsidiary of the Company, and a specialty printer and distributor of
calendars, advertising specialty products and soft cover year books, to SPL
Holdings, Inc. ("SPL", formerly known as J2, Inc.), a majority owned
subsidiary of the Company. SPL and its subsidiaries were designated as
non-restricted subsidiaries for purposes of the Company's Indentures relating
to its Senior Notes and Senior Subordinated Discount Debentures.
SPL was formed to combine a group of companies engaged in the design,
manufacture and marketing of specialty printing and label products. SPL is
comprised of Valmark Industries, Inc. ("Valmark"), Pamco Printed Tape and
Label Co., Inc. ("Pamco"), Sales Promotion Associates, Inc. ("SPAI"), and
Seaboard Folding Box Corporation ("Seaboard").
Concurrent with the sale of the net assets of SPAI, SPL was recapitalized
with (i) an equity investment of $22,300 by the Company and $160 from certain
affiliated investors, (ii) subordinated debt of $11,000, and (iii) a new
$45,000 senior secured bank financing comprised of a $20,000 Revolver and a
$25,000 Term Loan A. At December 31, 1996, $21,890 of the Term Loan A, and
$12,500 of the Revolver, was outstanding.
On May 1, 1996, concurrent with the acquisition of Seaboard, SPL entered
into an Amended and Restated Revolving Credit and Term Loan Agreement. This
agreement extended the above Revolver facility to $27,000 and added a Term
Loan B in the amount of $13,000. At December 31, 1996, $12,903 of Term Loan B
was outstanding.
Following the sale of the net assets and recapitalization transactions,
SPL is 83.3% owned by the Company and 16.7% owned by certain affiliates of
the Company, including partners and affiliates of The Jordan Company,
including Mr. Jordan, Mr. Quinn, Mr. Zalaznick, and Mr. Boucher.
NOTE 19 -- MOTORS AND GEARS HOLDINGS, INC.
Motors and Gears Holdings, Inc., along with its wholly-owned subsidiary,
Motors and Gears, Inc. ("M&G"), were formed in September 1995 to combine a
group of companies engaged in the manufacture and sale of fractional and
subfractional motors and gear motors primarily to customers located
throughout the United States.
M&G is comprised of Merkle-Korff and its wholly-owned subsidiary,
Barber-Colman, and Imperial and its wholly-owned subsidiaries, Scott and
Gear. All of the outstanding shares of Merkle-Korff were
F-27
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 31, 1996
(Dollars in Thousands)
NOTE 19 -- MOTORS AND GEARS HOLDINGS, INC. (Continued)
purchased in September 1995 and the net assets of Barber-Colman were
purchased by Merkle-Korff in March 1996. The net assets of Imperial, Scott
and Gear were purchased by M&G, from the Company, at an arms length basis on
November 7, 1996, with the proceeds from a debt offering (see Note 11). The
purchase price was $75,656, which included the repayment of $6,008 in
Imperial liabilities owed to the Company, and a contingent payment payable
pursuant to a contingent earnout agreement. Under the terms of the contingent
earnout agreement, 50% of Imperial, Scott and Gear's cumulative earnings
before interest, taxes, depreciation and amortization, as defined, exceeding
$50,000 during the five fiscal years ended December 31, 1996, through
December 31, 2000, will be paid to an affiliate of the Company. Payments, if
any, under the contingent earnout agreement will be determined and made on
April 30, 2001.
As a result of this purchase, the Company recognized $62.7 million of
deferred gain at the time of purchase for Federal income tax purposes, as
adjusted for the value of the earnout, once finally determined. This deferred
gain will be reduced as the M&G group reports depreciation and amortization
over approximately 15 years on most of the step-up in basis of those
purchased assets. As long as M&G remains in the Company's affiliated group,
the gain reported and the depreciation on the step-up in basis should exactly
offset each other. Upon any future deconsolidation of M&G from the Company's
affiliated group for Federal income tax purposes, any unreported gain would
be fully reported and subject to tax. If such deconsolidation were to occur
in 1997, the Company would report up to approximately $62 million of gain for
Federal income taxes (without giving effect to any of the Company's net
operating loss carry forwards), which would result in an income tax liability
up to approximately $25 million (assuming a combined 40% Federal, state and
local income tax rate, and without giving effect to any of the Company's net
operating loss carry forwards).
At December 31, 1996, Motors and Gears Holdings, Inc. is owned 86.3% by
the Company and 13.7% by certain affiliates of the Company, including
partners and affiliates of The Jordan Company, including Mr. Jordan, Mr.
Quinn, Mr. Zalaznick, and Mr. Boucher.
NOTE 20 -- STOCK APPRECIATION RIGHT AND COMPENSATION AGREEMENTS
In connection with the Company's acquisitions of AIM and Cambridge in
1989, the seller of these companies was granted stock appreciation rights in
respect of the appreciation of these companies. The formula used to value
these rights is calculated by determining 20% of a multiple of average cash
flow of these companies for the two years preceding the date when these
rights are exercised less the indebtedness of these companies. The seller
passed away during the third quarter of 1996. The seller's estate has
exercised these rights. The total amount owed under these rights is
approximately $6,200. AIM has fully accrued for these rights as of December
31, 1996. Payment of these rights is amortized over five years, such that
one-third is payable upon exercise, and two-thirds is payable in five equal
installments over 5 years.
Effective October 1, 1996, the Company voluntarily agreed to pay to an
executive $3.9 million in view of his contributions to the Company, including
identifying and analyzing acquisition candidates for the Company and
providing strategic advice to the Board of Directors of the Company. The
Company has fully accrued for this compensation agreement as of December 31,
1996. The Company agreed to pay the executive as follows: (i) one-third (or
$1.3 million) was paid to the executive in October 1996 and (ii) the
remaining two-thirds (or $2.6 million) will be paid to the executive in six
equal, semi-annual installments payable on each October 1 and April 1,
commencing on April 1, 1997.
NOTE 21 -- CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Company places cash and cash equivalents with
high quality financial institutions, and is restricted by its revolving
credit facilities as to its investment instruments. Concentration of credit
risk relating to accounts receivable is limited due to the large number of
customers from many different industries and locations. The Company believes
that its allowance for doubtful accounts is adequate to cover potential
credit risk.
F-28
<PAGE>
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
ASSETS
--------------------------------- .................................
Current assets:
Cash and cash equivalents ......................................... $ 30,887
Accounts receivable, net .......................................... 107,122
Inventories ....................................................... 111,372
Prepaid expenses and other current assets ......................... 13,876
--------------------
Total current assets ........................................... 263,257
Property, plant and equipment, net ................................ 100,079
Investments in and advances to affiliates ......................... 13,924
Goodwill, net ..................................................... 306,106
Other assets ...................................................... 48,566
--------------------
Total assets ................................................... $ 731,932
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
-------------------------------------------------------------------
Current liabilities:
Notes payable--lines of credit..................................... $ --
Accounts payable .................................................. 49,905
Accrued liabilities ............................................... 51,179
Advance deposits .................................................. 8,166
Current portion of long-term debt ................................. 8,530
--------------------
Total current liabilities ...................................... 117,780
Long-term debt ...................................................... 744,465
Other non-current liabilities ....................................... 9,732
Deferred income taxes................................................ 491
Minority interest.................................................... 4,013
Preferred stock.................................................... 1,515
Shareholders' equity (net capital deficiency):
Common stock ...................................................... 1
Additional paid-in capital ........................................ 2,117
Note receivable from shareholders.................................. (1,230)
Cumulative translation............................................. (179)
Retained earnings (accumulated deficit) ........................... (146,773)
--------------------
Total shareholders' equity (net capital deficiency) ............. (146,064)
--------------------
Total liabilities and shareholders' equity (net capital
deficiency) ...................................................... $ 731,932
====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-29
<PAGE>
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1997
---------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net sales ..................................................... $267,220 $324,889
Cost of sales, excluding depreciation ......................... 164,053 203,059
Selling, general and administrative expenses .................. 64,743 67,802
Depreciation .................................................. 8,660 9,027
Amortization of goodwill and other intangibles ................ 5,156 6,906
Management fees and other ..................................... 2,403 16,918
---------- ----------
Operating income ............................................. 22,205 21,177
Other (income) and expenses:
Interest expense ............................................. 28,975 37,775
Interest income .............................................. (1,344) (1,606)
Gain on sale of subsidiary and other.......................... -- (18,012)
---------- ----------
Total other expenses .......................................... 27,631 18,157
Income (Loss) before income taxes, minority interest, equity
in investee and extraordinary items........................... (5,426) 3,020
Provision for income taxes .................................... 1,244 1,200
---------- ----------
Income (Loss) before minority interest, equity in investee,
and extraordinary items....................................... (6,670) 1,820
Minority interest ............................................. (1,086) 764
Equity in investee ............................................ -- 4,168
---------- ----------
Loss before extraordinary items ............................... (5,584) (3,112)
Extraordinary items ........................................... -- 9,363
Net loss....................................................... $ (5,584) $(12,475)
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-30
<PAGE>
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1997
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss...................................................... $ (5,584) $(12,475)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................... 13,816 15,813
Provision for (benefit from) deferred income taxes .......... (1,143) 163
Amortization of deferred financing fees ..................... 1,525 1,864
Minority interest ........................................... (1,086) 764
Non-cash interest ........................................... 5,822 6,776
Equity in investee .......................................... -- 4,168
Extraordinary items ......................................... -- 9,363
Gain on sale of subsidiary................................... -- (18,508)
Changes in operating assets and liabilities net of effects
from acquisitions:
Increase in current assets ................................. (3,723) (13,328)
Decrease in current liabilities ............................ (2,796) (3,199)
Increase in non-current assets ............................. (5,111) (6,000)
Increase in non-current liabilities ........................ 429 3,630
---------- -----------
Net cash provided by (used in) operating activities ....... 2,149 (10,969)
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of subsidiary.......................... -- 35,218
Capital expenditures ......................................... (9,612) (5,758)
Advances to affiliates ....................................... (5,264) (1,335)
Acquisitions of minority interests and other ................. (144) --
Acquisition of subsidiaries .................................. (82,450) (70,913)
Cash acquired in purchase of subsidiaries .................... 1,390 456
Other......................................................... 2 (446)
---------- -----------
Net cash used in investing activities ..................... (96,078) (42,778)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Motors and Gears, Inc. common stock issuance.... -- 1,100
Proceeds from revolving credit facilities, net ............... 38,079 56,000
Proceeds from debt issuance--MK Holdings, Inc. ............... 20,000 --
Repayment of long-term debt .................................. (5,958) (5,263)
Proceeds from debt issuance--SPL Holdings, Inc. .............. 13,000 --
---------- -----------
Net cash provided by financing activities ................. 65,121 51,837
---------- -----------
Net decrease in cash and cash equivalents ...................... (28,808) (1,910)
Cash and cash equivalents at beginning of period ............... 41,253 32,797
---------- -----------
Cash and cash equivalents at end of period ..................... $ 12,445 $ 30,887
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest ................................................... $ 20,984 $ 28,262
Income taxes, net........................................... $ 1,471 $ 2,642
Non-cash investing activities:
Capital leases ............................................. $ 344 $ 1,257
Seller notes issued in acquisitions......................... $ 3,000 $ 1,500
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-31
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. ORGANIZATION
The unaudited condensed consolidated financial statements, which reflect
all adjustments, consisting only of normally recurring adjustments, that
management believes necessary to present fairly the results of interim
operations, should be read in conjunction with the Notes to the Consolidated
Financial Statements (including the Summary of Significant Accounting
Policies) included in the Company's audited consolidated financial statements
for the year ended December 31, 1996, which are included elsewhere herein.
Results of operations for the interim periods are not necessarily indicative
of annual results of operations.
2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
1997
----------
<S> <C>
Raw materials .. $ 37,834
Work-in-process.. 14,234
Finished goods... 59,304
----------
$111,372
==========
</TABLE>
3. NOTES AND OTHER RECEIVABLES FROM AFFILIATES AND INVESTMENT IN AFFILIATE
On January 21, 1997, Welcome Home filed for Chapter 11 bankruptcy
protection. As a result of the Chapter 11 filing, the Company no longer
consolidates Welcome Home in its financial statements as of January 21, 1997,
the date of the filing. For the period ended January 21, 1997, the Company
recorded a net loss of $1,195 related to Welcome Home. Receivables from
Welcome Home owed to the Company or its subsidiaries were $4,720 as of June
30, 1997.
On July 2, 1997, the Company received from Fannie May Holdings, Inc.
("Fannie May"), $14,348 in exchange for the following investments held by the
Company: $5,500 aggregate principal amount of Subordinated Notes and $7,000
aggregate principal amount of participation in outstanding term loans of
Archibald Candy Corporation, a wholly-owned subsidiary of Fannie May. The
amount received also included $1,573 of accrued interest and premium on the
above Subordinated Notes and term loans. On July 7, 1997, the Company
received $3,013 as a return of the $3,000 certificate of deposit held by the
Company as security for an obligation to purchase additional participation in
the above-mentioned term loans, plus $13 of accrued interest thereon.
4. ACQUISITION OF SUBSIDIARIES
On January 8, 1997, Beemak purchased the net assets of Arnon-Caine, Inc.
("ACI"), a designer and distributor of modular storage systems primarily for
sale to wholesale home centers and hardware stores. ACI subcontracts its
production to third party injection molders located primarily in Southern
California, which use materials and machines similar to those used by Beemak.
By early 1998, Beemak will serve as ACI's primary supplier. The Company
believes that the integration of ACI into Beemak's operations will provide
for future manufacturing cost savings as well as synergistic marketing
efforts.
The purchase price of $4,600, including costs incurred directly related to
the acquisition, was allocated to working capital of $300, property, plant
and equipment of $82, and excess purchase price over net identifiable assets
of $4,218. The acquisition was financed with cash.
On May 30, 1997, JTP Industries, a newly formed wholly-owned subsidiary of
the Company, purchased the net assets of LoDan West, Inc. and L/D West, Inc.
The purchase price of $17,000, including costs incurred directly related to
the transaction, was preliminarily allocated to net working capital of
$5,066, property, plant and equipment of $783, non-competition agreement of
$250, non-current assets of $41, and resulted in an excess purchase price
over net identifiable assets of $10,860. The acquisition was financed with
cash and a $1,500 subordinated seller note.
One June 12, 1997, Motors and Gears Industries, Inc., through its newly
formed wholly-owned subsidiary, FIR Group Holdings, Inc. and its wholly-owned
subsidiaries, Motors and Gears Amsterdam,
F-32
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
4. ACQUISITION OF SUBSIDIARIES (Continued)
B.V. and FIR Group Holdings Italia, SrL, purchased all of the common stock of
the FIR Group Companies, consisting of CIME S.p.A., SELIN S.p.A. and FIR
S.p.A. The FIR Group Companies are manufacturers of electric motors and pumps
for niche applications such as pumps for catering dishwashers, motors for
industrial sewing machines, and motors for industrial fans and ventilators.
The purchase price of $51,313, including costs directly related to the
transaction, was preliminarily allocated to working capital of $16,882,
property, plant, and equipment of $4,942, other long term assets and
liabilities of $3,877, and resulted in an excess of purchase price over net
identifiable assets of $33,366. The cash was provided from borrowings under
the Motors and Gears Industries, Inc. Credit Agreement established on
November 7, 1996 among Motors and Gears Industries, Inc., various banks, and
Bankers Trust Company, as agent.
5. DEBENTURE SWAP
On April 2, 1997, the Company privately placed approximately $214,036
aggregate principal amount of 11.75% Series A Senior Subordinated Discount
Debentures due 2009 (the "Series A Debentures"), at 56.52% of such principal
amount. The Series A Debentures are eligible for resale under Rule 144A of
the Securities Act of 1933, as amended (the "Securities Act"). The Company
placed the Series A Debentures to refinance substantially all of the $133,075
aggregate principal amount of its 11.75% Senior Subordinated Discount
Debentures due 2005. In conjunction with this transaction, the Company
recorded an extraordinary loss of $8,898 relating to the write-off of
deferred financing fees and the premium assessed on the new issue.
6. PAYMENT OF STOCK APPRECIATION RIGHTS
In March 1992, a subsidiary of the Company entered into an agreement with
its minority shareholders whereby the shareholders would exchange their
common stock, which amounted to a 24% interest, for 7% cumulative preferred
stock, covenants not to compete, and stock appreciation rights agreements.
The total consideration paid for this minority interest was $12,381.
Additionally, the former shareholders were granted stock appreciation
rights exercisable in full or in part on the occurrence of the disposition by
merger or otherwise in one or more transactions of (a) more than 50% of the
voting power and/or value of the capital stock of the subsidiary or (b) all
or substantially all the business or assets of the subsidiary. The value of
the stock appreciation rights is based on the ultimate sales price of the
stock or assets of the subsidiary, and is essentially 15% of the ultimate
sales price, less $15,625, of the stock or assets sold.
On April 10, 1997, the Company paid the former shareholders pursuant to an
agreement ("The Redemption Agreement"), as if the subsidiary was sold for
$110,000. The former shareholders received $9,438 in cash and a deferred
payment of $5,980 over five years at 8% interest. The Redemption Agreement
also requires that the $1,875 of remaining preferred stock be redeemed one
year from the date of the agreement.
If at any time prior to April 30, 1998, the Company has received offering
proceeds from the registration of any shares of common stock of the
subsidiary (the "IPO"), the Company will pay the former shareholders an
additional $2,250.
If the Company has not received proceeds from the IPO, the former
shareholders will receive a special bonus of 25% of the subsidiary's 1997
gross profit (as defined) in excess of $30,000.
As consideration for the signing of the Redemption Agreement, the former
shareholders will receive total non-compete payments of $352 payable over the
next thirteen months.
7. SALE OF SUBSIDIARIES
On May 15, 1997, the Company sold its subsidiary, Hudson Lock, Inc.
("Hudson"), for approximately $39.1 million. Hudson is a leading designer,
manufacturer, and marketer of highly engineered medium-
F-33
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
7. SALE OF SUBSIDIARIES (Continued)
security custom and specialty locks for original equipment manufacturer
customers. A gain of $18,508 was recorded by the Company in connection with
the sale.
On July 31, 1997, the Company sold its subsidiary, Paw Print Mailing List
Services, Inc. ("Paw Print"), for approximately $12.5 million. Paw Print is a
value-added provider of direct mail services.
8. PREFERRED STOCK
In April 1997, the Company entered into an agreement ("The Redemption
Agreement") with certain former shareholders of a subsidiary. Pursuant to The
Redemption Agreement, the Company is required to redeem $1,875 of remaining
preferred stock one year from the date of the agreement. At June 30, 1997,
the preferred stock is classified as an accrued liability.
In May 1997, Motors and Gears Holdings, Inc., a majority-owned subsidiary
of the Company, issued $1.5 million of senior, non-voting 8% cumulative
preferred stock to its minority shareholders.
9. FINANCIAL RECAPITALIZATION AND BUSINESS REPOSITIONING PLAN
On May 16, 1997, the Company participated in a recapitalization of its
majority-owned subsidiary, of Motors and Gears Holdings, Inc. (M&G). In
connection with the Recapitalization, M&G issued 16,250 shares of M&G common
stock (representing approximately 82.5% of the outstanding shares of M&G
common stock) to certain stockholders and affiliates of the Company and M&G
management for a total consideration of $2.2 million (of which $1.1 million
was paid in cash and $1.1 million was paid through the delivery of 8% zero
coupon notes due 2007). As a result of the Recapitalization, certain of the
Company's affiliates and M&G management will own substantially all of the M&G
common stock and the Company's investment in M&G will be represented solely
by the Cumulative Preferred Stock of M&G (the "Junior Preferred Stock"), but
not by any common stock of M&G, which will be held by stockholders and
affiliates of the Company and management of M&G.
On July 25, 1997, the Company recapitalized its investment in Jordan
Telecommunication Products, Inc. ("JTP") and JTP acquired the Company's
telecommunications and data communications products business from the Company
for total consideration of approximately $294.0 million, consisting of $264.0
million in cash, $10.0 million of assumed indebtedness and preferred stock,
and the issuance to the Company of $20.0 million aggregate liquidation
preference of JTP Junior Preferred Stock. The Company's stockholders and
affiliates and JTP management invested in and acquired the JTP common stock.
JTP financed the cash portion of this total consideration through JTP's
private placement of $190 million of JTP Senior Notes due 2007, $85 million
of cash proceeds of JTP Senior Discount Debentures due 2007, and $25 million
of JTP Senior Preferred Stock due 2009.
The Company privately placed $120 million of the Company's Senior Notes
due 2007, and used the net proceeds from this private placement, as well as
the net proceeds received by the Company in connection with the JTP
recapitalization, to repay approximately $78 million of bank borrowings by
the Company's subsidiaries under their credit agreements and repurchased $272
million of the Company's 10 3/8% Senior Notes due 2003 pursuant to a tender
offer and related consent solicitation. The Company also conducted a consent
solicitation with regard to its 11 3/4% Senior Subordinated Discount
debentures due 2009 in order to conform their covenant structure to those in
the Company's Senior Notes due 2007. As a result of the Recapitalization,
certain of the Company's affiliates and JTP management owns substantially all
of the JTP common stock. The Company's investment in JTP is represented
solely by the Junior Preferred Stock, but not by any common stock of JTP.
F-34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
E.F. Johnson Company
In our opinion, the accompanying balance sheets and the related statements
of operations and of cash flows present fairly, in all material respects, the
financial position of E.F. Johnson Company-Components Division (a division of
E.F. Johnson Company) as of December 31, 1994, November 26, 1995 and January
23, 1996, and the results of its operations and its cash flows for the year
ended December 31, 1994, the eleven month period ended November 26, 1995 and
the two month period ended January 23, 1996 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Minneapolis, Minnesota
August 28, 1996
F-35
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
ASSETS
- -------------------------------------
Current assets:
Accounts receivable.................. $1,554 $1,579 $1,420
Inventory............................ 2,297 2,191 2,421
Deferred tax asset................... 191 226 198
-------------- -------------- -------------
Total current assets................ 4,042 3,996 4,039
Machinery and equipment, net.......... 3,591 3,264 3,336
-------------- -------------- -------------
Total assets........................ $7,633 $7,260 $7,375
============== ============== =============
LIABILITIES AND DIVISION EQUITY
- -------------------------------------
Current liabilities:
Accounts payable..................... $ 673 $ 844 $1,337
Accrued compensation and benefits ... 411 647 639
Accrued commissions payable.......... 72 68 59
Other liabilities.................... 118 174 190
-------------- -------------- -------------
Total current liabilities........... 1,274 1,733 2,225
Deferred tax liability................ 1,038 873 846
Commitments (Note 7)
Division equity....................... 5,321 4,654 4,304
-------------- -------------- -------------
Total liabilities and division
equity............................. $7,633 $7,260 $7,375
============== ============== =============
</TABLE>
See accompanying notes to financial statements.
F-36
<PAGE>
E.F. JOHNSON COMPANY-COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN TWO
MONTHS MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Net sales:
Third party customers.......... $13,801 $14,001 $2,245
To Parent...................... 2,367 2,158 195
-------------- -------------- -------------
16,168 16,159 2,440
-------------- -------------- -------------
Cost of sales:
Third party customers.......... 8,844 8,641 1,424
To Parent...................... 1,539 1,403 127
-------------- -------------- -------------
10,383 10,044 1,551
-------------- -------------- -------------
Gross margin.................. 5,785 6,115 889
-------------- -------------- -------------
Operating expenses:
Selling and marketing.......... 1,666 1,750 267
Engineering.................... 498 483 84
Allocations from Parent
company....................... 667 591 106
-------------- -------------- -------------
Total operating expenses ..... 2,831 2,824 457
-------------- -------------- -------------
Operating income................ 2,954 3,291 432
Interest expense................ 237 -- --
-------------- -------------- -------------
Income before income taxes ..... 2,717 3,291 432
Provision for income taxes ..... (1,034) (1,251) (165)
-------------- -------------- -------------
Net income...................... $ 1,683 $ 2,040 $ 267
============== ============== =============
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE>
E.F. JOHNSON COMPANY-COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS TWO MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- --------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 1,683 $ 2,040 $ 267
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation.................................. 910 958 183
Deferred income taxes......................... 53 (200) 1
Loss on sale of property...................... 2 -- --
Changes in components of working capital:
(Increase) decrease in receivables........... (485) (25) 159
Decrease (increase) in inventories........... 347 106 (230)
Increase in accounts payable................. 355 171 493
(Decrease) increase in accrued liabilities .. (99) 288 (1)
-------------- --------------- -------------
Net cash provided by operating activities .. 2,766 3,338 872
-------------- --------------- -------------
Cash flows from investing activities:
Capital expenditures........................... (507) (656) (261)
Proceeds from sale of property................. 13 25 6
-------------- --------------- -------------
Net cash used by investing activities ...... (494) (631) (255)
-------------- --------------- -------------
Cash flows from financing activities:
Decrease in advances from Parent............... (4,041) -- --
Investment by (distributions to) Parent, net .. 1,769 (2,707) (617)
-------------- --------------- -------------
Net cash used by financing activities ...... (2,272) (2,707) (617)
-------------- --------------- -------------
Net change in cash.............................. -- -- --
Cash--beginning of period....................... -- -- --
-------------- --------------- -------------
Cash--end of period............................. $ -- $ -- $ --
============== =============== =============
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
E.F. Johnson Company--Components Division (the Division) is a division of
E.F. Johnson Company (the Parent). The Division manufactures RF connectors,
cable assemblies, electronic circuit hardware, spacers and test plugs and
jacks, as well as components designed to specific customer requirements.
Basis of Presentation
These financial statements present the assets, liabilities and results of
operations of the Division. The Parent's year end is December 31. The
financial statements as of and for the eleven month period ended November 25,
1995 were prepared for purposes of a letter of intent entered into in
conjunction with the sale of the Division (see Note 7). The financial
statements as of and for the two month period ended January 23, 1996 were
prepared to present the Division's results of operations subsequent to the
signing of the letter of intent and through the sale transaction closing
date.
Costs related to functions performed by the Parent and certain other costs
which are attributable to the Division are allocated to the Division by the
Parent. Costs related to these functions, as further described at Note 5,
include computer support, legal, insurance, human resources, financial and
other administrative services.
The Division is part of a consolidated group and as such has extensive
dealings with related entities. Management considers that the intercompany
charges, including the allocation of common costs from the Parent,
appropriately reflect the cost of services provided. However, the terms of
transactions were determined between related parties and may, therefore,
differ from terms which would have occurred between wholly unrelated parties
and may also differ from the costs which would have been incurred had the
Division operated as a completely autonomous entity.
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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Division's financial instruments consist primarily of inventories,
short-term trade receivables and payables for which the current carrying
amounts approximate fair market value.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined by the first-in, first-out (FIFO) method.
Machinery and Equipment
Machinery and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over estimated useful
lives which range from three to seven years.
F-39
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
Revenue Recognition
Revenue is recognized upon shipment of products. Rebates are granted to
certain distributors based on contractual formulas which consider the annual
sales volume to the distributors of Division product. Estimates of such
rebates are recorded as a reduction of sales at the time the product is
shipped by the Division.
Income Taxes
The Company is included in the consolidated federal income tax return
filed by the Parent. There is no tax sharing agreement between the Division
and its Parent. For financial statement purposes, the tax provision was
computed as if the Company filed a separate tax return using the liability
method under Financial Accounting Standard No. 109, "Accounting for Income
Taxes." Income taxes payable are recorded as a component of the investment
by/distributions to Parent in division equity.
Retirement Benefits
The Parent has a defined contribution qualified retirement savings and
profit sharing plan which covers all of its employees. The Company's profit
sharing contributions are discretionary. No profit sharing contributions were
authorized for 1994 and 1995. The Division's contributions to the retirement
savings plan during the year ended December 31, 1994, the eleven month period
ended November 26, 1995 and the two month period ended January 23, 1996 were
$45, $48 and $5, respectively.
Concentration of Credit Risk and Major Customers
Financial instruments which potentially subject the Division to
concentrations of credit risk consist principally of trade accounts
receivables; however, this risk is limited by the large number of customers
in the Division's customer base. Sales to Parent accounted for 15%, 13% and
8% of net sales during the year ended December 31, 1994, the eleven month
period ended November 26, 1995 and the two month period ended January 23,
1996, respectively.
NOTE 2--INVENTORY
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Finished goods ... $ 954 $ 901 $ 989
Work in process .. 849 847 926
Raw materials..... 494 443 506
-------------- -------------- -------------
Total
inventories..... $2,297 $2,191 $2,421
============== ============== =============
</TABLE>
F-40
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
NOTE 3--MACHINERY AND EQUIPMENT
Machinery and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Machinery and equipment............ $ 5,297 $ 5,828 $ 6,193
Furniture and fixtures............. 362 326 315
Construction in process............ -- 115 13
-------------- -------------- -------------
5,659 6,269 6,521
Less: Accumulated depreciation .... (2,068) (3,005) (3,185)
-------------- -------------- -------------
Total machinery and equipment,
net.............................. $ 3,591 $ 3,264 $ 3,336
============== ============== =============
</TABLE>
NOTE 4--DIVISION EQUITY
Division equity consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31,
1993........................ $ 1,869
Net income.................. 1,683
Investment by Parent, net .. 1,769
---------
Balance at December 31,
1994........................ 5,321
Net income.................. 2,040
Distributions to Parent,
net........................ (2,707)
---------
Balance at November 26,
1995........................ 4,654
Net income.................. 267
Distributions to Parent,
net........................ (617)
---------
Balance at January 23, 1996 . $ 4,304
=========
</TABLE>
Investments by/distributions to Parent represent the change in net assets
of the Division, net of income during each respective period.
NOTE 5--ALLOCATED COSTS
Services provided to the Division by the Parent include expenses incurred
and paid by the Parent on the Division's behalf, charges for periodic Parent
services provided at rates which management considers to reflect the
incremental cost of providing these services, and allocations of costs based
upon utilization of shared services by the Division. In addition, interest
expense was charged on advances from Parent at the Parent's average borrowing
rate. Management considers that these allocations are reasonable given the
services provided. Costs related to functions performed by the Parent and
certain other costs which are attributable to the Division are allocated to
the Division by the Parent as follows:
<TABLE>
<CAPTION>
ELEVEN TWO
MONTHS MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Operating expenses:
Management compensation.......................... $202 $241 $ 40
Computer support................................. 65 47 11
Legal services................................... 5 8 2
Insurance........................................ 34 24 3
Finance, human resources and other
administrative support services................. 361 271 50
-------------- -------------- -------------
$667 $591 $106
============== ============== =============
</TABLE>
F-41
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
NOTE 6--INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
ELEVEN TWO
MONTHS MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Current:
Federal .. $ 826 $1,222 $138
State..... 155 229 26
-------------- -------------- -------------
981 1,451 164
Deferred .. 53 (200) 1
-------------- -------------- -------------
$1,034 $1,251 $165
============== ============== =============
</TABLE>
The Company's effective income tax rate varies from the federal statutory
tax rate as follows:
<TABLE>
<CAPTION>
ELEVEN TWO
MONTHS MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Federal statutory tax rate.............. 34.0% 34.0% 34.0%
Increase in tax rate resulting from:
State taxes, net of federal tax
benefit............................... 4.0 4.0 4.0
Other, net.............................. 0.1 -- 0.2
-------------- -------------- -------------
Effective tax rate...................... 38.1% 38.0% 38.2%
============== ============== =============
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of asset and liabilities for financial reporting
and income tax purposes. Significant components of the Division's deferred
tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
ELEVEN TWO
MONTHS MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Deferred income tax assets:
Inventory....................... $ 80 $ 66 $ 70
Accruals........................ 111 160 128
-------------- -------------- -------------
191 226 198
Deferred income tax
liabilities:.................... (1,038) (873) (846)
-------------- -------------- -------------
Machinery and equipment......... $ (847) $(647) $(648)
============== ============== =============
</TABLE>
NOTE 7--SUBSEQUENT EVENT
During 1995, the Company entered into a letter of intent to sell the
Division's assets. The transaction was completed on January 23, 1996.
Prior to the sale of the Division's assets, substantially all assets of
the Division were pledged as collateral under the parent's revolving credit
facility and bank term debt agreement. Concurrent with the sale, the Division
obtained a release of its assets as collateral under the bank agreements.
F-42
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors
Viewsonics, Inc. and
Shanghai Viewsonics Electronic Co., Ltd.
We have audited the accompanying combined balance sheet of Viewsonics,
Inc. and Shanghai Viewsonics Electronic Co., Ltd. as of December 31, 1995,
and the related combined statements of income, stockholder's equity, and cash
flows for the year then ended. These financial statements are the
responsibility of the Companies' 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 combined financial position of Viewsonics, Inc.
and Shanghai Viewsonics Electronic Co., Ltd. at December 31, 1995, and the
combined results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
April 10, 1996
F-43
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JULY 31,
1995 1996
-------------- ------------
<S> <C> <C>
ASSETS
- -----------------------------------------------------
Current assets:
Cash................................................. $ 484,884 $ 620,932
Accounts receivable, less allowance of $9,161 ....... 1,218,410 1,488,355
Accounts receivable from related entity.............. 75,305 36,277
Inventories.......................................... 2,567,198 5,678,514
Other current assets................................. 18,051 --
-------------- ------------
Total current assets................................ 4,363,848 7,824,028
Property, equipment, and leasehold improvements--Net . 456,666 445,713
Other assets.......................................... 12,516 14,529
-------------- ------------
$4,833,030 $8,284,270
============== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
- -----------------------------------------------------
Current liabilities:
Accounts payable..................................... $ 442,938 $ 820,332
Accrued expenses..................................... 398,259 429,884
-------------- ------------
Total current liabilities........................... 841,197 1,250,216
Stockholder's equity:
Common stock......................................... 501 501
Additional paid-in capital........................... 614,499 614,499
Retained earnings.................................... 3,372,658 6,416,446
Foreign currency translation adjustment.............. 4,175 2,608
-------------- ------------
Total stockholder's equity.......................... 3,991,833 7,034,054
-------------- ------------
$4,833,030 $8,284,270
============== ============
</TABLE>
See accompanying notes.
F-44
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED PERIOD ENDED
DECEMBER 31 JULY 31
1995 1996
------------- --------------
<S> <C> <C>
Net sales .................................... $10,997,478 $8,069,407
Cost of sales................................. 4,867,307 3,276,123
------------- --------------
Gross profit.................................. 6,130,171 4,793,284
Selling, general, and administrative
expenses..................................... 2,974,998 1,762,562
------------- --------------
Operating income.............................. 3,155,173 3,030,722
Interest income............................... 48,938 13,066
------------- --------------
Net income.................................... $ 3,204,111 $3,043,788
============= ==============
</TABLE>
See accompanying notes.
F-45
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
COMBINED STATEMENT OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION STOCKHOLDER'S
STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY
-------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994........................ $501 $304,499 $ 4,069,643 $ 4,849 $ 4,379,492
Capital contribution......... -- 310,000 -- -- 310,000
Cash dividends paid.......... -- -- (3,901,096) -- (3,901,096)
Foreign currency translation
adjustment.................. -- -- -- (674) (674)
Net income................... -- -- 3,204,111 -- 3,204,111
-------- ------------ ------------- ------------- ---------------
Balance at December 31,
1995........................ 501 614,499 3,372,658 4,175 3,991,833
Foreign currency translation
adjustment (unaudited)...... -- -- -- (1,567) (1,567)
Net income (unaudited)....... -- -- 3,043,788 -- 3,043,788
-------- ------------ ------------- ------------- ---------------
Balance at July 31, 1996
(unaudited)................. $501 $614,499 $ 6,416,446 $ 2,608 $ 7,034,054
======== ============ ============= ============= ===============
</TABLE>
See accompanying notes.
F-46
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED PERIOD ENDED
DECEMBER 31, JULY 31,
1995 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................. $ 3,204,111 $ 3,043,788
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................. 148,387 86,559
Provision for bad debts................................... 4,711 --
Changes in operating assets and liabilities:
Accounts receivable...................................... (251,571) (269,945)
Accounts receivable from related entity.................. (75,305) 39,078
Inventories.............................................. (989,526) (3,111,316)
Other current assets..................................... (9,460) 18,051
Other assets............................................. 5,687 (2,013)
Accounts payable......................................... 106,596 377,394
Accrued expenses......................................... 204,491 31,625
-------------- --------------
Net cash provided by operating activities............... 2,348,121 213,221
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment, and leasehold
improvements.............................................. (184,716) (75,606)
-------------- --------------
Net cash used for investing activities.................. (184,716) (75,606)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution....................................... 310,000 --
Dividends paid............................................. (3,901,096) --
-------------- --------------
Net cash used for financing activities..................... (3,591,096) --
Effect of exchange rate changes on cash.................... (674) (1,567)
-------------- --------------
(Decrease) increase in cash................................ (1,428,365) 136,048
Cash at beginning of period................................ 1,913,249 484,884
-------------- --------------
Cash at end of period...................................... $ 484,884 $ 620,932
============== ==============
</TABLE>
See accompanying notes.
F-47
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Viewsonics, Inc. (VSI) and Shanghai Viewsonics Electronic Co., Ltd.
(SVECL), collectively referred to as the "Companies," are commonly
controlled. VSI designs, manufactures, and markets branded cable television
electronic network component and security electronic network component
products primarily to customers located throughout the United States.
VSI is economically dependent on SVECL an affiliate located in Shanghai,
China, which sells 100% of its production to VSI. Although there are a
limited number of manufacturers of the products currently purchased from
Svecl, VSI management believes that other suppliers could provide similar
products. However, the time required to locate and qualify other suppliers,
and the nature of their terms (which would likely not be comparable to those
currently in place) could cause a delay in filling orders and may be
financially disruptive to VSI.
The unaudited combined financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual combined
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Companies believe these disclosures are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments necessary for a fair presentation for the period
presented have been reflected and are of a formal recurring nature.
Results of operations for the period from January 1, 1996 to July 31, 1996
are not necessarily indicative of the results that may be achieved for the
entire year ended December 31, 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination
The combined financial statements include the accounts of VSI and SVECL.
Significant intercompany accounts and transactions have been eliminated in
the combined financial statements.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by the first in, first out (FIFO) method.
Property, Equipment, and Leasehold Improvements
Property and equipment are stated at cost, less accumulated depreciation.
Provisions for depreciation of property and equipment are determined using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are stated at cost, less accumulated amortization.
Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or the life of the respective asset.
Research and Development Cost
Research and development costs related to both present and future products
are expensed as incurred.
F-48
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Advertising Costs
Advertising costs are expensed as incurred.
Income Taxes
VSI is taxed as an S corporation under applicable provisions of the
Internal Revenue Code and, therefore, is generally not liable for federal and
certain state income taxes, as the income of VSI is included in the taxable
income of its stockholder.
SVECL is governed by the Income Tax Law of the People's Republic of China
(the PRC) concerning Enterprises with Foreign Investment and Foreign
Enterprises and various local income tax laws of the PRC (the FIE Income Tax
Laws). Pursuant to the FIE Income Tax Laws, the income of SVECL is fully
exempted from income tax for two years commencing from the first profitable
year of operations, followed by a 50% exemption for the next three years,
after which the income of SVECL will be taxable at a rate which is currently
27%.
No income tax provision has been recorded, as SVECL incurred a loss for
the year ended December 31, 1995 and has incurred losses since its inception.
Financial Instruments
Cash and trade receivables may subject the Companies to credit risk. VSI
holds cash at highly rated financial institutions which are federally insured
up to prescribed limits. Cash balances may exceed the federally insured
limits at any given time.
During 1995, VSI's two largest customers accounted for approximately 27%
of sales. These same customers accounted for approximately 36% of VSI's
December 31, 1995 accounts receivable. VSI closely monitors the credit
quality of its customers and maintains an allowance for potential credit
losses which, historically, have been within the range of management's
expectations.
Foreign Currency Translation
The accounts of SVECL are translated into U.S. dollars from the functional
local currency in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JULY 31,
1995 1996
-------------- -----------
<S> <C> <C>
Raw materials.................. $ 371,929 $ 734,094
Work in process................ 77,971 153,895
Finished goods................. 2,857,513 5,640,007
Inventory obsolescence
reserve....................... (740,215) (849,482)
-------------- -----------
$2,567,198 $5,678,514
============== ===========
</TABLE>
F-49
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
Property, equipment, and leasehold improvements consist of the following
as of December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Equipment ...................................... $698,984
Furniture and fixtures.......................... 127,506
Vehicles........................................ 51,176
Leasehold improvements.......................... 51,102
----------
928,768
----------
Less: Accumulated depreciation and
amortization................................... 472,102
----------
$456,666
==========
</TABLE>
5. STOCKHOLDER'S EQUITY
Common Stock and Additional Paid-in Capital
<TABLE>
<CAPTION>
<S> <C>
VSI
Common stock; $1 par value; 1,000 shares authorized; 501 shares issued
and outstanding.......................................................... $ 501
Additional paid-in capital................................................ 4,499
SVECL
Additional paid-in capital (registered capital)........................... 610,000
---------
$615,000
=========
</TABLE>
SVECL was registered on August 16, 1993 under the Laws of the PRC on
enterprises operated exclusively with foreign capital. The tenure of the
Company is for a period of 30 years.
The registered capital of the Company is $610,000. Since SVECL is a
"Limited Liability Company" under PRC Law, it does not issue stock of any
class.
Retained Earnings
As stipulated in the relevant regulations applicable to wholly
foreign-owned investment enterprises established in PRC, SVECL is required to
appropriate 10% of its profit after tax, after offsetting accumulated
deficit, determined in accordance with the PRC's accounting principles and
financial regulations, to the general reserve fund until such reserve reaches
50% of the registered capital of SVECL. The general reserve fund would not be
available for distribution as dividends.
Svecl has not generated any profit as of December 31, 1995 and,
accordingly, there were no profit distributions or appropriations to the
general reserve fund.
6. COMMITMENTS
The Companies lease manufacturing, office, and storage facilities and
certain equipment under noncancelable operating leases expiring in various
years through 2000. The leases require the Companies to pay real estate taxes
and maintenance costs.
F-50
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Commitments for future minimum payments under noncancelable leases are as
follows as of December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
1996 ... $260,692
1997.... 262,774
1998.... 356,066
1999.... 11,193
2000.... 1,106
</TABLE>
Rental expense for the year ended December 31, 1995 was approximately
$239,000.
7. FOREIGN CURRENCY
In April 1995, the National Foreign Exchange Training Center is Shanghai
(the exchange center) commenced operations. Enterprises operating in the PRC
can enter into exchange transactions at the exchange center through the Bank
of China or other authorized institutions. Payments for imported materials
are subject to the availability of foreign currency, which depends on the
foreign currency denominated earnings of the enterprises, or must be arranged
through the exchange center. Approval for exchange at the exchange center is
granted to enterprises in the PRC for valid reasons such as purchases of
imported materials and remittance of earnings. While conversion of Renminbi
into United States dollars or other foreign currencies can generally be
effected at the exchange center, there is no guarantee that it can be
effected at all times. SVECL has not had and does not believe it will have
any difficulty in exchanging its currency (Renminbi) for U.S. dollars at the
rate of exchange quoted by the People's Bank of China.
F-51
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Seaboard Folding Box Corp. and Affiliates:
We have audited the accompanying combined balance sheets of Seaboard
Folding Box Corp. (a Massachusetts corporation) and affiliates as of December
31, 1994 and 1995, and the related combined statements of income,
stockholder's equity, and cash flows for the years then ended. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
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 combined financial statements referred to above
present fairly, in all material respects, the financial position of Seaboard
Folding Box Corp. and affiliates as of December 31, 1994 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Canby, Maloney & Co., Inc.
Framingham, Massachusetts
February 15, 1996
F-52
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents ..................................... $ 1,449,883 $ 2,293,600
Accounts receivable, net of allowance for doubtful accounts of
$127,154 in 1994 and $189,358 in 1995 ........................ 2,376,683 3,090,644
Inventories ................................................... 2,535,521 3,359,008
Other current assets .......................................... 20,053 17,744
------------- -------------
Total current assets ......................................... 6,382,140 8,760,996
Property and Equipment, at cost:
Land .......................................................... 510,780 510,780
Buildings ..................................................... 2,494,220 2,494,220
Building improvements ......................................... 493,697 503,089
Furniture and fixtures ........................................ 85,544 89,425
Machinery and equipment ....................................... 5,888,338 5,972,723
Motor vehicles ................................................ 393,306 416,865
Tooling ....................................................... 582,522 690,522
------------- -------------
10,448,407 10,677,624
Less--Accumulated depreciation and amortization .............. (4,689,099) (5,426,099)
------------- -------------
5,759,308 5,251,525
Other Assets:
Deposits ...................................................... 10,088 10,088
Other assets .................................................. -- 35,000
------------- -------------
$12,151,536 $14,057,609
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current liabilities:
Demand note payable to a bank ................................. $ 700,000 $ --
Accounts payable .............................................. 919,002 816,543
Accrued expenses and payroll tax withholdings ................. 1,521,420 2,111,721
Accrued state income taxes .................................... 118,105 181,571
Due to officer ................................................ 385,000 385,000
------------- -------------
Total current liabilities .................................... 3,643,527 3,494,835
Deferred state income taxes .................................... 30,000 30,000
Stockholder's equity:
Common stock, no par value--Seaboard Folding Box Corp.,
authorized, issued and outstanding--200 shares ............... 200,000 200,000
Common stock, no par value--A&R Sales, Inc., authorized,
issued and outstanding--1,000 shares ......................... 1,000 1,000
Common stock, no par value--Seaboard Holding Corp., authorized
200 shares, issued and outstanding--10 shares ................ -- 1,000
Additional paid-in capital .................................... 200,000 200,000
Retained earnings ............................................. 8,077,009 10,130,774
------------- -------------
8,478,009 10,532,774
------------- -------------
$12,151,536 $14,057,609
============= =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-53
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Net sales ...................................... $15,561,044 $16,079,710
Cost of sales .................................. 9,405,511 9,319,217
------------- -------------
Gross profit .................................. 6,155,533 6,760,493
Selling, general and administrative expenses .. 3,162,741 3,080,521
------------- -------------
Income from operations......................... 2,992,792 3,679,972
Other income (expense):
Interest expense .............................. (31,902) (10,636)
Interest income ............................... 31,406 42,550
Sublease rental income ........................ 43,455 --
------------- -------------
42,959 31,914
------------- -------------
Income before provision for state income taxes 3,035,751 3,711,886
Provision for state income taxes ............... 82,000 113,000
------------- -------------
Net income ..................................... $ 2,953,751 $ 3,598,886
============= =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-54
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
NUMBER ADDITIONAL
OF SHARES PAID-IN RETAINED
ISSUED AMOUNT CAPITAL EARNINGS
----------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 .. 1,200 $201,000 $200,000 $ 6,436,258
Distributions to stockholder -- -- -- (1,313,000)
Net income .................. -- -- -- 2,953,751
----------- ---------- ------------ -------------
Balance, December 31, 1994 .. 1,200 201,000 200,000 8,077,009
Issuance of common stock in
Seaboard Holding Corp. .... 10 1,000 -- --
Distribution to stockholder -- -- -- (1,545,121)
Net income .................. -- -- -- 3,598,886
----------- ---------- ------------ -------------
Balance, December 31, 1995 .. 1,210 $202,000 $200,000 $10,130,774
=========== ========== ============ =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-55
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Collections from customers .................................. $ 15,580,612 $ 15,287,749
Interest income collected ................................... 31,406 42,550
Sublease rental income collected ............................ 43,455 --
Payment of operating expenses ............................... (11,381,550) (11,918,074)
Payment of interest ......................................... (32,914) (10,636)
Payment of state income taxes ............................... (42,690) (49,534)
-------------- --------------
Net cash provided by operating activities .................. 4,198,319 3,352,055
INVESTING ACTIVITIES
Purchase of property and equipment .......................... (2,234,638) (229,217)
Increase in other assets .................................... -- (35,000)
-------------- --------------
Net cash used for investing activities ..................... (2,234,638) (264,217)
FINANCING ACTIVITIES
Net (payments of) proceeds from demand note payable to a
bank ....................................................... 700,000 (700,000)
Payment of long-term debt ................................... (1,086,217) --
Distributions to stockholder ................................ (1,313,000) (1,545,121)
Sale of common stock ........................................ -- 1,000
-------------- --------------
Net cash used for financing activities ..................... (1,699,217) (2,244,121)
-------------- --------------
Net increase in cash and cash equivalents .................... 264,464 843,717
Cash and cash equivalents, beginning of year ................. 1,185,419 1,449,883
-------------- --------------
Cash and cash equivalents, end of year ....................... $ 1,449,883 $ 2,293,600
============== ==============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-56
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(CONTINUED)
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Net Income .......................................................... $2,953,751 $3,598,886
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ..................................... 747,958 737,000
(Increase) decrease in:
Accounts receivable .............................................. 242,568 (713,961)
Inventories ...................................................... (247,094) (823,487)
Other current assets ............................................. 3,409 2,309
------------ ------------
Increase (decrease) in:
Accounts payable ................................................. 114,270 (102,459)
Accrued expenses and payroll tax withholdings .................... 344,147 590,301
Accrued state income taxes ....................................... 39,310 63,466
------------ ------------
Net cash provided by operating activities ........................ $4,198,319 $3,352,055
============ ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-57
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Seaboard Folding Box Corp. and its affiliates, A&R Sales, Inc. and
Seaboard Holding Corp. (the Company), are engaged in the manufacture and sale
of cardboard boxes. The accompanying combined financial statements reflect
the application of certain accounting policies as described in this note.
Other policies and practices are covered in the remaining notes.
(a) Principles of Combination
The accompanying combined financial statements of Seaboard Folding Box
Corp., A&R Sales, Inc. (a Florida corporation) and Seaboard Holding Corp. (a
New York corporation), have been prepared on a combined basis, as all of the
entities are under common ownership and control. Seaboard Holding Corp. was
incorporated in March, 1995. All material transactions and accounts among the
three entities have been eliminated in combination.
(b) Cash Equivalents
The Company considers commercial paper purchased with an original maturity
of three months or less to be a cash equivalent.
(c) Inventories
Inventories, which include material, labor, and manufacturing overhead are
stated at the lower of cost (first-in, first-out) or market, and consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995
------------ ------------
<S> <C> <C>
Raw Materials ... $1,188,169 $1,191,431
Work-in-progress 207,816 396,220
Finished goods .. 1,139,536 1,771,357
------------ ------------
$2,535,521 $3,359,008
============ ============
</TABLE>
(d) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
income in amounts estimated to recover the cost of its property and equipment
over their estimated useful lives, using the straight-line method as follows:
<TABLE>
<CAPTION>
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
- ---------------------------- -------------------------
<S> <C>
Buildings ................... 25-39 Years
Building improvements ....... 10 Years
Furniture and fixtures ..... 5-10 Years
Machinery and equipment .... 10 Years
Motor vehicles .............. 3-5 Years
Tooling ..................... 3 Years
</TABLE>
(e) 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 combined
financial statements and the reported amounts of revenues and expenses during
the reporting period. Significant estimates used in preparing these financial
statements include those assumed in calculating the allowance for doubtful
accounts, the allowance for obsolete inventory and the costing of certain
inventory components. It is at least reasonably possible that the estimates
used will change within the next year.
F-58
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
2. DEMAND NOTE PAYABLE TO A BANK
The demand note payable to a bank represents borrowings under a working
capital line of credit agreement with a bank. The Company may borrow sums
under this agreement provided that the principal amount outstanding at any
time does not exceed $2,000,000. Borrowings under the agreement bear interest
at the bank's prime interest rate (8.5% at December 31, 1995) and are
collateralized by substantially all of the assets of the Company. The
agreement, among other things, requires the Company to maintain certain
financial ratios, as defined, and restricts the amount of distributions to be
paid to the stockholder.
3. SALES TO SIGNIFICANT CUSTOMERS
One customer accounted for 16% of net sales during the year ended December
31, 1994. Two customers accounted for 22% of net sales during the year ended
December 31, 1995.
4. INCOME TAXES
The Company's stockholder has elected to have the Company's income taxed
as an S Corporation under the provisions of the Internal Revenue Code and
various state tax codes, thereby consenting to include the Company's income
in the individual tax return of the stockholder. As a result, the Company is
not subject to federal income taxes.
The provision for state income taxes in the accompanying statements of
income results from taxable income generated in certain states in which the S
Corporation provisions differ from the Internal Revenue Code.
The Company accounts for income taxes according to SFAS No. 109,
"Accounting for Income Taxes," which requires an asset and liability approach
to financial accounting and reporting for income taxes. The difference
between the financial statement and tax bases of assets and liabilities is
determined annually. Deferred income tax assets and liabilities are computed
for those differences that have future tax consequences using the currently
enacted tax laws and rates that apply to the periods in which they are
expected to affect taxable income. Income tax expense is the current tax
payable or refundable for the period plus or minus the net change in the
deferred tax assets and liabilities.
The deferred state tax liability included in the accompanying combined
financial statements results principally from differences in depreciation
methods used for financial and tax reporting purposes.
The components of state income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
1994 1995
--------- ---------
<S> <C> <C>
Current .. $82,000 $113,000
========= =========
</TABLE>
5. EMPLOYEE BENEFIT PLANS
The Company has a non-contributory, defined benefit pension plan covering
all eligible union employees. The plan calls for benefits to be paid to
eligible union employees at retirement based upon years of service with the
Company. The Company's funding policy is to contribute annually an amount
needed to be consistent with the plan's objectives. Pension expense for the
years ended December 31, 1994 and 1995, was $14,395 and $41,137,
respectively.
During the year ended December 31, 1995, the Company decided to terminate
this pension plan. At December 31, 1995, the estimated payout of all plan
benefits exceeds the net assets available for benefit. The total cost to
terminate the pension plan, including the estimated payout of all plan
benefits, is approximately $30,000, which is included in accrued expenses at
December 31, 1995.
F-59
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
5. EMPLOYEE BENEFIT PLANS (Continued)
The Company also has a profit sharing plan covering all eligible
non-union employees. Contributions are made annually at the discretion of the
Company's directors. There were no contributions for the years ended December
31, 1994 and 1995, respectively.
6. CONCENTRATION OF CREDIT RISK
The Company extends credit on an unsecured basis to customers in a broad
range of industries located primarily in the eastern region of the United
States. Also, the Company has a cash account with a bank that has deposits in
excess of federally insured limits.
7. LETTER OF CREDIT
The Company has two letter of credit agreements with a bank for $200,000
as of December 31, 1995. The letters of credit are collateralized by cash on
deposit with the bank.
8. DUE TO OFFICER
The amount due to officer in the combined balance sheet is due on demand
and noninterest bearing.
9. SUBSEQUENT EVENTS
(a) Acquisition of Majestic Packaging Co., Inc.
Subsequent to December 31, 1995, Seaboard Holding Corp. purchased the
operating assets of Majestic Packaging Co., Inc. (seller) for approximately
$2,300,000. For a period of five years after the closing, Seaboard Holding
Corp. will pay the seller commissions on sales as defined in the purchase and
sale agreement. Seaboard Holding Corp. also entered into lease agreements for
two facilities. Seaboard Folding Box Corp. has guaranteed the payment and
performance of all terms and conditions of the purchase and sale agreement.
(b) Sale of the Company's Assets
Subsequent to December 31, 1995, the Company entered into a purchase and
sale agreement to sell substantially all of its assets. The final closing of
the sale is subject to various provisions in the agreement, and as of date of
issuance of these financial statements, had not occurred.
F-60
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED BALANCE SHEET
MAY 1, 1996
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash and cash equivalents............................................. $ 1,369,266
Accounts receivable, net of allowance for doubtful accounts of
$193,070............................................................. 4,515,869
Inventories........................................................... 4,335,293
Other current assets ................................................. 73,572
-------------
Total current assets ................................................ 10,294,000
-------------
Property and Equipment, at cost:
Land.................................................................. 510,780
Buildings............................................................. 2,494,220
Building improvements................................................. 515,092
Furniture and fixtures................................................ 104,425
Machinery and equipment............................................... 6,900,512
Motor vehicles........................................................ 459,550
Tooling .............................................................. 726,522
-------------
11,711,101
Less--Accumulated depreciation and amortization ...................... (5,675,476)
-------------
6,035,625
-------------
Other assets:
Goodwill, net of accumulated amortization of $4,400................... 670,600
Other assets ......................................................... 45,088
-------------
715,688
-------------
$17,045,313
=============
</TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C>
Current liabilities:
Demand note payable to a bank........................................ $ 2,318,905
Accounts payable..................................................... 1,170,984
Accrued expenses and payroll tax withholdings........................ 838,290
Accrued income taxes................................................. 219,768
Due to officer ...................................................... 385,000
-------------
Total current liabilities .......................................... 4,932,947
Deferred income taxes ................................................ 34,400
Stockholder's equity:
Common stock, no par value--Seaboard Folding Box Corp., authorized,
issued and outstanding--200 shares.................................. 200,000
Common stock, no par value--A & R Sales, Inc., authorized, issued
and outstanding--1,000 shares....................................... 1,000
Common stock, no par value--Seaboard Holding Corp., authorized 200
shares, issued and outstanding--10 shares........................... 1,000
Additional paid-in capital........................................... 200,000
Retained earnings ................................................... 11,675,966
-------------
12,077,966
-------------
$17,045,313
=============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-61
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED STATEMENT OF INCOME
FOR THE PERIOD FROM JANUARY 1, 1996 THROUGH MAY 1, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Net sales ..................................... $7,726,315
Cost of sales ................................. 4,602,519
------------
Gross profit.................................. 3,123,796
Selling, general, and administrative expenses 1,260,343
------------
Income from operations ....................... 1,863,453
Other income (expense):
Interest expense.............................. (45,170)
Interest income............................... 26,117
Rental income................................. 31,737
Miscellaneous income ......................... 129,073
------------
141,757
------------
Income before provision for income taxes ..... 2,005,210
Provision for income taxes .................... 115,000
------------
Net income.................................... $1,890,210
============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-62
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM JANUARY 1, 1996 THROUGH MAY 1, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
NUMBER OF ADDITIONAL
SHARES PAID-IN RETAINED
ISSUED AMOUNT CAPITAL EARNINGS
----------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 .. 1,210 $202,000 $200,000 $10,130,774
Distribution to stockholder -- -- -- (345,018)
Net income ................. -- -- -- 1,890,210
----------- ---------- ------------ -------------
Balance, May 1, 1996......... 1,210 $202,000 $200,000 $11,675,966
=========== ========== ============ =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-63
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 THROUGH MAY 1, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Collections from customers..................... $ 6,272,954
Interest income collected...................... 26,117
Miscellaneous and rental income collected ..... 160,810
Payment of operating expenses.................. (6,802,847)
Payment of interest............................ (45,170)
Payment of income taxes ....................... (72,703)
-------------
Net cash used for operating activities ...... (460,839)
-------------
INVESTING ACTIVITIES
Purchase of property and equipment ............ (118,477)
-------------
Net cash used for investing activities ...... (118,477)
-------------
FINANCING ACTIVITIES
Distributions to stockholder .................. (345,018)
-------------
Net cash used for financing activities ...... (345,018)
-------------
Net decrease in cash and cash equivalents ...... (924,334)
Cash and cash equivalents, beginning of period 2,293,600
-------------
Cash and cash equivalents, end of period ..... $ 1,369,266
=============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-64
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 THROUGH MAY 1, 1996
(UNAUDITED)
(CONTINUED)
RECONCILIATION OF NET INCOME TO NET CASH
USED FOR OPERATING ACTIVITIES
<TABLE>
<CAPTION>
<S> <C>
Net income...................................................................... $ 1,890,210
Adjustments to reconcile net income to net cash used for operating activities:
Depreciation and amortization.................................................. 253,777
Deferred income taxes.......................................................... 4,400
Increase in:
Accounts receivable........................................................... (1,425,225)
Inventories................................................................... (247,380)
Other current assets.......................................................... (55,828)
Increase (decrease) in:
Accounts payable.............................................................. 354,441
Accrued expenses and payroll tax withholdings................................. (1,273,431)
Accrued income taxes ......................................................... 38,197
-------------
Net cash used for operating activities....................................... $ (460,839)
=============
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Purchase of substantially all assets of Majestic Packaging Co., Inc. in
exchange for demand note payable to a bank as follows:
Inventories.................................................................... $ 728,905
Machinery and equipment........................................................ 915,000
Goodwill ...................................................................... 675,000
-------------
$ 2,318,905
=============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-65
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
MAY 1, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited combined financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual combined
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Companies believe these disclosures are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments necessary for a fair presentation for the period
presented have been reflected and are of a formal recurring nature. These
financial statements should be read in conjunction with the financial
statements and the notes thereto for the two years ended December 31, 1995.
Results of operations for the period from January 1, 1996 to May 1, 1996
are not necessarily indicative of the results that may be achieved for the
entire year ended December 31, 1996.
2. INVENTORIES
Inventories, which include material, labor, and manufacturing overhead are
stated at the lower of cost (first-in, first-out) or market, and consist of
the following:
<TABLE>
<CAPTION>
<S> <C>
Raw materials .. $1,351,610
Work-in-process 723,006
Finished goods . 2,260,677
------------
$4,335,293
============
</TABLE>
3. EMPLOYEE BENEFIT PLANS
The Company has elected to terminate its non-contributory, defined benefit
pension plan covering all eligible union employees. As of May 1, 1996, the
estimated payout of all plan benefits exceeds the net assets available for
benefit. The total cost to terminate the pension plan, including the
estimated payout of all plan benefits, is approximately $40,000, which is
included in accrued expenses at May 1, 1996.
4. ACQUISITION
On February 5, 1996, Seaboard Holding Corp. acquired certain assets of
Majestic Packaging Co., Inc. The acquisition has been accounted for using the
purchase method of accounting and the purchase price has been allocated to
the assets at their estimated fair market value on the date of acquisition as
follows:
<TABLE>
<CAPTION>
<S> <C>
Inventories............$ 728,905
Property and
equipment............. 915,000
Goodwill............... 675,000
-----------
$2,318,905
===========
</TABLE>
In connection with the acquisition, $100,000 of the purchase price has
been placed in escrow for a period of twelve months to insure the sale and
collection of the inventory purchased.
Included in accounts payable at May 1, 1996, is approximately $220,000
which is payable to the seller. The majority of this represents trade
receivables which have been collected by the Company on behalf of the seller.
F-66
<PAGE>
SEABOARD FOLDING BOX CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 1, 1996
(UNAUDITED)
5. DUE TO OFFICER
The amount due to officer in the combined balance sheet is due on demand
and noninterest bearing.
6. COMMITMENTS
(a) Commission and Non-Compete Agreement
In connection with the acquisition as described in Note 4, the Company
entered into a commission and noncompetition agreement with the seller for a
period of five years. Commissions due under the agreement are based upon
sales activity of the customer base existing on the date of acquisition, and
new sales activity obtained by the seller.
Commissions under this agreement for the period from February 5, 1996
through May 1, 1996 were approximately $230,000.
(B) FACILITY LEASES
In connection with the acquisition as described in Note 4, the Company was
assigned two separate operating leases for two facilities. The
non-cancellable leases expire in November, 1996 and March, 1997. The leases
have options of five and one year term extensions.
The future minimum rent due under these operating leases are:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 AMOUNT
- ------------- ----------
<S> <C>
1996.......... $182,192
1997.......... 36,150
----------
$218,342
==========
</TABLE>
Rent expense under these leases for the period from February 5, 1996
through May 1, 1996 was $78,236.
7. SUBSEQUENT EVENT
The Company has entered into an agreement to sell substantially all of the
assets of Seaboard Folding Box Corp. and A & R Sales, Inc. and all of the
outstanding common stock of Seaboard Holding Corp. for approximately
$23,000,000. The closing of the transaction occurred on May 1, 1996.,
effective May 2, 1996. The buyer acquired substantially all assets and
assumed certain liabilities of Seaboard Folding Box Corp. and A & R Sales,
Inc. The buyer also acquired all of the outstanding common stock of Seaboard
Holding Corp. The final selling price is subject to post closing adjustments
based upon activity, up to and including, May 1, 1996.
F-67
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. THIS
PROSPECTUS DOES 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. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Available Information....................... ii
Summary..................................... 1
Risk Factors................................ 12
Use of Proceeds............................. 19
Capitalization.............................. 20
Selected Financial Data..................... 21
Management's Discussion and Analysis of
Results of Operations and Financial
Condition.................................. 23
Business.................................... 33
Management.................................. 48
Principal Stockholders...................... 51
Certain Transactions........................ 53
Recapitalization and Repositioning Plan .... 58
Description of Certain Indebtedness ........ 60
Description of Capital Stock................ 65
The Exchange Offer.......................... 67
Description of the New Securities........... 76
Plan of Distribution........................ 101
Certain U.S. Federal Income Tax
Considerations............................. 102
Legal Matters............................... 108
Independent Auditors........................ 108
Index to Financial Statements and
Information................................ I-1
</TABLE>
<PAGE>
[JORDAN INDUSTRIES, INC. LOGO]
Jordan Industries, Inc.
$120,000,000
10 3/8% SERIES B SENIOR NOTES
DUE 2007
$214,036,493
11 3/4% SERIES B SENIOR
SUBORDINATED DISCOUNT
DEBENTURES DUE 2009
PROSPECTUS
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Illinois Business Corporation Act (Section 8.75) empowers Illinois
corporations to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that the person is or was a director, officer, employee or
agent of the registrant, or is or was serving at the request of the
registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, so long as such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the registrant and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful. For actions or suits by or in the right of the registrant, no
indemnification is permitted in respect of any claim, issue or matter as to
which such person is adjudged to be liable to the registrant, unless, and
only to the extent that, the court in which such action or suit was brought
determines upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court deems
proper. Any indemnification (unless ordered by a court) will be made by the
registrant only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct
set forth above. Such determination shall be made (1) by the board of
directors by a majority vote of a quorum consisting of the directors who are
not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable or if such directors so direct, by independent legal counsel
in a written opinion, or (3) by the stockholders. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled
under any by-laws, agreement, vote of stockholders or otherwise.
Section 8.75 also authorizes the registrant to buy directors' and
officers' liability insurance and gives a director, officer, employee or
agent of the registrant, or a person who is or was serving at the request of
the registrant as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
any liability asserted against such person and incurred by such person in any
capacity, or arising out of the person's status as such, whether or not the
registrant has the power to indemnify the person against such liability.
(b) The Articles of Incorporation of the registrant require, and the
By-Laws of the registrant provide for, indemnification of directors,
officers, employees and agents to the full extent permitted by law.
(c) The Purchase Agreements and the Registration Rights Agreements (the
forms of which are included as Exhibits 1.1 and 4.10-4.12 to this
registration statement) provide for the indemnification under certain
circumstances of the registrant, its directors and certain of its officers by
the Initial Purchasers.
ITEM. 21 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
A list of the exhibits included as part of this registration statement is
set forth below and in the Exhibit Index that immediately precedes such
exhibits.
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 Purchase Agreement, dated July 21, 1997, by and among Jordan Industries, Inc., Jefferies &
Company, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation(5)
1.2 Purchase and Sale Agreement, dated as of April 2, 1997, by and between Jordan Industries,
Inc. and the holders of 11 3/4% Senior Subordinated Discount Debentures due 2005 parties
thereto(5)
1.3 Purchase and Sale Agreement, dated as of April 2, 1997, by and between Jordan Industries,
Inc. and the holders of 11 3/4% Senior Subordinated Discount Debentures due 2005 parties
thereto(5)
1.4 Exchange Agreement, dated as of April 2, 1997, by and between Jordan Industries, Inc. and
the holders of 11 3/4% Senior Subordinated Discount Debentures due 2005 parties thereto(5)
3.1 Articles of Incorporation of Jordan Industries, Inc.(1)
3.2 Bylaws of Jordan Industries, Inc.(1)
4.1 Series A and Series B 10 3/8% Senior Notes Indenture, dated July 25, 1997, between Jordan
Industries, Inc. and First Trust National Association, as Trustee(5)
4.2 Series A and Series B 11 3/4% Senior Subordinated Discount Debentures Indenture, dated April
2, 1997, between Jordan Industries, Inc. and First Trust National Association, as Trustee(5)
4.3 First Supplemental Indenture, dated as of July 25, 1997, between Jordan Industries, Inc. and
First Trust National Association, as Trustee, to the 11 3/4% Senior Subordinated Discount
Debentures Indenture, dated as of April 2, 1997(5)
4.4 Global Series A Senior Note(5)
4.5 Form of Global Series B Senior Note*
4.6 Form of Global Series B Senior Subordinated Discount Debenture*
4.7 $120,000,000 10 3/8% Series A Senior Notes due 2007 Registration Rights Agreement, dated
July 25, 1997, by and among Jordan Industries, Inc., Jefferies & Company, Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation(5)
4.8 11 3/4% Series A Senior Subordinated Discount Debentures due 2009 Registration Rights
Agreement, dated April 2, 1997, between Jordan Industries, Inc. and the purchasers a party
thereto(5)
4.9 11 3/4% Series A Senior Subordinated Discount Debentures due 2009 Registration Rights
Agreement, dated April 2, 1997, between Jordan Industries, Inc. and the purchasers a party
thereto (identical to the agreement filed as Exhibit 4.8)
4.10 10 3/8% Senior Notes Indenture, dated as of July 15, 1993, between Jordan Industries, Inc.
and First Trust National Association, as Trustee(5)
4.11 First Supplemental Indenture, dated as of July 25, 1997, between Jordan Industries, Inc. and
First Trust National Association, as Trustee, to 10 3/8% Senior Notes Indenture, dated as of
July 15, 1993(5)
5 Opinion of Mayer, Brown & Platt*
II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------
10.1 Intercompany Notes, dated June 1, 1988, by and among Jordan Industries, Inc. and its
subsidiaries(1)(2)
10.2 Tax Sharing Agreement, dated as of June 1, 1988, by and among Jordan Industries, Inc. and
its subsidiaries(1)(2)
10.3 Stockholders Agreement, dated as of June 1, 1988, by and among Jordan Industries, Inc.'s
holders of Common Stock(1)
10.4 Employment Agreement, dated as of February 25, 1988, between Jordan Industries, Inc. and
Thomas H. Quinn(1)
10.5 Restricted Stock Agreement, dated as of February 25, 1988, between Jordan Industries, Inc.
and Jonathan F. Boucher(1)
10.6 Restricted Stock Agreement, dated as of February 25, 1988, between Jordan Industries, Inc.
and John R. Lowden(1)
10.7 Restricted Stock Agreement, dated as of February 25, 1988, between Jordan Industries, Inc.
and Thomas H. Quinn(1)
10.8 Stock Purchase Agreement, dated as of June 1, 1988, between Leucadia Investors, Inc. and
John W. Jordan, II(1)
10.9 Zero Coupon Note, dated June 1, 1988, issued by John W. Jordan, II to Leucadia Investors,
Inc.(1)
10.10 Amended and Restated Revolving Credit Agreement, dated as of July 25, 1997, by and among
JII, Inc., the lenders listed thereto and BankBoston, N.A., as agent*
10.11 Security Agreement, dated as of July 25, 1997, between JII, Inc. and BankBoston, N.A., as
agent*
10.12 Revolving Credit Agreement, dated as of August , 1995, between Specialty Printing and
Labeling and The First National Bank of Boston*
10.13 Amended and Restated Revolving Credit Agreement, dated as of May , 1996, between Specialty
Printing and Labeling and The First National Bank of Boston*
10.14 Revolving Credit Agreement, dated as of July 25, 1997, between JTP Industries, Inc., the
lenders listed thereto and BankBoston, N.A., as agent(4)
10.15 Revolving Credit Agreement, dated as of , 1997, between Motors & Gears, Inc. and
Bankers Trust Company*
10.16 Properties Services Agreement, dated as of July 25, 1997, between Jordan Industries, Inc.
and its subsidiaries(5)
10.17 Transition Agreements, each dated as of July 25, 1997, between Jordan Industries, Inc. and
Jordan Telecommunication Products, Inc. and Motors & Gears, Inc., respectively(5)
10.18 New Subsidiary Advisory Agreements, each dated as of July 25, 1997, between Jordan
Industries, Inc. and its subsidiaries(5)
10.19 New Subsidiary Consulting Agreements, each dated as of July 25, 1997, between Jordan
Industries, Inc. and its subsidiaries(5)
10.20 New TJC Management Consulting Agreement, dated as of July 25, 1997, between TJC Management
Corp. and Jordan Industries, Inc.(4)
II-3
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------
10.21 Termination Agreement, dated as of July 25, 1997, between Jordan Industries, Inc. and its
subsidiaries(5)
10.22 Form of Indemnification Agreement between Jordan Industries, Inc. and its subsidiaries and
their directors(5)
12 Statement re: Computation of Ratios(5)
22 Subsidiaries of Jordan Industries, Inc.*
23.1 Consent of Mayer, Brown & Platt (included in the opinion filed as Exhibit 5)
23.2 Consent of Ernst & Young LLP(5)
23.3 Consent of Mellon, Smith & Pivoz, P.C.(5)
23.4 Consent of Blackman Kallick Bartelstein, LLP(5)
23.5 Consent of Price Waterhouse, LLP(5)
23.6 Consent of Canby, Maloney & Co., Inc.(5)
24 Power of Attorney (included on the signature page in Part II of the Registration Statement)
25 Statement of Eligibility of Trustee(5)
28 Phantom Share Plan(3)
99 Form of Letter of Transmittal(5)
</TABLE>
- ------------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (No. 33-24317).
(2) The Company has entered into Intercompany Notes and Intercompany Tax
Sharing Agreements with Riverside, AIM, Cambridge, Beemak, Hudson,
Scott and Motors and Gears, which are identical in all material
respects to the notes and agreements incorporated by reference in this
Registration Statement. Copies of such additional notes and agreements
have therefore not been included at exhibits in this filing in
accordance with Instruction 2 to Item 601 of Regulation S-K.
(3) Incorporated by reference to the Company's 1989 Form 10-K.
(4) Incorporated by reference to Jordan Telecommunication Products, Inc.'s
Registration Statement on Form S-4 (No. 333- ).
(5) Filed herewith.
* To filed by amendment.
(b) Financial Statement Schedules:
A list of schedules included as part of this registration statement is set
forth below. All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted because they are not required, amounts which would otherwise be
required to be shown with respect to any item are not material, are
inapplicable or the required information has already been provided elsewhere
in the registration statement.
SCHEDULE INDEX
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION
- ------------ ------------------------------------------------------------
<S> <C>
II JORDAN INDUSTRIES, INC., VALUATION AND QUALIFYING ACCOUNTS
</TABLE>
II-4
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one
II-5
<PAGE>
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The registrant has not entered into any arrangement or understanding
with any person to distribute the securities to be received in the Exchange
Offer and to the best of the registrant's information and belief, each person
participating in the Exchange Offer is acquiring the securities in its
ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the securities to be received in
the Exchange Offer. In this regard, the registrant will make each person
participating in the Exchange Offer aware (through the Exchange Offer
Prospectus or otherwise) that if the Exchange Offer is being registered for
the purpose of secondary resales, any securityholder using the exchange offer
to participate in a distribution of the securities to be acquired in the
registered exchange offer (1) could not rely on the staff position enunciated
in Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (2) must comply with registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. The registrant acknowledges that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CHICAGO, STATE OF ILLINOIS, ON AUGUST 28, 1997.
JORDAN INDUSTRIES, INC.
By /s/ John W. Jordan
---------------------------------
John W. Jordan, II
Chairman, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JOHN W. JORDAN, II, 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 TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND ANY AND ALL 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 ANY AND ALL ACTS AND THINGS
REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT, OR HIS SUBSTITUTE OR
NOMINEE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on August 28, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------- -------------------------------------------------------
<S> <C>
/s/ John W. Jordan
-------------------------------
John W. Jordan II Chairman, Chief Executive Officer and Director
/s/ Thomas H. Quinn
-------------------------------
Thomas H. Quinn President, Chief Operating Officer and Director
/s/ Jonathan F. Boucher
-------------------------------
Jonathan F. Boucher Vice President and Director
/s/ G. Robert Fisher
-------------------------------
G. Robert Fisher General Counsel, Secretary and Director
/s/ David W. Zalaznick
-------------------------------
David W. Zalaznick Director
/s/ Joseph S. Steinberg
-------------------------------
Joseph S. Steinberg Director
/s/ Thomas C. Spielberger
------------------------------- Vice President, Controller and Principal Accounting
Thomas C. Spielberger Officer
*By /s/ John W. Jordan
----------------------------
Name: John W. Jordan, II as
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
SCHEDULE II
JORDAN INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNCOLLECTIBLE
ADDITIONS BALANCES
BALANCE AT CHARGED TO WRITTEN OFF BALANCE AT
BEGINNING OF COSTS AND NET OF END OF
PERIOD EXPENSES RECOVERIES OTHER PERIOD
-------------- ------------ --------------- ------- ------------
<S> <C> <C> <C> <C> <C>
December 31, 1994:
Allowance for doubtful accounts .... $ 1,131 $ 580 $(790) $137 $ 1,058
Valuation allowances for deferred
tax assets ......................... (25,782) (2,354) -- -- (23,428)
December 31, 1995:
Allowance for doubtful accounts .... 1,058 884 (636) -- 1,306
Valuation allowance for deferred tax
assets ............................. (23,428) (1,962) -- -- (21,466)
December 31, 1996:
Allowance for doubtful accounts .... 1,306 1,343 (731) 765 2,683
Valuation allowance for deferred tax
assets ............................. (21,466) 18,548 -- -- (40,014)
</TABLE>
S-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS, ON SCHEDULE S-II
The Boards of Directors and Shareholders
Jordan Industries, Inc.
We have audited the accompanying consolidated balance sheets of Jordan
Industries, Inc. as of December 31, 1995 and 1996, and the related consolidated
statements of operations, shareholders' equity (net capital deficiency), and
cash flows for each of the three years in the period ended December 31, 1996,
and have issued our report thereon dated March 27, 1997 (included elsewhere
in this Registration Statement). Our audits also included the financial
statement schedule listed in item 21(b) of this Registration Statement.
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the schedule based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Chicago, Illinois
March 27, 1997
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 Purchase Agreement, dated July 21, 1997, by and among Jordan Industries, Inc., Jefferies &
Company, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation
1.2 Purchase and Sale Agreement, dated as of April 2, 1997, by and between Jordan Industries,
Inc. and the holders of 11 3/4% Senior Subordinated Discount Debentures due 2005 parties
thereto
1.3 Purchase and Sale Agreement, dated as of April 2, 1997, by and between Jordan Industries,
Inc. and the holders of 11 3/4% Senior Subordinated Discount Debentures due 2005 parties
thereto
1.4 Exchange Agreement, dated as of April 2, 1997, by and between Jordan Industries, Inc. and
the holders of 11 3/4% Senior Subordinated Discount Debentures due 2005 parties thereto
3.1 Articles of Incorporation of Jordan Industries, Inc.
3.2 Bylaws of Jordan Industries, Inc.
4.1 Series A and Series B 10 3/8% Senior Notes Indenture, dated July 25, 1997, between Jordan
Industries, Inc. and First Trust National Association, as Trustee
4.2 Series A and Series B 11 3/4% Senior Subordinated Discount Debentures Indenture, dated April
2, 1997, between Jordan Industries, Inc. and First Trust National Association, as Trustee
4.3 First Supplemental Indenture, dated as of July 25, 1997, between Jordan Industries, Inc. and
First Trust National Association, as Trustee, to the 11 3/4% Senior Subordinated Discount
Debentures Indenture, dated as of April 2, 1997
4.4 Global Series A Senior Note
4.5 Form of Global Series B Senior Note
4.6 Form of Global Series B Senior Subordinated Discount Debenture
4.7 $120,000,000 10 3/8% Series A Senior Notes due 2007 Registration Rights Agreement, dated
July 25, 1997, by and among Jordan Industries, Inc., Jefferies & Company, Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation
4.8 11 3/4% Series A Senior Subordinated Discount Debentures due 2009 Registration Rights
Agreement, dated April 2, 1997, between Jordan Industries, Inc. and the purchasers a party
thereto
4.9 13 1/4% Series A Senior Subordinated Discount Debentures due 2009 Registration Rights
Agreement, dated April 2, 1997, between Jordan Industries, Inc. and the purchasers a party
thereto
4.10 10 3/8% Senior Notes Indenture, dated as of July 23, 1993, between Jordan Industries, Inc.
and First Trust National Association, as Trustee
4.11 First Supplemental Indenture, dated as of July 25, 1997, between Jordan Industries, Inc. and
First Trust National Association, as Trustee, to 10 3/8% Senior Notes Indenture, dated as of
July 23, 1993
5 Opinion of Mayer, Brown & Platt
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------
10.1 Intercompany Notes, dated June 1, 1988, by and among Jordan Industries, Inc. and its
subsidiaries
10.2 Tax Sharing Agreement, dated as of June 1, 1988, by and among Jordan Industries, Inc. and
its subsidiaries
10.3 Stockholders Agreement, dated as of June 1, 1988, by and among Jordan Industries, Inc.'s
holders of Common Stock
10.4 Employment Agreement, dated as of February 25, 1988, between Jordan Industries, Inc. and
Thomas H. Quinn
10.5 Restricted Stock Agreement, dated as of February 25, 1988, between Jordan Industries, Inc.
and Jonathan F. Boucher
10.6 Restricted Stock Agreement, dated as of February 25, 1988, between Jordan Industries, Inc.
and John R. Lowden
10.7 Restricted Stock Agreement, dated as of February 25, 1988, between Jordan Industries, Inc.
and Thomas H. Quinn
10.8 Stock Purchase Agreement, dated as of June 1, 1988, between Leucadia Investors, Inc. and
John W. Jordan, II
10.9 Zero Coupon Note, dated June 1, 1988, issued by John W. Jordan, II to Leucadia Investors,
Inc.
10.10 Amended and Restated Revolving Credit Agreement, dated as of July 25, 1997, by and among
JII, Inc., the lenders listed thereto and BankBoston, N.A., as agent
10.11 Security Agreement, dated as of July 25, 1997, between JII, Inc. and BankBoston, N.A., as
agent
10.12 Revolving Credit Agreement, dated as of August , 1995, between Specialty Printing and
Labeling and The First National Bank of Boston
10.13 Amended and Restated Revolving Credit Agreement, dated as of May , 1996, between Specialty
Printing and Labeling and The First National Bank of Boston
10.14 Revolving Credit Agreement, dated as of July 25, 1997, between JTP Industries, Inc., the
lenders listed thereto and BankBoston, N.A., as agent
10.15 Revolving Credit Agreement, dated as of , 1997, between Motors & Gears, Inc. and
Bankers Trust Company
10.16 Properties Services Agreement, dated as of July 25, 1997, between Jordan Industries, Inc.
and its subsidiaries
10.17 Transition Agreements, each dated as of July 25, 1997, between Jordan Industries, Inc. and
Jordan Telecommunication Products, Inc. and Motors & Gears, Inc., respectively
10.18 New Subsidiary Advisory Agreements, each dated as of July 25, 1997, between Jordan
Industries, Inc. and its subsidiaries
10.19 New Subsidiary Consulting Agreements, each dated as of July 25, 1997, between Jordan
Industries, Inc. and its subsidiaries
10.20 New TJC Management Consulting Agreement, dated as of July 25, 1997, between TJC Management
Corp. and Jordan Industries, Inc.
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------
10.21 Termination Agreement, dated as of July 25, 1997, between Jordan Industries, Inc. and its
subsidiaries
10.22 Form of Indemnification Agreement between Jordan Industries, Inc. and its subsidiaries and
their directors
12 Statement re: Computation of Ratios
22 Subsidiares of Jordan Industries, Inc.
23.1 Consent of Mayer, Brown & Platt (included in the opinion filed as Exhibit 5)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Mellon, Smith & Pivoz, P.C.
23.4 Consent of Blackman Kallick Bartelstein, LLP
23.5 Consent of Price Waterhouse, LLP
23.6 Consent of Canby, Maloney & Co., Inc.
24 Power of Attorney (included on the signature page in Part II of the Registration
Statement)
25 Statement of Eligibility of Trustee
28 Phantom Shares Plan
99 Form of Letter of Transmittal
</TABLE>
<PAGE>
Exhibit 1.1
JORDAN INDUSTRIES, INC.
$120,000,000 10 3/8% Series A Senior Notes due 2007
PURCHASE AGREEMENT
July 21, 1997
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
Jordan Industries, Inc., an Illinois corporation (the "Issuer"),
hereby agrees with you as follows:
1. Issuance of Securities. The Issuer proposes to issue and sell to
Jefferies & Company, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation (each a "Purchaser" and together, the "Purchasers") $120,000,000
aggregate principal amount of 10 3/8% Series A Senior Notes due 2007 (the
"Senior Notes"). The Senior Notes will be issued pursuant to an indenture (the
"Indenture"), to be dated as of July 25, 1997, between the Issuer and First
Trust National Association, as trustee (the "Trustee").
The Senior Notes will be offered and sold to the Purchasers pursuant
to an exemption from the registration requirements under the Securities Act of
1933, as amended (the "Act"). The Issuer has prepared a preliminary offering
circular, dated June 25, 1997 (the "Preliminary Offering Circular"), and a final
offering circular, dated July 21, 1997 (the "Offering Circular"), relating to
the offer and sale of the Senior Notes (the "Offering").
The Offering is a part of the Company's Recapitalization and
Repositioning Plan (the "Plan"), as described in the Offering Circular, and
contemporaneously with the Offering, the Company and certain of its subsidiaries
and affiliates (collectively, the "Jordan Entities")
<PAGE>
have implemented or will implement certain other transactions including the JTP
Recapitalization, the M&G Recapitalization, the Fannie May Refinancing, the New
Credit Agreement, the Tender Offer and Consent Solicitation for the Old Senior
Notes and the Consent Solicitation for the Discount Debentures (each as defined
or described in the Offering Circular). Collectively, the Offering and the other
transactions described in the Offering Circular under the caption
"Recapitalization and Repositioning Plan" are herein referred to as the
"Transactions."
Upon original issuance thereof, and until such time as the same is
no longer required under the applicable requirements of the Act, the Senior
Notes shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, AS SIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
THAT IS TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE
PROVIDED UNDER RULE 144(K) AS PERMITTING RESALES BY NON-AFFILIATES
OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH JORDAN
INDUSTRIES, INC. (THE "ISSUER") OR ANY AFFILIATE OF THE ISSUER WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY)
ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE ACT) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF RULE
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501(A)(l), (2), (3) OR (7) UNDER THE ACT THAT IS PURCHASING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT,
SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM AND, IN EACH OF THE
FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions hereof, the Issuer shall issue and sell to the Purchasers
and each Purchaser, severally and not jointly, shall purchase from the Issuer,
the principal amount of Senior Notes set forth opposite the names of the
Purchasers in Schedule I hereto. The purchase price for the Senior Notes shall
be 98% of the principal amount thereof.
3. Terms of Offering. The Purchasers have advised the Issuer that
the Purchasers will make offers to sell (the "Exempt Resales") some or all of
the Senior Notes purchased by the Purchasers hereunder on the terms set forth in
the Offering Circular, as amended or supplemented, solely to (i) persons whom
the Purchasers reasonably believe to be "qualified institutional buyers" as
defined in Rule 144A under the Act ("QIBs") and (ii) a limited number of
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or
(7) under the Act ("Accredited Investors") (such persons specified in clauses
(i) and (ii) being referred to herein as the "Eligible Purchasers").
Holders of the Senior Notes (including subsequent transferees) will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be executed on and dated as of the Closing
Date. Pursuant to the Registration Rights Agreement, the Issuer will agree,
among other things, to file with the Securities and Exchange Commission (the
"Commission") (i) a registration statement under the Act (the "Exchange Offer
Registration Statement") relating to, among other things, the 10 3/8% Series B
Senior Notes due 2007, of the Issuer (the "Exchange Notes" and, together with
the Senior Notes, the "Notes"), identical in all material respects to the Senior
Notes (except that the Exchange Notes
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shall have been registered pursuant to such registration statement) to be
offered in exchange for the Senior Notes (such offer to exchange being referred
to as the "Registered Exchange Offer") and/or (ii) under certain circumstances,
a shelf registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the Senior
Notes.
This Agreement, the Indenture, the Registration Rights Agreement,
the Notes and all other documents or instruments executed by the Issuer or any
of the other Jordan Entities in connection with the Transactions are referred to
herein as the "Documents."
4. Delivery and Payment. Delivery to the Purchasers of and payment
for the Senior Notes shall be made at a Closing (the "Closing") to be held at
8:00 a.m., Chicago time, on July 25, 1997 (the" Closing Date") at the offices of
Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603-34. The
Closing Date and the location of delivery of and the form of payment for the
Senior Notes may be varied by agreement between the Purchasers and the Issuer.
The Issuer shall deliver to the Purchasers (i) one or more
certificates representing the Senior Notes (the "Global Notes"), each in
definitive form, registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"), or such other names as the Purchasers may
request upon at least one business day's notice to the Issuer, in an amount
corresponding to the aggregate principal amount of the Senior Notes sold
pursuant to Exempt Resales to QIBs, and (ii) one or more certificates
representing the Senior Notes (the "Individual Notes"), in definitive form,
registered in such names and denominations as the Purchasers may so request, in
an aggregate amount corresponding to the aggregate principal amount of Senior
Notes sold pursuant to Exempt Resales to Accredited Investors, in each case
against payment by the Purchasers of the purchase price therefor by immediately
available Federal funds bank wire transfer to such bank account as the Issuer
shall designate at least two business days prior to the Closing.
The Global Notes and the Individual Notes in definitive form shall
be made available to the Purchasers for inspection at the New York offices of
Mayer, Brown & Platt (or such other place as shall be acceptable to the
Purchasers) not later than 9:30 a.m. on the business day immediately preceding
the Closing Date.
5. Agreements of the Issuer. The Issuer hereby agrees:
(a) To (i) advise the Purchasers promptly after obtaining
knowledge (and, if requested by the Purchasers, confirm such advice in
writing) of (A) the issuance by any state securities commission of any
stop order suspending the qualification or
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exemption from qualification of any of the Notes for offering or sale in
any jurisdiction, or the initiation of any proceeding for such purpose by
any state securities commission or other regulatory authority, or (B) the
happening of any event, during the period that is reasonably necessary for
Exempt Resales, that makes any statement of a material fact made in the
Offering Circular untrue or that requires the making of any additions to
or changes in the Offering Circular in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, (ii) use reasonable efforts to prevent the issuance of any
stop order or order suspending the qualification or exemption from
qualification of any of the Notes under any state securities or Blue Sky
laws, and (iii) if at any time any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of any of the Notes under any such laws, use
its reasonable efforts to obtain the withdrawal or lifting of such order
at the earliest possible time.
(b) To (i) furnish the Purchasers, without charge, as many
copies of the Offering Circular, and any amendments or supplements
thereto, as the Purchasers may reasonably request and (ii) promptly
prepare, upon the Purchasers' request, any amendment or supplement to the
Offering Circular that the Purchasers deem may be reasonably necessary in
connection with Exempt Resales (and the Issuer hereby consents to the use
of the Preliminary Offering Circular and the Offering Circular, and any
amendments and supplements thereto, by the Purchasers in connection with
Exempt Resales).
(c) Not to amend or supplement the Offering Circular prior to
the Closing Date unless the Purchasers shall previously have been advised
thereof and shall not have objected thereto in writing within five
business days after being furnished a copy thereof (unless in the opinion
of counsel to the Issuer such amendment or supplement is required by law).
(d) For so long as is reasonably necessary for Exempt Resales,
(i) if any event shall occur as a result of which, in the reasonable
judgment of the Issuer or the Purchasers, it becomes necessary or
advisable to amend or supplement the Offering Circular in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary to amend or supplement
the Offering Circular to comply with Applicable Law (defined below),
forthwith to prepare an appropriate amendment or supplement to the
Offering Circular (in form and substance reasonably satisfactory to the
Purchasers) so that (A) as so amended or supplemented the Offering
Circular will not include an untrue statement of 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 (B) the Offering Circular will comply with Applicable Law
and (ii) if it becomes necessary or advisable
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<PAGE>
to amend or supplement the Offering Circular so that the Offering Circular
will contain all of the information specified in, and meet the
requirements of, Rule 144A(d)(4) of the Act, forthwith to prepare an
appropriate amendment or supplement to the Offering Circular (in form and
substance reasonably satisfactory to the Purchasers) so that the Offering
Circular, as so amended or supplemented, will contain the information
specified in, and meet the requirements of, such rule.
(e) To cooperate with the Purchasers and their counsel in
connection with the qualification of the Notes under the securities or
Blue Sky laws of such jurisdictions as the Purchasers may request and
continue such qualification in effect so long as reasonably required for
Exempt Resales; provided, that the Issuer shall not be required in
connection therewith to file any general consent to service of process or
to qualify as a foreign corporation in any jurisdiction where it is not
now so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(f) Whether or not any of the Transactions are consummated or
this Agreement is terminated, to pay (i) all costs, expenses, fees and
taxes incident to (A) the preparation, printing and distribution of the
Preliminary Offering Circular and the Offering Circular and all amendments
and supplements thereto (including, without limitation, financial
statements and exhibits), (B) the printing and delivery of all preliminary
and final Blue Sky memoranda and all other agreements, memoranda,
correspondence and other documents prepared and delivered in connection
herewith, (C) the issuance and delivery of the Senior Notes, including the
fees of the Trustee and the cost of its personnel, (D) furnishing such
copies of the Preliminary Offering Circular and the Offering Circular, and
all amendments and supplements thereto, as may reasonably be requested for
use by the Purchasers, and (E) the preparation of the Senior Notes
(including, without limitation, printing and engraving thereof), (ii) all
fees and expenses of the Issuer's counsel and accountants, (iii) all
expenses and listing fees in connection with the application for quotation
of the Senior Notes in the National Association of Securities Dealers,
Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (iv) all
fees and expenses (including fees and expenses of counsel) in connection
with approval of the Senior Notes by DTC for "book-entry" transfer and (v)
all fees charged by rating agencies in connection with the rating of the
Notes, if any.
(g) To use the proceeds from the sale of the Senior Notes,
together with the proceeds from certain other Transactions, in the manner
described in the Offering Circular under the caption "Use of Proceeds."
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<PAGE>
(h) To the extent it may lawfully do so, not to insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension, usury or other law, wherever enacted, now or at
any time hereafter in force, that would prohibit or forgive the payment of
all or any portion of the principal of or interest on the Notes, or that
may affect the covenants or the performance of the Indenture (and, to the
extent it may lawfully do so, the Issuer hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
granted to the Trustee in the Indenture but shall suffer and permit the
execution of every such power as though no such law had been enacted).
(i) To use its best efforts to do and perform all things
required to be done and performed by the Issuer under this Agreement prior
to and after the Closing Date.
(j) Not to, and to ensure that none of its affiliates (as
defined in Rule 501(b) of the Act) will, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any "security" (as
defined in the Act) that would be integrated with the sale of the Senior
Notes in a manner that would require the registration under the Act of the
sale to the Purchasers or to the Eligible Purchasers of the Senior Notes.
(k) For so long as any of the Senior Notes remain outstanding,
during any period in which the Issuer is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to make available, upon request, to any owner of the Senior Notes
in connection with any sale thereof and any prospective Eligible Purchaser
of such Senior Notes from such owner, the information required by Rule
144A(d)(4) under the Act.
(l) To comply with the representation letter of the Issuer to
DTC relating to the approval of the Notes by DTC for "book entry"
transfer.
(m) To use its best efforts to effect the inclusion of the
Senior Notes in PORTAL.
(n) Except in connection with the Registered Exchange Offer or
the filing of the Shelf Registration Statement, not to, and not to
authorize or permit any person acting on its behalf to, (i) distribute any
offering material in connection with the offering and sale of the Senior
Notes other than the Preliminary Offering Circular and the Offering
Circular and any amendments and supplements to the Offering Circular
prepared in compliance with Section 5(c) hereof or (ii) solicit any offer
to buy or offer to sell the Senior Notes by means of any form of general
solicitation or general advertising
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<PAGE>
(including, without limitation, as such 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.
6. Representations and Warranties of the Issuer. The Issuer
represents and warrants to the Purchasers that:
(a) The Preliminary Offering Circular as of its date did not,
and the Offering Circular as of its date does not and as of the Closing
Date will not, and each supplement or amendment thereto as of its date
will not, contain any untrue statement of a material fact or omit to state
any material fact (except, in the case of the Preliminary Offering
Circular, for pricing terms and other financial terms intentionally left
blank) necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, other than
information furnished in writing to the Issuer by such Purchaser expressly
for use in the Offering Circular or the Preliminary Offering Circular. No
injunction or order has been issued that either (i) asserts that any of
the Transactions is subject to the registration requirements of the Act or
(ii) would prevent or suspend the issuance or sale of the Senior Notes or
the use of the Preliminary Offering Circular, the Offering Circular, or
any amendment or supplement thereto, in any jurisdiction. Each of the
Preliminary Offering Circular and the Offering Circular, as of their
respective dates contained, and the Offering Circular as amended or
supplemented as of the Closing Date will contain, all the information
specified in, and meet the requirements of, Rule 144A(d)(4) under the Act,
if applicable. Except as disclosed in the Offering Circular, there are no
related party transactions that would be required to be disclosed in the
Offering Circular if the Offering Circular were a prospectus included in a
Registration Statement on Form S-1 under the Act.
(b) The Senior Notes are eligible for trading under Rule 144A.
(c) Each of the Issuer and each Subsidiary (as defined below)
(i) have been duly organized, is validly existing and is in good standing
under the laws of its jurisdiction of organization, (ii) has all requisite
power and authority to carry on its business and to own, lease and operate
its properties and assets as described in the Offering Circular and (iii)
is duly qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in
which the nature of such businesses or the ownership or leasing of such
properties requires such qualification, except where the failure to be in
good standing or so qualified could not, singly or in the aggregate, have
a material adverse effect on (i) the properties, business, prospects,
operations, earnings, assets, liabilities or condition (financial or
otherwise) of the Issuer and the Subsidiaries, taken as a whole or (ii)
the ability of any Jordan Entity
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<PAGE>
to perform its obligations under any of the Documents (a "Material Adverse
Effect").
(d) Immediately following the Closing, (i) the only direct or
indirect subsidiaries of the Issuer of which the Issuer owns, directly or
indirectly, more than 50% of the voting power (collectively, the
"Subsidiaries"), will be the corporations identified on Schedule 6(d), and
(ii) except as set forth in Schedule 6(d), Part 1, the Issuer will
directly or indirectly beneficially own 100% of the outstanding shares of
capital stock of each Subsidiary, free and clear of Liens (as defined in
the Indenture) other than any Liens pursuant to the New Credit Agreement,
and all of such shares of capital stock will be duly authorized and
validly issued, fully paid and nonassessable and not issued in violation
of, or subject to, any preemptive or similar rights. Except as expressly
disclosed in the Offering Circular, there are no outstanding (x)
securities convertible into or exchangeable for any capital stock of the
Issuer or any of the Subsidiaries, (y) options, warrants or other rights
to purchase or subscribe to capital stock of the Issuer or any of the
Subsidiaries or securities convertible into or exchangeable for capital
stock of the Issuer or any of the Subsidiaries or (z) contracts,
commitments, agreements, understandings, arrangements, calls or claims of
any kind relating to the issuance of any capital stock of the Issuer or
any of the Subsidiaries, any such convertible or exchangeable securities
or any such options, warrants or rights. Immediately following the
Closing, the Issuer will not directly or indirectly own any capital stock
or other equity interest in any person other than as set forth in Schedule
6(d) Part 1 and Part 2.
(e) The table under the caption "Capitalization" in the
Offering Circular (including the footnotes thereto) presents fairly, as of
its date, (i) the capitalization of the Issuer and its Subsidiaries on a
consolidated basis, and (ii) the pro forma capitalization of the Issuer
and its Subsidiaries on a consolidated basis after giving effect to the
Transactions. Except as set forth in such table, immediately following the
Closing, neither the Issuer nor any of the Subsidiaries shall have any
liabilities, absolute, accrued or contingent other than (x) liabilities
that are reflected in the Financial Statements (defined below), or (y)
liabilities incurred subsequent to the date thereof in the ordinary course
of business, consistent with past practice, that could not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(f) Neither the Issuer nor any of the Subsidiaries has entered
into any agreement that conflicts with or will in any way impair the
rights granted to the Purchasers pursuant to the Registration Rights
Agreement.
(g) Each Jordan Entity has or will have all requisite power
and authority to enter into, deliver and perform its obligations under the
Documents to which it is a party and to consummate the Transactions. Each
of the Documents has been or will be
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duly and validly authorized by each Jordan Entity that is, or will be, a
party thereto, and this Agreement is, and when executed and delivered on
the Closing Date each other Document will be, a legal, valid and binding
obligation of each Jordan Entity that is a party hereto or thereto,
enforceable against each such person in accordance with its terms, except
as such enforceability may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws, (ii) limited by
general principles of equity (whether considered in a proceeding at law or
equity) and (iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution. When executed and delivered, each Document will conform in
all material respects to the description thereof in the Offering Circular.
On the Closing Date, the Indenture will conform to the requirements of the
Trust Indenture Act of 1939, as amended (the "TIA"), applicable to an
indenture that is required to be qualified under the TIA.
(h) The Senior Notes have been duly and validly authorized by
the Issuer for issuance and sale to the Purchasers pursuant to this
Agreement and, when executed and authenticated in accordance with the
terms of the Indenture and delivered to and paid for by the Purchasers in
accordance with the terms hereof, will be legal, valid and binding
obligations of the Issuer, enforceable against the Issuer in accordance
with their terms, except as such enforceability may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar
laws, (ii) limited by general principles of equity (whether considered in
a proceeding at law or equity) and (iii) limited by securities laws
prohibiting or limiting the availability of, and public policy against,
indemnification or contribution. The Exchange Notes have been duly and
validly authorized by the Issuer and, when executed, authenticated and
delivered in accordance with the terms of the Indenture and the
Registration Rights Agreement, will be legal, valid and binding
obligations of the Issuer, enforceable against the Issuer in accordance
with their terms, except as such enforceability may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar
laws, (ii) limited by general principles of equity (whether considered in
a proceeding at law or equity) and (iii) limited by securities laws
prohibiting or limiting the availability of, and public policy against,
indemnification or contribution.
(i) Neither the Issuer nor any of the Subsidiaries is (i) in
violation of its respective charter or by-laws (collectively, "Charter
Documents"), (ii) other than violations that are not reasonably likely to,
singly or in the aggregate, result in a Material Adverse Effect, in
violation of any Federal, state, local or foreign statute, law (including,
without limitation, common law) or ordinance, or any judgment, decree,
rule, regulation or order (collectively, "Applicable Law") of any
government, governmental or regulatory agency or body, court or
arbitrator, domestic or foreign (each, a "Govern-
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mental Authority") or (iii) other than breaches or defaults that are not
reasonably likely to, singly or in the aggregate, result in a Material
Adverse Effect, in breach of or default under (with the passage of time or
otherwise) any bond, debenture, note or other evidence of indebtedness,
indenture, mortgage, deed of trust, lease or any other agreement or
instrument to which any such person is a party or by which any of them or
their respective property is bound (collectively, "Applicable
Agreements"). There exists no condition that, with the passage of time or
otherwise, would constitute a violation of such Charter Documents or
Applicable Laws or a breach of or default under any Applicable Agreement
or result in the imposition of any penalty or the acceleration of any
indebtedness, other than breaches, violations, penalties, defaults or
conditions which are not reasonably likely to, singly or in the aggregate,
result in a Material Adverse Effect.
(j) Neither the execution, delivery or performance of the
Documents nor the consummation of the Transactions shall conflict with,
violate, constitute a breach of or a default (with the passage of time or
otherwise) under, require the consent of any person (other than consents
already obtained) under, result in the imposition of a Lien (other than
under the New Credit Agreement) on any assets of the Issuer or any of the
Subsidiaries, or result in an acceleration of indebtedness pursuant to (i)
the Charter Documents of the Issuer or any of the Subsidiaries, (ii) any
Applicable Agreement, other than such breaches, violations or defaults
that are not reasonably likely to, singly or in the aggregate, result in a
Material Adverse Effect or (iii) any Applicable Law, other than such
breaches, violation or defaults that are not reasonably likely to, singly
or in the aggregate, result in a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the Registration Rights
Agreement and the Indenture by the Issuer, compliance by the Issuer with
the provisions of this Agreement, the Indenture, the Registration Rights
Agreement and the Senior Notes and the issuance, sale and subsequent
registration of the Senior Notes, will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, or result
in the imposition of a lien or encumbrance on any properties of the Issuer
or any of the Subsidiaries, or an acceleration of indebtedness pursuant
to, (i) the charter or by-laws of the Issuer or any of the Subsidiaries,
(ii) any bond, debenture, note, indenture, mortgage, deed of trust or
other agreement or instrument to which the Issuer or any of the
Subsidiaries is a party or by which any of them or their property is
bound, or (iii) any law or administrative regulation applicable to the
Issuer or any of the Subsidiaries or any of their assets or properties, or
any judgment, order or decree of any court or governmental agency or
authority to which the Issuer or any of the Subsidiaries was or is now a
party or to which any of them or their respective properties are subject.
No consent, approval, authorization or order of, or filing or registration
with, any regulatory body, administrative agency, or other governmental
agency (except as securities or blue sky laws of the
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various states may require) that has not been made or obtained is required
for the execution, delivery and performance of this Agreement, the
Indenture and the Registration Rights Agreement and sale of the Senior
Notes pursuant to this Agreement. No consents or waivers from any person
are required to consummate the issuance, sale and subsequent registration
of the Exchange Notes pursuant to this Agreement and the Registration
Rights Agreement other than such consents and waivers as have been or will
be obtained. After giving effect to the Transactions, no Default or Event
of Default (as defined in the Indenture) will exist.
(k) No permit, authorization, approval, consent, license or
order of, or filing, registration or qualification with, any Governmental
Authority (collectively, "Permits") and no approval or consent of any
other person, is required in connection with, or as a condition to, the
execution, delivery or performance of any of the Documents or the
consummation of any of the Transactions, other than such Permits (i) as
have been made or obtained on or prior to the Closing Date, (ii) as are
not required to be made or obtained on or prior to the Closing Date that
will be made or obtained when required, (iii) the failure of which to make
or obtain is not reasonably likely, singly or in the aggregate, to result
in a Material Adverse Effect or (iv) as may be required under the
securities or Blue Sky laws of any jurisdiction other than the Federal
jurisdiction of the United States.
(l) Except as adequately disclosed in the Offering Circular,
there is no action, claim, suit or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
domestic or foreign (collectively, "Proceedings"), pending or threatened,
that either (i) seeks to restrain, enjoin, prevent the consummation of, or
otherwise challenge any of the Documents or any of the Transactions, or
(ii) could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Neither the Issuer nor any of the Subsidiaries is
subject to any judgment, order, decree, rule or regulation of any
Governmental Authority that is reasonably likely to, singly or in the
aggregate, have a Material Adverse Effect.
(m) The Issuer and each of the Subsidiaries has such Permits
as are necessary to own, lease and operate the properties and to conduct
the businesses described in the Offering Circular other than those the
failure of which is not reasonably likely, singly or in the aggregate, to
result in a Material Adverse Effect. All such Permits are in full force
and effect. No event has occurred which allows, or after notice or lapse
of time would allow, the imposition of any material penalty, revocation or
termination by the issuer thereof or which results in any material
impairment of the rights of the holder of any such Permits. Neither the
Issuer nor any of the Subsidiaries has any
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<PAGE>
reason to believe that any issuer is considering limiting, suspending or
revoking any such Permit.
(n) Except as set forth in the Offering Circular, or with such
exceptions as, singly or in the aggregate, are not reasonably likely to
have a Material Adverse Effect, (i) the Issuer and each of the
Subsidiaries has good and marketable title, free and clear of all liens,
claims, encumbrances and restrictions except liens for taxes not yet due
and payable, to all property and assets described in the Offering Circular
as being owned by them and (ii) the Issuer and the Subsidiaries enjoy
peaceful and undisturbed possession under all such leases to which any of
them is a party as lessee. All Applicable Agreements are in full force and
effect and are legal, valid and binding obligations, and no default has
occurred or is continuing thereunder, other than such defaults that are
not reasonably likely to, singly or in the aggregate, have a Material
Adverse Effect. The Issuer and the Subsidiaries maintain insurance
covering their properties, operations, personnel and businesses against
such losses and risks as they reasonably deem adequate in accordance with
customary industry practice. Any such insurance is outstanding and duly in
force.
(o) All material tax returns required to be filed by the
Issuer and the Subsidiaries in any jurisdiction (including foreign
jurisdictions) have been filed (other than Forms 5500, the failure of
which to timely file is not reasonably likely to result in any material
penalty) and, when filed, all such returns were true, correct and complete
in all material respects, and all taxes, assessments, fees and other
charges (including, without limitation, withholding taxes, penalties,
interest and additions to taxes) shown on such returns have been paid,
other than those being contested in good faith by appropriate proceedings,
or those that are currently payable without penalty or interest and, in
each case, for which an adequate reserve or accrual has been established
on the books and records of the Issuer in accordance with generally
accepted accounting principles of the United States, consistently applied
("GAAP"). There are no actual or proposed additional tax assessments for
any fiscal period against the Issuer or any of the Subsidiaries that are
reasonably likely to, singly or in the aggregate, have a Material Adverse
Effect. The charges, accruals and reserves on the books of each of the
Issuer and the Subsidiaries in respect of any tax liability for any years
not finally determined are adequate to meet any assessments or
re-assessments for additional income tax for any years not finally
determined.
(p) The Issuer and the Subsidiaries own, or are licensed
under, and have the right to use, all patents, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "Intellectual
13
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Property") currently used in, or necessary for the conduct of, their
businesses as set forth in the Offering Circular, with such exceptions as
are not reasonably likely, singly or in the aggregate, to have a Material
Adverse Effect. No claims have been asserted by any person and there is no
proceeding pending or, to the Issuer's knowledge, threatened before any
court or Governmental Authority, challenging the use of any such
Intellectual Property by the Issuer or any of the Subsidiaries or
questioning the validity or enforceability of any item of Intellectual
Property owned or used by Issuer or any Subsidiary, or license or other
agreement related thereto, and there is no valid basis for any such claim
(other than any claims that are not reasonably likely to, singly or in the
aggregate, have a Material Adverse Effect). The loss of any Intellectual
Property asset, other than the DURA-LINE and SILICORE trademarks or the
patent or manufacturing trade secrets covering the solid co-extruded
polymer lubricant lining used in connection with the SILICORE technology
would not have a Material Adverse Effect. All Intellectual Property assets
which are material to the businesses of the Issuer and the Subsidiaries as
currently conducted and as described in the Offering Circular are valid
and enforceable. To the Issuer's knowledge, the conduct of the businesses
of the Issuer and the Subsidiaries as currently conducted and as described
in the Offering Circular does not infringe on the Intellectual Property
rights of any other person, and no Person is infringing upon the
Intellectual Property rights of the Issuer or any Subsidiary, in any
material respect.
(q) Each of the Issuer and the Subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable assurance
that (i) material transactions are executed in accordance with
management's general or specific authorization, (ii) material transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP, and to maintain asset accountability, (iii) access
to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any material differences.
(r) Each of (i) the audited consolidated financial statements
of the Issuer and related notes contained in the Offering Circular (the
"Audited Financial Statements") and (ii) the unaudited historical
consolidated financial statements of the Issuer and related notes
contained in the Offering Circular (the "Interim Financial Statements"
and, together with the Audited Financial Statements, the "Financial
Statements") present fairly in all material respects the consolidated
financial position, results of operations and cash flows of the Issuer and
its Subsidiaries on a consolidated basis, as of the respective dates and
for the respective periods to which they apply, and have been prepared in
accordance with GAAP, and the requirements of Regulation S-X that would be
applicable
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if the Offering Circular were a prospectus included in a registration
statement on Form S-1 filed under the Act, except as disclosed therein.
The summary and selected historical financial data included in the
Offering Circular have been prepared on a basis consistent with that of
the Financial Statements and present fairly in all material respects the
consolidated financial position and results of operations of the Issuer
and the Subsidiaries on a consolidated basis as of the respective dates
and for the respective periods indicated. Each of (i) the audited
consolidated financial statements of persons other than the Issuer and
related notes contained in the Offering Circular and (ii) the unaudited
historical consolidated financial statements of such persons and related
notes contained in the Offering Circular present fairly in all material
respects the consolidated financial position, results of operations and
cash flows of such persons on a consolidated or combined basis, as of the
respective dates and for the respective periods to which they apply, and
have been prepared in accordance with GAAP and the requirements of
Regulation S-X that would be applicable if the Offering Circular were a
prospectus included in a registration statement on Form S-1 filed under
the Act, except as disclosed therein. The pro forma consolidated financial
statements and related notes included in the Offering Circular on a
consolidated basis (i) comply in all material respects with the rules and
guidelines of the Commission with respect to pro forma financial
statements except as disclosed in the Offering Circular, (ii) present
fairly in all material respects the pro forma financial position and
results of operations of the Issuer and its Subsidiaries on a combined
basis as of the dates and for the periods indicated, after giving effect
to the Transactions, (iii) have been prepared on a basis consistent with
the Financial Statements, except for the pro forma adjustments specified
therein, and (iv) are based on good faith, reasonable estimates and
assumptions of the Issuer. The summary pro forma financial information
included in the Offering Circular has been derived from such pro forma
financial statements and present fairly in all material respects the pro
forma combined financial position and results of operations of the Issuer
and its Subsidiaries on a consolidated basis as of the respective dates
and for the respective periods indicated. All other financial and
statistical data included in the Offering Circular are fairly and
accurately presented in all material respects and are derived from and
prepared on a basis consistent with, the Financial Statements and the
books and records of the Issuer and its Subsidiaries. Ernst & Young LLP
are independent public accountants with respect to the Issuer and its
Subsidiaries.
(s) Subsequent to the respective dates as of which information
is given in the Offering Circular, except as adequately disclosed in the
Offering Circular, (i) neither the Issuer nor any of the Subsidiaries has
incurred any liabilities, direct or contingent, that are material, singly
or in the aggregate, to the Issuer and the Subsidiaries on a consolidated
basis, or has entered into any material transactions not in the ordinary
course of business, (ii) there has not been any decrease in the capital
stock of any of
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them or any increase in long-term indebtedness or any material increase in
short-term indebtedness of the Issuer and the Subsidiaries on a
consolidated basis, or any payment of or declaration to pay any dividends
or any other distribution by the Issuer, and (iii) there has not been any
material adverse change in the properties, business, prospects,
operations, earnings, assets, liabilities or condition (financial or
otherwise) of the Issuer and the Subsidiaries taken as a whole (each of
clauses (i), (ii) and (iii), a "Material Adverse Change"). There is no
event known to the Issuer that is reasonably likely to occur, which if it
were to occur, would be reasonably likely to, singly or in the aggregate,
have a Material Adverse Effect, except such events that have been
adequately disclosed in the Offering Circular.
(t) Prior to and after the issuance of the Senior Notes and
after giving effect to the Transactions, (i) the present fair salable
value of the assets of the Issuer exceeded and will exceed the amount that
will be required to be paid on, or in respect of, the Issuer's debts and
other liabilities (including contingent liabilities) as they become
absolute and matured, (ii) the assets of the Issuer do not constitute and
will not constitute unreasonably small capital to carry out its business
as conducted or as proposed to be conducted, and (iii) the Issuer does not
intend to, and does not believe that it will, incur debts or other
liabilities beyond its ability to pay such debts and liabilities as they
mature. The Issuer does not intend to permit any of the Subsidiaries to
incur debts or other liabilities beyond their respective ability to pay
such debts and liabilities as they mature.
(u) Except as contemplated by this Agreement, neither the
Issuer nor any of its Affiliates has (i) taken, directly or indirectly,
any action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of any of them to facilitate the
sale or resale of any of the Senior Notes or (ii) except as disclosed in
the Offering Circular, (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, any of the Senior Notes or (B)
paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of any of them.
(v) No registration under the Act and no qualification of the
Indenture under the TIA is required for the sale of the Senior Notes to
the Purchasers as contemplated hereby or for the Exempt Resales, assuming
(i) that the Eligible Purchasers who buy the Senior Notes in the Exempt
Resales are QIBs or Accredited Investors, (ii) the accuracy of the
Purchasers' representations contained herein regarding the absence of
general solicitation in connection with the sale of the Senior Notes to
the Purchasers and the Exempt Resales, and (iii) the accuracy of the
representations made by each Accredited Investor who purchases the Senior
Notes pursuant to an Exempt Resale as set forth in the letters of
representation in the form of Annex A to the Offering Circular.
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No form of general solicitation or general advertising was used by the
Issuer or any of its Affiliates or any of their representatives (other
than the Purchasers) in connection with the offer and sale of any of the
Senior Notes or in connection with Exempt Resales. No securities of the
same class as any of the Senior Notes have been offered, issued or sold by
the Issuer or any of its Affiliates within the six-month period
immediately prior to the date hereof.
(w) No condition exists or event or transaction has occurred
in connection with any employee benefit plan that could result in the
Issuer or any such "Affiliate" incurring any liability, fine or penalty
that could, singly or in the aggregate, have a Material Adverse Effect.
With respect to any employee pension benefit plan that is subject to Title
IV of the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations promulgated thereunder ("ERISA"), (i) the fair
market value of the assets of such employee pension benefit plan equals or
exceeds the present value of the liabilities of such pension plan (as
determined in accordance with the actuarial methods and assumptions set
forth in the latest actuarial report for such employee pension benefit
plan), except where the failure to so equal or exceed would not, singly or
in the aggregate, have a Material Adverse Effect and (ii) there exists no
accumulated funding deficiency which could, singly or in the aggregate,
have a Material Adverse Effect. The terms "employee benefit plan,"
"employee pension benefit plan," and "party in interest" shall have the
meanings assigned to such terms in Section 3 of ERISA, the term
"Affiliate" shall have the meaning assigned to such term in Section
407(d)(7) of ERISA, and the term "disqualified person" shall have the
meaning assigned to such term in section 4975 of the Internal Revenue Code
of 1986, as amended, or the rules, regulations and published
interpretations promulgated thereunder (the "Code")
(x) None of the Transactions will violate or result in a
violation of Section 7 of the Exchange Act (including, without limitation,
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System). Neither the Issuer nor any of the Subsidiaries is subject
to regulation, or shall become subject to regulation upon the consummation
of the Transactions, under the Investment Company Act of 1940, as amended,
and the rules and regulations and interpretations promulgated thereunder,
the Public Utility Holding Company Act of 1935, as amended, the Federal
Power Act, the Interstate Commerce Act, the Commodity Exchange Act or any
Federal or state statute or regulation limiting its ability to incur or
assume indebtedness for borrowed money.
(y) Neither the Issuer nor any of the Subsidiaries has dealt
with any broker, finder, commission agent or other person (other than the
Purchasers) in connection with the Transactions and neither the Issuer nor
any of the Subsidiaries is under any obli-
17
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gation to pay any broker's fee or commission in connection with such
transactions (other than commissions and fees to the Purchasers as set
forth in the Offering Circular).
(z) Neither the Issuer nor any Subsidiary is engaged in any
unfair labor practice. Except as adequately disclosed in the Offering
Circular, there is (i) no unfair labor practice complaint or other
proceeding pending or, to the knowledge of the Issuer after due inquiry,
threatened against the Issuer or any of the Subsidiaries before the
National Labor Relations Board or any state, local or foreign labor
relations board or any industrial tribunal, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending or threatened, (ii) no strike, labor dispute,
slowdown or stoppage pending or, to the knowledge of the Issuer after due
inquiry, threatened against the Issuer or any of the Subsidiaries, and
(iii) no union representation question existing with respect to the
employees of the Issuer or any of the Subsidiaries, and, to the Issuer's
knowledge after due inquiry, no union organizing activities are taking
place that could, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(aa) Except as adequately disclosed in the Offering Circular
is not reasonably likely to, singly or in the aggregate, have a Material
Adverse Effect:
(1) each of the Issuer and the Subsidiaries (i) has
obtained all Permits that are required with respect to the operation
of its business, property and assets under the Environmental Laws
(as defined below) and are in material compliance with all terms and
conditions of such required Permits, and (ii) is in material
compliance with all Environmental Laws (including, without
limitation compliance with standards, schedules and timetables
therein);
(2) no real property or facility presently, or to the
Issuer's knowledge, formerly owned, used, operated, leased, managed
or controlled by the Issuer or any of the Subsidiaries is listed or
proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability
Information System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or on any other state or local list established
pursuant to any Environmental Law, and neither the Issuer nor any of
the Subsidiaries has received any notification of potential or
actual liability or request for information under CERCLA or any
comparable state or local law;
18
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(3) there have been no releases (i.e., any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or
dumping, on-site or, to the knowledge of the Issuer and the
Subsidiaries after due inquiry, off-site) of Hazardous Materials (as
defined below) by the Issuer or any of the Subsidiaries at, on,
under, from or into any facility or real property owned, operated,
leased, managed or controlled by any such person that are likely to
give rise to a material liability under any Environmental Law;
(4) to the Issuer's knowledge, there are no events,
activities, practices, incidents, investigations, notices,
contractual obligations or actions or conditions, circumstances or
plans that may interfere with or prevent compliance by the Issuer or
any of the Subsidiaries with any Environmental Law, or that may give
rise to any material liability under any Environmental Laws; and
(5) in the ordinary course of their businesses, the
Issuer and each of the Subsidiaries conduct a periodic review of the
effect of Environmental Laws on the business, operations and
properties of the Issuer and each of the Subsidiaries in the course
of which they identify and evaluate associated costs and liabilities
(including, without limitation, any capital or operating
expenditures required for cleanup, closure of properties or
compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such
review, the Issuer and each of the Subsidiaries have reasonably
concluded that such associated costs and liabilities could not
reasonably be expected, singly or in the aggregate, to have a
Material Adverse Effect on the Issuer and each of the Subsidiaries,
taken as a whole.
"Environmental Laws" means all Applicable Laws, now in
effect, relating to pollution or protection of human health or the
environment, including, without limitation, laws relating to (1)
emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or
hazardous constituents, substances or wastes, including, without
limitation, asbestos or asbestos-containing materials,
polychlorinated biphenyls, petroleum or any constituents relating to
or arising out of any oil production activities, including crude oil
or any fraction thereof, or any petroleum product or other wastes,
chemicals or substances regulated by any Environmental Law
(collectively referred to as "Hazardous Materials"), into the
environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), (2) the
manufacture, processing, distribution, use, generation, treatment,
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<PAGE>
storage, disposal, transport or handling of Hazardous Materials and
(3) under-ground storage tanks, and related piping, and emissions,
discharges, releases or threatened releases therefrom.
(bb) No statement, representation or warranty made by the
Issuer or any of the Subsidiaries, in any of the Documents or in any certificate
or document required by any of the Documents to be delivered to the Purchasers
was or will be, when made, inaccurate, untrue or incorrect in any material
respect.
7. Representations and Warranties of the Purchasers. Each of the
Purchasers, jointly and severally, represents and warrants with respect to
itself only that:
(a) It is a QIB.
(b) It (i) is not acquiring the Senior Notes with a view to
any distribution thereof that would violate the Act or the securities laws
of any state of the United States or any other applicable jurisdiction and
(ii) will be soliciting offers for the Senior Notes only from, and will be
reoffering and reselling the Senior Notes only to (A) persons in the
United States whom it reasonably believes to be QIBs in reliance on the
exemption from the registration requirements of the Act provided by Rule
144A, and (B) a limited number of Accredited Investors that execute and
deliver to the Issuer and the Purchasers a letter containing certain
representations and agreements in the form attached as Annex A to the
Offering Circular.
(c) No form of general solicitation or general advertising in
violation of the Act has been or will be used by such Purchasers or any of
their representatives in connection with the offer and sale of any of the
Senior Notes.
(d) In connection with the Exempt Resales, it will solicit
offers to buy the Senior Notes only from, and will offer and sell the
Senior Notes only to, Eligible Purchasers who, in purchasing such Senior
Notes, will be deemed to have represented and agreed (i) if such Eligible
Purchasers are QIBs, that they are purchasing the Senior Notes for their
own accounts or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are QIBs, (ii) that
such Senior Notes will not have been registered under the Act and may be
resold, pledged or otherwise transferred only (A) to a person who the
seller reasonably believes is a QIB in a transaction meeting the
requirements of Rule 144A, in a transaction meeting the requirements of
Rule 144 or in accordance with another exemption from the registration
requirements of the Act, (B) to the Issuer and (C) pursuant to an
effective registration statement and, in each case, in accordance with any
applicable securities laws of any state of the United
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States or any other applicable jurisdiction, and (iii) that the holder
will, and each subsequent holder is required to, notify any purchaser from
it of the security evidenced thereby of the resale restrictions set forth
in (ii) above.
8. Indemnification.
(a) The Issuer shall, without limitation as to time, indemnify
and hold harmless each Purchaser and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act) either Purchaser (any of such persons being hereinafter
referred to as a "controlling person"), and the respective officers,
directors, partners, employees, representatives and agents of the
Purchasers and any such controlling person (collectively, the "Issuer
Indemnified Parties"), to the fullest extent lawful, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and reasonable attorneys' fees) and
expenses (including, without limitation, costs and expenses incurred in
connection with investigating, preparing, pursuing or defending against
any of the foregoing) (collectively, "Losses"), as incurred, directly or
indirectly caused by, related to, based upon, arising out of or in
connection with (i) any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Circular or the
Offering Circular (or any amendment or supplement thereto), or 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
light of the circumstances under which they were made, not misleading or
(ii) any act, omission, transaction or event contemplated by the
Documents; provided, that the Issuer shall not be liable to any Issuer
Indemnified Party for any Losses that (i) arise solely from the gross
negligence or willful misconduct of such Issuer Indemnified Party, (ii)
are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to such Purchaser
furnished in writing to the Issuer (or reviewed and approved in writing)
by a Purchaser expressly for use in the Preliminary Offering Circular or
the Offering Circular, (iii) result solely from an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Preliminary Offering Circular or the Offering Circular and such Issuer
Indemnified Party or the related Purchaser failed to send a copy of the
Offering Circular, as then amended or supplemented, with or prior to the
delivery of written confirmation of the sale by such Purchaser to the
person asserting the claim from which such Losses arise, the Offering
Circular, as then amended or supplemented, would have corrected such
untrue statement or alleged untrue statement or omission or alleged
omission and the Issuer has delivered the Offering Circular, as then
amended or supplemented, to the Purchasers pursuant to this Agreement, or
(iv) result from the use by the Issuer Indemnified Party or the related
Purchaser of the Offering Circular when the Issuer has notified such
Purchaser in writing that the Offering Circular contains an
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untrue statement or omission of a fact or circumstance requiring an
amendment to the Offering Circular. The Issuer shall notify the Purchasers
promptly of the institution, threat or assertion of any Proceeding of
which the Issuer or any Subsidiary is aware in connection with the matters
addressed by this Agreement which involves the Issuer, any of the
Subsidiaries or any of the indemnified parties.
(b) Each Purchaser shall, severally and not jointly, without
limitation as to time, indemnify and hold harmless the Issuer, and its
directors, officers, and any person controlling the Issuer (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) (any
such persons being hereinafter referred to as a "controlling person"), and
the directors and officers of such controlling persons (the "Purchaser
Indemnified Parties" and together with the Issuer Indemnified Parties, the
"Indemnified Parties"), to the fullest extent lawful, from and against any
and all Losses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in the Preliminary Offering
Circular or the Offering Circular (or any amendment or supplement
thereto), or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, but only with respect to information relating to such
Purchaser furnished in writing (or reviewed and approved in writing) by
such Purchaser expressly for use in the Preliminary Offering Circular or
the Offering Circular (or any amendment or supplement thereto); provided,
however, that in no event shall the liability of each such Purchaser
exceed the total discounts and commissions received by such Purchaser with
respect to the Senior Notes purchased by it.
(c) If any Proceeding shall be brought or asserted against any
person entitled to indemnification hereunder, such Indemnified Party shall
give prompt written notice to the indemnifying party; provided, that the
failure to so notify the indemnifying party shall not relieve the
indemnifying party from any obligation or liability except to the extent
(but only to the extent) that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal) that
the indemnifying party has been prejudiced materially by such failure.
No indemnifying party shall consent to entry of any judgment
in or enter into any settlement of any pending or threatened Proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Party is a party thereto) unless such
judgment or settlement includes, as an unconditional term thereof, the
giving by the claimant or plaintiff to each Indemnified Party of a
release, in form and substance satisfactory to the Indemnified Party, from
all Losses that
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<PAGE>
may arise from such Proceeding or the subject matter thereof (whether or
not any Indemnified Party is a party thereto)
(d) If the indemnification provided for in this Section 8 is
unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section
8 would otherwise apply by its terms (other than by reason of exceptions
provided in this Section 8), then each indemnifying party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such Losses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Issuer, on the one hand, and the Purchasers, on the other
hand, from the offering of the Senior Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
pro-portion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuer,
on the one hand, and the Purchasers, on the other hand, in connection with
the actions, statements or omissions that resulted in such Losses, as well
as any other relevant equitable considerations. The relative benefits
received by the Issuer, on the one hand, and the Purchasers, on the other
hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Issuer, and the total discounts and commissions received by the
Purchasers, bear to the total price of the Senior Notes in Exempt Resales
in each case as set forth in the table on the cover page of the Offering
Circular. The relative fault of the Issuer, on the one hand, and the
Purchasers, on the other hand, shall be determined by reference to, among
other things, whether any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Issuer, on the one hand, or the Purchasers, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by an Indemnified Party as a result
of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any Proceeding, to the
extent such party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section 8 was available to such
party.
Each party hereto agrees that it would not be just and
equitable if contribution pursuant to this Section 8(c) were determined by
pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 8(c), neither Purchaser shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total discounts
and commissions received by such Purchaser with respect to the Senior
Notes exceeds the amount of any damages that such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue
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statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The indemnity and contribution agreements contained in
this Section 8 are in addition to any liability that the indemnifying
party may otherwise have to the Indemnified Parties.
9. Conditions.
(a) The obligation of the Purchasers to purchase the Senior
Notes under this Agreement is subject to the satisfaction or waiver of
each of the following conditions:
(i) All the representations and warranties of the
Company contained in this Agreement shall be true and correct in all
material respects (other than representations and warranties with a
materiality qualifier, which shall be true and correct as written) at and
as of the Closing Date after giving effect to the Transactions with the
same force and effect as if made on and as of such date. On or prior to
the Closing Date, each of the Jordan Entities and, to the knowledge of the
Issuer, each other party to the Documents (other than the Purchasers)
shall have performed or complied in all material respects with all of the
agreements and satisfied in all material respects all conditions on their
respective parts to be performed, complied with or satisfied at or prior
to the Closing Date pursuant to the Documents.
(ii) The Offering Circular shall have been printed and
copies made available to the Purchasers not later than 12:00 noon, New
York City time, on the second business day following the date of this
Agreement or at such later date and time as Jefferies & Company, Inc. may
approve.
(iii) No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the
Closing Date that would prevent or interfere with the consummation of any
of the Transactions; and no stop order suspending the qualification or
exemption from qualification of any of the Senior Notes in any
jurisdiction shall have been issued and no Proceeding for that purpose
shall have been commenced or be pending or contemplated.
(iv) No action shall have been taken and no Applicable
Law shall have been enacted, adopted or issued that would, as of the
Closing
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Date, prevent the consummation of any of the Transactions. No Proceeding
shall be pending or threatened other than Proceedings that (A) if
adversely determined could not, singly or in the aggregate, adversely
affect the issuance or marketability of the Senior Notes and (B) could not
be expected to have a Material Adverse Effect.
(v) Since the date as of which information is given in
the Offering Circular, there shall not have been any Material Adverse
Change.
(vi) The Notes shall have (A) been designated PORTAL
securities in accordance with the rules and regulations adopted by the
NASD relating to trading in the PORTAL market, and (B) received a rating
of B+ and B3 from Standard & Poor's Corporation and Moody's Investors
Service, Inc., respectively, which ratings shall be in effect on the
Closing Date and shall not have been amended or made subject to any notice
of potential downgrade or action of similar import.
(vii) The Purchasers shall have received on the Closing
Date (A) certificates dated the Closing Date, signed by (1) the Chief
Executive Officer and (2) the principal financial or accounting officer of
the Issuer, on behalf of the Issuer, (x) confirming the matters set forth
in paragraphs (i) through (v) and (xi) of this Section 9(a) and (y)
certifying as to such other matters as the Purchasers may reasonably
request, (B) a certificate, dated the Closing Date, signed by the
Secretary of the Issuer, certifying such matters as the Purchasers may
reasonably request and (C) a certificate of solvency, dated the Closing
Date, signed by the principal financial or accounting officer of the
Issuer substantially in the form previously approved by the Purchasers.
(viii) The Purchasers shall have received:
(1) an opinion of Mayer, Brown & Platt, special counsel
to the Issuer ("Mayer, Brown"), dated the Closing Date, in the form
of Exhibit A hereto;
(2) an opinion of Bryan Cave LLP, special counsel to the
Issuer ("Bryan Cave"), dated the Closing Date, in the form of
Exhibit B hereto; and
(3) an opinion of Skadden, Arps, Slate, Meagher & Flom
LLP, dated the Closing Date, in form and substance reasonably
satisfactory to the Purchasers covering such matters as are
customarily covered in such opinions.
25
<PAGE>
(ix) The Purchasers shall have received from Ernst &
Young LLP (A) a customary comfort letter, dated the date of the Offering
Circular, in form and substance reasonably satisfactory to the Purchasers,
with respect to the financial statements and certain financial information
contained in the Offering Circular, and (B) a customary comfort letter,
dated the Closing Date, in form and substance reasonably satisfactory to
the Purchasers, to the effect that they reaffirm the statements made in
the letter furnished pursuant to clause (A), except that the specified
date referred to shall be a date not more than five days prior to the
Closing Date.
(x) The Documents to be executed and delivered on or
prior to the Closing Date shall have been executed and delivered by all
parties thereto and the Purchasers shall have received a fully executed
original or a copy of the fully executed original of each Document.
(xi) On or prior to the Closing Date, the Transactions
to be consummated on or prior to the Closing Date shall have been duly
consummated. The Purchasers shall have received copies of all opinions
delivered by Mayer, Brown and Bryan Cave under or in connection with the
Transactions consummated on the Closing Date, and letters to the effect
that the Purchasers may rely on such opinions, as if addressed to the
Purchasers.
(xii) Counsel to the Purchasers shall have been
furnished with such documents as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 9.
(b) The obligation of the Issuer to sell the Senior Notes
under this Agreement is subject to the satisfaction or waiver of each of
the following conditions:
(i) The Purchasers shall have delivered payment to the
Issuer for the Senior Notes pursuant to Sections 2 and 4 of this
Agreement.
(ii) All of the representations and warranties of the
Purchasers in this Agreement shall be true and correct in all material
respects at and as of the Closing Date, with the same force and effect as
if made on and as of such date.
(iii) No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the
Closing Date that would prevent or interfere with the issuance and sale of
the Senior Notes; and no
26
<PAGE>
stop order suspending the qualification or exemption from qualification
of any of the Senior Notes in any jurisdiction shall have been issued and
no Proceeding for that purpose shall have been commenced or be pending or
contemplated as of the Closing Date.
10. Termination. (a) The Purchasers may terminate this Agreement at
any time prior to the Closing Date by written notice to the Issuer if any of the
following has occurred:
(i) since the date as of which information is given in
the Offering Circular, any material adverse effect or development
involving a prospective adverse effect on the properties, business,
prospects, operations, earnings, assets, liabilities or condition
(financial or otherwise), of the Issuer or any Subsidiary, whether or not
arising in the ordinary course of business, that could, in the Purchasers'
judgment, (i) make it impracticable or inadvisable to proceed with the
offering or delivery of the Senior Notes on the terms and in the manner
contemplated in the Offering Circular or (ii) materially impair the
investment quality of any of the Notes;
(ii) the failure of the Issuer to satisfy the conditions
contained in Section 9(a) hereof on or prior to the Closing Date;
(iii) any outbreak or escalation of hostilities or other
national or international calamity or crisis or material adverse change in
economic conditions in or the financial markets of the United States or
elsewhere, if the effect of such outbreak, escalation, calamity, crisis or
material adverse change in the economic conditions in or in the financial
markets of the United States or elsewhere could make it, in the
Purchasers' judgment, impracticable or inadvisable to market or proceed
with the offering or delivery of the Senior Notes on the terms and in the
manner contemplated in the Offering Circular or to enforce contracts for
the sale of any of the Senior Notes;
(iv) the suspension or limitation of trading generally
in securities on the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market or any setting of limitations on prices for
securities on any such exchange or Nasdaq National Market;
(v) the enactment, publication, decree or other
promulgation after the date hereof of any Applicable Law that in the
Purchasers' opinion materially and adversely affects, or could materially
and adversely affect, the properties, business, prospects, operations,
earnings, assets, liabilities or
27
<PAGE>
condition (financial or otherwise) of the Issuer and its Subsidiaries on a
consolidated basis;
(vi) any securities of any Jordan Entity shall have been
downgraded or placed on any "watch list" for possible downgrading by any
"nationally recognized statistical rating organization", as such term is
defined for purposes of Rule 431(g)(2) under the Act; or
(vii) the declaration of a banking moratorium by any
Governmental Authority; or the taking of any action by any Governmental
Authority after the date hereof in respect of its monetary or fiscal
affairs that in the Purchasers' opinion could have a material adverse
effect on the financial markets in the United States or elsewhere.
(b) The indemnities and contribution and expense reimbursement
provisions set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Purchasers, (ii) acceptance of the Senior Notes, and payment for them
hereunder, and (iii) any termination of this Agreement (other than pursuant to
Section 11). Without limiting the foregoing, notwithstanding any termination of
this Agreement (other than pursuant to Section 11), the Issuer shall be liable
(i) for all expenses that they have agreed to pay pursuant to Section 5(f)
hereof, and (ii) pursuant to Section 8 hereof.
11. Default by Purchasers. If either of the Purchasers shall fail or
refuse to purchase the Senior Notes that it has agreed to purchase hereunder on
the Closing Date and arrangements satisfactory to the Issuer for the purchase of
such Senior Notes are not made within 36 hours after such default, this
Agreement shall terminate without liability on the part of the Issuer or the
non-defaulting Purchaser, except as otherwise provided in Section 10(b) hereof.
Nothing herein shall relieve a defaulting Purchaser from liability for its
default.
12. Miscellaneous.
(a) Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Issuer, Arborlake Centre,
1751 Lake Cook Road, Suite 550, Deerfield, Illinois 60015, Attention:
Chief Executive Officer, with a copy to Mayer, Brown & Platt, 190 South
LaSalle Street, Chicago, Illinois 60603, Attention: James Carlson, Esq.
and (ii) if to the Purchasers, to Jefferies & Company, Inc., c/o Jefferies
& Company, Inc., 11100 Santa Monica Boulevard, 10th Floor, Los Angeles,
California 90025, Attention: Jerry M. Gluck, Esq., with a copy to Skadden,
Arps, Slate, Meagher & Flom LLP, 300 S. Grand Avenue, Suite 3400, Los
Angeles, California 90071, Atten-
28
<PAGE>
tion: Michael A. Woronoff, Esq. (provided that any notice pursuant to
Section 8 hereof will be mailed, delivered, telegraphed or telecopied and
confirmed to the party to be notified and its counsel), or in any case to
such other address as the person to be notified may have requested in
writing.
(b) This Agreement has been and is made solely for the benefit
of and shall be binding upon the Issuer, the Purchasers and, to the extent
provided in Section 8 hereof, the controlling persons, officers,
directors, partners, employees, representatives and agents referred to in
Section 8 and their respective heirs, executors, administrators,
successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not
include a purchaser of any of the Senior Notes from the Purchasers merely
because of such purchase. Notwithstanding the foregoing, it is expressly
understood and agreed that each purchaser who purchases Senior Notes from
the Purchasers is intended to be a beneficiary of the Issuer's covenants
contained in the Registration Rights Agreement to the same extent as if
the Notes were sold and those covenants were made directly to such
purchaser by the Issuer, and each such purchaser shall have the right to
take action against the Issuer to enforce, and obtain damages for any
breach of, those covenants.
(c) THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE
RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(d) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
(e) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) 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
29
<PAGE>
and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(g) This Agreement may be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may be
given, provided that the same are in writing and signed by each of the
signatories hereto.
(h) The indemnities and contribution and expense reimbursement
provisions set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery and
payment for the Senior Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any party
hereto, (ii) acceptance of the Senior Notes, and payment for them
hereunder, and (iii) any termination of this Agreement (other than
pursuant to Section 11).
30
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Issuer and the Purchasers.
Very truly yours,
JORDAN INDUSTRIES, INC.
By: /s/ Gordon L. Nelson, Jr.
------------------------------------
Name: Gordon L. Nelson, Jr.
Title: Senior Vice President, Treasurer
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By:
-------------------------------
Name: M. Brent Stevens
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------
Name: Patrick Fallon
Title: Managing Director
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Issuer and the Purchasers.
Very truly yours,
JORDAN INDUSTRIES, INC.
By:
------------------------------------
Name: Gordon L. Nelson, Jr.
Title: Senior Vice President, Treasurer
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By: /s/ M. Brent Stevens
-------------------------------
Name: M. Brent Stevens
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------
Name: Patrick Fallon
Title: Managing Director
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Issuer and the Purchasers.
Very truly yours,
JORDAN INDUSTRIES, INC.
By:
------------------------------------
Name: Gordon L. Nelson, Jr.
Title: Senior Vice President, Treasurer
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By:
-------------------------------
Name: M. Brent Stevens
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Patrick Fallon
-------------------------------
Name: Patrick Fallon
Title: Managing Director
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (including the Exhibits hereto, this
"Agreement"), dated as of April 2, 1997, by and between Jordan Industries,
Inc., an Illinois corporation ("JI"), and the undersigned holder of JI's 11
3/4% Senior Subordinated Discount Debentures due 2005 (the "Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Holder owns the aggregate principal amount set forth on
Schedule 1 hereto (the "Holders Interest") of JI's 11 3/4% Senior Subordinated
Discount Debentures due 2005 (the "Old Debentures") issued pursuant to the
Indenture (the "Old Indenture"), dated as of July 15, 1993, between JI and
First Trust National Association, as Trustee;
WHEREAS, JI desires to amend the Old Indenture and hereby solicits
Holder's consent (the "Consent Solicitation") to certain amendments to the Old
Indenture substantially in the form set forth on Exhibit A hereto (the
"Proposed Amendments"); and
WHEREAS, Holder desires to sell to JI all of Holder's right, title and
interest in, to and under the Old Debentures, in exchange for (i) the issuance
of JI's 11 3/4% Series A Senior Subordinated Discount Debentures due 2009 (the
"Series A Debentures") to be issued in accordance with Section 1 herein and
pursuant to an Indenture, dated as of April 2, 1997, between JI and First Trust
National Association, as Trustee in the form of Exhibit C (the "New
Indenture"), and (ii) sufficient consents pursuant to the Consent Solicitation
in order to authorize the Proposed Amendments to the Old Indenture in the form
of the Proposed Amendments. Such exchange made hereby and effected in
accordance with this Agreement is sometimes referred to herein as the "Purchase
and Sale."
NOW, THEREFORE, the parties hereto agree as follows:
1. TERMS OF PURCHASE AND SALE. (a) The Series A Debentures have been
offered and will be sold to the Holder pursuant to a private placement in
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Act").
(b) Effective at the Closing (as defined below), the Holder will sell
the aggregate principal amount of Old Debentures set forth on Schedule 1 hereto
in exchange for the aggregate principal amount of New Debentures (having the
original issue discount) set forth on Schedule 1 hereto. Upon such exchange,
Holder hereby sells, transfers, assigns and conveys unto JI, its successors and
assigns, and JI shall receive and accept all right, title and interest of
Holder in, to, under and in respect of the Old Debentures.
<PAGE>
(c) The New Debentures being issued pursuant to Section 1(b) above
pursuant to the Purchase and Sale are being issued to refinance the Old
Debentures for the New Debentures and constitute "Refinancing Indebtedness" as
defined in the Old Indenture relating to the Old Debentures.
(d) Holder (including subsequent transferees of the Series A
Debentures) will have the registration rights set forth in the Registration
Rights Agreement, dated as of April 2, 1997, by and among JI, Holder and other
holders of Old Debentures (the "Registration Rights Agreement") for so long as
such Series A Debentures constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, JI will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Act (the "Exchange Offer Registration
Statement") relating to (A) JI's 11 3/4% Series B Senior Subordinated Discount
Debentures due 2009 (the "Series B Debentures" and, together with the Series A
Debentures, the "New Debentures") to be offered in exchange for the Series A
Debentures (such offer to exchange being referred to as the "Registered
Exchange Offer") and/or (ii) a shelf registration statement pursuant to Rule
415 under the Act (the "Shelf Registration Statement" and together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale by certain holders of the Series A Debentures, and to use their
best efforts to cause such Registration Statements to be declared effective.
2. CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall occur on April 2, 1997, at the offices of Mayer, Brown &
Platt, 1675 Broadway, New York, New York 10019, and the following shall occur
at the Closing:
(a) Holder shall irrevocably instruct the participant in The
Depository Trust Company ("D.T.C.") System that holds the Old Debentures on
behalf of Holder to deliver "free" the Old Debentures to JI via the D.T.C.
account specified by JI on Exhibit C at least three business days prior to
Closing and shall take such action as is reasonably necessary to cause such
delivery to occur on the date of Closing.
(b) JI shall deliver to the Holder the Series A Debentures as set
forth in Schedule 1 hereto duly registered in the name of Cede & Co., as
nominee of D.T.C. and authenticated by the trustee under the New Indenture,
with the legend in the form set forth on the form of Series A Debenture set
forth in New Indenture.
The closing of the transactions contemplated hereby shall be expressly
conditioned upon the satisfaction of the Supplemental Indenture Conditions, the
Minimum Purchase and Sale Conditions and the General Conditions (as each such
term is defined in Section 6). JI covenants that, prior to the Closing Date, JI
shall not amend the Old Indenture (including pursuant to the supplemental
indenture effecting the Proposed Amendments in substantially the form of
Exhibit A hereto (the "Supplemental Indenture")) without the written consent of
the Holder unless immediately thereafter it consummates the transactions
contemplated hereby.
-2-
<PAGE>
The obligations of each party to close pursuant to this Section 2
shall also be conditioned upon the respective representations and warranties by
each such party herein being true and correct in all material respects as of
the Closing and such representations and warranties shall be deemed to be
restated and remade as of the date of Closing.
3. REPRESENTATIONS AND WARRANTIES OF JI. JI hereby represents and
warrants to Holder, and its successors and assigns, as follows:
(a) JI has duly authorized the Series A Debentures and, when issued
and authenticated in accordance with the terms of the New Indenture and
delivered to and paid for by Holder in accordance with the term hereof, the
Series A Debentures will be the legally valid and binding obligations of JI,
enforceable against JI in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in equity).
(b) JI is duly organized, validly existing and in good standing under
the laws of Delaware with all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Supplemental Indenture, the New Indenture, and the Registration Rights
Agreement and to consummate the transactions contemplated herein and therein.
(c) JI has duly authorized the Series B Debentures and, when issued
and authenticated in accordance with the terms of the Registered Exchange Offer
and the New Indenture, the Series B Debentures will conform to the description
thereof in the applicable Registration Statement, and will be the legally valid
and binding obligations of JI, enforceable against JI in accordance with their
terms, except as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a proceeding at law or in
equity).
(d) The execution, delivery and performance of this Agreement and all
other instruments and documents to be executed and delivered by JI in
connection herewith (including the Supplemental Indenture, the New Indenture
and the Registration Rights Agreement) have been (or will be prior to the
Closing) duly authorized by all necessary corporate proceedings.
(e) No authorizations, consents or approvals from, or notifications
to, or filing with, any court or any governmental agency having jurisdiction
over JI are or will be necessary for the valid execution, delivery or
performance by JI of this Agreement, except as may be required by the public
reporting requirements applicable to the Old Debentures or by the Registration
Rights Agreement.
-3-
<PAGE>
(f) This Agreement, the Supplemental Indenture, the New Indenture and
the Registration Rights Agreement constitute the legal, valid and binding
obligation of JI except as may be limited by bankruptcy, reorganization,
receivership, insolvency or similar laws affecting the enforcement of
creditors' rights generally and limitations on the enforcement of equitable
remedies.
(g) Assuming the accuracy of Holder's representations and warranties,
the execution, delivery and performance of this Agreement and all other
instruments and documents to be executed and delivered by JI in connection
herewith (including the Supplemental Indenture, the New Indenture and the
Registration Rights Agreement) and the consummation of the transactions
contemplated hereby or thereby by JI are not (and will not be) in conflict with
or in contravention or violation of any law (including common law), rule or
regulation by which JI is bound or to which it is subject or any material
agreement to which it is a party or by which it is bound (including the old
Indenture). No proceedings are pending against JI or, to JI's knowledge,
without independent investigation, threatened against JI before any court,
arbitrator or administrative or governmental body which, in the aggregate,
would have a material adverse effect on Holder's rights and remedies hereunder.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF HOLDER. Holder hereby
represents and warrants to JI, as of the date hereof, as follows:
(a) Holder is, and at all times prior to the Closing will be, the sole
beneficial owner and Holder's nominee is, and at all times prior to the Closing
will be, the sole legal and record owner, of the Holder's Interest free and
clear of all liens.
(b) Holder is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with all requisite power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated herein.
(c) The execution, delivery and performance of this Agreement and all
other instruments and documents to be executed and delivered by Holder in
connection herewith, including its consent to the Proposed Amendments (the
"Consent") contained herein and the Registration Rights Agreement, have been
(or will be) duly authorized by all necessary proceedings.
(d) No authorizations, consents or approvals from, or notifications
to, or filing with, any court or any governmental agency having jurisdiction
over Holder or any other person or entity are or will be necessary for the
valid execution, delivery or performance by Holder of this Agreement or the
agreements contemplated hereby.
(e) This Agreement, the Consent and the Registration Rights Agreement
constitutes the legal, valid and binding obligation of Holder except as may be
limited by bankruptcy, reorganization, receivership, insolvency or similar laws
affecting the enforcement of creditors' rights generally and limitations on the
enforcement of equitable remedies.
-4-
<PAGE>
(f) The execution, delivery and performance of this Agreement, the
Consent and the Registration Rights Agreement and all other instruments and
documents to be executed and delivered by Holder in connection herewith and
therewith and the consummation of the transactions contemplated hereby or
thereby by Holder are not (and will not be) in conflict with or in
contravention or violation of any law (including common law), rule or
regulation by which the Holder is bound or to which it is subject or any
material agreement to which it is a party or by which it is bound. No
proceedings are pending against Holder or, to Holder's knowledge, without
independent investigation, threatened against Holder before any court,
arbitrator or administrative or governmental body which, in the aggregate,
would have a material adverse effect on the Holder's Interest or JI's rights
and remedies hereunder or in respect of the Holder's Interest.
(g) Holder understands that the Series A Debentures have not been
registered under the Act, or any state securities laws, and may not be sold,
transferred or otherwise disposed of by Holder without such registration or an
exemption therefrom (including pursuant to Rule 144A to another qualified
institutional buyer within the meaning of Rule 144A of the Securities Act).
Holder is a "qualified institutional buyer" within the meaning of Rule 144A of
the Act or an institutional accredited investor, as defined in Rule 501(a)(1),
(2), (3) and (7) under the Act, in either case with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series A Debentures.
(h) Holder (i) is not acquiring the Series A Debentures with a view to
any distribution thereof or with any present intention of offering or selling
any of the Series A Debentures in a transaction that would violate the Act or
the securities laws of any State of the United States or any other applicable
jurisdiction, and (ii) has not solicited and, unless and until the Series A
Debentures are registered under the Act, will not solicit any offer to buy or
offer to sell the Series A Debentures by means of any form of general
solicitation or general advertising (as such terms are defined in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of the Act.
(i) Holder acknowledges that JI has material, non-public information
regarding the condition (financial and otherwise), results of operations,
businesses, properties, plans (including, without limitation, proposed
acquisitions, divestitures, financings, refinancings (including with regard to
the Purchase and Sale), and recapitalizations), and prospects of JI
(collectively, "Information") and that such Information might be material to
Holder's decision to participate in the Purchase and Sale of the Old Debentures
for the Series A Debentures, consent to the Proposed Amendments, become party
to this Agreement or be otherwise materially adverse to the Holder's interests.
Holder acknowledges that Holder has been offered the Information as well as the
opportunity to discuss the Company and its affairs and the Purchase and Sale
with the Company and its officers, representatives and agents, and that Holder
has declined such offer and discussions. Accordingly, Holder acknowledges and
agrees that JI shall have no obligation to disclose to Holder any of such
Information.
-5-
<PAGE>
(j) Holder acknowledges that: (1) it has received and reviewed this
Agreement, the Registration Rights Agreement, the Old Indenture, the Proposed
Amendments and the New Indenture attached hereto; (2) the Company's Report or
10K for the year ended December 31, 1996, and (3) has received or is able to
access the Incorporated Documents; and (4) Holder has been afforded the
opportunity to make appropriate inquiries of JI in connection with the
transactions contemplated by this Agreement.
(k) Holder has consulted its own legal, financial and tax counsel as
it deems appropriate in order to make an informed decision regarding its
exchange of the Old Debentures for the Series A Debentures, the issuance of
Series A Debentures in connection with the Consent and the transactions
contemplated hereby, including the tax consequences of the exchanges and an
investment in the Series A Debentures and its "original issue discounts" in
respect of the Old Debentures and the New Debentures.
(l) Holder is a sophisticated seller and investor with respect to the
Holder's Interest and has adequate information concerning the business and
financial condition of JI to make an informed decision regarding the exchange
of the Holder's Interest for the New Debentures pursuant to this Agreement and
has independently and without reliance upon Holder and based on such
information as Holder has deemed appropriate, made its own analysis and
decision to enter into this Agreement, except that Holder has relied upon the
representations and warranties of the Company contained in this Agreement.
(m) Holder represents that it has adequate information concerning the
business and financial condition of JI to make an informed decision regarding
the purchase of the Series A Debentures and has independently and without
reliance upon JI or Jefferies & Company, Inc. made its own analysis and
decision to sell the Old Debentures in exchange for the Series A Debentures.
Holder hereby waives and releases, to the fullest extent permitted by law, any
and all claims and causes of action it has or may have against JI and Jefferies
and their respective affiliates, controlling persons, officers, directors,
employees, representatives and agents, based upon, relating to or arising out
of the nondisclosure of any Information.
(n) Holder has not acquired the Series A Debentures on behalf, or at
the request, of JI or any of its affiliates. Holder has not engaged or employed
any broker or finder in connection with the transactions referred to herein.
Holder acknowledges and confirms that the sale of the Old Debentures in
exchange for the Series A Debentures by Holder was privately negotiated in an
independent transaction and not publicly solicited by or on behalf of JI or any
of its affiliates.
(o) Holder acknowledges that it is aware of the so-called insider
trading rules, regulations and law which prohibit sales and purchases of
securities while in possession of material non-public information and the
disclosure of such information to others, and that this Agreement and the
transactions contemplated hereby may constitute such information.
(p) Holder hereby consents, as of March 27, 1997, to the Proposed
Amendments to the Old Indenture and agrees to cause its nominee to execute and
deliver its consent to the Proposed
-6-
<PAGE>
Amendments in the form attached hereto as Exhibit D while still holder of the
Old Debentures and prior to the Purchase and Sale.
5. COSTS AND EXPENSES. JI and Holder shall each be responsible for
their own costs and expenses in connection with the preparation, negotiation
and execution of this Agreement. Jefferies has acted as agent for JI in
connection with the transactions contemplated hereby and is being paid fees by
JI.
6. DEFINITIONS.
"General Conditions" means the satisfaction of the following:
(i) there shall have been instituted or threatened or be pending
any action or proceeding before or by any court or governmental,
regulatory or administrative agency or instrumentality, or by any
other person, in connection with the Purchase and Exchange Offer or
the Consent Solicitation that is, or is reasonably likely to be, in
the sole judgment of JI, materially adverse to the business,
operations, properties, condition (financial or otherwise), assets,
liabilities or prospects of JI;
(ii) there shall have occurred any material adverse development,
in the sole judgment of JI, with respect to any action or proceeding
concerning JI existing on the date hereof;
(iii) an order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been proposed, enacted,
entered, issued, promulgated, enforced or deemed applicable by any
court or governmental, regulatory or administrative agency or
instrumentality that, in the sole judgment of JI, would or might
prohibit, prevent, restrict or delay consummation of either of the
Purchase and Sale or the Consent Solicitation or that is, or is
reasonably likely to be, materially adverse to the business,
operations, properties, condition (financial or otherwise), assets,
liabilities or prospects of JI;
(iv) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of JI that, in the sole
judgment of JI, would or might prohibit, prevent, restrict or delay
consummation of the Purchase and Sale or the Consent Solicitation or
that will, or is reasonably likely to, materially impair the
contemplated benefits to JI of the Purchase and Sale and the Consent
Solicitation; or
(v) the trustee under the New Indenture or the Holders shall have
objected in any respect to, or taken any action that could, in the
sole judgment of JI, adversely affect the consummation of, the
Purchase and Sale or the Consent Solicitation or JI's ability to cause
the Proposed Amendments to be effected, or shall have taken any action
that challenges the validity or effectiveness of the procedures used
by JI in soliciting the consents to the Proposed Amendments or in the
making of the Purchase and Sale Offer or the Consent
-7-
<PAGE>
Solicitation or the acceptance of, or payment for, any of the Old
Debentures or any of the consents by JI.
"Incorporated Documents" means the following documents filed by the
Company with the Commission pursuant to the Securities Exchange Act of 1934
("Exchange Act") and the Act:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996; and
(iii) Registration Statement on Form S-2 dated July 14, 1993, and
Prospectus, dated July 16, 1993 relating to the Old Debentures.
"Purchase and Sale Condition" means their being validly exchanged not
less than $67,868,395 in aggregate principal amount of the outstanding Old
Debentures on or prior to the Closing.
"Supplemental Indenture Condition" means execution and delivery of the
Supplemental Indenture as of April 2, 1997, providing for the Proposed
Amendments following receipt of consents to the Proposed Amendments delivered
by the execution of this Agreement by Holders of not less than $67,868,395 in
aggregate principal amount of the Old Debentures.
7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits hereto, sets forth the entire agreement between Holder and JI relating
to the transactions contemplated hereby, supersedes all prior communications
and understandings of any nature and may not be supplemented, altered or waived
other than in a writing signed by the parties.
8. NOTICES. Each notice or other communication hereunder shall be in
writing, shall be sent by mail, postage prepaid, messenger, telecopy or
overnight courier, shall be deemed given when delivered to the designated
address or telecopy set forth in Annex I, and in the case of delivery by mail,
five (5) days after deposit in the U.S. Mail (or such other address as Holders
or JI may designate from time to time to the other party hereto).
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties contained herein shall
survive the consummation of the transactions contemplated in this Agreement.
10. FURTHER ASSURANCES. Each party shall execute and deliver all
further documents or instruments reasonably requested by the other party in
order to effect the intent of this Agreement and obtain the full benefit of
this Agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on, and
inure to the benefit of, the parties hereto and their successors and assigns;
provided, that this Agreement shall not be assigned by either party hereto
without the prior written consent of the other.
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<PAGE>
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO CONFLICTS OF LAW PRINCIPLES.
13. SEVERABILITY. If any provision of this Agreement shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
14. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which when so executed shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
15. SECTION HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any purpose.
16. LIMITATIONS ON LIABILITY. The parties hereto acknowledge and agree
that in no event shall any of the partners, officers, directors, shareholders,
members, affiliates, employees, agents or investment managers (collectively,
"Representatives") of any party hereto have any obligation or liability to the
other or any other person for any action taken or omitted by or on behalf of
any party hereto or in connection herewith (such obligation and liability begin
the sole responsibility of such party hereunder). The parties hereto further
acknowledge and agree that all obligations and liabilities of the parties to
this Agreement or in connection herewith are enforceable solely against such
party and its assets and not against the assets of any other party or any
Representatives of any party.
17. NO RELATIONSHIP. Nothing contained herein shall establish any
fiduciary, partnership, joint venture or similar relationship between the
parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
JORDAN INDUSTRIES, INC.
By:
---------------------------
HOLDER:
------------------------------
[print name]
By:
---------------------------
Name:
Title:
<PAGE>
Schedule 1
(as of April 2, 1997)
Name of Holder: _____________________
Print Name: _________________________
Principal Amount of Old Debentures being sold: $________
Accreted Value of Old Debentures being sold: $________
Principal Amount of New Debentures: $________
Accreted Value of New Debentures: $________
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (including the Exhibits hereto, this
"Agreement"), dated as of April 2, 1997, by and between Jordan Industries,
Inc., an Illinois corporation ("JI"), and the undersigned holder of JI's 11
3/4% Senior Subordinated Discount Debentures due 2005 (the "Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Holder owns the aggregate principal amount set forth on
Schedule 1 hereto (the "Holders Interest") of JI's 11 3/4% Senior Subordinated
Discount Debentures due 2005 (the "Old Debentures") issued pursuant to the
Indenture (the "Old Indenture"), dated as of July 15, 1993, between JI and
First Trust National Association, as Trustee;
WHEREAS, JI desires to amend the Old Indenture and hereby solicits
Holder's consent (the "Consent Solicitation") to certain amendments to the Old
Indenture substantially in the form set forth on Exhibit A hereto (the
"Proposed Amendments"); and
WHEREAS, Holder desires to sell to JI all of Holder's right, title
and interest in, to and under the Old Debentures, in exchange for (i) the
issuance of JI's 11 3/4% Series A Senior Subordinated Discount Debentures due
2009 (the "Series A Debentures") to be issued in accordance with Section 1
herein and pursuant to an Indenture, dated as of April 2, 1997, between JI and
First Trust National Association, as Trustee in the form of Exhibit C (the
"New Indenture"), and (ii) sufficient consents pursuant to the Consent
Solicitation in order to authorize the Proposed Amendments to the Old
Indenture in the form of the Proposed Amendments. Such exchange made hereby
and effected in accordance with this Agreement is sometimes referred to herein
as the "Purchase and Sale."
NOW, THEREFORE, the parties hereto agree as follows:
1. TERMS OF PURCHASE AND SALE. (a) The Series A Debentures have been
offered and will be sold to the Holder pursuant to a private placement in
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Act").
(b) Effective at the Closing (as defined below), the Holder will sell
the aggregate principal amount of Old Debentures set forth on Schedule 1 hereto
in exchange for the aggregate principal amount of New Debentures (having the
original issue discount) set forth in Schedule 1 hereto. Upon such exchange,
Holder hereby sells, transfers, assigns and conveys unto JI, its successors and
assigns, and JI shall receive and accept all right, title and interest of
Holder in, to, under and in respect of the Old Debentures.
<PAGE>
(c) The New Debentures being issued pursuant to Section 1(b) above
pursuant to the Purchase and Sale are being issued to refinance the Old
Debentures for the New Debentures and constitute "Refinancing Indebtedness" as
defined in the Old Indenture relating to the Old Debentures.
(d) Holder (including subsequent transferees of the Series A
Debentures) will have the registration rights set forth in the Registration
Rights Agreement, dated as of April 2, 1997, by and among JI, Holder and other
holders of Old Debentures (the "Registration Rights Agreement") for so long as
such Series A Debentures constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, JI will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Act (the "Exchange Offer Registration
Statement") relating to (A) JI's 11 3/4% Series B Senior Subordinated Discount
Debentures due 2009 (the "Series B Debentures" and, together with the Series A
Debentures, the "New Debentures") to be offered in exchange for the Series A
Debentures (such offer to exchange being referred to as the "Registered
Exchange Offer") and/or (ii) a shelf registration statement pursuant to Rule
415 under the Act (the "Shelf Registration Statement" and together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale by certain holders of the Series A Debentures, and to use their
best efforts to cause such Registration Statements to be declared effective.
2. CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall occur on April 2, 1997, at the offices of Mayer, Brown &
Platt, 1675 Broadway, New York, New York 10019, and the following shall occur
at the Closing:
(a) Holder shall irrevocably instruct the participant in The
Depository Trust Company ("D.T.C.") System that holds the Old Debentures on
behalf of Holder to deliver the Old Debentures to JI against the delivery by JI
of the New Debentures and shall take such action as is reasonably necessary to
cause such delivery to occur on the date of Closing.
(b) JI shall deliver to the Holder the Series A Debentures as set
forth in Schedule 1 hereto duly registered in the name of Cede & Co., as
nominee of D.T.C. and authenticated by the trustee under the New Indenture,
with the legend in the form set forth on the form of Series A Debenture set
forth in New Indenture.
The closing of the transactions contemplated hereby shall be expressly
conditioned upon the satisfaction of the Supplemental Indenture Conditions, the
Minimum Purchase and Sale Conditions and the General Conditions (as each such
term is defined in Section 6). JI covenants that, prior to the Closing Date, JI
shall not amend the Old Indenture (including pursuant to the supplemental
indenture effecting the Proposed Amendments in substantially the form of
Exhibit A hereto (the "Supplemental Indenture")) without the written consent of
the Holder unless immediately thereafter it consummates the transactions
contemplated hereby.
-2-
<PAGE>
The obligations of each party to close pursuant to this Section 2
shall also be conditioned upon the respective representations and warranties by
each such party herein being true and correct in all material respects as of
the Closing and such representations and warranties shall be deemed to be
restated and remade as of the date of Closing.
3. REPRESENTATIONS AND WARRANTIES OF JI. JI hereby represents and
warrants to Holder, and its successors and assigns, as follows:
(a) JI has duly authorized the Series A Debentures and, when issued
and authenticated in accordance with the terms of the New Indenture and
delivered to and paid for by Holder in accordance with the term hereof, the
Series A Debentures will be the legally valid and binding obligations of JI,
enforceable against JI in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in equity).
(b) JI is duly organized, validly existing and in good standing under
the laws of Delaware with all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Supplemental Indenture, the New Indenture, and the Registration Rights
Agreement and to consummate the transactions contemplated herein and therein.
(c) JI has duly authorized the Series B Debentures and, when issued
and authenticated in accordance with the terms of the Registered Exchange Offer
and the New Indenture, the Series B Debentures will conform to the description
thereof in the applicable Registration Statement, and will be the legally valid
and binding obligations of JI, enforceable against JI in accordance with their
terms, except as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a proceeding at law or in
equity).
(d) The execution, delivery and performance of this Agreement and all
other instruments and documents to be executed and delivered by JI in
connection herewith (including the Supplemental Indenture, the New Indenture
and the Registration Rights Agreement) have been (or will be prior to the
Closing) duly authorized by all necessary corporate proceedings.
(e) No authorizations, consents or approvals from, or notifications
to, or filing with, any court or any governmental agency having jurisdiction
over JI are or will be necessary for the valid execution, delivery or
performance by JI of this Agreement, except as may be required by the public
reporting requirements applicable to the Old Debentures or by the Registration
Rights Agreement.
-3-
<PAGE>
(f) This Agreement, the Supplemental Indenture, the New Indenture and
the Registration Rights Agreement constitute the legal, valid and binding
obligation of JI except as may be limited by bankruptcy, reorganization,
receivership, insolvency or similar laws affecting the enforcement of
creditors' rights generally and limitations on the enforcement of equitable
remedies.
(g) Assuming the accuracy of Holder's representations and warranties,
the execution, delivery and performance of this Agreement and all other
instruments and documents to be executed and delivered by JI in connection
herewith (including the Supplemental Indenture, the New Indenture and the
Registration Rights Agreement) and the consummation of the transactions
contemplated hereby or thereby by JI are not (and will not be) in conflict with
or in contravention or violation of any law (including common law), rule or
regulation by which JI is bound or to which it is subject or any material
agreement to which it is a party or by which it is bound (including the old
Indenture). No proceedings are pending against JI or, to JI's knowledge,
without independent investigation, threatened against JI before any court,
arbitrator or administrative or governmental body which, in the aggregate,
would have a material adverse effect on Holder's rights and remedies hereunder.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF HOLDER. Holder hereby
represents and warrants to JI, as of the date hereof, as follows:
(a) Holder is, and at all times prior to the Closing will be, the sole
beneficial owner and Holder's nominee is, and at all times prior to the Closing
will be, the sole legal and record owner, of the Holder's Interest free and
clear of all liens.
(b) Holder is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with all requisite power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated herein.
(c) The execution, delivery and performance of this Agreement and all
other instruments and documents to be executed and delivered by Holder in
connection herewith, including its consent to the Proposed Amendments (the
"Consent") contained herein and the Registration Rights Agreement, have been
(or will be) duly authorized by all necessary proceedings.
(d) No authorizations, consents or approvals from, or notifications
to, or filing with, any court or any governmental agency having jurisdiction
over Holder or any other person or entity are or will be necessary for the
valid execution, delivery or performance by Holder of this Agreement or the
agreements contemplated hereby.
(e) This Agreement, the Consent and the Registration Rights Agreement
constitutes the legal, valid and binding obligation of Holder except as may be
limited by bankruptcy, reorganization, receivership, insolvency or similar laws
affecting the enforcement of creditors' rights generally and limitations on the
enforcement of equitable remedies.
-4-
<PAGE>
(f) The execution, delivery and performance of this Agreement, the
Consent and the Registration Rights Agreement and all other instruments and
documents to be executed and delivered by Holder in connection herewith and
therewith and the consummation of the transactions contemplated hereby or
thereby by Holder are not (and will not be) in conflict with or in
contravention or violation of any law (including common law), rule or
regulation by which the Holder is bound or to which it is subject or any
material agreement to which it is a party or by which it is bound. No
proceedings are pending against Holder or, to Holder's knowledge, without
independent investigation, threatened against Holder before any court,
arbitrator or administrative or governmental body which, in the aggregate,
would have a material adverse effect on the Holder's Interest or JI's rights
and remedies hereunder or in respect of the Holder's Interest.
(g) Holder understands that the Series A Debentures have not been
registered under the Act, or any state securities laws, and may not be sold,
transferred or otherwise disposed of by Holder without such registration or an
exemption therefrom (including pursuant to Rule 144A to another qualified
institutional buyer within the meaning of Rule 144A of the Securities Act).
Holder is a "qualified institutional buyer" within the meaning of Rule 144A of
the Act or an institutional accredited investor, as defined in Rule 501(a)(1),
(2), (3) and (7) under the Act, in either case with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series A Debentures.
(h) Holder (i) is not acquiring the Series A Debentures with a view to
any distribution thereof or with any present intention of offering or selling
any of the Series A Debentures in a transaction that would violate the Act or
the securities laws of any State of the United States or any other applicable
jurisdiction, and (ii) has not solicited and, unless and until the Series A
Debentures are registered under the Act, will not solicit any offer to buy or
offer to sell the Series A Debentures by means of any form of general
solicitation or general advertising (as such terms are defined in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of the Act.
(i) Holder acknowledges that JI has material, non-public information
regarding the condition (financial and otherwise), results of operations,
businesses, properties, plans (including, without limitation, proposed
acquisitions, divestitures, financings, refinancings (including with regard to
the Purchase and Sale), and recapitalizations), and prospects of JI
(collectively, "Information") and that such Information might be material to
Holder's decision to participate in the Purchase and Sale of the Old Debentures
for the Series A Debentures, consent to the Proposed Amendments, become party
to this Agreement or be otherwise materially adverse to the Holder's interests.
Holder acknowledges that Holder has been offered the Information as well as the
opportunity to discuss the Company and its affairs and the Purchase and Sale
with the Company and its officers, representatives and agents, and that Holder
has declined such offer and discussions. Accordingly, Holder acknowledges and
agrees that JI shall have no obligation to disclose to Holder any of such
Information.
-5-
<PAGE>
(j) Holder acknowledges that: (1) it has received and reviewed this
Agreement, the Registration Rights Agreement, the Old Indenture, the Proposed
Amendments and the New Indenture attached hereto; (2) the Company's Report or
10K for the year ended December 31, 1996, and (3) has received or is able to
access the Incorporated Documents; and (4) Holder has been afforded the
opportunity to make appropriate inquiries of JI in connection with the
transactions contemplated by this Agreement.
(k) Holder has consulted its own legal, financial and tax counsel as
it deems appropriate in order to make an informed decision regarding its
exchange of the Old Debentures for the Series A Debentures, the issuance of
Series A Debentures in connection with the Consent and the transactions
contemplated hereby, including the tax consequences of the exchanges and an
investment in the Series A Debentures and its "original issue discounts" in
respect of the Old Debentures and the New Debentures.
(l) Holder is a sophisticated seller and investor with respect to the
Holder's Interest and has adequate information concerning the business and
financial condition of JI to make an informed decision regarding the exchange
of the Holder's Interest for the New Debentures pursuant to this Agreement and
has independently and without reliance upon Holder and based on such
information as Holder has deemed appropriate, made its own analysis and
decision to enter into this Agreement, except that Holder has relied upon the
representations and warranties of the Company contained in this Agreement.
(m) Holder represents that it has adequate information concerning the
business and financial condition of JI to make an informed decision regarding
the purchase of the Series A Debentures and has independently and without
reliance upon JI or Jefferies & Company, Inc. made its own analysis and
decision to sell the Old Debentures in exchange for the Series A Debentures.
Holder hereby waives and releases, to the fullest extent permitted by law, any
and all claims and causes of action it has or may have against JI and Jefferies
and their respective affiliates, controlling persons, officers, directors,
employees, representatives and agents, based upon, relating to or arising out
of the nondisclosure of any Information.
(n) Holder has not acquired the Series A Debentures on behalf, or at
the request, of JI or any of its affiliates. Holder has not engaged or employed
any broker or finder in connection with the transactions referred to herein.
Holder acknowledges and confirms that the sale of the Old Debentures in
exchange for the Series A Debentures by Holder was privately negotiated in an
independent transaction and not publicly solicited by or on behalf of JI or any
of its affiliates.
(o) Holder acknowledges that it is aware of the so-called insider
trading rules, regulations and law which prohibit sales and purchases of
securities while in possession of material non-public information and the
disclosure of such information to others, and that this Agreement and the
transactions contemplated hereby may constitute such information.
(p) Holder hereby consents, as of April 2, 1997, to the Proposed
Amendments to the Old Indenture and agrees to cause its nominee to execute and
deliver its consent to the Proposed
-6-
<PAGE>
Amendments in the form attached hereto as Exhibit D while still holder of the
Old Debentures and prior to the Purchase and Sale.
5. COSTS AND EXPENSES. JI and Holder shall each be responsible for
their own costs and expenses in connection with the preparation, negotiation
and execution of this Agreement. Jefferies has acted as agent for JI in
connection with the transactions contemplated hereby and is being paid fees by
JI.
6. DEFINITIONS.
"General Conditions" means the satisfaction of the following:
(i) there shall have been instituted or threatened or be pending
any action or proceeding before or by any court or governmental,
regulatory or administrative agency or instrumentality, or by any
other person, in connection with the Purchase and Exchange Offer or
the Consent Solicitation that is, or is reasonably likely to be, in
the sole judgment of JI, materially adverse to the business,
operations, properties, condition (financial or otherwise), assets,
liabilities or prospects of JI;
(ii) there shall have occurred any material adverse development,
in the sole judgment of JI, with respect to any action or proceeding
concerning JI existing on the date hereof;
(iii) an order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been proposed, enacted,
entered, issued, promulgated, enforced or deemed applicable by any
court or governmental, regulatory or administrative agency or
instrumentality that, in the sole judgment of JI, would or might
prohibit, prevent, restrict or delay consummation of either of the
Purchase and Sale or the Consent Solicitation or that is, or is
reasonably likely to be, materially adverse to the business,
operations, properties, condition (financial or otherwise), assets,
liabilities or prospects of JI;
(iv) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of JI that, in the sole
judgment of JI, would or might prohibit, prevent, restrict or delay
consummation of the Purchase and Sale or the Consent Solicitation or
that will, or is reasonably likely to, materially impair the
contemplated benefits to JI of the Purchase and Sale and the Consent
Solicitation; or
(v) the trustee under the New Indenture or the Holders shall have
objected in any respect to, or taken any action that could, in the
sole judgment of JI, adversely affect the consummation of, the
Purchase and Sale or the Consent Solicitation or JI's ability to cause
the Proposed Amendments to be effected, or shall have taken any action
that challenges the validity or effectiveness of the procedures used
by JI in soliciting the consents to the Proposed Amendments or in the
making of the Purchase and Sale Offer or the Consent
-7-
<PAGE>
Solicitation or the acceptance of, or payment for, any of the Old
Debentures or any of the consents by JI.
"Incorporated Documents" means the following documents filed by the
Company with the Commission pursuant to the Securities Exchange Act of 1934
("Exchange Act") and the Act:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996; and
(iii) Registration Statement on Form S-2 dated July 14, 1993, and
Prospectus, dated July 16, 1993 relating to the Old Debentures.
"Purchase and Sale Condition" means their being validly exchanged not
less than $67,868,395 in aggregate principal amount of the outstanding Old
Debentures on or prior to the Closing.
"Supplemental Indenture Condition" means execution and delivery of the
Supplemental Indenture as of April 2, 1997, providing for the Proposed
Amendments following receipt of consents to the Proposed Amendments delivered
by the execution of this Agreement by Holders of not less than $67,868,395 in
aggregate principal amount of the Old Debentures.
7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits hereto, sets forth the entire agreement between Holder and JI relating
to the transactions contemplated hereby, supersedes all prior communications
and understandings of any nature and may not be supplemented, altered or waived
other than in a writing signed by the parties.
8. NOTICES. Each notice or other communication hereunder shall be in
writing, shall be sent by mail, postage prepaid, messenger, telecopy or
overnight courier, shall be deemed given when delivered to the designated
address or telecopy set forth in Annex I, and in the case of delivery by mail,
five (5) days after deposit in the U.S. Mail (or such other address as Holders
or JI may designate from time to time to the other party hereto).
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties contained herein shall
survive the consummation of the transactions contemplated in this Agreement.
10. FURTHER ASSURANCES. Each party shall execute and deliver all
further documents or instruments reasonably requested by the other party in
order to effect the intent of this Agreement and obtain the full benefit of
this Agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on, and
inure to the benefit of, the parties hereto and their successors and assigns;
provided, that this Agreement shall not be assigned by either party hereto
without the prior written consent of the other.
-8-
<PAGE>
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO CONFLICTS OF LAW PRINCIPLES.
13. SEVERABILITY. If any provision of this Agreement shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
14. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which when so executed shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
15. SECTION HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any purpose.
16. LIMITATIONS ON LIABILITY. The parties hereto acknowledge and agree
that in no event shall any of the partners, officers, directors, shareholders,
members, affiliates, employees, agents or investment managers (collectively,
"Representatives") of any party hereto have any obligation or liability to the
other or any other person for any action taken or omitted by or on behalf of
any party hereto or in connection herewith (such obligation and liability begin
the sole responsibility of such party hereunder). The parties hereto further
acknowledge and agree that all obligations and liabilities of the parties to
this Agreement or in connection herewith are enforceable solely against such
party and its assets and not against the assets of any other party or any
Representatives of any party.
17. NO RELATIONSHIP. Nothing contained herein shall establish any
fiduciary, partnership, joint venture or similar relationship between the
parties hereto.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
JORDAN INDUSTRIES, INC.
By:
--------------------------------
HOLDER:
-----------------------------------
[print name]
By:
--------------------------------
Name:
Title:
<PAGE>
Schedule 1
(as of April 2, 1997)
Name of Holder: _____________________
Print Name: _________________________
Principal Amount of Old Debentures being sold: $________
Accreted Value of Old Debentures being sold: $________
Principal Amount of New Debentures: $________
Accreted Value of New Debentures: $________
<PAGE>
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (including the Exhibits hereto, this
"Agreement"), dated as of April 2, 1997, by and between Jordan Industries,
Inc., an Illinois corporation ("JI"), and the undersigned holder of JI's 11
3/4% Senior Subordinated Discount Debentures due 2005 (the "Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Holder owns the aggregate principal amount set forth on
Schedule 1 hereto (the "Holders Interest") of JI's 11 3/4% Senior Subordinated
Discount Debentures due 2005 (the "Old Debentures") issued pursuant to the
Indenture (the "Old Indenture"), dated as of July 15, 1993, between JI and
First Trust National Association, as Trustee;
WHEREAS, JI desires to amend the Old Indenture and hereby solicits
Holder's consent (the "Consent Solicitation") to certain amendments to the Old
Indenture substantially in the form set forth on Exhibit A hereto (the
"Proposed Amendments"); and
WHEREAS, Holder desires to sell to JI all of Holder's right, title and
interest in, to and under the Old Debentures, in exchange for (i) the issuance
of JI's 11 3/4% Series A Senior Subordinated Discount Debentures due 2009 (the
"Series A Debentures") to be issued in accordance with Section 1 herein and
pursuant to an Indenture, dated as of April 2, 1997, between JI and First Trust
National Association, as Trustee in the form of Exhibit C (the "New
Indenture"), and (ii) sufficient consents pursuant to the Consent Solicitation
in order to authorize the Proposed Amendments to the Old Indenture in the form
of the Proposed Amendments. Such exchange made hereby and effected in
accordance with this Agreement is sometimes referred to herein as the
"Exchange."
NOW, THEREFORE, the parties hereto agree as follows:
1. TERMS OF PURCHASE AND SALE. (a) The Series A Debentures have been
offered and will be sold to the Holder pursuant to a private placement in
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Act").
(b) Effective at the Closing (as defined below), the Holder will
exchange the aggregate principal amount of Old Debentures set forth on Schedule
1 hereto for the aggregate principal amount of New Debentures (having the
original issue discount) set forth on Schedule 1 hereto. Upon such exchange,
Holder hereby sells, transfers, assigns and conveys unto JI, its successors and
assigns, and JI shall receive and accept all right, title and interest of
Holder in, to, under and in respect of the Old Debentures.
<PAGE>
(c) The New Debentures being issued pursuant to Section 1(b) above
pursuant to the Exchange are being issued to refinance the Old Debentures for
the New Debentures and constitute "Refinancing Indebtedness" as defined in the
Old Indenture relating to the Old Debentures.
(d) Holder (including subsequent transferees of the Series A
Debentures) will have the registration rights set forth in the Registration
Rights Agreement, dated as of April 2, 1997, by and among JI, Holder and other
holders of Old Debentures (the "Registration Rights Agreement") for so long as
such Series A Debentures constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, JI will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Act (the "Exchange Offer Registration
Statement") relating to (A) JI's 11 3/4% Series B Senior Subordinated Discount
Debentures due 2009 (the "Series B Debentures" and, together with the Series A
Debentures, the "New Debentures") to be offered in exchange for the Series A
Debentures (such offer to exchange being referred to as the "Registered
Exchange Offer") and/or (ii) a shelf registration statement pursuant to Rule
415 under the Act (the "Shelf Registration Statement" and together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale by certain holders of the Series A Debentures, and to use their
best efforts to cause such Registration Statements to be declared effective.
2. CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall occur on April 2, 1997, at the offices of Mayer, Brown &
Platt, 1675 Broadway, New York, New York 10019, and the following shall occur
at the Closing:
(a) Holder shall irrevocably instruct the participant in The
Depository Trust Company ("D.T.C.") System that holds the Old Debentures on
behalf of Holder to deliver "free" the Old Debentures to JI via the D.T.C.
account specified by JI on Exhibit C at least three business days prior to
Closing and shall take such action as is reasonably necessary to cause such
delivery to occur on the date of Closing.
(b) JI shall deliver to the Holder the Series A Debentures as set
forth in Schedule 1 hereto duly registered in the name of Cede & Co., as
nominee of D.C. and authenticated by the trustee under the New Indenture, with
the legend in the form set forth on the form of Series A Debenture set forth in
New Indenture.
The closing of the transactions contemplated hereby shall be expressly
conditioned upon the satisfaction of the Supplemental Indenture Conditions, the
Minimum Exchange Conditions and the General Conditions (as each such term is
defined in Section 6). JI covenants that, prior to the Closing Date, JI shall
not amend the Old Indenture (including pursuant to the supplemental indenture
effecting the Proposed Amendments in substantially the form of Exhibit A hereto
(the "Supplemental Indenture")) without the written consent of the Holder
unless immediately thereafter it consummates the transactions contemplated
hereby.
-2-
<PAGE>
The obligations of each party to close pursuant to this Section 2
shall also be conditioned upon the respective representations and warranties by
each such party herein being true and correct in all material respects as of
the Closing and such representations and warranties shall be deemed to be
restated and remade as of the date of Closing.
3. REPRESENTATIONS AND WARRANTIES OF JI. JI hereby represents and
warrants to Holder, and its successors and assigns, as follows:
(a) JI has duly authorized the Series A Debentures and, when issued
and authenticated in accordance with the terms of the New Indenture and
delivered to and paid for by Holder in accordance with the term hereof, the
Series A Debentures will be the legally valid and binding obligations of JI,
enforceable against JI in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in equity).
(b) JI is duly organized, validly existing and in good standing under
the laws of Delaware with all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Supplemental Indenture, the New Indenture, and the Registration Rights
Agreement and to consummate the transactions contemplated herein and therein.
(c) JI has duly authorized the Series B Debentures and, when issued
and authenticated in accordance with the terms of the Registered Exchange Offer
and the New Indenture, the Series B Debentures will conform to the description
thereof in the applicable Registration Statement, and will be the legally valid
and binding obligations of JI, enforceable against JI in accordance with their
terms, except as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a proceeding at law or in
equity) .
(d) The execution, delivery and performance of this Agreement and all
other instruments and documents to be executed and delivered by JI in
connection herewith (including the Supplemental Indenture, the New Indenture
and the Registration Rights Agreement) have been (or will be prior to the
Closing) duly authorized by all necessary corporate proceedings.
(e) No authorizations, consents or approvals from, or notifications
to, or filing with, any court or any governmental agency having jurisdiction
over JI are or will be necessary for the valid execution, delivery or
performance by JI of this Agreement, except as may be required by the public
reporting requirements applicable to the Old Debentures or by the Registration
Rights Agreement.
-3-
<PAGE>
(f) This Agreement, the Supplemental Indenture, the New Indenture and
the Registration Rights Agreement constitute the legal, valid and binding
obligation of JI except as may be limited by bankruptcy, reorganization,
receivership, insolvency or similar laws affecting the enforcement of
creditors' rights generally and limitations on the enforcement of equitable
remedies.
(g) Assuming the accuracy of Holder's representations and warranties,
the execution, delivery and performance of this Agreement and all other
instruments and documents to be executed and delivered by JI in connection
herewith (including the Supplemental Indenture, the New Indenture and the
Registration Rights Agreement) and the consummation of the transactions
contemplated hereby or thereby by JI are not (and will not be) in conflict with
or in contravention or violation of any law (including common law), rule or
regulation by which JI is bound or to which it is subject or any material
agreement to which it is a party or by which it is bound (including the old
Indenture). No proceedings are pending against JI or, to JI's knowledge,
without independent investigation, threatened against JI before any court,
arbitrator or administrative or governmental body which, in the aggregate,
would have a material adverse effect on Holder's rights and remedies hereunder.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF HOLDER. Holder hereby
represents and warrants to JI, as of the date hereof, as follows:
(a) Holder is, and at all times prior to the Closing will be, the sole
beneficial owner and Holder's nominee is, and at all times prior to the Closing
will be, the sole legal and record owner, of the Holder's Interest free and
clear of all liens.
(b) Holder is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with all requisite power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated herein.
(c) The execution, delivery and performance of this Agreement and all
other instruments and documents to be executed and delivered by Holder in
connection herewith, including its consent to the Proposed Amendments (the
"Consent") contained herein and the Registration Rights Agreement, have been
(or will be) duly authorized by all necessary proceedings.
(d) No authorizations, consents or approvals from, or notifications
to, or filing with, any court or any governmental agency having jurisdiction
over Holder or any other person or entity are or will be necessary for the
valid execution, delivery or performance by Holder of this Agreement or the
agreements contemplated hereby.
(e) This Agreement, the Consent and the Registration Rights Agreement
constitutes the legal, valid and binding obligation of Holder except as may be
limited by bankruptcy, reorganization, receivership, insolvency or similar laws
affecting the enforcement of creditors' rights generally and limitations on the
enforcement of equitable remedies.
-4-
<PAGE>
(f) The execution, delivery and performance of this Agreement, the
Consent and the Registration Rights Agreement and all other instruments and
documents to be executed and delivered by Holder in connection herewith and
therewith and the consummation of the transactions contemplated hereby or
thereby by Holder are not (and will not be) in conflict with or in
contravention or violation of any law (including common law), rule or
regulation by which the Holder is bound or to which it is subject or any
material agreement to which it is a party or by which it is bound. No
proceedings are pending against Holder or, to Holder's knowledge, without
independent investigation, threatened against Holder before any court,
arbitrator or administrative or governmental body which, in the aggregate,
would have a material adverse effect on the Holder's Interest or JI's rights
and remedies hereunder or in respect of the Holder's Interest.
(g) Holder understands that the Series A Debentures have not been
registered under the Act, or any state securities laws, and may not be sold,
transferred or otherwise disposed of by Holder without such registration or an
exemption therefrom (including pursuant to Rule 144A to another qualified
institutional buyer within the meaning of Rule 144A of the Securities Act).
Holder is a "qualified institutional buyer" within the meaning of Rule 144A of
the Act or an institutional accredited investor, as defined in Rule 501(a)(1),
(2), (3) and (7) under the Act, in either case with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series A Debentures.
(h) Holder (i) is not acquiring the Series A Debentures with a view to
any distribution thereof or with any present intention of offering or selling
any of the Series A Debentures in a transaction that would violate the Act or
the securities laws of any State of the United States or any other applicable
jurisdiction, and (ii) has not solicited and, unless and until the Series A
Debentures are registered under the Act, will not solicit any offer to buy or
offer to sell the Series A Debentures by means of any form of general
solicitation or general advertising (as such terms are defined in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of the Act.
(i) Holder acknowledges that JI has material, non-public information
regarding the condition (financial and otherwise), results of operations,
businesses, properties, plans (including, without limitation, proposed
acquisitions, divestitures, financings, refinancings (including with regard to
the Exchange), and recapitalizations), and prospects of JI (collectively,
"Information") and that such Information might be material to Holder's decision
to participate in the Exchange of the Old Debentures for the Series A
Debentures, consent to the Proposed Amendments, become party to this Agreement
or be otherwise materially adverse to the Holder's interests. Holder
acknowledges that Holder has been offered the Information as well as the
opportunity to discuss the Company and its affairs and the Exchange with the
Company and its officers, representatives and agents, and that Holder has
declined such offer and discussions. Accordingly, Holder acknowledges and
agrees that JI shall have no obligation to disclose to Holder any of such
Information.
-5-
<PAGE>
(j) Holder acknowledges that: (1) it has received and reviewed this
Agreement, the Registration Rights Agreement, the Old Indenture, the Proposed
Amendments and the New Indenture attached hereto; (2) the Company's Report or
10K for the year ended December 31, 1996, and (3) has received or is able to
access the Incorporated Documents; and (4) Holder has been afforded the
opportunity to make appropriate inquiries of JI in connection with the
transactions contemplated by this Agreement.
(k) Holder has consulted its own legal, financial and tax counsel as
it deems appropriate in order to make an informed decision regarding its
exchange of the Old Debentures for the Series A Debentures, the issuance of
Series A Debentures in connection with the Consent and the transactions
contemplated hereby, including the tax consequences of the exchanges and an
investment in the Series A Debentures and its "original issue discounts" in
respect of the Old Debentures and the New Debentures.
(l) Holder is a sophisticated seller and investor with respect to the
Holder's Interest and has adequate information concerning the business and
financial condition of JI to make an informed decision regarding the exchange
of the Holder's Interest for the New Debentures pursuant to this Agreement and
has independently and without reliance upon Holder and based on such
information as Holder has deemed appropriate, made its own analysis and
decision to enter into this Agreement, except that Holder has relied upon the
representations and warranties of the Company contained in this Agreement.
(m) Holder represents that it has adequate information concerning the
business and financial condition of JI to make an informed decision regarding
the purchase of the Series A Debentures and has independently and without
reliance upon JI or Jefferies & Company, Inc. made its own analysis and
decision to sell the Old Debentures in exchange for the Series A Debentures.
Holder hereby waives and releases, to the fullest extent permitted by law, any
and all claims and causes of action it has or may have against JI and Jefferies
and their respective affiliates, controlling persons, officers, directors,
employees, representatives and agents, based upon, relating to or arising out
of the nondisclosure of any Information.
(n) Holder has not acquired the Series A Debentures on behalf, or at
the request, of JI or any of its affiliates. Holder has not engaged or employed
any broker or finder in connection with the transactions referred to herein.
Holder acknowledges and confirms that the sale of the Old Debentures in
exchange for the Series A Debentures by Holder was privately negotiated in an
independent transaction and not publicly solicited by or on behalf of JI or any
of its affiliates.
(o) Holder acknowledges that it is aware of the so-called insider
trading rules, regulations and law which prohibit sales and purchases of
securities while in possession of material non-public information and the
disclosure of such information to others, and that this Agreement and the
transactions contemplated hereby may constitute such information.
(p) Holder hereby consents, as of April 2, 1997, to the Proposed
Amendments to the Old Indenture and agrees to cause its nominee to execute and
deliver its consent to the Proposed
-6-
<PAGE>
Amendments in the form attached hereto as Exhibit D while still holder of the
Old Debentures and prior to the Exchange.
5. COSTS AND EXPENSES. JI and Holder shall each be responsible for
their own costs and expenses in connection with the preparation, negotiation
and execution of this Agreement. Jefferies has acted as agent for JI in
connection with the transactions contemplated hereby and is being paid fees by
JI.
6. DEFINITIONS.
"General Conditions" means the satisfaction of the following:
(i) there shall have been instituted or threatened or be pending
any action or proceeding before or by any court or governmental,
regulatory or administrative agency or instrumentality, or by any
other person, in connection with the Exchange Offer or the Consent
Solicitation that is, or is reasonably likely to be, in the sole
judgment of JI, materially adverse to the business, operations,
properties, condition (financial or otherwise), assets, liabilities or
prospects of JI;
(ii) there shall have occurred any material adverse development,
in the sole judgment of JI, with respect to any action or proceeding
concerning JI existing on the date hereof;
(iii) an order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been proposed, enacted,
entered, issued, promulgated, enforced or deemed applicable by any
court or governmental, regulatory or administrative agency or
instrumentality that, in the sole judgment of JI, would or might
prohibit, prevent, restrict or delay consummation of either of the
Exchange or the Consent Solicitation or that is, or is reasonably
likely to be, materially adverse to the business, operations,
properties, condition (financial or otherwise), assets, liabilities or
prospects of JI;
(iv) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of JI that, in the sole
judgment of JI, would or might prohibit, prevent, restrict or delay
consummation of the Exchange or the Consent Solicitation or that will,
or is reasonably likely to, materially impair the contemplated
benefits to JI of the Exchange and the Consent Solicitation; or
(v) the trustee under the New Indenture or the Holders shall have
objected in any respect to, or taken any action that could, in the
sole judgment of JI, adversely affect the consummation of, the
Exchange or the Consent Solicitation or JI's ability to cause the
Proposed Amendments to be effected, or shall have taken any action
that challenges the validity or effectiveness of the procedures used
by JI in soliciting the consents to the Proposed Amendments or in the
making of the Exchange Offer or the Consent Solicitation
-7-
<PAGE>
or the acceptance of, or payment for, any of the Old Debentures or any
of the consents by JI.
"Incorporated Documents" means the following documents filed by the
Company with the Commission pursuant to the Securities Exchange Act of 1934
("Exchange Act") and the Act:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996; and
(iii) Registration Statement on Form S-2 dated July 14, 1993, and
Prospectus, dated July 16, 1993 relating to the Old Debentures.
"Exchange Condition" means their being validly exchanged not less than
$67,868,395 in aggregate principal amount of the outstanding Old Debentures on
or prior to the Closing.
"Supplemental Indenture Condition" means execution and delivery of the
Supplemental Indenture as of April 2, 1997, providing for the Proposed
Amendments following receipt of consents to the Proposed Amendments delivered
by the execution of this Agreement by Holders of not less than $67,868,395 in
aggregate principal amount of the Old Debentures.
7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits hereto, sets forth the entire agreement between Holder and JI relating
to the transactions contemplated hereby, supersedes all prior communications
and understandings of any nature and may not be supplemented, altered or waived
other than in a writing signed by the parties.
8. NOTICES. Each notice or other communication hereunder shall be in
writing, shall be sent by mail, postage prepaid, messenger, telecopy or
overnight courier, shall be deemed given when delivered to the designated
address or telecopy set forth in Annex I, and in the case of delivery by mail,
five (5) days after deposit in the U.S. Mail (or such other address as Holders
or JI may designate from time to time to the other party hereto).
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties contained herein shall
survive the consummation of the transactions contemplated in this Agreement.
10. FURTHER ASSURANCES. Each party shall execute and deliver all
further documents or instruments reasonably requested by the other party in
order to effect the intent of this Agreement and obtain the full benefit of
this Agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on, and
inure to the benefit of, the parties hereto and their successors and assigns;
provided, that this Agreement shall not be assigned by either party hereto
without the prior written consent of the other.
-8-
<PAGE>
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO CONFLICTS OF LAW PRINCIPLES.
13. SEVERABILITY. If any provision of this Agreement shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
14. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which when so executed shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
15. SECTION HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any purpose.
16. LIMITATIONS ON LIABILITY. The parties hereto acknowledge and agree
that in no event shall any of the partners, officers, directors, shareholders,
members, affiliates, employees, agents or investment managers (collectively,
"Representatives") of any party hereto have any obligation or liability to the
other or any other person for any action taken or omitted by or on behalf of
any party hereto or in connection herewith (such obligation and liability begin
the sole responsibility of such party hereunder). The parties hereto further
acknowledge and agree that all obligations and liabilities of the parties to
this Agreement or in connection herewith are enforceable solely against such
party and its assets and not against the assets of any other party or any
Representatives of any party.
17. NO RELATIONSHIP. Nothing contained herein shall establish any
fiduciary, partnership, joint venture or similar relationship between the
parties hereto.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
JORDAN INDUSTRIES, INC.
By:
-------------------------------
Name:
Title:
HOLDER:
----------------------------------
[print name]
By:
-------------------------------
Name:
Title:
<PAGE>
Exhibit 4.1
================================================================================
---------------------------------------
JORDAN INDUSTRIES, INC.
AND
FIRST TRUST NATIONAL ASSOCIATION
AS TRUSTEE
$120,000,000
SERIES A AND SERIES B
10 3/8% SENIOR NOTES DUE 2007
---------------------------------------
-------------------------
INDENTURE
Dated as of July 25, 1997
-------------------------
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
- ----------- -----------------
310(a)(1) .......................................................... 7.10
(a)(2) .......................................................... 7.10
(a)(3) .......................................................... N.A.**
(a)(4) .......................................................... N.A.
(a)(5) .......................................................... 7.10
(b) ............................................................. 7.10
(c) ............................................................. N.A.
311(a) ............................................................. 7.11
(b) ............................................................. 7.11
(c) ............................................................. N.A.
312(a) ............................................................. 2.05
(b) ............................................................. 10.03
(c) ............................................................. 10.03
313(a) ............................................................. 7.06
(b)(1) .......................................................... N.A.
(b)(2) .......................................................... 7.06
(c) ............................................................. 7.06; 10.02
(d) ............................................................. 7.06
314(a) ............................................................. 4.02; 10.02
(b) ............................................................. N.A.
(c)(1) .......................................................... 10.04
(c)(2) .......................................................... 10.04
(c)(3) .......................................................... N.A.
(d) ............................................................. N.A.
(e) ............................................................. 10.05
(f) ............................................................. N.A.
315(a) ............................................................. 7.01
(b) ............................................................. 7.05; 10.02
(c) ............................................................. 7.01
(d) ............................................................. 7.01
(e) ............................................................. 6.11
316(a)(last sentence) .............................................. 2.09
(a)(1)(A) ....................................................... 6.05
(a)(1)(B) ....................................................... 6.04
(a)(2) .......................................................... N.A.
(b) ............................................................. 9.02
317(a)(1) .......................................................... 6.08
(a)(2) .......................................................... 6.09
(b) ............................................................. 2.04
318(a) ............................................................. 10.01
- ----------
* This Cross-Reference Table is not part of the Indenture.
** Not applicable.
2
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions ................................................ 1
Section 1.02. Other Definitions .......................................... 20
Section 1.03. Incorporation by Reference of Trust Indenture Act .......... 20
Section 1.04. Rules of Construction ...................................... 21
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating ............................................ 21
Section 2.02. Execution and Authentication ............................... 22
Section 2.03. Registrar and Paying Agent ................................. 22
Section 2.04. Paying Agent to Hold Money in Trust ........................ 23
Section 2.05. Holder Lists ............................................... 23
Section 2.06. Transfer and Exchange ...................................... 23
Section 2.07. Replacement Securities ..................................... 27
Section 2.08. Outstanding Securities ..................................... 28
Section 2.09. Treasury Securities ........................................ 28
Section 2.10. Temporary Securities ....................................... 28
Section 2.11. Cancellation ............................................... 29
Section 2.12. Defaulted Interest ......................................... 29
Section 2.13. Record Date ................................................ 29
Section 2.14. CUSIP Number ............................................... 29
Section 2.15. Legends .................................................... 30
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee ......................................... 30
Section 3.02. Selection of Securities to Be Redeemed or Purchased ........ 31
Section 3.03. Notice of Redemption ....................................... 31
Section 3.04. Effect of Notice of Redemption ............................. 33
Section 3.05. Deposit of Redemption Price ................................ 33
Section 3.06. Securities Redeemed in Part ................................ 33
Section 3.07. Optional Redemption Provisions ............................. 33
Section 3.08. Mandatory Purchase Provision ............................... 34
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities ........................................ 36
Section 4.02. SEC Reports .................................................. 36
i
<PAGE>
Page
----
Section 4.03. Compliance Certificate ..................................... 37
Section 4.04. Stay, Extension and Usury Laws ............................. 38
Section 4.05. Limitation on Restricted Payments .......................... 38
Section 4.06. Corporate Existence ........................................ 42
Section 4.07. Limitation on Incurrence of Indebtedness ................... 43
Section 4.08. Limitation on Transactions with Affiliates ................. 44
Section 4.09. Limitation on Liens ........................................ 44
Section 4.10. Compliance with Laws, Taxes ................................ 45
Section 4.11. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries ........................ 45
Section 4.12. Maintenance of Office or Agencies .......................... 47
Section 4.13. Change of Control .......................................... 47
Section 4.14. Limitation on Asset Sales .................................. 47
Section 4.15. Limitation on Guarantees of Company Indebtedness
by Restricted Subsidiaries ................................. 48
ARTICLE 5
SUCCESSORS
Section 5.01. Merger or Consolidation .................................... 49
Section 5.02. Successor Corporation Substituted .......................... 50
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default .......................................... 51
Section 6.02. Acceleration ............................................... 53
Section 6.03. Other Remedies ............................................. 53
Section 6.04. Waiver of Past Defaults .................................... 54
Section 6.05. Control by Majority ........................................ 54
Section 6.06. Limitation on Suits ........................................ 54
Section 6.07. Rights of Holders to Receive Payment ....................... 55
Section 6.08. Collection Suit by Trustee ................................. 55
Section 6.09. Trustee May File Proofs of Claim ........................... 55
Section 6.10. Priorities ................................................. 56
Section 6.11. Undertaking for Costs ...................................... 56
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee .......................................... 56
Section 7.02. Rights of Trustee .......................................... 57
Section 7.03. Individual Rights of Trustee ............................... 58
Section 7.04. Trustee's Disclaimer ....................................... 58
Section 7.05. Notice to Holders of Defaults and Events of Default ........ 59
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Page
Section 7.06. Reports by Trustee to Holders .............................. 59
Section 7.07. Compensation and Indemnity ................................. 59
Section 7.08. Replacement of Trustee ..................................... 60
Section 7.09. Successor Trustee by Merger, etc. .......................... 61
Section 7.10. Eligibility; Disqualification .............................. 61
Section 7.11. Preferential Collection of Claims Against Company .......... 61
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Discharge of Liability on Securities; Defeasance ........... 62
Section 8.02. Conditions to Defeasance ................................... 62
Section 8.03. Application of Trust Money ................................. 64
Section 8.04. Repayment to Company ....................................... 64
Section 8.05. Indemnity for Government Obligations ....................... 64
Section 8.06. Reinstatement .............................................. 64
ARTICLE 9
AMENDMENTS
Section 9.01. Amendments and Supplements Permitted Without Consent of
Holders .................................................. 65
Section 9.02. Amendments and Supplements Requiring Consent of Holders .... 65
Section 9.03. Compliance with TIA ........................................ 67
Section 9.04. Revocation and Effect of Consents .......................... 67
Section 9.05. Notation on or Exchange of Securities ...................... 67
Section 9.06. Trustee Protected .......................................... 68
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trustee Indenture Act Controls ............................. 68
Section 10.02. Notices .................................................... 68
Section 10.03. Communication by Holders with Other Holders ................ 69
Section 10.04. Certificate and Opinion as to Conditions Precedent ......... 69
Section 10.05. Statements Required in Certificate or Opinion .............. 69
Section 10.06. Rules by Trustee and Agents ................................ 70
Section 10.07. Legal Holidays ............................................. 70
Section 10.08. No Recourse Against Others ................................. 70
Section 10.09. Counterparts ............................................... 70
Section 10.10. Variable Provisions ........................................ 70
Section 10.11. Governing Law .............................................. 71
Section 10.12. No Adverse Interpretation of Other Agreements .............. 71
Section 10.13. Successors ................................................. 71
Section 10.14. Severability ............................................... 71
Section 10.15. Table of Contents, Headings, etc ........................... 71
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INDENTURE, dated as of July 25, 1997, between Jordan Industries, Inc., an
Illinois corporation (the "Company"), and First Trust National Association, as
trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 10 3/8% Series A
Senior Notes due 2007 (the "Series A Notes") and the Company's 10 3/8% Series B
Senior Notes due 2007 (the "Series B Notes" and, together with the Series A
Notes, the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Affiliate" means any of the following:
(i) any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company,
(ii) any spouse, immediate family member or other relative who has
the same principal residence as any Person described in clause
(i) above,
(iii) any trust in which any such Persons described in clause (i) or
(ii) above has a beneficial interest, and
(iv) any corporation or other organization of which any such
Persons described above collectively own 50% or more of the
equity of such entity.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property (other than (i) the
sale or disposition of any Restricted Investment, (ii) the sale or lease of
inventory, equipment, receivables or other assets in the ordinary course of
business, (iii) Receivables Financings, (iv) any sale or transfer of properties
or assets by the Company or a Restricted Subsidiary to the Company or any other
Restricted Subsidiary, (v) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company as permitted pursuant to
Section 5.01 or (vi) Restricted Payments permitted by Section 4.05).
"Bankruptcy Law" means title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
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"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligations" means any obligation that is required to be
classified and accounted for as a capitalized lease for financial purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
Preferred Stock.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit,
time deposits, overnight bank deposits, bankers acceptances and repurchase
agreements of any commercial bank that has capital and surplus in excess of
$100,000,000 having maturities of one year or less from the date of acquisition,
(c) commercial paper of an issuer rated at least A-2 by Standard & Poor's
Corporation or P-2 by Moody's Investor Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments, and (d) money market accounts
or funds with or issued by Qualified Issuers.
"Cash Flow" means, for any given period and Person, the sum of, without
duplication, Consolidated Net Income, plus
(i) the portion of Net Income attributable to the minority
interests in its Subsidiaries, to the extent not included in
calculating Consolidated Net Income, plus
(ii) provision for taxes based on income or profits to the extent
such income or profits were included in computing Consolidated
Net Income, plus
(iii) Consolidated Interest Expense, to the extent deducted in
computing Consolidated Net Income, plus
(iv) the amortization of all intangible assets, to the extent such
amortization was deducted in computing Consolidated Net Income
(including, but not limited to, inventory write-ups, goodwill,
debt and financing costs and Incentive Arrangements), plus
(v) noncapitalized transaction costs incurred in connection with
financings, acquisitions or dispositions (including, but not
limited to, financing and refinancing fees, to the extent
deducted in computing Consolidated Net Income), plus
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(vi) all depreciation and all other noncash charges (including,
without limitation, those charges relating to purchase
accounting adjustments to the extent deducted in computing
Consolidated Net Income), plus
(vii) interest income, to the extent such income was not included in
computing Consolidated Net Income, plus
(viii) all dividend payments on Preferred Stock (whether or not paid
in cash), to the extent deducted in computing Consolidated Net
Income, plus
(ix) any extraordinary or nonrecurring charge or expense arising
out of the implementation of SFAS 106 or SFAS 109 to the
extent deducted in computing Consolidated Net Income,
provided, however, that if any such calculation includes any period during which
an acquisition or sale of a Person or the incurrence or repayment of
Indebtedness occurred, then such calculation for such period shall be made on a
Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and Person, the
ratio of:
(i) Cash Flow, divided by
(ii) the sum of Consolidated Interest Expense and the amount of all
dividend payments on any series of Preferred Stock of such
Person (except dividends paid or payable in additional shares
of Capital Stock (other than Disqualified Stock)), in each
case, without duplication;
provided, however, that if any such calculation includes any period during which
an acquisition or sale of a Person or the incurrence or repayment of
Indebtedness occurred, then such calculation for such period shall be made on a
Pro Forma Basis.
"Change of Control" means the occurrence of any of the following: (i) the
Jordan Stockholders shall fail to be the beneficial owners, directly or
indirectly, of at least 22% of the outstanding shares of common stock of the
Company on a fully-diluted basis (provided that the Issuance of any shares of
the Company's common stock pursuant to a primary public offering shall not be
considered to have diluted such percentage ownership); or (ii) the Company is
merged or consolidated with another corporation, or all or substantially all of
the assets of the Company are sold, leased or conveyed to another Person, and
the Jordan Stockholders are not the beneficial owners, directly or indirectly,
immediately following such transaction, of at least 22% of the Equity Interests
(which are entitled to vote in the election of directors or other governing
body) of the corporation surviving any such consolidation or merger, or the
Person to which such sale, lease or conveyance shall have been made; or (iii)
the Company is liquidated or dissolved.
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"Commission" means the Securities and Exchange Commission.
"Company" means Jordan Industries, Inc. until a successor replaces it in
accordance with Article 5 and thereafter means the successor, and shall include
any and all other obligors on the Securities.
"Company Order" means a written request or order signed in the name of the
Company by its Chairman of the Board, President or Senior Vice President, and by
its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary
and delivered to the Trustee.
"Consolidated Interest Expense" means, for any given period and Person,
the aggregate of the interest expense in respect of all Indebtedness of such
Person and its Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP (including amortization of original issue discount on
any such Indebtedness, all noncash interest payments, the interest portion of
any deferred payment obligation and the interest component of Capital Lease
Obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included in interest expense); provided,
however, that for the purpose of the Cash Flow Coverage Ratio (with respect to
Sections 4.07 and 5.01), Consolidated Interest Expense shall be calculated on a
Pro Forma Basis; provided further that any premiums, fees and expenses
(including the amortization thereof) payable in connection with the Plan and the
Offering and the applications of the net proceeds therefrom or any other
refinancing of Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Subsidiaries for such period,
on a consolidated basis, determined in accordance with GAAP; provided, however,
that
(i) the Net Income of any Person acquired in a pooling-of-interests
transaction for any period prior to the date of such acquisition
shall be excluded, and
(ii) Consolidated Net Income of any Person will not include, without
duplication, any deduction for:
(A) any increased amortization or depreciation resulting from the
write-up of assets pursuant to Accounting Principles Board
Opinion Nos. 16 and 17, as amended or supplemented from time
to time,
(B) the amortization of all intangible assets (including
amortization attributable to inventory write-ups, goodwill,
debt and financing costs, and Incentive Arrangements),
(C) any noncapitalized transaction costs incurred in connection
with financings, acquisitions or divestitures (including, but
not limited to, financing and refinancing fees),
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(D) any extraordinary or nonrecurring charges relating to any
premium or penalty paid, write-off of deferred financing costs
or other financial recapitalization charges in connection with
redeeming or retiring any Indebtedness prior to its stated
maturity, and
(E) any nonrecurring charge arising out of the restructuring or
consolidation of the operations of any Person(s) or business
either alone or together with the Company or any Restricted
Subsidiary, incurred within 18 months following the
acquisition of such Person(s) or business by the Company or
any Restricted Subsidiary;
provided, however, that for purposes of determining the Cash Flow Coverage
Ratio, Consolidated Net Income shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any Person means, as of any
date, the consolidated equity of the common stockholders of such Person
(excluding the accumulated foreign currency translation adjustment), all
determined on a consolidated basis in accordance with GAAP, but without any
reduction in respect of the payment of dividends on any series of such Person's
Preferred Stock if such dividends are paid in additional shares of Capital Stock
(other than Disqualified Stock); provided, however, that Consolidated Net Worth
shall also include, without duplication:
(i) the amortization of all write-ups of inventory,
(ii) the amortization of all intangible assets (including amortization of
goodwill, debt and financing costs, and Incentive Arrangements),
(iii) any noncapitalized transaction costs incurred in connection with
financings, acquisitions or divestitures (including, but not limited
to, financing and refinancing fees),
(iv) any increased amortization or depreciation resulting from the
write-up of assets pursuant to Accounting Principles Board Opinion
Nos. 16 and 17, as amended and supplemented from time to time,
(v) any extraordinary or nonrecurring charges or expenses relating to
any premium or penalty paid, write-off of deferred financing costs
or other financial recapitalization charges incurred in connection
with redeeming or retiring any Indebtedness prior to its stated
maturity,
(vi) any nonrecurring cash charge arising out of the restructuring or
consolidation of the operations of any Person(s) or business either
alone or together with the Company or any Restricted Subsidiary,
incurred within 18 months following the
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acquisition of such Person(s) or business by the Company or any
Restricted Subsidiary, and
(vii) any extraordinary or nonrecurring charge arising out of the
implementation of SFAS 106 or SFAS 109;
provided, however, that for purposes of determining Consolidated Net Worth (with
respect to Section 5.01), Consolidated Net Worth shall be calculated on a Pro
Forma Basis.
"Corporate Trust Office" shall be at the address of the Trustee specified
in Section 10.02 or such other address as the Trustee may give notice to the
Company.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Definitive Securities" means Securities that are in the form of Exhibit A
attached hereto (but without including the text referred to in footnotes 1 and 2
thereto).
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and thereafter "Depositary" shall mean or include such successor.
"Discount Debentures" means (i) the 11 3/4 % Senior Subordinated Discount
Debentures due 2009 of the Company and (ii) the 11 3/4 % Senior Subordinated
Discount Debentures due 2005 of the Company, if any, collectively.
"Disqualified Stock" means any Capital Stock that by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part on, or prior to, the
maturity date of the Securities.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation); provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Exchange Offer" means the offer by the Company to Holders to exchange
Series A Notes for Series B Notes pursuant to the Registration Rights Agreement.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the Issue Date. All financial and accounting determinations and
calculations under this Indenture shall be made in accordance with GAAP.
"Global Security" means a Security that contains the paragraph referred to
in footnote 1 and the additional schedule referred to in footnote 2 in the form
of the Security attached hereto as Exhibit A.
"Hedging Obligations" means, with respect to any Person, the Obligations
of such Persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange contracts,
currency swap agreements or similar agreements, and (iii) other agreements or
arrangements designed to protect such Person against fluctuations in, or
otherwise to establish financial hedges in respect of, exchange rates, currency
rates or interest rates.
"Holder" means a Person in whose name a Security is registered.
"Incentive Arrangements" means any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, noncompetition agreements,
subscription and stockholders agreements and other incentive and bonus plans and
similar arrangements made in connection with acquisitions of Persons or
businesses by the Company or the Restricted Subsidiaries or the retention of
executives, officers or employees by the Company or the Restricted Subsidiaries.
"Indebtedness" means, with respect to any Person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the deferred and unpaid balance
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
and any Hedging Obligations, if and to the extent such indebtedness (other than
a Hedging Obligation) would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP, and also
includes, to the extent not otherwise included, the guarantee of items that
would be included within this definition; provided, however, that "Indebtedness"
will not include any Incentive Arrangements or obligations or payments
thereunder.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Purchasers" means Jefferies & Company, Inc. and Donaldson, Lufkin
& Jenrette Securities Corporation.
7
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"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
"Issue" means to create, issue, assume, guarantee, incur or otherwise
become directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
For this definition, the terms "Issuing," "Issuer," "Issuance" and "Issued"
have meanings correlative to the foregoing.
"Issue Date" means the date on which Securities are first Issued pursuant
to the Indenture.
"JI Property Services Agreement" means the JI Property Services Agreement,
between the Company and JI Properties, Inc., as in effect on the Issue Date.
"Jordan Stockholders" means John W. Jordan, II, and/or his heirs,
executors and administrators, and/or The John W. Jordan, II Revocable Trust, The
Jordan Family Trust and/or any other trust established by John W. Jordan, II
whose beneficiaries are John W. Jordan, II and/or his lineal descendants or
other relatives.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York are not required to be open.
"Liquidated Damages" has the meaning set out in the Registration Rights
Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, any gain or
loss, together with any related provision for taxes, realized in connection with
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable Issued in connection with such Asset Sale, other
than the portion of such deferred payment
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constituting interest, and including any amounts received as disbursements or
withdrawals from any escrow or similar account established in connection with
any such Asset Sale, but, in either such case, only as and when so received)
received by the Company or any of its Restricted Subsidiaries in respect of such
Asset Sale, net of:
(i) the cash expenses of such Asset Sale (including, without limitation,
the payment of principal, premium, if any, and interest on
Indebtedness required to be paid as a result of such Asset Sale
(other than the Securities) and legal, accounting, management,
advisory and investment banking fees and sales commissions),
(ii) taxes paid or payable as a result thereof,
(iii) any portion of cash proceeds that the Company determines in good
faith should be reserved for post-closing adjustments, it being
understood and agreed that on the day that all such post-closing
adjustments have been determined, the amount (if any) by which the
reserved amount in respect of such Asset Sale exceeds the actual
post-closing adjustments payable by the Company or any of its
Restricted Subsidiaries shall constitute Net Proceeds on such date,
(iv) any relocation expenses and pension, severance and shutdown costs
incurred as a result thereof, and
(v) any deduction of appropriate amounts to be provided by the Company
or any of its Restricted Subsidiaries as a reserve in accordance
with GAAP against any liabilities associated with the asset disposed
of in such transaction and retained by the Company or such
Restricted Subsidiary after such sale or other disposition thereof,
including, without limitation, pension and other postemployment
benefit liabilities and liabilities related to environmental matters
or against any indemnification obligations associated with such
transaction.
"No Credit Agreement" means the credit agreement, dated as of the date
hereof and entered into by the Company and/or certain of its Restricted
Subsidiaries and certain Subsidiaries and the lenders party thereto in their
capacities as lenders thereunder and BankBoston, N.A., as agent, together with
all loan documents and instruments thereunder (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, without limitation, increasing the amount of available borrowings
thereunder, and all Obligations with respect thereto, in each case, to the
extent permitted by Section 4.07, 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.
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"New Subsidiary Advisory Agreements" means the New Subsidiary Advisory
Agreements, between the Company and each of its Restricted and Non-Restricted
Subsidiaries, as in effect on the Issue Date.
"New Subsidiary Consulting Agreements" means the New Subsidiary Consulting
Agreements, between the Company and each of its Restricted and Non-Restricted
Subsidiaries, as in effect on the Issue Date.
"New TJC Management Consulting Agreement" means the New TJC Management
Consulting Agreement, between the Company and TJC Management Corporation, as in
effect on the Issue Date.
"Nonrestricted Subsidiary" means Motors and Gears Holdings, Inc. and its
Subsidiaries, Jordan Telecommunication Products, Inc. and its Subsidiaries, J.I.
Properties, Inc. and its Subsidiaries, and any other Subsidiary of the Company
other than a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premium, penalties, fees, indemnities, expenses (including legal fees
and expenses), reimbursement obligations and other liabilities payable to the
holder of such Indebtedness under the documentation governing such Indebtedness,
and any other claims of such holder arising in respect of such Indebtedness.
"Offering" means the offering and sale of the Securities as contemplated
by the Offering Circular.
"Offering Circular" means the Offering Circular, dated July 21, 1997,
relating to the Company's offering and placement of the Securities.
"Officer" means the President, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Old Senior Notes" means the Company's 10 3/8% Senior Notes due 2003.
"Opinion of Counsel" means a written opinion in form and substance
satisfactory to, and from legal counsel who is acceptable to, the Trustee (such
counsel may be an employee of or counsel to the Company or the Trustee).
"Other Permitted Indebtedness" means:
(i) Indebtedness of the Company and its Restricted Subsidiaries existing
as of the Issue Date and all related Obligations as in effect on
such date (including Old Senior Notes, if any, the Discount
Debentures and the Securities);
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(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers' acceptances and letters of credit (including,
without limitation, letters of credit in respect of workers'
compensation claims) Issued in the ordinary course of business, or
other Indebtedness in respect of reimbursement-type obligations
regarding workers' compensation claims;
(iii) Refinancing Indebtedness, provided that:
(A) the principal amount of such Refinancing Indebtedness shall
not exceed the outstanding principal amount of Indebtedness
(including unused commitments) so extended, refinanced,
renewed, replaced, substituted or refunded plus any amounts
incurred to pay premiums, fees and expenses in connection
therewith,
(B) the Refinancing Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded,
(C) in the case of Refinancing Indebtedness for subordinated
Indebtedness, such Refinancing Indebtedness shall be
subordinated to the Securities at least to the same extent as
the Indebtedness being extended, refinanced, renewed,
replaced, substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted
Subsidiaries of Indebtedness of the Company not Issued in compliance
with Section 4.15);
(v) Indebtedness of the Company and its Restricted Subsidiaries Issued
in connection with making permitted Restricted Payments under clause
(iv) or (v) of Section 4.05(b) and guarantees by the Company of
Capital Lease Obligations of the Company's Nonrestricted
Subsidiaries up to the aggregate amount permitted by clause (xv) of
Section 4.05(b);
(vi) Indebtedness of any Nonrestricted Subsidiary; provided that such
Indebtedness is nonrecourse to the Company and its Restricted
Subsidiaries and the Company and its Restricted Subsidiaries have no
Obligations with respect to such Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries under
Hedging Obligations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries 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, which will not
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be, and will not be deemed to be, inadvertent) drawn against
insufficient funds in the ordinary course of business;
(ix) Indebtedness of any Person at the time it is acquired as a
Restricted Subsidiary; provided that such Indebtedness was not
Issued by such Person in connection with or in anticipation of such
acquisition and that such Indebtedness is nonrecourse to the Company
and any other Restricted Subsidiary and the Company and such other
Restricted Subsidiaries have no Obligations with respect to such
Indebtedness;
(x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary if the Indebtedness so guaranteed is permitted
under this Indenture;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the Company
if the Indebtedness so guaranteed is permitted under this Indenture
and the Securities are guaranteed by such Restricted Subsidiary to
the extent required by Section 4.15;
(xii) guarantees by the Company of Indebtedness of any Restricted
Subsidiaries if the Indebtedness so guaranteed is permitted under
this Indenture;
(xiii) Indebtedness of the Company and its Restricted Subsidiaries Issued
in connection with performance, surety, statutory, appeal or similar
bonds in the ordinary course of business; and
(xiv) Indebtedness of the Company and its Restricted Subsidiaries Issued
in connection with agreements providing for indemnification,
purchase price adjustments and similar obligations in connection
with the sale or disposition of any of their business, properties or
assets.
"Permitted Liens" means:
(a) with respect to the Company and the Restricted Subsidiaries,
(1) Liens for taxes, assessments, governmental charges or claims which
are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if a reserve or
other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor;
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by
appropriate proceedings if a reserve
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or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor;
(3) Liens incurred on deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and
other types of social security;
(4) Liens incurred on deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance and return of money bonds
and other obligations of a like nature incurred in the ordinary
course of business (exclusive of obligations for the payment of
borrowed money);
(5) easements, rights-of-way, zoning or other restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries
incurred in the ordinary course of business;
(6) Liens (including extensions, renewals and replacements thereof) upon
property acquired (the "Acquired Property") after the date of
original Issuance of the Securities, provided that
(A) any such Lien is created solely for the purpose of securing
Indebtedness representing, or Issued to finance, refinance or
refund, the cost (including the cost of construction) of the
Acquired Property,
(B) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of the cost of the Acquired Property,
(C) such Lien does not extend to or cover any property other than
the Acquired Property and any improvements on such Acquired
Property, and
(D) the Issuance of the Indebtedness to purchase the Acquired
Property is permitted by Section 4.07;
(7) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with
the importation of goods;
(8) judgment and attachment Liens not giving rise to an Event of
Default;
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(9) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its
Restricted Subsidiaries;
(10) Liens encumbering customary initial deposits and margin deposits,
and other Liens incurred in the ordinary course of business and that
are within the general parameters customary in the industry, in each
case securing Indebtedness under Hedging Obligations;
(11) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the
Company or its Restricted Subsidiaries;
(12) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by the Company or its Restricted
Subsidiaries in the ordinary course of business;
(13) any interest or title of a lessor in property subject to any Capital
Lease Obligation or operating lease;
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(15) Liens existing on the Issue Date and any extensions, renewals or
replacements thereof; and
(16) any Lien granted to the Trustee under this Indenture and any
substantially equivalent Lien granted to any trustee or similar
institution under any indenture for senior Indebtedness permitted by
the terms of this Indenture;
(b) with respect to the Restricted Subsidiaries,
(1) Liens securing Restricted Subsidiaries' reimbursement Obligations
with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and
proceeds thereof;
(2) Liens securing Indebtedness Issued by Restricted Subsidiaries if
such Indebtedness is permitted by (A) Section 4.07(a), (B) Section
4.07(b)(i), (b)(ii), (b)(iii) or (b)(iv), or (C) clause (i), (iii)
(to the extent the Indebtedness subject to such Refinancing
Indebtedness was subject to Liens), (vii), (ix) or (x) of the
definition of Other Permitted Indebtedness;
(3) Liens securing intercompany Indebtedness Issued by any Restricted
Subsidiary to the Company or another Restricted Subsidiary;
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(4) additional Liens at any one time outstanding with respect to assets
of the Restricted Subsidiaries the aggregate fair market value of
which does not exceed $10,000,000 (the fair market value of any such
asset is to be determined on the date such Lien is granted on such
asset); and
(5) Liens securing guarantees by Restricted Subsidiaries of Indebtedness
Issued by the Company if such guarantees are permitted by clause
(xi) (but only in respect of the property, rights and assets of the
Restricted Subsidiaries Issuing such guarantees) of the definition
of Other Permitted Indebtedness; and
(c) with respect to the Company,
(1) Liens securing Indebtedness Issued by the Company under the
New Credit Agreement if such Indebtedness is permitted by
Section 4.07 (including, but not limited to, Indebtedness
Issued by the Company under the New Credit Agreement pursuant
to Section 4.07(b)(i) and/or (iv));
(2) Liens securing Indebtedness of the Company if such
Indebtedness is permitted by clauses (i), (iii) (to the extent
the Indebtedness subject to such Refinancing Indebtedness is
subject to Liens) or (vii) of the definition of Other
Permitted Indebtedness; and
(3) Liens securing guarantees by the Company of Indebtedness
Issued by Restricted Subsidiaries if (x) such Indebtedness is
permitted by Section 4.07 (including, but not limited to,
Indebtedness Issued by Restricted Subsidiaries under the New
Credit Agreement pursuant to Sections 4.07(b)(i) and/or (v))
and (y) such guarantees are permitted by clause (xii) (but
only in respect of Indebtedness Issued by the Restricted
Subsidiaries under the New Credit Agreement pursuant to
Section 4.07) of the definition of Other Permitted
Indebtedness;
provided, however, that, notwithstanding any of the foregoing, the Permitted
Liens referred to in clause (c) of this definition shall not include any Lien on
Capital Stock of Restricted Subsidiaries held by the Company (as distinguished
from Liens on Capital Stock of Restricted Subsidiaries held by other Restricted
Subsidiaries) other than Liens securing (A) Indebtedness of the Company Issued
under the New Credit Agreement pursuant to Section 4.07 and any permitted
Refinancing Indebtedness of such Indebtedness and (B) guarantees by the Company
of Indebtedness Issued by Restricted Subsidiaries under the New Credit Agreement
pursuant to Section 4.07 and any permitted Refinancing Indebtedness of such
Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
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"Plan" means the Company's Recapitalization and Reposition Plan as
described in the Offering Circular and all agreements, instruments and
transactions pursuant thereto.
"Postpetition Interest" means all interest accrued or accruing after the
commencement of any Insolvency or Liquidation Proceeding in accordance with and
at the contract rate (including, without limitation, any rate applicable upon
default) specified in the agreement or instrument creating, evidencing or
governing any Indebtedness which is not subordinated in right of payment to any
other Indebtedness of the Company, whether or not, pursuant to applicable law or
otherwise, the claim for such interest is allowed as a claim in such Insolvency
or Liquidation Proceeding.
"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income, Cash Flow, and Consolidated Interest Expense in connection with the Cash
Flow Coverage Ratio (including, in connection with Section 4.05, the incurrence
of Indebtedness pursuant to Section 4.07(a) and Consolidated Net Worth for
purposes of Section 5.01), giving pro forma effect to (x) any acquisition or
sale of a Person, business or asset, related incurrence, repayment or
refinancing of Indebtedness or other related transactions, including any related
restructuring charges in respect of restructurings, consolidations, compensation
or head-count reductions or other cost savings which would otherwise be
accounted for as an adjustment permitted by Regulation S-X under the Securities
Act or on a pro forma basis under GAAP, or (y) any incurrence, repayment or
refinancing of any Indebtedness and the application of the proceeds therefrom,
in each case, as if such acquisition or sale and related transactions,
restructurings, consolidations, cost savings, reductions, incurrence, repayment
or refinancing were realized on the first day of the relevant period permitted
by Regulation S-X under the Securities Act or on a pro forma basis under GAAP.
Furthermore, in calculating the Cash Flow Coverage Ratio, (1) interest on
outstanding Indebtedness which is determined on a fluctuating basis as of the
determination 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 determination date; (2) if
interest on any Indebtedness actually incurred on the determined 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 determination date will be deemed to have been in
effect during the relevant 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 rate swaps or similar
interest rate protection Hedging Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"Qualified Issuer" means any commercial bank (a) which has capital and
surplus in excess of $100,000,000, and (b) the outstanding long-term debt
securities of which are rated at
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least A-2 by Standard & Poor's Corporation or P-2 by Moody's Investor Service,
Inc., or carry an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of investments.
"Qualified Stock" means, with respect to any Person, Capital Stock of such
Person other than Disqualified Stock.
"QIB" shall mean "qualified institutional buyer" as defined in Rule 144A.
"Receivables" means, with respect to any person or entity, all of the
following property and interests in property of such person or entity, whether
now existing or existing in the future or hereafter acquired or arising: (i)
accounts, (ii) accounts receivable (including, without limitation, all rights to
payment created by or arising from sales of goods, leases of goods or leased or
the rendition of services rendered no matter how evidenced, whether or not
earned by performance), (iii) all unpaid seller's or lessor's rights (including,
without limitation, recession, replevin, reclamation and stoppage in transit,
relating to any of the foregoing or arising therefrom), (iv) all rights to any
goods or merchandise represented by any of the foregoing (including, without
limitation, returned or repossessed goods), (v) all reserves and credit balances
with respect to any such accounts receivable or account debtors, (vi) all
letters of credit, security or guarantees of any of the foregoing, (vii) all
insurance policies or reports relating to any of the foregoing, (viii) all
collection or deposit accounts relating to any of the foregoing, (ix) all
proceeds of any of the foregoing, and (x) all books and records relating to any
of the foregoing.
"Receivables Financing" means (i) the sale or other disposition of
Receivables arising in the ordinary course of business or (ii) the sale or other
disposition of Receivables arising in the ordinary course of business to a
Receivables Subsidiary followed by a financing transaction in connection with
such sale or disposition of such Receivables.
"Receivables Subsidiary" means a Subsidiary of the Company that is
exclusively engaged in Receivables Financings and activities reasonably related
thereto.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries Issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund any
Indebtedness permitted under this Indenture or any Indebtedness Issued to so
extend, refinance, renew, replace, substitute or refund such Indebtedness, (ii)
any refinancings of Indebtedness Issued under the New Credit Agreement, and
(iii) any additional Indebtedness Issued to pay premiums and fees in connection
with clauses (i) and (ii).
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, by and between the Company, and the Initial
Purchasers as such agreement may be amended, modified or supplemented from time
to time.
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"Restricted Investment" means any capital contribution to, or other debt
or equity investment in (other than certain investments in marketable securities
and other negotiable instruments permitted by this Indenture), any Nonrestricted
Subsidiary or any Person other than a Restricted Subsidiary or the Company,
provided that Restricted Investments will not include any Incentive
Arrangements. The amount of any Restricted Investment shall be the amount of
cash and the fair market value at the time of transfer of all other property (as
determined by the Board of Directors in good faith) included in the original
Restricted Investment, plus all additions thereto, without any adjustments for
increases or decreases in value or write-ups, write-downs or write-offs with
respect to such Restricted Investment. Notwithstanding the foregoing, the
assignment by the Company and the assumption by a Nonrestricted Subsidiary of
operating leases of the Company shall not be deemed a Restricted Investment so
long as the Obligations of the Company thereunder are not increased thereby.
"Restricted Securities" means Securities that bear or are required to bear
the legends set forth in Exhibit A hereto.
"Restricted Subsidiary" means:
(i) any Subsidiary of the Company existing on the Issue Date, other than
a Nonrestricted Subsidiary, and
(ii) any other Subsidiary of the Company formed, acquired or existing
after the Issue Date that is designated as a "Restricted Subsidiary"
by the Company pursuant to a resolution approved by a majority of
the Board of Directors,
provided that any Restricted Subsidiary that is organized under the laws of a
foreign jurisdiction and whose stock or ownership interests are sold or
transferred to a Nonrestricted Subsidiary may, by resolution approved by a
majority of the Board of Directors, be thereafter designated and considered as a
Nonrestricted Subsidiary.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or head-count reduction, or any other cost savings, of any Persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as permitted by GAAP or Regulation S-X under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.
"Securities" has the meaning set forth in the preamble to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
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"Significant Subsidiary" means (i) any Restricted Subsidiary of the
Company that would be a "significant subsidiary" as defined in clause (2) of the
definition of such term in Rule 1-02 of Regulation S-X under the Securities Act
and the Exchange Act and (ii) any other Restricted Subsidiary of the Company
that is material to the business, earnings, prospects, assets or condition,
financial or otherwise, of the Company and its Restricted Subsidiaries taken as
a whole.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"SAR Agreements" means any agreements of the Company with regard to stock
appreciation rights in effect on the Issue Date.
"Subsidiary" of any Person means any entity of which the Equity Interests
entitled to cast at least a majority of the votes that may be cast by all Equity
Interests having ordinary voting power for the election of directors or other
governing body of such entity are owned by such Person (regardless of whether
such Equity Interests are owned directly by such Person or through one or more
Subsidiaries).
"Tax Sharing Agreement" means the tax sharing agreement between the
Company and each of its Subsidiaries, as in effect on the Issue Date.
"Transition Agreement" means the transition agreement between the Company
and Motors and Gears Holdings, Inc. and the transition agreement between the
Company and Jordan Telecommunication Products, Inc., as in effect on the Issue
Date.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the Issue Date.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
"Trust Officer" means the chairman of the board, the president or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
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"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged, provided that no U.S. Government Obligation
shall be callable at the Issuer's option.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding principal amount of such Indebtedness into (ii) the sum of the
product(s) obtained by multiplying (a) 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 (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
Section 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction" .......................................... 4.08
"Asset Sale Disposition Date" .................................... 4.14
"Asset Sale Trigger Date" ........................................ 4.14
"Change of Control Trigger Date" ................................. 4.13
"covenant defeasance option" ..................................... 8.01
"DTC" ............................................................ 2.03
"Disposition" .................................................... 5.01
"Event of Default" ............................................... 6.01
"Excess Proceeds" ................................................ 4.14
"legal defeasance option" ........................................ 8.01
"Notice of Default" .............................................. 6.01
"Offer" .......................................................... 3.08
"Other Indebtedness " ............................................ 4.15
"Other Indebtedness Guarantee" ................................... 4.15
"Paying Agent" ................................................... 2.03
"Purchase Date" .................................................. 3.08
"Registrar" ...................................................... 2.03
"Restricted Payments" ............................................ 4.05
"Successor Corporation" .......................................... 5.01
"Trustee Expenses" ............................................... 6.08
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. Any terms
incorporated by reference in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined in a Commission rule under the
TIA have the meanings so assigned to them therein.
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Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating.
The Securities and the Trustee's certificates of authentication shall be
substantially in the form of Exhibit A, which is part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Security shall be dated the date of its
authentication. The Securities shall be in denominations of $1,000 and integral
multiples thereof.
The Securities will be Issued (i) in the form of a Global Security,
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 2 thereto), and (ii) in the form of a Definitive
Security, substantially in the form of Exhibit A attached hereto (excluding the
text referred to in footnotes 1 and 2 thereto). The Global Security shall
represent the aggregate amount of outstanding Securities from time to time
endorsed thereon; provided that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.06 hereof.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
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Section 2.02. Execution and Authentication.
Two officers shall sign the Securities for the Company by manual or
facsimile signature. If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual signature
of the Trustee. The Trustee's signature shall be conclusive evidence that the
Security has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Securities shall be
substantially as set forth in Exhibit A.
The Trustee shall upon a Company Order authenticate Securities for
original Issuance up to an aggregate principal amount of $120,000,000. The
aggregate principal amount of Securities outstanding at any time may not exceed
$120,000,000 except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where Securities may be presented for payment (the "Paying
Agent"). The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Holder. The Company shall notify the
Trustee and the Trustee shall notify the Holders of the name and address of any
Agent not a party to this Indenture. The Company shall enter into an appropriate
agency agreement with any Agent not a party to this Indenture, which shall
incorporate the TIA's provisions. The agreement shall implement this Indenture's
provisions that relate to such Agent.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Securities. The
Company or any of its subsidiaries may act as Paying Agent, Registrar or
co-registrar. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with Section 7.07.
The Company initially appoints The Depositary Trust Company ("DTC") to act
as Depositary with prospect to Global Securities. The Trustee shall act as
custodian for the Depositary with respect to the Global Securities.
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Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the Holders'
benefit or the Trustee all money the Paying Agent holds for redemption or
purchase of the Securities or for the payment of principal of, premium, if any,
and interest on, the Securities, and will notify the Trustee of any Default by
the Company in providing the Paying Agent with sufficient funds to (i) purchase
Securities tendered pursuant to a Change of Control Offer, (ii) redeem
Securities called for redemption, or (iii) make any payment of principal,
premium or interest due on the Securities. While any such Default continues, the
Trustee may require the Paying Agent to pay all money it holds to the Trustee.
The Company at any time may require the Paying Agent to pay all money it holds
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company or any of its Subsidiaries) shall have no further liability for
the money it delivered to the Trustee. If the Company or any of its Subsidiaries
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the Holders' benefit or the Trustee all money it holds as Paying Agent.
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
Holders and shall otherwise comply with ss. 312(a) of the TIA. If the Trustee is
not the Registrar, the Company shall furnish to the Trustee, at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders including
the aggregate principal amount of the Securities each holds, and the Company
shall otherwise comply with ss. 312(a) of the TIA.
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When Definitive
Securities are presented by a Holder to the Registrar or co-registrar with a
request (1) to register the transfer of the Definitive Securities or (2) to
exchange such Definitive Securities for an equal principal amount of Definitive
Securities of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met; provided that any Definitive Securities so presented shall
(A) have been duly endorsed or accompanied by a written instruction of transfer
in form satisfactory to the Registrar duly executed by such Holder or by his
attorney duly authorized in writing; and (B) in the case of a Restricted
Security such request shall be accompanied by the following additional
documents:
(i) if such Restricted Security is being delivered to the
Registrar or co-registrar by a Holder for registration in the
name of such Holder, without transfer, a certification to that
effect (in substantially the form of Exhibit B attached
hereto); or
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(ii) if such Restricted Security is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect (in substantially the form of
Exhibit B attached hereto); or
(iii) if such Restricted Security is being transferred to an
accredited "institutional investor," as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act, a
transferee letter of representations (in substantially the
form attached as Annex A to the Offering Circular); or
(iv) if such Restricted Security is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in
substantially the form of Exhibit B attached hereto) and an
opinion of counsel reasonably acceptable to the Company and
the Registrar to the effect that such transfer is in
compliance with the Securities Act.
(b) Transfer of a Definitive Security for a Beneficial Interest in a
Global Security. A Definitive Security may be exchanged for a beneficial
interest in a Global Security only upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with
(i) written instructions directing the Trustee to make an
endorsement on the Global Security to reflect an increase in
the aggregate principal amount of the Securities represented
by the Global Security; and
(ii) if such Definitive Security is a Restricted Security, a
certification (in substantially the form of Exhibit B attached
hereto) to the effect that such Definitive Security is being
transferred to a QIB in accordance with Rule 144A;
in which case the Trustee shall cancel such Definitive Security and cause the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Security is then outstanding, the Company
shall issue and the Trustee shall authenticate a new Global Security in the
appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of a Global Security or beneficial interests therein shall be effected
through the Depositary in accordance with this Indenture and the procedures of
the Depositary therefor, which shall include restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security. Upon receipt by the Trustee of written transfer
instructions (or such other form of
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instructions as is customary for the Depositary), from the Depositary (or its
nominee) on behalf of any Person having a beneficial interest in a Global
Security, the Trustee shall, in accordance with the standing instructions and
procedures existing between the Depositary and the Trustee, cause the aggregate
principal amount of Global Securities to be reduced accordingly and, following
such reduction, the Company shall execute and the Trustee shall authenticate and
deliver to the transferee a Definitive Security in the appropriate principal
amount; provided that in the case of a Restricted Security such instructions
shall be accompanied by the following additional documents:
(i) if such beneficial interest is being transferred to the Person
designated by the Depositary as being the beneficial owner, a
certification to that effect (in substantially the form of
Exhibit B attached hereto); or
(ii) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect (in substantially the form of
Exhibit B attached hereto); or
(iii) if such Restricted Security is being transferred to an
accredited "institutional investor," as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act, a
transferee letter of representations (in substantially the
form attached as Annex A to the Offering Circular); or
(iv) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in
substantially the form of Exhibit B attached hereto) and an
opinion of counsel reasonably acceptable to the Company and to
the Registrar to the effect that such transfer is in
compliance with the Securities Act.
Definitive Securities Issued in exchange for a beneficial interest in a
Global Security shall be registered in such names and in such authorized
denominations as the Depositary shall instruct the Trustee.
(e) Transfer and Exchange of Global Securities. Notwithstanding any
other provision of this Indenture, the Global Security may not be transferred as
a whole except by the Depositary to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the Depositary or by
the Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary; provided that if
(i) the Depositary notifies the Company that the Depositary is
unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by the Company within 90 days
after delivery of such notice, or
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(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the Issuance of Definitive
Securities under this Indenture,
then the Company shall execute, and the Trustee shall authenticate and deliver,
Definitive Securities in an aggregate principal amount equal to the aggregate
principal amount of the Global Security in exchange for such Global Security.
(f) Cancellation and/or Adjustment of Global Securities. At such
time as all beneficial interests in the Global Security have either been
exchanged for Definitive Securities, redeemed, repurchased or cancelled, the
Global Security shall be returned to or retained and cancelled by the Trustee.
At any time prior to such cancellation, if any beneficial interest in the Global
Security is exchanged for Definitive Securities, redeemed, repurchased or
cancelled, the aggregate principal amount of Securities represented by such
Global Security shall be reduced accordingly and an endorsement shall be made on
such Global Security by the Trustee to reflect such reduction.
(g) General Provisions Relating to Transfers and Exchanges. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Definitive Securities and Global Securities at
the Registrar's request. All Definitive Securities and Global Securities Issued
upon any registration of transfer or exchange of Definitive Securities or Global
Securities shall be legal, valid and binding obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Definitive Securities or Global Securities surrendered upon
such registration of transfer or exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges (without
transfer to another Person) pursuant to Section 2.10, 3.06, 3.08 or 9.05, which
the Company shall pay).
The Company shall not be required to (i) issue, register the transfer of
or exchange Securities during a period beginning at the opening of business 15
days before the day of any selection of Securities for redemption under Section
3.02 hereof and ending at the close of business on the day of selection; or (ii)
register the transfer of or exchange any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part; or (iii) register the transfer of or exchange a Security between a
record date and the next succeeding interest payment date.
Prior to due presentment for registration of transfer of any Security, the
Trustee, any Agent and the Company may deem and treat the Person in whose name
any Security is registered as the absolute owner of such Security for all
purposes, and neither the Trustee, any Agent nor the Company shall be affected
by notice to the contrary.
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(h) Exchange of Series A Notes for Series B Notes. The Series A
Notes may be exchanged for Series B Notes pursuant to the terms of the Exchange
Offer. The Trustee and Registrar shall make the exchange as follows:
The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(A) upon Issuance of the Series B Notes, the transactions
contemplated by the Exchange Offer have been consummated; and
(B) the principal amount of Series A Notes properly tendered in
the Exchange Offer that are represented by a Global Security
and the principal amount of Series A Notes properly tendered
in the Exchange Offer that are represented by Definitive
Securities, the name of each Holder of such Definitive
Securities, the principal amount at maturity properly tendered
in the Exchange Offer by each such Holder and the name and
address to which Definitive Securities for Series B Notes
shall be registered and sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Series B Notes have been
registered under Section 5 of the Securities Act and this Indenture has been
qualified under the TIA and (y) with respect to the matters set forth in Section
6(p) of the Registration Rights Agreement and (iii) a Company Order, shall
authenticate (A) a Global Security for Series B Notes in aggregate principal
amount equal to the aggregate principal amount of Series A Notes represented by
a Global Security indicated in such Officers' Certificate as having been
properly tendered and (B) Definitive Securities representing Series B Notes
registered in the names of and in the principal amounts indicated in such
Officers' Certificate.
If the principal amount at maturity of the Global Security for the Series
B Notes is less than the principal amount at maturity of the Global Security for
the Series A Notes, the Trustee shall make an endorsement on such Global
Security for Series A Notes indicating a reduction in the principal amount at
maturity represented thereby.
The Trustee shall deliver such Definitive Securities for Series B Notes to
the Holders thereof as indicated in such Officers' Certificate.
Section 2.07. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or if the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Security, the Company shall Issue and the Trustee, upon the
Company's written order signed by two Officers, shall authenticate a replacement
Security if the Trustee's requirements are met. If the Trustee or the Company
requires, the Holder must supply an indemnity bond that is sufficient in the
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judgment of the Trustee and the Company to protect the Company, the Trustee, any
Agent or any authenticating agent from any loss which any of them may suffer if
a Security is replaced. The Company and the Trustee may charge for its expenses
in replacing a Security.
Every replacement Security is an additional Obligation of the Company.
Section 2.08. Outstanding Securities.
The Securities outstanding at any time are all the Securities the Trustee
has authenticated except for those it has cancelled, those delivered to it for
cancellation, and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that a bona
fide purchaser holds the replaced Security.
If the entire principal of and premium, if any, and accrued interest on
any Security is considered paid under Section 4.01, it ceases to be outstanding
and interest on it ceases to accrue.
Subject to Section 2.09, a Security does not cease to be outstanding
because the Company or an Affiliate holds the Security.
Section 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities that
the Company or an Affiliate own 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
Securities which the Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Securities that the Company or an Affiliate
offers to purchase or acquire pursuant to an Offer, exchange offer, tender offer
or otherwise shall not be deemed to be owned by the Company or an Affiliate
until legal title to such Securities passes to the Company or such Affiliate, as
the case may be.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee, upon
receipt of the Company's written order signed by two Officers, shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
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Section 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, any co-registrar and the Paying Agent shall forward
to the Trustee any Securities surrendered to them for registration of transfer,
exchange, replacement, payment (including all Securities called for redemption
and all Securities accepted for payment pursuant to an Offer) or cancellation,
and the Trustee shall cancel all such Securities and shall destroy all cancelled
Securities (subject to the Exchange Act's record retention requirements) and
deliver a certificate of their destruction to the Company unless by a Company
Order, the Company shall direct that cancelled Securities be returned to it. The
Company may not Issue new Securities to replace Securities that have been
cancelled by the Trustee or that have been delivered to the Trustee for
cancellation. If the Company or an Affiliate acquires any Securities (other than
by redemption or pursuant to an Offer), such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until such Securities are delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to Holders on a subsequent
special record date, in each case at the rate provided in the Securities and
Section 4.01. The Company shall, with the Trustee's consent, fix or cause to be
fixed each such special record date and payment date. At least 15 days before
the special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail a notice that states the special record date,
the related payment date and the amount of such interest to be paid.
Section 2.13. Record Date.
The record date for purposes of determining the identity of Holders of
Securities entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in ss. 316(c) of the TIA.
Section 2.14. CUSIP Number.
A "CUSIP" number will be printed on the Securities, and the Trustee shall
use the CUSIP number in notices of redemption, purchase or exchange as a
convenience to Holders, provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company will
promptly notify the Trustee of any change in the CUSIP number.
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Section 2.15. Legends.
(a) Except as permitted by subsection (b) or (c) hereof, each
Security shall bear legends relating to restrictions on transfer pursuant to the
securities laws in substantially the form set forth on Exhibit A attached
hereto.
(b) Upon any sale or transfer of a Restricted Security (including
any Restricted Security represented by a Global Security) pursuant to Rule 144
under the Securities Act or pursuant to an effective registration statement
under the Securities Act:
(i) in the case of any Restricted Security that is a Definitive
Security, the Registrar shall permit the Holder thereof to
exchange such Restricted Security for a Definitive Security
that does not bear the legends required by subsection (a)
above; and
(ii) in the case of any Restricted Security represented by a Global
Security, such Restricted Security shall not be required to
bear the legends required by subsection (a) above but shall
continue to be subject to the provisions of Section 2.06(c)
hereof; provided that with respect to any request for an
exchange of a Restricted Security that is represented by a
Global Security for a Definitive Security that does not bear
the legends required by subsection (a) above, which request is
made in reliance upon Rule 144, the Holder thereof shall
certify in writing to the Registrar that such request is being
made pursuant to Rule 144.
(c) The Company shall issue and the Trustee shall authenticate
Series B Notes in exchange for Series A Notes accepted for exchange in the
Exchange Offer. The Series B Notes shall not bear the legends required by
subsection (a) above unless the Holder of such Series A Notes is either (A) a
broker-dealer who purchased such Series A Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (B) a Person participating in the distribution of the Series A
Notes or (C) a Person who is an affiliate (as defined in Rule 144A) of the
Company.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to Section 3.07, it
shall furnish to the Trustee, at least 10 but not more than 15 days before
notice of redemption is to be mailed by the Company to the Holders, an Officers'
Certificate stating that the Company has elected to redeem Securities pursuant
to Section 3.07, the date notice of redemption is to be mailed to Holders, the
redemption date, the aggregate principal amount of Securities to be redeemed,
the redemption price for such Securities and the amount of accrued and unpaid
interest on such
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Securities as of the redemption date. If the Trustee is not the Registrar, the
Company shall, concurrently with delivery of its notice to the Trustee of a
redemption, cause the Registrar to deliver to the Trustee a certificate (upon
which the Trustee may rely) setting forth the name of, and the aggregate
principal amount of Securities held by, each Holder.
If the Company is required to offer to purchase Securities pursuant to
Section 4.13 or 4.14, it shall furnish to the Trustee, at least 2 Business Days
before notice of the Offer is to be mailed to Holders, an Officers' Certificate
setting forth that the Offer is being made pursuant to Section 4.13 or 4.14, as
the case may be, the Purchase Date, the maximum principal amount of Securities
the Company is offering to purchase pursuant to the Offer, the purchase price
for such Securities, and the amount of accrued and unpaid interest on such
Securities as of the Purchase Date.
The Company will also provide the Trustee with any additional information
that the Trustee reasonably requests in connection with any redemption or Offer.
Section 3.02. Selection of Securities to Be Redeemed or Purchased.
If less than all the Securities are to be redeemed or if less than all the
Securities tendered pursuant to an Offer are to be accepted for payment, the
Trustee shall select the outstanding Securities to be redeemed or accepted for
payment pro rata, by lot or by a method that complies with the requirements of
any exchange, if any, on which the Securities are listed and that the Trustee
considers fair and appropriate. If the Company elects to mail notice of a
redemption to Holders, the Trustee shall at least 5 business days prior to the
date notice of redemption is to be mailed, (i) select the Securities to be
redeemed from Securities outstanding not previously called for redemption, and
(ii) notify the Company of the names of each Holder of Securities selected for
redemption, the principal amount of Securities held by each such Holder and the
principal amount of such Holder's Securities that are to be redeemed. If less
than all Securities tendered pursuant to an Offer on the Purchase Date are to be
accepted for payment, the Trustee shall select on or promptly after the Purchase
Date the Securities to be accepted for payment. The Trustee shall select for
redemption or purchase Securities or portions of Securities in principal amounts
of $1,000 or integral multiples of $1,000; except that if all of the Securities
of a Holder are selected for redemption or purchase, the entire outstanding
amount of Securities held by such Holder, even if not a multiple of $1,000,
shall be redeemed or purchased. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Securities called for redemption or
tendered pursuant to an Offer also apply to portions of Securities called for
redemption or tendered pursuant to an Offer. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be called for
redemption or selected for purchase.
Section 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail a notice of redemption to each Holder of Securities or
portions thereof to be redeemed.
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The notice shall identify the Securities or portions thereof to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Securities and the amount of
unpaid and accrued interest on such Securities as of the date
of redemption;
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that,
after the redemption date, upon surrender of such Security, a
new Security or Securities in principal amount equal to the
unredeemed portion will be Issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price for, and any
accrued and unpaid interest on, such Securities;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases
to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or
printed on the Securities.
At the Company's request, the Trustee shall (at the Company's expense)
give notice of redemption in the Company's name at least 30 but not more than 60
days before a redemption; provided, however, that the Company shall deliver to
the Trustee, at least 45 days prior to the redemption date and at least 10 days
prior to the date that notice of the redemption is to be mailed to Holders, an
Officers' Certificate that (i) requests the Trustee to give notice of the
redemption to Holders, (ii) sets forth the information to be provided to Holders
in the notice of redemption, as set forth in the preceding paragraph, (iii)
states that the Company has elected to redeem Securities pursuant to Section
3.07(a) or 3.07(b), as the case may be, and (iv) sets forth the aggregate
principal amount of Securities to be redeemed and the amount of accrued and
unpaid interest thereon as of the redemption date. If the Trustee is not the
Registrar, the Company shall, concurrently with any such request, cause the
Registrar to deliver to the Trustee a certificate (upon which the Trustee may
rely) setting forth the name of, the address of, and the aggregate principal
amount of Securities held by, each Holder.
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Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date at the price set forth in the
Security.
Section 3.05. Deposit of Redemption Price.
On or prior to any redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Securities to be redeemed on that date. The Trustee
or the Paying Agent shall return to the Company any money that the Company
deposited with the Trustee or the Paying Agent in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all
Securities to be redeemed.
If the Company complies with the preceding paragraph, interest on the
Securities to be redeemed will cease to accrue on such Securities on the
applicable redemption date, whether or not such Securities are presented for
payment. If a Security is redeemed on or after an interest record date but on or
prior to the related interest payment date, then any accrued and unpaid interest
shall be paid to the Person in whose name such Security was registered at the
close of business on such record date. If any Security called for redemption
shall not be so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest will be paid on the
unpaid principal and premium, if any, and interest from the redemption date
until such principal, premium and interest is paid, at the rate of interest
provided in the Securities and in Section 4.01.
Section 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company shall
Issue and the Trustee shall authenticate for the Holder at the Company's expense
a new Security equal in principal amount to the unredeemed portion of the
Security surrendered.
Section 3.07. Optional Redemption Provisions.
The Securities may not be redeemed at the option of the Company prior to
August 1, 2002. During the twelve-month period beginning August 1 of the years
indicated below, the Securities will be redeemable at the option of the Company,
in whole or in part, on at least 30 but not more than 60 days' notice to each
Holder to be redeemed, at the redemption prices (expressed as percentages of the
principal amount) set forth below, plus any accrued and unpaid interest to the
date of redemption:
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Year Percentage
- ---- ----------
2002 ...................................................... 105.188%
2003 ...................................................... 102.594%
2004 and thereafter ....................................... 100.000%
Section 3.08. Mandatory Purchase Provision.
(a) Within 30 days after any Change of Control Trigger Date or Asset
Sale Trigger Date, the Company shall mail a notice to each Holder stating:
(i) that an offer ("Offer") is being made pursuant to Section 4.13
or 4.14, as the case may be, the length of time the Offer
shall remain open and the maximum aggregate principal amount
of Securities that the Company is offering to purchase;
(ii) the purchase price for the Securities (as set forth in Section
4.13 or 4.14, as the case may be), the amount of accrued and
unpaid interest on such Securities as of the purchase date,
and the purchase date (which shall be no earlier than 30 days
nor later than 40 days from the date such notice is mailed
(the "Purchase Date"));
(iii) that any Security not accepted for payment will continue to
accrue interest;
(iv) that, unless the Company fails to deposit with the Paying
Agent on the Purchase Date an amount sufficient to purchase
all Securities accepted for payment, interest shall cease to
accrue on such Securities after the Purchase Date;
(v) that Holders electing to tender any Security or portion
thereof will be required to surrender their Security, with a
form entitled "Option of Holder to Elect Purchase" completed,
to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day preceding
the Purchase Date; provided that Holders electing to tender
only a portion of any Security must tender a principal amount
of $1,000 or integral multiples thereof;
(vi) that Holders will be entitled to withdraw their election to
tender Securities if the Paying Agent receives, not later than
the close of business on the third Business Day preceding the
Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal
amount of Securities delivered for purchase and a statement
that
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such Holder is withdrawing his election to have such Security
purchased; and
(vii) that Holders whose Securities are accepted for payment in part
will be Issued new Securities equal in principal amount to the
unpurchased portion of Securities surrendered; provided that
only Securities in a principal amount of $1,000 or integral
multiples thereof will be accepted for payment.
(b) On the Purchase Date, the Company will, to the extent required
by this Indenture and the Offer,
(i) accept for payment Securities or portions thereof tendered
pursuant to such Offer,
(ii) deposit with the Paying Agent an amount sufficient to purchase
the lesser of (a) the Securities or portions thereof tendered
pursuant to such Offer, and (b) the maximum aggregate
principal amount of Securities that the Company offered to
purchase pursuant to such Offer, and
(iii) deliver or cause to be delivered to the Trustee all Securities
tendered pursuant to the Offer, together with an Officers'
Certificate setting forth the name of each Holder that
tendered Securities and the principal amount of the Securities
or portions thereof tendered by each such Holder.
(c) With respect to any Offer, if less than all of the Securities
tendered pursuant to an Offer are to be purchased by the Company, the Trustee
shall select on the Purchase Date the Securities or portions thereof to be
accepted for payment pursuant to Section 3.02.
(d) Promptly after consummation of an Offer, (i) the Paying Agent
shall mail to each Holder of Securities or portions thereof accepted for payment
an amount equal to the purchase price for, plus any accrued and unpaid interest
on, such Securities, (ii) with respect to any tendered Security not accepted for
payment in whole or in part, the Trustee shall return such Security to the
Holder thereof, and (iii) with respect to any Security accepted for payment in
part, the Trustee shall authenticate and mail to each such Holder a new Security
equal in principal amount to the unpurchased portion of the tendered Security.
(e) The Company will publicly announce the results of the Offer on
or as soon as practicable after the Purchase Date.
(f) The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent such laws and
regulations are applicable to any Offer.
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(g) With respect to any Offer, if the Company deposits with the
Paying Agent on the Purchase Date an amount sufficient to purchase all
Securities accepted for payment, interest shall cease to accrue on such
Securities after the Purchase Date; provided, however, that if the Company fails
to deposit such amount on the Purchase Date, interest shall continue to accrue
on such Securities until such deposit is made.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities.
The Company shall pay the principal of, and premium, if any, and interest
on the Securities on the dates and in the manner provided in the Securities.
Holders of Securities must surrender their Securities to the Paying Agent to
collect principal payments. Principal, premium and interest shall be considered
paid on the date due if the Paying Agent (other than the Company or any of its
Subsidiaries) holds as of 10:00 a.m. Eastern Standard Time money the Company
deposited in immediately available funds designated for and sufficient to pay
all principal premium, if any, and interest then due. The Paying Agent shall
return to the Company, no later than five days following the date of payment,
any money (including accrued interest) that exceeds such amount of principal,
premium, if any, and interest paid on the Securities. The Company shall pay any
and all amounts, including, without limitation, Liquidated Damages, if any, on
the dates and in the manner required under the Registration Rights Agreement.
Section 4.02. SEC Reports.
(a) The Company shall file with the Trustee, within 15 days after
the time of filing with the Commission, copies of the reports, information and
other documents (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) that the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
If the Company is not subject to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Commission and the Trustee all
such reports, information and other documents as it would be required to file if
it were subject to the requirements of Section 13 or 15(d) of the Exchange Act;
provided, that the Company shall not be in default of the provisions of this
Section 4.02 for any failure to file reports with the Commission solely by
refusal by the Commission to accept the same for filing. The Company shall
deliver (or cause the Trustee to deliver) copies of all reports, information and
documents required to be filed with the Trustee pursuant to this Section 4.02 to
the Holders at their addresses appearing in the register of Securities
maintained by the Registrar. The Company shall also comply with the provisions
of TIA ss. 314(a).
(b) If the Company is required to furnish annual, quarterly or
current reports to its stockholders pursuant to the Exchange Act, the Company
shall cause any annual, quarterly, current or other financial report furnished
by it generally to its stockholders to be filed with the
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Trustee and mailed to the Holders at their addresses appearing in the register
of Securities maintained by the Registrar. If the Company is not required to
furnish annual, quarterly or current reports to its stockholders pursuant to the
Exchange Act, the Company shall cause the financial statements of the Company
and its consolidated Subsidiaries (and similar financial statements for all
unconsolidated Subsidiaries, if any), including any notes thereto (and, with
respect to annual reports, an auditors' report by an accounting firm of
established national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," comparable to that which would
have been required to appear in annual or quarterly reports filed under Section
13 or 15(d) of the Exchange Act to be so filed with the Trustee and mailed to
the Holders promptly, but in any event, within 120 days after the end of each of
the fiscal years of the Company and within 60 days after the end of each of the
first three fiscal quarters of each such fiscal year.
(c) So long as is required for an offer or sale of the Securities to
qualify for an exemption under Rule 144A, the Company shall, upon request,
provide the information as would be required by clause (d)(4) thereunder if the
Company were subject to the requirements of such clause to each Holder and to
each beneficial owner and prospective purchaser of Securities identified by any
Holder of Restricted Securities.
(d) Notwithstanding anything herein to the contrary, the Trustee
shall have no duty to review such documents for purposes of determining their
compliance with any provision of this Indenture.
Section 4.03. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company has taken or proposes to take with respect thereto) and that
to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of, or
premium, if any or interest on, the Securities are prohibited or if such event
has occurred, a description of the event and what action the Company is taking
or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.02 shall be accompanied by a written statement
of the Company's independent
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public accountants (who shall be a firm of established national reputation
reasonably satisfactory to the Trustee) that in making the examination necessary
for certification of such financial statements nothing has come to their
attention which would lead them to believe that the Company has violated any
provisions of Section 4.01, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12,
4.13, 4.14 or 4.15 or of Article 5 or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(c) The Company will, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of (i) any Default or Event of Default or (ii) any event of default under any
other mortgage, indenture or instrument that could result in an Event of Default
under Section 6.01(4), an Officers' Certificate specifying such Default, Event
of Default or default and what action the Company is taking or proposes to take
with respect thereto.
Section 4.04. Stay, Extension and 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, extension or usury law wherever
enacted, now or at any time hereafter in force, that might affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, 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 has been
enacted.
Section 4.05. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or make any distribution on
account of the Company's or such Restricted Subsidiary's
Capital Stock or other Equity Interests (other than dividends
or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or a Restricted Subsidiary
and other than dividends or distributions payable by a
Restricted Subsidiary to another Restricted Subsidiary or to
the Company),
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interest purchased
from the Company or any Restricted Subsidiary),
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(iii) voluntarily prepay Indebtedness that is subordinated to the
Securities, whether any such subordinated indebtedness is
outstanding on, or Issued after, the Issue Date, or
(iv) make any Restricted Investment (all such dividends, distributions,
purchases, redemptions or other acquisitions, retirements,
prepayments and Restricted Investments being collectively referred
to as "Restricted Payments"), if, at the time of such Restricted
Payment:
(1) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(2) immediately after such Restricted Payment and after giving effect
thereto on a Pro Forma Basis, the Company shall not be able to
issue $1.00 of additional Indebtedness pursuant to Section
4.07(a); or
(3) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the Issue Date, exceeds the sum,
without duplication, of
(A) 50% of the aggregate Consolidated Net Income (including,
for this purpose, gains from Asset Sales and, to the extent
not included in Consolidated Net Income, any gain from a
Restricted Investment) of the Company (or, in case such
aggregate is a loss, 100% of such loss) for the period
(taken as one accounting period) from the beginning of the
first fiscal quarter commencing immediately after the Issue
Date and ending as of the Company's most recently ended
fiscal quarter at the time of such Restricted Payment, plus
(B) 100% of the aggregate net cash proceeds and the fair market
value of any property or securities (as determined by the
Board of Directors in good faith) received by the Company
from the Issue or sale of Equity Interests or warrants,
options or rights to acquire Equity Interests of the
Company or any Restricted Subsidiary subsequent to the
Issue Date (other than Equity Interests Issued or sold to a
Restricted Subsidiary and other than Disqualified Stock),
plus
(C) $5,000,000, plus
(D) the amount by which the principal amount of and any accrued
interest on either senior Indebtedness of the Company or
any Indebtedness of the Restricted Subsidiaries (not held
by the Company or any Restricted Subsidiary) is reduced on
the
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Company's consolidated balance sheet upon the conversion or
exchange subsequent to the Issue Date of such Indebtedness
for Equity Interests (other than Disqualified Stock) of the
Company or any Restricted Subsidiaries (less the amount of
any cash, or the fair market value of any other property or
securities (as determined by the Board of Directors in good
faith), distributed by the Company or any Restricted
Subsidiary (to Persons other than the Company or any other
Restricted Subsidiary) upon such conversion or exchange,
plus
(E) if any Nonrestricted Subsidiary is redesignated as a
Restricted Subsidiary, the fair market value (as determined
by the Board of Directors in good faith) of such
Nonrestricted Subsidiary as of the date it is redesignated;
provided, however, that for purposes of this clause (E),
the fair market value of any redesignated Nonrestricted
Subsidiary shall be reduced by the amount that any such
redesignation replenishes or increases the amount of
Restricted Investments permitted to be made pursuant to
Section 4.05(b)(iii).
(b) Notwithstanding Section 4.05(a), the following Restricted Payments
may be made:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if at said date of declaration such payment
would comply with the provisions hereof;
(ii) the retirement of any of the Company's Capital Stock or
subordinated Indebtedness in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary) of, other Capital Stock (other than
Disqualified Stock) and neither such retirement nor the proceeds
of any such sale or exchange shall be included in any computation
made pursuant to Section 4.05(a);
(iii) making Restricted Investments at any time, and from time to time,
in an aggregate outstanding amount of $40,000,000 after the Issue
Date (it being understood that if any Restricted Investment
acquired with a Restricted Payment after the Issue Date pursuant
to this Section 4.05(b)(iii) is sold, transferred or otherwise
conveyed to any Person other than the Company or a Restricted
Subsidiary, the portion of the net cash proceeds or fair market
value of securities or properties paid or transferred to the
Company and its Restricted Subsidiaries in connection with such
sale, transfer or conveyance that relates or corresponds to the
repayment or return of the original cost of such a Restricted
Investment will replenish or increase the amount of Restricted
Investments permitted to be made
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pursuant to this Section 4.05(b)(iii), so that up to $40,000,000
of Restricted Investments may be outstanding under this Section
4.05(b)(iii) at any given time);
(iv) the repurchase or redemption of the Company's common stock upon
the death of Thomas H. Quinn, pursuant to the terms of an
Employment Agreement, dated as of February 25, 1988, between the
Company and Thomas H. Quinn; provided, however, that the funds
necessary to satisfy the Company's obligation to repurchase or
redeem such Common Stock shall be fully reimbursed by insurance;
(v) the repurchase or redemption of the Company's common stock
pursuant to the terms of the several Restricted Stock Agreements,
each dated as of February 25, 1988, between the Company and each
of Thomas H. Quinn, Jonathan F. Boucher and John R. Lowden, the
Restricted Stock Agreement, dated as of January 1, 1992, between
the Company and Thomas Quinn, the Restricted Stock Agreements,
each dated as of January 1, 1992, between the Company and each of
Jonathan F. Boucher, Adam Max and Thomas Quinn, and the Restricted
Stock Agreement, dated as of May 16, 1997, between the Company and
Thomas Quinn, in each case as amended or supplemented, up to an
aggregate amount not to exceed $7,500,000;
(vi) any loans, advances, distributions or payments from the Company to
its Restricted Subsidiaries, or any loans, advances, distributions
or payments by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, pursuant to intercompany
Indebtedness, intercompany management agreements, intercompany tax
sharing agreements, and other intercompany agreements and
obligations;
(vii) the payment of directors' fees in an annual aggregate amount not
to exceed $250,000;
(viii) to the extent constituting Restricted Payments, if no Default or
Event of Default shall have occurred and be continuing or shall
occur as a consequence thereof, the payment of consulting,
financial and investment banking fees (but not limiting the
payment of indemnities, expenses and other amounts) under the New
TJC Management Consulting Agreement, provided that the obligation
of the Company to pay such fees under the New TJC Management
Consulting Agreement shall be subordinated expressly to the
Company's Obligations on the Securities;
(ix) the purchase, redemption, retirement or other acquisition of the
Discount Debentures required by their terms to be purchased,
redeemed, retired or
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acquired with the net proceeds from asset sales (as defined in the
instrument evidencing such subordinated Indebtedness) or upon a
change of control (as defined in the instrument evidencing such
subordinated Indebtedness);
(x) the exchanging, refinancing or refunding of subordinated
Indebtedness through the Issuance of subordinated Indebtedness so
long as the subordinated Indebtedness to be Issued is Refinancing
Indebtedness permitted under Section 4.07;
(xi) to the extent constituting Restricted Payments, any payments made
in connection with the Plan;
(xii) Restricted Investments received as consideration for the sale,
transfer or disposition of any business, properties or assets of
the Company or any Restricted Subsidiary, provided that the
Company complies with Section 4.14;
(xiii) any Restricted Investment constituting securities or instruments
of a Person Issued in exchange for trade or other claims against
such Person in connection with a financial reorganization or
restructuring of such Person;
(xiv) any Restricted Investment constituting an equity investment in a
Receivables Subsidiary; provided that the aggregate amount of such
equity investments does not exceed $1,000,000; and
(xv) guarantees by the Company of Capital Lease Obligations of
Nonrestricted Subsidiaries in an aggregate principal or face
amount not exceeding the aggregate principal or face amount of
capital leases of the Nonrestricted Subsidiaries guaranteed by the
Company on the Issue Date.
Section 4.06. Corporate Existence.
Subject to Section 4.14 and Article 5 hereof, the Company will do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and the corporate, partnership or other existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of each of its Restricted Subsidiaries and the rights
(charter and statutory), licenses and franchises of the Company and each of its
Restricted Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any Restricted Subsidiary, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Restricted Subsidiaries
taken as a whole and that the loss thereof is not adverse in any material
respect to the Holders.
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Section 4.07. Limitation on Incurrence of Indebtedness.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, Issue any Indebtedness (other than the Indebtedness represented
by the Securities, the Old Senior Notes and the Discount Debentures) unless the
Company's Cash Flow Coverage Ratio for its four full fiscal quarters next
preceding the date such additional Indebtedness is Issued would have been at
least (i) 1.7 to 1, if such date is between the date of original Issuance of the
Securities and June 30, 1999, (ii) 1.85 to 1, from July 1, 1999, through June
30, 2001, or (iii) 2.0 to 1, from July 1, 2001, and thereafter, in each case
determined on a Pro Forma Basis as if such additional Indebtedness and any other
Indebtedness issued since the end of the applicable four-quarter period had been
issued at the beginning of such four-quarter period.
(b) Section 4.07(a) will not apply to the Issuance of:
(i) Indebtedness of the Company and/or its Restricted
Subsidiaries up to the greater of (A) $75.0 million in
aggregate principal amount pursuant to the New Credit
Agreement and (B) an aggregate principal amount up to the
sum of (x) 85% of the book value of the Company and its
Restricted Subsidiaries' Receivables on a consolidated
basis and (y) 65% of the book value of the Company and its
Restricted Subsidiaries' inventories on a consolidated
basis;
(ii) Indebtedness of the Company and its Restricted Subsidiaries
pursuant to any Receivables Financing;
(iii) Indebtedness of the Company and its Restricted Subsidiaries
in connection with capital leases, sale and leaseback
transactions, purchase money obligations, capital
expenditures or similar financing transactions relating to
(A) their properties, assets and rights as of the date of
original Issuance of the Securities up to $20,000,000 in
aggregate principal amount, or (B) their properties, assets
and rights acquired after the date of original Issuance of
the Securities, provided that such Indebtedness under this
Section 4.07(b)(iii)(B) does not exceed 100% of the cost of
such properties, assets and rights;
(iv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to
$25,000,000 (all or any portion of which may be Issued as
additional Indebtedness under the New Credit Agreement);
and
(v) Other Permitted Indebtedness.
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Section 4.08. Limitation on Transactions with Affiliates.
(a) Except as otherwise set forth in this Indenture, neither the
Company nor any of its Restricted Subsidiaries may make any loan, advance,
guarantee or capital contribution to, or for the benefit of, or sell, lease,
transfer or dispose of any properties or assets to, or for the benefit of, or
purchase or lease any property or assets from, or enter into any or amend any
contract, agreement or understanding with, or for the benefit of, an Affiliate
(each such transaction or series of related transactions that are part of a
common plan an "Affiliate Transaction"), except in good faith and on terms that
are no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction on an
arm's-length basis from an unrelated Person.
(b) Neither the Company nor any of its Restricted Subsidiaries may
engage in any Affiliate Transaction involving aggregate payments or other
transfers by the Company and its Restricted Subsidiaries in excess of $5,000,000
(including cash and noncash payments and benefits valued at their fair market
value by the Board of Directors in good faith) unless the Company delivers to
the Trustee (i) a resolution of the Board of Directors stating that the Board of
Directors (including a majority of the disinterested directors, if any) has, in
good faith, determined that such Affiliate Transaction complies with the
provisions of this Indenture, and (ii) an opinion as to the fairness of such
Affiliate Transaction to the Company or such Restricted Subsidiary and the
Holders of Securities, in each case from a financial point of view by an
investment banking firm of national prominence that is not an Affiliate of the
Company.
(c) Notwithstanding Sections 4.08(a) and (b), this Section 4.08
will not apply to (i) transactions between the Company and any Restricted
Subsidiary or between Restricted Subsidiaries, (ii) any Restricted Payments
permitted pursuant to Section 4.05, (iii) payments of fees and other amounts
expressly due under any SAR Agreement, the New Subsidiary Advisory Agreements,
the New Subsidiary Consulting Agreements, the Tax Sharing Agreement, the JI
Properties Service Agreement, the Transition Agreement and the New TJC
Management Consulting Agreement, provided that any amendments, supplements,
modifications, substitutions, renewals or replacements of the foregoing
agreements are approved by a majority of the Board of Directors (including a
majority of the disinterested directors, if any) as fair to the Company and the
Holders of Securities, (iv) the payment of reasonable and customary directors'
fees to directors of the Company and its Restricted Subsidiaries, (v)
transactions in connection with a Receivables Financing or (vi) payments and
transactions in connection with the Plan.
Section 4.09. Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any asset now owned or
hereafter acquired by them, or any income or profits therefrom or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on its properties or assets, the Company
and any of its Restricted
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Subsidiaries may create any Lien upon any of their properties or assets
(including, but not limited to, any Capital Stock of its Subsidiaries) if the
Securities are equally and ratably secured.
Section 4.10. Compliance with Laws, Taxes.
The Company shall, and shall cause each of its Restricted Subsidiaries to,
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, noncompliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or condition,
financial or otherwise, of the Company and its Restricted Subsidiaries taken as
a whole.
The Company shall, and shall cause each of its Restricted Subsidiaries to,
pay prior to delinquency all taxes, assessments and governmental levies, except
those contested in good faith and by appropriate proceedings.
Section 4.11. Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective, any encumbrance or restriction on the
ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its
Capital Stock or any other interest or participation in, or
measured by, its profits, owned by the Company or any
Restricted Subsidiary, or pay any Indebtedness owed to, the
Company or any Restricted Subsidiary,
(ii) make loans or advances to the Company, or
(iii) transfer any of its properties or assets to the Company,
except for such encumbrances or restrictions existing under
or by reason of:
(A) applicable law,
(B) Indebtedness permitted (x) under Section 4.07(a),
(y) under Sections 4.07(b)(i), (ii) and (iv) and
clauses (i), (vii) and (ix) of the definition of
Other Permitted Indebtedness, or (z) Restricted
Payments and agreements or instruments evidencing
Restricted Payments permitted under Section 4.05,
(C) customary provisions restricting subletting or
assignment of any lease or license of the Company or
any Restricted Subsidiary,
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(D) customary provisions of any franchise, distribution
or similar agreement,
(E) any instrument governing Indebtedness or any other
encumbrance or restriction of a Person acquired by
the Company or any Restricted Subsidiary at the time
of such acquisition, which encumbrance or
restriction is not applicable to any Person, or the
properties or assets of any Person, other than the
Person, or the property or assets of the Person, so
acquired,
(F) Indebtedness or other agreements existing on the
date of original Issuance of the Securities,
(G) any Refinancing Indebtedness of Indebtedness
described in Section 4.07(b)(i), (ii), (iii) and
(iv) and clauses (i), (vi), and (ix) of the
definition of Other Permitted Indebtedness; provided
that the encumbrances and restrictions created in
connection with such Refinancing Indebtedness are no
more restrictive in any material respect with regard
to the interests of the Holders than the
encumbrances and restrictions in the refinanced
Indebtedness,
(H) any restrictions, with respect to a Restricted
Subsidiary, imposed pursuant to an agreement that
has been entered into for the sale or disposition of
the stock, business, assets or properties of such
Restricted Subsidiary,
(I) the terms of any Indebtedness of the Company
incurred in connection with Section 4.07, provided
that the terms of such Indebtedness constitute no
greater encumbrance or restriction on the ability of
any Restricted Subsidiary to pay dividends or make
distributions, make loans or advances or transfer
properties or assets than is permitted by this
Section 4.11, and
(J) the terms of purchase money obligations, but only to
the extent such purchase money obligations restrict
or prohibit the transfer of the property so
acquired.
(b) Nothing contained in this Section 4.11 shall prevent the
Company from entering into any agreement or instrument providing for the
incurrence of Permitted Liens or restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries that are
subject to Permitted Liens.
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Section 4.12. Maintenance of Office or Agencies.
The Company will maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of any Agent) where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of any change in the location of such office or agency. If at any time
the Company shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any matter relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
located at 100 Wall Street, 20th Floor, New York, NY 10005 as one such office or
agency of the Company in accordance with Section 2.03.
Section 4.13. Change of Control.
(a) Upon the occurrence of a Change of Control (such date being
the "Change of Control Trigger Date"), each Holder shall have the right to
require the Company to purchase such Holder's Securities pursuant to an Offer at
a purchase price equal to 101% of the aggregate principal amount of such
Securities, plus any accrued and unpaid interest to the Purchase Date. Although
the failure of the Company to purchase all Securities tendered in such an Offer
shall be a Default, if the Company is unable to purchase all Securities tendered
in such an Offer, the Company shall nevertheless purchase the maximum principal
amount of Securities that it is able to purchase at that time.
(b) In the event of a Change of Control, the Company shall not
offer to purchase or redeem any subordinated Indebtedness required or entitled
by its terms to be redeemed or purchased until the Change of Control Offer for
the Securities has been consummated and all Securities tendered pursuant to such
Offer have been accepted for payment.
Section 4. 14. Limitation on Asset Sales.
(a) The Company may not, and may not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale (including the
sale of any of the Capital Stock of any Restricted Subsidiary) providing for Net
Proceeds in excess of $2,500,000 unless at least (A) 50% of the consideration
thereof received by the Company is in the form of cash and/or
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Cash Equivalents and/or Marketable Securities and (B) 75% of the Net Proceeds
from such Asset Sale are applied to one or more of the following in such
combination as the Company shall elect: (i) an investment in another asset or
business in the same line of business as, or a line of business similar to that
of, the line of business of the Company and its Restricted Subsidiaries at that
time; provided that such investment occurs on or prior to the 365th day
following the date of such Asset Sale (the "Asset Sale Disposition Date"), (ii)
the purchase, redemption or other prepayment or repayment of outstanding senior
Indebtedness on or prior to the Asset Sale Disposition Date or (iii) an Offer
expiring on or prior to the Purchase Date.
(b) Any Net Proceeds from any Asset Sale that are not applied or
invested as provided in Section 4 14(a)(i) or (a)(ii) shall constitute "Excess
Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds
$10,000,000 (such date being an "Asset Sale Trigger Date"), the Company shall
make an Offer to all Holders to purchase the maximum principal amount of
Securities (the "Asset Sale Offer Amount") then outstanding that may be
purchased out of Excess Proceeds, at an offer price in cash in an amount equal
to 100% of the outstanding principal amount thereof plus any accrued and unpaid
interest to the Purchase Date.
(d) To the extent that any Excess Proceeds remain after completion
of the Offer, the Company may use such remaining amount for general corporate
purposes.
(e) Upon completion of each such Offer, the amount of Excess
Proceeds shall be reset to zero.
(f) Notwithstanding the foregoing, to the extent that any or all
of the Net Proceeds of an Asset Sale is prohibited or delayed by applicable
local law from being repatriated to the United States, the portion of such Net
Proceeds so affected will not be required to be applied pursuant to this Section
4.14, but may be retained for so long, but only for so long, as the applicable
local law prohibits repatriation to the United States. The Company will promptly
take all reasonable actions required by the applicable local law to permit such
repatriation, and once such repatriation of any affected Net Proceeds is not
prohibited under applicable local law, such repatriation will be immediately
effected and such repatriated Net Proceeds will be applied in the manner set
forth above as if such Asset Sale had occurred on the date of repatriation.
Section 4.15. Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries.
(a) The Company will not permit any Restricted Subsidiary,
directly or indirectly, to guarantee any Indebtedness of the Company other than
the Securities ("Other Indebtedness") unless:
(i) such Restricted Subsidiary contemporaneously executes and
delivers a supplemental indenture to this Indenture
providing for a guarantee of payment of the Securities then
outstanding by such Restricted Subsidiary
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to the same extent as the guarantee (the "Other
Indebtedness Guarantee") of the Other Indebtedness
(including waiver of subrogation, if any), and
(ii) if the Other Indebtedness guaranteed by such Restricted
Subsidiary is
(A) senior Indebtedness, the guarantee for the
Securities shall be pari passu in right of payment
with the Other Indebtedness Guarantee, and
(B) subordinated Indebtedness, the guarantee for the
Securities shall be senior in right of payment to
the Other Indebtedness Guarantee,
provided that the foregoing will not limit or restrict
guarantees Issued by Restricted Subsidiaries in respect to
Indebtedness of other Restricted Subsidiaries.
(b) Each guarantee of the Securities created by a Restricted
Subsidiary pursuant to Section 4.15(a) shall be in form and substance
satisfactory to the Trustee and shall provide, among other things, that it shall
be automatically and unconditionally released and discharged upon:
(i) any sale, exchange or transfer permitted by this Indenture
to any Person not an Affiliate of the Company of (A) all of
the Company's Capital Stock in such Restricted Subsidiary,
or (B) the sale of all or substantially all of the assets
of the Restricted Subsidiary and upon the application of
the Net Proceeds from such sale in accordance with Section
4.14, or
(ii) the release or discharge of the Other Indebtedness
Guarantee that resulted in the creation of such guarantee
of the Securities, except a discharge or release by or as a
result of payment under such Other Indebtedness Guarantee.
ARTICLE 5
SUCCESSORS
Section 5.01 Merger or Consolidation.
(a) The Company shall not consolidate or merge with or into, or
sell, lease, convey or otherwise dispose of all or substantially all of its
assets to, any Person (any such consolidation, merger or sale being a
"Disposition") unless:
(i) the successor entity of such Disposition or the Person to
which such Disposition shall have been made is a
corporation organized or existing
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under the laws of the United States, any state thereof or
the District of Columbia;
(ii) the successor corporation of such Disposition or the
corporation to which such Disposition shall have been made
expressly assumes the Obligations of the Company, pursuant
to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under this Indenture and the
Securities;
(iii) immediately after such Disposition, no Default or Event of
Default exists; and
(iv) the entity (the "Successor Corporation") formed by or
surviving any such Disposition, or the corporation to which
such Disposition shall have been made, shall
(A) have Consolidated Net Worth (immediately after the
Disposition but prior to any purchase accounting
adjustments resulting from the Disposition) equal to
or greater than the Consolidated Net Worth of the
Company immediately preceding the Disposition,
(B) be permitted immediately after the Disposition by
the terms of Section 4.07(a) to Issue at least $1.00
of additional Indebtedness determined on a Pro Forma
Basis pursuant to Section 4.07(a), and
(C) have a Cash Flow Coverage Ratio, for the four fiscal
quarters immediately preceding the applicable
Disposition determined on a Pro Forma Basis, equal
to or greater than the actual Cash Flow Coverage
Ratio of the Company for such four-quarter period.
Prior to the consummation of any proposed Disposition, the Company shall
deliver to the Trustee an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed Disposition and such supplemental
indenture comply with this Indenture.
Section 5.02. Successor Corporation Substituted.
Upon any Disposition, the successor corporation resulting from such
Disposition shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such Successor Corporation has been named as the Company herein; provided,
however, that neither the Company nor any Successor Corporation shall be
released from its Obligation to pay the principal of, and premium, if any, and
interest on, the Securities.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
(a) An "Event of Default" is
(1) a default for 30 days in payment of interest on the
Securities;
(2) a default in payment when due of principal or premium, if
any;
(3) the failure of the Company to comply with any of its other
agreements or covenants in, or provisions of, this
Indenture or the Securities and the Default continues for
the period, if applicable, and after the notice specified
in Section 6.01(b);
(4) a default by the Company or any Restricted Subsidiary under
any mortgage, indenture or instrument under which there may
be Issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any
Restricted Subsidiary (or the payment of which is
guaranteed by the Company or any Restricted Subsidiary),
whether such Indebtedness exists prior to or is created
after the Issue Date; if
(A) either (i) such default results from the failure to
pay principal of or interest on any such
Indebtedness and such default continues for 30 days
beyond any applicable grace period, or (ii) as a
result of such default the maturity of such
Indebtedness has been accelerated prior to its
expressed maturity; and
(B) the principal amount of such Indebtedness, together
with the principal amount of any other such
Indebtedness in default for failure to pay principal
or interest thereon, or the maturity of which has
been accelerated, aggregates in excess of
$15,000,000;
(5) a failure by the Company or any Restricted Subsidiary to
pay final judgments (not covered by insurance) aggregating
in excess of $7,500,000 which judgments a court of
competent jurisdiction does not rescind, annul or stay
within 45 days after their entry and the Default continues
for the period and after the notice specified in Section
6.01(b); and
(6) in existence when the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law
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(A) commences a voluntary case,
(B) consents to the entry of an order for relief against
it in an involuntary case,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors;
(7) in existence when a court of competent jurisdiction enters
an order or decree under any Bankruptcy Law that
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for all or substantially
all of the property of the Company or any
Significant Subsidiary, or
(C) order the liquidation of the Company or any
Significant Subsidiary,
and any such order or decree remains unstayed and in effect for 60
days.
(b) A Default under Section 6.01(a)(3)(other than a Default under
Sections 4.05, 4.07, 4.08, 4.11, 4.13, 4.14, 4.15, and 5.01 any of which shall
be an Event of Default with the notice but without the passage of time specified
in this Section 6.01(b)) or Section 6.01(a)(5) is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Securities notify the Company of the Default and the Company does
not cure the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is a
"Notice of Default."
(c) In the case of any Event of Default pursuant to Section
6.01(a) occurring by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding payment of
the premium which the Company would have to pay if the Company then had elected
to redeem the Securities pursuant to paragraph 5 of the Securities, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law, anything in this Indenture or in the Securities
contained to the contrary notwithstanding.
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Section 6.02. Acceleration.
(a) Upon the occurrence of any Event of Default (other than an
Event of Default under Section 6.01(a)(6) or (a)(7)), the Trustee or the Holders
of a least 25% in principal amount of the then outstanding Securities may
declare all outstanding Securities to be due and payable immediately and, upon
such declaration, the principal amount and premium, if any, of all such
Securities, and any accrued interest on, all such Securities to the date of
payment shall be due and payable immediately; provided, however, that if an
Event of Default arises under Section 6.0l(a)(6) or (a)(7) the principal amount
of, and premium, if any, and any accrued and unpaid interest on, all such
Securities, shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holders.
(b) The Holders of a majority in principal amount of the
Securities then outstanding by notice to the Trustee may rescind any such
declaration of acceleration of such Securities and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (other than the nonpayment of principal of, or premium, if
any, or interest on, the Securities which shall have become due by such
declaration) shall have been cured or waived.
(c) If there has been a declaration of acceleration of the
Securities because an Event of Default under Section 6.01(a)(4) has occurred and
is continuing, such declaration of acceleration shall be automatically annulled
if the holders of the Indebtedness described in Section 6.0l(a)(4) have
rescinded the declaration of acceleration in respect of such Indebtedness within
30 Business Days thereof and if:
(i) the annulment of such acceleration would not conflict with
any judgment or decree of a court of competent
jurisdiction,
(ii) all existing Events of Default, except non-payment of
principal or interest that shall have become due solely
because of the acceleration, have been cured or waived, and
(iii) the Company has delivered an Officer's Certificate to the
Trustee to the effect of clauses (i) and (ii) above.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, or premium, if any,
or interest on, the Securities or to enforce the performance of any provision of
the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the
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right or remedy or constitute a waiver of or acquiescence in the Event of
Default. All remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default in
the payment of the principal of, premium, if any, or interest on any Security
(which may be waived only with the consent of each Holder affected). Upon any
such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall deemed to have been cured for every purpose of this Indenture;
provided, that no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
Section 6.05. Control by Majority.
Subject to Section 7.01(e), the Holders of a majority in principal amount
of the then outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it by this Indenture. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, that
the Trustee determines may be unduly prejudicial to the rights of other Holders,
or would involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder may pursue a remedy with respect to this Indenture or the
Securities only if:
(i) the Holder gives to the Trustee notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in principal amount of the then
outstanding Securities make a request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or
expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity;
and
(v) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Securities do not
give the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
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Holders of the Securities may not enforce this Indenture, except as
provided herein.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, and premium, if any, and interest on
a Security, on or after a respective due date expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
date, 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 Section 6.01(a)(1) or (a)(2) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for (i) the principal,
premium, if any, and interest remaining unpaid on the Securities, (ii) interest
on overdue principal and premium, if any, and, to the extent lawful, interest
and (iii) 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 ("Trustee
Expenses").
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 to have the claims of the Trustee (including any
claim for Trustee Expenses) and the Holders allowed in any Insolvency or
Liquidation Proceeding or other judicial proceedings relative to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute to Holders any
money or other property payable or deliverable on any such claims, and each
Holder authorizes any Custodian in any such Insolvency or Liquidation Proceeding
or other judicial proceeding to make such payments to the Trustee, and if the
Trustee shall consent to the making of such payments directly to the Holders any
such Custodian is hereby authorized to make such payments directly to the
Holders, and to pay to the Trustee any amount due to it hereunder for Trustee
Expenses, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such Trustee Expenses, and any other amounts due
the Trustee under Section 7.07 out of the estate in any such proceeding, shall
be denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders may be entitled to receive in such
proceeding, whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any Insolvency or
Liquidation Proceeding.
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Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second; to the Holders for amounts due and unpaid on the
Securities for principal, premium, if any, and interest,
ratably, without preference or priority of any kind,
according to the amounts due and payable on the
Securities for principal, premium, if any, and interest,
respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the then outstanding Securities.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If any Event of Default occurs (and has not been cured), the
Trustee shall (i) exercise the rights and powers vested in it by this Indenture,
and (ii) use the same degree of care and skill in their exercise, as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee's duties shall be determined solely by the
express provisions of this Indenture, and the Trustee
need perform only those duties that are specifically set
forth in this Indenture and no
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others, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether they conform to this
Indenture's requirements and to confirm the correctness
of all mathematical computations.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that
(i) this paragraph does not limit the effect of Section
7.01(b);
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless
it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction it receives pursuant to
Section 6.05.
(d) Whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holders shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money it
receives except as the Trustee may agree in writing with the Company. Money the
Trustee holds in trust need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may rely on any document it believes to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers.
(e) Unless otherwise specifically provided in the Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer.
(f) Except with respect to Section 4.01, the Trustee shall have no
duty to inquire as to the performance by the Company with respect to the
covenants contained in Article 4. In addition, the Trustee shall not be deemed
to have knowledge of a Default or Event of Default except (i) any Default or
Event of Default occurring pursuant to Sections 4.01, 6.01(a)(i) or 6.01(a)(ii),
or (ii) any Default or Event of Default of which the Trustee shall have received
written notification or obtained actual knowledge.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company or an Affiliate
with the same rights it would have if it were not Trustee. However, if the
Trustee acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to the continue as trustee or
resign. Any Agent may do the same with like rights. The Trustee is also subject
to 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 or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities or for any
money paid to the Company or upon the Company's direction under any provisions
hereof, it shall not be responsible for the use or application of any money any
Paying Agent other than the Trustee receives, and it shall not be responsible
for any statement or recital herein or any statement in the Securities or any
other document in connection with the sale of the Securities or pursuant to this
Indenture, other than its certificate of authentication.
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Section 7.05. Notice to Holders of Defaults and Events of Default.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment on any Security (including any failure to
redeem Securities called for redemption or any failure to purchase Securities
tendered pursuant to an Offer that are required to be purchased by the terms of
this Indenture), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the Holders' interests.
Section 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
Issue Date, the Trustee shall mail to Holders a brief report dated as of such
reporting date that complies with ss. 313(a) of the TIA (but if no event
described in ss. (313)(a) of the TIA has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with ss. 313(b)(2) of the TIA. The Trustee shall also transmit by
mail all reports as required by ss. 313(c) of the TIA.
Commencing at the time this Indenture is qualified under the TIA, a copy
of each report at the time of its mailing to the Holders shall be filed with the
Commission and each stock exchange on which the Securities are listed. The
Company shall notify the Trustee when the Securities are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
advances and expenses it incurs or makes in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses the Trustee incurs arising out of or in connection with
the acceptance or administration of its duties under this Indenture, except as
set forth below. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its Obligations hereunder. The Company shall
defend the claim, and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
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The Company's Obligations under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any loss
or liability the Trustee incurs through negligence or bad faith.
To secure the Company's payment of its Obligations in this Section, the
Trustee shall have a Lien prior to the Securities on all money or property the
Trustee holds or collects, except that held in trust to pay principal of,
premium, if any, and interest on particular Securities. Such Lien shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(a)(6) or (a)(7) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute administrative expenses under any Bankruptcy
Law.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby created by
so notifying the Company. The Holders of a majority in principal amount of the
then outstanding Securities may remove the Trustee by so notifying the Trustee
and the Company. The Company may remove the Trustee if
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy
Law;
(iii) a Custodian or public officer takes charge of the Trustee or its
property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee; provided, that the Holders of a majority in principal amount of the
then outstanding Securities may appoint a successor Trustee to replace any
successor Trustee the Company appoints.
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
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principal amount of the then outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Holders. The retiring
Trustee shall promptly transfer all property it holds as Trustee to the
successor Trustee, provided all sums owing to the retiring Trustee hereunder
have been paid and subject to the Lien provided for in Section 7.07.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Company's obligations under Section 7.07 shall continue for the retiring
Trustee's benefit with respect to expenses and liabilities it incurred prior to
such replacement.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
The Trustee shall at all times (i) be a corporation organized and doing
business under the laws of the United States of America, of any state thereof,
or the District of Columbia authorized under such laws to exercise corporate
trustee power, (ii) be subject to supervision or examination by federal or state
authority, (iii) have a combined capital and surplus of at least $25 million
($100 million in the case of any successor Trustee) as set forth in its most
recent published annual report of condition, and (iv) satisfy the requirements
of ss. 310(a)(1), (2) and (5) of the TIA. The Trustee is subject to ss. 310(b)
of the TIA.
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to ss. 311(a) of the TIA, excluding any creditor
relationship listed in ss. 311(b) of the TIA. A Trustee who has resigned or been
removed shall be subject to ss. 311(a) of the TIA to the extent indicated
therein.
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ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Discharge of Liability on Securities; Defeasance.
(a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (ii) all outstanding Securities have become due and payable and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity all outstanding Securities, including interest thereon (other than
Securities replaced pursuant to Section 2.07), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Sections 8.01(c) and 8.06, cease to be of further effect.
(b) Subject to Sections 8.01(c), 8.02, and 8.06, the Company at
any time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.13, 4.14 and 4.15, and
the operation of Sections 5.01(a)(iii), 5.01(a)(iv) or 6.01(a)(3) through (a)(7)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.01(a)(3)
through (a)(7) or because of the Company's failure to comply with Section
5.01(a)(iii) or 5.01(a)(iv).
Upon satisfaction of the conditions set forth herein and upon the
Company's request (and at the Company's expense), the Trustee shall acknowledge
in writing the discharge of those obligations that the Company has terminated.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.04, 7.07, 7.08,
8.04, 8.05, and 8.06, and the Trustee's and the Paying Agent's Obligations in
Section 8.04 shall survive until the Securities have been paid in full.
Thereafter, the Company's Obligations in Sections 7.07 and 8.05 and the
Company's, Trustee's and Paying Agent's Obligations in Section 8.04 shall
survive.
Section 8.02. Conditions to Defeasance.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment in full of the
principal of and any premium due on, the Securities, and any
accrued and unpaid interest,
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as of the maturity date, the redemption date or the Purchase Date, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing
their opinion that the payments of principal and interest when due
and without reinvestment of the deposited U.S. Government
Obligations plus any deposited money without investment will
provide cash at such times and in such amounts as will be
sufficient to pay principal of, and premium, if any, and interest
when due on all the Securities to maturity or redemption, as the
case may be;
(3) since the Company's irrevocable deposit provided for in Section
8.02(1) 91 days have passed;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect to it;
(5) the deposit does not constitute a default under any other
agreement binding on the Company;
(6) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940, as amended;
(7) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) under 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 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 defeasance had
not occurred;
(8) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect
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; and
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(9) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent
to the defeasance and discharge of the Securities as this Article
8 contemplates have been satisfied.
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption or purchase of Securities at a future date in
accordance with Article 3.
Section 8.03. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
the Securities.
Section 8.04. Repayment to Company.
After the Securities have been paid in full, the Trustee and the Paying
Agent shall promptly turn over to the Company any excess money or securities
they hold.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money they hold for the payment of principal, premium or interest
that remains unclaimed for one year after the date upon which such payment shall
have become due; provided, however, that the Company shall have either caused
notice of such payment to be mailed to each Holder entitled thereto no less than
30 days prior to such repayment or within such period shall have published such
notice in a financial newspaper of widespread circulation published in The City
of New York (including, without limitation, The Wall Street Journal). After
payment to the Company, Holders entitled to the money must look to the Company
for payment as general creditors unless an applicable abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
Section 8.05. Indemnity for Government Obligations.
The Company shall pay and shall indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
Section 8.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 8 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 Securities
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shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that if the Company has made any payment of
principal of, or premium, if any, or interest on any Securities because of the
reinstatement of its Obligations, the Company shall be subrogated to the
Holders' rights to receive such payment from the money or U.S. Government
Obligations the Trustee or Paying Agent holds.
ARTICLE 9
AMENDMENTS
Section 9 01. Amendments and Supplements Permitted Without Consent of Holders.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Securities without the
consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(c) to provide for the assumption by a Successor Corporation of the
Company's Obligations to the Holders in the event of a Disposition
pursuant to Article 5;
(d) to comply with the Commission's requirements to effect or maintain
the qualification of this Indenture under the TIA; or
(e) to make any change that does not materially adversely affect any
Holder's legal rights hereunder.
Upon the Company's request, after receipt by the Trustee of a resolution
of the Board of Directors authorizing the execution of any amended or
supplemental indenture and the documents described in Section 9.06, the Trustee
shall join with the Company in the execution of any amended or supplemental
indenture authorized or permitted by the terms of this Indenture and make any
further appropriate agreements and stipulations which may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental indenture which affects its own rights, duties or immunities under
this Indenture or otherwise.
Section 9.02. Amendments and Supplements Requiring Consent of Holders.
Subject to Section 6.07, the Company and the Trustee may amend or
supplement this Indenture or the Securities with the written consent of the
Holders of at least a majority in principal amount of the then outstanding
Securities (including consents obtained in connection with a tender offer or
exchange offer for the Securities). Subject to Sections 6.04 and 6.07, the
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Holders of a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Securities) may also waive any existing Default or Event of Default
(other than a payment Default) and its consequences or compliance in a
particular instance by the Company with any provision of this Indenture or the
Securities.
Upon the Company's request, after receipt by the Trustee of a resolution
of the Board of Directors authorizing the execution of any supplemental
indenture, evidence of the Holders' consent, and the documents described in
Section 9.06, the Trustee shall join with the Company in the execution of such
amended or supplemental indenture unless such amended or supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to each Holder affected thereby a notice briefly describing
the amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amended or supplemental indenture or waiver. Without
the consent of each Holder affected, an amendment, supplement or waiver under
this Section may not
(1) reduce the principal amount of Securities whose Holders
must consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest, including default interest as set forth in
Section 4.01, on any Security or alter the redemption or
purchase provisions with respect thereto;
(3) reduce the principal of or change the fixed maturity of any
Security;
(4) make any Security payable in money other than that stated
in the Security;
(5) make any change in Section 6.04 or 6.07 or in this sentence
of this Section 9.02; or
(6) waive a default in the payment of the principal of, or
premium, if any, or interest on, or redemption or purchase
payment with respect to, any Security (except a rescission
of acceleration of the Securities by the Holders of at
least a majority in aggregate principal amount of the then
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outstanding Securities and a waiver of the payment default
that resulted from such acceleration).
Section 9.03. Compliance with TIA.
Every amendment or supplement to this Indenture or the Securities shall
be set forth in an amended supplemental indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
Indebtedness as the consenting Holder's Security, even if notation of the
consent is not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his or her Security or portion of a Security
if the Trustee receives the notice of revocation before the date on which the
Trustee receives an Officer's Certificate certifying that the Holders of the
requisite principal amount of Securities have consented to the amendment or
waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the holders of Securities entitled to consent to any
amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
holders of Securities at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to consent to such amendment or waiver
or to revoke any consent previously given, whether or not such Persons continue
to be holders of Securities after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Holders of the principal amount of Securities required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.
After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in any of clauses (1) through (6) of
Section 9.02. In such case the amendment or waiver shall bind each Holder who
has consented to it and every subsequent holder of a Security that evidences
the same debt as the consenting Holder's Security.
Section 9.05. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Security thereafter authenticated. The Company in
exchange for all Securities may Issue and the Trustee shall authenticate new
Securities that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or Issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
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Section 9.06. Trustee Protected.
The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article 9 if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing such amendment or supplemental
indenture, the Trustee shall be entitled to receive and, subject to Section
7.01, shall be fully protected in relying upon, an Officers' Certificate and
Opinion of Counsel as conclusive evidence that such amendment or supplemental
indenture is authorized or permitted by this Indenture, that it is not
inconsistent herewith, and that it will be valid and binding upon the Company in
accordance with its terms. The Company may not sign an amendment or supplemental
indenture until the Board of Directors approves it.
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trustee Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by the operation of ss. 318(c) of the TIA, the imposed duties
shall control.
Section 10.02. Notices.
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person, mailed by registered or
certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next-day delivery to the
other's address:
If to the Company:
Jordan Industries, Inc.
ArborLake Centre
1751 Lake Cook Road, Suite 300
Deerfield, Illinois 60015
Telecopier No.: (708) 945-9645
If to the Trustee:
First Trust National Association
180 East Fifth Street
St. Paul, MN 55011
Attn: Corporate Trust Department
Telecopier No.: (612) 223-0711
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The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given at the time delivered by hand if personally
delivered; the date receipt is acknowledged if mailed by registered or certified
mail; when answered back if telecopied; and the next Business Day after timely
delivery to the courier if sent by overnight air courier guaranteeing next-day
delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail to his or her address shown on the register kept by the Registrar. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 10.03. Communication 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 or the Securities. The Company, the
Trustee, the Registrar and any other Person shall have the protection of TIA ss.
312(c).
Section 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set
forth in Section 10.05) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements set
forth in Section 10.05) stating that, in the opinion of such counsel, all
such conditions precedent provided for in this Indenture relating to the
proposed action have been complied with.
Section 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall include:
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(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in such Person's opinion, such
condition or covenant has been complied with.
Section 10.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 10.07. Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
Section 10.08. No Recourse Against Others.
No director, officer, employee or stockholder of the Company shall have
any liability for any Obligations of the Company under the Securities, the
Registration Rights Agreement or the Indenture or for any Claim based on, in
respect of or by reason of such Obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the Issuance of the Securities.
Section 10.09. Counterparts.
This Indenture 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.
Section 10.10. Variable Provisions.
The Company initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.
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The first certificate pursuant to Section 4.03 shall be for the fiscal
year ending on December 31, 1997.
Section 10.11. Governing Law.
The internal laws of the State of New York shall govern this Indenture and
the Securities, without regard to the conflict-of-laws provisions thereof.
Section 10.12. 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 10.13. Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
Section 10.14. Severability.
If any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 10.15. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
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Dated as of July 25, 1997 JORDAN INDUSTRIES, INC.
By:
----------------------------------
Name:
--------------------------------
Attest:
- ------------------------------------
(SEAL)
Dated as of July 25, 1997 FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------
Name:
--------------------------------
Attest:
- ------------------------------------
(SEAL)
SIGNATURES
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EXHIBIT A
(Face of Security)
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY 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 MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DEPOSITORY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.(1)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) AS PERMITTING
RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY
PREDECESSOR OF SUCH NOTE) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO FOREIGN PERSONS THAT OCCUR IN
OFFSHORE TRANSACTIONS AND WITHOUT DIRECTED SELLING EFFORTS WITHIN THE MEANINGS
OF SUCH TERMS AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(l), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING THE NOTE FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO
- ---------------
1 This paragraph should be included only if the Note is issued in global form.
A-1
<PAGE>
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
A-2
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JORDAN INDUSTRIES, INC.
l0 3/8% SENIOR NOTE
DUE 2007
No. $
CUSIP NO.
Jordan Industries, Inc., an Illinois corporation (the "Company"), as
obligor, for value received promises to pay to ___________ or registered
assigns, the principal sum of [ ] Dollars on August 1, 2007. Interest Payment
Dates: February 1 and August 1 and on the maturity date. Record Dates: January
15 and July 15 (whether or not a Business Day).
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated:
JORDAN INDUSTRIES, INC.
By: __________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the Notes referred to in the within-mentioned Indenture:
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:____________________________
Authorized Signature
A-3
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(Back of Security)
10 3/8% SENIOR NOTE
DUE 2007
1. Interest. Jordan Industries, Inc., (the "Company") promises to
pay interest on the principal amount of the Notes at the rate and in the manner
specified below. Interest on the Notes will accrue at 1O 3/8% per annum from the
date this Note is issued until maturity and will be payable semiannually in cash
on February 1 and August 1 of each year, or if any such day is not a Business
Day on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date on which interest
has been paid or, if no interest has been paid, from July 25, 1997; provided
that the first Interest Payment Date shall be February 1, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date for the next Interest Payment Date
even if such Notes are cancelled after such record date and on or before such
Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect
principal payments on such Notes. The Company shall pay principal, 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. However, the Company may
pay principal, premium, if any, and interest by check payable in such money, and
any such check may be mailed to a Holder's registered address.
3. Paying Agent and Registrar. First Trust National Association (the
"Trustee") will initially act as the Paying Agent and Registrar. The Company may
appoint additional paying agents or co-registrars, and change the Paying Agent,
any additional paying agent, the Registrar or any co-registrar without prior
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of July 25, 1997 (the "Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (the "TIA") (15
U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to, and qualified by, all
such terms, certain of which are summarized herein, and Holders are referred to
the Indenture and the TIA for a statement of such terms (all capitalized terms
not defined herein shall have the meanings assigned than in the Indenture). The
Notes are unsecured general obligations of the Company limited to $120,000,000
in aggregate principal amount.
5. Optional Redemption. Except as described in paragraph 6 below,
the Notes may not be redeemed at the option of the Company prior to August 1,
2002. During the twelve (12) month period beginning August 1 of the years
indicated below, the Notes will be
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redeemable at the option of the Company, in whole or in part, at the redemption
prices (expressed as percentages of the principal amount) set forth below, plus
any accrued and unpaid interest to the date of redemption:
Year Percentage
---- ----------
2002 105.188 %
2003 102.594 %
2004 and thereafter 100.000 %
6. Mandatory Redemption. Subject to the Company's obligation to make
an offer to purchase Notes under certain circumstances pursuant to Section 4.13
and 4.14 of the Indenture (as described in paragraph 7 below), the Company is
not required to make any mandatory redemption, purchase or sinking fund payments
with respect to Securities.
7. Mandatory Offers to Purchase Securities. (a) Following the
occurrence of a Change of Control (the "Change of Control Trigger Date"), the
Company will be required to offer (a "Change of Control Offer") to purchase all
outstanding Securities at a purchase price equal to 101% of the principal amount
of such Securities, plus any accrued and unpaid interest to the date of
purchase.
(b) If the Company or any Restricted Subsidiary consummates one or
more Asset Sales and does not use all of the Net Proceeds from such Asset Sales
as provided in the Indenture, the Company will be required, under certain
circumstances, to utilize the Excess Proceeds from such Asset Sales to offer (an
"Asset Sale Offer") to purchase Notes at a purchase price equal to 100% of the
principal amount of the Notes, plus any accrued and unpaid interest to the date
of purchase. If the Excess Proceeds are insufficient to purchase all Notes
tendered pursuant to any Asset Sale Offer, the Trustee shall select the Notes to
be purchased in accordance with the terms of the Indenture.
(c) Holders may tender all or, subject to paragraph 8 below, any
portion of their Notes in a Change of Control or Asset Sale Offer (collectively,
an "Offer") by completing the form below entitled "OPTION OF HOLDER TO ELECT
PURCHASE."
(d) The Company will comply with Rule 14e-1 under the Securities
Exchange Act of 1934, as amended, and any other securities laws and regulations
to the extent applicable to any Offer.
8. Notice of Redemption or Purchase. Notice of an optional
redemption or an Offer will be mailed to each Holder at its registered address
at least 30 days but not more than 60 days before the date of redemption or
purchase. Notes may be redeemed or purchased in part, but only in whole
multiples of $1000 unless all Notes held by a Holder are to be redeemed or
purchased. On or after any date on which Notes are redeemed or purchased,
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<PAGE>
interest ceases to accrue on the Notes or portions thereof called for redemption
or accepted for purchase on such date.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples thereof.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. Holders seeking to transfer or exchange their Notes may be
required, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any Note
or portion of a Note selected for redemption or tendered pursuant to an Offer.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes, and any
existing Default or Event of Default (except a payment default) may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes. Without the consent of any Holder, the Indenture and the
Notes may be amended to: cure any ambiguity, defect or inconsistency; provide
for uncertificated Notes in addition to or in place of certified Notes; provide
for the assumption by another corporation of the Company's obligations to the
Holders in the event of a merger or consolidation of the Company in which the
Company is not the surviving corporation or a sale of substantially all of the
Company's assets to such other corporation; comply with the Securities and
Exchange Commission's requirements to effect or maintain the qualification of
the Indenture under the TIA; or, make any change that does not materially
adversely effect any Holder's rights under the Indenture. Certain provisions of
the Indenture cannot be amended without the consent of each Holder affected
thereby.
12. Defaults and Remedies. Events of Default include: default for 30
days in payment of interest on the Notes; default in payment of principal of or
premium, if any on the Notes; failure by the Company for 30 days after notice to
it to comply with any of its other agreements or covenants in, or provisions of,
the Indenture or the Notes; certain defaults under and acceleration prior to
maturity, or failure to pay at maturity, of certain other Indebtedness; certain
final judgments that remain undischarged; and certain events of bankruptcy or
insolvency involving the Company or any Restricted Subsidiary that is a
Significant Subsidiary. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the Notes may
declare all the Notes to be immediately due and payable in an amount equal to
the principal amount of such Notes, plus any accrued and unpaid interest;
provided, however, that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, the principal amount of, and any accrued and
unpaid interest on, the Notes becomes due and payable immediately without
further action or notice. Subject to certain exceptions, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power, provided that the Trustee will be under no
obligation to
A-6
<PAGE>
exercise any of its rights or powers under the Indenture at the request of the
Holders unless such Holders have offered to the Trustee security and indemnity
satisfactory to it. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may withhold from Holder notice of any
continuing default (except a payment Default) if it determines that withholding
notice is in their interests. The Company must furnish an annual compliance
certificate to the Trustee.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from and perform services
for the Company or any Affiliates, and may otherwise deal with the Company or
any Affiliates, as if it were not Trustee.
14. No Recourse Against Others. No director, officer, employee or
stockholder of the Company shall have any liability for any Obligations of the
Company under the Notes, the Indenture or the Registration Rights Agreement or
for any claim based on, in respect of, or by reason of such Obligations or the
creation of any such Obligation. Each Holder by accepting a Note waives and
releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Notes.
15. Successor Substituted. Upon the consolidation or merger by the
Company with or into another corporation, or upon the sale, conveyance, lease or
other disposition of all or substantially all of its assets to another
corporation, in accordance with the Indenture, the corporation surviving any
such merger or consolation (if not the Company) or the corporation to which such
assets were sold or transferred to shall succeed to, and be substituted for, and
may exercise every right and power of the Company under the Indenture with the
same effect as if such surviving or other corporation had been named as the
Company in the Indenture.
16. Governing Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of New York.
17. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
A-7
<PAGE>
20. Holders' Compliance with Registration Rights Agreement. Each
Holder of a Note, by his acceptance thereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, dated as of July 25, 1997,
among the Company and the parties named on the signature page thereof (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Company and the Purchasers (as defined therein) to the extent provided therein.
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to: Jordan Industries, Inc., ArborLake Centre, 1751 Lake
Cook Road, Suite 300, Deerfield, Illinois 60015.
A-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to:
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint__________________________ as agent to transfer this Note
on the books of the Company. The agent may substitute another to act for him.
_______________________________________________________________________________
Date:______________________
Your Signature:________________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee*
* NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
A-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.13 of the Indenture, check the box: |_|
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 of the Indenture, check the box: |_|
If you elect to have only part of this Note purchased by the Company
pursuant to Section 4.13 or 4.14 of the Indenture, state the amount (multiples
of $1000 only):
$____________________________
Date:________________________ Your Signature:__________________________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*
* NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES(2)
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Note following
Principal Amount of this Principal Amount of this such decrease (or in- Signature of autho-
Date of Exchange Global Note Global Note crease) rized officer of Trustee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ------------------------
(2) This should be included only if the Note is issued in global form.
A-11
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: [Series A] [Series B] 1O 3/8% Senior Notes due 2007 (the "Notes") of
Jordan Industries, Inc.
This Certificate relates to $______ principal amount of Notes held in *
|_| book-entry or * |_| definitive form by _______________________ (the
"Transferor").
The Transferor, by written order, has requested the Trustee:
|_| to deliver in exchange for its beneficial interest in the Global Note held
by the depository, a Note or Notes in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof indicated
above); or
|_| to exchange or register the transfer of a Note or Notes. In connection
with such request and in respect of each such Note, the Transferor does
hereby certify that Transferor is familiar with the indenture relating to
the above captioned Notes and the transfer of this Note does not require
registration under the Securities Act of 1933, as amended (the "Securities
Act"), because such Note:
|_| is being acquired for the Transferor's own account, without transfer;
|_| is being transferred pursuant to an effective registration statement;
|_| is being transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act), in reliance on such Rule 144A;
|_| is being transferred to an institutional "accredited investor" as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act;**
|_| is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;***
|_| is being transferred pursuant to Rule 144 under the Securities Act;*** or
|_| is being transferred pursuant to another exemption from the registration
requirements of the Securities Act (explain:_____________________________
____________________________________________________________________).***
________________________________
[INSERT NAME OF TRANSFEROR]
By:________________________
Date:______________________
* Check applicable box.
** If this box is checked, this certificate must be accompanied by a
transferee letter of representations.
*** If this box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in
compliance with the Securities Act.
B-1
<PAGE>
- -------------------------------------------------------------------------------
------------------------------------------
JORDAN INDUSTRIES, INC.
AND
FIRST TRUST NATIONAL ASSOCIATION
------------------------------------------
AS TRUSTEE
$213,975,655
SERIES A AND SERIES B
11 3/4% SENIOR SUBORDINATED
DISCOUNT DEBENTURES DUE 2009
------------------------------------------
------------------
INDENTURE
Dated as of April 2, 1997
------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE........................................................1
Section 1.01 DEFINITIONS...........................................1
Section 1.02 OTHER DEFINITIONS....................................20
Section 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT....20
Section 1.04 RULES OF CONSTRUCTION................................20
ARTICLE 2
THE SECURITIES.....................................................21
Section 2.01 FORM AND DATING......................................21
Section 2.02 EXECUTION AND AUTHENTICATION.........................21
Section 2.03 REGISTRAR AND PAYING AGENT...........................22
Section 2.04 PAYING AGENT TO HOLD MONEY IN TRUST..................22
Section 2.05 HOLDER LISTS.........................................23
Section 2.06 TRANSFER AND EXCHANGE................................23
Section 2.07 REPLACEMENT SECURITIES...............................29
Section 2.08 OUTSTANDING SECURITIES...............................30
Section 2.09 TREASURY SECURITIES..................................30
Section 2.10 TEMPORARY SECURITIES.................................30
Section 2.11 CANCELLATION.........................................30
Section 2.12 DEFAULTED INTEREST...................................31
Section 2.13 RECORD DATE..........................................31
Section 2.14 CUSIP NUMBER.........................................31
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE...............31
Section 3.01 NOTICES TO TRUSTEE...................................31
Section 3.02 SELECTION OF SECURITIES TO BE REDEEMED OR PURCHASED..32
Section 3.03 NOTICE OF REDEMPTION.................................32
Section 3.04 EFFECT OF NOTICE OF REDEMPTION.......................33
Section 3.05 DEPOSIT OF REDEMPTION PRICE..........................34
Section 3.06 SECURITIES REDEEMED IN PART..........................34
Section 3.07 OPTIONAL REDEMPTION PROVISIONS.......................34
Section 3.08 MANDATORY PURCHASE PROVISIONS........................35
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<PAGE>
ARTICLE 4
COVENANTS..........................................................36
Section 4.01. PAYMENT OF SECURITIES...............................36
Section 4.02. SEC REPORTS.........................................37
Section 4.03. COMPLIANCE CERTIFICATE..............................38
Section 4.04. STAY EXTENSION AND USURY LAWS.......................38
Section 4.05. LIMITATION ON RESTRICTED PAYMENTS...................39
Section 4.06. CORPORATE EXISTENCE.................................42
Section 4.07. LIMITATION ON INCURRENCE OF INDEBTEDNESS............43
Section 4.08. LIMITATION ON TRANSACTIONS WITH AFFILIATES..........44
Section 4.09. LIMITATION ON LIENS.................................45
Section 4.10. COMPLIANCE WITH LAWS, TAXES.........................45
Section 4.11. LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES......45
Section 4.12. MAINTENANCE OF OFFICE OR AGENCIES...................46
Section 4.13. CHANGE OF CONTROL...................................47
Section 4.14. LIMITATION ON ASSET SALES...........................47
Section 4.15. REDEMPTION OF OLD NOTES.............................48
Section 4.16. SENIOR SUBORDINATED INDEBTEDNESS....................48
Section 4.17. GUARANTEES BY RESTRICTED SUBSIDIARIES...............49
ARTICLE 5
SUCCESSORS.........................................................50
Section 5.01. MERGER OR CONSOLIDATION.............................50
Section 5.02. SUCCESSOR CORPORATION SUBSTITUTED...................51
ARTICLE 6
DEFAULTS AND REMEDIES..............................................51
Section 6.01. EVENTS OF DEFAULT...................................51
Section 6.02. ACCELERATION........................................53
Section 6.03. OTHER REMEDIES......................................53
Section 6.04. WAIVER OF PAST DEFAULTS.............................54
Section 6.05. CONTROL BY MAJORITY.................................54
Section 6.06. LIMITATION ON SUITS.................................54
Section 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT................55
Section 6.08. COLLECTION SUIT BY TRUSTEE..........................55
Section 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM....................55
Section 6.10. PRIORITIES..........................................55
Section 6.11. UNDERTAKING FOR COSTS...............................56
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<PAGE>
ARTICLE 7
TRUSTEE............................................................56
Section 7.01. DUTIES OF TRUSTEE...................................56
Section 7.02. RIGHTS OF TRUSTEE...................................57
Section 7.03. INDIVIDUAL RIGHTS OF TRUSTEE........................58
Section 7.04. TRUSTEE'S DISCLAIMER................................58
Section 7.05. NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF
DEFAULTS............................................58
Section 7.06. REPORTS BY TRUSTEE TO HOLDERS.......................58
Section 7.07. COMPENSATION AND INDEMNITY..........................59
Section 7.08. REPLACEMENT OF TRUSTEE..............................59
Section 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC....................60
Section 7.10. ELIGIBILITY; DISQUALIFICATION.......................61
Section 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY...61
ARTICLE 8
DISCHARGE OF INDENTURE.............................................61
Section 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE....61
Section 8.02. CONDITIONS TO DEFEASANCE............................62
Section 8.03. APPLICATION OF TRUST MONEY..........................63
Section 8.04. REPAYMENT TO COMPANY................................63
Section 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS................63
Section 8.06. REINSTATEMENT.......................................64
ARTICLE 9
AMENDMENTS.........................................................64
Section 9.01. AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT
CONSENT OF HOLDERS
Section 9.02. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF
HOLDERS.............................................65
Section 9.03. COMPLIANCE WITH TIA.................................66
Section 9.04. REVOCATION AND EFFECT OF CONSENTS...................66
Section 9.05. NOTATION ON OR EXCHANGE OF SECURITIES...............66
Section 9.06. TRUSTEE PROTECTED...................................67
Section 9.07. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF
HOLDERS OF SENIOR INDEBTEDNESS......................67
ARTICLE 10
SUBORDINATION......................................................67
Section 10.01. AGREEMENT TO SUBORDINATE...........................67
Section 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY...............67
Section 10.03. DEFAULT ON SENIOR INDEBTEDNESS.....................68
Section 10.04. ACCELERATION OF SECURITIES.........................69
Section 10.05. WHEN DISTRIBUTION MUST BE PAID OVER................69
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<PAGE>
Section 10.06. NOTICE.............................................70
Section 10.07. SUBROGATION........................................70
Section 10.08. RELATIVE RIGHTS....................................70
Section 10.09. THE COMPANY AND HOLDERS MAY NOT IMPAIR
SUBORDINATION......................................71
Section 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE...........72
Section 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.................72
Section 10.12. AUTHORIZATION TO EFFECT SUBORDINATION..............72
Section 10.13. PAYMENT............................................73
ARTICLE 11
MISCELLANEOUS......................................................73
Section 11.01. TRUST INDENTURE ACT CONTROLS.......................73
Section 11.02. NOTICES............................................73
Section 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS........74
Section 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.74
Section 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION......74
Section 11.06. RULES BY TRUSTEE AND AGENTS........................75
Section 11.07. LEGAL HOLIDAYS.....................................75
Section 11.08. NO RECOURSE AGAINST OTHERS.........................75
Section 11.09. COUNTERPARTS.......................................75
Section 11.10. VALUABLE PROVISIONS................................75
Section 11.11. GOVERNING LAW......................................76
Section 11.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS......76
Section 11.13. SUCCESSORS.........................................76
Section 11.14. SEVERABILITY.......................................76
Section 11.15. THIRD PARTY BENEFICIARIES..........................76
Section 11.16. TABLE OF CONTENTS, HEADINGS, ETC...................76
EXHIBIT A Form of Security .......................................A-1
EXHIBIT B Certificate of Transferor...............................B-1
EXHIBIT C Certificate of Institutional Accredited Investor........C-1
-4-
<PAGE>
This Indenture, dated as of April 2, 1997, is between Jordan
Industries, Inc., an Illinois corporation, and First Trust National
Association, as trustee.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of the Company's 11 3/4%
Series A Senior Subordinated Discount Debentures due 2009 (the "Series A
Discount Debentures") and the Company's 11 3/4% Series B Senior Subordinated
Discount Debentures due 2009 (the "Series B Discount Debentures," and, together
with the Series A Discount Debentures, the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. DEFINITIONS.
"Accreted Value" means with respect to any Security (i) as of any date
prior to April 1, 2002, the sum of (a) the initial offering price of such
Security, and (b) the portion of the original issue discount on such Security
(which for this purpose shall be deemed to be the excess of the principal
amount over the initial offering price) that has been amortized with respect to
such Security through such date, such original issue discount to be amortized
at the rate of 11 3/4% per annum (such percentage being expressed as a
percentage of the sum of the initial offering price plus previously amortized
original issue discount) using semi-annual compounding of such rate on each
April 1 and October 1, commencing April 1, 1997, from the date of original
Issuance of the Securities through such date, and (ii) on and after April 1,
2002, the principal amount of such Security.
"Affiliate" means any of the following:
(i) any Person directly or indirectly controlling or
controlled by or under direct or indirect common control
with the Company,
(ii) any spouse, immediate family member or other relative who
has the same principal residence as any person described
in clause (i) above,
(iii) any trust in which any such Persons described in clause
(i) or (ii) above has a beneficial interest, and
(iv) any corporation or other organization of which any such
Persons described above collectively own 50% or more of
the equity of such entity.
"Agent" means any Registrar, Paying Agent, or co-registrar.
"Asset Sale" means the sale, lease, conveyance or other disposition by
the Company or a Restricted Subsidiary of assets or property (other than (i)
the sale or disposition of any Restricted Investment, (ii) the sale of
inventory in the ordinary course of business, or (iii) Receivables Financings)
<PAGE>
whether owned on the date of original Issuance of the Securities or thereafter
acquired, in a single transaction or in a series of related transactions, that
are outside of the ordinary course of business of the Company or such
Restricted Subsidiary.
"Bankruptcy Law" means Title 11 United States Code or any similar
federal or state law for the relief of Debtors.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligations" means any obligation that is required to
be classified and accounted for as a capitalized lease for financial purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations
or other equivalents (however designated) of corporate stock, including any
Preferred Stock.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit,
time deposits, overnight bank deposits, bankers acceptances and repurchase
agreements of any commercial bank that has capital and surplus in excess of
$100,000,000 having maturities of one year or less from the date of
acquisition, (c) commercial paper of an issuer rated at least A-2 by Standard &
Poor's Corporation or P-2 by Moody's Investor Service, Inc., or carrying an
equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease publishing ratings of investments, and (d) money
market accounts or funds with or issued by Qualified Issuers.
"Cash Flow" means, for any given period and Person, the sum of,
without duplication, Consolidated Net Income, plus
(i) the portion of Net Income attributable to the minority
interests in its Subsidiaries. to the extent not included in
calculating Consolidated Net Income, plus
(ii) any provision for taxes based on income or profits to the
extent such income or profits were included in computing
Consolidated Net Income, plus
(iii) Consolidated Interest Expense, to the extent deducted in
computing Consolidated Net Income, plus
(iv) the amortization of all intangible assets, to the extent such
amortization was deducted in computing Consolidated Net Income
(including, but not limited to, inventory), write-ups,
goodwill, debt and financing costs and Incentive Arrangements),
plus
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<PAGE>
(v) any non-capitalized transaction costs incurred in connection
with financings or acquisitions, (including, but not limited
to, financing and refinancing fees, to the extent deducted in
computing Consolidated Net Income), plus
(vi) all depreciation and all other non-cash charges (including
without limitation, those charges relating to purchase
accounting adjustments, to the extent deducted in computing
Consolidated Net Income), plus
(vii) any interest income, to the extent such income was not included
in computing Consolidated Net Income, plus
(viii) all dividend payments on Preferred Stock (whether or not paid
in cash), to the extent deducted in computing Consolidated Net
Income, plus
(ix) any extraordinary or non-recurring charge or expense arising
out of the implementation of SFAS 106 or SFAS 109, to the
extent deducted in computing Consolidated Net Income;
provided, however, that if any such calculation includes any period during
which an acquisition or sale of a Person or the incurrence or repayment of
Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and Person, the
ratio of:
(a) Cash Flow, divided by
(b) the sum of Consolidated Interest Expense and the amount
of all dividend payments on any series of Preferred Stock
of such Person (except dividends paid or payable in
additional shares of Capital Stock (other than
Disqualified Stock)). in each case, without duplication;
provided, however, that if any such calculation includes any period during
which an acquisition or sale of a Person or the incurrence or repayment of
Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Change of Control" means the occurrence of any of the following: (i)
the Jordan Stockholders shall fail to be the beneficial owners, directly or
indirectly, of at least 22% of the outstanding shares of common stock of the
Company on a fully-diluted basis (provided that the Issuance of any shares of
the Company's common stock pursuant to a primary public offering shall not be
considered to have diluted such percentage ownership); or (ii) the Company is
merged or consolidated with another corporation, or all or substantially all of
the assets of the Company are sold, leased or conveyed to another Person, and
the Jordan Stockholders are not the beneficial owners, directly or indirectly,
immediately following such transaction, of at least 22% of the Equity Interests
(which are entitled to vote in the election of directors or other governing
body) of the corporation surviving any such consolidation or merger, or the
Person
-3-
<PAGE>
to which such sale, lease or conveyance shall have been made; or (iii) the
Company is liquidated or dissolved.
"Claim" means any and all rights to payment under or in respect of any
Security or this Indenture or any related agreements or arrangements, all
rights, remedies, demands, causes of action and claims of every type and
description at any time held or asserted by, or arising in favor of, any Holder
against the Company or any of its Subsidiaries or any Affiliate, or any of
their assets, on account of any breach of any promise, obligation, agreement,
indemnity, representation, warranty or covenant in a Security or this Indenture
or any related agreements or arrangements or in any manner arising out of, or
relating to, the offer, sale or purchase of a Security or the transactions
contemplated by this Indenture or by related agreements or the performance or
nonperformance or the payment or nonpayment thereof, whether based on contract,
tort, duty imposed by law or any other theory, legal or equitable and whether
for rescission, indemnification, contribution or damages (including without
limitation, (a) any claim substituted for, or equivalent to, any of the
foregoing, and (b) any judgment with respect to any of the foregoing).
"Company" means Jordan Industries, Inc. until a successor replaces it
in accordance with Article 5 and thereafter means the successor, and shall
include any and all other obligors on the Securities.
"Consolidated Interest Expense" means, for any given period and
Person, the aggregate of the interest expense in respect of all Indebtedness of
such Person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount on any such Indebtedness, all non-cash interest payments, the interest
portion of any deferred payment obligation and the interest component of
Capital Lease Obligations, but excluding amortization of deferred financing
fees if such amortization would otherwise be included in interest expense);
provided, however, that for the purpose of the Cash Flow Coverage Ratio in
Sections 4.07 and 5.01, Consolidated Interest Expense shall be calculated on a
Pro Forma Basis as if all Indebtedness Issued or refinanced during the relevant
period had been Issued or refinanced on the first day of such period; provided
further that any premiums, fees and expenses (including the amortization
thereof) payable in connection with the Refinancing Plan or any other
refinancing of Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
however, that:
(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such
acquisition shall be excluded, and
(ii) Consolidated Net Income of any Person will not include, without
duplication, any deduction for:
(A) any increased amortization or depreciation resulting from
the write-up of assets pursuant to Accounting Principles
Board Opinion Nos. 16 and 17, as amended or supplemented
from time to time,
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(B) the amortization of all intangible assets (including
amortization attributable to inventory write-ups,
goodwill, debt and financing costs, and Incentive
Arrangements),
(C) any non-capitalized transaction costs incurred in
connection with financings or acquisitions (including,
but not limited to, financing and refinancing fees),
(D) any extraordinary or nonrecurring charges relating to any
premium or penalty paid, write-off or deferred financing
costs or other financial recapitalization charges in
connection with redeeming or retiring any Indebtedness
prior to its stated maturity, and
(E) any non-recurring charge arising out of the restructuring
or consolidation of the operations of any Person(s) or
business either alone or together with the Company or any
Restricted Subsidiary, incurred within 18 months
following the acquisition of such Person(s) or business
by the Company or any Restricted Subsidiary;
provided, however, that for purposes of determining the Cash Flow Coverage
Ratio, Consolidated Net Income shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any Person means, as of any
date, the consolidated equity of the common stockholders of such Person
(excluding the cumulated foreign currency translation adjustment), all
determined on a consolidated basis in accordance with GAAP, but without any
reduction in respect of the payment of dividends on any series of such
Person's Preferred Stock if such dividends are paid in additional shares of
Capital Stock (other than Disqualified Stock); provided, however, that
Consolidated Net Worth shall also include, without duplication:
(i) the amortization of all write-ups of inventory,
(ii) the amortization of all intangible assets (including
amortization of goodwill, debt and financing costs, and
Incentive Arrangements),
(iii) any non-capitalized transaction costs incurred in connection
with financings or acquisitions (including, but not limited to,
financing and refinancing fees),
(iv) any increased amortization or depreciation resulting from the
write-up of assets pursuant to Accounting Principles Board
Opinion Nos. 16 and 17, as amended and supplemented from time
to time,
(v) any extraordinary or nonrecurring charges or expenses relating
to any premium or penalty paid, write-off or deferred financing
costs or other financial recapitalization charges incurred in
connection with redeeming or retiring any Indebtedness prior to
its stated maturity,
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(vi) any non-recurring cash charge arising out of the restructuring
or consolidation of the operations of any Person(s) or business
either alone or together with the Company or any Restricted
Subsidiary, incurred within 18 months following the acquisition
of such Person(s) or business by the Company or any Restricted
Subsidiary, and
(vii) any extraordinary or non-recurring charge arising out of the
implementation of SFAS 106 or SFAS 109;
provided, however, that for purposes of determining Consolidated Net Worth in
Section 5.01, Consolidated Net Worth shall be calculated on a Pro Forma Basis.
"Consulting Agreement" means the Amended and Restated Management
Consulting Agreement, between the Company and TJC Management Corporation, as in
effect on the date of original Issuance of the Securities.
"Corporate Trust Office" shall be at the address of the Trustee
specified in Section 11.02 or such other address as the Trustee may give notice
to the Company.
"Credit Agent" means the agent under the Credit Agreement or the New
Credit Agreement, as the case may be, or such other Person as may be designated
as such by the Company from time to time by notifying the Trustee.
"Credit Agreement" means the amended and restated revolving credit
agreement dated December 10, 1991 among the Company, certain of its
Subsidiaries and The First National Bank of Boston, as amended or supplemented
from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Securities" means Securities that are in the form of
Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto).
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depositary with respect to the Securities, until a successor shall have
been appointed and become such pursuant to Section 2.06 of this Indenture, and,
thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Indebtedness" means (i) Indebtedness evidenced by
(A) the Securities and (B) the Credit Agreement or the New Credit Agreement if
such Indebtedness constitutes Senior Indebtedness, irrespective of amount, and
(ii) any other Senior Indebtedness Issued under a credit agreement or other
credit facility (x) in an aggregate outstanding principal amount of at least
$50,000,000 (or, in the case of any revolving credit agreement or other
committed credit facility, having an aggregate commitment
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of at least $50,000,000), and (y) that is specifically designated by the
Company in the instrument creating or evidencing such Senior Indebtedness as
"Designated Senior Indebtedness."
"Disqualified Stock" means any Capital Stock that by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, the maturity date of the Securities.
"Dura-Line Agreement" means the Preferred Stock Agreement, dated March
1, 1991-2, among Dura-Line and certain other Persons, as in effect on the date
of original Issuance of the Securities.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation); provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer by the Company to Holders to exchange
Series B Securities for Series A Securities pursuant to the Registration Rights
Agreement.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the date of original Issuance of the Securities. All financial
and accounting determinations and calculations under this Indenture will be
made in accordance with GAAP.
"Global Security" means a Security that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 2
to the form of the Note attached hereto as Exhibit A.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Persons under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such Person against
fluctuations, or otherwise to establish financial hedges in respect of,
exchange rates, currency rates or interest rates.
"Holder" means a Person in whose name a Security is registered.
"Incentive Arrangements" means any earn-out agreements, stock
appreciation rights, "phantom" stock plans, employment agreements,
non-competition agreements, subscription and stockholders agreements and other
incentive and bonus plans and similar arrangements made in connection with
acquisitions of Persons or businesses by the Company or the Restricted
Subsidiaries or the retention of executives, officers or employees by the
Company or the Restricted Subsidiaries.
"Indebtedness" means, with respect to any Person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters
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<PAGE>
of credit (or reimbursement agreements in respect thereof) or representing the
deferred and unpaid balance of the purchase price of any property (including
pursuant to capital leases), except any such balance that constitutes an
accrued expense or a trade payable, and any Hedging Obligations, if and to the
extent such indebtedness (other than a Hedging Obligation) would appear as a
liability upon a balance sheet of such Person prepared on a consolidated basis
in accordance with GAAP, and also includes, to the extent not otherwise
included, the guarantee of items that would be included within this
definition; provided, however, that "Indebtedness" will not include any
Incentive Arrangements or obligations or payments thereunder.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Initial Purchasers" means the initial purchasers from the Company of
the Series A Discount Debentures.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
"Issue" means create, issue, assume, guarantee, incur or otherwise
become directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary,
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be issued by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary. For this definition, the terms "Issuing," "Issuer," "Issuance" and
"Issued" have meanings correlative to the foregoing.
"Jordan Stockholders" means John W. Jordan, II and/or his heirs,
executors and administrators, and/or The John W. Jordan, II Revocable Trust,
The Jordan Family Trust and/or any other trust established by John W. Jordan,
II whose beneficiaries are John W. Jordan, II and/or his lineal descendants or
other relatives.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security, interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell and any filing of
or agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York are not required to be open.
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<PAGE>
"Marketable Securities" means debt or equity securities of any Person
(other than the Company, or any Affiliate) that are freely tradeable under all
applicable federal and state securities laws and that are either listed on a
national stock exchange or traded over the counter.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person. determined in accordance with GAAP, excluding, however, any
gain or loss, together with any related provision for taxes, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions).
"Net Proceeds" means. with respect to any Asset Sale, the aggregate
amount of cash proceeds (including an cash received by way of deferred payment
pursuant to a note receivable Issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in either such
case, only as and when so received) received by the Company or any of its
Restricted Subsidiaries in respect of such Asset Sale, net of:
(i) the cash expenses of such Asset Sale (including, without
limitation, the payment of principal of, and premium, if any,
and interest on, Indebtedness required to be paid as a result
of such Asset Sale (other than the Securities) and legal,
accounting and investment banking fees and sales commissions),
(ii) taxes paid or payable as a result thereof,
(iii) any portion of cash proceeds that the Company determines in
good faith should be reserved for post-closing adjustments, it
being understood and agreed that on the day that all such
post-closing adjustments have been determined, the amount (if
any) by which the reserved amount in respect of such Asset Sale
exceeds the actual post-closing adjustments payable by the
Company or any of its Restricted Subsidiaries shall constitute
Net Proceeds on such date, and
(iv) any relocation expenses and pension, severance and shutdown
costs incurred as a result thereof.
"New Credit Agreement" means the credit agreement to be entered into
by the Company and/or certain of its Restricted Subsidiaries and The First
National Bank of Boston, as in effect at the date hereof, and as subsequently
amended, modified, extended, restated, replaced or supplemented, from time to
time, and any documents governing refinancings or extensions of amounts
borrowed thereunder.
"Non-Restricted Subsidiary" means J.I. Finance Company, Motors and
Gears Holdings, Inc. and its Subsidiaries, SPL Holdings, Inc. and its
Subsidiaries and any other Subsidiary of the Company other than a Restricted
Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
premiums, interest. penalties, fees, indemnities, expenses (including legal
fees and expenses), reimbursement obligations and
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other liabilities payable to the holder of such Indebtedness under the
documentation governing such Indebtedness, and any other claims of such holder
arising in respect of such Indebtedness.
"Officer" means the President, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Vice-President of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Old Debentures" means the Company's 11 3/4% Senior Subordinated
Discount Debentures due 2005.
"Old Note Indenture" means the indenture, dated as of December 15,
1988, between the Company and First Bank National Association, as trustee, as
amended or supplemented.
"Old Notes" means the Company's 13-7/8 % Series A Senior Subordinated
Notes due 1998, and the Company's 16% Series B Senior Subordinated Reset Notes
due 1998, each Issued under the Old Note Indenture.
"Opinion of Counsel" means a written opinion in form and substance
satisfactory to, and from legal counsel acceptable to, the Trustee (such
counsel may be an employee of or counsel to the Company or the Trustee).
"Other Permitted Indebtedness" means:
(i) Indebtedness of the Company and its Restricted Subsidiaries
existing as of the date of original issuance of the Securities
(including Old Notes, if any, the Securities and the
Securities);
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers acceptances and letters of credit
(including, without limitation, letters of credit in respect of
workers' compensation claims) Issued in the ordinary course of
business, or other Indebtedness with respect to
reimbursement-type obligations regarding workers' compensation
claims;
(iii) Refinancing Indebtedness, provided that:
(A) the principal amount of such Refinancing Indebtedness
shall not exceed the outstanding principal amount of
Indebtedness (including unused commitments) so extended,
refinanced, renewed, replaced, substituted or refunded
plus any amounts incurred to pay premiums, fees and
expenses in connection therewith,
(B) Refinancing Indebtedness of Indebtedness other than
Senior Indebtedness shall have a Weighted Average Life to
Maturity equal to or greater than the Weighted Average
Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded;
and
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(C) in the case of Refinancing Indebtedness of Subordinated
Indebtedness, such Refinancing Indebtedness shall be
subordinated to the Securities at least to the same
extent as the Indebtedness being extended, refinanced,
renewed, replaced, substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted
Subsidiaries of Indebtedness of the Company not Issued in
compliance with Section 4.17);
(v) Indebtedness of the Company and its Restricted Subsidiaries
Issued in connection with making permitted Restricted Payments
under Sections 4.05(b)(iv), (b)(v) or (b)(ix);
(vi) Indebtedness of any Non-Restricted Subsidiary Issued after the
date of original Issuance of the Securities, provided that such
Indebtedness is nonrecourse to the Company and its Restricted
Subsidiaries and the Company and its Restricted Subsidiaries
have no Obligations with respect to such Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries
under Hedging Obligations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
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, which
will not be, and will not be deemed to be, inadvertent) drawn
against insufficient funds in the ordinary course of business;
(ix) Indebtedness of any Person at the time it is acquired as a
Restricted Subsidiary, provided that such Indebtedness was not
Issued by such Person in connection with or in anticipation of
such acquisition;
(x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary if the Indebtedness so guaranteed is
permitted under this Indenture;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the
Company, if the Indebtedness so guaranteed is permitted under
this Indenture and the Securities are guaranteed by such
Restricted Subsidiary to the extent required by Section 4.17;
(xii) guarantees by the Company of Indebtedness of any Restricted
Subsidiary if the Indebtedness so guaranteed is permitted under
this Indenture;
(xiii) Indebtedness of the Company and its Restricted Subsidiaries
Issued in connection with performance, surety, statutory,
appeal or similar bonds in the ordinary course of business; and
(xiv) Indebtedness of the Company and its Restricted Subsidiaries
Issued in connection with agreements providing for
indemnification, purchase price adjustments and similar
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obligations in connection with the sale or disposition of any
of their business, properties or assets.
"Permitted Liens" means: (a) with respect to the Company and its
Restricted Subsidiaries,
(1) Liens for taxes, assessments, governmental charges or claims
which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if
a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor;
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other
like Liens arising in the ordinary course of business and with
respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any as shall be required in
conformity with GAAP shall have been made therefor;
(3) Liens incurred on deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security;
(4) Liens incurred on deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance and return of moneys,
bonds and other obligations of a like nature incurred in the
ordinary course of business (exclusive of obligations for the
payment of borrowed money);
(5) easements, rights-of-way, zoning or other restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries
incurred in the ordinary course of business;
(6) Liens (including extensions, renewals and replacements thereof)
upon property acquired (the "Acquired Property") after the date
of original Issuance of the Securities, provided that:
(A) any such Lien is created solely for the purpose of
securing Indebtedness representing, or Issued to finance,
refinance or refund, the cost (including the cost of
construction) of the Acquired Property,
(B) the principal amount of the Indebtedness secured by such
Lien does not exceed 100% of the cost of the Acquired
Property,
(C) such Lien does not extend to or cover any property other
than the Acquired Property and any improvements on such
Acquired Property, and
(D) the Issuance of the Indebtedness to purchase the Acquired
Property is permitted by Section 4.07;
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(7) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection
with the importation of goods;
(8) judgment and attachment Liens not giving rise to an Event of
Default;
(9) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its
Restricted Subsidiaries;
(10) Liens encumbering customary initial deposits and margin
deposits, and other Liens incurred in the ordinary course of
business and that are within the general parameters customary
in the industry, in each case securing Indebtedness under
Hedging Obligations;
(11) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty
requirements of the Company or its Restricted Subsidiaries,
(12) Liens arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or its Restricted
Subsidiaries in the ordinary course of business;
(13) any interest or title of a lessor in property subject to any
Capital Lease Obligation or operating lease;
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(15) Liens existing on the date of original Issuance of the
Securities and any extensions, renewals or replacements
thereof; and
(16) any (a) Lien granted to any trustee (including, but not limited
to, the Security Trustee) or similar institution under any
indenture for Senior Indebtedness, and (b) any Lien granted to
the Trustee under this Indenture and any substantially
equivalent Lien granted to any trustee or similar institution
under any indenture for Senior Subordinated Indebtedness
permitted by the terms of this Indenture;
(b) with respect to the Restricted Subsidiaries,
(1) Liens securing Restricted Subsidiaries' reimbursement
Obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit
and the products and proceeds thereof;
(2) Liens securing Indebtedness Issued by Restricted Subsidiaries
if such Indebtedness is permitted by (A) Section 4.07(a), (B)
Sections 4.07(b)(i), (b)(ii), (b)(iii) or (b)(iv), or (C)
clauses (i), (iii) (to the extent the Indebtedness subject to
such Refinancing Indebtedness was subject to Liens), (vii),
(ix) or (x) of the definition of Other Permitted Indebtedness;
(3) Liens securing intercompany Indebtedness Issued by any
Restricted Subsidiary to the Company or another Restricted
Subsidiary;
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(4) additional Liens at any one time outstanding with respect to
assets of the Restricted Subsidiaries the aggregate fair market
value of which does not exceed $10,000,000 (the fair market
value of any such asset is to be determined on the date such
Lien is granted on such asset);
(5) Liens securing guarantees by Restricted Subsidiaries of
Indebtedness Issued by the Company if such guarantees are
permitted by clause (xi) (but only in respect of the property,
rights and assets of the Restricted Subsidiaries Issuing such
guarantees) of the definition of Other Permitted Indebtedness;
and
(c) with respect to the Company,
(1) Liens securing Indebtedness Issued by the Company under the
Credit Agreement or the New Credit Agreement if such
Indebtedness is permitted by Section 4.07 (including, but not
limited to, Indebtedness Issued by the Company under the Credit
Agreement or the New Credit Agreement pursuant to Section
4.07(b)(i) and/or (b)(iv));
(2) Liens securing Indebtedness of the Company if such Indebtedness
is permitted by clauses (i), (iii) (to the extent the
Indebtedness subject to such Refinancing Indebtedness was
subject to Liens) or (vii) of the definition of Other Permitted
Indebtedness; and
(3) Liens securing guarantees by the Company of Indebtedness Issued
by Restricted Subsidiaries if such Indebtedness is permitted by
Section 4.07 (including, but not limited to, Indebtedness
Issued by Restricted Subsidiaries under the Credit Agreement or
the New Credit Agreement pursuant to Section 4.07(b)(i) and/or
(b)(iv)) and if such guarantees are permitted by clause (xii)
(but only in respect of Indebtedness Issued by the Restricted
Subsidiaries under the Credit Agreement or the New Credit
Agreement pursuant to Section 4.07) of the definition of Other
Permitted Indebtedness;
provided, however, that, notwithstanding any of the foregoing, the Permitted
Liens referred to in clause (c) of this definition shall not include any Lien
on Capital Stock of Restricted Subsidiaries held by the Company (as
distinguished from Liens on Capital Stock of Restricted Subsidiaries held by
other Restricted Subsidiaries) other than Liens securing (A) Indebtedness of
the Company Issued under the Credit Agreement or the New Credit Agreement
pursuant to Section 4.07 and any permitted Refinancing Indebtedness of such
Indebtedness, and (B) guarantees by the Company of Indebtedness Issued by
Restricted Subsidiaries under the Credit Agreement or the New Credit Agreement
pursuant to Section 4.07 and any permitted Refinancing Indebtedness of such
Indebtedness.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Post-Petition Interest" means, with respect to any Senior
Indebtedness, all interest accrued or accruing on such Senior Indebtedness
after the commencement of any Insolvency or Liquidation Proceeding in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument
creating, evidencing or governing such Senior
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Indebtedness, whether or not, pursuant to applicable law or otherwise, the
claim for such interest is allowed as a claim in such Insolvency or
Liquidation Proceeding.
"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock or any other class of such
corporation.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income, Cash Flow and the Cash Flow Coverage Ratio (including in connection
with Section 4.05, Section 4.16, Section 5.01, the incurrence of Indebtedness
pursuant to Section 4.07(a) and Consolidated Net Worth for purposes of Section
5.01, giving pro forma effect to (x) any acquisition or sale of a Person,
business or asset, related incurrence, repayment or refinancing of
Indebtedness or other related transactions, including any related
restructuring charges in respect of restructurings, consolidations,
compensation or headcount reductions or other cost savings which would
otherwise be accounted for as an adjustment permitted by Regulation S-X under
the Securities Act or on a pro forma basis under GAAP, or (y) any incurrence,
repayment or refinancing of any Indebtedness and the application of the
proceeds therefrom, in each case, as if such acquisition or sale and related
restructuring charges, incurrence, repayment or refinancing were realized on
the first day of the relevant period permitted by Regulation S-X under the
Securities Act or on a pro forma basis under GAAP. Furthermore, in calculating
the Cash Flow Coverage Ratio, (1) interest on outstanding Indebtedness
determined on a fluctuating basis as of the determination 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 determination date; (2) if interest on any Indebtedness actually
incurred on the determination 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
determination date will be deemed to have been in effect during the relevant
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 rate swaps or similar interest rate protection
Hedging Obligations, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements.
"Qualified Issuer" means any commercial bank (a) which has capital
and surplus in excess of $100,000,000 and (b) the outstanding long-term debt
securities of which are rated as least A-2 by Standard & Poor's Corporation or
P-2 by Moody's Investor Service, Inc., or carry an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments.
"Receivables" means, with respect to any Person all of the following
property and interests in property of such Person whether now existing or
existing in the future or hereafter acquired or arising: (i) accounts, (ii)
accounts receivable, (including, without limitation, all rights to payment
created by or arising from sales of goods, leases of goods or the rendition of
services, no matter how evidenced, whether or not earned by performance),
(iii) all unpaid seller's or lessor's rights (including without limitation,
recession, replevin, reclamation and stoppage in transit, relating to any of
the foregoing or arising therefrom), (iv) all rights to any goods or
merchandise represented by any of the foregoing (including, without
limitation, returned or repossessed goods, (v) all reserves and credit
balances with respect to any such accounts receivable or account debtors, (vi)
all letters of credit, security or guarantees
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of any of the foregoing, (vii) all insurance policies or reports relating to
any of the foregoing, (viii) all collection or deposit accounts relating to
any of the foregoing, (ix) all proceeds of any of the foregoing, and (x) all
books and records relating to any of the foregoing.
"Receivables Financing" means (i) the sale or other disposition of
Receivables that arise in the ordinary course of business, or (ii) the sale or
other disposition of Receivables that arise in the ordinary course of business
to a Receivables Subsidiary followed by a financing transaction in connection
with such sale or disposition of such Receivables.
"Receivables Subsidiary" means any Subsidiary of the Company or any
other corporation, trust or entity that is exclusively engaged in Receivables
Financings and activities reasonably related thereto.
"Refinancing Indebtedness" means (i) Indebtedness of the Company
and/or its Restricted Subsidiaries Issued or given in exchange for, or the
proceeds of which are used to, extend, refinance, renew, replace, substitute
or refund any Indebtedness permitted under this Indenture or any Indebtedness
Issued to so extend, refinance, renew, replace, substitute or refund such
Indebtedness, (ii) any refinancings of Indebtedness Issued under the Credit
Agreement or the New Credit Agreement, and (iii) any additional Indebtedness
Issued to pay premiums and fees in connection with clauses (i) and (ii).
"Refinancing Plan" means (i) the repayment of all outstanding
Indebtedness Issued under the Credit Agreement; (ii) the redemption of all the
outstanding Old Notes, including accrued interest thereon, whether pursuant to
a debt tender offer or Section 4.15; (iii) the payment of prepayment premiums
on the Old Notes and consent fees for the solicitation of consents to
amendments to the Old Indenture and the Old Notes from holders of Old Notes,
and (iv) the payment of fees and expenses relating to clauses (i), (ii), and
(iii).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April 2, 1997, by and among the Company and the Initial
Purchasers.
"Representative" means with respect to any Senior Indebtedness, the
indenture trustee or other trustee, agent or other representative(s), if any,
of holders of such Senior Indebtedness.
"Restricted Investment" means any capital contribution to, or other
debt or equity investment in (other than certain investments in marketable
securities and other negotiable instruments permitted by this Indenture) any
Non-Restricted Subsidiary or any Person other than a Restricted Subsidiary or
the Company, provided that Restricted Investments will not include any
Incentive Arrangements. The amount of any Restricted Investment shall be the
amount of cash and the fair market value at the time of transfer of all other
property (as determined by the Board of Directors in good faith) initially
invested or paid for such Restricted Investment, plus all additions thereto,
without any adjustments for increases or decreases in value of, or write-ups,
write-downs or write-offs with respect to, such Restricted Investment.
"Restricted Subsidiary" means:
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(i) any Subsidiary of the Company existing on the date of original
Issuance of the Securities under this Indenture, other than a
Non-Restricted Subsidiary, and
(ii) any other Subsidiary of the Company formed, acquired or
existing after the date of original Issuance of the Securities
that is designated as a "Restricted Subsidiary" by the Company
pursuant to a resolution approved by a majority of the Board of
Directors.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Discount Debentures and Series B
Discount Debentures Issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means:
(d) (i) all Obligations (including Post-Petition Interest) whether
existing on the date of original Issuance of the Securities
or Issued thereafter, in respect of:
(A) all Indebtedness of the Company for money borrowed, and
(B) all Indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which
the Company is responsible or liable;
(ii) all Capitalized Lease Obligations of the Company;
(iii) all Obligations of the Company:
(A) for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit
transaction,
(B) constituting Hedging Obligations, or
(C) Issued as the deferred purchase price of property and
all conditional sale Obligations of the Company and all
Obligations of the Company under any title retention
agreement;
(iv) all guarantees of the Company with respect to Obligations of
other Persons of the type referred to in clauses (ii) and
(iii) and with respect to the payment of dividends of other
Persons; and
(v) all Obligations of the Company consisting of modifications.
renewals, extensions. replacements and refundings of any
Obligations described in clauses (i), (ii), (iii) or (iv);
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unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding. it is provided that such Obligations are not
superior, or are pari passu, in right of payment to the Securities; provided,
however, that Senior Indebtedness shall not be deemed to include:
(1) any Obligation of the Company to any Subsidiary,
(2) any liability for federal, state, local or other taxes owed
or owing by the Company,
(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such
liabilities),
(4) any Indebtedness, guarantee or Obligation of the Company
that is contractually subordinated or junior in any respect
to any other Indebtedness, guarantee or Obligation of the
Company, or
(5) any Indebtedness incurred in violation of this Indenture.
(e) 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 a trustee,
receiver or other similar Person under any Bankruptcy Law, then
if such payment is recovered by, or paid over to, such trustee,
receiver or other similar Person, the Senior Indebtedness or part
thereof originally intended to be satisfied by such payment shall
be deemed to be reinstated and outstanding as if such payment had
not occurred. All Senior Indebtedness shall be and remain Senior
Indebtedness for all purposes of this Indenture, whether or not
subordinated in an Insolvency or Liquidation Proceeding.
"Senior Subordinated Indebtedness' means all Obligations of the type
referred to in clauses (i) through (v) of the definition of Senior Indebtedness
and including the Old Debentures unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that such Obligations are Senior Indebtedness, or it is provided that
such Obligations are subordinated or junior in right of payment to the
Securities, or it is not provided how such Obligations will rank in right of
payment to the Securities; provided, however, that Senior Subordinated
Indebtedness shall not be deemed to include any Indebtedness or Obligations of
the type referred to in clauses (1) through (5) at the end of paragraph (a) of
the definition of Senior Indebtedness.
"Series A Discount Debentures" means the Company's 11 3/4 Series A
Senior Subordinated Discount Debentures due 2009.
"Series B Discount Debentures" means the Company's 11 3/4 Series B
Senior Subordinated Discount Debentures due 2009.
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"Significant Subsidiary" means (i) any Restricted Subsidiary of the
Company that would be a "significant subsidiary" as defined in clause (2) of
the definition of such term in Rule 1-02 of Regulation S-X under the Securities
Act and the Exchange Act, and (ii) any other Restricted Subsidiary of the
Company that is material to the business, earnings, prospects, assets or
condition, financial or otherwise, of the Company and its Restricted
Subsidiaries taken as a whole.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Subordinated Indebtedness" means all Obligations of the type
referred to in clauses (i) through (v) of the definition of Senior
Indebtedness if the instrument creating or evidencing the same or pursuant to
which the same is outstanding designates such Obligations as being
subordinated or junior in right of payment to Senior Subordinated
Indebtedness.
"Subsidiary" of any Person means any entity of which the Equity
Interests entitled to cast at least a majority of the votes that may be cast
by all Equity Interests having ordinary voting power for the election of
directors or other governing body of such entity are owned by such Person
(regardless of whether such Equity Interests are owned directly by such Person
or through one or more Subsidiaries).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of original Issuance of the Securities.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.06
"Trustee" means First Trust National Association until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"Trust Officer" means the chairman of the board, the president or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged, provided that no U.S. Government
Obligation shall be callable at the Issuer's option.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding principal amount of such Indebtedness into (ii) the sum of the
product(s) obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other requirement payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment.
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Section 1.02 OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"........................................ 4.08
"Asset Sale Disposition Date".................................. 4.14
"Asset Sale Trigger Date"...................................... 4.14
"Change of Control Trigger Date"............................... 4.13
"covenant defeasance option"................................... 8.01
"Disposition".................................................. 5.01
"DTC".......................................................... 2.03
"Event of Default"............................................. 6.01
"Excess Proceeds".............................................. 4.14
"legal defeasance option"...................................... 8.01
"Notice of Default"............................................ 6.01
"Offer"........................................................ 3.08
"Other Indebtedness"........................................... 4.17
"Other Indebtedness Guarantee"................................. 4.17
"Paying Agent"................................................. 2.03
"Payment Blockage Period"...................................... 10.03
"Payment Notice"............................................... 10.03
"Purchase Date"................................................ 3.08
"Registrar".................................................... 2.03
"Restricted Payments".......................................... 4.05
"Successor Corporation"........................................ 5.01
"Trustee Expenses"............................................. 6.08
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this Indenture.
Any terms incorporated by reference in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them therein.
Section 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
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(2) an accounting term not otherwise defined herein has the meaning
assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular: and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
Section 2.01 FORM AND DATING.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, which is part of this Indenture.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule or usage. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and to the
extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Securities from time to time
endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee or the
Security Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06.
Section 2.02 EXECUTION AND AUTHENTICATION.
Two officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee, and the Trustee's signature shall be conclusive
evidence that the Security has been authenticated under this
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Indenture. The form of Trustee's certificate of authentication to be borne by
the Securities shall be substantially as set forth in Exhibit A.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Securities for original Issuance up to an aggregate
principal amount stated in paragraph 4 of each Security (the aggregate
principal amount of outstanding Securities may not exceed that amount at any
time, except as provided in Section 2.07).
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate.
Section 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (the "Registrar")
where Securities may be presented for registration of transfer or for exchange
and an office or agency (the "Paying Agent") where Securities may be presented
for payment. The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company may appoint one or more co-registrars
and one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Company may change the Paying Agent, Registrar or
co-registrar without prior notice to any Holder. The Company shall notify the
Trustee and the Trustee shall notify the Holders of the name and address of
any Agent not a party to this Indenture. The Company shall enter into an
appropriate agency agreement with any Agent not a party to this Indenture, and
such agreement shall incorporate the TIA's provisions and implement the
provisions of this Indenture that relate to such Agent.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the
Securities. The Company or any of its Subsidiaries may act as Paying Agent,
Registrar or co-registrar. If the Company fails to appoint or maintain a
Registrar and Paying Agent, the Trustee shall act as such, and shall be
entitled to appropriate compensation in accordance with Section 7.07.
Section 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the Holders'
benefit or the Trustee all money the Paying Agent holds for redemption or
purchase of the Securities or for the payment of principal of, or premium, if
any, or interest on, or Liquidated Damages, if any, with respect to the
Securities, and will notify the Trustee of any Default by the Company in
providing the Paying Agent with sufficient funds to (i) purchase Securities
tendered pursuant to a Change of Control Offer, (ii) redeem Securities called
for redemption, or (iii) make any payment of principal, premium or interest or
Liquidated Damages due on the Securities. While any such Default continues,
the Trustee may require the Paying Agent to pay all money it holds to the
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Trustee. The Company at any time may require the Paying Agent to pay all money
it holds to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or any of its Subsidiaries) shall have no further
liability for the money it delivered to the Trustee. If the Company or any of
its Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the Holders' benefit or the Trustee all money it holds as
Paying Agent.
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
Holders and shall otherwise comply with section 312(a) of the TIA. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee, at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of
such date as the Trustee may reasonably require that sets forth the names and
addresses of, and the aggregate principal amount of Securities held by, each
Holder, and the Company shall otherwise comply with section 312(a) of the TIA.
Section 2.06 TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Securities. When Definitive
Securities are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Securities presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney,
duly authorized in writing; and
(ii) in the case of a Definitive Security that is a Transfer
Restricted Security, such request shall be accompanied by
the following additional information and documents, as
applicable:
(A) if such Transfer Restricted Security is being delivered
to the Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification
to that effect from such Holder (in substantially the
form of Exhibit B hereto); or
(B) if such Transfer Restricted Security is being
transferred (1) to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act
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or (2) pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act (and
based on an opinion of counsel if the Company so
requests) or (3) pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from such Holder (in substantially the form
of Exhibit B hereto);
(C) if such Transfer Restricted Security is being
transferred to an institutional "accredited investor,"
within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act pursuant to a private
placement exemption from the registration requirements
of the Securities Act (and based on an opinion of
counsel if the Company so requests), a certification to
that effect from such Holder (in substantially the form
of Exhibit B hereto) and a certification from the
applicable transferee (in substantially the form of
Exhibit C hereto);
(D) if such Transfer Restricted Security is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act (and
based on an opinion of counsel if the Company so
requests), a certification to that effect from such
Holder (in substantially the form of Exhibit B hereto).
(b) Transfer of a Definitive Security for a Beneficial Interest in a
Global Security. A Definitive Security may not be exchanged for a beneficial
interest in a Global Security except upon satisfaction of the requirements set
forth below. Upon receipt by the Trustee of a Definitive Security, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, a certification from the Holder thereof (in
substantially the form of Exhibit B hereto) to the effect
that such Definitive Security is being transferred by such
Holder to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions from the Holder
thereof directing the Trustee to make, or to direct the
Security Custodian to make, an endorsement on the Global
Security to reflect an increase in the aggregate principal
amount of the Securities represented by the Global Security,
the Trustee shall cancel such Definitive Security in accordance with Section
2.11 and cause, or direct the Security Custodian to cause, in accordance with
the standing instructions and procedures existing between the Depositary and
the Security Custodian, the aggregate principal amount of Securities
represented by the Global Security to be increased accordingly. If no Global
Securities are then outstanding, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.02, the Trustee shall
authenticate a new Global Security in the appropriate principal amount.
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(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture and the procedures of
the Depositary therefor, which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security.
(i) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a
Definitive Security. Upon receipt by the Trustee of written
instructions or such other form of instructions as is
customary for the Depositary, from the Depositary or its
nominee on behalf of any Person having a beneficial interest
in a Global Security, and, in the case of a Transfer
Restricted Security, the following additional information
and documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the
beneficial owner, a certification to that effect from
such Person (in substantially the form of Exhibit B
hereto); or
(B) if such beneficial interest is being transferred (1) to
a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule
144A under the Securities Act or (2) pursuant to an
exemption from registration in accordance with Rule 144
under the Securities Act (and based on an opinion of
counsel if the Company so requests) or (3) pursuant to
an effective registration statement under the
Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B
hereto); or
(C) if such beneficial interest is being transferred to an
institutional "accredited investor," within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities
Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (and
based on an opinion of counsel if the Company so
requests), a certification to that effect from such
Holder (in substantially the form of Exhibit B hereto)
and a certification from the applicable transferee (in
substantially the form of Exhibit C hereto);
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act (and based on an
opinion of counsel if the Company so requests), a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto).
the Trustee or the Security Custodian, at the direction of
the Trustee, shall, in accordance with the standing
instructions and procedures existing between the Depositary
and the Security Custodian, cause the aggregate principal
amount of
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Global Securities to be reduced accordingly and, following
such reduction, the Company shall execute and, upon receipt
of an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate and deliver to the
transferee a Definitive Security in the appropriate
principal amount.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section
2.06(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall
deliver in accordance with the standard procedures of the
Depositary such Definitive Securities to the Persons in
whose names such Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Securities in Absence of Depository.
If at any time:
(i) the Depository for the Securities notifies the Company that
the Depository is unwilling or unable to continue as
Depository for the Global Securities and a successor
Depository for the Global Securities is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) The Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive
Securities under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02, authenticate and
deliver, Definitive Securities in an aggregate principal amount equal to the
principal amount of the Global Securities in exchange for such Global
Securities and registered in such names as the Depository shall instruct the
Trustee or the Company in writing.
(g) Legends.
(i) Except for any Transfer Restricted Security sold or
transferred (including any Transfer Restricted Security
represented by a Global Security) as described in (ii)
below, each Security certificate evidencing Global
Securities and Definitive Securities (and all Securities
issued in exchange therefor or substitution thereof) shall
bear legends in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES
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SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Security) pursuant to an effective registration
statement under the Securities Act, pursuant to Rule 144
under the Securities Act or pursuant to an opinion of
counsel reasonably satisfactory to the Company and the
Registrar that no legend is required:
(A) in the case of any Transfer Restricted Security that is
a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted
Security for a Definitive Security that does not bear
the legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted
Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Security, such Transfer
Restricted Security shall not be required to bear the
legend set forth in (i) above if all other interests in
such Global Security have been or are concurrently
being sold or transferred pursuant to Rule 144 under
the Securities Act or pursuant to an effective
registration statement under the Securities Act, but
such Transfer
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Restricted Security shall continue to be subject to the
provisions of Section 2.06(c); provided, however, that
with respect to any request for an exchange of a
Transfer Restricted Security that is represented by a
Global Security for a Definitive Security that does not
bear the legend set forth in (i) above, which request
is made in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar that such
request is being made pursuant to Rule 144 (such
certification to be substantially in the form of
Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.02, the
Trustee shall authenticate, Series B Securities in exchange
for Series A Securities accepted for exchange in the
Exchange Offer, which Series B Securities shall not bear the
legend set forth in (i) above, and the Registrar shall
rescind any restriction on the transfer of such Securities,
in each case unless the Holder of such Series A Securities
is either (A) a broker-dealer, (B) a Person participating in
the distribution of the Series A Securities or (C) a Person
who is an affiliate (as defined in Rule 144A) of the
Company. The Company shall identify to the Trustee such
Holders of the Securities in a written certification signed
by an Officer of the Company and, absent certification from
the Company to such effect, the Trustee shall assume that
there are no such Holders.
(h) Cancellation and/or Adjustment of Global Securities. At such time
as all beneficial interests in Global Securities have been exchanged for
Definitive Securities, redeemed, repurchased or canceled, all Global Securities
shall be returned to or retained and canceled by the Trustee in accordance with
Section 2.11. At any time prior to such cancellation, if any beneficial
interest in a Global Security is exchanged for Definitive Securities, redeemed,
repurchased or cancelled, the principal amount of Securities represented by
such Global Security shall be reduced accordingly and an endorsement shall be
made on such Global Security, by the Trustee or the Securities Custodian, at
the direction of the Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate
Definitive Securities and Global Securities at the
Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer
pursuant to Sections 3.07, 4.13, 4.14 and 9.05).
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(iii) Neither the Company nor the Registrar shall be required to
register the transfer of or exchange any Security selected
for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
(iv) All Definitive Securities and Global Securities issued upon
any registration of transfer or exchange of Definitive
Securities or Global Securities in accordance with this
Indenture (including any increase in the aggregate
principal amount of the Securities represented by the
Global Security pursuant to subsection (b) above) shall be
the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this
Indenture, as the Definitive Securities or Global
Securities surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required to issue Securities and
the Registrar shall not be required to register the
transfer of or to exchange Securities during a period
beginning at the opening of business 15 days before the day
of any selection of Securities for redemption under Section
3.02 and ending at the close of business on the day of
selection, or to register the transfer of or to exchange a
Security between a record date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration of a transfer
of any Security, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Security is
registered as the absolute owner of such Security for the
purpose of receiving payment of principal of, premium, if
any, accrued and unpaid interest, and Liquidated Damages,
if any, on such Securities, and neither the Trustee, any
Agent nor the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Definitive Securities and
Global Securities in accordance with the provisions of
Section 2.02.
Section 2.07 REPLACEMENT SECURITIES.
If any mutilated Security is surrendered to the Trustee. or if the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall Issue and the
Trustee, upon the Company's written order signed by two Officers, shall
authenticate a replacement Security if the Trustee's requirements are met. If
the Trustee or the Company requires, the Holder must supply an indemnity bond
that is sufficient in the judgment of the Trustee and the Company to protect
the Company, the Trustee, any Agent or any authenticating agent from any loss
that any of them may suffer if a Security is replaced. The Company and the
Trustee may charge for its expenses in replacing a Security.
Every replacement Security is an additional Obligation of the
Company.
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Section 2.08 OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities the
Trustee has authenticated except for those it has cancelled, those delivered
to it for cancellation, those representing reductions in the interest in a
Global Security effected by the Trustee in accordance with the provisions
hereof, and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that a bona
fide purchaser holds the replaced Security.
If the entire Accreted Value of, and premium, if any, and accrued
interest on, and Liquidated Damages, if any, with respect to, any Security is
considered paid under Section 4.01, it ceases to be outstanding and interest
and Liquidated Damages on it cease to accrue.
Subject to Section 2.09, a Security does not cease to be outstanding
because the Company or an Affiliate holds the Security.
Section 2.09 TREASURY SECURITIES.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or an Affiliate 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 Securities that the Trustee knows are so owned shall be so
disregarded. Notwithstanding the foregoing, Securities that the Company or an
Affiliate offers to purchase or acquires pursuant to an Offer, exchange offer,
tender offer or otherwise shall not be deemed to be owned by the Company or an
Affiliate until legal title to such Securities passes to the Company or such
Affiliate, as the case may be.
Section 2.10 TEMPORARY SECURITIES.
Until Definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee, upon receipt of the Company's written order signed by two Officers,
shall authenticate Definitive Securities in exchange for temporary Securities.
Until such exchange, temporary Securities shall be entitled to the same
rights, benefits and privileges as Definitive Securities.
Section 2.11 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, any co-registrar and the Paying Agent shall
forward to the Trustee any Securities surrendered to them for registration of
transfer, exchange, replacement, payment (including all Securities called for
redemption and all Securities accepted for payment pursuant to an Offer) or
cancellation, and the Trustee shall cancel all such Securities and shall
destroy all cancelled Securities (subject to the Exchange Act's record
retention requirements) and deliver a certificate of their destruction to the
Company unless by written
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order, signed by two Officers of the Company, the Company shall direct that
cancelled Securities be returned to it. The Company may not Issue new
Securities to replace any Securities that have been cancelled by the Trustee
or that have been delivered to the Trustee for cancellation. If the Company or
an Affiliate acquires any Securities (other than by redemption or pursuant to
an Offer), such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Securities unless and until such
Securities are delivered to the Trustee for cancellation.
Section 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to Holders on a subsequent
special record date, in each case at the rate provided in the Securities and
Section 4.01. The Company shall, with the Trustee's consent, fix or cause to
be fixed each such special record date and payment date. At least 15 days
before the special record date, the Company (or the Trustee, in the name of
and at the expense of the Company) shall mail a notice that states the special
record date, the related payment date and the amount of interest to be paid.
Section 2.13 RECORD DATE.
The record date for purposes of determining the identity of holders
of Securities entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided
for in section 316(c) of the TIA.
Section 2.14 CUSIP NUMBER.
A "CUSIP" number will be printed on the Securities, and the Trustee
shall use the CUSIP number in notices of redemption, purchase or exchange as a
convenience to Holders, provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities and that reliance may be placed
only on the other identification numbers printed on the Securities. The
Company will promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE
Section 3.01 NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to Section 3.07
it shall furnish to the Trustee, at least 10 but not more than 15 days before
notice of redemption is to be mailed by the Company to Holders, an Officers'
Certificate stating that the Company has elected to redeem Securities pursuant
to Section 3.07(a) or 3.07(b), as the case may be, the date notice of
redemption is to be mailed to Holders, the redemption date, the aggregate
principal amount of Securities to be redeemed, the redemption price for such
Securities and the amount of accrued and unpaid interest on and Liquidated
Damages, if any,
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with respect to such Securities as of the redemption date. If the Trustee is
not the Registrar, the Company shall, concurrently with delivery of its notice
to the Trustee of a redemption, cause the Registrar to deliver to the Trustee
a certificate (upon which the Trustee may rely) setting forth the name of, and
the aggregate principal amount of Securities held by, each Holder.
If the Company is required to offer to purchase Securities pursuant
to Section 4.13 or 4.14, it shall furnish to the Trustee, at least 2 Business
Days before notice of the Offer is to be mailed to Holders, an Officers'
Certificate setting forth that the Offer is being made pursuant to Section
4.13 or 4.14, as the case may be, the Purchase Date, the maximum principal
amount of Securities the Company is offering to purchase pursuant to the
Offer, the purchase price for such Securities, and the amount of accrued and
unpaid interest on and Liquidated Damages, if any, with respect to such
Securities as of the Purchase Date.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
Section 3.02 SELECTION OF SECURITIES TO BE REDEEMED OR PURCHASED.
If less than all outstanding Securities are to be redeemed or if less
than all Securities tendered pursuant to an Offer are to be accepted for
payment, the Trustee shall select the outstanding Securities to be redeemed or
accepted for payment pro rata, by lot or by a method that complies with the
requirements of any stock exchange on which the Securities are listed and that
the Trustee considers fair and appropriate. If the Company elects to mail
notice of a redemption to Holders, the Trustee shall at least 5 business days
prior to the date notice of redemption is to be mailed, (i) select the
Securities to be redeemed from Securities outstanding not previously called
for redemption, and (ii) notify the Company of the names of each Holder of
Securities selected for redemption, the principal amount of Securities held by
each such Holder and the principal amount of such Holder's Securities that are
to be redeemed. If less than all Securities tendered pursuant to an Offer on
the Purchase Date are to be accepted for payment, the Trustee shall select on
or promptly after the Purchase Date the Securities to be accepted for payment.
The Trustee shall select for redemption or purchase Securities or portions of
Securities in principal amounts of at least $1,000; except that if all of the
Securities of a Holder are selected for redemption or purchase, the aggregate
principal amount of the Securities held by such Holder shall be redeemed or
purchased. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Securities called for redemption or tendered pursuant
to an Offer also apply to portions of Securities called for redemption or
tendered pursuant to an Offer. The Trustee shall notify the Company promptly
of the Securities or portions of Securities to be called for redemption or
selected for purchase.
Section 3.03 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption to each Holder of Securities or
portions thereof that are to be redeemed .
The notice shall identify the Securities or portions thereof to be
redeemed and shall state:
(1) the redemption date;
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(2) the redemption price for the Securities and the amount of
accrued and unpaid interest on and Liquidated Damages, if
any, with respect to such Securities from April 1, 2002 to
the date of redemption;
(3) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and
that, after the redemption date, upon surrender of such
Security, a new Security or Securities in principal amount
equal to the unredeemed portion will be Issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price for the
Securities, and any accrued and unpaid interest on and
Liquidated Damages, if any, with respect to such Securities
from April 1, 2002 to the date of redemption;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases
to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number listed in such notice and
printed on the Securities.
At the Company's request, the Trustee shall (at the Company's expense)
give the notice of redemption in the Company's name at least 30 but not more
than 60 days before a redemption, provided, however, that the Company shall
deliver to the Trustee, at least 45 days prior to the redemption date and at
least 10 days prior to the date that notice of the redemption is to be mailed
to Holders, an Officers' Certificate that (i) requests the Trustee to give
notice of the redemption to Holders, (ii) sets forth the information to be
provided to Holders in the notice of redemption, as set forth in the preceding
paragraph, (iii) states that the Company has elected to redeem Securities
pursuant to Section 3.07(a) or 3.07(b), as the case may be, and (iv) sets forth
the aggregate principal amount of Securities to be redeemed and the amount of
accrued and unpaid interest and Liquidated Damages, if any, thereon as of the
redemption date. If the Trustee is not the Registrar, the Company shall,
concurrently with any such request, cause the Registrar to deliver to the
Trustee a certificate (upon which the Trustee may rely) setting forth the name
of, the address of, and the aggregate principal amount of Securities held by,
each Holder.
Section 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date at the price set forth in the
Security.
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Section 3.05 DEPOSIT OF REDEMPTION PRICE.
On or prior to any redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of, and accrued interest on, and Liquidated Damages, if any, with respect to,
all Securities to be redeemed on that date. The Trustee or the Paying Agent
shall return to the Company any money that the Company deposited with the
Trustee or the Paying Agent in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, and Liquidated Damages, if any,
with respect to, all Securities to be redeemed.
If the Company complies with the preceding paragraph, interest on the
Securities to be redeemed will cease to accrue on such Securities on the
applicable redemption date, whether or not such Securities are presented for
payment. If a Security is redeemed on or after an interest record date but on
or prior to the related interest payment date, then any accrued and unpaid
interest and Liquidated Damages shall be paid to the Person in whose name such
Security was registered at the close of business on such record date. If any
Security called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest will be paid on the unpaid principal, premium, interest,
and Liquidated Damages from the redemption date until such principal, premium,
interest and Liquidated Damages is paid, at the rate of interest provided in
the Securities and Section 4.01.
Section 3.06 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall Issue and the Trustee shall authenticate for the Holder at the Company's
expense a new Security equal in principal amount to the unredeemed portion of
the Security surrendered.
Section 3.07 OPTIONAL REDEMPTION PROVISIONS.
The Securities may not be redeemed at the option of the Company prior
to April 1, 2002. During the twelve (12) month period beginning April 1 of the
years indicated below, the Securities will be redeemable at the option of the
Company, in whole or in part, on at least 30 but not more than 60 days' notice
to each Holder to be redeemed, at the redemption prices (expressed as
percentages of the principal amount of the Securities) set forth below, plus
any accrued and unpaid interest and Liquidated Damages to the date of
redemption:
Year Percentage
- ---- ----------
2002.............................................................105.87500%
2003.............................................................102.93750%
2004 and thereafter..............................................100.00000%
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Section 3.08 MANDATORY PURCHASE PROVISIONS.
(a) Within 30 days after any Change of Control Trigger Date or Asset Sale
Trigger Date, the Company shall mail a notice to each Holder stating:
(i) that an offer ("Offer") is being made pursuant to Section 4.13
or 4.14, as the case may be, the length of time the Offer shall
remain open, and the maximum aggregate principal amount of
Securities that the Company is offering to purchase;
(ii) the purchase price for the Securities (as set forth in Section
4.13 or 4.14, as the case may be), the amount of accrued and
unpaid interest, and Liquidated Damages, if any, with respect
to such Securities as of the purchase date if such date occurs
after April 1, 2002, and the purchase date (which shall be no
earlier than 30 days nor later than 40 days from the date such
notice is mailed (the "Purchase Date"));
(iii) that any Security not accepted for payment will continue to
accrue interest, and Liquidated Damages, if any;
(iv) that, unless the Company fails to deposit with the Paying Agent
on the Purchase Date an amount sufficient to purchase all
Securities accepted for payment, interest shall cease to accrue
on such Securities after the Purchase Date;
(v) that Holders electing to tender any Security or portion thereof
will be required to surrender their Security, with a form
entitled "Option of Holder to Elect Purchase" completed, to the
Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the
Purchase Date, provided that Holders electing to tender only a
portion of any Security must tender a principal amount of at
least $1,000:
(vi) that Holders will be entitled to withdraw their election to
tender Securities if the paying Agent receives, not later than
the close of business on the third Business Day preceding the
Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal
amount of Securities delivered for purchase, and a statement
that such Holder is withdrawing his election to have such
Security purchase; and
(vii) that Holders whose Securities are accepted for payment in part
will be Issued new Securities equal in principal amount to the
unpurchased portion of Securities surrendered: provided that
only Securities in a principal amount of at least $1,000.
(b) On the Purchase Date, the Company will, to the extent required by this
Indenture and the Offer:
(i) accept for payment the Securities or portions thereof tendered
pursuant to such Offer,
(ii) deposit with the Paying Agent an amount sufficient to purchase
the lesser of (a) the Securities or portions thereof tendered
pursuant to such Offer, and (b) the maximum
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aggregate principal amount of Securities that the Company
offered to purchase pursuant to such Offer, and
(iii) deliver, or cause to be delivered, to the Trustee all
Securities tendered pursuant to the Offer, together with an
Officers' Certificate setting forth the name of each Holder
that tendered Securities and the principal amount of the
Securities or portions thereof tendered by each such Holder.
(c) With respect to any Offer, if less than all of the Securities tendered
pursuant to an Offer are to be purchased by the Company, the Trustee shall
select on the Purchase Date the Securities or portions thereof to be accepted
for payment pursuant to Section 3.02.
(d) Promptly after consummation of an Offer, (i) the Paying Agent shall mail
to each Holder of Securities or portions thereof accepted for payment an
amount equal to the purchase price for such Securities, plus any accrued and
unpaid interest on, and Liquidated Damages, if any, with respect to such
Securities from April 1, 2002 to the Purchase Date if such purchase occurs
after April 1, 2002, (ii) with respect to any tendered Security not accepted
for payment in whole or in part, the Trustee shall return such Security to the
Holder thereof, and (iii) with respect to any Security accepted for payment in
part, the Trustee shall authenticate and mail to each such Holder a new
Security equal in principal amount to the unpurchased portion of the tendered
Security.
(e) The Company will publicly announce the results of the Offer on or as soon
as practicable after the Purchase Date.
(f) The Company will comply with Rule 14(e)-1 under the Exchange Act and any
other securities laws and regulations to the extent such laws and regulations
are applicable to any Offer.
(g) With respect to any Offer, if the Company deposits with the Paying Agent
on the Purchase Date an amount sufficient to purchase all Securities accepted
for payment, interest shall cease to accrue on such Securities after the
Purchase Date; provided, however, that if the Company fails to deposit such
amount on the Purchase Date, interest shall continue to accrue on such
Securities until such deposit is made.
ARTICLE 4
COVENANTS
Section 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of, and any premium due on, the
Securities, and interest that accrues on such Securities after April 1, 2002,
on the dates and in the manner provided in the Securities. Holders of
Securities must surrender their Securities to the Paying Agent to collect
principal payments. Principal, premium, interest, and Liquidated Damages, if
any, shall be considered paid on the date due if the Paying Agent rather than
the Company or any of its Subsidiaries) holds as of 10:00 a.m. Eastern
Standard Time money the Company deposited in immediately available funds
designated for and sufficient to pay all principal, premium, if any, and
interest, and Liquidated Damages, if any,
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then due. The Paying Agent shall return to the Company, no later than five
days following the date of payment, any money (including accrued interest)
that exceeds the amount of principal, premium, if any, accrued and unpaid
interest, and Liquidated Damages, if any, paid on the Securities.
To the extent lawful, the Company shall pay interest (including
Post-Petition Interest) on (i) overdue principal and premium at the rate equal
to 2% per annum in excess of the then applicable interest rate on the
Securities, compounded semiannually, and (ii) overdue installments of interest
and Liquidated Damages (without regard to any applicable grace period) at the
same rate as set forth in clause (i), compounded semiannually. In the event of
an Insolvency or Liquidation Proceeding prior to April 1, 2002, the Accreted
Value of the Securities shall continue to increase pursuant to the terms of
this Indenture and the Securities to the extent lawful.
Section 4.02. SEC REPORTS.
(a) The Company shall file with the Trustee, within 15 days after it files
them with the SEC, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe) that the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. If the Company is not subject to the requirements of Section 13
or 15(d) of the Exchange Act, the Company shall file with the Trustee, within
15 days after it would have been required to file with the SEC, financial
statements, including any notes thereto (and with respect to annual reports,
an auditor's report by a firm of established national reputation reasonably
satisfactory to the Trustee), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," both comparable to that which
the Company would have been required to include in such annual reports,
information, documents or other reports if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act. Subsequent to the
qualification of the Indenture under the TIA, the Company also shall comply
with the provisions of section 314(a) of the TIA. Notwithstanding anything to
the contrary herein, the Trustee shall have no duty to review such documents
for the purposes of determining compliance with any provisions of this
Indenture.
(b) If the Company is required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act. the Company shall cause any annual
report furnished to its stockholders generally and any quarterly or other
financial reports it furnishes to its stockholders generally to be filed with
the Trustee and mailed to the Holders at their addresses appearing in the
register of Securities maintained by the Registrar. If the Company is not
required to furnish annual or quarterly reports to its stockholders pursuant
to the Exchange Act, the Company shall cause its financial statements referred
to in Section 4.02(a), including any notes thereto (and with respect to annual
reports, an auditors' report by a firm of established national reputation
reasonably satisfactory to the Trustee), and a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," to be so mailed to
the Holders within 120 days after the end of each of the Company's fiscal
years and within 60 days after the end of each of the first three fiscal
quarters of each year. The Company will cause to be disclosed in a statement
accompanying any annual report or comparable information as of the date of the
most recent financial statements in each such report or comparable information
the amount available for payments pursuant to Section 4.05 hereof. As of the
date hereof, the Company's fiscal year ends on December 31.
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(c) If the Company is not subject to the requirements of Section 13 or 15(d)
of the Exchange Act, for so long as any Securities remain outstanding, the
Company shall furnish to the Holders and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Section 4.03. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company, an Officers' Certificate stating that
a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions
hereof (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge
and what action the Company has taken or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred
and remains in existence by reason of which payments on account of the
principal of, premium, if any, any accrued and unpaid interest on, and
Liquidated Damages, if any, with respect to the Securities are prohibited or
if such event has occurred. a description of the event and what action the
Company is taking or proposes to take with respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.02 shall be accompanied by a written statement
of the Company's independent public accountants (who shall be a firm of
established national reputation reasonably satisfactory to the Trustee) that
in making the examination necessary for certification of such financial
statements nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Section 4.01, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, or 4.17 or of
Article 5 or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of (i) any
Default or Event of Default, or (ii) any default or event of default under any
other mortgage, indenture or instrument that could result in an Event of
Default under Section 6.01(4), an Officers' Certificate specifying such
Default, Event of Default or default and what action the Company is taking or
proposes to take with respect thereto.
Section 4.04. STAY EXTENSION AND 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, extension or usury law wherever
enacted, now or at any time hereafter in force, that might affect the
covenants or the performance of this Indenture; and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not, by resort to any
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such law, 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 has been enacted.
Section 4.05. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly,
(i) declare or pay any dividend or make any distribution on account
of the Company's or such Restricted Subsidiary's Capital Stock
or other Equity Interests (other than dividends or
distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or a Restricted Subsidiary
and other than dividends or distributions payable by a
Restricted Subsidiary to another Restricted Subsidiary or to
the Company),
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interest purchased
from the Company or any Restricted Subsidiary),
(iii) voluntarily prepay Indebtedness that is subordinated to the
Securities, whether any such Subordinated Indebtedness is
outstanding on, or issued after, the date of original issuance
of the Securities, except as specifically permitted by the
terms of this Indenture,
(iv) make any Restricted Investment (all such dividends,
distributions, purchases, redemptions or other acquisition,
retirements, prepayments and Restricted Investments being
collectively referred to as "Restricted Payments"), if, at the
time of such Restricted Payment:
(1) a Default or Event of Default shall have occurred and
be continuing or shall occur as a consequence thereof;
or
(2) immediately after such Restricted Payment and after
giving effect thereto on a Pro Forma Basis, the Company
shall not be able to Issue $1.00 of additional
Indebtedness pursuant to Section 4.07(a); or
(3) such Restricted Payment, together with the aggregate of
all other Restricted Payments made after the date of
original Issuance of the Securities, exceeds the sum
of, without duplication:
(A) 50% of the aggregate Consolidated Net Income
(including, for this purpose, gains from Asset
Sales and, to the extent not already included in
the aggregate Consolidated Net Income, gains from
Restricted Investments shall be added to the
aggregate Consolidated Net Income) of the Company
(or, in case such aggregate is a loss, 100% of
such loss) for the period (taken as one accounting
period) from the beginning of the first quarter
commencing immediately after the date of original
Issuance of the Securities and ended as of the
Company's most recently ended fiscal quarter at
the time of such Restricted Payment, plus
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(B) 100% of the aggregate net cash proceeds and the
fair market value of any property or securities
(as determined by the Board of Directors in good
faith) received by the Company from the Issue or
sale of Equity Interests or warrants, options or
rights to acquire Equity Interests of the Company
or any Restricted Subsidiary subsequent to the
date of original Issuance of the Securities (other
than Equity Interests Issued or sold to a
Restricted Subsidiary and other than Disqualified
Stock), plus
(C) $5,000,000, plus
(D) the amount by which the principal amount of and
any accrued interest on:
1) any Senior Indebtedness or Senior
Subordinated Indebtedness of the Company, or
2) any Indebtedness of the Restricted
Subsidiaries,
is reduced on the Company's consolidated balance
sheet upon the conversion or exchange (other than
by a Restricted Subsidiary) subsequent to the date
of original Issuance of the Securities of any
Indebtedness of the Company or any Restricted
Subsidiary (not held by the Company or any
Restricted Subsidiary) for Equity Interests (other
than Disqualified Stock) of the Company or any
Restricted Subsidiaries (less the amount of any
cash, or the fair market value of any other
property or securities (as determined by the Board
of Directors in good faith), distributed by the
Company or any Restricted Subsidiary (to Persons
other than the Company or any other Restricted
Subsidiary) upon such conversion or exchange),
plus
(E) if any Non-Restricted Subsidiary is redesignated
as a Restricted Subsidiary, the fair market value
(as determined by the Board of Directors in good
faith) of such Non-Restricted Subsidiary as of the
date it is redesignated; provided, however, that
for purposes of this clause (E), the fair market
value of any redesignated Non-Restricted
Subsidiary shall be reduced by the amount that any
such redesignation replenishes or increases the
amount of Restricted Investments permitted to be
made pursuant to Section 4.05(b)(iii).
(b) Notwithstanding Section 4.05(a), the following Restricted Payments
may be made:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such
payment would comply with the provisions hereof;
(ii) the retirement of any of the Company's Capital Stock or
Subordinated Indebtedness in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than
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to a Restricted Subsidiary) of, other Capital Stock (other than
Disqualified Stock) and neither such retirement nor the
proceeds of any such sale or exchange shall be included in any
computation made pursuant to Section 4.05(a);
(iii) making Restricted Investments at any time, and from time to
time, in an aggregate outstanding amount of $40,000,000 after
the date of original Issuance of the Securities under this
Indenture (it being understood that if any Restricted
Investment acquired with a Restricted Payment after the date of
original Issuance of the Securities pursuant to this clause
(iii) is sold, transferred or otherwise conveyed to any Person
other than the Company or a Restricted Subsidiary, the portion
of the net cash proceeds or fair market value of securities or
properties paid or transferred to the Company and its
Restricted Subsidiaries in connection with such sale, transfer
or conveyance that relates to the repayment or return of the
original cost of such a Restricted Investment will replenish or
increase the amount of Restricted Investments permitted to be
made pursuant to this Section 4.05(b)(iii), so that up to
$40,000,000 of Restricted Investments may be outstanding under
this Section 4.05(b)(iii) at any given time);
(iv) the repurchase or redemption of the Company's common stock upon
the death of Thomas H. Quinn, pursuant to the terms of an
Employment Agreement, dated as of February 25, 1988, between
the Company and Thomas H. Quinn, as amended or supplemented;
provided, however, that the funds necessary to satisfy the
Company's obligation to repurchase or redeem such Common Stock
shall be fully reimbursed by insurance;
(v) the repurchase or redemption of the Company's common stock
pursuant to the terms of the several Restricted Stock
Agreements, each dated as of February 25, 1988, between the
Company and each of Thomas H. Quinn, Jonathan F. Boucher and
John R. Lowden, the Restricted Stock Agreement, dated as of
December 31, 1992, between the Company and Thomas Quinn and the
Restricted Stock Agreements, each dated as of January 1, 1992,
between the Company and each of Jonathan F. Boucher, Adam Max
and Thomas Quinn, in each case as amended or supplemented, up
to an aggregate amount not to exceed $7,500,000;
(vi) any loans, advances, distributions or payments from the Company
to its Restricted Subsidiaries, or any loans, advances,
distributions or payments by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary, pursuant to
intercompany Indebtedness, intercompany management agreements,
intercompany tax sharing agreements, and other intercompany
agreements and obligations;
(vii) the payment of directors' fees in an annual aggregate amount
not to exceed $250,000;
(viii) investments in marketable securities and other negotiable
instruments through the William Penn Funds (including the
William Penn Interest Income Fund);
(ix) scheduled payments of dividends on, and redemptions of,
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(A) the Preferred Stock of Sate-Lite in an annual aggregate
amount not to exceed $20,000, and
(B) the Preferred Stock of Dura-Line,
1) in an aggregate annual amount not to exceed $300,000
for dividends, and
2) in an aggregate amount not to exceed $3,750,000 for
redemptions pursuant to the terms of the Dura-Line
Agreement;
(x) to the extent constituting Restricted Payments, if no Default
or Event of Default shall have occurred and be continuing or
shall occur as a consequence thereof, the payment of
consulting, financial and investment banking fees (but not
limiting the payment of indemnities, expenses and other
amounts) under the Consulting Agreement, provided that the
obligation of the Company to pay such fees under the Consulting
Agreement shall be subordinated expressly to the Company's
Obligations on the Securities;
(xi) the purchase, redemption, retirement or other acquisition of
(a) any Senior Indebtedness required by its terms to be
purchased, redeemed, retired or acquired with the net proceeds
from asset sales (as defined in the instrument evidencing such
Senior Indebtedness) or upon a change of control (as defined in
the instrument evidencing such Senior Indebtedness), and (b)
the Securities pursuant to Sections 4.13 and 4.14;
(xii) the exchanging, refinancing or refunding of Subordinated
Indebtedness through the Issuance of Subordinated Indebtedness
so long as the Subordinated Indebtedness to be Issued is
Refinancing Indebtedness permitted under Section 4.07; or
(xiii) any payments made in connection with the Refinancing Plan.
Section 4.06. CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other
existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of each of its Restricted Subsidiaries and
the rights (charter and statutory), licenses and franchises of the Company and
each of its Restricted Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any Restricted Subsidiary, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders.
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Section 4.07 LIMITATION ON INCURRENCE OF INDEBTEDNESS.
(a) The Company will not, and will not permit any Restricted Subsidiary to
Issue any Indebtedness (other than the Indebtedness represented by the
Securities, the Old Notes and the Securities) unless: the Company's Cash Flow
Coverage Ratio for its four full fiscal quarters next preceding the date such
additional Indebtedness is Issued would have been at least:
(i) 1.7 to 1, if such date is between the date of original Issuance
of the Securities under this Indenture and June 30, 1999,
(ii) 1.85 to 1, from July 1, 1999 through June 30, 2001, or
(iii) 2.0 to 1, from July 1, 2001 and thereafter,
in each case determined on a Pro Forma Basis (including a pro
forma application of proceeds of such Indebtedness and any
other Indebtedness incurred since the end of the applicable
four quarter period including, without limitation, the earnings
of any business acquired by the Company with the proceeds of
such Indebtedness) as if such additional Indebtedness and any
other Indebtedness issued since the end of the applicable four
quarter period had been Issued at the beginning of such
four-quarter period.
(b) Section 4.07(a) will not apply to the Issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries
up to the greater of (A) $75.0 million in aggregate principal
amount pursuant to the Credit Agreement or the New Credit
Agreement, and (B) an aggregate principal amount up to the sum
of: (x) 85% of the book value of the Company and its Restricted
Subsidiaries' Receivables on a consolidated basis, and (y) 65%
of the book value of the Company and its Restricted
Subsidiaries' inventories on a consolidated basis;
(ii) Indebtedness of the Company and its Restricted Subsidiaries
pursuant to any Receivables Financing;
(iii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, sale and leaseback
transactions, purchase money obligations, capital expenditures
or similar financing transactions relating to:
(A) their properties, assets and rights as of the date of
original Issuance of the Securities up to $20,000,000 in
aggregate principal amount, or
(B) their properties, assets and rights acquired after the
date of original Issuance of the Securities, provided
that such Indebtedness under this Section
4.07(b)(iii)(B) does not exceed 100% of the cost of such
properties, assets and rights:
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(iv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $25,000,000
(all or any portion of which may be Issued as additional
Indebtedness under the Credit Agreement or the New Credit
Agreement); and
(v) Other Permitted Indebtedness.
(c) Notwithstanding Sections 4.07(a) and (b), no Restricted Subsidiary shall
under any circumstances Issue a guarantee of any Indebtedness of the Company
except for guarantees Issued by Restricted Subsidiaries pursuant to Section
4.17, provided, however, that this Section 4.07(c) will not limit or restrict
guarantees Issued by Restricted Subsidiaries in respect of Indebtedness of
other Restricted Subsidiaries.
Section 4.08. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Neither the Company nor any of its Restricted Subsidiaries may make any
loan, advance, guarantee or capital contribution to, or for the benefit of, or
sell, lease, transfer or dispose of any properties or assets to, or for the
benefit of, or purchase or lease any property or assets from, or enter into
any or amend any contract, agreement or understanding with, or for the benefit
of, an Affiliate (each such transaction or series of related transactions that
are part of a common plan an "Affiliate Transaction"), except in good faith
and on terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction on an arm's length basis from an unrelated Person.
(b) Neither the Company nor any of its Restricted Subsidiaries may engage in
any Affiliate Transaction involving aggregate payments or other transfers by
the Company and its Restricted Subsidiaries in excess of $5,000,000 (including
cash and non-cash payments and benefits valued at their fair market value by
the Board of Directors in good faith) unless the Company delivers to the
Trustee (i) a resolution of the Board of Directors stating that the Board of
Directors (including a majority of the disinterested directors, if any) has,
in good faith, determined that such Affiliate Transaction complies with the
provisions of this Indenture, and (ii) an opinion as to the fairness of such
Affiliate Transaction to the Company or such Restricted Subsidiary from a
financial point of view by an investment banking firm of national prominence
that is not an Affiliate.
(c) Notwithstanding Sections 4.08(a) and (b), this Section 4.08 will not apply
to:
(i) transactions between the Company and any Restricted Subsidiary
or between Restricted Subsidiaries,
(ii) any payments or transactions permitted pursuant to Section
4.05,
(iii) payments of fees and other amounts due under the Consulting
Agreement, or
(iv) the payment of reasonable and customary directors' fees to
directors of the Company, its Restricted Subsidiaries.
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Section 4.09. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any asset now owned or
hereafter acquired by them, or any income or profits therefrom or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on its properties or assets, the Company
may create any Lien upon any of its properties or assets (including, but not
limited to, any Capital Stock of its Subsidiaries) if the Securities are
equally, and ratably secured.
Section 4.10. COMPLIANCE WITH LAWS, TAXES.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, comply with all statutes, laws, ordinances, or government
rules and regulations to which it is subject, non-compliance with which would
materially adversely affect the business, prospects, earnings, properties,
assets or condition, financial or otherwise, of the Company and its Restricted
Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, pay prior to delinquency, all taxes, assessments and
governmental levies, except those contested in good faith by appropriate
proceedings,
Section 4.11. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective, any encumbrance or restriction on the ability of
any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital
Stock or any other interest or participation in, or measured
by, its profits, owned by the Company or any Restricted
Subsidiary, or pay any Indebtedness owed to, the Company or any
Restricted Subsidiary,
(ii) make loans or advances to the Company, or
(iii) transfer any of its properties or assets to the Company, except
for such encumbrances or restrictions existing under or by
reason of:
(A) applicable law,
(B) Indebtedness permitted;
1) under Section 4.07(a),
2) under Sections 4.07(b)(i), (b)(ii) and (b)(iv) and
clauses (i), (vi) and (ix) of the definition of
Other Permitted Indebtedness, or
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3) agreements and transactions permitted under
Section 4.05,
(C) customary provisions restricting subletting or assignment
of any lease or license of the Company or any Restricted
Subsidiary,
(D) customary provisions of any franchise, distribution or
similar agreement,
(E) any instrument governing Indebtedness or any other
encumbrance or restriction of a Person acquired by the
Company or any Restricted Subsidiary at the time of such
acquisition, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or
assets of the Person, so acquired,
(F) Indebtedness or other agreements existing on the date of
original Issuance of the Securities,
(G) any Refinancing Indebtedness of Indebtedness described in
Section 4.07(b)(i), (b)(ii), and (b)(iv) and clauses (i),
(vii), and (ix) of the definition of Other Permitted
Indebtedness; provided that the encumbrances and
restrictions created in connection with such Refinancing
Indebtedness are no more restrictive in any material
respect with regard to the interests of the Holders than
the encumbrances and restrictions in the refinanced
Indebtedness,
(H) any restrictions, with respect to a Restricted
Subsidiary, imposed pursuant to an agreement that has
been entered into for the sale or disposition of the
stock, business, assets or properties of such Restricted
Subsidiary,
(I) the terms of any Indebtedness of the Company incurred in
connection with Section 4.07, provided that the terms of
such Indebtedness constitute no greater encumbrance or
restriction on the ability of any Restricted Subsidiary
to pay dividends or make distributions, make loans or
advances or transfer properties or assets than is
permitted by this Section 4.11, and
(J) the terms of purchase money obligations, but only to the
extent such purchase money obligations restrict or
prohibit the transfer of the property so acquired.
(b) Nothing contained in this Section 4.11 shall prevent the Company from
entering into any agreement or instrument providing for the incurrence of
Permitted Liens or restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that are subject
to Permitted Liens.
Section 4.12. MAINTENANCE OF OFFICE OR AGENCIES.
The Company will maintain in the Borough of Manhattan, the City of
New York an office or an agency (which may be an office of any Agent) where
Securities may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Securities
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and this Indenture may be served. The Company will give prompt written notice
to the Trustee of any change in the location of such office or agency. If at
any time the Company shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or recision shall in any matter
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or recision
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
Section 4.13. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control (such date being the "Change of
Control Trigger Date"), each Holder shall have the right to require the
Company to purchase such Holder's Securities pursuant to an Offer at a
purchase price equal to 101% of the Accreted Value of such Security at the
date of purchase, plus any accrued and unpaid interest and Liquidated Damages
from April 1, 2002 to the Purchase Date if such date occurs after April 1,
2002. Although the failure of the Company to purchase all Securities tendered
in such an Offer shall be a Default, if the Company is unable to purchase all
Securities tendered in such an Offer, the Company shall nevertheless purchase
the maximum principal amount of Securities that it is able to purchase at that
time.
(b) Notwithstanding Section 4.13(a), if any Senior Indebtedness entitled to be
redeemed or purchased by the Company upon a Change of Control is outstanding
when a Change of Control occurs, the Change of Control Trigger Date shall be
the first date on which all Senior Indebtedness that is required or entitled
pursuant to its terms to be redeemed or purchased upon a Change of Control has
been redeemed or purchased.
Section 4.14. LIMITATION ON ASSET SALES.
(a) The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, consummate an Asset Sale (including the sale of any of
the Capital Stock of any Restricted Subsidiary) providing for Net Proceeds in
excess of $2,500,000 unless at least (A) 50% of the consideration thereof
received by the Company or such Restricted Subsidiary is in the form of cash
and/or Cash Equivalents and/or Marketable Securities, and (B) 75% of the Net
Proceeds from such Asset Sale are applied to one or more of the following in
such combination as the Company shall elect:
(i) an investment in another asset or business in the same line of
business as, or a line of business similar to that of, the line
of business of the Company and its Restricted Subsidiaries at
that time; provided that such investment occurs on or prior to
the 365th day following the date of such Asset Sale (the "Asset
Sale Disposition Date"),
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(ii) the purchase, redemption or other prepayment or repayment of
outstanding Senior Indebtedness on or prior to the Asset Sale
Disposition Date, or
(iii) an offer expiring on or prior to the Purchase Date.
(b) Any Net Proceeds from the Asset Sale that are not applied or invested as
provided in Sections 4.14(a)(1) or (a)(ii) shall constitute "Excess Proceeds";
provided, however, that if an offer to purchase Senior Indebtedness with Net
Proceeds from any Asset Sales has commenced on or prior to 30 days after the
Asset Sale Disposition Date and completed on or prior to 70 days after the
Asset Sale Disposition Date, only the Net Proceeds not used to purchase Senior
Indebtedness in such offer shall be deemed Excess Proceeds.
(c) When the aggregate amount of Excess Proceeds exceeds $10,000,000 (the
"Asset Sale Trigger Date"),the Company shall make an Offer to all Holders to
purchase the maximum principal amount of the Securities then outstanding that
may be purchased out of Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the Accreted Value of such Securities, plus any
accrued and unpaid interest and Liquidated Damages from April 1, 2002 to the
Purchase Date if such date occurs after April 1, 2002.
(d) To the extent that any Excess Proceeds remain after completion of the
Offer, the Company may use such remaining amount for general corporate
purposes.
(e) Upon completion of an Offer, the amount of Excess Proceeds shall be reset
at zero.
(f) Notwithstanding the foregoing, to the extent that any or all of the Net
Proceeds of an Asset Sale is prohibited or delayed by applicable local law
from being repatriated to the United States, the portion of such Net Proceeds
so affected will not be required to be applied pursuant to this Section 4.14,
but may be retained for so long, but only for so long, as the applicable local
law prohibits repatriation to the United States. The Company will promptly
take all reasonable actions required by the applicable local law to permit
such repatriation, and once such repatriation of any affected Net Proceeds is
not prohibited under applicable local law, such repatriation will be
immediately effected and such repatriated Net Proceeds will be applied in the
manner set forth above as if such Asset Sale had occurred on the date of
repatriation.
Section 4.15. REDEMPTION OF OLD NOTES.
The Company will, on December 15, 1993, exercise its right to make an
optional redemption of all outstanding Old Notes, if any, in accordance with
the terms of the Old Indenture.
Section 4.16. SENIOR SUBORDINATED INDEBTEDNESS.
The Company shall not Issue any Indebtedness that is subordinate or
junior in right of payment to any Senior Indebtedness and senior in any
respect in right of payment to the Securities.
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Section 4.17. GUARANTEES BY RESTRICTED SUBSIDIARIES.
(a) The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee any Indebtedness of the Company other than the
Securities ("Other Indebtedness") unless:
(i) such Restricted Subsidiary contemporaneously executes and
delivers a supplemental indenture to this Indenture providing
for a guarantee of payment of the Securities then outstanding
by such Restricted Subsidiary to the same extent as the
guarantee (the "Other Indebtedness Guarantee") of the Other
Indebtedness (including waiver of subrogation, if any), and
(ii) if the Other Indebtedness guaranteed by such Restricted
Subsidiary is:
(A) Senior Indebtedness. the guarantee for the Securities
shall be subordinated in right of payment to the Other
Indebtedness Guarantee, and
(B) Senior Subordinated Indebtedness, the guarantee for the
Securities shall be pari passu in right of payment with
the Other Indebtedness Guarantee, and
(C) Subordinated Indebtedness, the guarantee for the
Securities shall be senior in right of payment to the
Other Indebtedness Guarantee,
provided that none of that the foregoing will limit or restrict
guarantees Issued by Restricted Subsidiaries in respect of
Indebtedness of other Restricted Subsidiaries.
(b) Each guarantee of the Securities created by a Restricted Subsidiary
pursuant to Section 4.17(a) shall be in form and substance satisfactory to the
Trustee and shall provide, among other things, that it will be automatically
and unconditionally released and discharged upon:
(i) any sale, exchange or transfer permitted by this Indenture to
any Person not an Affiliate of (A) all of the Company's Capital
Stock in such Restricted Subsidiary, or (B) the sale of all or
substantially all of the assets of the Restricted Subsidiary
and upon the application of the Net Proceeds from such sale in
accordance with Section 4.14, or
(ii) the release or discharge of the Other Indebtedness Guarantee
that resulted in the creation of such guarantee of the
Securities, except a discharge or release by or as a result of
payment under such Other Indebtedness Guarantee.
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ARTICLE 5
SUCCESSORS
Section 5.01. MERGER OR CONSOLIDATION.
(a) The Company shall not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to, any
Person, (any such consolidation, merger or sale being a "Disposition") unless:
(i) the successor entity of such Disposition or the Person to which
such Disposition shall have been made is a corporation
organized or existing under the laws of the United States, any
state thereof or the District of Columbia;
(ii) the successor corporation of such Disposition or the
corporation to which such Disposition shall have been made
expressly assumes the Obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Securities and this Indenture;
(iii) immediately after such Disposition no Default or Event of
Default exists; and
(iv) the entity (the "Successor Corporation") formed by or surviving
any such Disposition or the corporation to which such
Disposition shall have been made;
(A) shall have Consolidated Net Worth (immediately after the
Disposition but prior to any purchase accounting
adjustments resulting from the Disposition) equal to or
greater than the Consolidated Net Worth of the Company
immediately preceding the Disposition,
(B) shall be permitted immediately after the Disposition by
the terms of Section 4.07(a) to Issue at least $1.00 of
additional Indebtedness, and
(C) shall have a Cash Flow Coverage Ratio on a Pro Forma
Basis, for the four fiscal quarters immediately
preceding the applicable Disposition, equal to or
greater than the actual Cash Flow Coverage Ratio of the
Company for such four-quarter period;
provided, however, that for purposes of this Section 5.01
(a)(iv), wherever applicable, the Cash Flow Coverage Ratio
shall be calculated on a Pro Forma Basis after giving effect to
such Disposition as if the same had occurred at the beginning
of the applicable four-quarter period.
Prior to the consummation of any proposed Disposition, the Company
shall deliver to the Trustee an Officers' Certificate to the foregoing effect
and an Opinion of Counsel stating that the proposed Disposition and such
supplemental indenture comply with this Indenture.
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Section 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any Disposition. the Successor Corporation resulting from such
Disposition shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as
if such Successor has been named as the Company herein; provided, however,
that neither the Company nor any Successor Corporation shall be released from
its Obligation to pay the principal of, premium, if any, accrued and unpaid
interest on, and Liquidated Damages, if any, with respect to the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. EVENTS OF DEFAULT.
(a) An "Event of Default" is:
(1) a default for 30 days in payment of interest on, or Liquidated
Damages, if any, with respect to the Securities;
(2) a default in payment when due of principal or premium, if any;
(3) the failure of the Company to comply with any of its other
agreements or covenants in, or provisions of, the outstanding
Securities or this Indenture and the Default continues for the
period, if applicable, and after the notice specified in Section
6.01(b);
(4) a default by the Company or any Restricted Subsidiary under any
mortgage, indenture or instrument under which there may be Issued
or by which there may be secured or evidenced any Indebtedness
for money borrowed by the Company or any Restricted Subsidiary
(or the payment of which is guaranteed by the Company or any
Restricted Subsidiary), whether such Indebtedness exists prior
to, or is created after, the date of original Issuance of the
Securities if:
(A) either (i) such default results from the failure to pay
principal of or interest on any such Indebtedness and such
default continues for 30 days beyond any applicable grace
period, or (ii) as a result of such default the maturity of
such Indebtedness has been accelerated prior to its
expressed maturity, and
(B) the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default
for failure to pay principal or interest thereon, or the
maturity of which has been accelerated, aggregates in excess
of $15,000,000;
(5) a failure by the Company or any Restricted Subsidiary to pay
final judgments (not covered by insurance) aggregating in excess
of $7,500,000 which judgments a court of
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competent jurisdiction does not rescind, annul or stay within 45
days after their entry and the Default continues for the period
and after the notice specified in Section 6.01(b);
(6) in existence when the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(7) in existence when a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the property
of the Company or any Significant Subsidiary, or
(C) orders the liquidation of the Company or any Significant
Subsidiary, and any such order or decree remains unstayed
and in effect for 60 days.
(b) A Default under Section 6.01 (a)(3) (other than a Default under Sections
4.05, 4.07, 4.08, 4.11, 4.13, 4.14, 4.15, 4.16, 4.17 and 5.01 any of which
shall be an Event of Default with the notice but without the passage of time
specified in this Section 6.01(b)) or Section 6.01(a)(5) is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount
of the then outstanding Securities notify the Company of the Default and the
Company does not cure the Default within 30 days after receipt of the notice.
The notice must specify the Default and state that the notice is a "Notice of
Default."
(c) In the case of any Event of Default pursuant to Section 6.01(a) occurring
by reason of any willful, action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding payment of the premium
that the Company would have to pay if the Company then had elected to redeem
the Securities pursuant to paragraph 5 of the Securities, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law, anything in this Indenture or in the Securities contained to
the contrary notwithstanding.
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Section 6.02. ACCELERATION.
(a) Upon the occurrence of an Event of Default (other than an Event of Default
under Section 6.01(a)(6) or (a)(7)) occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding
Securities may declare all outstanding Securities to be due and payable
immediately and upon such declaration, the Accreted Value of, and any premium
due on, all such Securities, and any accrued and unpaid interest from April 1,
2002 to the date of payment if such declaration is made after April 1, 2002,
shall be due and payable immediately; provided, however, that if an Event of
Default arises under Section 6.01(a)(6) or (a)(7), the Accreted Value of, and
any premium due on, all such Securities, plus any accrued and unpaid interest
on such Securities from April 1, 2002 to the date of any such Event of Default
if it occurs after April 1, 2002, shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the
Trustee or any Holders; provided further that if any Indebtedness is
outstanding under the Credit Agreement or the New Credit Agreement, upon a
declaration of acceleration, the Accreted Value of, and any premium due on,
all such Securities, and any accrued and unpaid interest from April 1, 2002 to
the date of payment if such declaration is made after April 1, 2002, shall not
be payable until the earlier of (1) the day that is five Business Days after
notice of acceleration is given to the Company and the Credit Agent, or (2)
the date of acceleration of the Indebtedness under the Credit Agreement or the
New Credit Agreement, as the case may be.
(b) The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may rescind any declaration of
acceleration of such Securities and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Defaults and
Events of Default (other than the nonpayment of principal of, or premium, if
any, or interest on, the Securities which shall have become due by such
declaration) shall have been cured or waived.
(c) If there has been a declaration of acceleration of the Securities because
an Event of Default under Section 6.01(a)(4) has occurred and is continuing,
such declaration of acceleration shall be automatically annulled if the
holders of the Indebtedness described in Section 6.01(a)(4) have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 Business
Days thereof and if:
(i) the annulment of such acceleration would not conflict with any
judgment or decree of a court of competent jurisdiction,
(ii) all existing Events of Default, except non-payment of principal
or interest that shall have become due solely because of the
acceleration, have been cured or waived, and
(iii) the Company has delivered an Officer's Certificate to the
Trustee to the effect of clauses (i) and (ii) above.
Section 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy, to collect the payment of principal of, or
premium, if any, or interest on, the Securities or to enforce the performance
of any provision of the Securities or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may waive any existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default
in the payment of the principal of, or premium, if any, or interest on, any
Security (which may only be waived with the consent of each Holder affected) .
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; provided that no such waiver shall extend to any subsequent
or other Default or impair any right consequent thereon.
Section 6.05. CONTROL BY MAJORITY.
Subject to Section 7.01(e), the Holders of a majority in principal
amount of the then outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it by this Indenture. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of other Holders, or would involve the Trustee in personal liability.
Section 6.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Securities only if:
(i) the Holder gives to the Trustee notice of a continuing Event of
Default;
(ii) the Holders of at least 25% in principal amount of the then
outstanding Securities make a request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or
expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(v) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Securities do not give
the Trustee a direction inconsistent with the request.
A Holder may, not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
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Holders of the Securities may not enforce this Indenture, except as
provided herein.
Section 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of, and premium, if any, and
interest on, a Security, on or after a respective due date expressed in the
Security, or to bring suit for the enforcement of any such payment on or after
such respective date, 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 Section 6.01(a)(1) or (a)(2)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for (i) the
Accreted Value, premium and interest remaining unpaid on the Securities, (ii)
interest on overdue principal and premium, if any, and, to the extent lawful,
interest, and (iii) 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
("Trustee Expenses").
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 to have the claims of the
Trustee (including any claim for Trustee Expenses) and the Holders
allowed in any Insolvency or Liquidation Proceeding or other judicial
proceeding relative to the Company (or any other obligor upon the
Securities), its creditors or its property and shall be entitled and
empowered to collect, receive and distribute to Holders any money or
other property payable or deliverable on any such claims and each
Holder authorizes any Custodian in any such Insolvency or Liquidation
Proceeding or other judicial proceeding to make such payments to the
Trustee, and if the Trustee shall consent to the making of such
payments directly to the Holders any such Custodian is hereby
authorized to make such payments directly to the Holders, and to pay
to the Trustee any amount due to it hereunder for Trustee Expenses,
and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such Trustee Expenses, and any other
amounts due the Trustee under Section 7.07 out of the estate in any
such proceeding, shall be denied for any reason, payment of the same
shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties
which the Holders may be entitled to receive in such proceeding,
whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of
any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any Insolvency or Liquidation Proceeding.
Section 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
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First: to the Trustee for amounts due under Section 7.07;
Second: to the holders of Senior Indebtedness to the extent
required by Article 10 hereof;
Third: to Holders for amounts due and unpaid on the Securities
for principal, premium, if any, and interest, ratably,
without preference or priority of any kind, according
to the amounts due and payable on the Securities for
principal, premium, if any, and interest, respectively;
and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
Section 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit; and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07, or a suit by Holders of more than 10% in
principal amount of the then outstanding Securities.
ARTICLE 7
TRUSTEE
Section 7.01. DUTIES OF TRUSTEE.
(a) if an Event of Default occurs (and has not been cured) the Trustee shall
(i) exercise the rights and powers vested in it by this Indenture, and (ii)
use the same degree of care and skill in exercising such rights and powers as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee's duties shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture
and no others, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to
determine whether they conform to this Indenture's requirements
and to confirm the correctness of all mathematical
computations.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own wilful misconduct, except
that:
(i) this paragraph does not limit the effect of Section 7.01(b);
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction it receives pursuant to Section 6.05.
(d) Whether or not expressly so provided, every provision of this Indenture
that in any way relates to the Trustee is subject to paragraphs (a), (b) and
(c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or risk
its own funds or incur any liability . The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders unless such Holders shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability
or expense.
(f) The Trustee shall not be liable for interest on any money it receives
except as the Trustee may agree in writing with the Company. Money the Trustee
holds in trust need not be segregated from other funds except to the extent
required by law.
Section 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document it believes to be genuine and to have
been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or omits to take
in good faith that it believes to be authorized or within its rights or
powers.
(e) Unless otherwise specifically provided in the Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer.
Section 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not the Trustee.
However, if the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee or resign. Any Agent may do the same with like rights. The Trustee is
also subject to 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 or the Securities, it shall
not be accountable for the Company's use of the proceeds from the Securities
or for any money paid to the Company or upon the Company's direction under any
provisions hereof, it shall not be responsible for the use or application of
any money any Paying Agent other than the Trustee receives, and it shall not
be responsible for any statement or recital herein or any statement in the
Securities or any other document in connection with the sale of the Securities
or pursuant to this Indenture, other than its certificate of authentication.
Except with respect to Section 4.01, the Trustee shall have no duty to inquire
as to the performance of the Issuer's covenants in Article IV. In addition,
the Trustee shall be deemed not to have any knowledge of a Default or an Event
of Default except (i) any Event of Default occurring pursuant to Sections
6.01(a)(1), 6.01(a)(2) and 4.01, or (ii) any Default or Event of Default of
which the Trustee shall have received written notification or actual
knowledge.
Section 7.05. NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment on any Security (including any
failure to redeem Securities called for redemption or any failure to purchase
Securities tendered pursuant to an Offer that are required to be purchased by
the terms of this Indenture), the Trustee may withhold the notice if and so
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the Holders' interests.
Section 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each April 1 beginning with April 1, 1998, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with section 313(a) of the TIA (but if no event described in
section 313(a) of the TIA has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with section 313(b)(2) of the TIA.
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Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Holders shall be filed with
the SEC and each stock exchange on which the Securities are listed. The
Company shall notify the Trustee when the Securities are listed on any stock
exchange.
Section 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
disbursements, advances and expenses it incurs or makes in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses the Trustee incurs arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
except as set forth below. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Company shall not relieve the Company of its Obligations hereunder. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
The Company's Obligations under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability the Trustee incurs through negligence or bad faith.
To secure the Company's payment of its Obligations in this Section,
the Trustee shall have a Lien prior to the Securities on all money or property
the Trustee holds or collects, except that held in trust to pay the principal
of, and premium, if any, and interest on, particular Securities. Such Lien
shall survive the satisfaction and discharge of this Indenture. Compensation,
reimbursement and indemnification to the Trustee under this Section is not
subordinated to any Senior Indebtedness.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute administrative expenses under any
Bankruptcy Law .
Section 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
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The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal
amount of the then outstanding Securities may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee or
its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee, provided that the Holders of a majority in principal amount
of the then outstanding Securities may appoint a successor Trustee to replace
any successor Trustee appointed by Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
appointment to Holders. The retiring Trustee shall promptly transfer all
property it holds as Trustee to the successor Trustee, provided all sums owing
to the retiring Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
shall continue for the retiring Trustee's benefit with respect to expenses and
liabilities it incurred prior to being replaced.
Section 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
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Section 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times (i) be a corporation organized and
doing business under the laws of the United States of America, of any state
thereof, or the District of Columbia authorized under such laws to exercise
corporate trustee power, (ii) be subject to supervision or examination by
federal or state authority, (iii) have a combined capital and surplus of at
least $25 million ($100 million in the case of any successor Trustee) as set
forth in its most recent published annual report of condition, and (iv)
satisfy the requirements of sections 310(a)(1), (2) and (5) of the TIA. The
Trustee is subject to section 310(b) of the TIA.
Section 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to section 31l(a) of the TIA, excluding any
creditor relationship listed in section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to 311(a) of the TIA to the extent
indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.
(a) When (i) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.07) for cancellation, or
(ii) all outstanding Securities have become due and payable and the Company
irrevocably deposits with the Trustee funds sufficient to pay at maturity all
outstanding Securities, including interest and Liquidated Damages, if any,
thereon (other than Securities replaced pursuant to Section 2.07), and if in
either case the Company pays all other sums payable under this Indenture by
the Company, then this Indenture shall, subject to Sections 8.01(c) and 8.06,
cease to be of further effect.
(b) Subject to Sections 8.01(c), 8.02, and 8.06, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.13, 4.14, 4.15, 4.16 and 4.17, and
the operation of Sections 5.01(iii), 5.01(iv), or 6.01(a)(3) through (a)(7)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities
may not be accelerated because of an Event of Default specified in 6.01(a)(3)
through (a)(7) or because of the Company's failure to comply with Sections
5.01(iii) or 5.01(iv).
Upon satisfaction of the conditions set forth herein and upon the
Company's request (and at the Company's expense), the Trustee shall
acknowledge in writing the discharge of those obligations that the
Company has terminated.
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(c) Notwithstanding clauses (a) and (b) above, the Company's obligations in
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.04, 7.07, 7.08, 8.04, 8.05, and
8.06, and the Trustee's and the Paying Agent's obligations in Section 8.04
shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07 and 8.05 and the Company's, Trustee's
and Paying Agent's obligations in Section 8.04 shall survive.
Section 8.02. CONDITIONS TO DEFEASANCE.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations sufficient for the payment in full
of the principal of, and any premium due on, the Securities, and
any accrued and unpaid interest on, and Liquidated Damages, if
any, with respect to the Securities then outstanding, from April
1, 2002, as the maturity date, the redemption date or the
Purchase Date, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing
their opinion that the payments of principal and interest when
due and without reinvestment of the deposited U.S. Government
Obligations plus any deposited money without investment will
provide cash at such times and in such amounts as will be
sufficient to pay principal of, premium, if any, any accrued and
unpaid interest when due on, and Liquidated Damages, if any, with
respect to all the Securities to maturity or redemption, as the
case may be;
(3) since the Company's irrevocable deposit provided for in Section
8.02(1) 91 days have passed;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect to it;
(5) the deposit does not constitute a default under any other
agreement binding on the Company;
(6) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940, as amended;
(7) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling, or (ii) under
applicable federal 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 on the same
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amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(8) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee and Opinion of Counsel to the
effect 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; and
(9) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent
to the defeasance and discharge of the Securities contemplated by
this Article 8 have been satisfied.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption or purchase of Securities at a
future date in accordance with Article 3.
Section 8.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Indenture to the payment of principal of, premium,
if any, and interest on, and Liquidated Damages, if any, with respect to, the
Securities.
Section 8.04. REPAYMENT TO COMPANY.
After the Securities have been paid in full, the Trustee and the
Paying Agent shall promptly turn over to the Company any excess money or
securities they hold.
The Trustee and the Paying Agent shall pay to the Company upon
written request any money they hold for the payment of principal, premium,
interest or Liquidated Damages that remains unclaimed for 1 year after the
date upon which such payment shall have become due; provided, however, that
the Company shall have either caused notice of such payment to be mailed to
each Holder entitled thereto no less than 30 days prior to such repayment or
within such period shall have published such notice in a financial newspaper
of widespread circulation published in The City of New York ( including,
without limitation, The Wall Street Journal). After payment to the Company,
Holders entitled to the money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
Section 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS.
The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or the principal and interest received on such U.S.
Government Obligations.
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Section 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 8 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 Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that, if the Company has made any payment of
principal of, premium, if any, any accrued and unpaid interest on, and
Liquidated Damages, if any, with respect to, any Securities because of the
reinstatement of its Obligations, the Company shall be subrogated to the
Holders' rights to receive such payment from the money or U. S. Government
Obligations the Trustee or Paying Agent holds.
ARTICLE 9
AMENDMENTS
Section 9.01. AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF HOLDERS.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Securities without the
consent of any Holder or any holder of any Senior Indebtedness:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Securities in addition to or in
place of certificated Securities,
(c) to provide for the assumption by a Successor Corporation of the
Company's Obligations to the Holders in the event of a
Disposition pursuant to Article 5;
(d) to comply with SEC's requirements to effect or maintain the
qualification of this Indenture under the TIA; or
(e) to make any change that does not materially adversely affect any
Holder's legal rights under this Indenture.
Upon the Company's request, after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any amended
or supplemental indenture and/or the documents described in Section 9.06, the
Trustee shall join with the Company in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
contained in any such amended or supplemental indenture, but the Trustee shall
not be obligated to enter into an amended or supplemental indenture that
affects its own rights, duties or immunities under this Indenture or
otherwise.
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Section 9.02. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS.
Subject to Section 6.07, the Company and the Trustee may amend or
supplement this Indenture or the Securities with the written consent of the
Holders of at least a majority in principal amount of the then outstanding
Securities (including consents obtained in connection with a tender offer or
exchange offer for the Securities). Subject to Sections 6.04 and 6.07, the
Holders of a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange
offer for the Securities) may also waive any existing Default or Event of
Default (other than a payment Default) and its consequences or compliance in a
particular instance by the Company with any provision of this Indenture or the
Securities.
Upon the Company's request and after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any
supplemental indenture, evidence of the Holders' consent, and the documents
described in Section 9.06, the Trustee shall join with the Company in the
execution of such amended or supplemental indenture unless such amended or
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but not be obligated to, enter into such amended or supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective,
the Company shall mail to each Holder affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amended or supplemental indenture or
waiver. Without the consent of each Holder affected, an amendment, supplement
or waiver under this Section may not:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of interest,
including default interest as set forth in Section 4.01, or
Liquidated Damages, if any, on any Security, or alter the
redemption or purchase provisions with respect thereto;
(3) reduce the principal of or change the fixed maturity of any
Security,
(4) make any Security payable in money other than that stated in the
Security;
(5) make any change in Section 6.04 or 6.07 or in this sentence of
this Section 9.02:
(6) make any change in Article 10 that adversely affects any rights
of such Holder; or
(7) waive a default in the payment of the principal of, or premium,
if any, or interest on, and Liquidated Damages, if any, with
respect to, or redemption or purchase
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payment with respect to, any Security (except a rescission of
acceleration of the Securities by the Holders of at least a
majority in aggregate principal amount of the then outstanding
Securities and a waiver of the payment default that resulted from
such acceleration).
Section 9.03. COMPLIANCE WITH TIA.
Every amendment or supplement to this Indenture or the Securities
shall be set forth in an amended supplemental indenture that complies with the
TIA as then in effect.
Section 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Security is a continuing consent by the Holder and
every subsequent holder of a Security or portion of a Security that evidences
the same Indebtedness as the consenting Holder's Security, even if notation of
the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his or her Security or portion
of a Security if the Trustee receives the notice of revocation before the date
on which the Trustee receives an Officer's Certificate certifying that the
Holders of the requisite principal amount of Securities have consented to the
amendment or waiver,
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the holders of Securities entitled to consent to
any amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
holders of Securities at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to consent to such amendment or
waiver or to revoke any consent previously given, whether or not such Persons
continue to be holders of Securities after such record date. No consent shall
be valid or effective for more than 90 days after such record date unless
consents from Holders of the principal amount of Securities required hereunder
for such amendment or waiver to be effective shall have also been given and
not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in any of clauses (1) through (6)
of Section 9.02. In such case, the amendment or waiver shall bind each Holder
who has consented to it and every subsequent holder of a Security that
evidences the same debt as the consenting Holder's Security.
Section 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Security thereafter authenticated. The Company in
exchange for all Securities may Issue and the Trustee shall authenticate new
Securities that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or Issue a new Security
shall not affect the validity and effect of such amendment, supplement or
waiver.
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Section 9.06. TRUSTEE PROTECTED.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing such amendment or
supplemental indenture, the Trustee shall be entitled to receive and, subject
to Section 7.01, shall be fully protected in relying upon, an Officers'
Certificate and Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that
it is not inconsistent herewith, and that it will be valid and binding upon
the Company in accordance with its terms. The Company may not sign an
amendment or supplemental indenture until the Board of Directors approves it.
Section 9.07. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS OF
SENIOR INDEBTEDNESS.
No amendment or modification to Article 10, this Section 9.07 or
Section 11.15 may be made to this Indenture without the consent of holders of
at least a majority of the outstanding principal amount of each class of
Designated Senior Indebtedness that would be adversely affected by such
amendment or modification (the Securities, Senior Indebtedness Issued under
the Credit Agreement or the New Credit Agreement, and any other Designated
Senior Indebtedness shall each be a separate class); provided, however, that
if some but not all classes of Designated Senior Indebtedness consent to any
such amendment or modification, such amendment or modification shall be
effective with respect to each consenting class.
ARTICLE 10
SUBORDINATION
Section 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Security agrees,
any provision of this Indenture or Securities to the contrary notwithstanding,
that all Obligations owned under and in respect of the Securities are
subordinated in right of payment, to the extent and in the manner provided in
this Article, to the prior payment in full in cash of all Obligations owed
under and in respect of all Senior Indebtedness, and that the subordination is
for the benefit of all holders of all Senior Indebtedness, whether outstanding
on the date of original Issuance of the Securities or immediately thereafter.
For this Article 10, a distribution may consist of cash, securities
or other property, by set-off or otherwise.
Section 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment or distribution of assets of any kind or character,
whether in cash, property or securities, to creditors in any Insolvency or
Liquidation Proceeding with respect to the Company, no payment or distribution
shall be made on the account of the Securities until all amounts due or to
become due under or with respect to any Senior Indebtedness (including any
Post-Petition Interest) shall first be
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paid in cash in full. Upon any such Insolvency or Liquidation Proceedings any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders or the Trustee
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 if received by them, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the amounts of Senior
Indebtedness such holders hold) or their Representative or Representatives, as
their 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, after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of Senior Indebtedness.
(b) A Disposition or the liquidation or dissolution of the Company following a
Disposition to another Person upon the terms and conditions provided in
Article 5 shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such Disposition complies
with the Conditions stated in Article 5.
Section 10.03. DEFAULT ON SENIOR INDEBTEDNESS.
(a) Upon and during the continuation of any default in the payment of
principal of, or premium, if any, or interest on, any Senior
Indebtedness, or any Obligation owing under or in respect of Senior
Indebtedness, or if any event of default (other than a payment
default) with respect to any Senior Indebtedness shall have occurred
and be continuing and shall have resulted in such Senior Indebtedness
becoming or being declared due and payable prior to the date on which
it would otherwise have become due and payable, or
(b) if any event of default other than as described in Section 10.03(a)
with respect to any Designated Senior Indebtedness shall have
occurred and be continuing permitting the holders of such Designated
Senior Indebtedness (or their Representative) to declare such
Designated Senior Indebtedness due and payable prior to the date on
which it would otherwise have become due and payable,
then no Payment shall be made by or on behalf of the Company on account of the
Securities in case of:
(i) any payment or nonpayment event of default specified in
10.03(a) unless and until such event of default shall have been
cured or waived in writing in accordance with the instruments
governing such Senior Indebtedness or such acceleration shall
have been rescinded or annulled, or
(ii) any nonpayment event of default specified in 10.03(b), during
the period (a "Payment Blockage Period") commencing on the date
the Company and the Trustee receive written notice (a "Payment
Notice") of such event of default (which notice shall be
binding on the Trustee and the Holders as to the occurrence of
such an event of default from any holders of Designated Senior
Indebtedness or a Representative of such holders) and ending on
the earliest of:
(A) 179 days after such date,
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(B) the date, if any, on which such Designated Senior
Indebtedness to which such default relates is paid in
full or such default is cured or waived in writing in
accordance with the instruments governing such Designated
Senior Indebtedness by the holders of such Designated
Senior Indebtedness, and
(C) the date on which the Trustee receives written notice
from the holders of Designated Senior Indebtedness (or a
Representative of such holders) that commenced the
Payment Blockage Period gives written notice that the
Payment Blockage Period has been terminated.
During any consecutive 360-day period, the aggregate of all Payment Blockage
Periods shall not exceed 179 days and there shall be a period of at least 181
consecutive days in each consecutive 360-day period when no Payment Blockage
Period is in effect. For all purposes of this Section 10.03, no event of
default that existed or was continuing with respect to the Senior Indebtedness
with respect to which notice commencing a Payment Blockage Period was given on
the date such Payment Blockage Period commenced shall be, or be made, the
basis for the commencement of any subsequent Payment Blockage Period unless
such event of default is cured or waived for a period of not less than 90
consecutive days.
Section 10.04. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify the Credit Agent and each holder of
Senior Indebtedness of the acceleration.
Section 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
If the Company shall make any payment to the Trustee on account of
the principal of, or premium, if any, or interest on, and Liquidated Damages,
if any, with respect to, the Securities, or any other Obligation in respect of
the Securities, or the Holders shall receive from any source any payment on
account of the principal of, or premium, if any, or interest on, and
Liquidated Damages, if any, with respect to, the Securities or any Obligation
in respect of the Securities, at a time when such payment is prohibited by
this Article 10, the Trustee or such Holders shall hold such payment in trust
for the benefit of, and shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness (pro rata as to each of such holders on the
basis of the respective amounts of Senior Indebtedness they hold) or their
Representative or the trustee under the indenture or other agreement (if any)
pursuant to which this Article 10, Senior Indebtedness may have been Issued,
as their respective interests may appear, for application to the payment of
all Senior Indebtedness remaining unpaid to the extent necessary to pay all
Senior Indebtedness in full in cash in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on its part as are specifically
set forth in this Article 10, and no implied covenants or obligations with
respect to the holders of Senior Indebtedness shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness, and shall not be liable
to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior
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Indebtedness shall be entitled by virtue of this Article 10, except if such
payment is made at a time when a Trust Officer has knowledge that the terms of
this Article 10 prohibit such payment.
Section 10.06. NOTICE.
Neither the Trustee nor the Paying Agent shall at any time be charged
with the knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee or Paying Agent under this Article
10, unless and until the Trustee or Paying Agent shall have received written
notice thereof from the Company or one or more holders of Senior Indebtedness
or a Representative of any holders of Senior Indebtedness; and, prior to the
receipt of any such written notice, the Trustee or Paying Agent shall be
entitled to assume conclusively that no such facts exist. The Trustee shall be
entitled to rely on the delivery to it of written notice by a Person
representing itself to be a holder of Senior Indebtedness (or a Representative
thereof) to establish that such notice has been given.
The Company shall promptly notify the Trustee and the Paying Agent in
writing of any facts it knows that would cause a payment of principal of, or
premium, if any, or interest on, and Liquidated Damages, if any, with respect
to, the Securities or any other Obligation in respect of the Securities to
violate this Article 10, but failure to give such notice shall not affect the
subordination of the Securities to the Senior Indebtedness provided in this
Article 10 or the rights of holders of Senior Indebtedness under this Article
10.
Section 10.07. SUBROGATION.
After all Senior Indebtedness is paid in full in cash and until the
Securities are paid in full, Holders shall be subrogated (equally and ratably
with all other Indebtedness pari passu with the Securities) to the rights of
holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the Holders
have been applied to the payment of Senior Indebtedness. A distribution made
under this Article 10 to holders of Senior Indebtedness that otherwise would
have been made to Holders is not, as between the Company and Holders, a
payment by the Company on the Senior Indebtedness.
Section 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the Company's
Obligations, which are absolute and unconditional, to pay
principal of, and premium, if any, and interest on, and
Liquidated Damages, if any, with respect to, the Securities
in accordance with their terms;
(2) affect the relative rights of Holders and the Company's
creditors other than their rights in relation to holders of
Senior Indebtedness; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of
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Senior Indebtedness to receive distributions and payments
otherwise payable to Holders.
Nothing contained in this Article 10 or elsewhere in this Indenture
or in any Security is intended to or shall impair, as between the Company and
the Holders, the obligations of the Company, which are absolute and
unconditional to pay to the Holders the principal of, and premium, if any, and
interest on, the Securities as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the relative
rights of the 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 10 of the holders of such Senior Indebtedness.
The failure to make a payment on account of principal of, interest
on, or Liquidated Damages, if any, with respect to the Securities by reason of
any provision of this Article 10 shall not be construed as preventing the
occurrence of an Event of Default under Section 6.01.
Section 10.09. THE COMPANY AND HOLDERS MAY NOT IMPAIR SUBORDINATION.
(a) No right of any holder of Senior Indebtedness to enforce the subordination
as herein provided shall at any time in any way be prejudiced or impaired by
any act or failure to act on the Company's part or by any noncompliance by the
Company with the terms, provisions and covenants of this Indenture or the
Securities or any other agreement regardless of any knowledge thereof with
which any such holder may have or be otherwise charged.
(b) Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness, or any of them, may, at any time and from time
to time, without the consent of or notice to the Holders, without incurring
any liabilities to any Holder and without impairing or releasing the
subordination and other benefits provided in this Indenture or the Holder's
obligations to the holders of Senior Indebtedness, even if any Holder's right
of reimbursement or subrogation or other right or remedy is affected, impaired
or extinguished thereby, do any one or more of the following:
(i) change the manner, place or terms of payment or change or
extend the time of payment of, or renew, exchange, amend,
increase or alter, the terms of any Senior Indebtedness, any
security therefor or guarantee thereof or any liability of any
obligor thereon (including any guarantor) to such holder, or
any liability Issued in respect thereof or otherwise amend,
renew, exchange, extend, modify, increase or supplement in any
manner any Senior Indebtedness or any instrument evidencing or
guaranteeing or securing the same or any agreement under which
Senior Indebtedness is outstanding;
(ii) sell, exchange, release, surrender, realize upon, enforce or
otherwise deal with in any manner and in any order any property
pledged, mortgaged or otherwise securing Senior Indebtedness or
any liability of any obligor thereon, to such holder, or any
liability Issued in respect thereof;
(iii) settle or compromise any Senior Indebtedness or any other
liability of any obligor of the Senior Indebtedness to such
holder or any security therefor or any liability Issued in
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respect thereof and apply any sums by whomsoever paid and
however realized to any liability (including, without
limitation, Senior Indebtedness) in any manner or order; and
(iv) fail to take or to record or otherwise perfect, for any reason
or for no reason, any lien or security interest securing Senior
Indebtedness by whomsoever granted, exercise or delay in or
refrain from exercising any right or remedy against any obligor
or any guarantor or any other Person, elect any remedy and
otherwise deal freely with any obligor and any security for the
Senior Indebtedness or any liability of any obligor to such
holder or any liability Issued in respect thereof.
(c) Each Holder by accepting a Security agrees not to compromise, release,
forgive or otherwise discharge the Obligations of the Company with respect to
his or her Security unless holders of a majority of the outstanding amount of
each class of Senior Indebtedness (as described in Section 9.07) consent to
such compromise, release, forgiveness or other discharge.
Section 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to
their Representative, if any.
If any payment or distribution of the Company's assets is required to
be made to holders of Senior Indebtedness pursuant to this Article 10, the
Trustee and the Holders shall be entitled to rely upon any order or decree of
any court of competent jurisdiction, or upon any certificate of a
Representative of Senior Indebtedness or a Custodian, in ascertaining the
holders of Senior Indebtedness entitled to participate in any such payment or
distribution, the amount payable to be paid or distributed filed to holders of
Senior Indebtedness and all other facts pertinent thereto or to this Article
10.
Section 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
The Trustee or Paying Agent may continue to make payments on the
Securities unless at least three Business Days prior to any payment date it
has received written notice of facts that would cause a payment of principal
of, or premium, if any, or interest on, or Liquidated Damages, if any, with
respect to, the Securities to violate this Article. Only the Company, a
Representative of Senior Indebtedness, or a holder of Senior Indebtedness that
has no Representative may give such notice.
To the extent permitted by the TIA, the Trustee in its individual or
any other capacity may hold Indebtedness (including Senior Indebtedness) with
the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
Section 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Security by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in this Article 10,
and appoints the Trustee his attorney-in-fact for any and all such purposes,
(including, without limitation, the timely filing of a claim for the unpaid
balance of the Security such Holder holds in the form required in any
Insolvency or Liquidation Proceeding and causing such claim to be approved).
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If a proper claim or proof of debt in the form required in such
proceeding is not filed by or on behalf of all Holders prior to 30 days before
the expiration of the time to file such claims or proofs, then the holders or a
Representative of any Senior Indebtedness are hereby authorized, and shall have
the right (without any duty), to file an appropriate claim for and on behalf of
such Holders.
Section 10.13. PAYMENT.
A payment on account of or with respect to any Security shall
include, without limitation, any direct or indirect payment of principal,
premium, interest or Liquidated Damages, if any, with respect to or in
connection with any optional redemption or purchase provisions, any direct or
indirect payment payable by reason of any other Indebtedness or Obligation
being subordinated to the Securities, and any direct or indirect payment or
recovery on any Claim as a Holder relating to or arising out of this Indenture
or any Security, or the Issuance of any Security, or the transactions
contemplated by this Indenture or referred to herein.
ARTICLE 11
MISCELLANEOUS
Section 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of Section 318(c) of the TIA, the imposed
duties shall control.
Section 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in person, mailed by
registered or certified mail, postage prepaid, return receipt requested or
delivered by telecopier or overnight air courier guaranteeing next day
delivery to the other's address:
If to the Company:
Jordan Industries, Inc.
ArborLake Centre
1751 Lake Cook Road
Suite 550
Deerfield, Illinois 60015
Telecopier No.: (708) 945-9645
If to the Trustee:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Telecopier No.: (612)-224-0711
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The Company or the Trustee by notice to the other may designate
additional or different addresses or subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given at the time delivered by hand, if
personally delivered; the date receipt is acknowledged, if mailed by
registered or certified mail; when answered back, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first-class mail to his or her address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to section 312(b) of the TIA with
other Holders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of section 312(c) of the TIA. . Section 11.04. CERTIFICATE
AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements
set forth in Section 11.05) stating that, in the opinion of
the signers, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed
action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements
set forth in Section 11.05) stating that, in the opinion of
such counsel, all such conditions precedent provided for in
this Indenture relating to the proposed action have been
complied with.
Section 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to section 314(a)(4) of the TIA) shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
-74-
<PAGE>
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in such Person's opinion, such
condition or covenant has been complied with.
Section 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.07. LEGAL HOLIDAYS.
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
Section 11.08. NO RECOURSE AGAINST OTHERS.
No director. officer, employee or stockholder of the Company shall
have any liability for any Obligations of the Company under the Securities or
this Indenture or for any Claim based on, in respect of or by reason of such
Obligations or the creation if any such Obligation. Each Holder by accepting a
Security waives and releases all such liability, and such waiver and release
is part of the consideration for the Issuance of the Securities.
Section 11.09. COUNTERPARTS.
This Indenture 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.
Section 11.10. VALUABLE PROVISIONS.
The Company initially appoints the Trustee as Paying Agent, Registrar
and authenticating agent.
The first compliance certificate to be delivered by the Company to
the Trustee pursuant to Section 4.03 shall be for the fiscal year ending on
December 31, 1997.
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<PAGE>
Section 11.11. GOVERNING LAW.
The internal laws of the State of New York shall govern this
Indenture and the Securities, without regard to the conflict of laws
provisions thereof.
Section 11.12. 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, and no other
indenture, loan or debt agreement may be used to interpret this Indenture.
Section 11.13. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture
shall bind its successor.
Section 11.14. SEVERABILITY.
If any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 11.15. THIRD PARTY BENEFICIARIES.
Holders of Senior Indebtedness are third party beneficiaries of, and
any of them (or their Representative) shall have the right to enforce the
provisions of this Indenture that benefit such holders.
Section 11.16. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
-76-
<PAGE>
Dated as of April 2, 1997 JORDAN INDUSTRIES, INC.
By:
--------------------------------
Name:
Title:
Attest:
- --------------------------------
[SEAL]
Dated as of April 2, 1997 FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------------
Name:
Title:
Attest:
- --------------------------------
[SEAL]
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<PAGE>
EXHIBIT A
(Face of Security)
11 3/4% SERIES [A/B] SENIOR SUBORDINATED DISCOUNT
DEBENTURE DUE 2009
$___________
Cusip No. ____________
JORDAN INDUSTRIES, INC.
promises to pay to _____________________________________________________________
or registered assigns,
the principal sum of ________________________________ Dollars on April 1, 2009
Interest Payment Dates: October 1 and April 1
Record Dates: September 15 and March 15
Dated:
Authenticated:
||
FIRST TRUST NATIONAL ASSOCIATION, JORDAN INDUSTRIES, INC.
as Trustee
By: By:
-------------------------------- --------------------------------
Authorized Signature
OR
By:
--------------------------------
as Authenticating Agent
A - 1
<PAGE>
By:
--------------------------------
Authorized Signature (SEAL)
This is one of the Securities referenced in the within-mentioned indenture.
||
A - 2
<PAGE>
[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 a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such successor
Depository. The Depository Trust Company shall act as the Depository until a
successor shall be appointed by the Company and the Registrar. Unless this
certificate is presented by an authorized representative of The Depository
Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as may be requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY Person IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]1
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON
AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY
OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Additional provisions of this Security are set forth on the other
side of this Security.
- --------------
1. This paragraph should be included only if the Security is issued in Global
form.
A - 3
<PAGE>
(Back of Security)
11 3/4% SERIES [A/B] SENIOR SUBORDINATED
DISCOUNT DEBENTURE DUE 2009
1. INTEREST. Jordan Industries, Inc. (the "Company") promises to pay
interest on the principal amount of the Securities at the rate and in the
manner specified below. The Company will pay Liquidated Damages pursuant to
Section 5 of the Registration Rights Agreement referred to below. Interest
will not accrue on the Securities prior to April 1, 2002. Thereafter, interest
on the Securities will accrue at 11 3/4% per annum and will be payable
semiannually in cash on October 1 and April 1 of each year, or if any such day
is not a Business Day on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Securities will accrue from the most recent
date on which interest has been paid or, if no interest has been paid, from
April 1, 2002; provided that the first Interest Payment Date shall be October
1, 2002. The Company shall pay interest on overdue principal and premium, if
any, from time to time on demand at the rate of 2% per annum in excess of the
interest rate then in effect and shall pay interest on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360- day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered holders of
Securities at the close of business on the record date for the next interest
Payment Date even if such Securities are canceled after such record date and
on or before such Interest Payment Date. Holders must surrender Securities to
a Paying Agent to collect principal payments on such Securities. The Company
will pay principal, premium, if any, and interest and Liquidated Damages, if
any, in money of the United States that at the time of payment is legal tender
for payment of public and private debts. However, the Company may pay
principal, premium, if any, and interest and Liquidated Damages, if any, by
check payable in such money, and any such check may be mailed to a Holder's
registered address. provided that payment by wire transfer of immediately
available funds will be required with respect to principal, premium, if any,
interest and Liquidated Damages, if any, on all Global Securities.
3. PAYING AGENT AND REGISTRAR. First Trust National Association (the
"Trustee") will initially act as the Paying Agent and Registrar. The Company
may appoint additional paying agents or co-registrars, and change the Paying
Agent, any additional paying agent, the Registrar or any co-registrar without
prior notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. INDENTURE. The Company issued the Securities under an Indenture,
dated as of April 2, 1997, (the "Indenture"), between the Company and the
Trustee. The terms of the Securities 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) as in effect on the date of the
original issuance of the Securities (the "Trust Indenture Act"). The
Securities are subject to, and qualified by, all such terms, certain of which
are summarized herein, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of such terms (all capitalized terms not defined
herein shall have the meanings assigned them in the Indenture). The Securities
are unsecured general obligations of the Company limited to $133,075,293 in
aggregate principal amount.
A - 4
<PAGE>
5. OPTIONAL REDEMPTION. (a) Except as described in paragraph 5(b)
below the Securities may not be redeemed at the option of the Company prior to
April I , 2002. During the twelve (12) month period beginning April 1, of the
years indicated below, the Securities will be redeemable at the option of the
Company, in whole or in part, at the redemption prices (expressed as
percentages of the principal amount of the Securities on the date of
redemption) set forth below, plus any accrued and unpaid interest to the date
of redemption:
Year Percentage
2002..................................... 105.87500%
2003..................................... 102.93750%
2004 and thereafter...................... 100.00000%
6. MANDATORY REDEMPTION. Subject to the Company's obligation to make
an offer to purchase Securities under certain circumstances pursuant to
Section 4.13 and 4.14 of the Indenture (as described in paragraph 7 below),
the Company is not required to make any mandatory redemption, purchase or
sinking fund payments with respect to the Securities.
7. MANDATORY OFFERS TO PURCHASER SECURITIES. (a) Following the
occurrence of a Change of Control (the "Change of Control Trigger Date"), the
Company will be required to offer (a "Change of Control Offer") to purchase
all outstanding Securities at a purchase price equal to 101% of the Accreted
Value of such Securities, plus any accrued and unpaid interest from April 1,
2002 to the purchase date if such purchase occurs after April 1, 2002;
provided, however, that if any outstanding Senior Indebtedness is required or
entitled pursuant to its terms to be redeemed or purchased by the Company upon
a Change of Control, the Change of Control Trigger Date shall be the first
date on which all such Senior Indebtedness that elects, or is required to be,
redeemed or purchased as a result of the Change of Control has been redeemed
or purchased.
(b) If the Company or any Restricted Subsidiary consummates one or
more Asset Sales and does not use all of the Net Proceeds from such Asset
Sales as provided in the Indenture, the Company will be required, under
certain circumstances, to utilize the Excess Proceeds from such Asset Sales to
offer (an "Asset Sale Offer") to purchase Securities at a purchase price equal
to 100% of the Accreted Value of the Securities, plus any accrued and unpaid
interest from April 1, 2002 to the purchase date if such purchase occurs after
April 1, 2002. If the Excess Proceeds are insufficient to purchase all
Securities tendered pursuant to any Asset Sale Offer, the Trustee shall select
the Securities to be purchased in accordance with the terms of the Indenture.
(c) Holders may tender all or, subject to paragraph 8 below, any
portion of their Securities in a Change of Control Offer or Asset Sale Offer
(collectively, an "Offer") by completing the form below entitled "OPTION OF
HOLDER TO ELECT PURCHASE."
(d) The Company will comply with Rule 14e-1 under the Securities
Exchange Act of 1934, as amended, and any other securities laws and
regulations to the extent applicable to any Offer.
8. NOTICE OF REDEMPTION OR PURCHASE. Notice of an optional redemption
or an Offer will be mailed to each Holder at its registered address at least 30
days but not more than 60 days before the date of redemption or purchase.
Securities may be redeemed or purchased in part, but only in principal
A - 1
<PAGE>
amount of at least $1,000 unless all Securities held by a Holder are to be
redeemed or purchased. On or after any date on which Securities are redeemed
or purchased, interest ceases to accrue on the Securities or portions thereof
called for redemption or accepted for purchase on such date.
9. SUBORDINATION. The Securities are subordinated in right of
payment, to the extent and in the manner provided in the Indenture, to the
prior payment in full of all Senior Indebtedness. In the event of an
Insolvency or Liquidation Proceeding or upon the maturity of any Senior
Indebtedness, whether by lapse of time, acceleration or otherwise, the holders
of Senior Indebtedness must be paid in full in cash before any payment of
principal of, or premium, if any, or interest (including any Post-Petition
Interest) on, the Securities. The Company agrees, and each Holder by accepting
a Security consents and agrees, to the subordination provided in the Indenture
and authorizes the Trustee to give it effect.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. Holders seeking to
transfer or exchange their Securities may be required, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Security or portion of a Security
selected for redemption or tendered pursuant to an Offer. Also, it need not
exchange or register the transfer of any Securities for a period of 15
Business Days before a selection of Securities to be redeemed or between a
record date and the next succeeding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered holder of a Security may be
treated as its owner for all purposes.
12. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the Holders of
at least a majority in principal amount of the then outstanding Securities,
and any existing Default (except a payment Default) may be waived with the
consent of the Holders of a majority in principal amount of the then
outstanding Securities. Without the consent of any Holder, the Indenture or
the Securities may be amended to: cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities: provide for the assumption by another corporation of
the Company's obligations to Holders in the event of a merger or consolidation
of the Company in which the Company is not the surviving corporation or a sale
of substantially all of the Company's assets to such other corporation; comply
with the SEC's requirements to effect or maintain the qualification of the
Indenture under the Trust Indenture Act; or, make any change that does not
materially adversely affect any Holder's rights under the Indenture. Certain
provisions of the Indenture cannot be amended without the consent of holders
of Senior Indebtedness.
13. DEFAULTS AND REMEDIES. Events of Default include: default for 30
days in payment of interest on the Securities; default in payment of principal
of or premium, if any, on the Securities; failure by the Company for 30 days
after notice to it to comply with any of its other agreements or covenants in,
or provisions of, the Indenture or the Securities; certain defaults under and
acceleration prior to maturity, or failure to pay at maturity, of certain
other Indebtedness; certain final judgments that remain undischarged; and,
certain events of bankruptcy or insolvency involving the Company or any
Restricted Subsidiary that is a Significant Subsidiary. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be
immediately due and payable in an amount equal to the Accreted Value of such
Securities, plus any
A - 2
<PAGE>
accrued and unpaid interest; provided, however, that in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, the
Accreted Value of, and any accrued and unpaid interest on, the Securities
becomes due and payable immediately without further action or notice, provided
further that if any Indebtedness is outstanding under the Credit Agreement or
the New Credit Agreement, upon a declaration of acceleration of the
Securities, the Accreted Value of, and any accrued and unpaid interest on, the
Securities shall not be payable until the earlier of (1) the day which is five
Business Days after notice of acceleration is given to the Company and the
Credit Agent, or (2) the date of acceleration of the Indebtedness under the
Credit Agreement or the New Credit Agreement, as the case may be. Subject to
certain exceptions, Holders of a majority in principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any trust or
power, provided that the Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request of Holders unless
such Holders have offered to the Trustee security and indemnity satisfactory
to it. Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may withhold from Holders notice of any
continuing default (except a payment Default) if it determines that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or any Affiliate, and may otherwise deal with the
Company or any Affiliate, as if it were not Trustee.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee or
stockholder of the Company shall have any liability for any Obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of, such Obligations or the creation of any such
Obligation. Each Holder by accepting a Security waives and releases all such
liability, and such waiver and release is part of the consideration for the
issuance of the Securities.
16. SUCCESSOR SUBSTITUTED. Upon the consolidation or merger by the
Company with or into another corporation, or upon the sale, conveyance, lease
or other disposition of all or substantially all of its assets to another
corporation, in accordance with the Indenture, the corporation surviving any
such merger or consolidation (if not the Company) or the corporation to which
such assets were sold or transferred to shall succeed to, and be substituted
for, and may exercise every right and power of the Company under the Indenture
with the same effect as if such surviving or other corporation had been named
as the Company in the Indenture.
17. GOVERNING LAW. This Security shall be governed by and construed in
accordance with the internal laws of the State of New York.
18. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
19. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U G M A (= Uniform Gifts
to Minors Act).
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the
A - 3
<PAGE>
Securities and have directed the Trustee to use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Securities or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers printed on the securities.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, which has in it the text of this
Security in larger type. Request may be made to:
Jordan Industries, Inc.
1751 Lake Cook Road
ArborLake Centre
Suite 550
Deerfield, Illinois 60015
Attention: Secretary
A - 4
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to:
-----------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
----------------------------------------
----------------------------------------
----------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________________________________________
__________________________________ as agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Date: _________________________ Your Signature:________________________
(Sign exactly as your
name appears on the other
side of this Security)
Signature Guarantee:
__________________________________
A - 5
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Security purchased by the Company pursuant
to Section 4.13 of the Indenture, check the box: [ ]
If you elect to have this Security purchased by the company pursuant
to Section 4.14 of the Indenture, check the box: [ ]
If you elect to have only part of this Security purchased by the
Company pursuant to Section 4.13 or 4.14 of the Indenture, state the amount
(principal amount of at least $1,000 only):
$
----------------------------
Date: Your Signature:
------------------------ -------------------------
(Sign exactly as your
name appears on the other
side of the Security)
Signature Guarantee:
- -----------------------------
A - 6
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES2
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Security authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or
Date of Exchange this Global Security this Global Security (or increase) Security Custodian
---------------- -------------------- -------------------- ------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------
2.This should be included only if the Senior Note is issued in global form.
A - 7
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF Securities
-----------------, -------
Re: 11 3/4% Series [A/B] Senior Subordinated Discount Debentures due 2009 of
Jordan Industries, Inc.
This Certificate relates to $_____ principal amount of Securities held
in * ________ book-entry or *_______ definitive form by ________________ (the
"Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register
the transfer of a Security or Securities.
[ ] In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and that the
transfer of this Security does not require registration under the Securities
Act (as defined below) because:*
[ ] Such Security is being acquired for the Transferor's own account
without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
[ ] Such Security is being transferred (i) to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")), in reliance on Rule 144A or (ii) pursuant
to an exemption from registration in accordance with Rule 904 under the
Securities Act (and in the case of clause (ii), based on an opinion of counsel
if the Company so requests and together with a certification in substantially
the form of Exhibit D to the Indenture).
[ ] Such Security is being transferred (i) in accordance with Rule 144
under the Securities Act (and based on an opinion of counsel if the Company so
requests) or (ii) pursuant to an effective registration statement under the
Securities Act.
[ ] Such Security is being transferred to an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement exemption from the registration
requirements of the Securities Act (and based on an opinion of counsel if the
Company so requests together with a certification in substantially the form of
Exhibit C to the Indenture).
- ---------------
B-1
<PAGE>
* Check applicable box.
B-2
<PAGE>
[ ] Such Security is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
----------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------
Name:
Title:
Address:
- --------------
*Check applicable box.
B-3
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED BY
INSTITUTIONAL ACCREDITED INVESTORS
---------------, -----
___________________, as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed purchase of certain 11 3/4% Series
[A/B] Senior Subordinated Discount Debentures due 2009 (the "Securities") of
Jordan Industries, Inc., a Delaware corporation (the "Company"), we represent
that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional
Accredited Investor"), or an entity in which all of the equity owners are
Institutional Accredited Investors;
(ii) any purchase of Securities will be for our own account or for
the account of one or more other Institutional Accredited Investors as to
which we exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks
of purchasing Securities and we and any accounts for which we are acting
are able to bear the economic risks of our or their investment;
(iv) we are not acquiring Securities with a view to any distribution
thereof in a transaction that would violate the Securities Act or the
securities laws of any State of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the
property of any accounts for which we are acting as fiduciary shall
remain at all times within our control; and
(v) we 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
Securities.
We understand that the Securities have not been registered under
the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Securities, that such Securities may be
offered, resold, pledged or otherwise transferred only (i) to a person whom we
reasonably believe to be a qualified institutional buyer (as defined in Rule
144A under the Securities Act) in a transaction meeting the requirements of
Rule 144A, in a transaction meeting the requirements of Rule 144 under the
Securities Act, outside the United States in a transaction meeting the
requirements of Rule 904 under the Securities Act or in accordance with
another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel if the Company so requests), (ii) to the
Company or (iii) pursuant to an effective registration statement, and, in each
case, in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction. We understand that the
registrar will not be required to accept for registration of transfer any
Securities,
C-1
<PAGE>
except upon presentation of evidence satisfactory to the Company that the
foregoing restrictions on transfer have been complied with. We further
understand that the Securities purchased by us will be in the form of
definitive physical certificates and that such certificates will bear a legend
reflecting the substance of this paragraph. We further agree to provide to any
person acquiring any of the Securities from us a notice advising such person
that resales of the Securities are restricted as stated herein.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree
to notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT
OF LAWS PROVISIONS THEREOF.
Very truly yours,
-----------------------------------
[Name of Transferor]
By:
--------------------------------
Name:
Title:
Address:
C-2
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
-----------------, ------
______________________, as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed sale of certain 11 3/4% Series [A/B]
Securities due 2009 (the "Securities") Jordan Industries, Inc., a Delaware
corporation (the "Company"), we represent that:
(i) the offer of the Securities was not made to a person in the United
States;
(ii) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable; and
(iv) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
-----------------------------------
[Name of Transferor]
By:
--------------------------------
Name:
Title:
Address:
D-1
<PAGE>
TABLE OF CONTENTS
D-ii
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of July 25, 1997, is
between JORDAN INDUSTRIES, INC., an Illinois corporation (the "Company"), and
FIRST TRUST NATIONAL ASSOCIATION, as trustee (herein called the "Trustee").
PRELIMINARY STATEMENT
The Company and the Trustee have entered into an Indenture, dated as
of April 2, 1997 (the "Indenture"), with respect to the Company's 11 3/4%
Senior Subordinated Discount Debentures due 2009. Capitalized terms used
herein, not otherwise defined herein, shall have the meanings given them in the
Indenture.
Section 9.02 of the Indenture provides that, under certain
circumstances, a supplemental indenture may be entered into by the Company and
the Trustee with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Securities. In accordance with the
terms of Sections 9.02 and 9.06 of the Indenture, the Company has, by
resolution of the Board of Directors, authorized this First Supplemental
Indenture. The Trustee has determined that this First Supplemental Indenture
is in form satisfactory to it.
The Company has solicited consents to proposed amendments to the
Indenture, pursuant to the Consent Solicitation Statement, dated June 26, 1997
(as the same may be amended, supplemented or otherwise modified from time to
time, the "Consent Solicitation"). This First Supplemental Indenture evidences
the proposed amendments described in the Consent Solicitation.
All things necessary to make this First Supplemental Indenture a valid
agreement of the Company and the Trustee and a valid amendment of and
supplement to the Indenture have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities issued under the Indenture from and after the date of this First
Supplemental Indenture, as follows:
Section 1. Amendment to the Indenture.
(a) Section . DEFINITIONS. The following definitions are amended and
restated in their entirety, or added to Section 1.01 of the Indenture in their
alphabetically appropriate place, as applicable, to read as follows (deletions
are indicated by a line through the deleted text and new language is indicated
by a double underline):
"Asset Sale" means the sale, lease, conveyance or other disposition by
the Company or a Restricted Subsidiary of assets or property (other than (i)
the sale or disposition of any Restricted Investment, (ii) the sale or lease of
inventory, equipment, receivables or other assets in the ordinary course of
business, (iii) Receivables Financings, (iv) any sale or transfer of properties
or assets by the Company or a Restricted Subsidiary to the Company or any other
Restricted Subsidiary, (v) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company as permitted under
Article V, or (vi) Restricted Payments permitted by Section 4.05).
"Cash Flow" means, for any given period and Person, the sum of,
without duplication, Consolidated Net Income, plus
(i) the portion of Net Income attributable to the minority
interests in its Subsidiaries to the extent not included in
calculating Consolidated Net Income, plus
<PAGE>
(ii) provision for taxes based on income or profits to the extent
such income or profits were included in computing Consolidated
Net Income, plus
(iii) Consolidated Interest Expense, to the extent deducted in
computing Consolidated Net Income, plus
(iv) the amortization of all intangible assets, to the extent such
amortization was deducted in computing Consolidated Net Income
(including, but not limited to, inventory write-ups, goodwill,
debt and financing costs and Incentive Arrangements), plus
(v) non-capitalized transaction costs incurred in connection with
financings, acquisitions or dispositions (including, but not
limited to, financing and refinancing fees, to the extent
deducted in computing Consolidated Net Income), plus
(vi) all depreciation and all other non-cash charges (including,
without limitation, those charges relating to purchase
accounting adjustments, to the extent deducted in computing
Consolidated Net Income), plus
(vii) interest income, to the extent such income was not included in
computing Consolidated Net Income, plus
(viii) all dividend payments on Preferred Stock (whether or not paid
in cash), to the extent deducted in computing Consolidated Net
Income, plus
(ix) any extraordinary or non-recurring charge or expense arising
out of the implementation of SFAS 106 or SFAS 109, to the
extent deducted in computing Consolidated Net Income;
provided, however, that if any such calculation includes any period during
which an acquisition or sale of a Person or the incurrence or repayment of
Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Consolidated Interest Expense" means, for any given period and
Person, the aggregate of the interest expense in respect of all Indebtedness
of such Person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount on any such Indebtedness, all non-cash interest payments, the
interest portion of any deferred payment obligation and the interest component
of Capital Lease Obligations, but excluding amortization of deferred financing
fees if such amortization would otherwise be included in interest expense);
provided, however, that for the purpose of the Cash Flow Coverage Ratio in
Sections 4.07 and 5.01, Consolidated Interest Expense shall be calculated on a
Pro Forma Basis; provided further that any premiums, fees and expenses
(including the amortization thereof) payable in connection with the Plan and
the Offering and the application of the net proceeds therefrom or any other
refinancing of Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
however, that:
(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such
acquisition shall be excluded, and
(ii) Consolidated Net Income of any Person will not include, without
duplication, any deduction for:
2
<PAGE>
(A) any increased amortization or depreciation resulting from
the write-up of assets pursuant to Accounting Principles
Board Opinion Nos. 16 and 17, as amended or supplemented
from time to time,
(B) the amortization of all intangible assets (including
amortization attributable to inventory write-ups,
goodwill, debt and financing costs, and Incentive
Arrangements),
(C) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or divestitures
(including, but not limited to, financing and refinancing
fees),
(D) any extraordinary or nonrecurring charges relating to any
premium or penalty paid, write-off of deferred financing
costs or other financial recapitalization charges in
connection with redeeming or retiring any Indebtedness
prior to its stated maturity, and
(E) any non-recurring charge arising out of the restructuring
or consolidation of the operations of any Person(s) or
business either alone or together with the Company or any
Restricted Subsidiary, incurred within 18 months
following the acquisition of such Person(s) or business
by the Company or any Restricted Subsidiary;
provided, however, that for purposes of determining the Cash Flow Coverage
Ratio, Consolidated Net Income shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any Person means, as of any
date, the consolidated equity of the common stockholders of such Person
(excluding the accumulated foreign currency translation adjustment), all
determined on a consolidated basis in accordance with GAAP, but without any
reduction in respect of the payment of dividends on any series of such
Person's Preferred Stock if such dividends are paid in additional shares of
Capital Stock (other than Disqualified Stock); provided, however, that
Consolidated Net Worth shall also include, without duplication:
(i) the amortization of all write-ups of inventory,
(ii) the amortization of all intangible assets (including
amortization of goodwill, debt and financing costs, and
Incentive Arrangements),
(iii) any non-capitalized transaction costs incurred in connection
with financings, acquisitions or divestitures (including, but
not limited to, financing and refinancing fees),
(iv) any increased amortization or depreciation resulting from the
write-up of assets pursuant to Accounting Principles Board
Opinion Nos. 16 and 17, as amended and supplemented from time
to time,
(v) any extraordinary or nonrecurring charges or expenses relating
to any premium or penalty paid, write-off of deferred financing
costs or other financial recapitalization charges incurred in
connection with redeeming or retiring any Indebtedness prior to
its stated maturity,
(vi) any non-recurring cash charge arising out of the restructuring
or consolidation of the operations of any Person(s) or business
either alone or together with the Company or any Restricted
Subsidiary, incurred within 18 months following the acquisition
of such Person(s) or business by the Company or any Restricted
Subsidiary, and
(vii) any extraordinary or non-recurring charge arising out of the
implementation of SFAS 106 or SFAS 109;
3
<PAGE>
provided, however, that for purposes of determining Consolidated Net Worth in
Section 5.01, Consolidated Net Worth shall be calculated on a Pro Forma Basis.
"First Supplemental Indenture" means the First Supplemental
Indenture, dated as of the date first written above, between the Company and
the Trustee, to this Indenture.
"Net Proceeds" means. with respect to any Asset Sale, the aggregate
amount of cash proceeds (including an cash received by way of deferred payment
pursuant to a note receivable Issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or
similar account established in connection with any such Asset Sale, but, in
either such case, only as and when so received) received by the Company or any
of its Restricted Subsidiaries in respect of such Asset Sale, net of:
(i) the cash expenses of such Asset Sale (including, without
limitation, the payment of principal of, and premium, if any,
and interest on, Indebtedness required to be paid as a result
of such Asset Sale (other than the Securities) and legal,
accounting, management, advisory and investment banking fees
and sales commissions),
(ii) taxes paid or payable as a result thereof,
(iii) any portion of cash proceeds that the Company determines in
good faith should be reserved for post-closing adjustments, it
being understood and agreed that on the day that all such
post-closing adjustments have been determined, the amount (if
any) by which the reserved amount in respect of such Asset Sale
exceeds the actual post-closing adjustments payable by the
Company or any of its Restricted Subsidiaries shall constitute
Net Proceeds on such date,
(iv) any relocation expenses and pension, severance and shutdown
costs incurred as a result thereof, and
(v) any deduction of appropriate amounts to be provided by the
Company or any of its Restricted Subsidiaries as a reserve in
accordance with GAAP against any liabilities associated with
the asset disposed of in such transaction and retained by the
Company or such Restricted Subsidiary after such sale or other
disposition thereof, including, without limitation, pension and
other post-employment benefit liabilities and liabilities
related to environmental matters or against any indemnification
obligations associated with such transaction.
"New Credit Agreement" means the credit agreement to be entered into
by the Company and/or certain of its Restricted Subsidiaries and certain
Subsidiaries and the lenders party thereto in their capacities as lenders
thereunder and The First National Bank of Boston, N.A., as agent, together
with all loan documents and instruments thereunder (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, without limitation, increasing the amount of
available borrowings thereunder, and all Obligations with respect thereto, in
each case, to the extent permitted by Section 4.07, 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.
"New Senior Notes" means the 103/8% Senior Notes due 2007 of the
Company.
"New Subsidiary Advisory Agreements" means the New Subsidiary
Advisory Agreements, between the Company and each of its Subsidiaries, as in
effect on the date of the First Supplemental Indenture.
4
<PAGE>
"New Subsidiary Consulting Agreements" means the New Subsidiary
Consulting Agreements, between the Company and each of its Subsidiaries, as in
effect on the date of the First Supplemental Indenture.
"New TJC Management Consulting Agreement" means the New TJC
Management Consulting Agreement, between the Company and TJC Management
Corporation, as in effect on the date of the First Supplemental Indenture.
"Non-Restricted Subsidiary" means Motors and Gears Holdings, Inc. and
its Subsidiaries, Jordan Telecommunications Products, Inc. and its
Subsidiaries, JI Properties, Inc. and its Subsidiaries, and any other
Subsidiary of the Company other than a Restricted Subsidiary.
"Offering Circular" means the Offering Circular of the Company, dated
July 21, 1997, for the New Senior Notes.
"Other Permitted Indebtedness" means:
(i) Indebtedness of the Company and its Restricted Subsidiaries
existing as of the date of the First Supplemental Indenture
(including Old Notes, if any, the Securities and the New Senior
Notes);
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers acceptances and letters of credit
(including, without limitation, letters of credit in respect of
workers' compensation claims) Issued in the ordinary course of
business, or other Indebtedness with respect to
reimbursement-type obligations regarding workers' compensation
claims;
(iii) Refinancing Indebtedness, provided that:
(A) the principal amount of such Refinancing Indebtedness
shall not exceed the outstanding principal amount of
Indebtedness (including unused commitments) so extended,
refinanced, renewed, replaced, substituted or refunded
plus any amounts incurred to pay premiums, fees and
expenses in connection therewith,
(B) Refinancing Indebtedness of Indebtedness other than
Senior Indebtedness shall have a Weighted Average Life to
Maturity equal to or greater than the Weighted Average
Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded;
and
(C) in the case of Refinancing Indebtedness of Subordinated
Indebtedness, such Refinancing Indebtedness shall be
subordinated to the Securities at least to the same
extent as the Indebtedness being extended, refinanced,
renewed, replaced, substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted
Subsidiaries of Indebtedness of the Company not Issued in
compliance with Section 4.17);
(v) Indebtedness of the Company and its Restricted Subsidiaries
Issued in connection with making permitted Restricted Payments
under Sections 4.05(b)(iv) or (b)(v) and guarantees by the
Company of (a) capital leases of the Company's Non-Restricted
Subsidiaries up to the aggregate amount permitted by clause
4.05(b)(xv) and (b) operating leases of or assumed by
Non-Restricted Subsidiaries and existing on the date of
original issuance of the New Senior Notes, including any
refinancing, substitution, extension or other modification
thereto, up to the aggregate amount permitted by Section
4.05(b)(xv);
5
<PAGE>
(vi) Indebtedness of any Non-Restricted Subsidiary, provided that
such Indebtedness is nonrecourse to the Company and its
Restricted Subsidiaries and the Company and its Restricted
Subsidiaries have no Obligations with respect to such
Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries
under Hedging Obligations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
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, which
will not be, and will not be deemed to be, inadvertent) drawn
against insufficient funds in the ordinary course of business;
(ix) Indebtedness of any Person at the time it is acquired as a
Restricted Subsidiary, provided that such Indebtedness was not
Issued by such Person in connection with or in anticipation of
such acquisition and that such Indebtedness is nonrecourse to
the Company and any other Restricted Subsidiary and the Company
and such other Restricted Subsidiaries have no Obligations with
respect to such Indebtedness;
(x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary if the Indebtedness so guaranteed is
permitted under this Indenture;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the
Company, if the Indebtedness so guaranteed is permitted under
this Indenture and the Securities are guaranteed by such
Restricted Subsidiary to the extent required by Section 4.17;
(xii) guarantees by the Company of Indebtedness of any Restricted
Subsidiary if the Indebtedness so guaranteed is permitted under
this Indenture;
(xiii) Indebtedness of the Company and its Restricted Subsidiaries
Issued in connection with performance, surety, statutory,
appeal or similar bonds in the ordinary course of business; and
(xiv) Indebtedness of the Company and its Restricted Subsidiaries
Issued in connection with agreements providing for
indemnification, purchase price adjustments and similar
obligations in connection with the sale or disposition of any
of their business, properties or assets.
"Permitted Liens" means: (a) with respect to the Company and its
Restricted Subsidiaries,
(1) Liens for taxes, assessments, governmental charges or claims
which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if
a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor;
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other
like Liens arising in the ordinary course of business and with
respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any as shall be required in
conformity with GAAP shall have been made therefor;
(3) Liens incurred on deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security;
(4) Liens incurred on deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance and return of moneys,
6
<PAGE>
bonds and other obligations of a like nature incurred in the
ordinary course of business (exclusive of obligations for
the payment of borrowed money);
(5) easements, rights-of-way, zoning or other restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries
incurred in the ordinary course of business;
(6) Liens (including extensions, renewals and replacements thereof)
upon property acquired (the "Acquired Property") after the date
of the First Supplemental Indenture, provided that:
(A) any such Lien is created solely for the purpose of
securing Indebtedness representing, or Issued to finance,
refinance or refund, the cost (including the cost of
construction) of the Acquired Property,
(B) the principal amount of the Indebtedness secured by such
Lien does not exceed 100% of the cost of the Acquired
Property,
(C) such Lien does not extend to or cover any property other
than the Acquired Property and any improvements on such
Acquired Property, and
(D) the Issuance of the Indebtedness to purchase the Acquired
Property is permitted by Section 4.07;
(7) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection
with the importation of goods;
(8) judgment and attachment Liens not giving rise to an Event of
Default;
(9) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its
Restricted Subsidiaries;
(10) Liens encumbering customary initial deposits and margin
deposits, and other Liens incurred in the ordinary course of
business and that are within the general parameters customary
in the industry, in each case securing Indebtedness under
Hedging Obligations;
(11) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty
requirements of the Company or its Restricted Subsidiaries,
(12) Liens arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or its Restricted
Subsidiaries in the ordinary course of business;
(13) any interest or title of a lessor in property subject to any
Capital Lease Obligation or operating lease;
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(15) Liens existing on the date of the First Supplemental Indenture
and any extensions, renewals or replacements thereof; and
(16) any (a) Lien granted to any trustee (including, but not limited
to, the Security Trustee) or similar institution under any
indenture for Senior Indebtedness, and (b) any Lien granted to
the Trustee under this Indenture and any substantially
equivalent Lien granted to any trustee or similar
7
<PAGE>
institution under any indenture for Senior Subordinated
Indebtedness permitted by the terms of this Indenture;
(b) with respect to the Restricted Subsidiaries,
(1) Liens securing Restricted Subsidiaries' reimbursement
Obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit
and the products and proceeds thereof;
(2) Liens securing Indebtedness Issued by Restricted Subsidiaries
if such Indebtedness is permitted by (A) Section 4.07(a), (B)
Sections 4.07(b)(i), (b)(ii), (b)(iii) or (b)(iv), or (C)
clauses (i), (iii) (to the extent the Indebtedness subject to
such Refinancing Indebtedness was subject to Liens), (vii),
(ix) or (x) of the definition of Other Permitted Indebtedness;
(3) Liens securing intercompany Indebtedness Issued by any
Restricted Subsidiary to the Company or another Restricted
Subsidiary;
(4) additional Liens at any one time outstanding with respect to
assets of the Restricted Subsidiaries the aggregate fair market
value of which does not exceed $10,000,000 (the fair market
value of any such asset is to be determined on the date such
Lien is granted on such asset);
(5) Liens securing guarantees by Restricted Subsidiaries of
Indebtedness Issued by the Company if such guarantees are
permitted by clause (xi) (but only in respect of the property,
rights and assets of the Restricted Subsidiaries Issuing such
guarantees) of the definition of Other Permitted Indebtedness;
and
(c) with respect to the Company,
(1) Liens securing Indebtedness Issued by the Company under the
Credit Agreement or the New Credit Agreement if such
Indebtedness is permitted by Section 4.07 (including, but not
limited to, Indebtedness Issued by the Company under the Credit
Agreement or the New Credit Agreement pursuant to Section
4.07(b)(i) and/or (b)(iv));
(2) Liens securing Indebtedness of the Company if such Indebtedness
is permitted by clauses (i), (iii) (to the extent the
Indebtedness subject to such Refinancing Indebtedness was
subject to Liens) or (vii) of the definition of Other Permitted
Indebtedness; and
(3) Liens securing guarantees by the Company of Indebtedness Issued
by Restricted Subsidiaries if such Indebtedness is permitted by
Section 4.07 (including, but not limited to, Indebtedness
Issued by Restricted Subsidiaries under the Credit Agreement or
the New Credit Agreement pursuant to Section 4.07(b)(i) and/or
(b)(iv)) and if such guarantees are permitted by clause (xii)
(but only in respect of Indebtedness Issued by the Restricted
Subsidiaries under the Credit Agreement or the New Credit
Agreement pursuant to Section 4.07) of the definition of Other
Permitted Indebtedness;
provided, however, that, notwithstanding any of the foregoing, the Permitted
Liens referred to in clause (c) of this definition shall not include any Lien
on Capital Stock of Restricted Subsidiaries held by the Company (as
distinguished from Liens on Capital Stock of Restricted Subsidiaries held by
other Restricted Subsidiaries) other than Liens securing (A) Indebtedness of
the Company Issued under the Credit Agreement or the New Credit Agreement
pursuant to Section 4.07 and any permitted Refinancing Indebtedness of such
Indebtedness, and (B) guarantees by the Company of Indebtedness Issued by
Restricted Subsidiaries under the Credit Agreement or the New Credit Agreement
pursuant to Section 4.07 and any permitted Refinancing Indebtedness of such
Indebtedness.
8
<PAGE>
"Plan" means the Company's Recapitalization and Repositioning Plan
referenced in the Offering Circular and all agreements, instruments and
transactions pursuant thereto.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income, Cash Flow, and Consolidated Interest Expense in connection with the
Cash Flow Coverage Ratio (including in connection with Section 4.05, Section
4.16, Section 5.01, the incurrence of Indebtedness pursuant to Section 4.07(a)
and Consolidated Net Worth for purposes of Section 5.01), giving pro forma
effect to (x) any acquisition or sale of a Person, business or asset, related
incurrence, repayment or refinancing of Indebtedness or other related
transactions, including any related restructuring charges in respect of
restructurings, consolidations, compensation or headcount reductions or other
cost savings which would otherwise be accounted for as an adjustment permitted
by Regulation S-X under the Securities Act or on a pro forma basis under GAAP,
or (y) any incurrence, repayment or refinancing of any Indebtedness and the
application of the proceeds therefrom, in each case, as if such acquisition or
sale and related transactions, restructurings, consolidations, cost savings,
reductions, incurrence, repayment or refinancing were realized on the first
day of the relevant period permitted by Regulation S-X under the Securities
Act or on a pro forma basis under GAAP. Furthermore, in calculating the Cash
Flow Coverage Ratio, (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the determination 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
determination date; (2) if interest on any Indebtedness actually incurred on
the determination 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 determination
date will be deemed to have been in effect during the relevant 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 rate swaps or similar interest rate protection Hedging
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company
existing on the date of the First Supplemental Indenture, other than a
Non-Restricted Subsidiary, and (ii) any other Subsidiary of the Company
formed, acquired or existing after the date of the First Supplemental
Indenture that is designated as a "Restricted Subsidiary" by the Company
pursuant to a resolution approved by a majority of the Board of Directors,
provided that any Restricted Subsidiary that is organized under the laws of a
foreign jurisdiction and whose stock or ownership interests are sold or
transferred to a Non-Restricted Subsidiary may, by resolution approved by a
majority of the Board of Directors, be thereafter designated and considered as
a Non-Restricted Subsidiary.
"Tax Sharing Agreement" means the Tax Sharing Agreement, between the
Company and each of its Subsidiaries, as in effect on the date of the First
Supplemental Indenture.
"Transition Agreement" means the Transition Agreement, between the
Company and Motors and Gears Holdings, Inc., and the Transition Agreement,
between the Company and Jordan Telecommunications Products, Inc., each as in
effect on the date of the First Supplemental Indenture.
(b) The following Sections of the Indenture are hereby amended and
restated in their entirety, or added to the Indenture in their numerically
predetermined place, to read as follows (deletions are indicated by a line
through the deleted text and new language is indicated by a double underline):
Section 4.05. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly,
(i) declare or pay any dividend or make any distribution on account
of the Company's or such Restricted Subsidiary's Capital Stock
or other Equity Interests (other than dividends or
distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or a
9
<PAGE>
Restricted Subsidiary and other than dividends or
distributions payable by a Restricted Subsidiary to another
Restricted Subsidiary or to the Company),
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interest purchased
from the Company or any Restricted Subsidiary),
(iii) voluntarily prepay Indebtedness that is subordinated to the
Securities, whether any such Subordinated Indebtedness is
outstanding on, or issued after, the date of original issuance
of the Securities, except as specifically permitted by the
terms of this Indenture,
(iv) make any Restricted Investment (all such dividends,
distributions, purchases, redemptions or other acquisitions,
retirements, prepayments and Restricted Investments being
collectively referred to as "Restricted Payments"), if, at the
time of such Restricted Payment:
(1) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(2) immediately after such Restricted Payment and after
giving effect thereto on a Pro Forma Basis, the Company
shall not be able to Issue $1.00 of additional
Indebtedness pursuant to Section 4.07(a); or
(3) such Restricted Payment, together with the aggregate of
all other Restricted Payments made after the date of the
First Supplemental Indenture, exceeds the sum of, without
duplication:
(A) 50% of the aggregate Consolidated Net Income
(including, for this purpose, gains from Asset
Sales and, to the extent not already included in
the aggregate Consolidated Net Income, gains from
Restricted Investments) of the Company (or, in case
such aggregate is a loss, 100% of such loss) for
the period (taken as one accounting period) from
the beginning of the first fiscal quarter
commencing immediately after the date of the First
Supplemental Indenture and ending as of the
Company's most recently ended fiscal quarter at the
time of such Restricted Payment, plus
(B) 100% of the aggregate net cash proceeds and the
fair market value of any property or securities (as
determined by the Board of Directors in good faith)
received by the Company from the Issue or sale of
Equity Interests or warrants, options or rights to
acquire Equity Interests of the Company or any
Restricted Subsidiary subsequent to the date of the
First Supplemental Indenture (other than Equity
Interests Issued or sold to a Restricted Subsidiary
and other than Disqualified Stock), plus
(C) $5,000,000, plus
(D) the amount by which the principal amount of and any
accrued interest on:
1) any Senior Indebtedness or Senior
Subordinated Indebtedness of the Company, or
2) any Indebtedness of the Restricted
Subsidiaries,
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(not held by the Company or any Restricted
Subsidiary) is reduced on the Company's
consolidated balance sheet upon the conversion or
exchange subsequent to the date of the First
Supplemental Indenture for Equity Interests (other
than Disqualified Stock) of the Company or any
Restricted Subsidiaries (less the amount of any
cash, or the fair market value of any other
property or securities (as determined by the Board
of Directors in good faith), distributed by the
Company or any Restricted Subsidiary (to Persons
other than the Company or any other Restricted
Subsidiary) upon such conversion or exchange, plus
(E) if any Non-Restricted Subsidiary is redesignated as
a Restricted Subsidiary, the fair market value (as
determined by the Board of Directors in good faith)
of such Non-Restricted Subsidiary as of the date it
is redesignated; provided, however, that for
purposes of this clause (E), the fair market value
of any redesignated Non-Restricted Subsidiary shall
be reduced by the amount that any such
redesignation replenishes or increases the amount
of Restricted Investments permitted to be made
pursuant to Section 4.05(b)(iii).
(b) Notwithstanding Section 4.05(a), the following Restricted Payments
may be made:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such
payment would comply with the provisions hereof;
(ii) the retirement of any of the Company's Capital Stock or
Subordinated Indebtedness in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary) of, other Capital Stock (other than
Disqualified Stock) and neither such retirement nor the
proceeds of any such sale or exchange shall be included in any
computation made pursuant to Section 4.05(a);
(iii) making Restricted Investments at any time, and from time to
time, in an aggregate outstanding amount of $40,000,000 after
the date of the First Supplemental Indenture under this
Indenture (it being understood that if any Restricted
Investment acquired with a Restricted Payment after the date of
the First Supplemental Indenture pursuant to this clause (iii)
is sold, transferred or otherwise conveyed to any Person other
than the Company or a Restricted Subsidiary, the portion of the
net cash proceeds or fair market value of securities or
properties paid or transferred to the Company and its
Restricted Subsidiaries in connection with such sale, transfer
or conveyance that relates to the repayment or return of the
original cost of such a Restricted Investment will replenish or
increase the amount of Restricted Investments permitted to be
made pursuant to this Section 4.05(b)(iii), so that up to
$40,000,000 of Restricted Investments may be outstanding under
this Section 4.05(b)(iii) at any given time);
(iv) the repurchase or redemption of the Company's common stock upon
the death of Thomas H. Quinn, pursuant to the terms of an
Employment Agreement, dated as of February 25, 1988, between
the Company and Thomas H. Quinn, as amended or supplemented;
provided, however, that the funds necessary to satisfy the
Company's obligation to repurchase or redeem such Common Stock
shall be fully reimbursed by insurance;
(v) the repurchase or redemption of the Company's common stock
pursuant to the terms of the several Restricted Stock
Agreements, each dated as of February 25, 1988, between the
Company and each of Thomas H. Quinn, Jonathan F. Boucher and
John R. Lowden, the Restricted Stock Agreement, dated as of
December 31, 1992, between the Company and Thomas Quinn, the
Restricted Stock Agreements, each dated as of January 1, 1992,
between the Company and each of Jonathan F.
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Boucher, Adam Max and Thomas Quinn, and the Restricted Stock
Agreement, dated as of May 16, 1997, between the Company and
Thomas Quinn, in each case as amended or supplemented, up to
an aggregate amount not to exceed $7,500,000;
(vi) any loans, advances, distributions or payments from the Company
to its Restricted Subsidiaries, or any loans, advances,
distributions or payments by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary, pursuant to
intercompany Indebtedness, intercompany management agreements,
intercompany tax sharing agreements, and other intercompany
agreements and obligations;
(vii) the payment of directors' fees in an annual aggregate amount
not to exceed $250,000;
(viii) to the extent constituting Restricted Payments, if no Default
or Event of Default shall have occurred and be continuing or
shall occur as a consequence thereof, the payment of
consulting, financial and investment banking fees (but not
limiting the payment of indemnities, expenses and other
amounts) under the New TJC Management Consulting Agreement,
provided that the obligation of the Company to pay such fees
under the New TJC Management Consulting Agreement shall be
subordinated expressly to the Company's Obligations on the
Securities;
(ix) the purchase, redemption, retirement or other acquisition of
(a) any Senior Indebtedness required by its terms to be
purchased, redeemed, retired or acquired with the net proceeds
from asset sales (as defined in the instrument evidencing such
Senior Indebtedness) or upon a change of control (as defined in
the instrument evidencing such Senior Indebtedness), and (b)
the Securities pursuant to Sections 4.13 and 4.14;
(x) the exchanging, refinancing or refunding of Subordinated
Indebtedness through the Issuance of Subordinated Indebtedness
so long as the Subordinated Indebtedness to be Issued is
Refinancing Indebtedness permitted under Section 4.07;
(xi) to the extent constituting Restricted Payments, any payments
made in connection with the Plan as disclosed in the Offering
Circular for the New Senior Notes;
(xii) Restricted Investments received as consideration for the sale,
transfer or disposition of any business, properties or assets
of the Company or any Restricted Subsidiary, provided, that the
Company complies with the Section 4.14;
(xiii) any Restricted Investment constituting securities or
instruments of a Person issued in exchange for trade or other
claims against such person in connection with a financial
reorganization or restructuring of such Person;
(xiv) any Restricted Investment constituting an equity investment in
a Receivables Subsidiary; provided that the aggregate amount of
such equity investments does not exceed $1,000,000; and
(xv) guarantees by the Company of (a) capital lease obligations of
Non-Restricted Subsidiaries in an aggregate principal or face
amount not exceeding the aggregate principal or face amount of
capital leases of the Non-Restricted Subsidiaries guaranteed by
the Company on the date of the First Supplemental Indenture and
(b) operating leases of or assumed by Non-Restricted
Subsidiaries and existing on the date of the First Supplemental
Indenture, including any refinancing, substitution, extension
or other modification thereto.
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<PAGE>
Section 4.07. LIMITATION ON INCURRENCE OF INDEBTEDNESS.
(a) The Company will not, and will not permit any Restricted Subsidiary to,
Issue any Indebtedness (other than the Indebtedness represented by the
Securities, the Old Notes and the New Senior Notes) unless: the Company's Cash
Flow Coverage Ratio for its four full fiscal quarters next preceding the date
such additional Indebtedness is Issued would have been at least:
(i) 1.7 to 1, if such date is between the date of original Issuance
of the Securities under this Indenture and June 30, 1999,
(ii) 1.85 to 1, from July 1, 1999 through June 30, 2001, or
(iii) 2.0 to 1, from July 1, 2001 and thereafter,
in each case determined on a Pro Forma Basis as if such
additional Indebtedness and any other Indebtedness issued
since the end of the applicable four quarter period had been
Issued at the beginning of such four-quarter period.
(b) Section 4.07(a) will not apply to the Issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries
up to the greater of (A) $75.0 million in aggregate principal
amount pursuant to the Credit Agreement or the New Credit
Agreement, and (B) an aggregate principal amount up to the sum
of: (x) 85% of the book value of the Company and its Restricted
Subsidiaries' Receivables on a consolidated basis, and (y) 65%
of the book value of the Company and its Restricted
Subsidiaries' inventories on a consolidated basis;
(ii) Indebtedness of the Company and its Restricted Subsidiaries
pursuant to any Receivables Financing;
(iii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, sale and leaseback
transactions, purchase money obligations, capital expenditures
or similar financing transactions relating to:
(A) their properties, assets and rights as of the date of the
First Supplemental Indenture up to $20,000,000 in
aggregate principal amount, or
(B) their properties, assets and rights acquired after the
date of the First Supplemental Indenture, provided that
such Indebtedness under this Section 4.07(b)(iii)(B) does
not exceed 100% of the cost of such properties, assets
and rights:
(iv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $25,000,000
(all or any portion of which may be Issued as additional
Indebtedness under the Credit Agreement or the New Credit
Agreement); and
(v) Other Permitted Indebtedness.
Section 4.08. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Neither the Company nor any of its Restricted Subsidiaries may make any
loan, advance, guarantee or capital contribution to, or for the benefit of, or
sell, lease, transfer or dispose of any properties or assets to, or for the
benefit of, or purchase or lease any property or assets from, or enter into or
amend any contract, agreement
13
<PAGE>
or understanding with, or for the benefit of, an Affiliate (each such
transaction or series of related transactions that are part of a common plan
an "Affiliate Transaction"), except in good faith and on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction on an arm's length
basis from an unrelated Person.
(b) Neither the Company nor any of its Restricted Subsidiaries may engage in
any Affiliate Transaction involving aggregate payments or other transfers by
the Company and its Restricted Subsidiaries in excess of $5,000,000 (including
cash and non-cash payments and benefits valued at their fair market value by
the Board of Directors in good faith) unless the Company delivers to the
Trustee (i) a resolution of the Board of Directors stating that the Board of
Directors (including a majority of the disinterested directors, if any) has,
in good faith, determined that such Affiliate Transaction complies with the
provisions of this Indenture, and (ii) an opinion as to the fairness of such
Affiliate Transaction to the Company or such Restricted Subsidiary and the
holders of the Securities from a financial point of view by an investment
banking firm of national prominence that is not an Affiliate.
(c) Notwithstanding Sections 4.08(a) and (b), this Section 4.08 will not apply
to:
(i) transactions between the Company and any Restricted Subsidiary
or between Restricted Subsidiaries,
(ii) any Restricted Payments permitted pursuant to Section 4.05,
(iii) payments of fees and other amounts due under any stock
appreciation right ("SAR") agreements, the New Subsidiary
Advisory Agreements, the New Subsidiary Consulting Agreements,
the Tax Sharing Agreement, the JI Properties Services
Agreement, the Transition Agreement and the New TJC Management
Consulting Agreement, provided, that any amendments,
supplements, modifications, substitutions, renewals or
replacements of the foregoing agreements are approved by a
majority of the Board of Directors (including a majority of the
disinterested directors, if any) as fair to the Company and the
holders of the Securities,
(iv) the payment of reasonable and customary directors' fees to
directors of the Company and its Restricted Subsidiaries,
(v) transactions in connection with a Receivables Financing, or
(vi) payments and transactions in connection with the Plan as
described in the Offering Circular.
Section 4.09. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any asset now owned or
hereafter acquired by them, or any income or profits therefrom or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on its properties or assets, the Company
and any of its Restricted Subsidiaries may create any Lien upon any of their
properties or assets (including, but not limited to, any Capital Stock of its
Subsidiaries) if the Securities are equally, and ratably secured.
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<PAGE>
Section 4.11. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective, any encumbrance or restriction on the ability of
any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital
Stock or any other interest or participation in, or measured
by, its profits, owned by the Company or any Restricted
Subsidiary, or pay any Indebtedness owed to, the Company or any
Restricted Subsidiary,
(ii) make loans or advances to the Company, or
(iii) transfer any of its properties or assets to the Company, except
for such encumbrances or restrictions existing under or by
reason of:
(A) applicable law,
(B) Indebtedness permitted;
1) under Section 4.07(a),
2) under Sections 4.07(b)(i), (b)(ii) and (b)(iv) and
clauses (i), (vi) and (ix) of the definition of
Other Permitted Indebtedness, or
3) Restricted Payments and agreements or instruments
evidencing Restricted Payments permitted under
Section 4.05,
(C) customary provisions restricting subletting or assignment
of any lease or license of the Company or any Restricted
Subsidiary,
(D) customary provisions of any franchise, distribution or
similar agreement,
(E) any instrument governing Indebtedness or any other
encumbrance or restriction of a Person acquired by the
Company or any Restricted Subsidiary at the time of such
acquisition, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or
assets of the Person, so acquired,
(F) Indebtedness or other agreements existing on the date of
the First Supplemental Indenture,
(G) any Refinancing Indebtedness of Indebtedness described in
Section 4.07(b)(i), (b)(ii), (b)(iii) and (b)(iv) and
clauses (i), (vi), and (ix) of the definition of Other
Permitted Indebtedness; provided that the encumbrances
and restrictions created in connection with such
Refinancing Indebtedness are no more restrictive in any
material respect with regard to the interests of the
Holders than the encumbrances and restrictions in the
refinanced Indebtedness,
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<PAGE>
(H) any restrictions, with respect to a Restricted
Subsidiary, imposed pursuant to an agreement that has
been entered into for the sale or disposition of the
stock, business, assets or properties of such Restricted
Subsidiary,
(I) the terms of any Indebtedness of the Company incurred in
connection with Section 4.07, provided that the terms of
such Indebtedness constitute no greater encumbrance or
restriction on the ability of any Restricted Subsidiary
to pay dividends or make distributions, make loans or
advances or transfer properties or assets than is
permitted by this Section 4.11, and
(J) the terms of purchase money obligations, but only to the
extent such purchase money obligations restrict or
prohibit the transfer of the property so acquired.
(b) Nothing contained in this Section 4.11 shall prevent the Company from
entering into any agreement or instrument providing for the incurrence of
Permitted Liens or restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that are subject
to Permitted Liens.
Section 5.01. MERGER OR CONSOLIDATION.
(a) The Company shall not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to, any
Person (any such consolidation, merger or sale being a "Disposition") unless:
(i) the successor entity of such Disposition or the Person to which
such Disposition shall have been made is a corporation
organized or existing under the laws of the United States, any
state thereof or the District of Columbia;
(ii) the successor corporation of such Disposition or the
corporation to which such Disposition shall have been made
expressly assumes the Obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Securities and this Indenture;
(iii) immediately after such Disposition no Default or Event of
Default exists; and
(iv) the entity (the "Successor Corporation") formed by or surviving
any such Disposition or the corporation to which such
Disposition shall have been made;
(A) shall have Consolidated Net Worth (immediately after the
Disposition but prior to any purchase accounting
adjustments resulting from the Disposition) equal to or
greater than the Consolidated Net Worth of the Company
immediately preceding the Disposition,
(B) shall be permitted immediately after the Disposition by
the terms of Section 4.07(a) to Issue at least $1.00 of
additional Indebtedness determined on a Pro Forma Basis
pursuant to Section 4.07(a), and
(C) shall have a Cash Flow Coverage Ratio on a Pro Forma
Basis, for the four fiscal quarters immediately preceding
the applicable Disposition, equal to or greater than the
actual Cash Flow Coverage Ratio of the Company for such
four-quarter period.
Prior to the consummation of any proposed Disposition, the Company
shall deliver to the Trustee an Officers' Certificate to the foregoing effect
and an Opinion of Counsel stating that the proposed Disposition and such
supplemental indenture comply with this Indenture.
16
<PAGE>
Section 2. Effectiveness; Termination
(a) This First Supplemental Indenture is entered into pursuant to and
consistent with Section 9.02 of the Indenture, and nothing herein shall
constitute an amendment, supplement or waiver requiring the approval of each
Holder pursuant to clauses (1) through (7) of the last paragraph of Section
9.02.
(b) This First Supplemental Indenture shall become effective and
binding on the Company, the Trustee and the Holders of the Securities upon the
execution and delivery by the parties to this First Supplemental Indenture;
provided, however, that the provisions of the Indenture referred to in Section
1 above (such provisions being referred to as the "Amended Provisions") will
remain in effect in the form they existed prior to the execution of this First
Supplemental Indenture, the deletions and amendments of the Amended Provisions
will not become operative, and the terms of the Indenture will not be amended,
modified or deleted, in each case until the date and time (the "Payment Date")
that the Company pays the Consent Payments to the Trustee. Upon the Payment
Date, the Amended Provisions will automatically be deleted or modified as
contemplated by Section 1 above.
Section 3. Reference to and Effect on the Indenture.
(a) On and after the Payment Date, each reference in the Indenture to
"the Indenture," "this Indenture," "hereunder," "hereof" or "herein" shall
mean and be a reference to the Indenture as supplemented by this First
Supplemental Indenture unless the context otherwise requires.
(b) Except as specifically amended above, the Indenture shall remain
in full force and effect and is hereby ratified and confirmed.
Section 4. Governing Law.
This First Supplemental Indenture shall be construed and enforced in
accordance with, and interpreted under, the internal laws of the State of New
York, without reference to the conflict of laws provisions thereof.
Section 5. Counterparts and Methods of Execution.
This First Supplemental Indenture may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties, notwithstanding that all parties have not signed the same
counterpart.
Section 6. Titles.
Section titles are for descriptive purposes only and shall not
control or alter the meaning of this First Supplemental Indenture as set forth
in the text.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this
First Supplemental Indenture to be duly executed by their respective officers
thereunto duly authorized all as of the day and year first above written.
JORDAN INDUSTRIES, INC.
By:
--------------------------------
Its: Senior Vice President
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------------
Its:
-------------------------------
18
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of July, 1997, before me personally came to me known,
who, being by me duly sworn, did depose and say that he resides at New York,
New York; that he is a ________________ of FIRST TRUST NATIONAL ASSOCIATION,
one of the banking corporations described herein and that executed the above
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
-----------------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ______ day of July, 1997, before me personally came , to me
known, who, being by me duly sworn, did depose and say that he resides at New
York, New York; that he is a ________________ of JORDAN INDUSTRIES, INC., the
corporation described herein and that executed the above instrument; and that
he signed his name thereto by order of the Board of Directors of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
-----------------------------------
Notary Public
<PAGE>
Exhibit 4.4
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY 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 MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DEPOSITORY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) AS PERMITTING
RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY
PREDECESSOR OF SUCH NOTE) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO FOREIGN PERSONS THAT OCCUR IN
OFFSHORE TRANSACTIONS AND WITHOUT DIRECTED SELLING EFFORTS WITHIN THE MEANINGS
OF SUCH TERMS AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING THE NOTE FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN
<PAGE>
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
2
<PAGE>
JORDAN INDUSTRIES, INC.
10 3/8% SENIOR NOTE
DUE 2007
No. 001 $117,375,000
CUSIP NO. 480695-AG-0
Jordan Industries, Inc., an Illinois corporation (the "Company"), as
obligor, for value received promises to pay to Cede & Co. or registered assigns,
the principal sum of One Hundred Seventeen Million, Three Hundred Seventy-Five
Thousand Dollars on August 1, 2007. Interest Payment Dates: February 1 and
August 1 and on the maturity date. Record Dates: January 15 and July 15 (whether
or not a Business Day).
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Dated: July 25, 1997
JORDAN INDUSTRIES, INC,
By: /s/ G. Robert Fisher
------------------------------------
Name: G. Robert Fisher
Title: General Counsel and Secretary
By /s/ Gordon L. Nelson, Jr.
------------------------------------
Name: Gordon L. Nelson, Jr.
Title: Senior Vice President
3
<PAGE>
Trustee's Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By: /s/ Rick Prokosch
--------------------------------------
Authorized Signature
4
<PAGE>
(Back of Security)
10 3/8% SENIOR NOTE
DUE 2007
1. Interest. Jordan Industries, Inc., (the "Company") promises to pay
interest on the principal amount of the Notes at the rate and in the manner
specified below. Interest on the Notes will accrue at 10 3/8% per annum from the
date this Note is issued until maturity and will be payable semiannually in cash
on February 1 and August 1 of each year, or if any such day is not a Business
Day on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date on which interest
has been paid or, if no interest has been paid, from July 25, 1997; provided
that the first Interest Payment Date shall be February 1, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the record date for the next Interest Payment Date even if
such Notes are cancelled after such record date and on or before such Interest
Payment Date. Holders must surrender Notes to a Paying Agent to collect
principal payments on such Notes. The Company shall pay principal, 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. However, the Company may
pay principal, premium, if any, and interest by check payable in such money, and
any such check may be mailed to a Holder's registered address.
3. Paying Agent and Registrar. First Trust National Association (the
"Trustee") will initially act as the Paying Agent and Registrar. The Company may
appoint additional paying agents or co-registrars, and change the Paying Agent,
any additional paying agent, the Registrar or any co-registrar without prior
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as of
July 25, 1997 (the "Indenture") between the Company and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "TIA") (15 U.S.
Code ss.ss. 77aaa-77bbbb). The Notes are subject to, and qualified by, all such
terms, certain of which are summarized herein, and Holders
5
<PAGE>
are referred to the Indenture and the TIA for a statement of such terms (all
capitalized terms not defined herein shall have the meanings assigned than in
the Indenture). The Notes are unsecured general obligations of the Company
limited to $120,000,000 in aggregate principal amount.
5. Optional Redemption. Except as described in paragraph 6 below, the
Notes may not be redeemed at the option of the Company prior to August 1, 2002.
During the twelve (12) month period beginning August 1 of the years indicated
below, the Notes will be redeemable at the option of the Company, in whole or in
part, at the redemption prices (expressed as percentages of the principal
amount) set forth below, plus any accrued and unpaid interest to the date of
redemption:
Year Percentage
---- ----------
2002 .............................. 105.188 %
2003 .............................. 102.594 %
2004 and thereafter ............... 100.000 %
6. Mandatory Redemption. Subject to the Company's obligation to make an
offer to purchase Notes under certain circumstances pursuant to Section 4.13 and
4.14 of the Indenture (as described in paragraph 7 below), the Company is not
required to make any mandatory redemption, purchase or sinking fund payments
with respect to Securities.
7. Mandatory Offers to Purchase Securities. (a) Following the occurrence
of a Change of Control (the "Change of Control Trigger Date"), the Company will
be required to offer (a "Change of Control Offer") to purchase all outstanding
Securities at a purchase price equal to 101% of the principal amount of such
Securities, plus any accrued and unpaid interest to the date of purchase.
(b) If the Company or any Restricted Subsidiary consummates one or more
Asset Sales and does not use all of the Net Proceeds from such Asset Sales as
provided in the Indenture, the Company will be required, under certain
circumstances, to utilize the Excess Proceeds from such Asset Sales to offer (an
"Asset Sale Offer") to purchase Notes at a purchase price equal to 100% of the
principal amount of the Notes, plus any accrued and unpaid interest to the date
of purchase. If the Excess Proceeds are insufficient to purchase all Notes
tendered pursuant to any Asset Sale Offer, the Trustee shall select the Notes to
be purchased in accordance with the terms of the Indenture.
6
<PAGE>
(c) Holders may tender all or, subject to paragraph 8 below, any portion
of their Notes in a Change of Control or Asset Sale Offer (collectively, an
"Offer") by completing the form below entitled "OPTION OF HOLDER TO ELECT
PURCHASE."
(d) The Company will comply with Rule 14e-1 under the Securities Exchange
Act of 1934, as amended, and any other securities laws and regulations to the
extent applicable to any Offer.
8. Notice of Redemption or Purchase. Notice of an optional redemption or
an Offer will be mailed to each Holder at its registered address at least 30
days but not more than 60 days before the date of redemption or purchase. Notes
may be redeemed or purchased in part, but only in whole multiples of $1000
unless all Notes held by a Holder are to be redeemed or purchased. On or after
any date on which Notes are redeemed or purchased, interest ceases to accrue on
the Notes or portions thereof called for redemption or accepted for purchase on
such date.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples thereof. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. Holders seeking to transfer or exchange their Notes may be
required, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any Note
or portion of a Note selected for redemption or tendered pursuant to an Offer.
10. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the Indenture
or the Notes may be amended with the consent of the Holders of at least a
majority in principal amount of the then outstanding Notes, and any existing
Default or Event of Default (except a payment default) may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Notes. Without the consent of any Holder, the Indenture and the Notes may be
amended to: cure any ambiguity, defect or inconsistency; provide for
uncertificated Notes in addition to or in place of certified Notes; provide for
the assumption by another corporation of the Company's obligations to the
7
<PAGE>
Holders in the event of a merger or consolidation of the Company in which the
Company is not the surviving corporation or a sale of substantially all of the
Company's assets to such other corporation; comply with the Securities and
Exchange Commission's requirements to effect or maintain the qualification of
the Indenture under the TIA; or, make any change that does not materially
adversely effect any Holder's rights under the Indenture. Certain provisions of
the Indenture cannot be amended without the consent of each holder of affected
thereby.
12. Defaults and Remedies. Events of Default include: default for 30 days
in payment of interest on the Notes; default in payment of principal of or
premium, if any, on the Notes; failure by the Company for 30 days after notice
to it to comply with any of its other agreements or covenants in, or provisions
of, the Indenture or the Notes; certain defaults under and acceleration prior to
maturity, or failure to pay at maturity, of certain other Indebtedness; certain
final judgments that remain undischarged; and, certain events of bankruptcy or
insolvency involving the Company or any Restricted Subsidiary that is a
Significant Subsidiary. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the Notes may
declare all the Notes to be immediately due and payable in an amount equal to
the principal amount of such Notes, plus any accrued and unpaid interest;
provided, however, that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, the principal amount of, and any accrued and
unpaid interest on, the Notes becomes due and payable immediately without
further action or notice. Subject to certain exceptions, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power, provided that the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of the Holders unless such Holders have offered to the Trustee security
and indemnity satisfactory to it. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may withhold from Holder
notice of any continuing default (except a payment Default) if it determines
that withholding notice is in their interests. The Company must furnish an
annual compliance certificate to the Trustee.
13. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from and perform services for
the Company or any Affiliates, and may otherwise deal with the Company or any
Affiliates, as if it were not Trustee.
8
<PAGE>
14. No Recourse Against Others. No director, officer, employee or
stockholder of the Company shall have any liability for any Obligations of the
Company under the Notes, the Indenture or the Registration Rights Agreement or
for any claim based on, in respect of, or by reason of such Obligations or the
creation of any such Obligation. Each Holder by accepting a Note waives and
releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Notes.
15. Successor Substituted. Upon the consolidation or merger by the Company
with or into another corporation, or upon the sale, conveyance, lease or other
disposition of all or substantially all of its assets to another corporation, in
accordance with the Indenture, the corporation surviving any such merger or
consolation (if not the Company) or the corporation to which such assets were
sold or transferred to shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indenture with the same
effect as if such surviving or other corporation had been named as the Company
in the Indenture.
16. Governing Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of New York.
17. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
20. Holders' Compliance with Registration Rights Agreement. Each Holder of
a Note, by his acceptance thereof, acknowledges and agrees to
9
<PAGE>
the provisions of the Registration Rights Agreement, dated as of July 25, 1997,
among the Company and the parties named on the signature page thereof (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Company and the Purchasers (as defined therein) to the extent provided therein.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to: Jordan Industries, Inc., ArborLake Centre, 1751 Lake
Cook Road, Suite 300, Deerfield, Illinois 60015.
10
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to:
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint______________________________ as agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
________________________________________________________________________________
Date:_______________________
Your Signature:
--------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee*
- ------------------------
* NOTICE: The signature must be guaranteed by an institution which is
a member of one of the following recognized signature
guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.13 of the Indenture, check the box: | |
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.14 of the Indenture, check the box: | |
If you elect to have only part of this Note purchased by the Company
pursuant to Section 4.13 or 4.14 of the Indenture, state the amount (multiples
of $1000 only):
$_____________________________
Date: Your Signature:
------------------ -------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*
- ------------------------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
12
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Note following
Principal Amount of this Principal Amount of this such decrease (or Signature of authorized
Date of Exchange Global Note Global Note increase) officer of Trustee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
13
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: Series A 10 3/8% Senior Notes due 2007 (the "Notes") of Jordan Industries,
Inc.
This Certificate relates to $______ principal amount of Notes held in *
| | book-entry or * | | definitive form by _______________________ (the
"Transferor").
The Transferor, by written order, has requested the Trustee:
| | to deliver in exchange for its beneficial interest in the Global Note held
by the depository, a Note or Notes in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof indicated
above); or
| | to exchange or register the transfer of a Note or Notes. In connection
with such request and in respect of each such Note, the Transferor does
hereby certify that Transferor is familiar with the indenture relating to
the above captioned Notes and the transfer of this Note does not require
registration under the Securities Act of 1933, as amended (the "Securities
Act") because such Note:
| | is being acquired for the Transferor's own account, without transfer;
| | is being transferred pursuant to an effective registration statement;
| | is being transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act), in reliance on such Rule 144A;
| | is being transferred to an institutional "accredited investor" as defined
in Rule 501(a)(l), (2), (3) or (7) under the Securities Act;**
| | is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;***
| | is being transferred pursuant to Rule 144 under the Securities Act;*** or
| | is being transferred pursuant to another exemption from the registration
requirements of the Securities Act (explain:______________________________
_____________________________________________________________________).***
----------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------
14
<PAGE>
Date:
---------------------
* Check applicable box.
** If this box is checked, this certificate must be accompanied by a
transferee letter of representations.
*** If this box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
15
<PAGE>
Exhibit 4.7
JORDAN INDUSTRIES, INC.
$120,000,000 10 3/8% Series A Senior Notes due 2007
REGISTRATION RIGHTS AGREEMENT
July 25, 1997
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
JORDAN INDUSTRIES, INC., an Illinois corporation (the "Company"), is
issuing and selling to Jefferies & Company, Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation (together, the "Purchasers"), upon the terms set
forth in a purchase agreement, dated as of July 21, 1997 (the "Purchase
Agreement"), $120,000,000 aggregate principal amount of its 10 3/8% Series A
Senior Notes due 2007 (the "Notes"). As an inducement to the Purchasers to enter
into the Purchase Agreement, the Company agrees with the Purchasers, for the
benefit of the holders of the Securities (defined below) (including, without
limitation, the Purchasers), as follows:
1. Definitions
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
<PAGE>
Advice: See Section 6.
Agreement: This Registration Rights Agreement.
Applicable Period: See Section 2.
Business Days: Any day other than (i) Saturday or Sunday, or (ii) a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
Closing Date: July 25, 1997.
Effectiveness Date: The 120th day following the Closing Date.
Effectiveness Period: See Section 3.
Event Date: See Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2.
Exchange Offer Registration Statement: See Section 2.
Exchange Securities: 10 3/8% Series B Senior Notes due 2007 of the
Company identical in all material respects to the Notes, except for references
to series and restrictive legends.
Filing Date: The 60th day following the Closing Date.
Holder: Each holder of Registrable Securities.
2
<PAGE>
indemnified party; See Section 8.
indemnifying parties: See Section 8.
Indenture: The Indenture, dated the date hereof, between the Company
and First Trust National Association, as trustee, pursuant to which the Notes
are being issued, as amended or supplemented from time to time, in accordance
with the terms thereof.
Initial Shelf Registration: See Section 3.
Losses: See Section 8.
NASD: The National Association of Securities Dealers, Inc.
Participating Broker-Dealer: See Section 2.
Person: An individual, trustee, corporation, partnership, joint
stock company, joint venture, trust, unincorporated organization or government
or any agency or political subdivision thereof, union, business association,
firm or other entity.
Private Exchange: See Section 2.
Private Exchange Securities: See Section 2.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, 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.
Registrable Securities: The (i) Notes, (ii) Private Exchange
Securities and (iii) Exchange Securities received in the Exchange Offer that may
not be sold without restriction under federal or state securities law.
3
<PAGE>
Registration Statement: Any registration statement of the Company
that covers any of the Securities pursuant to the provisions of this Agreement,
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 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.
Rule 144A: Rule 144A 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 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: The Notes, the Private Exchange Securities and the
Exchange Securities, collectively.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2.
Shelf Registration: The Initial Shelf Registration and any
Subsequent Shelf Registration.
Special Counsel: Counsel chosen by the holders of a majority in
aggregate principal amount of Securities.
Subsequent Shelf Registration: See Section 3.
TIA: The Trust Indenture Act of 1939, as amended.
4
<PAGE>
Trustee: The trustee under the Indenture and, if any, the trustee
under any indenture governing the Exchange Securities or the Private Exchange
Securities.
Underwritten Registration or Underwritten Offering: A registration
in which securities of the Company are sold to an underwriter for reoffering to
the public.
Weekly Liquidated Damages Amount: See Section 4.
2. Exchange Offer
(a) The Company shall (i) prepare and file with the SEC promptly
after the date hereof, but in no event later than the Filing Date, a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer (the
"Exchange Offer") to the Holders to issue and deliver to such Holders, in
exchange for the Notes, a like aggregate principal amount of Exchange
Securities, (ii) use its best efforts to cause the Exchange Offer Registration
Statement to become effective as promptly as practicable after the filing
thereof, but in no event later than the Effectiveness Date, (iii) use its best
efforts to keep the Exchange Offer Registration Statement effective until the
consummation of the Exchange Offer pursuant to its terms, and (iv) unless the
Exchange Offer would not be permitted by a policy of the SEC, commence the
Exchange Offer and use its best efforts to issue, on or prior to 30 business
days after the date on which the Exchange Offer Registration Statement is
declared effective, Exchange Securities in exchange for all Notes tendered prior
thereto pursuant to the Exchange Offer. The Exchange Offer shall not be subject
to any conditions, other than that the Exchange Offer does not violate
Applicable Law or any applicable interpretation of the staff of the SEC.
(b) The Exchange Securities shall be issued under, and entitled to
the benefits of, the Indenture or a trust indenture that is identical to the
Indenture (other than references to series, provisions with regard to
restrictive legends and such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA).
(c) In connection with the Exchange Offer, the Company shall:
5
<PAGE>
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal that is an exhibit thereto and related documents;
(ii) use its best efforts to keep the Exchange Offer open for
not less than 20 Business Days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law);
(iii) utilize the services of a depository 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 12:00 midnight, 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 laws
applicable to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) use its best efforts to cause the Trustee promptly to
authenticate and deliver to each Holder of Notes, Exchange Securities equal in
aggregate principal amount to the Notes of such Holder so accepted for exchange.
(e) Interest on each Exchange Security and Private Exchange Security
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the date of original issue of the Notes. Each Exchange Security
and Private Exchange Security shall bear interest at the rate set forth thereon;
provided, that interest with respect to the period prior to the issuance thereof
shall accrue at the rate or rates borne by the Notes from time to time during
such period.
6
<PAGE>
(f) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
containing 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 Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution"
section shall also allow the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including (without
limitation) all Participating Brokers-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities. The Company shall use its best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus to be lawfully delivered by all Persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as such
Persons must comply with such requirements in order to resell the Exchange
Securities; provided that such period shall not exceed 180 days after
consummation of the Exchange Offer (as such period may be extended pursuant to
the last paragraph of Section 6 hereof (the "Applicable Period")).
(g) If, prior to consummation of the Exchange Offer, the Purchasers
hold any Securities acquired by them and having the status as an unsold
allotment in the initial distribution, the Company shall, upon the request of
the Purchasers, simultaneously with the delivery of the Exchange Securities in
the Exchange Offer, issue (pursuant to the same indenture as the Exchange
Securities) and deliver to the Purchasers, in exchange for the Securities held
by the Purchasers (the "Private Exchange"), a like principal amount of debt
securities of the Company that are identical to the Exchange Securities (the
"Private Exchange Securities"). The Private Exchange Securities shall bear the
same CUSIP number as the Exchange Securities.
(h) The Company may require each Holder participating in the
Exchange Offer to represent to the Company that at the time of the consummation
of the Exchange Offer (i) any Exchange Securities received by such Holder in the
Exchange Offer will be acquired in the ordinary course of its business, (ii)
such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Securities within the meaning of
the Securities Act or resale of the Exchange Securities in violation of the
Securities Act, (iii) if such Holder is not a broker-dealer, that it is not
engaged in and does not intend to engage in, the distribution of the Exchange
Securities, (iv) if such Holder is a
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broker-dealer that will receive Exchange Securities for its own account in
exchange for Notes that were acquired as a result of market-making or other
trading activities, that it will deliver a prospectus, as required by law, in
connection with any resale of such Exchange Securities, and (v) if such Holder
is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer, either
the Company or a majority of the holders of Registrable Securities determines in
its or their reasonable judgment that (A) the Exchange Securities would not,
upon receipt, be tradeable by the Holders thereof without restriction under the
Securities Act and the Exchange Act and without material restrictions under
applicable Blue Sky or state securities laws, or (B) the interests of the
Holders under this Agreement, taken as a whole, would be materially adversely
affected by the consummation of the Exchange Offer, (ii) applicable
interpretations of the staff of the SEC would not permit the consummation of the
Exchange Offer prior to the Effectiveness Date, (iii) subsequent to the
consummation of the Private Exchange, the Purchasers so request, (iv) the
Exchange Offer is not consummated within 150 days of the Closing Date for any
reason or (v) in the case of any Holder not permitted to participate in the
Exchange Offer or of any Holder participating in the Exchange Offer that
receives Exchange Securities that may not be sold without restriction under
state and federal securities laws and, in either case contemplated by this
clause (v), such Holder notifies the Company within one year of the consummation
of the Exchange Offer, then the Company shall promptly deliver to the Holders
(or in the case of any occurrence of the event described in clause (v) hereof,
to any such Holder) and the Trustee notice thereof (the "Shelf Notice") and
shall file an Initial Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is required to be delivered pursuant to Section
2(i)(i), (ii) or (iv), then this section shall apply to all Registrable
Securities. Otherwise, upon consummation of the Exchange Offer in accordance
with Section 2, the provisions of this section shall apply solely with respect
to (i) Notes held by any Holder thereof not permitted to participate in the
Exchange Offer, (ii) Notes held by the Purchasers and (iii) Exchange Securities
that are not freely tradeable as contemplated by Section 2(i)(v) hereof.
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<PAGE>
(a) Initial Shelf Registration. The Company shall, under the
circumstances set forth in Section 2(i), prepare and 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 Securities (the "Initial Shelf
Registration"). The Company shall use its best efforts to file the Initial Shelf
Registration within 20 days of the delivery of the Shelf Notice or as promptly
as possible following the request of the Purchasers or, if later, by the Filing
Date. The Initial Shelf Registration shall be on an appropriate form permitting
registration of such Registrable Securities for resale by such Holders in the
manner or manners designated by a majority in principal amount of the securities
then outstanding (including, without limitation, one or more underwritten
offerings). The Company shall (i) not permit any securities other than the
Registrable Securities to be included in any Shelf Registration, and (ii) use
its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act as promptly as practicable after the filing
thereof and to keep the Initial Shelf Registration continuously effective under
the Securities Act until the date that is 24 months from the Effectiveness Date
(subject to extension pursuant to the last paragraph of Section 6 hereof) (the
"Effectiveness Period"), or such shorter period ending when (i) all Registrable
Securities covered by the Initial Shelf Registration have been sold or (ii) a
Subsequent Shelf Registration covering all of the Registrable Securities has
been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If any 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 Company shall use its 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 Shelf
Registration in a manner reasonably expected 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
Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Subsequent Shelf Registration continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf Registration,
and any Subsequent Shelf Registration, was previously effective.
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4. Liquidated Damages.
(a) The Company acknowledges and agrees that the Holders will suffer
damages, and that it would not be feasible to ascertain the extent of such
damages with precision, if the Company fails to fulfill its obligations
hereunder. Accordingly, in the event of such failure, the Company agrees to pay
liquidated damages to each Holder under the circumstances and to the extent set
forth below:
(i) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed with the SEC on or prior to the Filing
Date; or
(ii) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date; or
(iii) if the Company has not exchanged Exchange Securities for all
Notes validly tendered in accordance with the terms of the Exchange Offer within
30 business days after the date on which an Exchange Offer Registration
Statement is declared effective by the SEC; or
(iv) if a Shelf Registration is filed and declared effective by the
SEC but thereafter ceases to be effective without being succeeded within 30 days
by a Subsequent Shelf Registration filed and declared effective, other than as a
result of a change in applicable laws or a published change in SEC policy such
that the Company, using reasonable best efforts, is not able to have the
Subsequent Shelf Registration declared effective;
(each of the foregoing an "Event," and the date on which the Event occurs being
referred to herein as an "Event Date").
Upon the occurrence of any Event, the Company shall pay, or cause to
be paid, in addition to amounts otherwise due under the Indenture and the
Registrable Securities, as liquidated damages, and not as a penalty, to each
Holder of a Registrable Security, an additional amount (the "Weekly Liquidated
Damages Amount") equal to (A) for each weekly period beginning on the Event Date
for the first 90-day period immediately following such Event Date, $.05 per week
per $1,000 principal amount of Registrable Securities held by such Holder, and
(B) for each weekly period beginning with the first full week after the 90-day
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period set forth in the foregoing clause (A), $.10 per week per $1,000 principal
amount of Registrable Securities held by such Holder; provided that such
liquidated damages will, in each case, cease to accrue (subject to the
occurrence of another Event) on the date on which all Events have been cured. An
Event under clause (i) above shall be cured on the date that either the Exchange
Offer Registration Statement or the Initial Shelf Registration is filed with the
SEC; an Event under clause (ii) above shall be cured on the date that either the
Exchange Offer Registration Statement or the Initial Shelf Registration is
declared effective by the SEC; an Event under clause (iii) above shall be cured
on the earlier of the date (A) the Exchange Offer is consummated with respect to
all Notes validly tendered or (B) the Company delivers a Shelf Notice to the
Holders; and an Event under clause (iv) above shall be cured on the earlier of
(A) the date on which the applicable Shelf Registration is no longer subject to
an order suspending the effectiveness thereof or proceedings relating thereto or
(B) a new Subsequent Shelf Registration is declared effective.
(b) The Company shall notify the Trustee within five Business Days
after each Event Date. The Company shall pay the liquidated damages due on the
Registrable Securities by depositing with the Trustee, in trust, for the benefit
of the Holders thereof, by 12:00 noon, New York City time, on or before the
applicable semi-annual interest payment date for the Registrable Securities,
immediately available funds in sums sufficient to pay the liquidated damages
then due. The liquidated damages amount due shall be payable on each interest
payment date to the record Holder of Registrable Securities entitled to receive
the interest payment to be made on such date as set forth in the Indenture.
5. [Intentionally Left Blank]
6. Registration Procedures
In connection with the registration of any Securities pursuant to
Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of such Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, as soon as practicable after the
date hereof but in any event on or prior to the Filing Date, or such later date
as is provided for in Section 3, a Registration Statement or Registration
Statements as prescribed by Section 2 or 3, and use its best efforts to cause
each such
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<PAGE>
Registration Statement to become effective and remain effective as provided
herein; provided, that, if (i) such filing is pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall, if requested, furnish to
and afford the Holders of the Registrable Securities covered by such
Registration Statement, their Special Counsel, each Participating Broker-Dealer,
the managing underwriters, if any, and their counsel, a reasonable opportunity
to review and make available for inspection by such Persons copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed, such financial and other
information and books and records of the Company, and cause the officers,
directors and employees of the Company, Company counsel and independent
certified public accountants of the Company, to respond to such inquiries, as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders, Participating Broker-Dealer and underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company may, prior
to furnishing any such information, require each Holder, its counsel, each
Participating Broker-Dealer, the managing underwriters and their counsel to
execute a confidentiality agreement reasonably satisfactory to the Company to
keep confidential any non-public information relating to the Company received by
such person and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 6(a)) until such information has been made generally available to
the public unless the release of such information is required by law or is
necessary to respond to inquiries of regulatory authorities (including the
National Association of Insurance Commissioners, or similar organizations or
their successors). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement, their Special
Counsel, any Participating Broker-Dealer or the managing underwriters, if any,
or their counsel shall reasonably object in writing.
(b) Provide an indenture trustee for the Registrable Securities or
the Exchange Securities, as the case may be, and cause the Indenture (or other
indenture relating to the Registrable Securities) to be qualified under the TIA
not later than the effective date of the first Registration Statement; and in
connection
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<PAGE>
therewith, 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 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.
(c) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods required
hereby; 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 any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating Broker-Dealers
who so request (i) upon the Company's receipt, a copy of the order of the SEC
declaring such Registration Statement and any post-effective amendment thereto
effective and (ii) such reasonable number of copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
any documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus), and such reasonable number of
copies of the final Prospectus as filed by the Company pursuant to Rule 424(b)
under the Securities Act, in conformity with the requirements of the Securities
Act, and (iv) such other documents (including any amendments required to be
filed pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Company hereby consents to the use of the Prospectus by each of the
selling Holders of Registrable Securities 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
Securities covered by, or the sale by Participating Broker-Dealers of the
Exchange Securities pursuant to, such Prospectus and any amendment thereto.
(e) If (A) a Shelf Registration is filed pursuant to Section 3 or
(B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any
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<PAGE>
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, their
Special Counsel, each Participating Broker-Dealer and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm such
notice in writing, (i) when a Prospectus 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, (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 Prospectus or the initiation of any
proceedings for that purpose, (iii) if, at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Securities, the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 6(n) below cease to be true and correct in any material respect, (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities or the Exchange Securities to be sold by
any Participating Broker-Dealer for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such purpose, (v)
of the happening of any event 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 such Registration Statement, Prospectus or
documents so that 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 Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) Use its best efforts to register or qualify, and, if applicable,
to cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, Securities to be included in a Registration Statement for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer or
the managing underwriters reasonably request in writing; and, if Securities are
offered other than through an Underwritten Offering, the Company shall cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 6(f) at the expense
of the Company; keep each such registration or
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<PAGE>
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 necessary or advisable to enable the disposition in such
jurisdictions of the Securities covered by the applicable Registration
Statement, provided, however, that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (ii) take action that would subject it to general service of process
in any jurisdiction where it is not so subject or (iii) subject it to taxation
in excess of a nominal dollar amount in any such jurisdiction where it is not
then subject.
(g) Use its best efforts 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 Securities for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible time.
(h) If (A) a Shelf Registration is filed pursuant to Section 3 or
(B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Securities, (i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein required to comply with any Applicable
Law and (ii) make all required filings of such Prospectus or such post-effective
amendment as soon as practicable after the Company has received notification of
such matters required by Applicable Law to be incorporated in such Prospectus or
post-effective amendment.
(i) If (A) a Shelf Registration is filed pursuant to Section 3 or
(B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends, other than as required by applicable
law, and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"); and
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<PAGE>
enable such Registrable Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or Holders may reasonably
request.
(j) If (i) a Shelf Registration is filed pursuant to Section 3 or
(ii) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
6(e)(v) or 6(e)(vi) above, as promptly as practicable prepare 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 Securities being sold thereunder
or to the purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, 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 therein, in light of the
circumstances under which they were made, not misleading.
(k) Use its best efforts to cause the Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
appropriate, if so requested by the Holders of a majority in aggregate principal
amount of Securities covered by such Registration Statement or the managing
underwriters, if any.
(l) Prior to the effective date of the first Registration Statement
relating to the Securities, (i) provide the applicable trustee with printed
certificates for the Securities in a form eligible for deposit with DTC and (ii)
provide a CUSIP number for each of the Securities.
(m) Use its best efforts to cause all Securities covered by such
Registration Statement to be listed on each securities exchange, if any, on
which similar debt securities issued by the Company are then listed.
(n) If a Shelf Registration is filed pursuant to Section 3, enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority of the Registrable
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<PAGE>
Securities being sold) in order to expedite or facilitate the registration or
the disposition of such Registrable Securities, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, (i) make such representations and
warranties to the Holders and the underwriters, if any, with respect to the
business of the Company and its Subsidiaries, and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as are customarily
made by issuers to underwriters in Underwritten Offerings, and confirm the same
if and when reasonably requested; (ii) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any, and the
Holders of a majority in principal amount of the Registrable Securities being
sold), addressed to each selling Holder and each of the underwriters, if any,
covering the matters customarily covered in opinions requested in Underwritten
Offerings; (iii) obtain "cold comfort" letters and updates thereof (which
letters and updates (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters) from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any Subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each of
the underwriters and each selling Holder, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort" letters
in connection with Underwritten Offerings and such other matters as reasonably
requested by underwriters; and (iv) deliver such documents and certificates as
may be reasonably requested by the Holders of a majority in principal amount of
the Registrable Securities being sold and the managing underwriters, if any, to
evidence the continued validity of the representations and warranties of the
Company and its Subsidiaries made pursuant to clause (i) above and to evidence
compliance with any conditions contained in the underwriting agreement or other
similar agreement entered into by the Company.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earnings statements 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 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing on the first day of the
fiscal quarter following each fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if
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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 an Exchange Offer or Private Exchange,
obtain an opinion of counsel to the Company (in form, scope and substance
reasonably satisfactory to the Purchasers), addressed to all Holders
participating in the Exchange Offer or Private Exchange, as the case may be, to
the effect that (i) the Company has duly authorized, executed and delivered the
Exchange Securities or the Private Exchange Securities, as the case may be, and
the Indenture and (ii) the Exchange Securities or the Private Exchange
Securities, as the case may be, and the Indenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforcement may be
subject to (x) applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and (y) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
(q) If an Exchange Offer or Private Exchange is to be consummated,
upon delivery of the Registrable Securities by such Holders to the Company (or
to such other Person as directed by the Company) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the Company
shall mark, or cause to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(s) Use its best efforts to take all other steps necessary to effect
the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby.
As a condition to its participation in the Exchange Offer or a Shelf
Registration pursuant to the terms of this Agreement, each Holder of Registrable
Securities shall furnish, upon the written request of the Company, a written
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<PAGE>
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Securities to be issued in
the Exchange Offer and (C) it is acquiring the Exchange Securities or the
Private Exchange Securities, as applicable, in its ordinary course of business.
Notwithstanding anything to the contrary contained herein, if (A)
the Board of Directors of the Company determines in good faith that it is in the
best interests of the Company not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction involving the
Company or its subsidiaries and (B) the Company notifies the Holders within two
Business Days after the Board of Directors makes such determination, the Company
may allow the Shelf Registration Statement to fail to be effective and usable as
a result of such nondisclosure for up to 60 days during the Effectiveness
Period, but in no event for any period in excess of 30 consecutive days;
provided, however, that the Effectiveness Period shall be extended by the number
of days during which such registration statement was not effective or usable
pursuant to the foregoing provisions; provided, further, that the Company shall
be required to pay any applicable liquidated damages pursuant to Section 4
during any such period.
Each Holder and each Participating Broker-Dealer agrees by
acquisition of such Registrable Securities or Exchange Securities of any
Participating Broker-Dealer that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 6(e)(ii),
6(e)(iv), 6(e)(v) or 6(e)(vi), such Holder will forthwith discontinue
disposition (in the jurisdictions specified in a notice of a Section 6(e)(iv)
event, and elsewhere in a notice of a Section 6(e)(ii), 6(e)(v) or 6(e)(vi)
event) of such Securities covered by such Registration Statement or Prospectus
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(j), or until it is advised in writing (the
"Advice") by the Company that offers or sales in a particular jurisdiction may
be resumed or that the use of the applicable Prospectus may be resumed, as the
case may be, and has received copies of any amendments or supplements thereto.
If the Company shall give such notice, each of the Effectiveness Period and 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 such Securities covered by such Registration Statement
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 6(j) or (y) the Advice.
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7. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, 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 and (B) fees and expenses of compliance with state securities or Blue
Sky laws (including, without limitation, reasonable fees and disbursements
of counsel in connection with Blue Sky qualifications of the Registrable
Securities or Exchange Securities and determination of the eligibility of
the Registrable Securities or Exchange Securities for investment under the
laws of such jurisdictions (x) where the Holders are located, in the case
of the Exchange Securities, or (y) as provided in Section 6(f), in the
case of Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period);
(ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities or Exchange
Securities in a form eligible for deposit with DTC and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or, in respect of Registrable Securities or Exchange
Securities to be sold by a Participating Broker-Dealer during the
Applicable Period, by the Holders of a majority in aggregate principal
amount of the Registrable Securities included in any Registration
Statement or of such Exchange Securities, as the case may be);
(iii) messenger, telephone, duplication, word processing and
delivery expenses incurred by the Company in the performance of its
obligations hereunder;
(iv) fees and disbursements of counsel for the Company;
(v) fees and disbursements of all independent certified public
accountants referred to in Section 6(n)(iii) (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance);
20
<PAGE>
(vi) Securities Act liability insurance, if the Company so
desires such insurance;
(vii) fees and expenses of all other Persons retained by the
Company; internal expenses of the Company (including, without limitation,
all salaries and expenses of officers and employees of the Company
performing legal or accounting duties); and the expense of any annual
audit; and
(viii) rating agency fees and the fees and expenses incurred
in connection with the listing of the Securities to be registered on any
securities exchange.
(b) The Company shall reimburse the Holders for the reasonable fees
and disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Securities to be included in any Registration Statement which
counsel shall be reasonably satisfactory to the Company.
8. Indemnification
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless each Holder and each
Participating Broker-Dealer selling Exchange Securities during the Applicable
Period, each Person who controls each such Holder (within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act) and the officers,
directors, partners, employees, representatives and agents of each such Holder,
Participating Broker-Dealer and controlling person, to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of preparation and reasonable
attorneys' fees) and expenses (including, without limitation, reasonable costs
and expenses incurred in connection with investigating, preparing, pursuing or
defending against any of the foregoing) (collectively, "Losses"), as incurred,
directly or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus, or in
any amendment or supplement thereto, or in any preliminary prospectus, or 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 light of the
circumstances under which they were made, not misleading, except insofar as such
21
<PAGE>
Losses are based upon information relating to such Holder or Participating
Broker-Dealer and furnished in writing to the Company (or reviewed and approved
in writing) by such Holder or Participating Broker-Dealer expressly for use
therein; provided, however, that the Company shall not be liable to any
Indemnified Party to the extent that any such Losses arise solely out of an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus, or Prospectus that has been amended or
supplemented, if (i) such Indemnified Party or related Holder of a Registrable
Security failed to send or deliver a copy of the Prospectus, as then amended or
supplemented, with or prior to the delivery of written confirmation of the sale
by such Indemnified Party or the related Holder of a Registrable Security to the
person asserting the claim from which such Losses arise, (ii) the Prospectus, as
amended or supplemented, would have corrected such untrue statement or alleged
untrue statement or omission or alleged omission, and (iii) the Company has
complied with its obligations under Section 6(e) hereof; provided, further, that
the Company shall not be liable to any Indemnified Party to the extent that any
such Losses are a result of the use by the Indemnified Party of any Prospectus,
when, upon receipt of a notice from the Company of the existence of any fact of
the kind described in Section 6(e) and as contemplated by the last paragraph of
Section 6, the Indemnified Party or the related Holder was not permitted to do
so. The Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers, directors, agents and employees and each Person
who controls such Persons (within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders or the Participating
Broker-Dealer.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement, Prospectus or form of prospectus,
any amendment or supplement thereto, or any preliminary prospectus in which a
Holder is participating, such Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
any Registration Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person, if any, who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20(a) of the Exchange
Act), and the directors, officers, agents or employees of such controlling
persons, to the fullest extent lawful, from and against all Losses arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in any
22
<PAGE>
Registration Statement, Prospectus or form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or 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 light of the circumstances
under which they were made, not misleading to the extent, but only to the
extent, that such untrue statement or alleged untrue statement of a material
fact or omission or alleged omission of a material fact is contained in any
information so furnished in writing by such Holder to the Company expressly for
use therein. In no event shall the liability of any selling Holder be greater in
amount than the dollar amount of the proceeds (net of payment of all expenses)
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly notify the party or
parties from which such indemnity is sought (the "indemnifying parties") in
writing; provided, that the failure to so notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal)
that the indemnifying parties have been prejudiced materially by such failure.
The indemnifying party shall have the right, exercisable by giving
written notice to an indemnified party, within 20 business days after receipt of
written notice from such indemnified party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided, that an indemnified party
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless: (1) the
indemnifying party has agreed to pay such fees and expenses; or (2) the
indemnifying party shall have failed promptly to assume the defense of such
Proceeding or shall have failed to employ counsel reasonably satisfactory to
such indemnified party; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party or any of its affiliates or controlling persons, and such
indemnified party shall have been advised by counsel that there may be one or
more defenses available to such indemnified party that are in addition to, or in
conflict with, those defenses available to the indemnifying party or such
affiliate or controlling person (in which case, if such indemnified party
notifies the indemnifying parties in writing that it elects to employ separate
counsel at the expense of the indemnifying
23
<PAGE>
parties, the indemnifying parties shall not have the right to assume the defense
thereof and the reasonable fees and expenses of such counsel shall be at the
expense of the indemnifying party; it being understood, however, that, the
indemnifying party shall not, in connection with any one such Proceeding or
separate but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified
party).
No indemnifying party shall be liable for any settlement of any such
Proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such
Proceeding, each indemnifying party jointly and severally agrees, subject to the
exceptions and limitations set forth above, to indemnify and hold harmless each
indemnified party from and against any and all Losses by reason of such
settlement or judgment. The indemnifying party 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
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such Proceeding for
which such indemnified party would be entitled to indemnification hereunder
(whether or not any indemnified party is a party thereto).
(d) Contribution. If the indemnification provided for in this
Section 8 is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this Section 8
would otherwise apply by its terms (other than by reason of exceptions provided
in this Section 8), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such statement or
24
<PAGE>
omission. The amount paid or payable by an indemnified party as a result of any
Losses shall be deemed to include any legal or other fees or expenses incurred
by such party in connection with any Proceeding, to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided
for in Section 8(a) or 8(b) was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(d), an indemnifying party that
is a selling Holder shall not be required to contribute, in the aggregate, any
amount in excess of such Holder's Maximum Contribution Amount. A selling
Holder's "Maximum Contribution Amount" shall equal the excess of (i) the
aggregate proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
8 are in addition to any liability that the indemnifying parties may have to the
indemnified parties.
9. Rule 144 and Rule 144A
The Company covenants that it shall (a) file the reports required to
be filed by it (if so required) under the Securities Act and the Exchange Act in
a timely manner and, if at any time any such Person is not required to file such
reports, it will, upon the request of any Holder, make publicly available other
information necessary to permit sales pursuant to Rule 144 and Rule 144A and (b)
take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act pursuant to the exemptions
provided by Rule 144 and Rule 144A. Upon the request of any Holder, the Company
shall deliver to such Holder a written statement as to whether they have
complied with such information and requirements.
25
<PAGE>
10. Underwritten Registrations
If any of the Registrable Securities 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 Securities included in such offering and shall be reasonably
acceptable to the Company.
No Holder of Registrable Securities may participate in any
Underwritten Registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, underwriting
agreements, powers of attorney, lock-up letters and other documents reasonably
required under the terms of such underwriting arrangements.
11. Miscellaneous
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture or, in the case of the
Purchasers, in the Purchase Agreement, or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not entered into, as
of the date hereof, and shall not enter into, after the date of this Agreement,
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of
26
<PAGE>
Holders of at least a majority of the then outstanding aggregate principal
amount of Registrable Securities; provided, that Section 8 shall not be amended,
modified or supplemented, and waivers or consents to departures from this
proviso may not be given, unless the Company has obtained the written consent of
each Holder. 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 whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement, provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(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, certified
first-class mail, return receipt requested, next-day air courier or facsimile:
(i) if to a Holder, at the most current address given by such
holder to the Company in accordance with the provisions of this Section
11(d), which address initially is, with respect to each holder, the
address of such holder maintained by the Registrar under the Indenture,
with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand
Avenue, Suite 3400, Los Angeles, California 90071, telecopy number (213)
687-5600, Attention: Michael A. Woronoff, Esq.; and
(ii) if to the Company, initially Arbor Lake Center, 1751 Lake
Cook Road, Suite 550, Deerfield, Illinois 60015, telecopy number (847)
945-9909, Attention: Chief Executive Officer, and thereafter at such other
address, notice of which is given in accordance with the provisions of
this Section 11(d), with a copy to Mayer, Brown & Platt, 1675 Broadway,
Suite 1900, New York, New York 10019, telecopy number (212) 262-1910,
Attention: James B. Carlson.
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 telecopied.
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<PAGE>
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address 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, including, without limitation and without the need for an express
assignment, subsequent Holders.
(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) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) 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.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
28
<PAGE>
herein, with respect to the registration rights granted by the Company in
respect of securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Attorneys' Fees. In any Proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the courts, shall be
entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
(l) Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than Holders deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
29
<PAGE>
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of
date first written above.
JORDAN INDUSTRIES, INC.
By:
-------------------------------------
Name: Gordon L. Nelson, Jr.
Title: Senior Vice President, Treasurer
ACCEPTED AND AGREED TO:
JEFFRIES & COMPANY, INC.
By: /s/ M. Brent Stevens
--------------------------
Name: M. Brent Stevens
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
--------------------------
Name: Patrick Fallon
Title: Managing Director
<PAGE>
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
JORDAN INDUSTRIES, INC.
By:
-------------------------------------
Name: Gordon L. Nelson, Jr.
Title: Senior Vice President, Treasurer
ACCEPTED AND AGREED TO:
JEFFERIES & COMPANY. INC.
By:
--------------------------
Name: M. Brent Stevens
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Patrick Fallon
--------------------------
Name: Patrick Fallon
Title: Managing Director
<PAGE>
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
JORDAN INDUSTRIES, INC.
By: /s/ Gordon L. Nelson, Jr.
-------------------------------------
Name: Gordon L. Nelson, Jr.
Title: Senior Vice President, Treasurer
ACCEPTED AND AGREED TO:
JEFFERIES & COMPANY, INC.
By:
--------------------------
Name: M. Brent Stevens
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
--------------------------
Name: Patrick Fallon
Title: Managing Director
<PAGE>
===============================================================================
JORDAN INDUSTRIES, INC.
------------------------------
11 3/4% SERIES A SENIOR SUBORDINATED DISCOUNT DEBENTURES DUE 2009
------------------------------
--------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF APRIL 2, 1997
--------------------
===============================================================================
<PAGE>
This Registration Rights Agreement (this Agreement, together all
similar Registration Rights Agreements entered into pursuant to the Purchase
and Sale Agreements referenced below, is referred to as the "Agreement") is
made and entered into as of April 2, 1997, by and among Jordan Industries, an
Illinois corporation (the "Company"), and the Purchasers listed on signature
pages hereto (each a "Purchaser" and, collectively, the "Purchasers"), each of
which has agreed to exchange the Company's 11 3/4% Series A Senior
Subordinated Discount Debentures due 2005 (the "Old Debentures") for the
Company's 11 3/4% Series A Senior Subordinated Discount Debentures due 2009
(the "Series A Debentures") pursuant to the Purchase and Sale Agreement (as
defined below).
This Agreement is made pursuant to the Purchase and Sale Agreement,
dated as of April 2, 1997 (such agreement, together with all exhibits thereto,
is referred to as the "Purchase and Sale Agreement"), by and between the
Company and the Purchasers. In order to induce the Purchasers to exchange the
Old Debentures for the Series A Debentures, the Company has agreed to provide
the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Purchasers
set forth in the Purchase and Sale Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the corporate trust office of the Trustee,
on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Debentures: Series B Debentures
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Series A Debentures that such Broker-Dealer acquired for its own account as a
result of market-making activities or other trading activities (other than
Series A Debentures acquired directly from the Company or any of its
affiliates).
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
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<PAGE>
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Debentures to be issued in the Exchange Offer, (b)
the maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the Registrar under the Indenture of Series B Debentures in the
same aggregate principal amount as the aggregate principal amount of Series A
Debentures tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Debentures, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Debentures pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Debentures the opportunity to exchange all such
outstanding Transfer Restricted Debentures for Series B Debentures in an
aggregate principal amount equal to the aggregate principal amount of the
Transfer Restricted Debentures tendered in such exchange offer by such
Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Debentures to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act, and to certain
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3),
(5) and (7) of Regulation D under the Act.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated the Closing Date, among the Company
and the trustee in respect of the Debentures (the "Trustee"), pursuant to
which the Debentures are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Debentures.
NASD: National Association of Securities Dealers, Inc.
-3-
<PAGE>
Old Debentures: The Company's 11 3/4 Senior Subordinated Discount
Debentures due 2005.
Person: An individual, partnership, corporation, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person
who is a Holder of Debentures on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Series B Debentures pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Debentures
pursuant to the Shelf Registration Statement, in each case, (i) which is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Debentures.
Debentures: The Series A Debentures and the Series B Debentures.
Series B Debentures: The Company's 11 3/4% Series B Subordinated
Discount Debentures due 2009 to be issued pursuant to the Indenture (i) in the
Exchange Offer or (ii) upon the request of any Holder of Series A Debentures
covered by a Shelf Registration Statement, in exchange for such Series A
Debentures.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Debentures: Each Debenture, until the earliest to
occur of (a) the date on which such Debenture is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Debenture has been disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such Debenture is
-4-
<PAGE>
disposed of by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery
of the Prospectus contained therein) or (d) the date on which such Debenture
is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Debentures
(each, a "Holder") whenever such Person owns Transfer Restricted Debentures.
3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company shall (i) cause to be filed with the Commission as
soon as practicable after the Closing Date, but in no event later than 60 days
after the Closing Date, the Exchange Offer Registration Statement, (ii) use
their best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than 120
days after the Closing Date, (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause such Exchange Offer Registration Statement
to become effective, (B) file, if applicable, a post-effective amendment to
such Exchange Offer Registration Statement pursuant to Rule 430A under the Act
and (C) cause all necessary filings, if any, in connection with the
registration and qualification of the Series B Debentures to be made under the
Blue Sky laws of such jurisdictions as are necessary to permit Consummation of
the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The
Exchange Offer shall be on the appropriate form permitting registration of the
Series B Debentures to be offered in exchange for the Series A Debentures that
are Transfer Restricted Debentures and to permit sales of Broker-Dealer
Transfer Restricted Debentures by Restricted Broker-Dealers as contemplated by
Section 3(c) below.
(b) In connection with any such Exchange Offer Registration
Statement, the Company may, in its sole discretion and without any obligation,
offer to exchange Series B Debentures for the Old Debentures held by Persons
not party to the Purchase and Sale Agreement, and the Company may, in its sole
discretion and without obligation to do so, pay fees to such Persons in
connection with any such exchange.
(c) The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to be effective continuously, and shall keep the
Exchange Offer open, for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such
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period be less than 20 Business Days. The Company shall cause the Exchange
Offer to comply with all applicable federal and state securities laws. No
securities other than the Debentures shall be included in the Exchange Offer
Registration Statement. The Company shall use its best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 Business Days thereafter.
(d) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Series A Debentures that
are Transfer Restricted Debentures and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Debentures (other than Transfer
Restricted Debentures acquired directly from the Company) pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Series B Debenture received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery
by such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales of Broker-Dealer Transfer
Restricted Debentures by Restricted Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Debentures held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
(e) The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for sales of Broker-Dealer Transfer
Restricted Debentures by Restricted Broker-Dealers, and to ensure that such
Registration Statement conforms with the requirements of this Agreement, the
Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of 180 days from the date on which the
Exchange Offer is Consummated.
(f) The Company shall promptly provide sufficient copies of the
latest version of such Prospectus to such Restricted Broker-Dealers promptly
upon request, and in no event later than two days after such request, at any
time during such one-year period in order to facilitate such sales.
4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Series B Debentures
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 6(a)(i) below have
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been complied with) or (ii) if any Holder of Transfer Restricted Debentures
shall notify the Company within 20 Business Days following the Consummation of
the Exchange Offer that (A) such Holder is prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder may not
resell the Series B Debentures acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series
A Debentures acquired directly from the Company or one of its affiliates, then
the Company shall, (x) cause to be filed on or prior to the earliest of (1)
180 days after the date on which the Company is notified by the Commission or
otherwise determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above and (2) 75 days after the
date on which the Company receives the notice specified in clause (ii) above,
a shelf registration statement pursuant to Rule 415 under the Act (which may
be an amendment to the Exchange Offer Registration Statement (in either event,
the "Shelf Registration Statement")), relating to all Transfer Restricted
Debentures the Holders of which shall have provided information required
pursuant to Section 4(b) hereof, and (y) use their best efforts to cause such
Shelf Registration Statement to become effective at the earliest possible
time, but in no event later than 105 days after the date on which the Company
becomes obligated to file such Shelf Registration Statement. If, after the
Company has filed an Exchange Offer Registration Statement which satisfies the
requirements of Section 3(a) above, the Company is required to file and make
effective a Shelf Registration Statement solely because the Exchange Offer
shall not be permitted under applicable federal law, then the filing of the
Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above. Such an event shall have no effect on the
requirements of clause (y) above, or on the Effectiveness Target Date as
defined in Section 5 below. The Company shall use its reasonable best efforts
to keep the Shelf Registration Statement discussed in this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to
ensure that it is available for sales of Transfer Restricted Debentures by the
Holders thereof entitled to the benefit of this Section 4(a), and to ensure
that it conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of at least three years (as extended pursuant to Section
6(c)(i)) following the date on which such Shelf Registration Statement first
becomes effective under the Act or such shorter period that will terminate
when all Transfer Restricted Debentures covered by the Shelf Registration
Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Debentures
may include any of its Transfer Restricted Debentures in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information specified in item 507 of Regulation S-K under the
Act for use in connection with any Shelf Registration Statement or Prospectus
or preliminary Prospectus included therein. No Holder of Transfer Restricted
Debentures shall be entitled to Liquidated Damages pursuant to Section 5
hereof unless and until such Holder
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shall have used its best efforts to provide all such information. Each Holder
as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such
Holder not materially misleading.
5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to 75 days after the Closing Date, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to 105 days after the Closing Date (the "Effectiveness
Target Date"), (iii) the Exchange Offer has not been Consummated within 30
Business Days after the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement or (iv) subject to the provisions of Section
6(c)(i) below, any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to
be usable for its intended purpose without being succeeded immediately (but in
any event within five Business Days thereafter) by a post-effective amendment
to such Registration Statement that cures such failure and that is itself
declared effective within such five Business Day period, other than, in the
case of clause (iv) above, for such period in which such Registration
Statement shall cease to be effective as a result of post-effective amendments
to incorporate annual filings which the Company is required to file with the
Commission or post-effective amendments not otherwise covered by Section
6(c)(i) hereof, provided that the Company in good faith attempts to cause such
Registration Statement to be declared effective as soon as reasonably
practicable (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company hereby agrees to pay to each Holder of
Transfer Restricted Debentures, for the first 90-day period immediately
following the occurrence of such Registration Default, liquidated damages in
an amount equal to $.05 per week per $1,000 principal amount of Debentures
constituting Transfer Restricted Debentures held by such Holder for so long as
the Registration Default continues. The amount of liquidated damages payable
to each Holder shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Debentures held by such Holder for
each subsequent 90-day period up to a maximum of $.40 per week per $1,000 in
principal amount of Debentures constituting Transfer Restricted Debentures
held by such Holder; provided, however, that (1) upon filing of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the
Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of
the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
posteffective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the liquidated damages
payable with respect to such Transfer Restricted Debentures as a result of
such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
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All accrued liquidated damages shall be paid by the Company to the
Global Note Holder by wire transfer of immediately available funds or by
federal funds check and to Holders of Certificated Securities by wire transfer
to the accounts specified by them or by mailing checks to their registered
addresses if no such accounts have been specified on each Damages Payment
Date. All obligations of the Company set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Debenture at the time
such security ceases to be a Transfer Restricted Debenture shall survive until
such time as all such obligations with respect to such security shall have
been satisfied in full.
6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) below, shall use their best efforts to effect such exchange and
to permit the sale of Broker-Dealer Transfer Restricted Debentures being sold
in accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, following the date hereof there has been published a
change in Commission policy with respect to exchange offers such as
the Exchange Offer, such that in the reasonable opinion of counsel to
the Company there is a substantial question as to whether the
Exchange Offer is permitted by applicable federal law or Commission
policy, the Company hereby agrees to seek a no-action letter or other
favorable decision from the Commission allowing the Company to
Consummate an Exchange Offer for such Series A Debentures. The
Company hereby agrees to pursue the issuance of such a decision to
the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of Commission
policy. In connection with the foregoing, the Company hereby agrees,
however, to take all such other actions as are requested by the
Commission or otherwise required in connection with the issuance of
such decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursuing a resolution (which need not be favorable) by the
Commission staff of such submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of
Transfer Restricted Debentures shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter
of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an affiliate of the
Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Debentures to be
issued in the Exchange Offer and (C) it is acquiring the Series B
Debentures in its ordinary course of
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business. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on
the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991)
and Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction must
be covered by an effective registration statement containing the
selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of Series B
Debentures obtained by such Holder in exchange for Series A
Debentures acquired by such Holder directly from the Company or an
affiliate thereof.
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, the
Company shall provide a supplemental letter to the Commission (A)
stating that the Company is registering the Exchange Offer in
reliance on the position of the Commission enunciated in Exxon
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley
and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including
a representation that the Company has not entered into any
arrangement or understanding with any Person to distribute the Series
B Debentures to be received in the Exchange Offer and that, to the
best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B
Debentures in its ordinary course of business and has no arrangement
or understanding with any Person to participate in the distribution
of the Series B Debentures received in the Exchange Offer and (C) any
other undertaking or representation required by the Commission as set
forth in any no-action letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration
to permit the sale of the Transfer Restricted Debentures being sold in
accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to Section 4(b)
hereof), and pursuant thereto the Company will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Debentures in accordance with the intended method or
methods of distribution thereof within the time otherwise in accordance with
the provisions hereof.
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<PAGE>
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Debentures (including, without limitation, an
Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Debentures by Restricted Broker-Dealers),
the Company shall:
(i) use its reasonable efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement for omission or (B)
not to be effective and usable for resale of Transfer Restricted
Debentures during the period required by this Agreement, the Company
shall file promptly an appropriate amendment to such Registration
Statement, (1) in the case of clause (A), correcting any such
misstatement or omission, and (2) in the case of either clause (A) or
(B), use its reasonable efforts to cause such amendment to be
declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter. Notwithstanding the foregoing, if (A) the
Board of Directors of the Company determines in good faith that it is
in the best interests of the Company not to disclose the existence of
or facts surrounding any proposed or pending material corporate
transaction involving the Company or its subsidiaries and (B) the
Company notifies the Holders within two Business Days after the Board
of Directors makes such determination, the Company may allow the
Shelf Registration Statement to fail to be effective and usable as a
result of such nondisclosure for up to 60 days during the three-year
period of effectiveness required by Section 4 hereof, but in no event
for any period in excess of 30 consecutive days; provided, however,
that the three-year period referred to in Section 4 hereof during
which the Shelf Registration Statement is required to be effective
and usable shall be extended by the number of days during which such
registration statement was not effective or usable pursuant to the
foregoing provisions.
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, or such shorter
period as will terminate when all Transfer Restricted Debentures
covered by such Registration Statement have been sold; cause the
Prospectus to be supplemented by any required Prospectus Supplement,
and as so supplemented to be filed pursuant to Rule 424 under the
Act, and to comply fully with Rules 424 and 430A, as applicable,
under the Act in a timely manner; and comply with the provisions of
the Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or
supplement to the Prospectus;
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<PAGE>
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission
for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the
Act or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Debentures for offering or
sale in any jurisdiction, or the initiation of an proceeding for any
of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact
made in the Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein
not misleading, or that requires the making of any additions to or
changes in the Prospectus in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any
state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from qualification
of the Transfer Restricted Debentures under state securities or Blue
Sky laws, the Company shall use its reasonable efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) in the case of a Shelf Registration Statement, use
reasonable efforts to furnish to the Purchaser, each selling Holder
named in any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing
with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such
Registration Statement), prior to filing and reasonably respond to
comments received from such persons, and make the Company's
representatives available for discussion of such documents and other
customary due diligence matters.
(v) subject to execution of confidentiality agreements that
are reasonably satisfactory to the Company as to the disclosure of
any non-public information obtained pursuant to this Section
6(c)(vi), make available upon reasonable notice and at reasonable
times for inspection by the selling Holders, any managing underwriter
participating in any disposition pursuant to such Registration
Statement and any attorney or accountant retained by such selling
Holders or any of such underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company
and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Holder, underwriter,
attorney or
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accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness;
(vi) in the case of a Shelf Registration Statement, if
requested by any selling Holders or the underwriter(s) in connection
with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Debentures,
information with respect to the principal amount of Transfer
Restricted Debentures being sold to such underwriter(s), the purchase
price being paid therefor and any other terms of the offering of the
Transfer Restricted Debentures to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters reasonably requested to be included in such Prospectus
supplement or post-effective amendment;
(vii) in the case of a Shelf Registration Statement, furnish
to each selling Holder and each of the underwriter(s) in connection
with such sale, if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference);
(viii) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each Preliminary Prospectus) and any amendment
or supplement thereto as such Persons reasonably may request, the
Company here consents to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the underwriter(s), if any, in connection
with the offering and the sale of the Transfer Restricted Debentures
covered by the Prospectus or any amendment or supplement thereto;
(ix) enter into such customary agreements and make such
representations an warranties and take all such other actions in
connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Debentures pursuant to any
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Debentures
or underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement, and in such
connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration,
the Company shall:
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(A) furnish (or in the case of paragraphs (2) and
(3), use its best efforts to furnish) to each selling Holder
and each underwriter, if any, upon the effectiveness of the
Shelf Registration Statement and to each Restricted
Broker-Dealer upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement,
as the case may be, signed on behalf of the Company
by (x) the President or any Vice President and (y)
a principal financial or accounting officer of the
Company confirming, as of the date thereof, such
other matters as the Holders and/or underwriter(s)
may reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement,
as the case may be, of counsel for the Company,
covering matters customarily covered in opinions
requested in Underwritten Offerings and dated the
date of effectiveness of the Shelf Registration
Statement or the date of Consummation of the
Exchange Offer, as the case may be; and
(3) a customary comfort letter, dated as
of the date of effectiveness of the Shelf
Registration Statement or the date of Consummation
of the Exchange Offer, as the case may be, from the
Company's independent accountants, in the customary
form and covering matters of the type customarily
covered in comfort letters to underwriters in
connection with Underwritten Offerings;
(B) set forth in full or incorporate by reference
in the underwriting agreement, if any, in connection with
any sale or resale pursuant to any Shelf Registration
Statement the indemnification provisions and procedures of
Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates
as may be reasonable, requested by the selling Holders or
the underwriter(s), if any, to evidence compliance with
clause (A) above and with any customary conditions contained
in the underwriting agreement or other agreement entered
into by the Company pursuant to this clause (x).
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required
thereunder, and if at any time the representations and warranties of
the Company contemplated in (A)(1) above cease to be true and
correct, the Company shall so advise the underwriter(s), if any, and
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selling Holders promptly and if requested by such Persons, shall
confirm such advice in writing;
(x) prior to any public offering of Transfer Restricted
Debentures, cooperate with the selling Holders, the underwriter(s),
if any, and their respective counsel in connection with the
registration and qualification of the Transfer Restricted Debentures
under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriters), if any, may request and do any and
all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted
Debentures covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to register
or qualify as a foreign corporation where it is not now so qualified
or to take any action that would subject it to the service of process
in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it
is not now so subject;
(xi) issue, upon the request of any Holder of Series A
Debentures covered by any Shelf Registration Statement contemplated
by this Agreement, Series B Debentures, having an aggregate principal
amount equal to the aggregate principal amount of Series A Debentures
surrendered to the Company by such Holder in exchange therefor or
being sold by such Holder; such Series B Debentures to be registered
in the name of such Holder or in the name of the purchaser(s) of such
Debentures, as the case may be; in return, the Series A Debentures
held by such Holder shall be surrendered to the Company for
cancellation;
(xii) in connection with any sale of Transfer Restricted
Debentures that will result in such securities no longer being
Transfer Restricted Debentures, cooperate with the selling Holders
and the underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted
Debentures to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Debentures in such denominations
and such names as the Holders or the underwriter(s), if any, may
request at least two Business Days prior to such sale of Transfer
Restricted Debentures;
(xiii) use its reasonable efforts to cause the disposition
of the Transfer Restricted Debentures covered by the Registration
Statement to be registered with or approved by such other U.S.
governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Debentures,
subject to the proviso contained in clause (xi) above;
(xiv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any
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document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of
Transfer Restricted Debentures, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xv) provide a CUSIP number for all Transfer Restricted
Debentures not later than the effective date of a Registration
Statement covering such Transfer Restricted Debentures and provide
the Trustee under the Indenture with primed certificates for the
Transfer Restricted Debentures which are in a form eligible for
deposit with the Depository Trust Company;
(xvi) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified
independent underwriter") that is required to be retained in
accordance with the rules and regulations of the NASD, and use its
reasonable efforts to cause such Registration Statement to become
effective and approved by such governmental agencies or authorities
as may be necessary to enable the Holders selling Transfer Restricted
Debentures to consummate the disposition of such Transfer Restricted
Debentures;
(xvii) otherwise use its reasonable efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term
is defined in paragraph (c) of Rule 158 under the Act);
(xviii) cause the Indenture to be qualified under the TIA
not later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate
with the Trustee and the Holders of Debentures to effect such changes
to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and
use its reasonable efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner; and
(xix) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Debenture that, upon receipt of the notice referred to in
Section 6(c)(i) or any
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<PAGE>
notice from the Company of the existence of any fact of the kind described in
Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Debentures pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof, or
until it is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (the "Advice").
If so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Debentures that was current at the time of receipt of either such notice. In
the event the Company shall give any such notice, the time period regarding
the effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(i) or Section 6(c)(iii)(D) hereof to and including the date when
each selling Holder covered by such Registration Statement shall have received
the copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xv,) hereof or shall have received the Advice.
7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including
filings made with the NASD and counsel fees in connection therewith); (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws, (iii) all printing expenses of printing (including printing
certificates for the Series B Debentures and printing of Prospectuses); (iv)
all fees and disbursements of counsel for the Company and, in accordance with
Section 7(b) below, the Holders of Transfer Restricted Debentures; and (v) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with any Shelf Registration Statement required by
this Agreement, the Company will reimburse the Holders of Transfer Restricted
Debentures the distribution of which is being registered pursuant to the Shelf
Registration Statement for the reasonable fees and disbursements of not more
than one counsel chosen by the Holders of a majority of the principal amount
of such Transfer Restricted Debentures, which counsel shall be satisfactory to
the Company in its sole discretion.
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<PAGE>
8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each Holder
and (ii) each person, if any, who controls (within the meaning of Section 15
of the Act or Section 20 of the Exchange Act) any Holder (any of the persons
referred to in this clause (ii) being hereinafter referred to as a
"controlling person") and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Holder"), from and against any and all losses,
claims, damages, liabilities and judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (or any amendment or supplement thereto), or caused by
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages, liabilities or judgments (i) are caused by any
such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any of the Holders furnished in writing to
the Company by any of the Holders expressly for use therein, (ii) with respect
to the preliminary prospectus, result from the fact that the Holder sold
Transfer Restricted Debentures to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
prospectus, as amended or supplemented, if the Company shall have previously
furnished copies thereof to the Holder in accordance with this Agreement and
the prospectus, as amended or supplemented, would have corrected such untrue
statement or omission or (iii) are a result of the use by the Indemnified
Holder of any prospectus, when, upon receipt of a notice from the Company of
the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof
contemplated by the last paragraph of Section 6 hereof, the Indemnified Holder
was not permitted to do so.
In case any action or proceeding shall be brought against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Company, such Indemnified Holder (or the Indemnified Holder controlled by such
controlling person) shall promptly notify the Company in writing (provided,
that the failure to give such notice shall not relieve the Company of its
obligations pursuant to this Agreement). Such Indemnified Holder shall have
the right to employ its own counsel in any such action but the fees and
expenses of such counsel shall be at the expense of the Indemnified Holder or
such controlling person unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) the named
parties to any such action (including any impleaded parties) include both the
Indemnified Holder or such controlling person and the Company and the
Indemnified Holder or such controlling person shall have been advised in
writing by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Company
(in which case the Company shall not have the right to assume the defense of
such action on behalf of the Indemnified Holder or such controlling person),
it being understood, however, that the Company shall not, in connection with
any one such action or proceeding or separate but
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<PAGE>
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for such Indemnified
Holders, which firm shall be designated by the Holders and be reasonably
satisfactory to the Company. The Company shall not be liable for any
settlement of any such action or proceeding effected without the Company's
prior written consent, which consent shall not be withheld unreasonably, but
if settled with the Company's written consent, and the Company agrees to
indemnify and hold harmless any Indemnified Holder from and against any loss
or liability by reason of such settlement. The Company shall not, without the
prior written consent of each Indemnified Holder effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Holder is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Holder, unless such settlement includes an unconditional
release of such Indemnified Holder from all liability on claims that are the
subject matter of such proceeding.
(b) Each Holder of Transfer Restricted Debentures agrees, severally
and not jointly, to indemnify and hold harmless the Company, and its
directors, officers, and any person controlling the Company (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each of the
indemnified Holders, but only with respect to information relating to such
Holder furnished in writing by such Holder expressly for use in any
Registration Statement. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling
person in respect of which indemnity may be sought against a Holder of
Transfer Restricted Debentures, such Holder shall have the rights and duties
given the Company and the Company or its directors or officers or such
controlling person shall have the rights and duties given to each Holder by
the preceding paragraph. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or judgments referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
judgments (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Holders on the other
hand from their sale of Transfer Restricted Debentures or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and of the Indemnified Holder on the other in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Indemnified Holder on the other shall be determined by reference to, among
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<PAGE>
other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied
by the Company or by the Indemnified Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim.
The Company and each Holder of Transfer Restricted Debentures agree
that it would not be just and equitable if contribution pursuant to this
Section 8(c) were determined by pro rata allocation (even if the Holders were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, none of the Holders (and its related Indemnified
Holders) shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the dollar amount of proceeds received by such
Holder upon the sale of Transfer Restricted Debentures exceeds the amount of
any damages which such Holder has otherwise bee required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute pursuant to this Section 8(c) are several in proportion to the
respective principal amount of Series A Debentures held by each of the Holders
hereunder and not joint.
9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Debentures remain outstanding and during any period in
which the Company is not subject to Section 13 or 15(d) of the Securities
Exchange Act, to make available, upon request of any Holder of Transfer
Restricted Debentures, to any Holder or beneficial owner of Transfer
Restricted Debentures in connection with any sale thereof and any prospective
purchaser of such Transfer Restricted Debentures designated by such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Debentures pursuant to
Rule 144A.
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Debentures on the basis provided in customary underwriting arrangements
entered into in connection therewith and (b)
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<PAGE>
completes and executes all reasonable questionnaires, powers of attorney,
lock-up letters and other documents required under the terms of such
underwriting arrangements.
11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any Underwritten Offering that will
administer such offering will be selected by the Company. Such investment
bankers and managers are referred to herein as the "underwriters."
12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise
all rights provided herein, in the Indenture, the Purchase and Sale Agreement
or granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company has
not previously entered into any agreement granting any registration rights
with respect to its securities to any Person, other than those rights existing
by virtue of the Stockholders Agreement, dated April 14, 1989, among the
Company and certain of its stockholders, as amended. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) Adjustments Affecting the Debentures. The Company will not take
any action, or voluntarily permit any change to occur, with respect to the
Debentures that would materially and adversely affect the ability of the
Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Company has obtained
the written consent of Holders of a majority of the outstanding principal
amount of Transfer Restricted Debentures. Notwithstanding the foregoing, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant
to such Exchange Offer may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Debentures subject to such
Exchange Offer.
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<PAGE>
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier,
or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records
of the Registrar under the Indenture, with a copy to the Registrar
under the Indenture; and
(ii) if to the Company:
Jordan Industries, Inc.
ArborLake Centre
1751 Lake Cook Road
Suite 550
Deerfield, IL 60015
Telecopier No.: (708) 945-5698
Attention: Chief Financial Officer
With a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Telecopier No.: (212) 262-1910
Attention: James B. Carlson, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Debentures; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and to the extent such successor or
assign acquired Transfer Restricted Debentures directly from such Holder at a
time when such Holder could not transfer such Transfer Restricted Debentures
pursuant to a Shelf Registration Statement.
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<PAGE>
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability
of any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the Purchase and
Sale Agreement and the agreements contemplated thereby is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Transfer Restricted Debentures. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above
JORDAN INDUSTRIES, INC.
By:
-------------------------------
Name:
Title:
-------------------------------
[Print Name of Purchaser]
By:
-------------------------------
Name:
Title:
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<PAGE>
================================================================================
------------------------------
JORDAN INDUSTRIES, INC.
AND
FIRST TRUST NATIONAL ASSOCIATION
AS TRUSTEE
$275,000,000
10 3/8% SENIOR NOTES DUE 2003
------------------------------
-----------
INDENTURE
Dated as of July 15, 1993
-----------
================================================================================
<PAGE>
CROSS-REFERENCE TABLE *
Trust Indenture
Act Section .............................................. Indenture Section
310(a)(1) ...................................................... 7.10
(a)(2) ...................................................... 7.10
(a)(3) ...................................................... N.A.**
(a)(4) ...................................................... N.A.
(a)(5) ...................................................... 7.10
(b) ......................................................... 7.10
(c) ......................................................... N.A.
311(a) ......................................................... 7.11
(b) ......................................................... 7.11
(c) ......................................................... N.A.
312(a) ......................................................... 2.05
(b) ......................................................... 10.03
(c) ......................................................... 10.03
313(a) ......................................................... 7.06
(b)(1) ...................................................... N.A.
(b)(2) ...................................................... 7.06
(c) ......................................................... 7.06;10.02
(d) ......................................................... 7.06
314(a) ......................................................... 4.02;10.02
(b) ......................................................... N.A.
(c)(1) ...................................................... 10.04
(c)(2) ...................................................... 10.04
(c)(3) ...................................................... N.A.
(d) ......................................................... N.A.
(e) ......................................................... 10.05
(f) ......................................................... N.A.
315(a) ......................................................... 7.01
(b) ......................................................... 7.05
(c) ......................................................... 7.01
(d) ......................................................... 7.01
(e) ......................................................... 6.11
316(a)(last sentence) .......................................... 2.09
(a)(1)(A) ................................................... 6.05
(a)(1)(B) ................................................... 6.04
(a)(2) ...................................................... N.A.
(b) ......................................................... 6.04;6.07
317(a)(1) ...................................................... 6.08
(a)(2) ...................................................... 6.09
(b) ......................................................... 2.04
318(a) ......................................................... 10.01
- ----------
* This Cross-Reference Table is not part of the Indenture.
** Not applicable.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions .................................................. 1
Section 1.02. Other Definitions ............................................ 16
Section 1.03. Incorporation by Reference of Trust Indenture Act ............ 17
Section 1.04. Rules of Construction ........................................ 17
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating .............................................. 17
Section 2.02. Execution and Authentication ................................. 17
Section 2.03. Registrar and Paying Agent ................................... 18
Section 2.04. Paying Agent to Hold Money in Trust .......................... 18
Section 2.05. Holder Lists ................................................. 19
Section 2.06. Transfer and Exchange ........................................ 19
Section 2.07. Replacement Securities ....................................... 19
Section 2.08. Outstanding Securities ....................................... 20
Section 2.09. Treasury Securities .......................................... 20
Section 2.10. Temporary Securities ......................................... 20
Section 2.11. Cancellation ................................................. 20
Section 2.12. Defaulted Interest ........................................... 21
Section 2.13. Record Date .................................................. 21
Section 2.14. CUSIP Number ................................................. 21
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE
Section 3.01. Notices to Trustee ........................................... 21
Section 3.02. Selection of Securities to be Redeemed or Purchased .......... 22
Section 3.03. Notice of Redemption ......................................... 22
Section 3.04. Effect of Notice of Redemption ............................... 23
Section 3.05. Deposit of Redemption Price .................................. 23
Section 3.06. Securities Redeemed in Part .................................. 24
Section 3.07. Optional Redemption Provisions ............................... 24
Section 3.08. Mandatory Purchase Provisions ................................ 24
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities ........................................ 26
Section 4.02. SEC Reports .................................................. 26
Section 4.03. Compliance Certificate ....................................... 27
Section 4.04. Stay, Extension and Usury Laws ............................... 27
Section 4.05. Limitation on Restricted Payments ............................ 28
Section 4.06. Corporate Existence .......................................... 31
(i)
<PAGE>
Section 4.07. Limitation on Incurrence of Indebtedness ..................... 31
Section 4.08. Limitation on Transactions With Affiliates ................... 32
Section 4.09. Limitation on Liens .......................................... 33
Section 4.10. Compliance With Laws, Taxes .................................. 33
Section 4.11. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries ............... 33
Section 4.12. Maintenance of Office or Agencies ............................ 35
Section 4.13. Change of Control ............................................ 35
Section 4.14. Limitation on Asset Sales .................................... 35
Section 4.15. Redemption of Old Notes ...................................... 36
Section 4.16. Limitation on Amendment of Discount Debenture
Indenture .................................................... 36
Section 4.17. Guarantees by Restricted Subsidiaries ........................ 37
ARTICLE 5
SUCCESSORS
Section 5.01. Merger or Consolidation ...................................... 37
Section 5.02. Successor Corporation Substituted ............................ 38
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default ............................................ 38
Section 6.02. Acceleration ................................................. 40
Section 6.03. Other Remedies ............................................... 41
Section 6.04. Waiver of Past Defaults ...................................... 41
Section 6.05. Control by Majority .......................................... 41
Section 6.06. Limitation on Suits .......................................... 41
Section 6.07. Rights of Holders to Receive Payment ......................... 42
Section 6.08. Collection Suit by Trustee ................................... 42
Section 6.09. Trustee May File Proofs of Claim ............................. 42
Section 6.10. Priorities ................................................... 43
Section 6.11. Undertaking for Costs ........................................ 43
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee ............................................ 43
Section 7.02. Rights of Trustee ............................................ 44
Section 7.03. Individual Rights of Trustee ................................. 45
Section 7.04. Trustee's Disclaimer ......................................... 45
Section 7.05. Notice to Holders of Defaults and Events of Default .......... 45
Section 7.06. Reports by Trustee to Holders ................................ 45
Section 7.07. Compensation and Indemnity ................................... 45
Section 7.08. Replacement of Trustee ....................................... 46
Section 7.09. Successor Trustee by Merger, etc ............................. 47
Section 7.10. Eligibility, Disqualification ................................ 47
Section 7.11. Preferential Collection of Claims Against Company ............ 47
(ii)
<PAGE>
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Discharge of Liability on Securities; Defeasance ............. 47
Section 8.02. Conditions to Defeasance ..................................... 48
Section 8.03. Application of Trust Money ................................... 49
Section 8.04. Repayment to Company ......................................... 49
Section 8.05. Indemnity for Government Obligations ......................... 50
Section 8.06. Reinstatement ................................................ 50
ARTICLE 9
AMENDMENTS
Section 9.01. Amendments and Supplements Permitted Without Consent
of Holders ................................................... 50
Section 9.02. Amendments and Supplements Requiring Consent of
Holders ...................................................... 51
Section 9.03. Compliance with TIA .......................................... 52
Section 9.04. Revocation and Effect of Consents ............................ 52
Section 9.05. Notation on or Exchange of Securities ........................ 52
Section 9.06. Trustee Protected ............................................ 52
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls ................................ 53
Section 10.02. Notices ..................................................... 53
Section 10.03. Communication by Holders with Other Holders ................. 54
Section 10.04. Certificate and Opinion as to Conditions Precedent .......... 54
Section 10.05. Statements Required in Certificate or Opinion ............... 54
Section 10.06. Rules by Trustee and Agents ................................. 54
Section 10.07. Legal Holidays .............................................. 54
Section 10.08. No Recourse Against Others .................................. 55
Section 10.09. Counterparts ................................................ 55
Section 10.10. Variable Provisions ......................................... 55
Section 10.11. Governing Law ............................................... 55
Section 10.12. No Adverse Interpretation of Other Agreements ............... 55
Section 10.13. Successors .................................................. 55
Section 10.14. Severability ................................................ 55
Section 10.15. Table of Contents, Headings, Etc ............................ 55
EXHIBIT A. Form of Security ................................................ A-1
(iii)
<PAGE>
This Indenture, dated as of July 15, 1993, is between Jordan Industries,
Inc., an Illinois corporation, and First Trust National Association, as trustee.
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the holders of the Company's 10 3/8% Senior
Notes due 2003:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Affiliate" means any of the following:
(i) any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company,
(ii) any spouse, immediate family member or other relative who has
the same principal residence as any person described in clause
(i) above.
(iii) any trust in which any such Persons described in clause (i) or
(ii) above has a beneficial interest, and
(iv) any corporation or other organization of which any such
Persons described above collectively own 50% or more of the
equity of such entity.
"Agent" means any Registrar, Paying Agent, or co-registrar.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property (other than (i) the
sale or disposition of any Restricted Investment, (ii) the sale of inventory in
the ordinary course of business, or (iii) Receivables Financings) whether owned
on the date of original Issuance of the Securities or thereafter acquired, in a
single transaction or in a series of related transactions, that are outside of
the ordinary course of business of the Company or such Restricted Subsidiary.
"Bankruptcy Law" means title 11 United States Code or any similar federal
or state law for the relief of Debtors.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligations" means any obligation that is required to be
classified and accounted for as a capitalized lease for financial purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP.
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"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
Preferred Stock.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit,
time deposits, overnight bank deposits, bankers acceptances and repurchase
agreements of any commercial bank that has capital and surplus in excess of
$100,000,000 having maturities of one year or less from the date of acquisition,
(c) commercial paper of an issuer rated at least A-2 by Standard & Poor's
Corporation or P-2 by Moody's Investor Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments, and (d) money market accounts
or funds with or issued by Qualified Issuers.
"Cash Flow" means, for any given period and Person, the sum of, without
duplication, Consolidated Net Income, plus
(i) the portion of Net Income attributable to the minority interests in
its Subsidiaries, to the extent not included in calculating
Consolidated Net Income, plus
(ii) any provision for taxes based on income or profits to the extent
such income or profits were included in computing Consolidated Net
Income, plus
(iii) Consolidated Interest Expense, to the extent deducted in computing
Consolidated Net Income, plus
(iv) the amortization of all intangible assets, to the extent such
amortization was deducted in computing Consolidated Net Income
(including, but not limited to, inventory write-ups, goodwill, debt
and financing costs and Incentive Arrangements), plus
(v) any non-capitalized transaction costs incurred in connection with
financings or acquisitions, (including, but not limited to,
financing and refinancing fees, to the extent deducted in computing
Consolidated Net Income), plus
(vi) all depreciation and all other non-cash charges (including without
limitation, those charges relating to purchase accounting
adjustments, to the extent deducted in computing Consolidated Net
income), plus
(vii) any interest income, to the extent such income was not included in
computing Consolidated Net Income, plus
(viii) all dividend payments on Preferred Stock (whether or not paid in
cash), to the extent deducted in computing Consolidated Net Income,
plus
(ix) any extraordinary or non-recurring charge or expense arising out of
the implementation of SFAS 106 or SFAS 109, to the extent deducted
in computing Consolidated Net Income;
provided, however, that if any such calculation includes any period prior
to the date of original Issuance of the Securities, such calculation for
such period shall be made on a pro forma basis
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as if all businesses acquired during the relevant period had been acquired
on the first day of such period.
"Cash Flow Coverage Ratio" means, for any given period and Person, the
ratio of:
(a) Cash Flow, divided by
(b) the sum of Consolidated Interest Expense and the amount of all
dividend payments on any series of Preferred Stock of such
Person (except dividends paid or payable in additional shares
of Capital Stock (other than Disqualified Stock)), in each
case, without duplication;
provided, however, that if any such calculation includes any period prior to the
date of original Issuance of the Securities, such calculation for such period
shall be made on a pro forma basis as provided in the definitions of
Consolidated Interest Expense and Cash Flow.
"Change of Control" means the occurrence of any of the following: (i) the
Jordan Stockholders shall fail to be the beneficial owners, directly or
indirectly, of at least 22% of the outstanding shares of common stock of the
Company on a fully-diluted basis (provided that the Issuance of any shares of
the Company's common stock pursuant to a primary public offering shall not be
considered to have diluted such percentage ownership); or (ii) the Company is
merged or consolidated with another corporation, or all or substantially all of
the assets of the Company are sold, leased or conveyed to another Person, and
the Jordan Stockholders are not the beneficial owners, directly or indirectly,
immediately following such transaction, of at least 22% of the Equity Interests
(which are entitled to vote in the election of directors or other governing
body) of the corporation surviving any such consolidation or merger, or the
Person to which such sale, lease or conveyance shall have been made; or (iii)
the Company is liquidated or dissolved.
"Company" means Jordan Industries, Inc. until a successor replaces it in
accordance with Article 5 and thereafter means the successor, and shall include
any and all other obligors on the Securities.
"Consolidated Interest Expense" means, for any given period and Person,
the aggregate of the interest expense in respect of all Indebtedness of such
Person and its Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP (including amortization of original issue discount on
any such Indebtedness, all non-cash interest payments, the interest portion of
any deferred payment obligation and the interest component of Capital Lease
Obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included in interest expense); provided,
however, that for the purpose of the Cash Flow Coverage Ratio in Sections 4.07
and 5.01, Consolidated Interest Expense shall be calculated on a pro forma basis
as if all Indebtedness Issued or refinanced during the relevant period had been
Issued or refinanced on the first day of such period; provided further that any
premiums, fees and expenses (including the amortization thereof) payable in
connection with the Refinancing Plan or any other refinancing of Indebtedness
will be excluded.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Subsidiaries for such period,
on a consolidated basis, determined in accordance with GAAP; provided, however,
that:
(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition
shall be excluded, and
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(ii) Consolidated Net Income of any Person will not include, without
duplication, any deduction for:
(A) any increased amortization or depreciation resulting from the
write-up of assets pursuant to Accounting Principles Board
Opinion Nos. 16 and 17, as amended or supplemented from time
to time,
(B) the amortization of all intangible assets (including
amortization attributable to inventory write-ups, goodwill,
debt and financing costs, and Incentive Arrangements),
(C) any non-capitalized transaction costs incurred in connection
with financings or acquisitions (including, but not limited
to, financing and refinancing fees),
(D) any extraordinary or nonrecurring charges relating to any
premium or penalty paid, write-off or deferred financing costs
or other financial recapitalization charges in connection with
redeeming or retiring any Indebtedness prior to its stated
maturity, and
(E) any non-recurring charge arising out of the restructuring or
consolidation of the operations of any Person(s) or business
either alone or together with the Company or any Restricted
Subsidiary, incurred within 18 months following the
acquisition of such Person(s) or business by the Company or
any Restricted Subsidiary;
provided, however, that for purposes of determining the Cash Flow Coverage Ratio
in Sections 4.07 and 5.01, Consolidated Net Income shall be calculated on a pro
forma basis as if all businesses acquired during the relevant period had been
acquired on the first day of such period.
"Consolidated Net Worth" with respect to any Person means, as of any date,
the consolidated equity of the common stockholders of such Person (excluding the
cumulated foreign currency translation adjustment), all determined on a
consolidated basis in accordance with GAAP, but without any reduction in respect
of the payment of dividends on any series of such Person's Preferred Stock if
such dividends are paid in additional shares of Capital Stock (other than
Disqualified Stock); provided, however, that Consolidated Net Worth shall also
include, without duplication:
(i) the amortization of all write-ups of inventory,
(ii) the amortization of all intangible assets (including amortization of
goodwill, debt and financing costs, and Incentive Arrangements),
(iii) any non-capitalized transaction costs incurred in connection with
financings or acquisitions (including, but not limited to, financing
and refinancing fees),
(iv) any increased amortization or depreciation resulting from the
write-up of assets pursuant to Accounting Principles Board Opinion
Nos. 16 and 17, as amended and supplemented from time to time,
(v) any extraordinary or nonrecurring charges or expenses relating to
any premium or penalty paid, write-off or deferred financing costs
or other financial recapitalization
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charges incurred in connection with redeeming or retiring any
Indebtedness prior to its stated maturity,
(vi) any non-recurring cash charge arising out of the restructuring or
consolidation of the operations of any Person(s) or business either
alone or together with the Company or any Restricted Subsidiary,
incurred within 18 months following the acquisition of such
Person(s) or business by the Company or any Restricted Subsidiary,
and
(vii) any extraordinary or non-recurring charge arising out of the
implementation of SFAS 106 or SFAS 109;
provided, however, that for purposes of determining Consolidated Net Worth in
Section 5.01, Consolidated Net Worth shall be calculated on a pro forma basis as
if all businesses acquired during the relevant period had been acquired on the
first day of such period.
"Consulting Agreement" means the Amended and Restated Management
Consulting Agreement, between the Company and TJC Management Corporation, as in
effect on the date of original Issuance of the Securities.
"Corporate Trust Office" shall be at the address of the Trustee specified
in Section 10.02 or such other address as the Trustee may give notice to the
Company.
"Credit Agent" means the agent under the Credit Agreement or the New
Credit Agreement, as the case may be, or such other Person as may be designated
as such by the Company from time to time by notifying the Trustee.
"Credit Agreement" means the amended and restated revolving credit
agreement dated December 10, 1991 among the Company, certain of its Subsidiaries
and The First National Bank of Boston, as amended or supplemented from time to
time.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Discount Debentures" means the Company's 11 3/4% Senior Subordinated
Discount Debentures due 2005.
"Discount Debenture Indenture" means the Indenture governing the Company's
Discount Debentures as in effect on the date of original Issuance of the
Securities and as thereafter amended.
"Disqualified Stock" means any Capital Stock that by its terms (or by the
terms of any security into which its 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 option of the holder thereof, in whole or in part on, or prior to, the
maturity date of the Securities.
"Dura-Line Agreement" means the Preferred Stock Agreement, dated March 1,
1992, among Dura-Line and certain other Persons, as in effect on the date of
original Issuance of the Securities.
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"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation); provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the date of original Issuance of the Securities. All financial
and accounting determinations and calculations under this indenture will be made
in accordance with GAAP.
"Hedging Obligations" means, with respect to any Person, the Obligations
of such Persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange contracts,
currency swap agreements or similar agreements, and (iii) other agreements or
arrangements designed to protect such Person against fluctuations, or otherwise
to establish financial hedges in respect of, exchange rates, currency rates or
interest rates.
"Holder" means a Person in whose name a Security is registered.
"Incentive Arrangements" means any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with acquisitions of
Persons or businesses by the Company or the Restricted Subsidiaries or the
retention of executives, officers or employees by the Company or the Restricted
Subsidiaries.
"Indebtedness" means, with respect to any Person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the deferred and unpaid balance
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
and any Hedging Obligations, if and to the extent such indebtedness (other than
a Hedging Obligation) would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP, and also
includes, to the extent not otherwise included, the guarantee of items that
would be included within this definition; provided, however, that "Indebtedness"
will not include any Incentive Arrangements or obligations or payments
thereunder.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
"Issue" means create, issue, assume, guarantee, incur or otherwise become
directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
For this definition, the terms "Issuing," "Issuer," "Issuance" and "Issued" have
meanings correlative to the foregoing.
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"Jordan Stockholders" means John W. Jordan, II and/or his heirs, executors
and administrators, and/or The John W. Jordan, II Revocable Trust, The Jordan
Family Trust and/or any other trust established by John W. Jordan, II whose
beneficiaries are John W. Jordan, II and/or his lineal descendants or other
relatives.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York are not required to be open.
"Marketable Securities" means debt or equity securities of any Person
(other than the Company or any Affiliate) that are freely tradeable under all
applicable federal and state securities laws and that are either listed on a
national stock exchange or traded over the counter.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, any gain or
loss, together with any related provision for taxes, realized in connection with
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable Issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in either such
case, only as and when so received) received by the Company or any of its
Restricted Subsidiaries in respect of such Asset Sale, net of:
(i) the cash expenses of such Asset Sale (including, without limitation,
the payment of principal of, and premium, if any, and interest on,
Indebtedness required to be paid as a result of such Asset Sale
(other than the Securities) and legal, accounting and investment
banking fees and sales commissions),
(ii) taxes paid or payable as a result thereof,
(iii) any portion of cash proceeds that the Company determines in good
faith should be reserved for post-closing adjustments, it being
understood and agreed that on the day that all such post-closing
adjustments have been determined, the amount (if any) by which the
reserved amount in respect of such Asset Sale exceeds the actual
post-closing adjustments payable by the Company or any of its
Restricted Subsidiaries shall constitute Net Proceeds on such date,
and
(iv) any relocation expenses and pension, severance and shutdown costs
incurred as a result thereof.
"New Credit Agreement" means the credit agreement to be entered into by
the Company and/or certain of its Restricted Subsidiaries and certain lenders,
as amended, modified, extended, restated,
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replaced or supplemented, from time to time, and any documents governing
refinancings or extensions of amounts borrowed thereunder.
"Non-Restricted Subsidiary" means J.I. Finance Company and any other
Subsidiary of the Company other than a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
premiums, interest, penalties, fees, indemnities, expenses (including legal fees
and expenses), reimbursement obligations and other liabilities payable to the
holder of such Indebtedness under the documentation governing such Indebtedness,
and any other claims of such holder arising in respect of such Indebtedness.
"Officer" means the President, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Old Note Indenture" means the indenture, dated as of December 15, 1988,
between the Company and First Bank National Association, as trustee, as amended
or supplemented.
"Old Notes" means the Company's 13-7/8% Series A Senior Subordinated Notes
due 1998, and the Company's 16% Series B Senior Subordinated Reset Notes due
1998, each Issued under the Old Note Indenture.
"Opinion of Counsel" means a written opinion in form and substance
satisfactory to, and from legal counsel acceptable to, the Trustee (such counsel
may be an employee of or counsel to the Company or the Trustee).
"Other Permitted Indebtedness" means
(i) Indebtedness of the Company and its Restricted Subsidiaries existing
as of the date of original Issuance of the Securities (including Old
Notes, if any, the Discount Debentures and the Securities);
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers acceptances and letters of credit (including,
without limitation, letters of credit in respect of workers'
compensation claims) Issued in the ordinary course of business, or
other indebtedness with respect to reimbursement-type obligations
regarding workers' compensation claims;
(iii) Refinancing Indebtedness, provided that:
(A) the principal amount of such Refinancing Indebtedness shall
not exceed the outstanding principal amount of Indebtedness
(including unused commitments) so extended, refinanced,
renewed, replaced, substituted or refunded plus any amounts
incurred to pay premiums, fees and expenses in connection
therewith;
(B) Refinancing Indebtedness of Indebtedness shall have a Weighted
Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted or
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refunded, provided that this clause (B) will not apply to
Refinancing Indebtedness Issued under the Credit Agreement or
the New Credit Agreement; and
(C) in the case of Refinancing Indebtedness of Subordinated
Indebtedness, such Refinancing Indebtedness shall be
subordinated to the Securities at least to the same extent as
the Indebtedness being extended, refinanced, renewed,
replaced, substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted
Subsidiaries of Indebtedness of the Company not Issued in compliance
with Section 4.17);
(v) Indebtedness of the Company and its Restricted Subsidiaries Issued
in connection with making permitted Restricted Payments under
Sections 4.05(b)(iv), (b)(v) or (b)(ix);
(vi) Indebtedness of any Non-Restricted Subsidiary Issued after the date
of original Issuance of the Securities, provided that such
Indebtedness is nonrecourse to the Company and its Restricted
Subsidiaries and the Company and its Restricted Subsidiaries have no
Obligations with respect to such Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries under
Hedging Obligations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries 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, which will not be, and will not be deemed to
be, inadvertent) drawn against insufficient funds in the ordinary
course of business;
(ix) Indebtedness of any Person at the time it is acquired as a
Restricted Subsidiary, provided that such Indebtedness was not
Issued by such Person in connection with or in anticipation of such
acquisition;
(x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary if the Indebtedness so guaranteed is permitted
under this Indenture;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the
Company, if the Indebtedness so guaranteed is permitted under this
Indenture and the Securities are guaranteed by such Restricted
Subsidiary to the extent required by Section 4.17;
(xii) guarantees by the Company of Indebtedness of any Restricted
Subsidiary if the Indebtedness so guaranteed is permitted under this
Indenture;
(xiii) Indebtedness of the Company and its Restricted Subsidiaries Issued
in connection with performance, surety, statutory, appeal or similar
bonds in the ordinary course of business; and
(xiv) Indebtedness of the Company and its Restricted Subsidiaries Issued
in connection with agreements providing for indemnification,
purchase price adjustments and similar obligations in connection
with the sale or disposition of any of their business, properties or
assets.
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"Permitted Liens" means: (a) with respect to the Company and its
Restricted Subsidiaries,
(1) Liens for taxes, assessments, governmental charges or claims which
are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if a reserve or
other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor;
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate
provision, if any as shall be required in conformity with GAAP shall
have been made therefor;
(3) Liens incurred on deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and
other types of social security;
(4) Liens incurred on deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance and return of money bonds
and other obligations of a like nature incurred in the ordinary
course of business (exclusive of obligations for the payment of
borrowed money);
(5) easements, rights-of-way, zoning or other restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries
incurred in the ordinary course of business;
(6) Liens (including extensions, renewals and replacements thereof) upon
property acquired (the "Acquired Property") after the date of
original Issuance of the Securities, provided that:
(A) any such Lien is created solely for the purpose of securing
Indebtedness representing, or Issued to finance, refinance or
refund, the cost (including the cost of construction) of the
Acquired Property,
(B) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of the cost of the Acquired Property,
(C) such Lien does not extend to or cover any property other than
the Acquired Property and any improvements on such Acquired
Property, and
(D) the Issuance of the Indebtedness to purchase the Acquired
Property is permitted by Section 4.07;
(7) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with
the importation of goods;
(8) judgment and attachment Liens not giving rise to an Event of
Default;
(9) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its
Restricted Subsidiaries;
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(10) Liens encumbering customary initial deposits and margin deposits,
and other Liens incurred in the ordinary course of business and that
are within the general parameters customary in the industry, in each
case securing indebtedness under Hedging Obligations;
(11) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the
Company or its Restricted Subsidiaries;
(12) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by the Company or its Restricted
Subsidiaries in the ordinary course of business;
(13) any interest or title of a lessor in property subject to any Capital
Lease Obligation or operating lease;
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(15) Liens existing on the date of original Issuance of the Securities
and any extensions, renewals or replacements thereof; and
(16) any Lien granted to the Trustee under this Indenture and any
substantially equivalent Lien granted to any trustee or similar
institution under any indenture for Indebtedness permitted by the
terms of this Indenture;
(b) with respect to the Restricted Subsidiaries,
(1) Liens securing Restricted Subsidiaries' reimbursement Obligations
with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and
proceeds thereof;
(2) Liens securing Indebtedness Issued by Restricted Subsidiaries if
such Indebtedness is permitted by (A) Section 4.07(a), (B) Sections
4.07(b)(i), (b)(ii), (b)(iii) or (b)(iv), or (C) clauses (i), (iii)
(to the extent the Indebtedness subject to such Refinancing
Indebtedness was subject to Liens), (vii), (ix) or (x) of the
definition of Other Permitted Indebtedness;
(3) Liens securing intercompany Indebtedness Issued by any Restricted
Subsidiary to the Company or another Restricted Subsidiary;
(4) additional Liens at any one time outstanding with respect to assets
of the Restricted Subsidiaries the aggregate fair market value of
which does not exceed $10,000,000 (the fair market value of any such
asset is to be determined on the date such Lien is granted on such
asset);
(5) Liens securing guarantees by Restricted Subsidiaries of Indebtedness
Issued by the Company if such guarantees are permitted by clause
(xi) (but only in respect of the property, rights and assets of the
Restricted Subsidiaries Issuing such guarantees) of the definition
of Other Permitted Indebtedness; and
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(c) with respect to the Company,
(1) Liens securing Indebtedness Issued by the Company under the Credit
Agreement or the New Credit Agreement if such Indebtedness is
permitted by Section 4.07 (including, but not limited to,
Indebtedness Issued by the Company under the Credit Agreement or the
New Credit Agreement pursuant to Section 4.07(b)(i) and/or (b)(iv));
(2) Liens securing Indebtedness of the Company if such Indebtedness is
permitted by clauses (i), (iii) (to the extent the Indebtedness
subject to such Refinancing Indebtedness was subject to Liens) or
(vii) of the definition of Other Permitted Indebtedness; and
(3) Liens securing guarantees by the Company of Indebtedness Issued by
Restricted Subsidiaries if such Indebtedness is permitted by Section
4.07 (including, but not limited to, Indebtedness Issued by
Restricted Subsidiaries under the Credit Agreement or the New Credit
Agreement pursuant to Section 4.07(b)(i) and/or (b)(iv)) and if such
guarantees are permitted by clause (xii) (but only in respect of
Indebtedness Issued by the Restricted Subsidiaries under the Credit
Agreement or the New Credit Agreement pursuant to Section 4.07) of
the definition of Other Permitted Indebtedness;
provided, however, that, notwithstanding any of the foregoing, the Permitted
Liens referred to in clause (c) of this definition shall not include any Lien on
Capital Stock of Restricted Subsidiaries held by the Company (as distinguished
from Liens on Capital Stock of Restricted Subsidiaries held by other Restricted
Subsidiaries) other than Liens securing (A) Indebtedness of the Company Issued
under the Credit Agreement or the New Credit Agreement pursuant to Section 4.07
and any permitted Refinancing Indebtedness of such Indebtedness, and (B)
guarantees by the Company of Indebtedness Issued by Restricted Subsidiaries
under the Credit Agreement or the New Credit Agreement pursuant to Section 4.07
and any permitted Refinancing Indebtedness of such Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Post-Petition Interest" means, with respect to any Senior Indebtedness,
all interest accrued or accruing on such Senior Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding in accordance with and
at the contract rate (including, without limitation, any rate applicable upon
default) specified in the agreement or instrument creating, evidencing or
governing such Senior Indebtedness, whether or not, pursuant to applicable law
or otherwise, the claim for such interest is allowed as a claim in such
Insolvency or Liquidation Proceeding.
"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Qualified Issuer" means any commercial bank (a) which has capital and
surplus in excess of $100,000,000, and (b) the outstanding long-term debt
securities of which are rated at least A-2 by Standard & Poor's Corporation or
P-2 by Moody's Investor Service, Inc., or carry an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments.
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"Receivables" means, with respect to any Person all of the following
property and interests in property of such Person whether now existing or
existing in the future or hereafter acquired or arising: (i) accounts, (ii)
accounts receivable, (including, without limitation, all rights to payment
created by or arising from sales of goods, leases of goods or the rendition of
services, no matter how evidenced, whether or not earned by performance), (iii)
all unpaid seller's or lessor's rights (including without limitation, recession,
replevin, reclamation and stoppage in transit, relating to any of the foregoing
or arising therefrom), (iv) all rights to any goods or merchandise represented
by any of the foregoing (including, without limitation, returned or repossessed
goods), (v) all reserves and credit balances with respect to any such accounts
receivable or account debtors, (vi) all letters of credit, security or
guarantees of any of the foregoing, (vii) all insurance policies or reports
relating to any of the foregoing, (viii) all collection or deposit accounts
relating to any of the foregoing, (ix) all proceeds of any of the foregoing, and
(x) all books and records relating to any of the foregoing.
"Receivables Financing" means (i) the sale or other disposition of
Receivables that arise in the ordinary course of business, or (ii) the sale or
other disposition of Receivables that arise in the ordinary course of business
to a Receivables Subsidiary followed by a financing transaction in connection
with such sale or disposition of such Receivables.
"Receivables Subsidiary" means any Subsidiary of the Company or any other
corporation, trust or entity, that is exclusively engaged in Receivables
Financings and activities reasonably related thereto.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries Issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund any
Indebtedness permitted under this Indenture or any Indebtedness Issued to so
extend, refinance, renew, replace, substitute or refund such Indebtedness, (ii)
any refinancings of Indebtedness Issued under the Credit Agreement or the New
Credit Agreement, and (iii) any additional Indebtedness Issued to pay premiums
and fees in connection with clauses (i) and (ii).
"Refinancing Plan" means (i) the repayment of all outstanding indebtedness
Issued under the Credit Agreement; (ii) the redemption of all the outstanding
Old Notes, including accrued interest thereon, whether pursuant to a debt tender
offer or Section 4.15; (iii) the payment of prepayment premiums on the Old Notes
and consent fees for the solicitation of consents to amendments to the Old
Indenture and the Old Notes from holders of Old Notes, and (iv) the payment of
fees and expenses relating to clauses (i), (ii), and (iii).
"Restricted Investment" means any capital contribution to, or other debt
or equity investment in (other than certain investments in marketable securities
and other negotiable instruments permitted by this Indenture) any Non-Restricted
Subsidiary or any Person other than a Restricted Subsidiary or the Company,
provided that Restricted Investments will not include any Incentive
Arrangements. The amount of any Restricted Investment shall be the amount of
cash and the fair market value at the time of transfer of all other property (as
determined by the Board of Directors in good faith) initially invested or paid
for such Restricted Investment, plus all additions thereto, without any
adjustments for increases or decreases in value of, or write-ups, write-downs or
write-offs with respect to, such Restricted Investment.
"Restricted Subsidiary" means:
(i) JII/Sales Promotion Associates, Inc., Imperial Electric Company
Parsons Precision Products, Inc., Sate-Lite Manufacturing Company,
Dura-Line Corporation, DACCO, Incorporated, Riverside Book and
Bible House, Incorporated, Scott Motors, Inc. and Gear Research,
Inc., World Bible Publishers, Inc., Clifton Book Company., Inc., Aim
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Electronics Corporation, Hudson Lock, Inc., Beemak Plastics, Inc.,
Borg Manufacturing, Detroit Transmission Products Co., Transmission
Parts Warehouse, Inc., ABC Transmission Parts Warehouse, Inc.,
Nashville Transmission Parts Warehouse, Inc., Nashville Transmission
Parts Warehouse, Inc., DACCO/Detroit of Florida, Inc., DACCO/Detroit
of Minnesota, Inc., DACCO/Detroit of Colorado, Inc., DACCO/Detroit
of Indiana Inc., DACCO/Detroit of Missouri, Inc., DACCO/Detroit of
Memphis, Inc., DACCO/Detroit of Nebraska, Inc., DACCO/Detroit of
Alabama Inc., DACCO/Detroit of New Jersey, Inc., DACCO/Detroit of
Michigan, Inc., DACCO/Detroit of Arizona, Inc., DACCO/Detroit of
North Carolina, Inc., JI Aviation, Inc., Cambridge Products
Corporation, Welcome Home, Inc.,
(ii) any other Subsidiary of the Company existing on the date of original
Issuance of the Securities other than J.I. Finance Company, and
(iii) any other Subsidiary of the Company formed, acquired or existing
after the date of original Issuance of the Securities that is
designated as a "Restricted Subsidiary" by the Company pursuant to a
resolution approved by a majority of the Board of Directors.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Company's 10 3/8% Senior Notes due 2003 Issued
under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means:
(a) (i) all Obligations (including Post-Petition Interest) whether
existing on the date of original Issuance of the Securities or
Issued thereafter, in respect of:
(A) all Indebtedness of the Company for money borrowed, and
(B) all Indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which
the Company is responsible or liable;
(ii) all Capitalized Lease Obligations of the Company;
(iii) all Obligations of the Company:
(A) for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit
transaction,
(B) constituting Hedging Obligations, or
(C) Issued as the deferred purchase price of property and
all conditional sale Obligations of the Company and all
Obligations of the Company under any title retention
agreement;
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(iv) all guarantees of the Company with respect to Obligations of
other Persons of the type referred to in clauses (ii) and
(iii) and with respect to the payment of dividends of other
Persons; and
(v) all Obligations of the Company consisting of modifications,
renewals, extensions, replacements and refundings of any
Obligations described in clauses (i), (ii), (iii) or (iv);
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such Obligations are subordinated
in right of payment to the Securities; provided, however, that Senior
Indebtedness shall not be deemed to include:
(1) any Obligation of the Company to any Subsidiary,
(2) any liability for federal, state, local or other taxes owed or
owing by the Company,
(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such
liabilities),
(4) any Indebtedness, guarantee or Obligation of the Company that
is contractually subordinated or junior in any respect to any
other Indebtedness, guarantee or Obligation of the Company, or
(5) any Indebtedness incurred in violation of this Indenture.
(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 a trustee,
receiver or other similar Person under any Bankruptcy Law, then if
such payment is recovered by, or paid over to, such trustee,
receiver or other similar Person, the Senior Indebtedness or part
thereof originally intended to be satisfied by such payment shall he
deemed to be reinstated and outstanding as if such payment had not
occurred. All Senior Indebtedness shall be and remain Senior
Indebtedness for all purposes of this Indenture, whether or not
subordinated in an insolvency or Liquidation Proceeding.
"Significant Subsidiary" means (i) any Restricted Subsidiary of the
Company that would be a "significant subsidiary" as defined in clause (2) of the
definition of such term in Rule 1-02 of Regulation S-X under the Securities Act
and the Exchange Act, and (ii) any other Restricted Subsidiary of the Company
that is material to the business, earnings, prospects, assets or condition,
financial or otherwise, of the Company and its Restricted Subsidiaries taken as
a whole.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Subordinated Indebtedness" means all Obligations of the type referred to
in clauses (i) through (v) of the definition of Senior Indebtedness if the
instrument creating or evidencing the same or pursuant
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to which the same is outstanding designates such Obligations as being
subordinated or junior in right of payment to Senior Indebtedness.
"Subsidiary" of any Person means any entity of which the Equity Interests
entitled to cast at least a majority of the votes that may be cast by all Equity
Interests having ordinary voting power for the election of directors or other
governing body of such entity are owned by such Person (regardless of whether
such Equity Interests are owned directly by such Person or through one or more
Subsidiaries).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss. ss.
77aaa-77bbbb) as in effect on the date of original Issuance of the Securities.
"Trustee" means First Trust National Association until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"Trust Officer" means the chairman of the board, the president or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged, provided that no U.S. Government Obligation
shall be callable at the Issuer's option.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding principal amount of such Indebtedness into (ii) the sum of the
product(s) obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other requirement payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
Section 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction" ............................... 4.08
"Asset Sale Disposition Date" ......................... 4.14
"Asset Sale Trigger Date" ............................. 4.14
"Change of Control Trigger Date" ...................... 4.13
"covenant defeasance option" .......................... 8.01
"Disposition" ......................................... 5.01
"Event of Default" .................................... 6.01
"Excess Proceeds" ..................................... 4.14
"legal defeasance option" ............................. 8.01
"Notice of Default" ................................... 6.01
"Offer" ............................................... 3.08
"Other Indebtedness" .................................. 4.17
"Other Indebtedness Guarantee" ........................ 4.17
"Paying Agent" ........................................ 2.03
"Purchase Date" ....................................... 3.08
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"Registrar" ......................................... 2.03
"Restricted Payments" ............................... 4.05
"Successor Corporation" ............................. 5.01
"Trustee Expenses" .................................. 6.08
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in, and made a part of, this Indenture. Any terms
incorporated by reference in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them therein.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the
meaning assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Security shall be dated the date of its
authentication. The Securities shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Section 2.02. Execution and Authentication.
Two officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
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If an Officer whose signature is on a Security no longer holds that office
at the time the Security is authenticated, the Security shall nevertheless be
valid.
A Security shall not be valid until authenticated by the manual signature
of the Trustee, and the Trustee's signature shall be conclusive evidence that
the Security has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Securities shall be
substantially as set forth in Exhibit A.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Securities for original Issuance up to an aggregate
principal amount stated in paragraph 4 of each Security (the aggregate principal
amount of outstanding Securities may not exceed that amount at any time, except
as provided in Section 2.07).
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (the "Registrar") where
Securities may be presented for registration of transfer or for exchange and an
office or agency (the "Paying Agent") where Securities may be presented for
payment. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Company may change the Paying Agent, Registrar or
co-registrar without prior notice to any Holder. The Company shall notify the
Trustee and the Trustee shall notify the Holders of the name and address of any
Agent not a party to this Indenture. The Company shall enter into an appropriate
agency agreement with any Agent not a party to this Indenture, and such
agreement shall incorporate the TIA's provisions and implement the provisions of
this Indenture that relate to such Agent.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Securities. The
Company or any of its Subsidiaries may act as Paying Agent, Registrar or
co-registrar. If the Company fails to appoint or maintain a Registrar and Paying
Agent, the Trustee shall act as such, and shall be entitled to appropriate
compensation in accordance with Section 7.07.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the Holders'
benefit or the Trustee all money the Paying Agent holds for redemption or
purchase of the Securities or for the payment of principal of, or premium, if
any, or interest on, the Securities, and will notify the Trustee of any Default
by the Company in providing the Paying Agent with sufficient funds to (i)
purchase Securities tendered pursuant to a Change of Control Offer, (ii) redeem
Securities called for redemption, or (iii) make any payment of principal,
premium or interest due on the Securities. While any such Default continues, the
Trustee may require the Paying Agent to pay all money it holds to the Trustee.
The Company at any time may require the Paying Agent to pay all money it holds
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company or any of its Subsidiaries) shall have no further liability for
the money it delivered to
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the Trustee. If the Company or any of its Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the Holders' benefit or
the Trustee all money it holds as Paying Agent.
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
Holders and shall otherwise comply with section 312(a) of the TIA. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee, at least
seven Business Days before each interest payment date and at such other times
as the Trustee may request in writing, a list in such form and as of such date
as the Trustee may reasonably require that sets forth the names and addresses
of, and the aggregate principal amount of Securities held by, each Holder, and
the Company shall otherwise comply with section 312(a) of the TIA.
Section 2.06. Transfer and Exchange.
When Securities are presented to the Registrar or a co-registrar with a
request to register a transfer or to exchange them for an equal principal amount
of Securities of other denominations, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met;
provided, however, that any Security presented or surrendered for registration
of transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar and the Trustee
duly executed by the Holder thereof or by his attorney duly authorized in
writing. To permit registrations of transfers and exchanges, the Company shall
Issue, and the Trustee shall authenticate, Securities at the Registrar's
request.
Neither the Company nor the Registrar shall be required to Issue, register
the transfer of, or exchange any Security (i) during a period beginning at the
opening of business on the day the Trustee receives notice of an optional
redemption from the Company pursuant to Section 3.02 and ending at the close of
business on the day the Securities or portions thereof to be redeemed are
selected by the Trustee, (ii) selected for redemption, in whole or in part,
except the unredeemed portion of any Security being redeemed in part, (iii)
prior to the Payment Date that has been tendered pursuant to an Offer and not
withdrawn, (iv) between the record date and the next succeeding interest payment
date.
No service charge shall be made for any registration of transfer or
exchange (except as otherwise expressly permitted herein), but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Section 2.10, 3.06, 3.08, or 9.05, which the Company shall pay).
Prior to due presentment for registration of transfer of any Security, the
Trustee, any Agent and the Company may deem and treat the Person in whose name
any Security is registered as the absolute owner of such Security (whether or
not such Security shall be overdue and notwithstanding any notation of ownership
or other writing on such Security made by anyone other than the Company, the
Registrar or any co-registrar) for the purpose of receiving payment of principal
of, and premium, if any, and interest on, such Security and for all other
purposes, and notice to the contrary shall not affect the Trustee, any Agent or
the Company.
Section 2.07. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or if the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Security, the Company shall Issue
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and the Trustee, upon the Company's written order signed by two Officers, shall
authenticate a replacement Security if the Trustee's requirements are met. If
the Trustee or the Company requires, the Holder must supply an indemnity bond
that is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent or any authenticating agent from any loss that
any of them may suffer if a Security is replaced. The Company and the Trustee
may charge for its expenses in replacing a Security.
Every replacement Security is an additional Obligation of the Company.
Section 2.08. Outstanding Securities.
The Securities outstanding at any time are all the Securities the Trustee
has authenticated except for those it has cancelled, those delivered to it for
cancellation, and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that a bonafide
purchaser holds the replaced Security.
If the entire principal of, and premium, if any, and accrued interest on,
any Security is considered paid under Section 4.01, it ceases to be outstanding
and interest on it ceases to accrue.
Subject to Section 2.09, a Security does not cease to be outstanding
because the Company or an Affiliate holds the Security.
Section 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or an Affiliate 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
Securities that the Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Securities that the Company or an Affiliate
offers to purchase or acquires pursuant to an Offer, exchange offer, tender
offer or otherwise shall not be deemed to be owned by the Company or an
Affiliate until legal title to such Securities passes to the Company or such
Affiliate, as the case may be.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee, upon
receipt of the Company's written order signed by two Officers, shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
Section 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, any co-registrar and the Paying Agent shall forward
to the Trustee any Securities surrendered to them for registration of transfer,
exchange, replacement, payment (including all Securities called for redemption
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and all Securities accepted for payment pursuant to an Offer) or cancellation,
and the Trustee shall cancel all such Securities and shall destroy all cancelled
Securities (subject to the Exchange Act's record retention requirements) and
deliver a certificate of their destruction to the Company unless by written
order, signed by two Officers of the Company, the Company shall direct that
cancelled Securities be returned to it. The Company may not Issue new Securities
to replace any Securities that have been cancelled by the Trustee or that have
been delivered to the Trustee for cancellation. If the Company or an Affiliate
acquires any Securities (other than by redemption or pursuant to an Offer), such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Securities unless and until such Securities are
delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to Holders on a subsequent
special record date, in each case at the rate provided in the Securities and
Section 4.01. The Company shall, with the Trustee's consent, fix or cause to be
fixed each such special record date and payment date. At least 15 days before
the special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail a notice that states the special record date,
the related payment date and the amount of interest to be paid.
Section 2.13. Record Date.
The record date for purposes of determining the identity of holders of
Securities entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in section 316(c) of the TIA.
Section 2.14. CUSIP Number.
A "CUSIP" number will be printed on the Securities, and the Trustee shall
use the CUSIP number in notices of redemption, purchase or exchange as a
convenience to Holders, provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company will
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE
Section 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to Section 3.07 it
shall furnish to the Trustee, at least 10 but not more than 15 days before
notice of redemption is to be mailed by the Company to Holders, an Officers'
Certificate stating that the Company has elected to redeem Securities pursuant
to Section 3.07(a) or 3.07(b), as the case may be, the date notice of redemption
is to be mailed to Holders, the redemption date, the aggregate principal amount
of Securities to be redeemed, the redemption price for such Securities and the
amount of accrued and unpaid interest on such Securities as of the redemption
date. If the Trustee is not the Registrar, the Company shall, concurrently with
delivery of its notice to the Trustee of a redemption, cause the Registrar to
deliver to the Trustee a certificate (upon which the
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Trustee may rely) setting forth the name of, and the aggregate principal amount
of Securities held by, each Holder.
If the Company is required to offer to purchase Securities pursuant to
Section 4.13 or 4.14, it shall furnish to the Trustee, at least 2 Business Days
before notice of the Offer is to be mailed to Holders, an Officers' Certificate
setting forth that the Offer is being made pursuant to Section 4.13 or 4.14, as
the case may be, the Purchase Date, the maximum principal amount of Securities
the Company is offering to purchase pursuant to the Offer, the purchase price
for such Securities, and the amount of accrued and unpaid interest on such
Securities as of the Purchase Date.
The Company will also provide the Trustee with any additional information
that the Trustee reasonably requests in connection with any redemption or Offer.
Section 3.02. Selection of Securities to be Redeemed or Purchased.
If less than all outstanding Securities are to be redeemed or if less than
all Securities tendered pursuant to an Offer are to be accepted for payment, the
Trustee shall select the outstanding Securities to be redeemed or accepted for
payment pro rata, by lot or by a method that complies with the requirements of
any stock exchange on which the Securities are listed and that the Trustee
considers fair and appropriate. If the Company elects to mail notice of a
redemption to Holders, the Trustee shall at least 5 business days prior to the
date notice of redemption is to be mailed, (i) select the Securities to be
redeemed from Securities outstanding not previously called for redemption, and
(ii) notify the Company of the names of each Holder of Securities selected for
redemption, the principal amount of Securities held by each such Holder and the
principal amount of such Holder's Securities that are to be redeemed. If less
than all Securities tendered pursuant to an Offer on the Purchase Date are to be
accepted for payment, the Trustee shall select on or promptly after the Purchase
Date the Securities to be accepted for payment. The Trustee shall select for
redemption or purchase Securities or portions of Securities in principal amounts
of $1,000 or integral multiples of $1,000; except that if all of the Securities
of a Holder are selected for redemption or purchase, the aggregate principal
amount of the Securities held by such Holder, even if not a multiple of $1,000,
shall be redeemed or purchased. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Securities called for redemption or
tendered pursuant to an Offer also apply to portions of Securities called for
redemption or tendered pursuant to an Offer. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be called for
redemption or selected for purchase.
Section 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail a notice of redemption to each Holder of Securities or
portions thereof that are to be redeemed.
The notice shall identify the Securities or portions thereof to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Securities and the amount of
unpaid and accrued interest on such Securities as of the date
of redemption;
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that,
after the redemption date, upon surrender
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of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion will be Issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price for, and any
accrued and unpaid interest on, such Securities;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases
to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number listed in such notice and printed
on the Securities.
At the Company's request, the Trustee shall (at the Company's expense)
give the notice of redemption in the Company's name at least 30 but not more
than 60 days before a redemption; provided, however, that the Company shall
deliver to the Trustee, at least 45 days prior to the redemption date and at
least 10 days prior to the date that notice of the redemption is to be mailed
to Holders, an Officers' Certificate that (i) requests the Trustee to give
notice of the redemption to Holders, (ii) sets forth the information to be
provided to Holders in the notice of redemption, as set forth in the preceding
paragraph, (iii) states that the Company has elected to redeem Securities
pursuant to Section 3.07(a) or 3.07(b), as the case may be, and (iv) sets forth
the aggregate principal amount of Securities to be redeemed and the amount of
accrued and unpaid interest thereon as of the redemption date. If the Trustee is
not the Registrar, the Company shall, concurrently with any such request, cause
the Registrar to deliver to the Trustee a certificate (upon which the Trustee
may rely) setting forth the name of, the address of, and the aggregate principal
amount of Securities held by, each Holder.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date at the price set forth in the
Security.
Section 3.05. Deposit of Redemption Price.
On or prior to any redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of, and accrued interest on, all Securities to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Company any money that the
Company deposited with the Trustee or the Paying Agent in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all
Securities to be redeemed.
If the Company complies with the preceding paragraph, interest on the
Securities to be redeemed will cease to accrue on such Securities on the
applicable redemption date, whether or not such Securities are presented for
payment. If a Security is redeemed on or after an interest record date but on or
prior to the related interest payment date, then any accrued and unpaid interest
shall be paid to the Person in whose name such Security was registered at the
close of business on such record date. If any Security
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called for redemption shall not be so paid upon surrender for redemption because
of the failure of the Company to comply with the preceding paragraph, interest
will be paid on the unpaid principal, premium, if any, and interest from the
redemption date until such principal, premium and interest is paid, at the rate
of interest provided in the Securities and Section 4.01.
Section 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company shall
Issue and the Trustee shall authenticate for the Holder at the Company's expense
a new Security equal in principal amount to the unredeemed portion of the
Security surrendered.
Section 3.07. Optional Redemption Provisions.
The Securities may not be redeemed at the option of the Company prior to
August 1, 1998. During the twelve (12) month period beginning August 1 of the
years indicated below, the Securities will be redeemable at the option of the
Company, in whole or in part, on at least 30 but not more than 60 days' notice
to each Holder to be redeemed, at the redemption prices (expressed as
percentages of the principal amount of the Securities) set forth below, plus any
accrued and unpaid interest to the date of redemption:
Year Percentage
---- ----------
1998 ................................... 105.18750%
1999 ................................... 102.59375%
2000 and thereafter .................... 100.00000%
Section 3.08. Mandatory Purchase Provisions.
(a) Within 30 days after any Change of Control Trigger Date or Asset Sale
Trigger Date, the Company shall mail a notice to each Holder stating:
(i) that an offer ("Offer") is being made pursuant to Section 4.13 or
4.14, as the case may be, the length of time the Offer shall remain
open, and the maximum aggregate principal amount of Securities that
the Company is offering to purchase;
(ii) the purchase price for the Securities (as set forth in Section 4.13
or 4.14, as the case may be), the amount of accrued and unpaid
interest on such Securities as of the purchase date, and the
purchase date (which shall be no earlier than 30 days nor later
than 40 days from the date such notice is mailed (the "Purchase
Date"));
(iii) that any Security not accepted for payment will continue to accrue
interest;
(iv) that, unless the Company fails to deposit with the Paying Agent on
the Purchase Date an amount sufficient to purchase all Securities
accepted for payment, interest shall cease to accrue on such
Securities after the Purchase Date;
(v) that Holders electing to tender any Security or portion thereof will
be required to surrender their Security, with a form entitled
"Option of Holder to Elect Purchase" completed, to the Paying Agent
at the address specified in the notice prior to the close of
business on the Business Day preceding the Purchase Date, provided
that Holders
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electing to tender only a portion of any Security must tender a
principal amount of $1,000 or integral multiples thereof;
(vi) that Holders will be entitled to withdraw their election to tender
Securities if the Paying Agent receives, not later than the close of
business on the third Business Day preceding the Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Securities delivered for
purchase, and a statement that such Holder is withdrawing his
election to have such Security purchased; and
(vii) that Holders whose Securities are accepted for payment in part will
be Issued new Securities equal in principal amount to the
unpurchased portion of Securities surrendered; provided that only
Securities in a principal amount of $1,000 or integral multiples
thereof will be accepted for payment in part.
(b) On the Purchase Date, the Company will, to the extent required by this
Indenture and the Offer:
(i) accept for payment the Securities or portions thereof tendered
pursuant to such Offer,
(ii) deposit with the Paying Agent an amount sufficient to purchase the
lesser of (a) the Securities or portions thereof tendered pursuant
to such Offer, and (b) the maximum aggregate principal amount of
Securities that the Company offered to purchase pursuant to such
Offer, and
(iii) deliver, or cause to be delivered, to the Trustee all Securities
tendered pursuant to the Offer, together with an Officers'
Certificate setting forth the name of each Holder that tendered
Securities and the principal amount of the Securities or portions
thereof tendered by each such Holder.
(c) With respect to any Offer, if less than all of the Securities tendered
pursuant to an Offer are to be purchased by the Company, the Trustee shall
select on the Purchase Date the Securities or portions thereof to be accepted
for payment pursuant to Section 3.02.
(d) Promptly after consummation of an Offer, (i) the Paying Agent shall mail to
each Holder of Securities or portions thereof accepted for payment an amount
equal to the purchase price for, plus any accrued and unpaid interest on, such
Securities, (ii) with respect to any tendered Security not accepted for payment
in whole or in part, the Trustee shall return such Security to the Holder
thereof, and (iii) with respect to any Security accepted for payment in part,
the Trustee shall authenticate and mail to each such Holder a new Security equal
in principal amount to the unpurchased portion of the tendered Security.
(e) The Company will publicly announce the results of the Offer on or as soon as
practicable after the Purchase Date.
(f) The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations to the extent such laws and regulations are
applicable to any Offer.
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(g) With respect to any Offer, if the Company deposits with the Paying Agent on
the Purchase Date an amount sufficient to purchase all Securities accepted for
payment, interest shall cease to accrue on such Securities after the Purchase
Date; provided, however, that if the Company fails to deposit such amount on the
Purchase Date, interest shall continue to accrue on such Securities until such
deposit is made.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities.
The Company shall pay the principal of, and premium, if any, and interest
on, the Securities on the dates and in the manner provided in the Securities.
Holders of Securities must surrender their Securities to the Paying Agent to
collect principal payments. Principal, premium, and interest shall be considered
paid on the date due if the Paying Agent (other than the Company or any of its
Subsidiaries) holds as of 10:00 a.m. Eastern Standard Time money the Company
deposited in immediately available funds designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Paying Agent shall
return to the Company, no later than five days following the date of payment,
any money (including accrued interest) that exceeds the amount of principal,
premium, if any, and interest paid on the Securities.
To the extent lawful, the Company shall pay interest (including
Post-Petition Interest) on (i) overdue principal and premium at the rate equal
to 2% per annum in excess of the then applicable interest rate on the
Securities, compounded semiannually, and (ii) overdue installments of interest
(without regard to any applicable grace period) at the same rate as set forth in
clause (i), compounded semiannually.
Section 4.02. SEC Reports.
(a) The Company shall file with the Trustee, within 15 days after it files them
with the SEC, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) that the Company is required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Company is
not subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Trustee, within 15 days after it would have been
required to file with the SEC, financial statements, including any notes thereto
(and with respect to annual reports, an auditor's report by a firm of
established national reputation reasonably satisfactory to the Trustee), and a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," both comparable to that which the Company would have been required
to include in such annual reports, information, documents or other reports if
the Company were subject to the requirements of Section 13 or 15(d) of the
Exchange Act. Subsequent to the qualification of the Indenture under the TIA,
the Company also shall comply with the provisions of section 314(a) of the TIA.
(b) If the Company is required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act, the Company shall cause any annual
report furnished to its stockholders generally and any quarterly or other
financial reports it furnishes to its stockholders generally to be filed with
the Trustee and mailed to the Holders at their addresses appearing in the
register of Securities maintained by the Registrar. If the Company is not
required to furnish annual or quarterly reports to its stockholders pursuant to
the Exchange Act, the Company shall cause its financial statements referred to
in Section 4.02(a), including any notes thereto (and with respect to annual
reports, an auditors' report by a firm of established national reputation
reasonably satisfactory to the Trustee), and a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," to be so mailed to
the Holders within
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120 days after the end of each of the Company's fiscal years and within 60
days after the end of each of the first three fiscal quarters of each year. The
Company will cause to be disclosed in a statement accompanying any annual report
or comparable information as of the date of the most recent financial statements
in each such report or comparable information the amount available for payments
pursuant to Section 4.05 hereof. As of the date hereof, the Company's fiscal
year ends on December 31.
Section 4.03. Compliance Certificate.
The Company shall deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company has taken or proposes to take with respect thereto) and that
to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of, or
premium, if any, or interest on, the Securities are prohibited or if such event
has occurred, a description of the event and what action the Company is taking
or proposes to take with respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.02 shall be accompanied by a written statement
of the Company's independent public accountants (who shall be a firm of
established national reputation reasonably satisfactory to the Trustee) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Section 4.01, 4.05, 4.06, 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, or 4.17 or of Article 5 or, if
any such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation.
The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of (i) any
Default or Event of Default, or (ii) any default or event of default under any
other mortgage, indenture of instrument that could result in an Event of Default
under Section 6.01(4), an Officers' Certificate specifying such Default, Event
of Default or default and what action the Company is taking or proposes to take
with respect thereto.
Section 4.04. Stay, Extension and 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, extension or usury law wherever
enacted, now or at any time hereafter in force, that might affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, 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 has been
enacted.
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Section 4.05. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly,
(i) declare or pay any dividend or make any distribution on account of
the Company's or such Restricted Subsidiary's Capital Stock or other
Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or a
Restricted Subsidiary and other than dividends or distributions
payable by a Restricted Subsidiary to another Restricted Subsidiary
or to the Company),
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any of its Restricted Subsidiaries
(other than any such Equity Interest purchased from the Company or
any Restricted Subsidiary),
(iii) voluntarily prepay Indebtedness that is subordinated to the
Securities, whether any such Subordinated Indebtedness is
outstanding on, or issued after, the date of original issuance of
the Securities, except as specifically permitted by the terms of
this Indenture,
(iv) make any Restricted Investment (all such dividends, distributions,
purchases, redemptions or other acquisition, retirements,
prepayments and Restricted Investments being collectively referred
to as "Restricted Payments"), if, at the time of such Restricted
Payment:
(1) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(2) immediately after such Restricted Payment and after giving
effect thereto on a pro forma basis, the Company shall not be
able to Issue $l.00 of additional Indebtedness pursuant to
Section 4.07(a); or
(3) such Restricted Payment, together with the aggregate of all
other Restricted Payments made after the date of original
Issuance of the Securities, exceeds the sum of, without
duplication:
(A) 50% of the aggregate Consolidated Net Income (including,
for this purpose, gains from Asset Sales and, to the
extent not already included in the aggregate
Consolidated Net Income, gains from Restricted
Investments shall be added to the aggregate Consolidated
Net Income) of the Company (or, in case such aggregate
is a loss, 100% of such loss) for the period (taken as
one accounting period) from the beginning of the first
quarter commencing immediately after the date of
original Issuance of the Securities and ended as of the
Company's most recently ended fiscal quarter at the time
of such Restricted Payment, plus
(B) 100% of the aggregate net cash proceeds and the fair
market value of any property or securities (as
determined by the Board of Directors in good faith)
received by the Company from the Issue or sale of Equity
Interests or warrants, options or rights to acquire
Equity Interests of the Company or any Restricted
Subsidiary subsequent to the date of original
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Issuance of the Securities (other than Equity Interests
Issued or sold to a Restricted Subsidiary and other than
Disqualified Stock), plus
(C) $5,000,000, plus
(D) the amount by which the principal amount of and any
accrued interest on:
(1) any Senior Indebtedness of the Company, or
(2) any Indebtedness of the Restricted Subsidiaries,
is reduced on the Company's consolidated balance sheet
upon the conversion or exchange (other than by a
Restricted Subsidiary) subsequent to the date of
original Issuance of the Securities of any indebtedness
of the Company or any Restricted Subsidiary (not held by
the Company or any Restricted Subsidiary) for Equity
Interests (other than Disqualified Stock) of the Company
or any Restricted Subsidiaries (less the amount of any
cash, or the fair market value of any other property or
securities (as determined by the Board of Directors in
good faith), distributed by the Company or any
Restricted Subsidiary (to Persons other than the Company
or any other Restricted Subsidiary) upon such conversion
or exchange), plus
(F) if any Non-Restricted Subsidiary is redesignated as a
Restricted Subsidiary, the fair market value (as
determined by the Board of Directors in good faith) of
such Non-Restricted Subsidiary as of the date it is
redesignated; provided, however, that for purposes of
this clause (E), the fair market value of any
redesignated Non-Restricted Subsidiary shall be reduced
by the amount that any such redesignation replenishes or
increases the amount of Restricted Investments permitted
to be made pursuant to Section 4.05(b)(iii).
(b) Notwithstanding Section 4.05(a), the following Restricted Payments may be
made:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would comply with the provisions hereof;
(ii) the retirement of any of the Company's Capital Stock or Subordinated
Indebtedness in exchange for, or out of the net proceeds of the
substantially concurrent sale (other than to a Restricted
Subsidiary) of, other Capital Stock (other than Disqualified Stock)
and neither such retirement nor the proceeds of any such sale or
exchange shall be included in any computation made pursuant to
Section 4.05(a);
(iii) making Restricted Investments at any time, and from time to time, in
an aggregate outstanding amount of $40,000,000 after the date of
original Issuance of the Securities (it being understood that if any
Restricted Investment acquired with a Restricted Payment after the
date of original Issuance of the Securities pursuant to this clause
(iii) is sold, transferred or otherwise conveyed to any Person other
than the Company or a Restricted Subsidiary, the portion of the net
cash proceeds or fair market value of securities or
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properties paid or transferred to the Company and its Restricted
Subsidiaries in connection with such sale, transfer or conveyance
that relates to the repayment or return of the original cost of such
a Restricted Investment will replenish or increase the amount of
Restricted Investments permitted to be made pursuant to this Section
4.05(b)(iii), so that up to $40,000,000 of Restricted Investments may
be outstanding under this Section 4.05(b)(iii) at any given time);
(iv) the repurchase or redemption of the Company's common stock upon the
death of Thomas H. Quinn, pursuant to the terms of an Employment
Agreement, dated as of February 25, 1988, between the Company and
Thomas H. Quinn, as amended or supplemented; provided, however, that
the funds necessary to satisfy the Company's obligation to
repurchase or redeem such Common Stock shall be fully reimbursed by
insurance;
(v) the repurchase or redemption of the Company's common stock pursuant
to the terms of the several Restricted Stock Agreements, each dated
as of February 25, 1988, between the Company and each of Thomas H.
Quinn, Jonathan F. Boucher and John R. Lowden, the Restricted Stock
Agreement, dated as of December 31, 1992, between the Company and
Thomas Quinn and the Restricted Stock Agreements, each dated as of
January 1, 1992, between the Company and each of Jonathan F.
Boucher, Adam Max and Thomas Quinn, in each case as amended or
supplemented, up to an aggregate amount not to exceed $7,500,000;
(vi) any loans, advances, distributions or payments from the Company to
its Restricted Subsidiaries, or any loans, advances, distributions
or payments by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary, pursuant to intercompany Indebtedness,
intercompany management agreements, intercompany tax sharing
agreements, and other intercompany agreements and obligations;
(vii) the payment of directors' fees in an annual aggregate amount not to
exceed $250,000;
(viii) investments in marketable securities and other negotiable
instruments through the William Penn Funds (including the William
Penn Interest Income Fund);
(ix) scheduled payments of dividends on, and redemptions of,
(A) the Preferred Stock of Sate-Lite in an annual aggregate amount
not to exceed $20,000, and
(B) the Preferred Stock of Dura-Line,
(1) in an aggregate annual amount not to exceed $300,000 for
dividends, and
(2) in an aggregate amount not to exceed $3,750,000 for
redemptions pursuant to the terms of the Dura-Line
Agreement;
(x) to the extent constituting Restricted Payments, if no Default or
Event of Default shall have occurred and be continuing or shall
occur as a consequence thereof, the payment of consulting, financial
and investment banking fees (but not limiting the payment of
indemnities, expenses and other amounts) under the Consulting
Agreement, provided that
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the obligation of the Company to pay such fees under the Consulting
Agreement shall be subordinated expressly to the Company's
Obligations on the Securities;
(xi) the purchase, redemption, retirement or other acquisition of (a) any
Senior Indebtedness required by its terms to be purchased, redeemed,
retired or acquired with the net proceeds from asset sales (as
defined in the instrument evidencing such Senior Indebtedness) or
upon a change of control (as defined in the instrument evidencing
such Senior Indebtedness), and (b) the Securities pursuant to
Sections 4.13 and 4.14;
(xii) the exchanging, refinancing or refunding of Subordinated
Indebtedness through the Issuance of Subordinated Indebtedness so
long as the Subordinated Indebtedness to be Issued is Refinancing
Indebtedness permitted under Section 4.07; or
(xiii) any payments made in connection with the Refinancing Plan.
Section 4.06. Corporate Existence.
Subject to Section 4.14 and Article 5 hereof, the Company will do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and the corporate, partnership or other existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of each of its Restricted Subsidiaries and the rights
(charter and statutory), licenses and franchises of the Company and each of its
Restricted Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any Restricted Subsidiary, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Restricted Subsidiaries
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
Section 4.07. Limitation on Incurrence of Indebtedness.
(a) The Company will not, and will not permit any Restricted Subsidiary to Issue
any Indebtedness (other than the Indebtedness represented by the Discount
Debentures, the Old Notes and the Securities) unless: the Company's Cash Flow
Coverage Ratio for its four full fiscal quarters next preceding the date such
additional Indebtedness is Issued would have been at least:
(i) 1.7 to 1, if such date is between the date of original Issuance of
the Securities and June 30, 1995,
(ii) 1.85 to 1, from July 1, 1995 through June 30, 1997, or
(iii) 2.0 to 1, from July 1, 1997 and thereafter,
in each case determined on a pro forma basis (including a pro forma
application of proceeds of such Indebtedness and any other
Indebtedness incurred since the end of the applicable four quarter
period including, without limitation, the earnings of any business
acquired by the Company with the proceeds of such Indebtedness) as
if such additional Indebtedness and any other Indebtedness issued
since the end of the applicable four quarter period had been Issued
at the beginning of such four-quarter period.
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(b) Section 4.07(a) will not apply to the Issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries up to
the greater of (A) $75.0 million in aggregate principal amount
pursuant to the Credit Agreement or the New Credit Agreement, and
(B) an aggregate principal amount up to the sum of: (x) 85% of the
book value of the Company and its Restricted Subsidiaries'
Receivables on a consolidated basis, and (y) 65% of the book value
of the Company and its Restricted Subsidiaries' inventories on a
consolidated basis;
(ii) Indebtedness of the Company and its Restricted Subsidiaries pursuant
to any Receivables Financing;
(iii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, sale and leaseback transactions,
purchase money obligations, capital expenditures or similar
financing transactions relating to:
(A) their properties, assets and rights as of the date of original
Issuance of the Securities up to $20,000,000 in aggregate
principal amount, or
(B) their properties, assets and rights acquired after the date of
original Issuance of the Securities, provided that such
Indebtedness under this Section 4.07(b)(iii)(B) does not
exceed 100% of the cost of such properties, assets and rights;
(iv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $25,000,000 (all
or any portion of which may be Issued as additional Indebtedness
under the Credit Agreement or the New Credit Agreement); and
(v) Other Permitted Indebtedness.
(c) Notwithstanding Sections 4.07(a) and (b), no Restricted Subsidiary shall
under any circumstances Issue a guarantee of any Indebtedness of the Company
except for guarantees Issued by Restricted Subsidiaries pursuant to Section
4.17, provided, however, that this Section 4.07(c) will not limit or restrict
guarantees Issued by Restricted Subsidiaries in respect of Indebtedness of other
Restricted Subsidiaries.
Section 4.08. Limitation on Transactions With Affiliates.
(a) Neither the Company nor any of its Restricted Subsidiaries may make any
loan, advance, guarantee or capital contribution to, or for the benefit of, or
sell, lease, transfer or dispose of any properties or assets to, or for the
benefit of, or purchase or lease any property or assets from, or enter into any
or amend any contract, agreement or understanding with, or for the benefit of,
an Affiliate (each such transaction or series of related transactions that are
part of a common plan an "Affiliate Transaction"), except in good faith and on
terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
on an arm's length basis from an unrelated Person.
(b) Neither the Company nor any of its Restricted Subsidiaries may engage in any
Affiliate Transaction involving aggregate payments or other transfers by the
Company and its Restricted Subsidiaries in excess of $5,000,000 (including cash
and non-cash payments and benefits valued at their fair market value by the
Board of Directors in good faith) unless the Company delivers to the Trustee
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(i) a resolution of the Board of Directors stating that the Board of Directors
(including a majority of the disinterested directors, if any) has, in good
faith, determined that such Affiliate Transaction complies with the provisions
of this Indenture, and (ii) an opinion as to the fairness of such Affiliate
Transaction to the Company or such Restricted Subsidiary from a financial point
of view by an investment banking firm of national prominence that is not an
Affiliate.
(c) Notwithstanding Sections 4.08(a) and (b), this Section 4.08 will not apply
to:
(i) transactions between the Company and any Restricted Subsidiary or
between Restricted Subsidiaries,
(ii) any payments or transactions permitted pursuant to Section 4.05,
(iii) payments of fees and other amounts due under the Consulting
Agreement, and
(iv) the payment of reasonable and customary directors' fees to directors
of the Company and its Restricted Subsidiaries.
Section 4.09. Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any asset now owned or
hereafter acquired by them, or any income or profits therefrom or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on its properties or assets, the Company
may create any Lien upon any of its properties or assets (including, but not
limited to, any Capital Stock of its Subsidiaries) if the Securities are equally
and ratably secured.
Section 4.10. Compliance With Laws, Taxes.
The Company shall, and shall cause each of its Restricted Subsidiaries to,
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, non-compliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or condition,
financial or otherwise, of the Company and its Restricted Subsidiaries taken as
a whole.
The Company shall, and shall cause each of its Restricted Subsidiaries to,
pay prior to delinquency all taxes, assessments and governmental levies, except
those contested in good faith by appropriate proceedings.
Section 4.11. Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.
(a) The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective, any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits, owned by the Company or any Restricted Subsidiary, or pay
any Indebtedness owed to, the Company or any Restricted Subsidiary,
(ii) make loans or advances to the Company, or
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(iii) transfer any of its properties or assets to the Company,
except for such encumbrances or restrictions existing under or by
reason of:
(A) applicable law,
(b) Indebtedness permitted;
(1) under Section 4.07(a),
(2) under Sections 4.07(b)(i), (b)(ii) and (b)(iv) and
clauses (i), (vii), and (ix) of the definition of Other
Permitted Indebtedness, or
(3) agreements and transactions permitted under Section
4.05,
(C) customary provisions restricting subletting or assignment of
any lease or license of the Company or any Restricted
Subsidiary,
(D) customary provisions of any franchise, distribution or similar
agreement,
(E) any instrument governing Indebtedness or any other encumbrance
or restriction of a Person acquired by the Company or any
Restricted Subsidiary at the time of such acquisition, which
encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired,
(F) Indebtedness or other agreements existing on the date of
original Issuance of the Securities,
(G) any Refinancing Indebtedness of Indebtedness described in
Section 4.07(b)(i), (b)(ii) and (b)(iv) and clauses (i),
(vii), and (ix) of the definition of Other Permitted
Indebtedness; provided that the encumbrances and restrictions
created in connection with such Refinancing Indebtedness are
no more restrictive in any material respect with regard to the
interests of the Holders than the encumbrances and
restrictions in the refinanced Indebtedness,
(H) any restrictions, with respect to a Restricted Subsidiary,
imposed pursuant to an agreement that has been entered into
for the sale or disposition of the stock, business, assets or
properties of such Restricted Subsidiary,
(I) the terms of any Indebtedness of the Company incurred in
connection with Section 4.07, provided that the terms of such
Indebtedness constitute no greater encumbrance or restriction
on the ability of any Restricted Subsidiary to pay dividends
or make distributions, make loans or advances or transfer
properties or assets than is permitted by this Section 4.11,
and
(J) the terms of purchase money obligations, but only to the
extent such purchase money obligations restrict or prohibit
the transfer of the property so acquired.
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(b) Nothing contained in this Section 4.11 shall prevent the Company from
entering into any agreement or instrument providing for the incurrence of
Permitted Liens or restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that are subject to
Permitted Liens.
Section 4.12. Maintenance of Office or Agencies.
The Company will maintain in the Borough of Manhattan, the City of New
York an office or an agency (which may be an office of any Agent) where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of any change in the location of such office or agency. If at any time
the Company shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or recision shall in any matter relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or recision and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.13. Change of Control.
(a) Upon the occurrence of a Change of Control (such date being the "Change of
Control Trigger Date"), each Holder shall have the right to require the Company
to purchase such Holder's Securities pursuant to an Offer at a purchase price
equal to 101% of the aggregate principal amount of such Securities, plus any
accrued and unpaid interest to the Purchase Date. Although the failure of the
Company to purchase all Securities tendered in such an Offer shall be a Default,
if the Company is unable to purchase all Securities tendered in such an Offer,
the Company shall nevertheless purchase the maximum principal amount of
Securities that it is able to purchase at that time.
(b) In the event of a Change of Control, the Company shall not offer to purchase
or redeem any Subordinated Indebtedness required or entitled by its terms to be
redeemed or purchased until the Change of Control Offer for the Securities has
been consummated and all Securities tendered pursuant to such Offer have been
accepted for payment.
Section 4.14. Limitation on Asset Sales.
(a) The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, consummate an Asset Sale (including the sale of any of
the Capital Stock of any Restricted Subsidiary) providing for Net Proceeds in
excess of $2,500,000 unless at least (A) 50% of the consideration thereof
received by the Company or such Restricted Subsidiary is in the form of cash
and/or Cash Equivalents and/or Marketable Securities, and (B) 75% of the Net
Proceeds from such Asset Sale are applied to one or more of the following in
such combination as the Company shall elect:
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(i) an investment in another asset or business in the same line of
business as, or a line of business similar to that of, the line of
business of the Company and its Restricted Subsidiaries at that
time; provided that such investment occurs on or prior to the 365th
day following the date of such Asset Sale (the "Asset Sale
Disposition Date"),
(ii) the purchase, redemption or other prepayment or repayment of
outstanding Senior Indebtedness on or prior to the Asset Sale
Disposition Date, or
(iii) an Offer expiring on or prior to the Purchase Date.
(b) Any Net Proceeds from the Asset Sale that are not applied or invested as
provided in Sections 4.14(a)(i) or (a)(ii) shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10,000,000 (the "Asset
Sale Trigger Date"), the Company shall make an Offer to all Holders to purchase
the maximum principal amount of the Securities then outstanding that may be
purchased out of Excess Proceeds, at an offer price in cash in an amount equal
to 100% of the outstanding principal amount thereof, plus any accrued and unpaid
interest to the Purchase Date.
(d) To the extent that any Excess Proceeds remain after completion of the Offer,
the Company may use such remaining amount for general corporate purposes.
(e) Upon completion of an Offer, the amount of Excess Proceeds shall be reset at
zero.
(f) Notwithstanding the foregoing, to the extent that any or all of the Net
Proceeds of an Asset Sale is prohibited or delayed by applicable local law from
being repatriated to the United States, the portion of such Net Proceeds so
affected will not be required to be applied pursuant to this Section 4.14, but
may be retained for so long, but only for so long, as the applicable local law
prohibits repatriation to the United States. The Company will promptly take all
reasonable actions required by the applicable local law to permit such
repatriation, and once such repatriation of any affected Net Proceeds is not
prohibited under applicable local law, such repatriation will be immediately
effected and such repatriated Net Proceeds will be applied in the manner set
forth above as if such Asset Sale had occurred on the date of repatriation.
Section 4.15. Redemption of Old Notes.
The Company will, on December 15, 1993, exercise its right to make an
optional redemption of all outstanding Old Notes, if any, in accordance with the
terms of the Old Indenture.
Section 4.16. Limitation on Amendment of Discount Debenture Indenture.
Article 10 and Sections 9.07 and 11.15 of the Discount Debenture Indenture
shall not be amended, modified, supplemented or altered in any manner that would
adversely affect Holders of the Securities without the consent of Holders of at
least a majority of the outstanding principal amount of the Securities.
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Section 4.17. Guarantees by Restricted Subsidiaries.
(a) The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee any Indebtedness of the Company other than the
Securities ("Other Indebtedness") unless:
(i) such Restricted Subsidiary contemporaneously executes and delivers a
supplemental indenture to this Indenture providing for a guarantee
of payment of the Securities then outstanding by such Restricted
Subsidiary to the same extent as the guarantee (the "Other
Indebtedness Guarantee") of the Other Indebtedness (including waiver
of subrogation, if any), and
(ii) if the Other Indebtedness guaranteed by such Restricted Subsidiary
is:
(A) Senior Indebtedness, the guarantee for the Securities shall be
pari passu in right of payment to the Other Indebtedness
Guarantee, and
(B) Subordinated Indebtedness, the guarantee for the Securities
shall be senior in right of payment to the Other Indebtedness
Guarantee,
provided that none of that the foregoing will limit or restrict
guarantees Issued by Restricted Subsidiaries in respect of
Indebtedness of other Restricted Subsidiaries.
(b) Each guarantee of the Securities created by a Restricted Subsidiary pursuant
to Section 4.17(a) shall be in form and substance satisfactory to the Trustee
and shall provide, among other things, that it will be automatically and
unconditionally released and discharged upon:
(i) any sale, exchange or transfer permitted by this Indenture to any
Person not an Affiliate of (A) all of the Company's Capital Stock in
such Restricted Subsidiary, or (B) the sale of all or substantially
all of the assets of the Restricted Subsidiary and upon the
application of the Net Proceeds from such sale in accordance with
Section 4.14, or
(ii) the release or discharge of the Other Indebtedness Guarantee that
resulted in the creation of such guarantee of the Securities, except
a discharge or release by or as a result of payment under such Other
Indebtedness Guarantee.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger or Consolidation.
(a) The Company shall not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to, any
Person, (any such consolidation, merger or sale being a "Disposition") unless:
(i) the successor entity of such Disposition or the Person to which such
Disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or
the District of Columbia;
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(ii) the successor corporation of such Disposition or the corporation to
which such Disposition shall have been made expressly assumes the
Obligations of the Company, pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee, under the Securities
and this Indenture;
(iii) immediately after such Disposition no Default or Event of Default
exists; and
(iv) the entity (the "Successor Corporation") formed by or surviving any
such Disposition or the corporation to which such Disposition shall
have been made;
(A) shall have Consolidated Net Worth (immediately after the
Disposition but prior to any purchase accounting adjustments
resulting from the Disposition) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding
the Disposition,
(B) shall be permitted immediately after the Disposition by the
terms of Section 4.07(a) to Issue at least $1.00 of additional
Indebtedness, and
(C) shall have a pro forma Cash Flow Coverage Ratio, for the four
fiscal quarters immediately preceding the applicable
Disposition, equal to or greater than the actual Cash Flow
Coverage Ratio of the Company for such four quarter period;
provided, however, that for purposes of this Section 5.01(a)(iv),
wherever applicable, the pro forma Cash Flow Coverage Ratio shall be
calculated after giving effect to such Disposition as if the same
had occurred at the beginning of the applicable four-quarter period.
Prior to the consummation of any proposed Disposition, the Company shall
deliver to the Trustee an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed Disposition and such supplemental
indenture comply with this Indenture.
Section 5.02. Successor Corporation Substituted.
Upon any Disposition, the Successor Corporation resulting from such
Disposition shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such Successor has been named as the Company herein; provided, however, that
neither the Company nor any Successor Corporation shall be released from its
Obligation to pay the principal of, and premium, if any, and interest on, the
Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
(a) An "Event of Default" is:
(1) a default for 30 days in payment of interest on the
Securities;
(2) a default in payment when due of principal or premium, if any;
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(3) the failure of the Company to comply with any of its other
agreements or covenants in, or provisions of, the outstanding
Securities or this Indenture and the Default continues for the
period, if applicable, and after the notice specified in
Section 6.01(b);
(4) a default by the Company or any Restricted Subsidiary under
any mortgage, indenture or instrument under which there may be
Issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any
Restricted Subsidiary (or the payment of which is guaranteed
by the Company or any Restricted Subsidiary), whether such
Indebtedness exists prior to, or is created after, the date of
original Issuance of the Securities if:
(A) either (i) such default results from the failure to pay
principal of or interest on any such Indebtedness and
such default continues for 30 days beyond any applicable
grace period, or (ii) as a result of such default the
maturity of such Indebtedness has been accelerated prior
to its expressed maturity, and
(B) the principal amount of such Indebtedness, together with
the principal amount of any other such Indebtedness in
default for failure to pay principal or interest
thereon, or the maturity of which has been accelerated,
aggregates in excess of $15,000,000;
(5) a failure by the Company or any Restricted Subsidiary to pay
final judgments (not covered by insurance) aggregating in
excess of $7,500,000 which judgments a court of competent
jurisdiction does not rescind, annul or stay within 45 days
after their entry and the Default continues for the period and
after the notice specified in Section 6.01(b);
(6) in existence when the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it
in an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors;
(7) in existence when a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
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(B) appoints a Custodian of the Company or any Significant
Subsidiary, or for all or substantially all of the
property of the Company or any Significant Subsidiary,
or
(C) orders the liquidation of the Company or any Significant
Subsidiary,
and any such order or decree remains unstayed and in effect
for 60 days.
(b) A Default under Section 6.01(a)(3) (other than a Default under Sections
4.05, 4.07, 4.08, 4.11, 4.13, 4.14, 4.15, 4.16, 4.17, and 5.01 any of which
shall be an Event of Default with the notice but without the passage of time
specified in this Section 6.01(b)) or Section 6.01(a)(5) is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Securities notify the Company of the Default and the
Company does not cure the Default within 30 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default."
(c) In the case of any Event of Default pursuant to Section 6.01(a) occurring by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have to pay if the Company then had elected to redeem the
Securities pursuant to paragraph 5 of the Securities, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law, anything in this Indenture or in the Securities contained to the contrary
notwithstanding.
Section 6.02. Acceleration.
(a) Upon the occurrence of an Event of Default (other than an Event of Default
under Section 6.01(a)(6) or (a)(7)) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Securities
may declare all outstanding Securities to be due and payable immediately and
upon such declaration, the principal amount and premium, if any, of all such
Securities, and any accrued interest on, all such Securities to the date of
payment shall be due and payable immediately; provided, however, that if an
Event of Default arises under Section 6.01(a)(6) or (a)(7), the principal amount
of, and premium, if any, and any accrued and unpaid interest on, all such
Securities, shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holders.
(b) The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may rescind any declaration of acceleration
of such Securities and its consequences if the rescission would not conflict
with any judgment or decree and if all existing Defaults and Events of Default
(other than the nonpayment of principal of, or premium, if any, or interest on,
the Securities which shall have become due by such declaration) shall have been
cured or waived.
(c) If there has been a declaration of acceleration of the Securities because an
Event of Default under Section 6.0l(a)(4) has occurred and is continuing, such
declaration of acceleration shall be automatically annulled if the holders of
the Indebtedness described in Section 6.01(a)(4) have rescinded the declaration
of acceleration in respect of such Indebtedness within 30 Business Days thereof
and if:
(i) the annulment of such acceleration would not conflict with any
judgment or decree of a court of competent jurisdiction,
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(ii) all existing Events of Default, except non-payment of principal or
interest that shall have become due solely because of the
acceleration, have been cured or waived, and
(iii) the Company has delivered an Officer's Certificate to the Trustee to
the effect of clauses (i) and (ii) above.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, or premium, if any,
or interest on, the Securities or to enforce the performance of any provision of
the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may waive any existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default in
the payment of the principal of, or premium, if any, or interest on, any
Security (which may only be waived with the consent of each Holder affected).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall deemed to have been cured for every purpose of
this Indenture; provided that no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Subject to Section 7.01(e), the Holders of a majority in principal amount
of the then outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it by this Indenture. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, that
the Trustee determines may be unduly prejudicial to the rights of other Holders,
or would involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder may pursue a remedy with respect to this Indenture or the
Securities only if:
(i) the Holder gives to the Trustee notice of a continuing Event of
Default;
(ii) the Holders of at least 25% in principal amount of the then
outstanding Securities make a request to the Trustee to pursue the
remedy;
(iii) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
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(iv) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(v) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Securities do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Holders of the Securities may not enforce this Indenture, except as
provided herein.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, and premium, if any, and interest on,
a Security on or after a respective due date expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
date, 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 Section 6.01(a)(1) or (a)(2) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for (i) the principal,
premium, if any, and interest remaining unpaid on the Securities, (ii) interest
on overdue principal and premium, if any, and, to the extent lawful, interest,
and (iii) 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 ("Trustee
Expenses").
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 to have the claims of the Trustee (including any
claim for Trustee Expenses) and the Holders allowed in any Insolvency or
Liquidation Proceeding or other judicial proceeding relative to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute to Holders any
money or other property payable or deliverable on any such claims and each
Holder authorizes any Custodian in any such Insolvency or Liquidation Proceeding
or other judicial proceeding to make such payments to the Trustee, and if the
Trustee shall consent to the making of such payments directly to the Holders any
such Custodian is hereby authorized to make such payments directly to the
Holders, and to pay to the Trustee any amount due to it hereunder for Trustee
Expenses, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such Trustee Expenses, and any other amounts due
the Trustee under Section 7.07 out of the estate in any such proceeding, shall
be denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders may be entitled to receive in such
proceeding, whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any Insolvency or
Liquidation Proceeding.
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Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the
Securities for principal, premium, if any, and
interest, ratably, without preference or priority
of any kind, according to the amounts due and
payable on the Securities for principal, premium,
if any, and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the then outstanding Securities.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default occurs (and has not been cured) the Trustee shall (i)
exercise the rights and powers vested in it by this Indenture, and (ii) use the
same degree of care and skill in exercising such rights and powers as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee's duties shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine
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whether they conform to this Indenture's requirements and to confirm
the correctness of all mathematical computations.
(c) The Trustee may not be relieved from liability for its own negligent action,
its own negligent failure to act, or its own wilful misconduct, except that:
(i) this paragraph does not limit the effect of Section 7.01(b);
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction it
receives pursuant to Section 6.05.
(d) Whether or not expressly so provided, every provision of this Indenture that
in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of
this Section.
(e) No provision of this Indenture shall require the Trustee to expend or risk
its own funds or incur any liability. The Trustee shall be under no obligation
to exercise any of its rights and powers under this Indenture at the request of
any Holders unless such Holders shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money it receives except
as the Trustee may agree in writing with the Company. Money the Trustee holds in
trust need not be segregated from other funds except to the extent required by
law.
Section 7.02. Rights of Trustee.
(a) The Trustee may rely on any document it believes to be genuine and to have
been signed or presented by the proper Person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers'
Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in
good faith that it believes to be authorized or within its rights or powers.
(e) Unless otherwise specifically provided in the Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer.
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Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company or an Affiliate
with the same rights it would have if it were not Trustee. However, if the
Trustee acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue as trustee or
resign. Any Agent may do the same with like rights. The Trustee is also subject
to 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 or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities or for any
money paid to the Company or upon the Company's direction under any provisions
hereof, it shall not be responsible for the use or application of any money any
Paying Agent other than the Trustee receives, and it shall not be responsible
for any statement or recital herein or any statement in the Securities or any
other document in connection with the sale of the Securities or pursuant to this
Indenture, other than its certificate of authentication.
Section 7.05. Notice to Holders of Defaults and Events of Default.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment on any Security (including any failure to
redeem Securities called for redemption or any failure to purchase Securities
tendered pursuant to an Offer that are required to be purchased by the terms of
this Indenture), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the Holders' interests.
Section 7.06. Reports by Trustee to Holders.
Within 60 days after each August 1 beginning with August 1, 1994, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with section 313(a) of the TIA (but if no event described in
section 313(a) of the TIA has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with section 313(b)(2) of the TIA. The Trustee shall also transmit by mail all
reports as required by section 313(c) of the TIA.
Commencing at the time this Indenture is qualified under the TIA, a copy
of each report at the time of its mailing to Holders shall be filed with the SEC
and each stock exchange on which the Securities are listed. The Company shall
notify the Trustee when the Securities are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
advances and expenses it incurs or makes in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
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The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses the Trustee incurs arising out of or in connection with
the acceptance or administration of its duties under this Indenture, except as
set forth below. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its Obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee may
have separate counsel and the Company shall pay the reasonable fees and expenses
of such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The Company's Obligations under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any loss
or liability the Trustee incurs through negligence or bad faith.
To secure the Company's payment of its Obligations in this Section, the
Trustee shall have a Lien prior to the Securities on all money or property the
Trustee holds or collects, except that held in trust to pay principal of, and
premium, if any, and interest on, particular Securities. Such Lien shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute administrative expenses under any Bankruptcy
Law.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby created by
so notifying the Company. The Holders of a majority in principal amount of the
then outstanding Securities may remove the Trustee by so notifying the Trustee
and the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankruptcy or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy
Law;
(iii) a Custodian or public officer takes charge of the Trustee or its
property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee, provided that the Holders of a majority in principal amount of the then
outstanding Securities may appoint a successor Trustee to replace any successor
Trustee appointed by Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the
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then outstanding Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective and the successor Trustee
shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its appointment to
Holders. The retiring Trustee shall promptly transfer all property it holds as
Trustee to the successor Trustee, provided all sums owing to the retiring
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the retiring
Trustee's benefit with respect to expenses and liabilities it incurred prior to
being replaced.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
The Trustee shall at all times (i) be a corporation organized and doing
business under the laws of the United States of America, of any state thereof,
or the District of Columbia authorized under such laws to exercise corporate
trustee power, (ii) be subject to supervision or examination by federal or state
authority, (iii) have a combined capital and surplus of at least $25 million
($100 million in the case of any successor Trustee) as set forth in its most
recent published annual report of condition, and (iv) satisfy the requirements
of sections 310(a)(1), (2) and (5) of the TIA. The Trustee is subject to section
310(b) of the TIA.
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to section 311(a) of the TIA, excluding any
creditor relationship listed in section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to section 311(a) of the TIA to the
extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Discharge of Liability on Securities; Defeasance.
(a) When (i) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.07) for cancellation, or
(ii) all outstanding Securities have become due and payable and the Company
irrevocably deposits with the Trustee funds sufficient to pay at maturity all
outstanding Securities, including interest thereon (other than Securities
replaced pursuant to Section 2.07), and if in either case the Company pays all
other sums payable under this Indenture by the Company, then this Indenture
shall, subject to Sections 8.01(c) and 8.06, cease to be of further effect.
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(b) Subject to Sections 8.01(c), 8.02, and 8.06, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.13, 4.14, 4.15, 4.16 and 4.17, and
the operation of Sections 5.01(iii), 5.01(iv), or 6.01(a)(3) through (a)(7)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in 6.01(a)(3) through
(a)(7) or because of the Company's failure to comply with Sections 5.01(iii) or
5.01(iv).
Upon satisfaction of the conditions set forth herein and upon the
Company's request (and at the Company's expense), the Trustee shall acknowledge
in writing the discharge of those obligations that the Company has terminated.
(c) Notwithstanding clauses (a) and (b) above, the Company's obligations in
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.04, 7.07, 7.08, 8.04, 8.05, and
8.06, and the Trustee's and the Paying Agent's obligations in Section 8.04 shall
survive until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.07 and 8.05 and the Company's, Trustee's and Paying
Agent's obligations in Section 8.04 shall survive.
Section 8.02. Conditions to Defeasance.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations sufficient for the
payment in full of the principal of, and any premium due on,
the Securities, and any accrued and unpaid interest, as of the
maturity date, the redemption date or the Purchase Date, as
the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and
interest when due and without reinvestment of the deposited
U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts
as will be sufficient to pay principal of, and premium, if
any, and interest when due on all the Securities to maturity
or redemption, as the case may be;
(3) since the Company's irrevocable deposit provided for in
Section 8.02(1) 91 days have passed;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect to it;
(5) the deposit does not constitute a default under any other
agreement binding on the Company;
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(6) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940, as amended;
(7) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating
that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii)
under 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 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 defeasance had not occurred;
(8) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to
the effect 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; and
(9) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities
contemplates by this Article 8 have been satisfied.
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption or purchase of Securities at a future date in
accordance with Article 3.
Section 8.03. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of, and premium, if
any, and interest on, the Securities.
Section 8.04. Repayment to Company.
After the Securities have been paid in full, the Trustee and the Paying
Agent shall promptly turn over to the Company any excess money or securities
they hold.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money they hold for the payment of principal, premium or interest
that remains unclaimed for 1 year after the date upon which such payment shall
have become due; provided however, that the Company shall have either caused
notice of such payment to be mailed to each Holder entitled thereto no less than
30 days prior to such repayment or within such period shall have published such
notice in a financial newspaper of widespread circulation published in The City
of New York,(including, without limitation, The Wall Street Journal). After
payment to the Company, Holders entitled to the money must look to the Company
for payment as general creditors unless an applicable abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
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Section 8.05. Indemnity for Government Obligations.
The Company shall pay and shall indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
Section 8.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 8 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 Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article 8
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Article 8;
provided, however, that, if the Company has made any payment of principal of, or
premium, if any, or interest on, any Securities because of the reinstatement of
its Obligations, the Company shall be subrogated to the Holders' rights to
receive such payment from the money or U.S. Government Obligations the Trustee
or Paying Agent holds.
ARTICLE 9
AMENDMENTS
Section 9.01. Amendments and Supplements Permitted Without Consent of Holders.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Securities without the
consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Securities in addition to or in place
of certificated Securities;
(c) to provide for the assumption by a Successor Corporation of the
Company's Obligations to the Holders in the event of a Disposition
pursuant to Article 5;
(d) to comply with SEC's requirements to effect or maintain the
qualification of this Indenture under the TIA; or
(e) to make any change that does not materially adversely affect any
Holder's legal rights under this indenture.
Upon the Company's request, after receipt by the Trustee of a resolution
of the Board of Directors authorizing the execution of any amended or
supplemental indenture, the documents described in Section 9.06, the Trustee
shall join with the Company in the execution of any amended or supplemental
indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be contained in any
such amended or supplemental indenture, but the Trustee shall not be obligated
to enter into an amended or supplemental indenture that affects its own rights,
duties or immunities under this Indenture or otherwise.
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Section 9.02. Amendments and Supplements Requiring Consent of Holders.
Subject to Section 6.07, the Company and the Trustee may amend or
supplement this Indenture or the Securities with the written consent of the
Holders of at least a majority in principal amount of the then outstanding
Securities (including consents obtained in connection with a tender offer or
exchange offer for the Securities). Subject to Sections 6.04 and 6.07, the
Holders of a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Securities) may also waive any existing Default or Event of Default
(other than a payment Default) and its consequences or compliance in a
particular instance by the Company with any provision of this Indenture or the
Securities.
Upon the Company's request and after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any
supplemental indenture, evidence of the Holders' consent, and the documents
described in Section 9.06, the Trustee shall join with the Company in the
execution of such amended or supplemental indenture unless such amended or
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but not be obligated to, enter into such amended or supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to each Holder affected thereby a notice briefly describing
the amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amended or supplemental indenture or waiver. Without
the consent of each Holder affected, an amendment, supplement or waiver under
this Section may not:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of interest,
including default interest as set forth in Section 4.01, on
any Security or alter the redemption or purchase provisions
with respect thereto;
(3) reduce the principal of or change the fixed maturity of any
Security;
(4) make any Security payable in money other than that stated in
the Security;
(5) make any change in Section 6.04 or 6.07 or in this sentence of
this Section 9.02; or
(6) waive a default in the payment of the principal of, or
premium, if any, or interest on, or redemption or purchase
payment with respect to, any Security (except a rescission of
acceleration of the Securities by the Holders of at least a
majority in aggregate principal amount of the then outstanding
Securities and a waiver of the payment default that resulted
from such acceleration).
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Section 9.03. Compliance with TIA.
Every amendment or supplement to this Indenture or the Securities shall be
set forth in an amended supplemental indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Security is a continuing consent by the Holder and every
subsequent holder of a Security or portion of a Security that evidences the same
Indebtedness as the consenting Holder's Security, even if notation of the
consent is not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his or her Security or portion of a Security
if the Trustee receives the notice of revocation before the date on which the
Trustee receives an Officer's Certificate certifying that the Holders of the
requisite principal amount of Securities have consented to the amendment or
waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the holders of Securities entitled to consent to any
amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
holders of Securities at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to consent to such amendment or waiver
or to revoke any consent previously given, whether or not such Persons continue
to be holders of Securities after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Holders of the principal amount of Securities required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.
After an amendment or waiver becomes effective it shall bind every Holder,
unless it is of the type described in any of clauses (1) through (6) of Section
9.02. In such case, the amendment or waiver shall bind each Holder who has
consented to it and every subsequent holder of a Security that evidences the
same debt as the consenting Holder's Security.
Section 9.05. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Security thereafter authenticated. The Company in
exchange for all Securities may Issue and the Trustee shall authenticate new
Securities that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or Issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee Protected.
The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article 9 if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing such amendment or supplemental
indenture, the Trustee shall be entitled to receive and, subject to Section
7.01, shall be fully protected in relying upon, an Officers' Certificate and
Opinion of Counsel as conclusive evidence that such amendment or supplemental
indenture is authorized or permitted by this Indenture, that it is not
inconsistent herewith, and that it will be valid and binding upon the Company in
accordance with its terms. The Company may not sign an amendment or supplemental
indenture until the Board of Directors approves it.
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ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 318(c) of the TIA, the imposed duties
shall control.
Section 10.02. Notices.
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person, mailed by registered or
certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address:
If to the Company:
Jordan Industries, Inc.
ArborLake Centre
1751 Lake Cook Road
Suite 550
Deerfield, Illinois 60015
Telecopier No.: (708) 945-9645
If to the Trustee:
First Trust National Association
P.O. Box 64111
St. Paul, Minnesota 55164-0111
Attention: Corporate Trust Department
Telecopier No.: (612) 223-7549
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; the date receipt is acknowledged, if mailed by registered or
certified mail; when answered back, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail to his or her address shown on the register kept by the Registrar. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
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Section 10.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to section 312(b) of the TIA with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of section 312(c) of the TIA.
Section 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements
set forth in Section 10.05) stating that, in the opinion of
the signers, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed action
have been complied with; and
(b) an Opinion of Counsel (which shall include the statements set
forth in Section 10.05) stating that, in the opinion of such
counsel, all such conditions precedent provided for in this
Indenture relating to the proposed action have been complied
with.
Section 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to section 314(a)(4) of the TIA) shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in such Person's opinion, such
condition or covenant has been complied with.
Section 10.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 10.07. Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
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Section 10.08. No Recourse Against Others.
No director, officer, employee or stockholder of the Company shall have
any liability for any Obligations of the Company under the Securities or this
Indenture or for any Claim based on, in respect of or by reason of such
Obligations or the creation if any such Obligation. Each Holder by accepting a
Security waives and releases all such liability, and such waiver and release is
part of the consideration for the Issuance of the Securities.
Section 10.09. Counterparts.
This Indenture 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.
Section 10.10. Variable Provisions.
The Company initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.
The first compliance certificate to be delivered by the Company to the
Trustee pursuant to Section 4.03 shall be for the fiscal year ending on December
31, 1993.
Section 10.11. Governing Law.
The internal laws of the State of New York shall govern this Indenture and
the Securities, without regard to the conflict of laws provisions thereof.
Section 10.12. 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, and no other
indenture, loan or debt agreement may be used to interpret this Indenture.
Section 10.13. Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
Section 10.14. Severability.
If any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 10.15. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table, and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
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Dated as of July 15, 1993 JORDAN INDUSTRIES, INC.
By: [ILLEGIBLE]
------------------------------------
Name:
Title:
Attest:
[ILLEGIBLE]
- -----------------------------
[SEAL]
Dated as of July 15, 1993 FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By: [ILLEGIBLE]
------------------------------------
Name: [ILLEGIBLE]
Title: [ILLEGIBLE]
Attest:
[ILLEGIBLE]
- -----------------------------
[SEAL]
<PAGE>
EXHIBIT A
(Face of Security)
10 3/8% SENIOR NOTE DUE 2003
No._____ $________
JORDAN INDUSTRIES, INC.
promises to pay to _____________________________________________________________
or registered assigns,
the principal sum of _________________________________ Dollars on August 1, 2003
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Dated:
Authenticated:
FIRST TRUST NATIONAL ASSOCIATION, as Trustee JORDAN INDUSTRIES, INC.
By: By:
----------------------- --------------------
Authorized Signature
OR By:
--------------------------
as Authenticating Agent
By:
--------------------
Authorized Signature (SEAL)
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<PAGE>
(Back of Security)
10 3/8% SENIOR NOTE DUE 2003
1. Interest. Jordan Industries, Inc. (the "Company") promises to pay
interest on the principal amount of the Securities at the rate and in the manner
specified below. Interest on the Securities will accrue at 10 3/8% per annum
from the date this Security is issued until maturity and will be payable
semiannually in cash on February 1 and August 1 of each year, or if any such day
is not a Business Day on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Securities will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from July 23,
1993; provided that the first Interest Payment Date shall be February 1, 1994.
The Company shall pay interest on overdue principal and premium, if any, from
time to time on demand at the rate of 2% per annum in excess of the interest
rate then in effect and shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
36O-day year of twelve 3O-day months.
2. Method of Payment. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered holders of
Securities at the close of business on the record date for the next Interest
Payment Date even if such Securities are cancelled after such record date and on
or before such Interest Payment Date. Holders must surrender Securities to a
Paying Agent to collect principal payments on such Securities. The Company will
pay principal, 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.
However, the Company may pay principal, premium, if any, and interest by check
payable in such money, and any such check may be mailed to a Holder's registered
address.
3. Paying Agent and Registrar. First Trust National Association (the
"Trustee") will initially act as the Paying Agent and Registrar. The Company may
appoint additional paying agents or co-registrars, and change the Paying Agent,
any additional paying agent, the Registrar or any co-registrar without prior
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Securities under an Indenture, dated
as of July 15, 1993 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities 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) as in effect on the date of the original issuance of
the Securities (the "Trust Indenture Act"). The Securities are subject to, and
qualified by, all such terms, certain of which are summarized herein, and
Holders are referred to the Indenture and the Trust Indenture Act for a
statement of such terms (all capitalized terms not defined herein shall have the
meanings assigned them in the Indenture). The Securities are unsecured general
obligations of the Company limited to $275,000,000 in aggregate principal
amount.
5. Optional Redemption. (a) Except as described in paragraph 5(b) below,
the Securities may not be redeemed at the option of the Company prior to August
1, 1998. During the twelve (12) month period beginning August 1 of the years
indicated below, the Securities will be redeemable at the option of the Company,
in whole or in part, at the redemption prices (expressed as percentages of the
principal amount) set forth below, plus any accrued and unpaid interest to the
date of redemption:
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<PAGE>
Year Percentage
1998 ..................................... 105.18750%
1999 ..................................... 102.59375%
2000 and thereafter ...................... 100.00000%
6. Mandatory Redemption. Subject to the Company's obligation to make an
offer to purchase Securities under certain circumstances pursuant to Section
4.13 and 4.14 of the Indenture (as described in paragraph 7 below), the Company
is not required to make any mandatory redemption, purchase or sinking fund
payments with respect to the Securities.
7. Mandatory Offers to Purchase Securities. (a) Following the occurrence
of a Change of Control (the "Change of Control Trigger Date"), the Company will
be required to offer (a "Change of Control Offer") to purchase all outstanding
Securities at a purchase price equal to 101% of the principal amount of such
Securities, plus any accrued and unpaid interest to the date of purchase.
(b) If the Company or any Restricted Subsidiary consummates one or more
Asset Sales and does not use all of the Net Proceeds from such Asset Sales as
provided in the Indenture, the Company will be required, under certain
circumstances, to utilize the Excess Proceeds from such Asset Sales to offer (an
"Asset Sale Offer") to purchase Securities at a purchase price equal to 100% of
the principal amount of the Securities, plus any accrued and unpaid interest to
the date of purchase. If the Excess Proceeds are insufficient to purchase all
Securities tendered pursuant to any Asset Sale Offer, the Trustee shall select
the Securities to be purchased in accordance with the terms of the Indenture.
(c) Holders may tender all or, subject to paragraph 8 below, any portion
of their Securities in a Change of Control Offer or Asset Sale Offer
(collectively, an "Offer") by completing the form below entitled "OPTION OF
HOLDER TO ELECT PURCHASE."
(d) The Company will comply with Rule 14e-1 under the Securities Exchange
Act of 1934, as amended, and any other securities laws and regulations to the
extent applicable to any Offer.
8. Notice of Redemption or Purchase. Notice of an optional redemption or
an Offer will be mailed to each Holder at its registered address at least 30
days but not more than 60 days before the date of redemption or purchase.
Securities may be redeemed or purchased in part, but only in whole multiples of
$1000 unless all Securities held by a Holder are to be redeemed or purchased. On
or after any date on which Securities are redeemed or purchased, interest ceases
to accrue on the Securities or portions thereof called for redemption or
accepted for purchase on such date.
9. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples thereof.
The transfer of Securities may be registered and Securities may be exchanged as
provided in the Indenture. Holders seeking to transfer or exchange their
Securities may be required, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Security or portion of a Security selected for redemption or
tendered pursuant to an Offer. Also, it need not exchange or register the
transfer of any Securities for a period of 15 Business Days before a selection
of Securities to be redeemed or between a record date and the next succeeding
Interest Payment Date.
10. Persons Deemed Owners. The registered holder of a Security may be
treated as its owner for all purposes.
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<PAGE>
11. Amendments and Waivers. Subject to certain exceptions, the Indenture
or the Securities may be amended with the consent of the Holders of at least a
majority in principal amount of the then outstanding Securities, and any
existing Default (except a payment Default) may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding
Securities. Without the consent of any Holder, the Indenture or the Securities
may be amended to: cure any ambiguity, defect or inconsistency; provide for
uncertificated Securities in addition to or in place of certificated Securities;
provide for the assumption by another corporation of the Company's obligations
to Holders in the event of a merger or consolidation of the Company in which the
Company is not the surviving corporation or a sale of substantially all of the
Company's assets to such other corporation; comply with the Securities and
Exchange Commission's requirements to effect or maintain the qualification of
the Indenture under the Trust Indenture Act; or, make any change that does not
materially adversely affect any Holder's rights under the Indenture. Certain
provisions of the Indenture cannot be amended without the consent of holders of
Senior Indebtedness.
12. Defaults and Remedies. Events of Default include: default for 30 days
in payment of interest on the Securities; default in payment of principal of or
premium, if any, on the Securities; failure by the Company for 30 days after
notice to it to comply with any of its other agreements or covenants in, or
provisions of, the Indenture or the Securities; certain defaults under and
acceleration prior to maturity, or failure to pay at maturity, of certain other
Indebtedness; certain final judgments that remain undischarged; and, certain
events of bankruptcy or insolvency involving the Company or any Restricted
Subsidiary that is a Significant Subsidiary. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be immediately due and payable
in an amount equal to the principal amount of such Securities, plus any accrued
and unpaid interest; provided, however, that in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, the principal amount
of, and any accrued and unpaid interest on, the Securities becomes due and
payable immediately without further action or notice. Subject to certain
exceptions, Holders of a majority in principal amount of the then outstanding
Securities may direct the Trustee in its exercise of any trust or power,
provided that the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of Holders unless such
Holders have offered to the Trustee security and indemnity satisfactory to it.
Holders may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee may withhold from Holders notice of any continuing
default (except a payment Default) if it determines that withholding notice is
in their interests. The Company must furnish an annual compliance certificate to
the Trustee.
13. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or any Affiliate, and may otherwise deal with the Company or any
Affiliate, as if it were not Trustee.
14. No Recourse Against Others. No director, officer, employee or
stockholder of the Company shall have any liability for any Obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of, such Obligations or the creation of any such
Obligation. Each Holder by accepting a Security waives and releases all such
liability, and such waiver and release is part of the consideration for the
issuance of the Securities.
15. Successor Substituted. Upon the consolidation or merger by the Company
with or into another corporation, or upon the sale, conveyance, lease or other
disposition of all or substantially all of its assets to another corporation, in
accordance with the Indenture, the corporation surviving any such merger or
consolidation (if not the Company) or the corporation to which such assets were
sold or transferred to shall succeed to, and be substituted for, and may
exercise every right and power of the
A - 4
<PAGE>
Company under the Indenture with the same effect as if such surviving or other
corporation had been named as the Company in the Indenture.
16. Governing Law. This Security shall be governed by and construed in
accordance with the internal laws of the State of New York.
17. Authentication. This Security shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. 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 Securities and have directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers printed on the securities.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture, which has in it the text of this Security in
larger type. Request may be made to:
Jordan Industries, Inc.
1751 Lake Cook Road
ArborLake Centre
Suite 550
Deerfield, Illinois 60015
Attention: Secretary
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<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to:
_______________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_________________________________________________
_________________________________________________
_________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
_____________________________ as agent to transfer this Security on the books of
the Company. The agent may substitute another to act for him.
Date: ____________________ Your Signature:
--------------------------------
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:
- ------------------------------
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Security purchased by the Company pursuant to
Section 4.13 of the Indenture, check the box: |___|
If you elect to have this Security purchased by the company pursuant to
Section 4.14 of the Indenture, check the box: |___|
If you elect to have only part of this Security purchased by the Company
pursuant to Section 4.13 or 4.14 of the Indenture, state the amount (multiples
of $1000 only):
$________________
Date: ____________________ Your Signature:
--------------------------------
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:
- ---------------------------------
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<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of July 25, 1997, is
between JORDAN INDUSTRIES, INC., an Illinois corporation (the "Company"), and
FIRST TRUST NATIONAL ASSOCIATION, as trustee (herein called the "Trustee").
PRELIMINARY STATEMENT
The Company and the Trustee have entered into an Indenture (herein
called the "Indenture"), dated as of July 15, 1993 with respect to the
Company's 10 3/8% Senior Notes due 2003. Capitalized terms used herein, not
otherwise defined herein, shall have the meanings given them in the Indenture.
Section 9.02 of the Indenture provides that, under certain
circumstances, a supplemental indenture may be entered into by the Company and
the Trustee with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Securities. In accordance with the
terms of Sections 9.02 and 9.06 of the Indenture, the Company has, by
resolution of the Board of Directors, authorized this First Supplemental
Indenture. The Trustee has determined that this First Supplemental Indenture
is in form satisfactory to it.
The Company has offered to purchase for cash all of the outstanding
Securities from the Holders and, in connection therewith, the Company
solicited consents to proposed amendments to the Indenture, pursuant to the
Offer to Purchase and Consent Solicitation Statement, dated June 21, 1997 (as
the same may be amended, supplemented or otherwise modified from time to time,
the "Offer to Purchase"). This First Supplemental Indenture evidences the
proposed amendments described in the Offer to Purchase.
All things necessary to make this First Supplemental Indenture a
valid agreement of the Company and the Trustee and a valid amendment of and
supplement to the Indenture have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities issued under the Indenture from and after the date of this First
Supplemental Indenture, as follows:
Section 1. Amendment to the Indenture.
1.1 Deletions.
(a) Section 4.05 of the Indenture is hereby deleted in its entirety.
(b) Section 4.07 of the Indenture is hereby deleted in its entirety.
(c) Section 4.08 of the Indenture is hereby deleted in its entirety.
(d) Section 4.09 of the Indenture is hereby deleted in its entirety.
(e) Section 4.11 of the Indenture is hereby deleted in its entirety.
(f) Section 4.17 of the Indenture is hereby deleted in its entirety.
(g) Section 5.01 of the Indenture is hereby deleted in its entirety.
<PAGE>
1.2 Restricted and Non-Restricted Subsidiaries.
(a) The definitions of "Non-Restricted Subsidiary" and
"Restricted Subsidiary" in Section 1.01 of the Indenture are
hereby amended and restated in their entirety to read as
follows:
"Non-Restricted Subsidiary" means Motors and Gears Holdings, Inc. and
its Subsidiaries, Jordan Telecommunication Products, Inc. and its Subsidiaries,
J.I. Properties, Inc., and any other Subsidiary of the Company other than a
Restricted Subsidiary, subject to Section 4.18.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company
existing on the date of the First Supplemental Indenture, other than a
Non-Restricted Subsidiary, and (ii) any other Subsidiary of the Company
formed, acquired or existing after the date of the First Supplemental
Indenture that is designated as a Restricted Subsidiary by the Company
pursuant to a resolution approved by a majority of the Board of Directors,
subject, in each case, to Section 4.18.
(b) The following Section 4.18 is hereby added to the Indenture in
its numerically predetermined place:
Section 4.18 DESIGNATION OF RESTRICTED AND NON-RESTRICTED SUBSIDIARIES.
(a) Subject to the exceptions set forth below, from and after the date of the
First Supplemental Indenture, the Company may designate any existing or newly
formed Restricted Subsidiary as a Non-Restricted Subsidiary; provided that:
(i) either
(A) the Subsidiary to be so designated has total assets of
$1.0 million or less, or
(B) immediately before and after giving effect to such
designation, on a Pro Forma Basis, (1) the Company could
incur $1.00 of additional Indebtedness pursuant to Section
4.07, determined on a Pro Forma Basis, and (2) no Default
or Event of Default shall have occurred and be continuing,
or
(C) the Subsidiary to be so designated is organized under the
laws of a jurisdiction not within the United States and is
sold or transferred to a Non-Restricted Subsidiary in
accordance with Section 4.14, and
(ii) in any case, all transactions between the Subsidiary to be so
designated and its Affiliates remaining in effect are permitted
pursuant to Section 4.08.
(b) Any investment made by the Company or any Restricted Subsidiary which is
redesignated from a Restricted Subsidiary to a Non-Restricted Subsidiary shall
thereafter be considered as having been a Restricted Investment (to the extent
not previously included as a Restricted Payment) made on the day such
Subsidiary is designated as a NonRestricted Subsidiary in the amount of the
greater of:
(i) the fair market value (as determined by the Board of Directors
of the Company in good faith) of the Equity Interests of such
Subsidiary held by the Company and its Restricted Subsidiaries
on such date on a Pro Forma Basis, and
(ii) the amount of the Investments determined in accordance with GAAP
made by the Company and any of its Restricted Subsidiaries in
such Subsidiary.
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(c) Subject to the exceptions set forth below, from and after the date of the
First Supplemental Indenture, the Company may designate any existing or newly
formed Non-Restricted Subsidiary as a Restricted Subsidiary; provided that:
(i) immediately before and after giving effect to such designation,
on a Pro Forma Basis, the Company could incur any Indebtedness
of such Non-Restricted Subsidiary in accordance with Section
4.07, and
(ii) all transactions whereby such Non-Restricted Subsidiary is
designated a Restricted Subsidiary are permitted pursuant to
Section 4.08.
Any investment made by the Company or any Restricted Subsidiary in such
redesignated Non-Restricted Subsidiary will no longer be considered to be an
outstanding Restricted Investment.
(d) The designation of a Subsidiary as a Restricted Subsidiary or the removal
of such designation shall be made by a resolution adopted by a majority of the
Board of Directors of the Company stating that the Board of Directors has made
such designation in accordance with the Indenture, and the Company shall
deliver to the Trustee such resolution together with an Officers' Certificate
certifying that the designation complies with the Indenture. Such designation
shall be effective as of the date specified in the applicable resolution,
which may not be before the date the applicable Officers' Certificate is
delivered to the Trustee.
1.3 Definition of "Asset Sale."
The definition of "Asset Sale" in Section 1.01 of the Indenture is
hereby amended and restated in its entirety to read as follows:
"Asset Sale" means the sale, lease, conveyance or other disposition
by the Company or a Restricted Subsidiary of assets or property (other than
(i) the sale or disposition of any Restricted Investment, (ii) the sale or
lease of inventory, equipment, receivables or other assets in the ordinary
course of business, (iii) Receivables Financings, (iv) any sale or transfer of
properties or assets by the Company or a Restricted Subsidiary to the Company
or any other Restricted Subsidiary, (v) the designation of a Restricted
Subsidiary as a Non-Restricted Subsidiary, pursuant to Section 4.18, (vi) the
sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company permitted by Section 5.01, (vii) the sale or
disposition of obsolete equipment or other obsolete assets, (viii) Restricted
Payments permitted by Section 4.05, or (ix) any sale, lease, conveyance or
other disposition of assets or property in connection with the Refinancing and
Repositioning Plan of the Company and its Subsidiaries referenced in the
Offering Circular, dated July __, 1997, relating to the Company's offering and
placement of the __% Senior Notes due 2007, and all agreements, instruments
and transactions pursuant thereto.
1.4 Conforming Changes.
(a) The definitions of "Capital Lease Obligations," "Cash Flow,"
"Cash Flow Coverage Ratio," "Consolidated Interest Expense,"
"Consolidated Net Income," "Consolidated Net Worth,"
"Consulting Agreement," "Credit Agent," "Credit Agreement,"
"Dura-Line Agreement," "Disqualified Stock," "Net Income,"
"Other Permitted Indebtedness," "Permitted Liens,"
"Refinancing Indebtedness," "Refinancing Plan," "SFAS 106,"
"SFAS 109" and "Weighted Average Life to Maturity" set forth
in Section 1.01 of the Indenture are hereby deleted in their
entirety.
(b) Section 1.02 of the Indenture is hereby amended as follows:
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(i) The terms "Affiliate Transaction," "Other Indebtedness,"
"Other Indebtedness Guarantee" and "Restricted Payments"
are deleted therefrom; and
(ii) The terms "Disposition" and "Successor Corporation" shall
refer to Section 5.02.
(c) The second paragraph of Section 4.03 of the Indenture is
hereby amended by replacing the phrase "Section 4.01, 4.05,
4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15,
4.16, or 4.17 or of Article 5" with the phrase "Section
4.01, 4.06, 4.10, 4.12, 4.13, 4.14, 4.15, or 4.16 or of
Article 5" where such phrase appears in such paragraph.
(g) Section 5.02 of the Indenture is hereby amended and restated
in its entirety to read as follows:
"Upon any consolidation or merger with or into, or sale,
lease, conveyance or other disposition of all or
substantially all of the assets of the Company (a
"Disposition"), the entity formed by or surviving any such
Disposition or the entity to which such Disposition shall
have been made (the "Successor Corporation") shall succeed
to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same
effect as if such Successor Corporation has been named as the
Company herein; provided, however, that neither the Company
nor the Successor Corporation shall be release from it
Obligation to pay the principal of, and premium, if any, and
interest on, the Securities."
(h) Section 6.01(b) of the Indenture is hereby amended by
replacing the first parenthetical therein with the
parenthetical "(other than a Default under Sections 4.13,
4.14, 4.15 and 4.16 and of which shall be an Event of
Default with the notice but without the passage of time
specified in this Section 6.01(b))".
(i) Section 8.01(b) of the Indenture is hereby amended as
follows:
(i) subclause (ii) of the first paragraph of Section
8.01(b) is hereby amended and restated in its entirety
to read as follows:
"(ii) its obligations under the Sections 4.02,
4.03, 4.06, 4.10, 4.13, 4.14, 4.15 and 4.16, and
the operation of Sections 6.01(a)(3) through
(a)(7) ("covenant defeasance option").
(ii) the second sentence of the second paragraph of Section
8.01(b) is hereby amended by deleting therefrom the
phrase "or because of the Company's failure to comply
with Sections 5.01(iii) or 5.01(iv)".
Section 2. Effectiveness; Termination
(a) This First Supplemental Indenture is entered into pursuant to and
consistent with Section 9.02 of the Indenture, and nothing herein shall
constitute an amendment, supplement or waiver requiring the approval of each
Holder pursuant to clauses (1) through (6) of the last paragraph of Section
9.02.
(b) This First Supplemental Indenture shall become effective and
binding on the Company, the Trustee and the Holders of the Securities upon the
execution and delivery by the parties to this First Supplemental Indenture;
provided, however, that the provisions of the Indenture referred to in Section
1 above (such provisions being referred to as the "Amended Provisions") will
remain in effect in the form they existed prior to the execution of this First
Supplemental Indenture, the deletions and amendments of the Amended Provisions
will not become
4
<PAGE>
operative, and the terms of the Indenture will not be amended, modified or
deleted, in each case until the date and time (the "Payment Date") that the
Company accepts for payment pursuant to the Offer to Purchase at least a
majority in principal amount of the outstanding Securities, and deposits the
payment therefore with the depositary for the Offer to Purchase. Upon the
Payment Date, the Amended Provisions will automatically be deleted or modified
as contemplated by Section 1 above.
Section 3. Reference to and Effect on the Indenture.
(a) On and after the Payment Date, each reference in the Indenture to
"the Indenture," "this Indenture," "hereunder," "hereof" or "herein" shall
mean and be a reference to the Indenture as supplemented by this First
Supplemental Indenture unless the context otherwise requires.
(b) Except as specifically amended above, the Indenture shall remain
in full force and effect and is hereby ratified and confirmed.
Section 4. Governing Law.
This First Supplemental Indenture shall be construed and enforced in
accordance with, and interpreted under, the internal laws of the State of New
York, without reference to the conflict of laws provisions thereof.
Section 5. Counterparts and Methods of Execution.
This First Supplemental Indenture may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties, notwithstanding that all parties have not signed the same
counterpart.
Section 6. Titles.
Section titles are for descriptive purposes only and shall not
control or alter the meaning of this First Supplemental Indenture as set forth
in the text.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this
First Supplemental Indenture to be duly executed by their respective officers
thereunto duly authorized all as of the day and year first above written.
JORDAN INDUSTRIES, INC.
By:
--------------------------------
Its: Senior Vice President
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------------
Its:
-------------------------------
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of July, 1997, before me personally came to me known,
who, being by me duly sworn, did depose and say that he resides at New York,
New York; that he is a ________________ of FIRST TRUST NATIONAL ASSOCIATION,
one of the banking corporations described herein and that executed the above
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
-----------------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ______ day of July, 1997, before me personally came , to me
known, who, being by me duly sworn, did depose and say that he resides at New
York, New York; that he is a ________________ of JORDAN INDUSTRIES, INC., the
corporation described herein and that executed the above instrument; and that
he signed his name thereto by order of the Board of Directors of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
-----------------------------------
Notary Public
<PAGE>
Exhibit 10.16
PROPERTIES SERVICES AGREEMENT
-----------------------------
THIS PROPERTIES SERVICES AGREEMENT (this "Agreement") is made and
entered into as of this 25th day of July, 1997, by and among JI Properties,
Inc., a Delaware corporation ("JI Properties"), Jordan Telecommunication
Products, Inc., a Delaware corporation, Jordan Industries, Inc., an Illinois
corporation, and each of its subsidiaries listed on the signature page hereto
(collectively referred to herein as the "Company").
WHEREAS, the Company wishes to obtain the use of certain real estate,
asset and transportation assets owned or leased by JI Properties and to obtain
the related services of JI Properties' personnel or personnel to which JI
Properties has access; and
WHEREAS, JI Properties desires to provide or cause to be provided
those assets and services requested by the Company under such terms and
conditions.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Assets and Services.
1.1 Assets. JI Properties hereby grants to the Company the right
to use the Assets set forth on Exhibit A.
1.2 Services to be Rendered. JI Properties shall make available
the services of its personnel or personnel to which it has access to provide
such services in connection with the use of the Assets as are necessary for the
use and/or operation of such Assets (the "Services").
1.3 Charges. The charges to the Company for the use of Assets and
Services shall consist of an amount equal to the sum of (i) the costs actually
incurred in the use and/or operation of the Assets used or operated by the
Company (including the costs of the related Services as determined by JI
Properties) and (ii) a portion of the costs associated with owning such assets
which are not directly attributable to the operation or use of such assets
equal in amount to such costs multiplied by a fraction, the numerator of which
is equal to the Company's net revenues and the denominator of which is the sum
of the net revenues of all entities which have entered into agreements with JI
Properties similar to this Agreement.
1.4 Performance of Services. JI Properties covenants that it will
perform or cause to be performed the Services in a timely, efficient and
workmanlike manner and in substantially the same manner in which JI Properties
(or its predecessor) is providing such services to the Company currently. JI
Properties further covenants that it will maintain or contract for a sufficient
staff of trained personnel to enable it to perform the Services hereunder. JI
Properties may retain third
<PAGE>
parties or its affiliates to provide certain of the Services hereunder. Any
arrangements between JI Properties and its affiliates for the provision of
Services hereunder shall be commercially reasonable and on terms not less
favorable than those which could be obtained from unaffiliated third parties.
1.5 Payment for Facilities and Services. JI Properties shall bill
the Company, at the end of each calendar month for the applicable charges, or
on such other periodic basis a determined by JI Properties. Such amount shall
be payable by the Company in full within 30 days of receipt thereof by the
Company.
1.6 Reimbursement. The Company shall reimburse JI Properties for
all reasonable third party out-of-pocket expenses it incurs on behalf of the
Company not billed directly to the Company within 30 days of receipt of the
invoice therefor, if not included in the charges pursuant to Section 1.3.
Section 2. Term. The term of this Agreement shall commence the date
hereof and continue until December 31, 2007, unless extended, or sooner
terminated, as provided below. This Agreement shall be automatically renewed
for successive one-year terms starting December 31, 2007 unless either party
hereto, within sixty (60) days prior to the scheduled renewal date, notifies
the other party as to its election to terminate this Agreement.
Notwithstanding the foregoing, this Agreement may be terminated by not less
than ninety (90) days' prior written notice from the Company to the JI
Properties at any time after (a) substantially all of the stock or
substantially all of the assets of the Company or all of its subsidiaries are
sold to an entity unaffiliated with the JI Properties and/or a majority of the
Company stockholders immediately prior to the sale, (b) the Company is merged
or consolidated into another entity unaffiliated with the JI Properties and/or
a majority of the Company's stockholders immediately prior to such merger and
the Company is not the survivor of such transaction or (c) a public offering
of the voting securities of the Company has been consummated. Subject to the
foregoing, the Agreement will not be terminated as a result of any Company
ceasing to be a subsidiary of Jordan Industries, Inc. for financial reporting
or other purposes.
Section 3. Audit of Services. At any time during regular business
hours and as often as reasonably requested by the Company's officers, JI
Properties shall permit the Company or its authorized representatives to
examine and make copies and abstracts from the records and books of JI
Properties for the purpose of auditing the performance of, and the charges of,
JI Properties under the terms of this Agreement; provided, that all costs and
expenses of such inspection shall be borne by the Company.
Section 4. Prevention of Performance. JI Properties shall not be
determined to be in violation of this Agreement if it is prevented from
performing any Services hereunder for any reason beyond its reasonable
control, including without limitation, acts of God, nature, or of public
enemy, strikes, or limitations of law, regulations or rules of the Federal or
of any state or local government or of any agency thereof.
-2-
<PAGE>
Section 5. Indemnification.
5.1 By the Company. The Company shall indemnify, defend and hold
JI Properties, and its directors, officers, and employees harmless from and
against all damages, losses and reasonable out-of-pocket expenses (including
fees) incurred by them in the course of performing the duties on behalf of the
Company and its subsidiaries as prescribed hereby.
5.2 Remedy. JI Properties does not assume any responsibility
under this Agreement other than to render the services called for under this
Agreement in good faith and in a manner reasonably believed to be in the best
interests of the Company. The Company's sole remedy on account of the failure
of JI Properties to provide the Assets render the Services as and when required
hereunder shall be to procure such assets or services elsewhere.
Section 6. Additional Subsidiaries. If at any time after the date
upon which this Agreement is executed, the Company acquires or creates one or
more subsidiary corporations (a "Subsequent Subsidiary"), the Company shall
cause such Subsequent Subsidiary to be subject to this Agreement and all
references herein to the Company's "direct and indirect subsidiaries" shall be
interpreted to include all Subsequent Subsidiaries.
Section 7. Payments Not Subject to Set-off. Any payments paid by the
Company under this Agreement shall not be subject to set-off and shall be
increased by the amount, if any, of any taxes (other than income taxes) or
other governmental charges levied in respect of such payments, so that JI
Properties is made whole for such taxes or charges.
Section 8. Notices.
8.1 Manner of Delivery. Each notice, demand, request, consent,
report, approval or communication (each a "Notice") which is or may be required
to be given by either party to the other party in connection with this
Agreement and the transactions contemplated hereby, shall be in writing, and
given by telecopy, personal delivery, receipted delivery service, or by
certified mail, return receipt requested, prepaid and properly addressed to the
party to be served.
8.2 Addresses. Notices shall be addressed as follows:
If to the Company:
Jordan Telecommunication Products, Inc.
ArborLake Centre
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Attention: Dominic Pileggi
-3-
<PAGE>
If to JI Properties:
JI Properties, Inc.
Arborlake Centre
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Attention: Thomas H. Quinn
8.3 Effective Date. Notices shall be effective on the date sent
via telecopy, the date delivered personally or by receipted delivery service,
or three (3) days after the date mailed.
8.4 Change of Address. Each party may designate by notice to the
others in writing, given in the foregoing manner, a new address to which any
notice may thereafter be so given, served or sent.
Section 9. Independent Contractor. JI Properties and its
personnel shall, for purposes of this Agreement, be independent contractors
with respect to the Company
Section 10. Entire Agreement. This Agreement sets forth the entire
understanding of the Company and JI Properties, and supersedes all prior
agreements, arrangements and communications, whether oral or written, with
respect to the subject matter hereof. No supplement, modification, termination
in whole or in part, or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver by either
party of any breach of any provision of this Agreement shall be deemed a
continuing waiver or a waiver of any preceding or succeeding breach of such
provision or of any other provision herein contained.
Section 11. Assignability; Binding Effect. This Agreement may be
assigned by either party hereto without the consent of the other party,
provided, however, such assignment shall not relieve such party from its
obligations hereunder. Any assignment of this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, each of their respective successors and permitted assigns,
and no other persons shall have or derive any right, benefit or obligation
hereunder.
Section 12. Headings. The headings and titles of the various
paragraphs of this Agreement are inserted merely for the purpose of
convenience, and do not expressly or by implication limit, define, extend or
affect the meaning or interpretation of this Agreement or the specific terms
or text of the paragraph so designated.
Section 13. Governing Law. This Agreement shall be governed by the
internal laws (and not the law of conflicts) of the State of Illinois.
Section 14. Severability. In the event that any provision of this
Agreement shall be held to be void or unenforceable in whole or in part, the
remaining provisions of this Agreement and the
-4-
<PAGE>
remaining portion of any provision held void or unenforceable in part shall
continue in full force and effect.
Section 15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall be considered one and the same instrument.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
JI PROPERTIES, INC.
By: /s/ Thomas C. Spielberger
-------------------------------
Name: Thomas C. Spielberger
Title: Vice President
JORDAN TELECOMMUNICATION PRODUCTS,
INC.
By: /s/ Dominic Pileggi
-------------------------------
Name: Dominic Pileggi
Title: Authorized Officer
TJC MANAGEMENT CORPORATION
By: /s/ G. Robert Fisher
-------------------------------
Name: G. Robert Fisher
Title: Secretary
JORDAN INDUSTRIES, INC.
JII, INC.
JI PROPERTIES, INC.
J.I. FINANCE COMPANY
CAPE CRAFTSMAN, INC.
WELCOME HOME, INC.
HOME AGAIN STORES, INC.
THE IMPERIAL ELECTRIC COMPANY
THE SCOTT MOTORS COMPANY
GEAR RESEARCH, INC.
MOTORS AND GEARS HOLDINGS, INC.
MOTORS AND GEARS, INC.
MOTORS AND GEARS INDUSTRIES, INC.
MERKLE-KORFF INDUSTRIES, INC.
FIR GROUP HOLDINGS, INC.
MOTORS AND GEARS AMSTERDAM B.V.
MOTORS AND GEARS HOLDINGS
AMSTERDAM B.V.
FIR GROUP HOLDINGS ITALIA, S.r.l.
-6-
<PAGE>
CONSTRUGIONI INTALIANE MOTORI
ELETTRICI, S.p.a.
SELIOSISTERNI, S.p.a.
FIR ELECTROMECCANICA, S.p.a.
SPL HOLDINGS, INC.
VALMARK INDUSTRIES, INC.
PAMCO PRINTED TAPE & LABEL CO., INC.
SALES PROMOTION ASSOCIATES, INC.
SEABOARD FOLDING BOX CORPORATION
BEEMAK PLASTICS, INC.
JII/SALES PROMOTION ASSOCIATES, INC.
THE OLD IMPERIAL ELECTRIC COMPANY
THE OLD SCOTT MOTORS COMPANY
OLD GEAR RESEARCH, INC.
DACCO, INCORPORATED
DETROIT TRANSMISSION PRODUCTS CO.
DACCO/DETROIT OF OHIO, INC.
ABC TRANSMISSION PARTS
WAREHOUSE, INC.
DACCO/DETROIT OF MINNESOTA, INC
DACCO/DETROIT OF INDIANA, INC.
DACCO/DETROIT OF
NORTH CAROLINA, INC.
DACCO/DETROIT OF MEMPHIS, INC.
DACCO/DETROIT OF ALABAMA, INC.
DACCO/DETROIT OF MICHIGAN, INC.
DACCO/DETROIT OF TEXAS, INC.
DACCO/DETROIT OF WEST VIRGINIA, INC.
BORG MANUFACTURING
NASHVILLE TRANSMISSION PARTS, INC.
DACCO/DETROIT OF FLORIDA, INC.
DACCO/DETROIT OF COLORADO, INC.
DACCO/DETROIT OF MISSOURI, INC.
DACCO/DETROIT OF ARIZONA, INC.
DACCO/DETROIT OF NEBRASKA, INC.
DACCO/DETROIT OF NEW JERSEY, INC.
DACCO/DETROIT OF OKLAHOMA, INC.
DACCO/DETROIT OF
SOUTH CAROLINA, INC.
DACCO INTERNATIONAL, INC.
PARSONS PRECISION PRODUCTS, INC.
SATE-LITE MANUFACTURING COMPANY
RIVERSIDE BOOK AND BIBLE HOUSE,
-7-
<PAGE>
INCORPORATED
AIM ELECTRONICS CORPORATION
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP, INC.
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP - EUROPE, INC.
VITELEC ELECTRONICS LIMITED
LODAN WEST, INC.
JOHNSON COMPONENTS, INC.
VIEWSONICS, INC.
SHANGHAI VIEWSONICS ELECTRONICS
CO., LTD.
ADAPT COMMUNICATION
SUPPLY CO. S. FL., INC.
NORTHERN TECHNOLOGIES
HOLDINGS, INC.
NORTHERN TECHNOLOGIES, INC.
DURA-LINE CORPORATION
DIVERSIFIED WIRE & CABLE CO.
BOND HOLDINGS, INC.
CAMBRIDGE PRODUCTS CORPORATION
By: /s/ Thomas H. Quinn
-------------------------------
Name: Thomas H. Quinn
Authorized Officer
-8-
<PAGE>
TRANSITION AGREEMENT
--------------------
THIS TRANSITION AGREEMENT (this "Agreement") is made and entered into
as of this 25th day of July, 1997, by and between Jordan Telecommunication
Products, Inc., a Delaware corporation (the "Company"), and Jordan Industries,
Inc., an Illinois corporation ("Parent").
WHEREAS, the Company wishes to occupy certain of the facilities
leased by the Parent and to purchase from Parent certain services designed to
assist the Company in transitioning to a stand-alone company pursuant to terms
and conditions as more specifically described herein;
WHEREAS, Parent desires to provide or cause to be provided those
facilities and services requested by the Company under such terms and
conditions; and
WHEREAS, the Company will retain the sole and absolute right and
authority to fully and completely operate and manage its business and
properties.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Facilities and Services.
1.1 Facilities. Parent hereby grants to the Company the
right to use the Facilities set forth on Exhibit A. The Company acknowledges
and agrees that within 60 days of the expiration of the term of this
Agreement, it shall leave the Facilities in the same condition as at the
commencement of the term of the Agreement, ordinary wear and tear and damage
by casualty excepted.
1.2 Services to be Rendered. Parent shall provide the
Company with the services described below (each, a "Service", and
collectively, the "Services") as selected from time to time by the Company:
(a) Insurance Administration. Assistance in securing all
forms of insurance, including property, casualty, workers'
compensation and trustees' and officers' liability coverage; managing
insurance policies; negotiation of premiums; arranging payment terms;
managing claims; and preparation of loss fund analysis. The amount
and levels of insurance shall be determined in the sole and absolute
discretion of the Company.
(b) Accounting. Provision of all accounting services,
including accounts payable functions; processing of all employee
expense reports and reimbursements of travel and entertainment
expenses; and maintenance of accounts payable, cash disbursement
systems, including reasonable internal controls, internal audit
coverage and audit support, including
<PAGE>
financial audits, operational audits and information system audits,
as requested and authorized in advance by the Company.
(c) Management Information Systems.
(i) Applications Development. Development, maintenance
and continuing evolution of system applications to provide
technology solutions to business needs and problems, as
requested and authorized in advance by the Company.
(ii) Telecommunications. Design, operation and
maintenance of network infrastructure, including telephone
and data transmission lines, voice mail, facsimile machines,
cellular phones, pager, etc.; negotiation of contracts with
third party vendors and suppliers; and local area network and
wide area network communications support.
(iii) Operations/Technical Support and User Support.
Design, maintenance and operation of the computing
environment, including business specific applications,
network wide applications, electronic mail and other systems;
purchase and maintenance of equipment, including hardware and
software; configuration, installation and support of computer
equipment; and education and training of the user community.
(d) Special Projects. Support of all special projects, as
requested and authorized in advance by the Company.
(e) Legal. Coordination and supervision of all third party
legal services; assistance in the preparation of public filings and
registration statements; and oversight of processing of claims
against the Company.
(f) Investor Relations/Communications. Preparation and
coordination of annual and quarterly reports to securityholders;
presentations to public; public relations; preparation of marketing
materials; and investor relations services.
1.3 Allocation of Facilities; Scope of Services; Charges.
The parties agree to cooperate and use reasonable efforts in order to allocate
the Facilities in accordance with the reasonable requests (based on their
business needs) of Parent and the Company. Charges for the use of the
Facilities will be allocated based upon the square footage assigned to the
parties hereunder. The parties will agree from time to time on the Services to
be provided, the scope of Services listed in Section 1.2 and the charges for
such Services. The scope of Services shall consist of the estimated amount of
items to be processed or hours to be spent for a category of the Services in
any year as agreed to by the parties. The charges for Services shall consist
of an amount equal to Parent's costs incurred in providing such Services. If
the scope of Services actually performed by Parent in any category of Services
is different than that agreed to by the parties, or if the scope
-2-
<PAGE>
of Services is increased at the request of the Company, then the parties shall
negotiate in good faith to revise the scope of Services and to adjust the
charges for such Services.
1.4 Performance of Services. Parent covenants that it will
perform or cause to be performed the Services in a timely, efficient and
workmanlike manner and in substantially the same manner in which Parent is
providing such services to the Company currently. Parent further covenants
that it will maintain or contract for a sufficient staff of trained personnel
to enable it to perform the Services hereunder. Parent may retain third
parties or its affiliates to provide certain of the Services hereunder. Any
arrangements between Parent and its affiliates for the provision of Services
hereunder shall be commercially reasonable and on terms not less favorable
than those which could be obtained from unaffiliated third parties.
1.5 Payment for Facilities and Services. Parent shall bill
the Company, at the end of each calendar month for the applicable Facilities
and Services. Such amount shall be payable by the Company in full within 30
days of receipt thereof by the Company.
1.6 Reimbursement. The Company shall reimburse Parent for
all reasonable third party out-of-pocket expenses it incurs on behalf of the
Company not billed directly to the Company within 30 days of receipt of the
invoice therefor, if not included in the charges pursuant to Section 1.3.
Section 2. Term. The initial term of this Agreement shall commence on
the date hereof and shall be through December 31, 1997 (the "Initial Term")
and shall be renewable by the Company every year thereafter, subject to
approval by a majority of the Independent Directors (which they may withhold
or grant in their sole discretion). Absent written notice of non-renewal as
provided in this Section 2, this Agreement shall be automatically renewed for
successive one-year terms (each, a "Renewal Term") upon the expiration of the
Initial Term and each Renewal Term. Notice of non-renewal, if given, shall be
given in writing by either party hereto not less than ninety (90) calendar
days before the expiration of the Initial Term or any Renewal Term. Upon
termination of this Agreement, Parent shall promptly return to the Company all
monies, books, records and other materials held by it for or on behalf of the
Company. As used herein, the term "Independent Director" means each member of
the Company's Board of Trustees who is not affiliated with Parent or any of
its affiliates, directly or indirectly, whether by ownership of, ownership
interest in, employment by, any material business or professional relationship
with, or service as an officer of Parent or any of its affiliates, and is not
serving as a trustee or director for more than three real estate investment
trusts organized by a sponsor of the Company.
Section 3. Audit of Services. At any time during regular business
hours and as often as reasonably requested by the Company's officers, Parent
shall permit the Company or its authorized representatives to examine and make
copies and abstracts from the records and books of Parent for the purpose of
auditing the performance of, and the charges of, Parent under the terms of
this Agreement; provided, that all costs and expenses of such inspection shall
be borne by the Company.
-3-
<PAGE>
Section 4. Prevention of Performance. Parent shall not be determined
to be in violation of this Agreement if it is prevented from performing any
Services hereunder for any reason beyond its reasonable control, including
without limitation, acts of God, nature, or of public enemy, strikes, or
limitations of law, regulations or rules of the Federal or of any state or
local government or of any agency thereof.
Section 5. Indemnification.
5.1 By the Company. The Company shall indemnify, defend and
hold Parent, and its directors, officers, and employees harmless from and
against all damages, losses and reasonable out-of-pocket expenses (including
fees) incurred by them in the course of performing the duties on behalf of the
Company and its subsidiaries as prescribed hereby.
5.2 Remedy. Parent does not assume any responsibility under
this Agreement other than to render the services called for under this
Agreement in good faith and in a manner reasonably believed to be in the best
interests of the Company. The Company's sole remedy on account of the failure
of Parent to render the services as and when required hereunder shall be to
procure services elsewhere and to charge Parent the difference between the
reasonable increased cost, if any, to procure new services, and the current
cost to the Company to procure services under this Agreement.
Section 6. Notices.
6.1 Manner of Delivery. Each notice, demand, request,
consent, report, approval or communication (each a "Notice") which is or may
be required to be given by either party to the other party in connection with
this Agreement and the transactions contemplated hereby, shall be in writing,
and given by telecopy, personal delivery, receipted delivery service, or by
certified mail, return receipt requested, prepaid and properly addressed to
the party to be served.
6.2 Addresses. Notices shall be addressed as follows:
If to the Company:
Jordan Telecommunication Products, Inc.
ArborLake Centre
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Attention: Dominic Pileggi
If to Parent:
Jordan Industries, Inc.
ArborLake Centre
1751 Lake Cook Road, Suite 550
-4-
<PAGE>
Deerfield, Illinois 60015
Attention: Thomas H. Quinn
6.3 Effective Date. Notices shall be effective on the date
sent via telecopy, the date delivered personally or by receipted delivery
service, or three (3) days after the date mailed.
6.4 Change of Address. Each party may designate by notice to
the others in writing, given in the foregoing manner, a new address to which
any notice may thereafter be so given, served or sent.
Section 7. Independent Contractor. The Parent and its personnel shall,
for purposes of this Agreement, be independent contractors with respect to the
Company
Section 8. Entire Agreement. This Agreement sets forth the entire
understanding of the Company and Parent, and supersedes all prior agreements,
arrangements and communications, whether oral or written, with respect to the
subject matter hereof. No supplement, modification, termination in whole or in
part, or waiver of this Agreement shall be binding unless executed in writing
by the party to be bound thereby. No waiver by either party of any breach of
any provision of this Agreement shall be deemed a continuing waiver or a
waiver of any preceding or succeeding breach of such provision or of any other
provision herein contained.
Section 9. Assignability; Binding Effect. This Agreement may be
assigned by either party hereto without the consent of the other party,
provided, however, such assignment shall not relieve such party from its
obligations hereunder. Any assignment of this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, each of their respective successors and permitted assigns,
and no other persons shall have or derive any right, benefit or obligation
hereunder.
Section 10. Headings. The headings and titles of the various
paragraphs of this Agreement are inserted merely for the purpose of
convenience, and do not expressly or by implication limit, define, extend or
affect the meaning or interpretation of this Agreement or the specific terms
or text of the paragraph so designated.
Section 11. Governing Law. This Agreement shall be governed by the
internal laws (and not the law of conflicts) of the State of Illinois.
Section 12. Severability. In the event that any provision of this
Agreement shall be held to be void or unenforceable in whole or in part, the
remaining provisions of this Agreement and the remaining portion of any
provision held void or unenforceable in part shall continue in full force and
effect.
-5-
<PAGE>
Section 13. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall be considered one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
JORDAN TELECOMMUNICATION PRODUCTS, INC.
By: /s/ Dominic Pileggi
-----------------------------------
Name: Dominic Pileggi
Title: Authorized Officer
JORDAN INDUSTRIES, INC.
By: /s/ Gordon L. Nelson
-----------------------------------
Name: Gordon L. Nelson
Title: Senior Vice President
-7-
<PAGE>
EXHIBIT A
DESCRIPTION OF FACILITIES
For purposes of the Transition Agreement, Facilities shall mean the
facilities maintained by Parent or one of its affiliates at the following
addresses:
ArborLake Centre
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Facilities shall also include any other premises owned, leased or
subleased by Parent at which the Company desires to utilize such premises as
well as the utilities, fixtures, furniture and equipment used in connection
with the operation of such premises.
<PAGE>
TRANSITION AGREEMENT
THIS TRANSITION AGREEMENT (this "Agreement") is made and entered into
as of this 25th day of July, 1997, by and between Motors and Gears Holdings,
Inc., a Delaware corporation (the "Company"), and Jordan Industries, Inc., an
Illinois corporation ("Parent").
WHEREAS, the Company wishes to occupy certain of the facilities
leased by the Parent and to purchase from Parent certain services designed to
assist the Company in transitioning to a stand-alone company pursuant to terms
and conditions as more specifically described herein;
WHEREAS, Parent desires to provide or cause to be provided those
facilities and services requested by the Company under such terms and
conditions; and
WHEREAS, the Company will retain the sole and absolute right and
authority to fully and completely operate and manage its business and
properties.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Facilities and Services.
1.1 Facilities. Parent hereby grants to the Company the
right to use the Facilities set forth on Exhibit A. The Company acknowledges
and agrees that within 60 days of the expiration of the term of this
Agreement, it shall leave the Facilities in the same condition as at the
commencement of the term of the Agreement, ordinary wear and tear and damage
by casualty excepted.
1.2 Services to be Rendered. Parent shall provide the
Company with the services described below (each, a "Service", and
collectively, the "Services") as selected from time to time by the Company:
(a) Insurance Administration. Assistance in securing all
forms of insurance, including property, casualty, workers'
compensation and trustees' and officers' liability coverage; managing
insurance policies; negotiation of premiums; arranging payment terms;
managing claims; and preparation of loss fund analysis. The amount
and levels of insurance shall be determined in the sole and absolute
discretion of the Company.
(b) Accounting. Provision of all accounting services,
including accounts payable functions; processing of all employee
expense reports and reimbursements of travel and entertainment
expenses; and maintenance of accounts payable, cash disbursement
systems, including reasonable internal controls, internal audit
coverage and audit support, including
<PAGE>
financial audits, operational audits and information system audits,
as requested and authorized in advance by the Company.
(c) Management Information Systems.
(i) Applications Development. Development, maintenance
and continuing evolution of system applications to provide
technology solutions to business needs and problems, as
requested and authorized in advance by the Company.
(ii) Telecommunications. Design, operation and
maintenance of network infrastructure, including telephone
and data transmission lines, voice mail, facsimile machines,
cellular phones, pager, etc.; negotiation of contracts with
third party vendors and suppliers; and local area network and
wide area network communications support.
(iii) Operations/Technical Support and User Support.
Design, maintenance and operation of the computing
environment, including business specific applications,
network wide applications, electronic mail and other systems;
purchase and maintenance of equipment, including hardware and
software; configuration, installation and support of computer
equipment; and education and training of the user community.
(d) Special Projects. Support of all special projects, as
requested and authorized in advance by the Company.
(e) Legal. Coordination and supervision of all third party
legal services; assistance in the preparation of public filings and
registration statements; and oversight of processing of claims
against the Company.
(f) Investor Relations/Communications. Preparation and
coordination of annual and quarterly reports to securityholders;
presentations to public; public relations; preparation of marketing
materials; and investor relations services.
1.3 Allocation of Facilities; Scope of Services; Charges.
The parties agree to cooperate and use reasonable efforts in order to allocate
the Facilities in accordance with the reasonable requests (based on their
business needs) of Parent and the Company. Charges for the use of the
Facilities will be allocated based upon the square footage assigned to the
parties hereunder. The parties will agree from time to time on the Services to
be provided, the scope of Services listed in Section 1.2 and the charges for
such Services. The scope of Services shall consist of the estimated amount of
items to be processed or hours to be spent for a category of the Services in
any year as agreed to by the parties. The charges for Services shall consist
of an amount equal to Parent's costs incurred in providing such Services. If
the scope of Services actually performed by Parent in any category of Services
is different than that agreed to by the parties, or if the scope
-2-
<PAGE>
of Services is increased at the request of the Company, then the parties shall
negotiate in good faith to revise the scope of Services and to adjust the
charges for such Services.
1.4 Performance of Services. Parent covenants that it will
perform or cause to be performed the Services in a timely, efficient and
workmanlike manner and in substantially the same manner in which Parent is
providing such services to the Company currently. Parent further covenants
that it will maintain or contract for a sufficient staff of trained personnel
to enable it to perform the Services hereunder. Parent may retain third
parties or its affiliates to provide certain of the Services hereunder. Any
arrangements between Parent and its affiliates for the provision of Services
hereunder shall be commercially reasonable and on terms not less favorable
than those which could be obtained from unaffiliated third parties.
1.5 Payment for Facilities and Services. Parent shall bill
the Company, at the end of each calendar month for the applicable Facilities
and Services. Such amount shall be payable by the Company in full within 30
days of receipt thereof by the Company.
1.6 Reimbursement. The Company shall reimburse Parent for
all reasonable third party out-of-pocket expenses it incurs on behalf of the
Company not billed directly to the Company within 30 days of receipt of the
invoice therefor, if not included in the charges pursuant to Section 1.3.
Section 2. Term. The initial term of this Agreement shall commence on
the date hereof and shall be through December 31, 1997 (the "Initial Term")
and shall be renewable by the Company every year thereafter, subject to
approval by a majority of the Independent Directors (which they may withhold
or grant in their sole discretion). Absent written notice of non-renewal as
provided in this Section 2, this Agreement shall be automatically renewed for
successive one-year terms (each, a "Renewal Term") upon the expiration of the
Initial Term and each Renewal Term. Notice of non-renewal, if given, shall be
given in writing by either party hereto not less than ninety (90) calendar
days before the expiration of the Initial Term or any Renewal Term. Upon
termination of this Agreement, Parent shall promptly return to the Company all
monies, books, records and other materials held by it for or on behalf of the
Company. As used herein, the term "Independent Director" means each member of
the Company's Board of Trustees who is not affiliated with Parent or any of
its affiliates, directly or indirectly, whether by ownership of, ownership
interest in, employment by, any material business or professional relationship
with, or service as an officer of Parent or any of its affiliates, and is not
serving as a trustee or director for more than three real estate investment
trusts organized by a sponsor of the Company.
Section 3. Audit of Services. At any time during regular business
hours and as often as reasonably requested by the Company's officers, Parent
shall permit the Company or its authorized representatives to examine and make
copies and abstracts from the records and books of Parent for the purpose of
auditing the performance of, and the charges of, Parent under the terms of
this Agreement; provided, that all costs and expenses of such inspection shall
be borne by the Company.
-3-
<PAGE>
Section 4. Prevention of Performance. Parent shall not be determined
to be in violation of this Agreement if it is prevented from performing any
Services hereunder for any reason beyond its reasonable control, including
without limitation, acts of God, nature, or of public enemy, strikes, or
limitations of law, regulations or rules of the Federal or of any state or
local government or of any agency thereof.
Section 5. Indemnification.
5.1 By the Company. The Company shall indemnify, defend and
hold Parent, and its directors, officers, and employees harmless from and
against all damages, losses and reasonable out-of-pocket expenses (including
fees) incurred by them in the course of performing the duties on behalf of the
Company and its subsidiaries as prescribed hereby.
5.2 Remedy. Parent does not assume any responsibility under
this Agreement other than to render the services called for under this
Agreement in good faith and in a manner reasonably believed to be in the best
interests of the Company. The Company's sole remedy on account of the failure
of Parent to render the services as and when required hereunder shall be to
procure services elsewhere and to charge Parent the difference between the
reasonable increased cost, if any, to procure new services, and the current
cost to the Company to procure services under this Agreement.
Section 6. Notices.
6.1 Manner of Delivery. Each notice, demand, request,
consent, report, approval or communication (each a "Notice") which is or may
be required to be given by either party to the other party in connection with
this Agreement and the transactions contemplated hereby, shall be in writing,
and given by telecopy, personal delivery, receipted delivery service, or by
certified mail, return receipt requested, prepaid and properly addressed to
the party to be served.
6.2 Addresses. Notices shall be addressed as follows:
If to the Company:
Motors and Gears Holdings, Inc.
Arborlake Center
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Attention: Dominic Pileggi
If to Parent:
Jordan Industries, Inc.
Arborlake Center
1751 Lake Cook Road, Suite 550
-4-
<PAGE>
Deerfield, Illinois 60015
Attention: Thomas H. Quinn
6.3 Effective Date. Notices shall be effective on the date
sent via telecopy, the date delivered personally or by receipted delivery
service, or three (3) days after the date mailed.
6.4 Change of Address. Each party may designate by notice to
the others in writing, given in the foregoing manner, a new address to which
any notice may thereafter be so given, served or sent.
Section 7. Independent Contractor. The Parent and its personnel shall,
for purposes of this Agreement, be independent contractors with respect to the
Company
Section 8. Entire Agreement. This Agreement sets forth the entire
understanding of the Company and Parent, and supersedes all prior agreements,
arrangements and communications, whether oral or written, with respect to the
subject matter hereof. No supplement, modification, termination in whole or in
part, or waiver of this Agreement shall be binding unless executed in writing
by the party to be bound thereby. No waiver by either party of any breach of
any provision of this Agreement shall be deemed a continuing waiver or a waiver
of any preceding or succeeding breach of such provision or of any other
provision herein contained.
Section 9. Assignability; Binding Effect. This Agreement may be
assigned by either party hereto without the consent of the other party,
provided, however, such assignment shall not relieve such party from its
obligations hereunder. Any assignment of this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, each of their respective successors and permitted assigns,
and no other persons shall have or derive any right, benefit or obligation
hereunder.
Section 10. Headings. The headings and titles of the various
paragraphs of this Agreement are inserted merely for the purpose of
convenience, and do not expressly or by implication limit, define, extend or
affect the meaning or interpretation of this Agreement or the specific terms
or text of the paragraph so designated.
Section 11. Governing Law. This Agreement shall be governed by the
internal laws (and not the law of conflicts) of the State of Illinois.
Section 12. Severability. In the event that any provision of this
Agreement shall be held to be void or unenforceable in whole or in part, the
remaining provisions of this Agreement and the remaining portion of any
provision held void or unenforceable in part shall continue in full force and
effect.
-5-
<PAGE>
Section 13. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall be considered one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MOTORS AND GEARS HOLDINGS, INC.
By:
--------------------------------
Name: Thomas H. Quinn
Title: Authorized Officer
JORDAN INDUSTRIES, INC.
By:
--------------------------------
Name: Gordon L. Nelson, Jr.
Title: Senior Vice President
-7-
<PAGE>
EXHIBIT A
DESCRIPTION OF FACILITIES
For purposes of the Transition Agreement, Facilities shall mean the
facilities maintained by Parent or one of its affiliates at the following
addresses:
Arborlake Center
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Facilities shall also include any other premises owned, leased or
subleased by Parent at which the Company desires to utilize such premises as
well as the utilities, fixtures, furniture and equipment used in connection
with the operation of such premises.
<PAGE>
NEW SUBSIDIARY ADVISORY AGREEMENT
THIS NEW SUBSIDIARY ADVISORY AGREEMENT ("Agreement"), is executed as
of the 25th day of July 1997 by and among JORDAN INDUSTRIES, INC., an Illinois
corporation, JII, Inc., a Delaware corporation (hereinafter referred to as the
"Consultant"), and each of the other parties a signatory hereto (hereinafter
collectively referred to as the "Company").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Consultant has and/or has access to personnel who are
highly skilled in the field of rendering advice to businesses and financial
advice to the Company;
WHEREAS, the Board of Directors of the Company has been made fully
aware of the relationships of certain members of the Company's Board of
Directors to the Consultant;
WHEREAS, the Company's Board of Directors has reviewed in detail and
discussed the terms and provisions of this Agreement and the fairness of this
Agreement and whether more favorable agreements for the Company could be
obtained from unaffiliated third parties; and
WHEREAS, on the basis of its review of this Agreement, the Board of
Directors of the Company deemed it advisable and in the best interests of the
Company and necessary to the conduct, promotion, and attainment of the
business objectives of the Company that the Company retain Consultant to
provide business and financial advice to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto do hereby agree
as follows:
1. The Company hereby retains the Consultant, through the
Consultant's own personnel or through personnel available to the Consultant,
to render consulting services from time to time to the Company and its direct
and indirect subsidiaries (whether now existing or hereafter acquired) in
connection with their acquisitions, divestitures and investments, their
financial affairs, their relationships with their lenders, stockholders and
other third-party associates or affiliates, and the expansion of their
businesses. Consultant shall render such services to the Company and/or its
direct and indirect subsidiaries in good faith and in accordance with
professional standards and applicable law. The term of this Agreement shall
commence the date hereof and continue until December 31, 2007, unless
extended, or sooner terminated, as provided in Section 5 below. The
Consultant's personnel shall be reasonably available to the Company's
managers, auditors and other personnel for consultation and advice pursuant to
this Agreement, subject to Consultant's reasonable convenience and scheduling.
Services may be rendered at the Consultant's offices or at such
<PAGE>
other locations selected by the Consultant as the Company and the Consultant
shall from time to time agree.
2. Subject to Section 4 hereof, the Company shall pay to the
Consultant (i) an investment banking and sponsorship fee of up to two percent
(2%) of the aggregate consideration paid (including non-competition, earnout,
contingent purchase price, incentive arrangements and similar payments) (A) by
the Company and/or its subsidiaries in connection with the acquisition by the
Company and/or its subsidiaries of all or substantially all of the outstanding
capital stock, warrants, options or other rights to acquire or sell capital
stock, or all or substantially all of the business or assets of another
individual, corporation, partnership or other business entity, (B) by the
Company and/or its subsidiaries in connection with any joint venture or other
minority investment, or (C) to the Company in connection with the sale by the
Company of all or substantially all of the Company's and/or its subsidiaries'
outstanding capital stock, warrants, options, or other rights to acquire or
sell stock, or all or substantially all of the business or assets of the
Company and/or its subsidiaries (each of the transactions described in clauses
(A), (B) and (C), a "Transaction"), including, but not limited to, any
Transaction negotiated for the Company involving any affiliate of the Company
or the Consultant, including, but not limited to, any Transaction involving,
TJC Management Corporation, The Jordan Company, MCIT PLC, Jordan/Zalaznick
Capital Company, Leucadia National Corporation or any affiliates of any of the
foregoing (collectively, the "Jordan Affiliates"); and (ii) a financial
consulting fee of up to one percent (1%) of the amount obtained or made
available pursuant to any debt, equity or other financing (including without
limitation, any refinancing) by the Company and/or its subsidiaries with the
assistance of Consultant, including, but not limited to, any financing
obtained for the Company and/or its subsidiaries from one or more of the
Jordan Affiliates. However, the amount of such fees payable in each such
Transaction will be no less favorable to the Company than those that could be
obtained from comparable, unaffiliated third parties, and will be subject to
separate discussion and approval, in connection with each such Transaction, by
each of a majority of the Board of Directors and a majority of the directors
who are disinterested directors in relation to Consultant and its affiliates.
Notwithstanding and in addition to the foregoing, if the Consultant renders
services to the Company outside the ordinary course of business, the Company
shall pay an additional amount equal to the value of such extraordinary
services rendered by the Consultant as may be separately agreed to between the
Consultant and the Company.
3. The Company shall promptly reimburse Consultant for out-of-pocket
expenses (including, without limitation, an allocable amount of the
Consultant's overhead expenses attributable to the Company and its direct and
indirect subsidiaries, determined on actual usage, percentage revenue or such
other basis as Consultant may determine) incurred by the Consultant and its
personnel in performing services hereunder to the Company and its direct and
indirect subsidiaries upon the Consultant rendering a statement therefor,
together with such supporting data as the Company shall reasonably require.
-2-
<PAGE>
4. Notwithstanding the foregoing, the Company shall not be required
to pay the fees under Section 2, (a) if and to the extent expressly prohibited
by the provisions of any credit, stock, financing or other agreements or
instruments binding upon the Company, its subsidiaries or properties, (b) if
the Company has not paid cash interest on any interest payment date or has
postponed or not made any principal payments with respect to any of their
indebtedness on any scheduled payment dates, or (c) if the Company has not
paid cash dividends on any dividend payment date as set forth in its
certificate of incorporation or as declared by its Board of Directors, or has
postponed or not made any redemptions on any redemption date as set forth in
its certificate of incorporation or any certificate of designation with
respect to its preferred stock, if any. Any payments otherwise owed hereunder,
which are not made for any of the above-mentioned reasons, shall not be
canceled but rather accrue, and shall be payable by the Company promptly when,
and to the extent, that the Company is no longer prohibited from making such
payments and when the Company has become current with respect to such
principal or interest payments, has become current with respect to such
dividends and has made such redemptions with respect to such preferred stock,
if any. Any payment required hereunder which is not paid when due shall bear
interest at the rate of ten percent (10%) per annum. This Section 4 will not,
in any event, restrict or limit the Company's obligations under Sections 3, 8
and 9, which will be absolute and not subject to set-off.
5. This Agreement shall be automatically renewed for successive
one-year terms starting December 31, 2007 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from the Company to the Consultant at any time after (a)
substantially all of the stock or substantially all of the assets of the
Company or all of its subsidiaries are sold to an entity unaffiliated with the
Consultant and/or a majority of the Company stockholders immediately prior to
the sale, or (b) the Company is merged or consolidated into another entity
unaffiliated with the Consultant and/or a majority of the Company's
stockholders immediately prior to such merger and the Company is not the
survivor of such transaction. Subject to the foregoing, the Agreement will not
be terminated as a result of any Company ceasing to be a subsidiary of Jordan
Industries, Inc. for financial reporting or other purposes.
6. The Consultant shall have no liability to the Company on account
of (a) any advice which it renders to the Company or any of its direct or
indirect subsidiaries, provided the Consultant believed in good faith that
such advice was useful or beneficial to the Company or any of its direct or
indirect subsidiaries at the time it was rendered, or (b) the Consultant's
inability to obtain financing or achieve other results desired by the Company
(or any of its direct or indirect subsidiaries) or Consultant's failure to
render services to the Company at any particular time or from time to time, or
(c) the failure of any Transaction to meet the financial, operating, or other
expectations of the Company or any of direct or indirect subsidiaries. The
Company's and any of its direct or indirect subsidiaries' sole remedy for any
claim under this Agreement shall be termination of this Agreement.
-3-
<PAGE>
7. Notwithstanding anything contained in this Agreement to the
contrary, the Company agrees and acknowledges for itself and on behalf of its
direct and indirect subsidiaries that the Consultant, the Jordan Affiliates
and their shareholders, employees, directors and affiliates intend to engage
and participate in acquisitions and business transactions outside of the scope
of the relationship created by this Agreement and neither the Consultant, any
of the Jordan Affiliates nor any of their respective shareholders, partners,
employees, directors or agents shall be under any obligation whatsoever to
make such acquisitions or business transactions through the Company or any of
its direct or indirect subsidiaries or offer such acquisitions or business
transactions to the Company or any of its direct or indirect subsidiaries.
8. The Company will, and will cause each of its direct and indirect
subsidiaries to, indemnify and hold harmless to the fullest extent permitted
by applicable law the Consultant, its affiliates and associates, each of the
Jordan Affiliates, and each of the respective owners, partners, officers,
directors, employees and agents of each of the foregoing, from and against any
loss, liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company
and its subsidiaries.
9. Any payments paid by the Company under this Agreement shall not be
subject to set-off and shall be increased by the amount, if any, of any taxes
(other than income taxes) or other governmental charges levied in respect of
such payments, so that the Consultant is made whole for such taxes or charges.
10. (a) This Agreement may not be modified, waived, terminated or
amended except expressly by an instrument in writing signed by the Consultant
and the Company.
(b) This Agreement may be assigned by Consultant to any of its
subsidiaries or affiliates without the consent of the Company, provided,
however, such assignment shall not relieve such party from its obligations
hereunder. Any assignment of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns.
(c) In the event that any provision of this Agreement shall be
held to be void or unenforceable in whole or in part, the remaining provisions
of this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereinafter specify by written notice to the other party.
-4-
<PAGE>
(e) If at any time after the date upon which this Agreement is
executed, the Company acquires or creates one or more subsidiary corporations
(a "Subsequent Subsidiary"), the Company shall cause such Subsequent Subsidiary
to be subject to this Agreement and all references herein to the Company's
"direct and indirect subsidiaries" shall be interpreted to include all
Subsequent Subsidiaries.
(f) Each subsidiary of the Company shall be jointly and severally
liable and obligated hereunder with respect to each obligation, responsibility
and liability of the Company, as if a direct obligation of such subsidiary.
(g) No waiver by either party of any breach of any provision of
this Agreement shall be deemed a continuing waiver or a waiver of any preceding
or succeeding breach of such provision or of any other provision herein
contained.
(h) Except as provided by that certain Termination Agreement, of
even date herewith, by and among certain of the parties hereto, this Agreement
sets forth the entire understanding of the Company and the Consultant, and
supersedes all prior agreements, arrangements and communications, whether oral
or written, with respect to the subject matter hereof.
(i) The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
(j) This Agreement shall be governed by the internal laws (and not
the law of conflicts) of the State of Illinois.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
JORDAN INDUSTRIES, INC.
By:
---------------------------------
Name: Gordon L. Nelson, Jr.
Senior Vice President
TJC MANAGEMENT CORPORATION
By:
---------------------------------
Name: G. Robert Fisher
Secretary
JII, INC.
JI PROPERTIES, INC.
J.I. FINANCE COMPANY
CAPE CRAFTSMAN, INC.
WELCOME HOME, INC.
HOME AGAIN STORES, INC.
SPL HOLDINGS, INC.
VALMARK INDUSTRIES, INC.
PAMCO PRINTED TAPE & LABEL CO., INC.
SALES PROMOTION ASSOCIATES, INC.
SEABOARD FOLDING BOX CORPORATION
BEEMAK PLASTICS, INC.
JII/SALES PROMOTION ASSOCIATES, INC.
THE OLD IMPERIAL ELECTRIC COMPANY
THE OLD SCOTT MOTORS COMPANY
OLD GEAR RESEARCH, INC.
DACCO, INCORPORATED
DETROIT TRANSMISSION PRODUCTS CO.
DACCO/DETROIT OF OHIO, INC.
ABC TRANSMISSION PARTS
WAREHOUSE, INC.
DACCO/DETROIT OF MINNESOTA, INC
DACCO/DETROIT OF INDIANA, INC.
DACCO/DETROIT OF
NORTH CAROLINA, INC.
DACCO/DETROIT OF MEMPHIS, INC.
DACCO/DETROIT OF ALABAMA, INC.
DACCO/DETROIT OF MICHIGAN, INC.
DACCO/DETROIT OF TEXAS, INC.
DACCO/DETROIT OF WEST VIRGINIA, INC.
BORG MANUFACTURING
-6-
<PAGE>
NASHVILLE TRANSMISSION PARTS, INC.
DACCO/DETROIT OF FLORIDA, INC.
DACCO/DETROIT OF COLORADO, INC.
DACCO/DETROIT OF MISSOURI, INC.
DACCO/DETROIT OF ARIZONA, INC.
DACCO/DETROIT OF NEBRASKA, INC.
DACCO/DETROIT OF NEW JERSEY, INC.
DACCO/DETROIT OF OKLAHOMA, INC.
DACCO/DETROIT OF
SOUTH CAROLINA, INC.
DACCO INTERNATIONAL, INC.
PARSONS PRECISION PRODUCTS, INC.
SATE-LITE MANUFACTURING COMPANY
RIVERSIDE BOOK AND BIBLE HOUSE,
INCORPORATED
By:
---------------------------------
Name: Thomas H. Quinn
Authorized Officer
-7-
<PAGE>
NEW SUBSIDIARY ADVISORY AGREEMENT
THIS NEW SUBSIDIARY ADVISORY AGREEMENT ("Agreement"), is executed as
of the 25th day of July 1997 by and among JORDAN INDUSTRIES, INC., an Illinois
corporation (hereinafter referred to as the "Consultant"), and JORDAN
TELECOMMUNICATION PRODUCTS, INC., a Delaware corporation and each of the other
parties a signatory hereto (hereinafter collectively referred to as the
"Company").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Consultant has and/or has access to personnel who are
highly skilled in the field of rendering advice to businesses and financial
advice to the Company;
WHEREAS, the Board of Directors of the Company has been made fully
aware of the relationships of certain members of the Company's Board of
Directors to the Consultant;
WHEREAS, the Company's Board of Directors has reviewed in detail and
discussed the terms and provisions of this Agreement and the fairness of this
Agreement and whether more favorable agreements for the Company could be
obtained from unaffiliated third parties; and
WHEREAS, on the basis of its review of this Agreement, the Board of
Directors of the Company deemed it advisable and in the best interests of the
Company and necessary to the conduct, promotion, and attainment of the
business objectives of the Company that the Company retain Consultant to
provide business and financial advice to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto do hereby agree
as follows:
1. The Company hereby retains the Consultant, through the
Consultant's own personnel or through personnel available to the Consultant,
to render consulting services from time to time to the Company and its direct
and indirect subsidiaries (whether now existing or hereafter acquired) in
connection with their acquisitions, divestitures and investments, their
financial affairs, their relationships with their lenders, stockholders and
other third-party associates or affiliates, and the expansion of their
businesses. Consultant shall render such services to the Company and/or its
direct and indirect subsidiaries in good faith and in accordance with
professional standards and applicable law. The term of this Agreement shall
commence the date hereof and continue until December 31, 2007, unless
extended, or sooner terminated, as provided in Section 5 below. The
Consultant's personnel shall be reasonably available to the Company's
managers, auditors and other personnel for consultation and advice pursuant to
this Agreement, subject to Consultant's reasonable convenience and scheduling.
Services may be rendered at the Consultant's offices or at such
<PAGE>
other locations selected by the Consultant as the Company and the Consultant
shall from time to time agree.
2. (a) Subject to Section 4 hereof, the Company shall pay to the
Consultant (i) an investment banking and sponsorship fee of up to two percent
(2%) of the aggregate consideration paid (including non-competition, earnout,
contingent purchase price, incentive arrangements and similar payments) (A) by
the Company and/or its subsidiaries in connection with the acquisition by the
Company and/or its subsidiaries of all or substantially all of the outstanding
capital stock, warrants, options or other rights to acquire or sell capital
stock, or all or substantially all of the business or assets of another
individual, corporation, partnership or other business entity, (B) by the
Company and/or its subsidiaries in connection with any joint venture or other
minority investment, or (C) to the Company in connection with the sale by the
Company of all or substantially all of the Company's and/or its subsidiaries'
outstanding capital stock, warrants, options, or other rights to acquire or
sell stock, or all or substantially all of the business or assets of the
Company and/or its subsidiaries (each of the transactions described in clauses
(A), (B) and (C), a "Transaction"), including, but not limited to, any
Transaction negotiated for the Company involving any affiliate of the Company
or the Consultant, including, but not limited to, any Transaction involving,
TJC Management Corporation, The Jordan Company, MCIT PLC, Jordan/Zalaznick
Capital Company, Leucadia National Corporation or any affiliates of any of the
foregoing (collectively, the "Jordan Affiliates"); and (ii) a financial
consulting fee of up to one percent (1%) of the amount obtained or made
available pursuant to any debt, equity or other financing (including without
limitation, any refinancing) by the Company and/or its subsidiaries with the
assistance of Consultant, including, but not limited to, any financing obtained
for the Company and/or its subsidiaries from one or more of the Jordan
Affiliates. However, the amount of such fees payable in each such Transaction
will be no less favorable to the Company than those that could be obtained from
comparable, unaffiliated third parties, and will be subject to separate
discussion and approval, in connection with each such Transaction, by each of a
majority of the Board of Directors and a majority of the directors who are
disinterested directors in relation to Consultant and its affiliates.
Notwithstanding and in addition to the foregoing, if the Consultant renders
services to the Company outside the ordinary course of business, the Company
shall pay an additional amount equal to the value of such extraordinary
services rendered by the Consultant as may be separately agreed to between the
Consultant and the Company.
(b) In recognition of the services rendered by the
Consultant in connection with the evaluation, negotiation, financing and
closing of the Company's senior note, senior discount note, preferred stock
and bank financing on or about the date hereof, the Company will pay
Consultant a fee of $4,100,000, such amount to be in lieu of any fees that may
otherwise be payable pursuant to this Section 2 in connection with the
Offerings and the transactions contemplated thereby.
3. The Company shall promptly reimburse Consultant for out-of-pocket
expenses (including, without limitation, an allocable amount of the
Consultant's overhead expenses
-2-
<PAGE>
attributable to the Company and its direct and indirect subsidiaries,
determined on actual usage, percentage revenue or such other basis as
Consultant may determine) incurred by the Consultant and its personnel in
performing services hereunder to the Company and its direct and indirect
subsidiaries upon the Consultant rendering a statement therefor, together with
such supporting data as the Company shall reasonably require.
4. Notwithstanding the foregoing, the Company shall not be required
to pay the fees under Section 2, (a) if and to the extent expressly prohibited
by the provisions of any credit, stock, financing or other agreements or
instruments binding upon the Company, its subsidiaries or properties, (b) if
the Company has not paid cash interest on any interest payment date or has
postponed or not made any principal payments with respect to any of their
indebtedness on any scheduled payment dates, or (c) if the Company has not
paid cash dividends on any dividend payment date as set forth in its
certificate of incorporation or as declared by its Board of Directors, or has
postponed or not made any redemptions on any redemption date as set forth in
its certificate of incorporation or any certificate of designation with
respect to its preferred stock, if any. Any payments otherwise owed hereunder,
which are not made for any of the above-mentioned reasons, shall not be
canceled but rather accrue, and shall be payable by the Company promptly when,
and to the extent, that the Company is no longer prohibited from making such
payments and when the Company has become current with respect to such
principal or interest payments, has become current with respect to such
dividends and has made such redemptions with respect to such preferred stock,
if any. Any payment required hereunder which is not paid when due shall bear
interest at the rate of ten percent (10%) per annum. This Section 4 will not,
in any event, restrict or limit the Company's obligations under Sections 3, 8
and 9, which will be absolute and not subject to set-off.
5. This Agreement shall be automatically renewed for successive
one-year terms starting December 31, 2007 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from the Company to the Consultant at any time after (a)
substantially all of the stock or substantially all of the assets of the
Company or all of its subsidiaries are sold to an entity unaffiliated with the
Consultant and/or a majority of the Company stockholders immediately prior to
the sale, or (b) the Company is merged or consolidated into another entity
unaffiliated with the Consultant and/or a majority of the Company's
stockholders immediately prior to such merger and the Company is not the
survivor of such transaction. Subject to the foregoing, the Agreement will not
be terminated as a result of any Company ceasing to be a subsidiary of Jordan
Industries, Inc. for financial reporting or other purposes.
6. The Consultant shall have no liability to the Company on account
of (a) any advice which it renders to the Company or any of its direct or
indirect subsidiaries, provided the Consultant believed in good faith that
such advice was useful or beneficial to the Company or any of its direct or
indirect subsidiaries at the time it was rendered, or (b) the
-3-
<PAGE>
Consultant's inability to obtain financing or achieve other results desired by
the Company (or any of its direct or indirect subsidiaries) or Consultant's
failure to render services to the Company at any particular time or from time
to time, or (c) the failure of any Transaction to meet the financial,
operating, or other expectations of the Company or any of direct or indirect
subsidiaries. The Company's and any of its direct or indirect subsidiaries'
sole remedy for any claim under this Agreement shall be termination of this
Agreement.
7. Notwithstanding anything contained in this Agreement to the
contrary, the Company agrees and acknowledges for itself and on behalf of its
direct and indirect subsidiaries that the Consultant, the Jordan Affiliates
and their shareholders, employees, directors and affiliates intend to engage
and participate in acquisitions and business transactions outside of the scope
of the relationship created by this Agreement and neither the Consultant, any
of the Jordan Affiliates nor any of their respective shareholders, partners,
employees, directors or agents shall be under any obligation whatsoever to
make such acquisitions or business transactions through the Company or any of
its direct or indirect subsidiaries or offer such acquisitions or business
transactions to the Company or any of its direct or indirect subsidiaries.
8. The Company will, and will cause each of its direct and indirect
subsidiaries to, indemnify and hold harmless to the fullest extent permitted
by applicable law the Consultant, its affiliates and associates, each of the
Jordan Affiliates, and each of the respective owners, partners, officers,
directors, employees and agents of each of the foregoing, from and against any
loss, liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company
and its subsidiaries.
9. Any payments paid by the Company under this Agreement shall not be
subject to set-off and shall be increased by the amount, if any, of any taxes
(other than income taxes) or other governmental charges levied in respect of
such payments, so that the Consultant is made whole for such taxes or charges.
10. (a) This Agreement may not be modified, waived, terminated or
amended except expressly by an instrument in writing signed by the Consultant
and the Company.
(b) This Agreement may be assigned by Consultant to any of its
subsidiaries or affiliates without the consent of the Company, provided,
however, such assignment shall not relieve such party from its obligations
hereunder. Any assignment of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns.
(c) In the event that any provision of this Agreement shall be
held to be void or unenforceable in whole or in part, the remaining provisions
of this Agreement and the
-4-
<PAGE>
remaining portion of any provision held void or unenforceable in part shall
continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereinafter specify by written notice to the other party.
(e) If at any time after the date upon which this Agreement is
executed, the Company acquires or creates one or more subsidiary corporations
(a "Subsequent Subsidiary"), the Company shall cause such Subsequent Subsidiary
to be subject to this Agreement and all references herein to the Company's
"direct and indirect subsidiaries" shall be interpreted to include all
Subsequent Subsidiaries.
(f) Each subsidiary of the Company shall be jointly and severally
liable and obligated hereunder with respect to each obligation, responsibility
and liability of the Company, as if a direct obligation of such subsidiary.
(g) No waiver by either party of any breach of any provision of
this Agreement shall be deemed a continuing waiver or a waiver of any preceding
or succeeding breach of such provision or of any other provision herein
contained.
(h) Except as provided by that certain Termination Agreement, of
even date herewith, by and among certain of the parties hereto, this Agreement
sets forth the entire understanding of the Company and the Consultant, and
supersedes all prior agreements, arrangements and communications, whether oral
or written, with respect to the subject matter hereof.
(i) The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
(j) This Agreement shall be governed by the internal laws (and not
the law of conflicts) of the State of Illinois.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
JORDAN INDUSTRIES, INC.
By:
------------------------------------
Name: Gordon L. Nelson, Jr.
Senior Vice President
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
JTP INDUSTRIES, INC.
AIM ELECTRONICS CORPORATION
OLD JORDAN TELECOMMUNICATIONS
PRODUCT GROUP, INC.
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP - EUROPE, INC.
VITELEC ELECTRONICS LIMITED
LODAN WEST, INC.
JOHNSON COMPONENTS, INC.
NEW VIEWSONICS, INC.
SHANGHAI VIEWSONICS ELECTRONICS
CO., LTD.
ADAPT COMMUNICATION
SUPPLY CO. S. FL., INC.
NORTHERN TECHNOLOGIES
HOLDINGS, INC.
NORTHERN TECHNOLOGIES, INC.
NEW DURA-LINE CORPORATION
DIVERSIFIED WIRE & CABLE CO.
BOND HOLDINGS, INC.
NEW CAMBRIDGE PRODUCTS
CORPORATION
By:
------------------------------------
Name: Thomas H. Quinn
Authorized Officer
-6-
<PAGE>
NEW SUBSIDIARY ADVISORY AGREEMENT
THIS NEW SUBSIDIARY ADVISORY AGREEMENT ("Agreement"), is executed as
of the 25th day of July 1997 by and among JORDAN INDUSTRIES, INC., an Illinois
corporation (hereinafter referred to as the "Consultant"), MOTORS AND GEARS
HOLDINGS, INC., a Delaware corporation and each of the other parties a
signatory hereto (hereinafter collectively referred to as the "Company").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Consultant has and/or has access to personnel who are
highly skilled in the field of rendering advice to businesses and financial
advice to the Company;
WHEREAS, the Board of Directors of the Company has been made fully
aware of the relationships of certain members of the Company's Board of
Directors to the Consultant;
WHEREAS, the Company's Board of Directors has reviewed in detail and
discussed the terms and provisions of this Agreement and the fairness of this
Agreement and whether more favorable agreements for the Company could be
obtained from unaffiliated third parties; and
WHEREAS, on the basis of its review of this Agreement, the Board of
Directors of the Company deemed it advisable and in the best interests of the
Company and necessary to the conduct, promotion, and attainment of the
business objectives of the Company that the Company retain Consultant to
provide business and financial advice to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto do hereby agree
as follows:
1. The Company hereby retains the Consultant, through the
Consultant's own personnel or through personnel available to the Consultant,
to render consulting services from time to time to the Company and its direct
and indirect subsidiaries (whether now existing or hereafter acquired) in
connection with their acquisitions, divestitures and investments, their
financial affairs, their relationships with their lenders, stockholders and
other third-party associates or affiliates, and the expansion of their
businesses. Consultant shall render such services to the Company and/or its
direct and indirect subsidiaries in good faith and in accordance with
professional standards and applicable law. The term of this Agreement shall
commence the date hereof and continue until December 31, 2007, unless
extended, or sooner terminated, as provided in Section 5 below. The
Consultant's personnel shall be reasonably available to the Company's
managers, auditors and other personnel for consultation and advice pursuant to
this Agreement, subject to Consultant's reasonable convenience and scheduling.
Services may be rendered at the Consultant's offices or at such other
locations selected by the Consultant as the Company and the Consultant shall
from time to time agree.
<PAGE>
2. Subject to Section 4 hereof, the Company shall pay to the
Consultant (i) an investment banking and sponsorship fee of up to two percent
(2%) of the aggregate consideration paid (including non-competition, earnout,
contingent purchase price, incentive arrangements and similar payments) (A) by
the Company and/or its subsidiaries in connection with the acquisition by the
Company and/or its subsidiaries of all or substantially all of the outstanding
capital stock, warrants, options or other rights to acquire or sell capital
stock, or all or substantially all of the business or assets of another
individual, corporation, partnership or other business entity, (B) by the
Company and/or its subsidiaries in connection with any joint venture or other
minority investment, or (C) to the Company in connection with the sale by the
Company of all or substantially all of the Company's and/or its subsidiaries'
outstanding capital stock, warrants, options, or other rights to acquire or
sell stock, or all or substantially all of the business or assets of the
Company and/or its subsidiaries (each of the transactions described in clauses
(A), (B) and (C), a "Transaction"), including, but not limited to, any
Transaction negotiated for the Company involving any affiliate of the Company
or the Consultant, including, but not limited to, any Transaction involving,
TJC Management Corporation, The Jordan Company, MCIT PLC, Jordan/Zalaznick
Capital Company, Leucadia National Corporation or any affiliates of any of the
foregoing (collectively, the "Jordan Affiliates"); and (ii) a financial
consulting fee of up to one percent (1%) of the amount obtained or made
available pursuant to any debt, equity or other financing (including without
limitation, any refinancing) by the Company and/or its subsidiaries with the
assistance of Consultant, including, but not limited to, any financing
obtained for the Company and/or its subsidiaries from one or more of the
Jordan Affiliates. However, the amount of such fees payable in each such
Transaction will be no less favorable to the Company than those that could be
obtained from comparable, unaffiliated third parties, and will be subject to
separate discussion and approval, in connection with each such Transaction, by
each of a majority of the Board of Directors and a majority of the directors
who are disinterested directors in relation to Consultant and its affiliates.
Notwithstanding and in addition to the foregoing, if the Consultant renders
services to the Company outside the ordinary course of business, the Company
shall pay an additional amount equal to the value of such extraordinary
services rendered by the Consultant as may be separately agreed to between the
Consultant and the Company.
3. The Company shall promptly reimburse Consultant for out-of-pocket
expenses (including, without limitation, an allocable amount of the
Consultant's overhead expenses attributable to the Company and its direct and
indirect subsidiaries, determined on actual usage, percentage revenue or such
other basis as Consultant may determine) incurred by the Consultant and its
personnel in performing services hereunder to the Company and its direct and
indirect subsidiaries upon the Consultant rendering a statement therefor,
together with such supporting data as the Company shall reasonably require.
4. Notwithstanding the foregoing, the Company shall not be required
to pay the fees under Section 2, (a) if and to the extent expressly prohibited
by the provisions of any credit, stock, financing or other agreements or
instruments binding upon the Company, its subsidiaries or properties, (b) if
the Company has not paid cash interest on any interest payment date or has
postponed or not made any principal payments with respect to any of their
indebtedness on any
-2-
<PAGE>
scheduled payment dates, or (c) if the Company has not paid cash dividends on
any dividend payment date as set forth in its certificate of incorporation or
as declared by its Board of Directors, or has postponed or not made any
redemptions on any redemption date as set forth in its certificate of
incorporation or any certificate of designation with respect to its preferred
stock, if any. Any payments otherwise owed hereunder, which are not made for
any of the above-mentioned reasons, shall not be canceled but rather accrue,
and shall be payable by the Company promptly when, and to the extent, that the
Company is no longer prohibited from making such payments and when the Company
has become current with respect to such principal or interest payments, has
become current with respect to such dividends and has made such redemptions
with respect to such preferred stock, if any. Any payment required hereunder
which is not paid when due shall bear interest at the rate of ten percent
(10%) per annum. This Section 4 will not, in any event, restrict or limit the
Company's obligations under Sections 3, 8 and 9, which will be absolute and
not subject to set-off.
5. This Agreement shall be automatically renewed for successive
one-year terms starting December 31, 2007 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from the Company to the Consultant at any time after (a)
substantially all of the stock or substantially all of the assets of the
Company or all of its subsidiaries are sold to an entity unaffiliated with the
Consultant and/or a majority of the Company stockholders immediately prior to
the sale, or (b) the Company is merged or consolidated into another entity
unaffiliated with the Consultant and/or a majority of the Company's
stockholders immediately prior to such merger and the Company is not the
survivor of such transaction. Subject to the foregoing, the Agreement will not
be terminated as a result of any Company ceasing to be a subsidiary of Jordan
Industries, Inc. for financial reporting or other purposes.
6. The Consultant shall have no liability to the Company on account
of (a) any advice which it renders to the Company or any of its direct or
indirect subsidiaries, provided the Consultant believed in good faith that
such advice was useful or beneficial to the Company or any of its direct or
indirect subsidiaries at the time it was rendered, or (b) the Consultant's
inability to obtain financing or achieve other results desired by the Company
(or any of its direct or indirect subsidiaries) or Consultant's failure to
render services to the Company at any particular time or from time to time, or
(c) the failure of any Transaction to meet the financial, operating, or other
expectations of the Company or any of direct or indirect subsidiaries. The
Company's and any of its direct or indirect subsidiaries' sole remedy for any
claim under this Agreement shall be termination of this Agreement.
7. Notwithstanding anything contained in this Agreement to the
contrary, the Company agrees and acknowledges for itself and on behalf of its
direct and indirect subsidiaries that the Consultant, the Jordan Affiliates
and their shareholders, employees, directors and affiliates intend to engage
and participate in acquisitions and business transactions outside of the scope
of the relationship created by this Agreement and neither the Consultant, any
of the Jordan Affiliates nor any of their respective shareholders, partners,
employees, directors or agents shall
-3-
<PAGE>
be under any obligation whatsoever to make such acquisitions or business
transactions through the Company or any of its direct or indirect subsidiaries
or offer such acquisitions or business transactions to the Company or any of
its direct or indirect subsidiaries.
8. The Company will, and will cause each of its direct and indirect
subsidiaries to, indemnify and hold harmless to the fullest extent permitted
by applicable law the Consultant, its affiliates and associates, each of the
Jordan Affiliates, and each of the respective owners, partners, officers,
directors, employees and agents of each of the foregoing, from and against any
loss, liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company
and its subsidiaries.
9. Any payments paid by the Company under this Agreement shall not be
subject to set-off and shall be increased by the amount, if any, of any taxes
(other than income taxes) or other governmental charges levied in respect of
such payments, so that the Consultant is made whole for such taxes or charges.
10. (a) This Agreement may not be modified, waived, terminated or
amended except expressly by an instrument in writing signed by the Consultant
and the Company.
(b) This Agreement may be assigned by Consultant to any of its
subsidiaries or affiliates without the consent of the Company, provided,
however, such assignment shall not relieve such party from its obligations
hereunder. Any assignment of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns.
(c) In the event that any provision of this Agreement shall be
held to be void or unenforceable in whole or in part, the remaining provisions
of this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereinafter specify by written notice to the other party.
(e) If at any time after the date upon which this Agreement is
executed, the Company acquires or creates one or more subsidiary corporations
(a "Subsequent Subsidiary"), the Company shall cause such Subsequent Subsidiary
to be subject to this Agreement and all references herein to the Company's
"direct and indirect subsidiaries" shall be interpreted to include all
Subsequent Subsidiaries.
(f) Each subsidiary of the Company shall be jointly and severally
liable and obligated hereunder with respect to each obligation, responsibility
and liability of the Company, as if a direct obligation of such subsidiary.
-4-
<PAGE>
(g) No waiver by either party of any breach of any provision of
this Agreement shall be deemed a continuing waiver or a waiver of any preceding
or succeeding breach of such provision or of any other provision herein
contained.
(h) Except as provided by that certain Termination Agreement, of
even date herewith, by and among certain of the parties hereto, this Agreement
sets forth the entire understanding of the Company and the Consultant, and
supersedes all prior agreements, arrangements and communications, whether oral
or written, with respect to the subject matter hereof.
(i) The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
(j) This Agreement shall be governed by the internal laws (and not
the law of conflicts) of the State of Illinois.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
JORDAN INDUSTRIES, INC.
By:
-----------------------------------
Name: Gordon L. Nelson, Jr.
Senior Vice President
THE IMPERIAL ELECTRIC COMPANY
THE SCOTT MOTORS COMPANY
GEAR RESEARCH, INC.
MOTORS AND GEARS HOLDINGS, INC.
MOTORS AND GEARS, INC.
MOTORS AND GEARS INDUSTRIES, INC.
MERKLE-KORFF INDUSTRIES, INC.
FIR GROUP HOLDINGS, INC.
MOTORS AND GEARS AMSTERDAM B.V.
MOTORS AND GEARS HOLDINGS
AMSTERDAM B.V.
FIR GROUP HOLDINGS ITALIA, S.r.l.
CONSTRUGIONI INTALIANE MOTORI
ELETTRICI, S.p.a.
SELIOSISTERNI, S.p.a.
FIR ELECTROMECCANICA, S.p.a.
By:
-----------------------------------
Name: Thomas H. Quinn
Authorized Officer
-6-
<PAGE>
NEW SUBSIDIARY CONSULTING AGREEMENT
THIS NEW SUBSIDIARY CONSULTING AGREEMENT ("Agreement"), is executed
as of the 25th day of July 1997 by and among JORDAN INDUSTRIES, INC., an
Illinois corporation (hereinafter referred to as the "Consultant"), JII, Inc.,
a Delaware corporation and each of the other parties a signatory hereto
(hereinafter collectively referred to as the "Company").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Consultant has and/or has access to personnel who are
highly skilled in the field of rendering advice to businesses and financial
advice to the Company;
WHEREAS, the Board of Directors of the Company has been made fully
aware of the relationships of certain members of the Company's Board of
Directors to the Consultant;
WHEREAS, the Company's Board of Directors has reviewed in detail and
discussed the terms and provisions of this Agreement and the fairness of this
Agreement and whether more favorable agreements for the Company could be
obtained from unaffiliated third parties; and
WHEREAS, on the basis of its review of this Agreement, the Board of
Directors of the Company deemed it advisable and in the best interests of the
Company and necessary to the conduct, promotion, and attainment of the
business objectives of the Company that the Company retain Consultant to
provide business and financial advice to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto do hereby agree
as follows:
1. The Company hereby retains the Consultant, through the
Consultant's own personnel or through personnel available to the Consultant,
to render consulting services from time to time to the Company and its direct
and indirect subsidiaries (whether now existing or hereafter acquired) in
connection with their business affairs. Consultant shall render such services
to the Company and/or its direct and indirect subsidiaries in good faith and
in accordance with professional standards and applicable law. The term of this
Agreement shall commence the date hereof and continue until December 31, 2007,
unless extended, or sooner terminated, as provided in Section 6 below. The
Consultant's personnel shall be reasonably available to the Company's
managers, auditors and other personnel for consultation and advice pursuant to
this Agreement, subject to Consultant's reasonable convenience and scheduling.
Services may be rendered at the Consultant's offices or at such other
locations selected by the Consultant as the Company and the Consultant shall
from time to time agree.
<PAGE>
2. Consultant shall be obligated to present to the Company all
acquisition, business and investment opportunities identified by the
Consultant that relate to manufacturing, assembly, distribution or marketing
of products and services in the telecommunications and data communications
industry, and will not permitted to purse such opportunities or present such
opportunities to third parties unless the Company determines not to pursue
such opportunities or consents thereto, provided that this obligation will
apply only to Consultant, and will not apply to any stockholders of affiliates
of the Consultant, including The Jordan Company. This Agreement will not
prohibit, and Consultant's stockholders and affiliates will not be prohibited
from, pursuing such opportunities or offering them to third parties without
the Company's consent.
3. Subject to Section 5 hereof, the Company shall pay to the
Consultant a consulting services fee of one percent (1%) of the net sales of
the Company and its subsidiaries, without duplication, payable quarterly in
arrears on the March 31, June 30, September 30 and December 31 of each year,
starting with a pro rata payment on September 30, 1997 for the period from the
date hereof through September 30, 1997. Notwithstanding and in addition to the
foregoing, if the Consultant renders services to the Company outside the
ordinary course of business, the Company shall pay an additional amount equal
to the value of such extraordinary services rendered by the Consultant as may
be separately agreed to between the Consultant and the Company.
4. The Company shall promptly reimburse Consultant for out-of-pocket
expenses (including, without limitation, an allocable amount of the
Consultant's overhead expenses attributable to the Company and its direct and
indirect subsidiaries, determined on actual usage, percentage revenue or such
other basis as Consultant may determine), incurred by the Consultant and its
personnel in performing services hereunder to the Company and its direct and
indirect subsidiaries upon the Consultant rendering a statement therefor,
together with such supporting data as the Company shall reasonably require.
5. Notwithstanding the foregoing, the Company shall not be required
to pay the fees under Section 3, (a) if and to the extent expressly prohibited
by the provisions of any credit, stock, financing or other agreements or
instruments binding upon the Company, its subsidiaries or properties, (b) if
the Company has not paid cash interest on any interest payment date or has
postponed or not made any principal payments with respect to any of their
indebtedness on any scheduled payment dates, or (c) if the Company has not
paid cash dividends on any dividend payment date as set forth in its
certificate of incorporation or as declared by its Board of Directors, or has
postponed or not made any redemptions on any redemption date as set forth in
its certificate of incorporation or any certificate of designation with
respect to its preferred stock, if any. Any payments otherwise owed hereunder,
which are not made for any of the above-mentioned reasons, shall not be
canceled but rather accrue, and shall be payable by the Company promptly when,
and to the extent, that the Company is no longer prohibited from making such
payments and when the Company has become current with respect to such
principal or interest payments, has become current with respect to such
dividends and has made such redemptions with respect to such preferred
<PAGE>
stock, if any. Any payment required hereunder which is not paid when due shall
bear interest at the rate of ten percent (10%) per annum. This Section 5 will
not, in any event, restrict or limit the Company's obligations under Sections
4, 9 and 10, which will be absolute and not subject to set-off.
6. This Agreement shall be automatically renewed for successive
one-year terms starting December 31, 2007 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from the Company to the Consultant at any time after (a)
substantially all of the stock or substantially all of the assets of the
Company or all of its subsidiaries are sold to an entity unaffiliated with the
Consultant and/or a majority of the Company stockholders immediately prior to
the sale, or (b) the Company is merged or consolidated into another entity
unaffiliated with the Consultant and/or a majority of the Company's
stockholders immediately prior to such merger and the Company is not the
survivor of such transaction. Subject to the foregoing, the Agreement will not
be terminated as a result of any Company ceasing to be a subsidiary of Jordan
Industries, Inc. for financial reporting or other purposes.
7. The Consultant shall have no liability to the Company on account
of (a) any advice which it renders to the Company or any of its direct or
indirect subsidiaries, provided the Consultant believed in good faith that
such advice was useful or beneficial to the Company or any of its direct or
indirect subsidiaries at the time it was rendered, or (b) the Consultant's
inability to obtain financing or achieve other results desired by the Company
(or any of its direct or indirect subsidiaries) or Consultant's failure to
render services to the Company at any particular time or from time to time, or
(c) the failure of any acquisition, divestiture, financing or business plan to
meet the financial, operating, or other expectations of the Company or any of
direct or indirect subsidiaries. The Company's and any of its direct or
indirect subsidiaries' sole remedy for any claim under this Agreement shall be
termination of this Agreement.
8. Notwithstanding anything contained in this Agreement to the
contrary, but subject to Section 2, the Company agrees and acknowledges for
itself and on behalf of its direct and indirect subsidiaries that the
Consultant, TJC Management Corporation, The Jordan Company, MCIT PLC,
Jordan/Zalaznick Capital Company, Leucadia National Corporation or any
affiliates of any of the foregoing (collectively, the "Jordan Affiliates") and
their respective shareholders, partners, employees, directors and agents
intend to engage and participate in acquisitions and business transactions
outside of the scope of the relationship created by this Agreement and neither
the Consultant, any of the Jordan Affiliates nor any of their respective
shareholders, partners, employees, directors or agents shall be under any
obligation whatsoever to make such acquisitions or business transactions
through the Company or any of its direct or indirect subsidiaries or offer
such acquisitions or business transactions to the Company or any of its direct
or indirect subsidiaries.
<PAGE>
9. The Company will, and will cause each of its direct and indirect
subsidiaries to, indemnify and hold harmless to the fullest extent permitted
by applicable law the Consultant, its affiliates and associates, each of the
Jordan Affiliates, and each of the respective owners, partners, officers,
directors, employees and agents of each of the foregoing, from and against any
loss, liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company
and its subsidiaries.
10. Any payments paid by the Company under this Agreement shall not
be subject to set-off and shall be increased by the amount, if any, of any
taxes (other than income taxes) or other governmental charges levied in
respect of such payments, so that the Consultant is made whole for such taxes
or charges.
11. (a) This Agreement may not be modified, waived, terminated or
amended except expressly by an instrument in writing signed by the Consultant
and the Company.
(b) This Agreement may be assigned by either party hereto without
the consent of the other party, provided, however, such assignment shall not
relieve such party from its obligations hereunder. Any assignment of this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
(c) In the event that any provision of this Agreement shall be
held to be void or unenforceable in whole or in part, the remaining provisions
of this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereinafter specify by written notice to the other party.
(e) If at any time after the date upon which this Agreement is
executed, the Company acquires or creates one or more subsidiary corporations
(a "Subsequent Subsidiary"), the Company shall cause such Subsequent Subsidiary
to be subject to this Agreement and all references herein to the Company's
"direct and indirect subsidiaries" shall be interpreted to include all
Subsequent Subsidiaries.
(f) Each subsidiary of the Company shall be jointly and severally
liable and obligated hereunder with respect to each obligation, responsibility
and liability of the Company, as if a direct obligation of such subsidiary.
<PAGE>
(g) No waiver by either party of any breach of any provision of
this Agreement shall be deemed a continuing waiver or a waiver of any preceding
or succeeding breach of such provision or of any other provision herein
contained.
(h) Except as provided by that certain Termination Agreement, of
even date herewith, by and among certain of the parties hereto, this Agreement
sets forth the entire understanding of the Company and the Consultant, and
supersedes all prior agreements, arrangements and communications, whether oral
or written, with respect to the subject matter hereof.
(i) The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
(j) This Agreement shall be governed by the internal laws (and not
the law of conflicts) of the State of Illinois.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
JORDAN INDUSTRIES, INC.
By:
------------------------------------
Name: Gordon L. Nelson, Jr.
Senior Vice President
TJC MANAGEMENT CORPORATION
By:
------------------------------------
Name: G. Robert Fisher
Secretary
JII, INC.
JI PROPERTIES, INC.
J.I. FINANCE COMPANY
CAPE CRAFTSMAN, INC.
WELCOME HOME, INC.
HOME AGAIN STORES, INC.
SPL HOLDINGS, INC.
VALMARK INDUSTRIES, INC.
PAMCO PRINTED TAPE & LABEL CO., INC.
SALES PROMOTION ASSOCIATES, INC.
SEABOARD FOLDING BOX CORPORATION
BEEMAK PLASTICS, INC.
JII/SALES PROMOTION ASSOCIATES, INC.
THE OLD IMPERIAL ELECTRIC COMPANY
THE OLD SCOTT MOTORS COMPANY
OLD GEAR RESEARCH, INC.
DACCO, INCORPORATED
DETROIT TRANSMISSION PRODUCTS CO.
DACCO/DETROIT OF OHIO, INC.
ABC TRANSMISSION PARTS
WAREHOUSE, INC.
DACCO/DETROIT OF MINNESOTA, INC
DACCO/DETROIT OF INDIANA, INC.
DACCO/DETROIT OF
NORTH CAROLINA, INC.
DACCO/DETROIT OF MEMPHIS, INC.
DACCO/DETROIT OF ALABAMA, INC.
DACCO/DETROIT OF MICHIGAN, INC.
DACCO/DETROIT OF TEXAS, INC.
DACCO/DETROIT OF WEST VIRGINIA, INC.
BORG MANUFACTURING
<PAGE>
NASHVILLE TRANSMISSION PARTS, INC.
DACCO/DETROIT OF FLORIDA, INC.
DACCO/DETROIT OF COLORADO, INC.
DACCO/DETROIT OF MISSOURI, INC.
DACCO/DETROIT OF ARIZONA, INC.
DACCO/DETROIT OF NEBRASKA, INC.
DACCO/DETROIT OF NEW JERSEY, INC.
DACCO/DETROIT OF OKLAHOMA, INC.
DACCO/DETROIT OF
SOUTH CAROLINA, INC.
DACCO INTERNATIONAL, INC.
PARSONS PRECISION PRODUCTS, INC.
SATE-LITE MANUFACTURING COMPANY
RIVERSIDE BOOK AND BIBLE HOUSE,
INCORPORATED
By:
------------------------------------
Name: Thomas H. Quinn
Authorized Officer
<PAGE>
Exhibit 10.19
NEW SUBSIDIARY CONSULTING AGREEMENT
THIS NEW SUBSIDIARY CONSULTING AGREEMENT ("Agreement"), is executed
as of the 25th day of July 1997 by and among JORDAN INDUSTRIES, INC., an
Illinois corporation (hereinafter referred to as the "Consultant"), JORDAN
TELECOMMUNICATION PRODUCTS, INC., a Delaware corporation and each of the other
parties a signatory hereto (hereinafter collectively referred to as the
"Company").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Consultant has and/or has access to personnel who are
highly skilled in the field of rendering advice to businesses and financial
advice to the Company;
WHEREAS, the Board of Directors of the Company has been made fully
aware of the relationships of certain members of the Company's Board of
Directors to the Consultant;
WHEREAS, the Company's Board of Directors has reviewed in detail and
discussed the terms and provisions of this Agreement and the fairness of this
Agreement and whether more favorable agreements for the Company could be
obtained from unaffiliated third parties; and
WHEREAS, on the basis of its review of this Agreement, the Board of
Directors of the Company deemed it advisable and in the best interests of the
Company and necessary to the conduct, promotion, and attainment of the
business objectives of the Company that the Company retain Consultant to
provide business and financial advice to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto do hereby agree
as follows:
1. The Company hereby retains the Consultant, through the
Consultant's own personnel or through personnel available to the Consultant,
to render consulting services from time to time to the Company and its direct
and indirect subsidiaries (whether now existing or hereafter acquired) in
connection with their business affairs. Consultant shall render such services
to the Company and/or its direct and indirect subsidiaries in good faith and
in accordance with professional standards and applicable law. The term of this
Agreement shall commence the date hereof and continue until December 31, 2007,
unless extended, or sooner terminated, as provided in Section 6 below. The
Consultant's personnel shall be reasonably available to the Company's
managers, auditors and other personnel for consultation and advice pursuant to
this Agreement, subject to Consultant's reasonable convenience and scheduling.
Services may be rendered at the Consultant's offices or at such other
locations selected by the Consultant as the Company and the Consultant shall
from time to time agree.
<PAGE>
2. Consultant shall be obligated to present to the Company all
acquisition, business and investment opportunities identified by the
Consultant that relate to manufacturing, assembly, distribution or marketing
of products and services in the telecommunications and data communications
industry, and will not permitted to purse such opportunities or present such
opportunities to third parties unless the Company determines not to pursue
such opportunities or consents thereto, provided that this obligation will
apply only to Consultant, and will not apply to any stockholders of affiliates
of the Consultant, including The Jordan Company. This Agreement will not
prohibit, and Consultant's stockholders and affiliates will not be prohibited
from, pursuing such opportunities or offering them to third parties without
the Company's consent.
3. Subject to Section 5 hereof, the Company shall pay to the
Consultant a consulting services fee of one percent (1%) of the net sales of
the Company and its subsidiaries, without duplication, payable quarterly in
arrears on the March 31, June 30, September 30 and December 31 of each year,
starting with a pro rata payment on September 30, 1997 for the period from the
date hereof through September 30, 1997. Notwithstanding and in addition to the
foregoing, if the Consultant renders services to the Company outside the
ordinary course of business, the Company shall pay an additional amount equal
to the value of such extraordinary services rendered by the Consultant as may
be separately agreed to between the Consultant and the Company.
4. The Company shall promptly reimburse Consultant for out-of-pocket
expenses (including, without limitation, an allocable amount of the
Consultant's overhead expenses attributable to the Company and its direct and
indirect subsidiaries, determined on actual usage, percentage revenue or such
other basis as Consultant may determine), incurred by the Consultant and its
personnel in performing services hereunder to the Company and its direct and
indirect subsidiaries upon the Consultant rendering a statement therefor,
together with such supporting data as the Company shall reasonably require.
5. Notwithstanding the foregoing, the Company shall not be required
to pay the fees under Section 3, (a) if and to the extent expressly prohibited
by the provisions of any credit, stock, financing or other agreements or
instruments binding upon the Company, its subsidiaries or properties, (b) if
the Company has not paid cash interest on any interest payment date or has
postponed or not made any principal payments with respect to any of their
indebtedness on any scheduled payment dates, or (c) if the Company has not
paid cash dividends on any dividend payment date as set forth in its
certificate of incorporation or as declared by its Board of Directors, or has
postponed or not made any redemptions on any redemption date as set forth in
its certificate of incorporation or any certificate of designation with
respect to its preferred stock, if any. Any payments otherwise owed hereunder,
which are not made for any of the above-mentioned reasons, shall not be
canceled but rather accrue, and shall be payable by the Company promptly when,
and to the extent, that the Company is no longer prohibited from making such
payments and when the Company has become current with respect to such
principal or interest payments, has become current with respect to such
dividends and has made such redemptions with respect to such preferred
<PAGE>
stock, if any. Any payment required hereunder which is not paid when due shall
bear interest at the rate of ten percent (10%) per annum. This Section 5 will
not, in any event, restrict or limit the Company's obligations under Sections
4, 9 and 10, which will be absolute and not subject to set-off.
6. This Agreement shall be automatically renewed for successive
one-year terms starting December 31, 2007 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from the Company to the Consultant at any time after (a)
substantially all of the stock or substantially all of the assets of the
Company or all of its subsidiaries are sold to an entity unaffiliated with the
Consultant and/or a majority of the Company stockholders immediately prior to
the sale, or (b) the Company is merged or consolidated into another entity
unaffiliated with the Consultant and/or a majority of the Company's
stockholders immediately prior to such merger and the Company is not the
survivor of such transaction. Subject to the foregoing, the Agreement will not
be terminated as a result of any Company ceasing to be a subsidiary of Jordan
Industries, Inc. for financial reporting or other purposes.
7. The Consultant shall have no liability to the Company on account
of (a) any advice which it renders to the Company or any of its direct or
indirect subsidiaries, provided the Consultant believed in good faith that
such advice was useful or beneficial to the Company or any of its direct or
indirect subsidiaries at the time it was rendered, or (b) the Consultant's
inability to obtain financing or achieve other results desired by the Company
(or any of its direct or indirect subsidiaries) or Consultant's failure to
render services to the Company at any particular time or from time to time, or
(c) the failure of any acquisition, divestiture, financing or business plan to
meet the financial, operating, or other expectations of the Company or any of
direct or indirect subsidiaries. The Company's and any of its direct or
indirect subsidiaries' sole remedy for any claim under this Agreement shall be
termination of this Agreement.
8. Notwithstanding anything contained in this Agreement to the
contrary, but subject to Section 2, the Company agrees and acknowledges for
itself and on behalf of its direct and indirect subsidiaries that the
Consultant TJC Management Corporation, The Jordan Company, MCIT PLC,
Jordan/Zalaznick Capital Company, Leucadia National Corporation or any
affiliates of any of the foregoing (collectively, the "Jordan Affiliates") and
their respective shareholders, partners, employees, directors and agents
intend to engage and participate in acquisitions and business transactions
outside of the scope of the relationship created by this Agreement and neither
the Consultant, any of the Jordan Affiliates nor any of their respective
shareholders, partners, employees, directors or agents shall be under any
obligation whatsoever to make such acquisitions or business transactions
through the Company or any of its direct or indirect subsidiaries or offer
such acquisitions or business transactions to the Company or any of its direct
or indirect subsidiaries.
<PAGE>
9. The Company will, and will cause each of its direct and indirect
subsidiaries to, indemnify and hold harmless to the fullest extent permitted
by applicable law the Consultant, its affiliates and associates, each of the
Jordan Affiliates, and each of the respective owners, partners, officers,
directors, employees and agents of each of the foregoing, from and against any
loss, liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company
and its subsidiaries.
10. Any payments paid by the Company under this Agreement shall not
be subject to set-off and shall be increased by the amount, if any, of any
taxes (other than income taxes) or other governmental charges levied in
respect of such payments, so that the Consultant is made whole for such taxes
or charges.
11. (a) This Agreement may not be modified, waived, terminated or
amended except expressly by an instrument in writing signed by the Consultant
and the Company.
(b) This Agreement may be assigned by either party hereto without
the consent of the other party, provided, however, such assignment shall not
relieve such party from its obligations hereunder. Any assignment of this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
(c) In the event that any provision of this Agreement shall be
held to be void or unenforceable in whole or in part, the remaining provisions
of this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereinafter specify by written notice to the other party.
(e) If at any time after the date upon which this Agreement is
executed, the Company acquires or creates one or more subsidiary corporations
(a "Subsequent Subsidiary"), the Company shall cause such Subsequent Subsidiary
to be subject to this Agreement and all references herein to the Company's
"direct and indirect subsidiaries" shall be interpreted to include all
Subsequent Subsidiaries.
(f) Each subsidiary of the Company shall be jointly and severally
liable and obligated hereunder with respect to each obligation, responsibility
and liability of the Company, as if a direct obligation of such subsidiary.
<PAGE>
(g) No waiver by either party of any breach of any provision of
this Agreement shall be deemed a continuing waiver or a waiver of any preceding
or succeeding breach of such provision or of any other provision herein
contained.
(h) Except as provided by that certain Termination Agreement, of
even date herewith, by and among certain of the parties hereto, this Agreement
sets forth the entire understanding of the Company and the Consultant, and
supersedes all prior agreements, arrangements and communications, whether oral
or written, with respect to the subject matter hereof.
(i) The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
(i) This Agreement shall be governed by the internal laws (and not
the law of conflicts) of the State of Illinois.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
JORDAN INDUSTRIES, INC.
By: /s/ Gordan L. Nelson Jr.
-------------------------------------
Name: Gordon L. Nelson, Jr.
Senior Vice President
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
JTP INDUSTRIES, INC.
AIM ELECTRONICS CORPORATION
OLD JORDAN TELECOMMUNICATIONS
PRODUCT GROUP, INC.
JORDAN TELECOMMUNICATIONS PRODUCT
GROUP EUROPE, INC.
VITELEC ELECTRONICS LIMITED
JOHNSON COMPONENTS, INC.
NEW VIEWSONICS, INC.
SHANGHAI VIEWSONICS ELECTRONICS CO.,
LTD.
ADAPT COMMUNICATION SUPPLY CO. S. FL.
INC.
NORTHERN TECHNOLOGIES HOLDINGS,
INC.
NORTHERN TECHNOLOGIES, INC.
NEW DURA-LINE CORPORATION
DIVERSIFIED WIRE & CABLE, INC.
BOND HOLDINGS, INC.
NEW CAMBRIDGE PRODUCTS CORPORATION
By: /s/Thomas H. Quinn
-------------------------------------
Name: Thomas H. Quinn
Authorized Officer
<PAGE>
NEW SUBSIDIARY CONSULTING AGREEMENT
THIS NEW SUBSIDIARY CONSULTING AGREEMENT ("Agreement"), is executed
as of the 25th day of July 1997 by and among JORDAN INDUSTRIES, INC., an
Illinois corporation (hereinafter referred to as the "Consultant"), MOTORS AND
GEARS HOLDINGS, INC., a Delaware corporation and each of the other parties a
signatory hereto (hereinafter collectively referred to as the "Company").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Consultant has and/or has access to personnel who are
highly skilled in the field of rendering advice to businesses and financial
advice to the Company;
WHEREAS, the Board of Directors of the Company has been made fully
aware of the relationships of certain members of the Company's Board of
Directors to the Consultant;
WHEREAS, the Company's Board of Directors has reviewed in detail and
discussed the terms and provisions of this Agreement and the fairness of this
Agreement and whether more favorable agreements for the Company could be
obtained from unaffiliated third parties; and
WHEREAS, on the basis of its review of this Agreement, the Board of
Directors of the Company deemed it advisable and in the best interests of the
Company and necessary to the conduct, promotion, and attainment of the
business objectives of the Company that the Company retain Consultant to
provide business and financial advice to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto do hereby agree
as follows:
1. The Company hereby retains the Consultant, through the
Consultant's own personnel or through personnel available to the Consultant,
to render consulting services from time to time to the Company and its direct
and indirect subsidiaries (whether now existing or hereafter acquired) in
connection with their business affairs. Consultant shall render such services
to the Company and/or its direct and indirect subsidiaries in good faith and
in accordance with professional standards and applicable law. The term of this
Agreement shall commence the date hereof and continue until December 31, 2007,
unless extended, or sooner terminated, as provided in Section 6 below. The
Consultant's personnel shall be reasonably available to the Company's
managers, auditors and other personnel for consultation and advice pursuant to
this Agreement, subject to Consultant's reasonable convenience and scheduling.
Services may be rendered at the Consultant's offices or at such other
locations selected by the Consultant as the Company and the Consultant shall
from time to time agree.
<PAGE>
2. Consultant shall be obligated to present to the Company all
acquisition, business and investment opportunities identified by the
Consultant that related to manufacturing, assembly, distribution or marketing
of products and services in the motors and gears industry, and will not
permitted to purse such opportunities or present such opportunities to third
parties unless the Company determines not to pursue such opportunities or
consents thereto, provided that this obligation will apply only to Consultant,
and will not apply to any stockholders of affiliates of the Consultant,
including The Jordan Company. This Agreement will not prohibit, and
Consultant's stockholders and affiliates will not be prohibited from, pursuing
such opportunities or offering them to third parties without the Company's
consent.
3. Subject to Section 5 hereof, the Company shall pay to the
Consultant a consulting services fee of one percent (1%) of the net sales of
the Company and its subsidiaries, without duplication, payable quarterly in
arrears on the March 31, June 30, September 30 and December 31 of each year,
starting with a pro rata payment on September 30, 1997 for the period from the
date hereof through September 30, 1997. Notwithstanding and in addition to the
foregoing, if the Consultant renders services to the Company outside the
ordinary course of business, the Company shall pay an additional amount equal
to the value of such extraordinary services rendered by the Consultant as may
be separately agreed to between the Consultant and the Company.
4. The Company shall promptly reimburse Consultant for out-of-pocket
expenses (including, without limitation, an allocable amount of the
Consultant's overhead expenses attributable to the Company and its direct and
indirect subsidiaries, determined on actual usage, percentage revenue or such
other basis as Consultant may determine), incurred by the Consultant and its
personnel in performing services hereunder to the Company and its direct and
indirect subsidiaries upon the Consultant rendering a statement therefor,
together with such supporting data as the Company shall reasonably require.
5. Notwithstanding the foregoing, the Company shall not be required
to pay the fees under Section 3, (a) if and to the extent expressly prohibited
by the provisions of any credit, stock, financing or other agreements or
instruments binding upon the Company, its subsidiaries or properties, (b) if
the Company has not paid cash interest on any interest payment date or has
postponed or not made any principal payments with respect to any of their
indebtedness on any scheduled payment dates, or (c) if the Company has not
paid cash dividends on any dividend payment date as set forth in its
certificate of incorporation or as declared by its Board of Directors, or has
postponed or not made any redemptions on any redemption date as set forth in
its certificate of incorporation or any certificate of designation with
respect to its preferred stock, if any. Any payments otherwise owed hereunder,
which are not made for any of the above-mentioned reasons, shall not be
canceled but rather accrue, and shall be payable by the Company promptly when,
and to the extent, that the Company is no longer prohibited from making such
payments and when the Company has become current with respect to such
principal or interest payments, has become current with respect to such
dividends and has made such redemptions with respect to such preferred
<PAGE>
stock, if any. Any payment required hereunder which is not paid when due shall
bear interest at the rate of ten percent (10%) per annum. This Section 5 will
not, in any event, restrict or limit the Company's obligations under Sections
4, 9 and 10, which will be absolute and not subject to set-off.
6. This Agreement shall be automatically renewed for successive
one-year terms starting December 31, 2007 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from the Company to the Consultant at any time after (a)
substantially all of the stock or substantially all of the assets of the
Company or all of its subsidiaries are sold to an entity unaffiliated with the
Consultant and/or a majority of the Company stockholders immediately prior to
the sale, or (b) the Company is merged or consolidated into another entity
unaffiliated with the Consultant and/or a majority of the Company's
stockholders immediately prior to such merger and the Company is not the
survivor of such transaction. Subject to the foregoing, the Agreement will not
be terminated as a result of any Company ceasing to be a subsidiary of Jordan
Industries, Inc. for financial reporting or other purposes.
7. The Consultant shall have no liability to the Company on account
of (a) any advice which it renders to the Company or any of its direct or
indirect subsidiaries, provided the Consultant believed in good faith that
such advice was useful or beneficial to the Company or any of its direct or
indirect subsidiaries at the time it was rendered, or (b) the Consultant's
inability to obtain financing or achieve other results desired by the Company
(or any of its direct or indirect subsidiaries) or Consultant's failure to
render services to the Company at any particular time or from time to time, or
(c) the failure of any acquisition, divestiture, financing or business plan to
meet the financial, operating, or other expectations of the Company or any of
direct or indirect subsidiaries. The Company's and any of its direct or
indirect subsidiaries' sole remedy for any claim under this Agreement shall be
termination of this Agreement.
8. Notwithstanding anything contained in this Agreement to the
contrary, but subject to Section 2, the Company agrees and acknowledges for
itself and on behalf of its direct and indirect subsidiaries that the
Consultant, TJC Management Corporation, The Jordan Company, MCIT PLC,
Jordan/Zalaznick Capital Company, Leucadia National Corporation or any
affiliates of any of the foregoing (collectively, the "Jordan Affiliates") and
their respective shareholders, partners, employees, directors and agents
intend to engage and participate in acquisitions and business transactions
outside of the scope of the relationship created by this Agreement and neither
the Consultant, any of the Jordan Affiliates nor any of their respective
shareholders, partners, employees, directors or agents shall be under any
obligation whatsoever to make such acquisitions or business transactions
through the Company or any of its direct or indirect subsidiaries or offer
such acquisitions or business transactions to the Company or any of its direct
or indirect subsidiaries.
<PAGE>
9. The Company will, and will cause each of its direct and indirect
subsidiaries to, indemnify and hold harmless to the fullest extent permitted
by applicable law the Consultant, its affiliates and associates, each of the
Jordan Affiliates, and each of the respective owners, partners, officers,
directors, employees and agents of each of the foregoing, from and against any
loss, liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company
and its subsidiaries.
10. Any payments paid by the Company under this Agreement shall not
be subject to set-off and shall be increased by the amount, if any, of any
taxes (other than income taxes) or other governmental charges levied in
respect of such payments, so that the Consultant is made whole for such taxes
or charges.
11. (a) This Agreement may not be modified, waived, terminated or
amended except expressly by an instrument in writing signed by the Consultant
and the Company.
(b) This Agreement may be assigned by either party hereto without
the consent of the other party, provided, however, such assignment shall not
relieve such party from its obligations hereunder. Any assignment of this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
(c) In the event that any provision of this Agreement shall be
held to be void or unenforceable in whole or in part, the remaining provisions
of this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereinafter specify by written notice to the other party.
(e) If at any time after the date upon which this Agreement is
executed, the Company acquires or creates one or more subsidiary corporations
(a "Subsequent Subsidiary"), the Company shall cause such Subsequent Subsidiary
to be subject to this Agreement and all references herein to the Company's
"direct and indirect subsidiaries" shall be interpreted to include all
Subsequent Subsidiaries.
(f) Each subsidiary of the Company shall be jointly and severally
liable and obligated hereunder with respect to each obligation, responsibility
and liability of the Company, as if a direct obligation of such subsidiary.
<PAGE>
(g) No waiver by either party of any breach of any provision of
this Agreement shall be deemed a continuing waiver or a waiver of any preceding
or succeeding breach of such provision or of any other provision herein
contained.
(h) Except as provided by that certain Termination Agreement, of
even date herewith, by and among certain of the parties hereto, this Agreement
sets forth the entire understanding of the Company and the Consultant, and
supersedes all prior agreements, arrangements and communications, whether oral
or written, with respect to the subject matter hereof.
(i) The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
(j) This Agreement shall be governed by the internal laws (and not
the law of conflicts) of the State of Illinois.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
JORDAN INDUSTRIES, INC.
By:
-------------------------------------
Name: Gordon L. Nelson, Jr.
Senior Vice President
THE IMPERIAL ELECTRIC COMPANY
THE SCOTT MOTORS COMPANY
GEAR RESEARCH, INC.
MOTORS AND GEARS HOLDINGS, INC.
MOTORS AND GEARS, INC.
MOTORS AND GEARS INDUSTRIES, INC.
MERKLE-KORFF INDUSTRIES, INC.
FIR GROUP HOLDINGS, INC.
MOTORS AND GEARS AMSTERDAM B.V.
MOTORS AND GEARS HOLDINGS
AMSTERDAM B.V.
FIR GROUP HOLDINGS ITALIA, S.r.l.
CONSTRUGIONI INTALIANE MOTORI
ELETTRICI, S.p.a.
SELIOSISTERNI, S.p.a.
FIR ELECTROMECCANICA, S.p.a.
By:
-------------------------------------
Name: Thomas H. Quinn
Authorized Officer
<PAGE>
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT is dated as of July 25, 1997, by and among
The Jordan Company, Jordan Industries, Inc., an Illinois corporation ("Jordan
Industries"), JII, Inc., a Delaware corporation ("JII"), TJC Management
Corporation, a Delaware corporation ("TJC", and together with Jordan Industries
and JII, the "Consultants"), and each of the other parties a signatory hereto
(together with Jordan Industries, JII and TJC, the "Subject Companies").
W I T N E S S E T H:
WHEREAS, the Consultants and the Subject Companies desire to terminate
all prior arrangements, practices and agreements whereby any of the Consultants
provided advisory, consulting or management services to the Subject Companies
in consideration for advisory, consulting or management fees (the "Old
Consulting Agreements"), other than the provisions thereof relating to
indemnification by the parties thereto, and replace the Old Consulting
Agreements with the agreements listed on the attached Exhibit B (the "New
Consulting Agreements").
WHEREAS, the termination of the Old Consulting Agreements is
contingent upon the consummation of the offering of $120,000,000 initial
aggregate principal amount of 10 3/8% Senior Notes due 2007 of Jordan
Industries (the "Offering").
NOW, THEREFORE, it is agreed as follows:
1. Termination of the Old Consulting Agreements.
(a) Effective upon the completion of the Offering, the Old
Consulting Agreements, other than the provisions thereof relating to
indemnificaiton by the parties thereto, shall be terminated and shall have no
further force or effect. The provisions of any tax sharing agreements and notes
evidencing intercompany borrowings between or among the parties hereto shall
not affected by this Agreement.
(b) In connection with the termination of the Old Consulting
Agreements and simultaneously with the consummation of the JTP Recapitalization
(as such term is defined in the Offering Circular, dated July 21, 1997, used in
connection with the Offering) each of AIM Electronics Corporation, Jordan
Telecommunications Product Group, Inc., Jordan Telecommunications Product
Group-Europe, Inc., Vitelec Electronics Limited, LoDan West, Inc., Johnson
Components, Inc., Viewsonics, Inc., Shanghai Viewsonics Electronics Co.,
<PAGE>
Ltd., Adapt Communication Supply Co. S. Fl. Inc., Northern Technologies
Holdings, Inc., Northern Technologies, Inc., Dura-Line Corporation, Dura-Line
Mexico S.A. de C.V., Dura-Line CT s.r.o., Dura-Line Limited, Dura-Line (Israel)
LTD., Dura-Line International, Inc., Dura-Line Shanghai Plastics Co., Ltd.,
Diversified Wire & Cable, Inc., Bond Holdings, Inc., Bond Technologies, Inc.,
Cable Spec Ltd., Balance Mfg. Services of Southern California, Inc., Balance
Mfg. Services, Inc., BSM, Inc., and Cambridge Products Corporation
(collectively, the "JTP Subsidiaries") shall pay such accrued and unpaid fees
and interest owed by them under the Old Consulting Agreement, as are set forth
in Section I of Exhibit A hereto.
(c) In connection with the termination of the Old Consulting
Agreements, each Subject Company other than the JTP Subsidiaries shall pay such
accrued and unpaid fees and interest owed under the Old Consulting Agreements
as are set forth in Section II of Exhibit A hereto at any time, and from time
to time, prior to January 31, 1998; provided, that any amounts unpaid on and
after January 31, 1998 will be payable upon demand, together with interest
accrued on any unpaid amounts accruing at a rate of 1% for each 30 day period
such amounts remain unpaid.
(d) The Consultants and their direct and indirect affiliates
shall have no liability to any of the Subject Companies on account of any
advice which was rendered to any of them, whether under the Old Consulting
Agreements or otherwise; provided, that the Consultants believed in good faith
that such advice was useful or beneficial to the Subject Companies at the time
it was rendered, including any advice rendered under the Old Consulting
Agreements. The Consultants and their affiliates will not be liable to any of
the Subject Companies as a result of or in connection with services or other
activities performed on behalf of any of them, whether under the Old Consulting
Agreements or otherwise, except with regard to their gross negligence or
willful misconduct.
(e) The Subject Companies will, to the fullest extent permitted
by applicable law, indemnify and hold harmless the Consultants and their direct
and indirect affiliates and associates, and each of their owners, partners,
officers, employees and agents, from and against any loss, liability, damage,
claim or expenses (including the fees and expenses of counsel) arising as a
result or in connection with any services or other activities on behalf of the
Subject Companies, including any services or activities rendered under the Old
Consulting Agreements.
II. Miscellaneous.
(a) This Agreement sets forth the entire understanding of the
parties hereto. This Agreement or any provision hereof may not be modified,
waived, terminated or amended except expressly by an instrument in writing
signed by the Consultants and the Subject Companies.
2
<PAGE>
(b) This Agreement may not be assigned by any of the parties
without the consent of all of the other parties hereto, and shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns upon such permitted assignment.
(c) In the event that any provision of this Agreement shall be
held to be void or unenforceable, in whole or in part, the remaining provisions
of this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice
given hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereafter specify by written notice to the other party.
(e) No waiver by any party of any breach of any provision of this
Agreement shall be deemed a continuing waiver or a waiver of any preceding or
succeeding breach of such provision or of any other provision herein contained.
(f) The Consultants and their respective personnel shall, for
purposes of this Agreement, be independent contractors with respect to the
Subject Companies.
(g) This Agreement shall be governed by the internal laws (and
not the law of conflicts) of the State of New York.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE JORDAN COMPANY
By:
------------------------------------
Name: John W. Jordan, II
Title: Partner
TJC MANAGEMENT CORPORATION
By:
------------------------------------
Name: G. Robert Fisher
Title: Secretary
JORDAN INDUSTRIES, INC.
JII, INC.
JI PROPERTIES, INC.
J.I. FINANCE COMPANY
CAPE CRAFTSMAN, INC.
WELCOME HOME, INC.
HOME AGAIN STORES, INC.
THE IMPERIAL ELECTRIC COMPANY
THE SCOTT MOTORS COMPANY
GEAR RESEARCH, INC.
MOTORS AND GEARS HOLDINGS, INC.
MOTORS AND GEARS, INC.
MOTORS AND GEARS INDUSTRIES, INC.
MERKLE-KORFF INDUSTRIES, INC.
FIR GROUP HOLDINGS, INC.
MOTORS AND GEARS AMSTERDAM B.V.
MOTORS AND GEARS HOLDINGS
AMSTERDAM B.V.
FIR GROUP HOLDINGS ITALIA, S.r.l.
CONSTRUGIONI INTALIANE MOTORI
ELETTRICI, S.p.a.
SELIOSISTERNI, S.p.a.
FIR ELECTROMECCANICA, S.p.a.
SPL HOLDINGS, INC.
VALMARK INDUSTRIES, INC.
PAMCO PRINTED TAPE & LABEL CO., INC.
SALES PROMOTION ASSOCIATES, INC.
SEABOARD FOLDING BOX CORPORATION
BEEMAK PLASTICS, INC.
4
<PAGE>
JII/SALES PROMOTION ASSOCIATES, INC.
THE OLD IMPERIAL ELECTRIC COMPANY
THE OLD SCOTT MOTORS COMPANY
OLD GEAR RESEARCH, INC.
DACCO, INCORPORATED
DETROIT TRANSMISSION PRODUCTS CO.
DACCO/DETROIT OF OHIO, INC.
ABC TRANSMISSION PARTS
WAREHOUSE, INC.
DACCO/DETROIT OF MINNESOTA, INC
DACCO/DETROIT OF INDIANA, INC.
DACCO/DETROIT OF
NORTH CAROLINA, INC.
DACCO/DETROIT OF MEMPHIS, INC.
DACCO/DETROIT OF ALABAMA, INC.
DACCO/DETROIT OF MICHIGAN, INC.
DACCO/DETROIT OF TEXAS, INC.
DACCO/DETROIT OF WEST VIRGINIA, INC.
BORG MANUFACTURING
NASHVILLE TRANSMISSION PARTS, INC.
DACCO/DETROIT OF FLORIDA, INC.
DACCO/DETROIT OF COLORADO, INC.
DACCO/DETROIT OF MISSOURI, INC.
DACCO/DETROIT OF ARIZONA, INC.
DACCO/DETROIT OF NEBRASKA, INC.
DACCO/DETROIT OF NEW JERSEY, INC.
DACCO/DETROIT OF OKLAHOMA, INC.
DACCO/DETROIT OF
SOUTH CAROLINA, INC.
DACCO INTERNATIONAL, INC.
PARSONS PRECISION PRODUCTS, INC.
SATE-LITE MANUFACTURING COMPANY
RIVERSIDE BOOK AND BIBLE HOUSE,
INCORPORATED
AIM ELECTRONICS CORPORATION
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP, INC.
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP - EUROPE, INC.
VITELEC ELECTRONICS LIMITED
LODAN WEST, INC.
JOHNSON COMPONENTS, INC.
VIEWSONICS, INC.
5
<PAGE>
SHANGHAI VIEWSONICS ELECTRONICS
CO., LTD.
ADAPT COMMUNICATION
SUPPLY CO. S. FL., INC.
NORTHERN TECHNOLOGIES
HOLDINGS, INC.
NORTHERN TECHNOLOGIES, INC.
DURA-LINE CORPORATION
DURA-LINE MEXICO S.A. de C.V.
DURA-LINE CT s.r.o.
DURA-LINE LIMITED
DURA-LINE (ISRAEL) LTD
DURA-LINE INTERNATIONAL, INC.
DURA-LINE SHANGHAI PLASTICS CO., LTD.
DIVERSIFIED WIRE & CABLE CO.
BOND HOLDINGS, INC.
BOND TECHNOLOGIES, INC.
CABLE SPEC. LTD.
BALANCE MFG. SERVICES OF
SOUTHERN CALIFORNIA, INC.
BALANCE MFG. SERVICES, INC.
BSM, INC.
CAMBRIDGE PRODUCTS CORPORATION
By:
------------------------------------
Name: Thomas H. Quinn
Title: Authorized Officer
6
<PAGE>
EXHIBIT A:
[TO COME FROM TOM SPIELBERGER THURSDAY MORNING]
I. Fees and accrued interest for JTP Subsidiaries
Name Fees Interest Consultant
---- ---- -------- ----------
II. Fees and accrued interest for other Subject Companies
Name Fees Interest Consultant
---- ---- -------- ----------
<PAGE>
EXHIBIT B:
New Consulting Agreements
<PAGE>
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of July 25, 1997 ("this
Agreement"), is by and among New Johnson Components, Inc., a Delaware
corporation, (the "Indemnitor") and Thomas C. Spielberger ("Indemnitee").
WITNESSETH
WHEREAS, highly competent persons are becoming more reluctant to
serve publicly-held corporations as directors, executive officers, or in other
capacities unless they are provided with adequate protection through insurance
and indemnification against inordinate risks of claims and actions against
them arising out of their service to and activities on behalf of the
corporation; and
WHEREAS, the current difficulties or virtual impossibility of
obtaining adequate insurance and uncertainties relating to indemnification
have increased the difficulty of attracting and retaining such persons; and
WHEREAS, the Boards of Directors of the Indemnitor have determined
that the inability to attract and retain such persons is detrimental to the
best interests of the Indemnitor's stockholders and that the Indemnitor should
act to assure such persons that there will be increased certainty of such
protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Indemnitor
contractually to obligate themselves to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Indemnitor free from undue concern that they will not be so
indemnified; and
WHEREAS, the Certificate of Incorporation (the "Certificate") and the
Bylaws (the "Bylaws") of each of the Indemnitor provide for the
indemnification of the directors, officers, agents and employees of the
Indemnitor to the full extent permitted by the General Corporation Law of the
State of Delaware (the "Act"). The Certificate, the Bylaws and the Act
specifically provide that they are not exclusive, and thereby contemplate that
contracts may be entered into between the Indemnitor and the members of their
Boards of Directors and their executive officers with respect to
indemnification of such directors and their executive officers; and
WHEREAS, pursuant to Jordan Telecommunication Products, Inc.'s
("JTP") proposed $190,000,000 Senior Note, $120,000,000 Discount Note and
$25,000,000 Senior Exchangeable Preferred Stock Units offering pursuant to
that certain Offering Circular, dated July 21, 1997 (the "Offering"), some of
the assets of predecessor companies to the Indemnitor are being purchased from
Jordan Industries, Inc. by JTP, which has formed some of the Indemnitor for
this purpose,
<PAGE>
as part of a recapitalization which will make JTP a stand-alone, industry
focused company. Therefore, the newly formed Indemnitor desire to enter into
this Indemnification Agreement with Indemnitee, which is substantially similar
to Indemnification Agreements currently in effect between Indemnitee and other
subsidiaries of JTP; and
WHEREAS, this Agreement is being entered into as part of Indemnitee's
total compensation for serving as a director and/or an executive officer, as
the case may be;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Indemnitor jointly and severally on the one hand and
Indemnitee on the other do hereby covenant and agree as follows:
SECTION 1. Service by Indemnitee.
Indemnitee agrees to serve as director of the Indemnitor and/or
executive officer of the Indemnitor if so designated by the Indemnitor and
appointed by the respective Boards of Directors, and agrees to the
indemnification provisions provided for herein. Indemnitee may at any time and
for any reason resign from such position (subject to any other contractual
obligation or other obligation imposed by operation of law), in which event
the Indemnitor shall have no obligation under this Agreement to continue
Indemnitee in any such position.
SECTION 2. Indemnification.
The Indemnitor shall indemnify Indemnitee to the fullest extent
permitted by applicable law in effect on the date hereof, notwithstanding that
such indemnification is not specifically authorized by this Agreement, the
Certificate, the Bylaws, the Act or otherwise. In the event of any change,
after the date of this Agreement, in any applicable law, statute or rule
regarding the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent that they would
expand Indemnitee's rights hereunder, shall be within the scope of
Indemnitee's rights and the Indemnitor's obligations hereunder, and, to the
extent that they would narrow Indemnitee's rights hereunder, shall be excluded
from this Agreement; provided, however, that any change that is required by
applicable laws, statutes or rules to be applied to this Agreement shall be so
applied regardless of whether the effect of such change is to narrow
Indemnitee's rights hereunder. Without diminishing the scope of the
indemnification provided by this Section 2, the rights of indemnification of
Indemnitee provided hereunder shall include indemnification in respect of the
Offering and shall not be limited to those rights set forth hereinafter,
except to the extent expressly prohibited by applicable law.
-2-
<PAGE>
SECTION 3. Action or Proceeding Other Than an Action by or in the
Right of the Indemnitor.
Indemnitee shall be entitled to the indemnification rights provided
in this Section 3 if he is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative in nature, other than an
action by or in the right of the Indemnitor, by reason of the fact that he is
or was a director, officer, employee, agent or fiduciary of the Indemnitor or
is or was serving at the request of the Indemnitor as a director, officer,
employee, agent, partner, trustee or fiduciary of any other entity, or by
reason of anything done or not done by him in any such capacity. Pursuant to
this Section 3, Indemnitee shall be indemnified against reasonable costs and
expenses (including, but not limited to, counsel fees, costs, judgments,
penalties, fines, ERISA excise taxes, and amounts paid in settlement)
(collectively, "Damages") actually and reasonably incurred by him in
connection with such action, suit or proceeding (including, but not limited
to, the investigation, defense or appeal thereof), if, in the case of conduct
in his official capacity with the corporation, he acted in good faith and in
the Indemnitor's best interests, and in all other cases, he acted in good
faith and was at least not opposed to the Indemnitor's best interests, and
with respect to any criminal action or proceeding had no reasonable cause to
believe his conduct was unlawful, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have
been finally adjudged to be liable for (i) negligence or misconduct in the
performance of his duty to any of the Indemnitor unless and only to the extent
that the court in which such action or suit was brought, or any other court of
competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses as
such court shall deem proper or (ii) the indemnification does not relate to
any liability arising under Section 16(b) of the Securities Exchange Act of
1934, as amended, or any of the rules or regulations promulgated thereunder.
Notwithstanding the foregoing, the Indemnitor shall be required to indemnify
an officer or director in connection with an action, suit or proceeding
initiated by such person only if such action, suit or proceeding was
authorized by the Board or a committee thereof. No indemnity pursuant to this
Agreement shall be provided by the Indemnitor for Damages that have been paid
directly to Indemnitee by an insurance carrier under a policy of directors'
and officers' liability insurance maintained by the Indemnitor.
SECTION 4. Actions by or in the Right of the Indemnitor.
Indemnitee shall be entitled to the indemnification rights provided
in this Section 4 if he is or was made a party or is threatened to be made a
party to any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative brought by or in the
right of the Indemnitor to procure a judgment in their favor by reason of the
fact that he is or was a director, officer, employee, agent or fiduciary of
the Indemnitor or is or was serving at the request of the Indemnitor as a
director, officer, employee, agent, partner, trustee or fiduciary of any other
entity by reason of anything done or not done by
-3-
<PAGE>
him in any such capacity. Pursuant to this Section 4, Indemnitee shall be
indemnified against Damages (as defined in Section 3 of Agreement) actually
and reasonably incurred by him in connection with such action or suit
(including, but not limited to the investigation, defense, settlement or
appeal thereof) if, in the case of conduct in his official capacity with the
corporation, he acted in good faith and in the Indemnitor's best interests,
and in all other cases, he acted in good faith and was at least not opposed to
the Indemnitor's best interests, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have
been finally adjudged to be liable for (i) negligence or misconduct in the
performance of his duty to any of the Indemnitor unless and only to the extent
that the court in which such action or suit was brought, or any other court of
competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses as
such court shall deem proper or (ii) the indemnification does not relate to
any liability arising under Section 16(b) of the Securities Exchange Act of
1934, as amended, or any of the rules or regulations promulgated thereunder.
Notwithstanding the foregoing, the Indemnitor shall be required to indemnify
an officer or director in connection with an action, suit or proceeding
initiated by such person only if such action, suit or proceeding was
authorized by the Board or a committee thereof. No indemnity pursuant to this
Agreement shall be provided by the Indemnitor for Damages that have been paid
directly to Indemnitee by an insurance carrier under a policy of directors'
and officers' liability insurance maintained by the Indemnitor.
SECTION 5. Indemnification for Costs, Charges and Expenses of
Successful Party.
Notwithstanding the other provisions of this Agreement, to the extent
that Indemnitee has served as a witness on behalf of the Indemnitor or has
been successful, on the merits or otherwise, including, without limitation,
the dismissal of an action without prejudice, in defense of any action, suit
or proceeding referred to in Section 3 and Section 4 hereof, or in defense of
any claim, issue or matter therein, shall be indemnified against all
reasonable costs, charges, and expenses (including counsel fees) actually and
reasonably incurred by him or on his behalf in connection therewith.
SECTION 6. Partial Indemnification
If Indemnitee is only partially successful in the defense,
investigation, settlement or appeal of any action, suit, investigation or
proceeding described in Section 3 or 4 hereof, and as a result is not entitled
under Section 5 hereof to indemnification by the Company for the total amount
of the expenses (including attorneys' fees), costs, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by him,
the Company shall nevertheless indemnify Indemnitee, as a matter of right
pursuant to Section 5 hereof, to the extent Indemnitee has been partially
successful.
-4-
<PAGE>
SECTION 7. Determination of Entitlement to Indemnification.
Upon written request by Indemnitee for indemnification pursuant to
Section 3 or Section 4 hereof, the entitlement of Indemnitee to
indemnification pursuant to the terms of this Agreement shall be determined by
the following person or persons who shall be empowered to make such
determination: (a) the Boards of Directors of the Indemnitor by a majority
vote of a quorum consisting of Disinterested Directors (as hereinafter
defined); or (b) if such a quorum is not obtainable or, even if obtainable, if
the Board of Directors by the majority vote of Disinterested Directors so
directs, by Independent Counsel (as hereinafter defined) in a written opinion
to the Board of Directors, a copy of which shall be delivered to Indemnitee;
or (c) by the stockholders, but shares owned by or voted under the control of
directors, including the Indemnitee, who are at the time parties to the
proceeding may not be voted on the determination. Such Independent Counsel
shall be selected by the Board of Directors and approved by Indemnitee. Upon
failure of the Board of Directors to so select such Independent Counsel or
upon failure of Indemnitee to so approve, such Independent Counsel shall be
selected by the Chancellor of the State of Delaware or such other person as
the Chancellor shall designate to make such selection. Such determination of
entitlement to indemnification shall be made no later than sixty (60) days
after receipt by the Indemnitor of a written request for indemnification. Such
request shall include documentation or information which is necessary for such
determination and which is reasonably available to Indemnitee. Any Damages
incurred by Indemnitee in connection with his request for indemnification
hereunder shall be borne by the Indemnitor. The Indemnitor hereby indemnify
and agree to hold Indemnitee harmless therefrom irrespective of the outcome of
the determination of Indemnitee's entitlement to indemnification. If the
person making such determination shall determine that Indemnitee is entitled
to indemnification as to part (but not all) of the application for
indemnification, such person shall reasonably prorate such partial
indemnification among such claims, issues or matters.
SECTION 8. Presumptions and Effect of Certain Proceedings.
The Secretary of the Indemnitor shall, promptly upon receipt of
Indemnitee's request for indemnification, advise in writing its Board of
Directors and the Boards of Directors of the other Indemnitor or such other
person or persons empowered to make the determination as provided in Section 7
that Indemnitee has made such request for indemnification. Indemnitee shall be
presumed to be entitled to indemnification hereunder and the Indemnitor shall
have the burden of proof in the making of any determination contrary to such
presumption. If the person or persons so empowered to make such determination
shall have failed to make the requested indemnification within 60 days after
receipt by the Indemnitor of such request, the requisite determination of
entitlement to indemnification shall be deemed to have been made and
Indemnitee shall be absolutely entitled to such indemnification, absent actual
and material fraud in the request for indemnification. The termination of any
action, suit, investigation or proceeding described in Section 3 or Section 4
hereof by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself (a) create a presumption
that Indemnitee did not act in good faith and in a manner
-5-
<PAGE>
which he reasonably believed to be in or not opposed to the best interests of
the Indemnitor, and, with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was unlawful or
(b) otherwise adversely affect the rights of Indemnitee to indemnification
except as may be provided herein.
SECTION 9. Advancement of Expenses and Costs.
All reasonable expenses and costs incurred by Indemnitee who is party
to a proceeding (including counsel fees, retainers and advances of
disbursements required of Indemnitee) (collectively, the "Expense Advance")
shall be paid by the Indemnitor in advance of the final disposition of such
action, suit or proceeding at the request of Indemnitee within twenty (20)
days after the receipt by the Indemnitor of a statement or statements from
Indemnitee requesting such advance or advances from time to time. Such
statement or statements shall reasonably evidence the expenses and costs
incurred by him in connection therewith. The Indemnitor's obligation to
provide an Expense Advance is subject to the following conditions: (i) if the
proceeding arose in connection with Indemnitee's service as a director and/or
executive officer of the Indemnitor (and not in any other capacity in which
Indemnitee rendered service, including service to any related company), then
the Indemnitee or his representative shall have executed and delivered to the
Indemnitor an undertaking, which need not be secured and shall be accepted
without reference to Indemnitee's financial ability to make repayment, by or
on behalf of Indemnitee to repay all Expense Advance if and to the extent that
it shall ultimately be determined by a final, unappealable decision rendered
by a court having jurisdiction over the parties and the question that
Indemnitee is not entitled to be indemnified for such Expense Advance under
this Agreement or otherwise; (ii) Indemnitee shall give the Indemnitor such
information and cooperation as it may reasonably request and as shall be
within Indemnitee's power; and (iii) Indemnitee shall furnish, upon request by
the Indemnitor and if required under applicable law, a written affirmation of
Indemnitee's good faith belief that any applicable standards of conduct have
been met by Indemnitee. Indemnitee's entitlement to such Expense Advance shall
include those incurred in connection with any proceeding by Indemnitee seeking
an adjudication pursuant to this Agreement. In the event that a claim for an
Expense Advance is made hereunder and is not paid in full within twenty (20)
days after written notice of such claim is delivered to the Indemnitor,
Indemnitee may, but need not, at any time thereafter bring suit against any of
the Indemnitor to recover the unpaid amount of the claim.
SECTION 10. Remedies of Indemnitee in Cases of
Determination not to Indemnify or to Advance
Expenses.
In the event that a determination is made that Indemnitee is not
entitled to indemnification hereunder or if payment has not been timely made
following a determination of entitlement to indemnification pursuant to
Sections 7 and 8, or if expenses are not advanced pursuant to Section 9,
Indemnitee shall be entitled to a final adjudication in an appropriate court
of the State of Delaware or any other court of competent jurisdiction of his
entitlement to such indemnification or advance. The Indemnitor shall not
oppose
-6-
<PAGE>
Indemnitee's right to seek any such adjudication or any other claim. Such
judicial proceeding shall be made de novo and Indemnitee shall not be
prejudiced by reason of a determination (if so made) that he is not entitled
to indemnification. If a determination is made or deemed to have been made
pursuant to the terms of Section 7 or Section 8 hereof that Indemnitee is
entitled to indemnification, the Indemnitor shall be bound by such
determination and is precluded from asserting that such determination has not
been made or that the procedure by which such determination was made is not
valid, binding and enforceable. The Indemnitor further agree to stipulate in
any such court that the Indemnitor are bound by all the provisions of this
Agreement and are precluded from making any assertion to the contrary. If the
court shall determine that Indemnitee is entitled to any indemnification
hereunder, the Indemnitor shall pay all reasonable Damages actually incurred
by Indemnitee in connection with such adjudication (including, but not limited
to, any appellate proceedings).
SECTION 11. Other Rights to Indemnification.
The indemnification and advancement of expenses (including counsel
fees) and costs provided by this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may now or in the future be entitled
under any provision of the By-laws, provisions of the Certificate, vote of
stockholders or Disinterested Directors, provision of law or otherwise.
SECTION 12. Counsel Fees and Other Expenses to Enforce Agreement.
In the event that Indemnitee is subject to or intervenes in any
proceeding in which the validity or enforceability of this Agreement is at
issue or seeks an adjudication or award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee, if he
prevails in whole or in part in such action, shall be entitled to recover from
the Indemnitor, and shall be indemnified by the Indemnitor against, any
reasonable expenses for counsel fees and disbursements actually and reasonably
incurred by him.
SECTION 13. Duration of Agreement.
This Agreement shall continue until and terminate upon the later of
(a) 10 years after Indemnitee has ceased to occupy any of the positions or
have any of the relationships described in Section 3 or Section 4 of this
Agreement or (b) the final termination of all pending or threatened actions,
suits, proceedings or investigations with respect to Indemnitee. This
Agreement shall be binding upon the Indemnitor and their successors and
assigns and shall inure to the benefit of Indemnitee and his spouse, assigns,
heirs, devisees, executors, administrators or other legal representatives.
-7-
<PAGE>
SECTION 14. Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby and (b) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, all portions of any paragraph of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
SECTION 15. Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original, but all of which
together shall constitute one and the same Agreement. Only one such
counterpart signed by the party against whom enforceability is sought needs to
be produced to evidence the existence of this Agreement.
SECTION 16. Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement
or to affect the construction thereof.
SECTION 17. Definitions.
For purposes of this Agreement:
(a) "Disinterested Director" shall mean a director of the Indemnitor
who is not or was not a party to the action, suit, investigation or proceeding
in respect of which indemnification is being sought by Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member of a law
firm that neither is presently nor in the past five years has been retained to
represent (i) the Indemnitor or Indemnitee in any matter material to either
such party or (ii) any other party to the action, suit, investigation or
proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the
Indemnitor or Indemnitee in an action to determine Indemnitee's right to
indemnification under this Agreement.
-8-
<PAGE>
SECTION 18. Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
SECTION 19. Mutual Acknowledgment.
The Indemnitor and Indemnitee acknowledge that, in certain instances,
federal law or public policy may override applicable state law and prohibit
the Indemnitor from indemnifying Indemnitee under this Agreement or otherwise.
For example, the Indemnitor and Indemnitee acknowledge that the U.S.
Securities and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain
federal securities laws, and federal legislation prohibits indemnification for
certain ERISA violations. Furthermore, Indemnitee understands and acknowledges
that the Indemnitor have undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Indemnitor's right under
public policy to indemnify Indemnitee.
SECTION 20. Notice by Indemnitee.
Indemnitee agrees promptly to notify the Indemnitor in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any matter which may be subject to
indemnification covered hereunder, either civil, criminal or investigative.
SECTION 21. Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed or if (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed, to the following addresses:
(a) if to Indemnitee:
c/o The Jordan Company
9 West 57th Street, Suite 4000
New York, NY 10019
-9-
<PAGE>
(b) if to the Indemnitor:
c/o Jordan Telecommunication Products, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Attention: President
or to such other address as may have been furnished to Indemnitee by the
Indemnitor or to the Indemnitor by Indemnitee, as the case may be.
SECTION 22. Other Agreements.
This Agreement restates and supersedes, but does not limit or negate,
any indemnification, rights or interests of Indemnitee under any prior
agreements between the Indemnitor and Indemnitee.
SECTION 23. Governing Law.
The parties agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
NEW JOHNSON COMPONENTS, INC.
By:
-----------------------------------
Thomas H. Quinn
Authorized Officer
INDEMNITEE:
--------------------------------------
Name: Thomas C. Spielberger
-11-
<PAGE>
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1992 1993 1994 1995 1996
---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense (1).................... $ 37,024 $39,686 $39,482 $ 45,231 $ 60,339
Rental expense included in fixed
charges................................ 1,955 2,157 2,856 3,755 4,887
---------- --------- --------- ---------- ----------
Total fixed charges.................... 38,979 41,843 42,338 48,986 65,226
---------- --------- --------- ---------- ----------
Earnings:
Pre-tax (loss) income................... (13,299) (2,817) 27,689 (11,773) (47,410)
Plus: fixed charges..................... 38,979 41,843 42,338 48,986 65,226
---------- --------- --------- ---------- ----------
Total earnings......................... $ 25,680 $39,026 $70,027 $ 37,213 $ 17,816
---------- --------- --------- ---------- ----------
Ratio of earnings to fixed charges (2) .. -- -- 1.7x -- --
========== ========= ========= ========== ==========
</TABLE>
- ------------
(1) Interest expense excludes amortization of deferred financing fees.
(2) Earnings were insufficient to cover fixed charges by $13.3 million,
$2.8 million, $11.8 million and $47.4 million for the years ended
December 31, 1992, 1993, 1995 and 1996, respectively. However, this
deficiency reflects non-cash charges for depreciation and amortization
of goodwill and other intangibles, and amortization of financing costs
and debt discount of $21.1 million, $19.3 million, $23.4 million and
$33.4 million for the respective fiscal years discussed above. Earnings
were sufficient to cover fixed charges in 1994 due to the recognition
of a gain on the sale of a partial interest in the Company's currently
deconsolidated subsidiary, Welcome Home.
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report, dated March 27, 1997, on the consolidated balance
sheets of Jordan Industries, Inc. as of December 31, 1995 and 1996, and the
related consolidated statements of operations, shareholders' equity (net
capital deficiency), and cash flows for each of the three years in the period
ended December 31, 1996; our report, dated April 10, 1996, on the combined
balance sheet of Viewsonics, Inc. and Shanghai Viewsonics Electronic Co.,
Ltd. as of December 31, 1995, and the related combined statements of income,
stockholder's equity, and cash flows for the year then ended; in the
Registration Statement (Form S-4 No. 333-XXXXX) and related Prospectus of
Jordan Industries, Inc. for the registration of $120,000,000 of 10 3/8%
Series B Senior Notes due 2007 and $213,635,725 of 11 3/4% Series B Senior
Subordinated Discount Debentures due 2009.
Ernst & Young LLP
Chicago, Illinois
August 26, 1997
<PAGE>
EXHIBIT 23.2 (CONTINUED)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our report, dated March 27, 1997, on the
consolidated financial statement schedule of Jordan Industries, Inc. as of
December 31, 1995 and 1996 and for the three years in the period ended
December 31, 1996, in the Registration Statement (Form S-4 No. 333-XXXXX) and
related Prospectus of Jordan Industries, Inc. for the registration of
$120,000,000 of 10 3/8% Series B Senior Notes due 2007 and $213,635,725 of 11
3/4% Series B Senior Subordinated Discount Debentures due 2009.
Ernst & Young LLP
Chicago, Illinois
August 26, 1997
<PAGE>
EXHIBIT 23.3
[MELLEN, SMITH & PIVOZ, P.C. LETTERHEAD]
CONSENT OF MELLEN, SMITH & PIVOZ, P.C., INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report, dated February 13, 1997, on the balance sheet of
Diversified Wire & Cable, Inc. as of December 31, 1996, and the related
statement of operations, changes in stockholders' equity, and cash flows for
the period June 25, 1996 to December 31, 1996, in the Registration Statement
(Form S-4 No. 333-XXXXX) and related Prospectus of Jordan Industries, Inc.
for the registration of $120,000,000 of 10 3/8% Series B Senior Notes due
2007 and $213,635,725 of 11 3/4% Series B Subordinated Discount Debentures
due 2009.
/s/ Mellen, Smith & Pivoz,
----------------------------------
Mellen, Smith & Pivoz, P.C.
Bingham Farms, Michigan
August 27, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF BLACKMAN KALLICK BARTELSTEIN, LLP,
INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report, dated February 11, 1997, except for Note 11, as to
which the date is June 6, 1997, on the balance sheet of Paw Print Mailing
List Services, Inc. as of December 31, 1996, and the related statements of
loss and accumulated deficit and cash flows for the period from November 9,
1996 (inception) through December 31, 1996, in the Registration Statement
(Form S-4 No. 333-XXXXX) and related Prospectus of Jordan Industries, Inc.
for the registration of $120,000,000 of 10-3/8% Series B Senior Notes due
2007 and $213,635,725 of 11-3/4% Series B Senior Subordinated Discount
Debentures due 2009.
/s/ Blackman Kallick Bartelstein, LLP
---------------------------------------
Blackman Kallick Bartelstein, LLP
Chicago, Illinois
August 27, 1997
<PAGE>
[INSERT DOCUMENT TEXT HERE]
<PAGE>
EXHIBIT 23.6
[CANBY, MALONEY & CO., INC. LETTERHEAD]
CONSENT OF CANBY, MALONEY & CO., INC. INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report, dated February 15, 1996, on the combined balance
sheets of Seaboard Folding Box Corp. and affiliates as of December 31, 1994
and 1995, and the related combined statements of income, stockholder's
equity, and cash flows for the years then ended; in the Registration
Statement (Form S-4 No. 333-XXXXX) and related Prospectus of Jordan
Industries, Inc. for the registration of $120,000,000 of 10-3/8% Series B
Senior Notes due 2007 and $213,635,725 of 11-3/4% Series B Senior
Subordinated Discount Debentures due 2009.
/s/ Canby, Maloney & Co., Inc.
----------------------------------
Canby, Maloney & Co., Inc.
Framingham, MA
August 26, 1997
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
JORDAN INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Illinois 36-3598114
(State of Incorporation) (I.R.S. Employer
Identification No.)
Arborlake Centre, Suite 550
1751 Lake Cook Road
Deerfield, IL 60015
(Address of Principal Executive Offices) (Zip Code)
10 3/8% SERIES B SENIOR NOTES DUE 2007
11 3/4% SERIES B SENIOR SUBORDINATED DISCOUNT DEBENTURES DUE 2009
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority is incorporated by reference to Registration Number
333-24029.
* Incorporated by reference to Registration Number 22-25656.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested,
all in the City of Saint Paul and State of Minnesota on the 20th day of August,
1997.
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
--------------------------------
Richard H. Prokosch
Trust Officer
/s/ S. Christopherson
- ------------------------------
S. Christopherson
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, FIRST TRUST NATIONAL ASSOCIATION hereby consents that reports
of examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: August 6, 1997
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------------
Richard H. Prokosch
Trust Officer
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR TENDERS OF
$120,000,000 AGGREGATE PRINCIPAL AMOUNT OF
10-3/8% SERIES A SENIOR NOTES DUE 2007
$214,036,493 PRINCIPAL AMOUNT AT MATURITY
OF 11-3/4% SERIES A SENIOR SUBORDINATED DISCOUNT DEBENTURES DUE 2009
JORDAN INDUSTRIES, INC.
PURSUANT TO THE PROSPECTUS
DATED , 1997 OF JORDAN INDUSTRIES, INC.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997
(UNLESS EXTENDED)(THE "EXPIRATION DATE"). TENDERED OLD SECURITIES MAY BE
WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER.
- -------------------------------------------------------------------------------
Deliver to: First Trust National Association. Exchange Agent:
By Mail (registered or certified mail recommended), Hand or Overnight Courier:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Specialized Finance
Corporation Trust Department, Fourth Floor
By Facsimile:
(612) 244-1537
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1997 (the "Prospectus"), of Jordan Industries, Inc., an
Illinois corporation (the "Company"), and this Letter of Transmittal, which
may be amended from time to time (this "Letter"), which together constitute
the Company's offer (the "Exchange Offer") to exchange up to $120 million
aggregate principal amount of 10-3/8% Series B Senior Notes due 2007 (the "New
Senior Notes") and $214,036,493 principal amount at maturity of 11-3/4%
Series B Senior Subordinated Discount Debentures due 2009 (the "New Discount
Debentures" and together with the New Senior Notes, the "New Securities") of
the Company for a like principal amount of the Company's issued and
outstanding 10-3/8% Series A Senior Notes due 2007 (the "Old Senior Notes"
and together with the New Senior Notes, the "Senior Notes") and 11-3/4%
Series A Senior Subordinated Discount Debentures due 2009 (the "Old Discount
Debentures" and together with the New Discount Debentures, the "Discount
Debentures;" the Old Discount Debentures and Old Senior Notes are sometimes
collectively referred to as the "Old Securities" and sometimes collectively
with the New Securities, as the "Exchange Securities"), with the holders
(each holder of Old Securities, a "Holder") thereof.
For each Old Security accepted for exchange, the Holder of such Old
Security will receive a New Note having a principal amount equal to that of
the surrendered Old Security. The New Senior Notes will bear interest at a
rate of 10-3/8% per annum from July 25, 1997. The New Discount Debentures
will not bear interest prior to April 1, 2002. Thereafter, interest on the
New Discount Debentures will accrue at 11-3/4% per annum. Accordingly,
registered holders of New Securities on the relevant record date for the
first interest payment date following the consummation of the Exchange Offer
will receive interest accruing from the most recent date to which interest
has been paid or, if no interest has been paid, from July 25, 1997 with
respect to the New Senior Notes, or from April 1, 2002 with respect to the
New Discount Debentures. Old Securities accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange
Offer. Holders of Old Securities whose Old Securities are accepted for
exchange will not receive any payment in respect of interest or dividends on
such Old Securities otherwise payable on any interest payment date the record
date for which occurs on or after consummation of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of the
Automated Tender Offering Program ("ATOP") at the Depository Trust Company
("DTC"); (ii) by Holders who are ATOP members but choose not to use ATOP; or
(iii) if the Old Securities are to be tendered in accordance with the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus. See Instruction 2. Delivery
of this Letter to DTC does not constitute delivery to the Exchange Agent.
Notwithstanding anything to the contrary in the registration rights
agreements, dated July 25, 1997 and April 2, 1997, among the Company and the
original purchasers of Old Securities (the "Registration Rights Agreements"),
the Company will accept for exchange any and all Old Securities validly
tendered on or prior to 5:00 p.m., New York City time, on , 1997
(unless the Exchange Offer is extended by the Company) (the "Expiration
Date"). Tenders of Old Securities may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD SECURITIES IN THE EXCHANGE OFFER
MUST COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD SECURITIES TO THE
EXCHANGE AGENT AND NOT TO THE COMPANY.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Securities being tendered for exchange. However, the Exchange Offer is
subject to certain conditions. Please see the Prospectus under the section
titled "The Exchange Offer--Conditions to the Exchange Offer."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, Holders of Old Securities in any jurisdiction in which the
making or acceptance of the Exchange Offer would not be in compliance with
the laws of such jurisdiction.
-2-
<PAGE>
The instructions included with this Letter of Transmittal must be followed
in their entirety. Questions and request for assistance or for additional
copies of the Prospectus or this Letter of Transmittal may be directed to the
Exchange Agent at the address listed above.
-3-
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company the principal amount of Old
Securities indicated below under "Description of Old Securities," in
accordance with and upon the terms and subject to the conditions set forth in
the Prospectus, receipt of which is hereby acknowledged, and in this Letter
of Transmittal, for the purpose of exchanging each $1,000 principal amount of
Old Securities designated herein held by the undersigned and tendered hereby
for $1,000 principal amount of the New Securities. New Securities will be
issued only in integral multiples of $1,000 to each tendering Holder of Old
Securities whose Old Securities are accepted in the Exchange Offer. Holders
may tender all or a portion of their Old Securities pursuant to the Exchange
Offer.
Subject to, and effective upon, the acceptance for exchange of the Old
Securities tendered herewith in accordance with the terms of the Exchange
Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to all such Old
Securities that are being tendered hereby and that are being accepted for
exchange pursuant to the Exchange Offer. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that the Exchange
Agent also acts as the agent of the Company), with respect to the Old
Securities tendered hereby and accepted for exchange pursuant to the Exchange
Offer with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest) to deliver the Old
Securities tendered hereby to the Company (together with all accompanying
evidences of transfer and authenticity) for transfer or cancellation by the
Company.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, executors, administrators, legal
representatives, successors and assigns of the undersigned. Any tender of Old
Securities hereunder may be withdrawn only in accordance with the procedures
set forth in the instructions contained in this Letter of Transmittal. See
Instruction 4 hereto.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Old
Securities tendered hereby and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Company to be necessary or desirable to complete the assignment
and transfer of the Old Securities tendered. The undersigned has read and
agrees to all of the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Securities tendered hereby. All
authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal Rights" section of the Prospectus.
The name(s) and address(es) of the registered Holder(s) should be printed
herein under "Description of Old Securities" (unless a label setting forth
such information appears thereunder), exactly as they appear on the Old
Securities tendered hereby. The certificate number(s) and the principal
amount of Old Securities to which this Letter of Transmittal relates,
together with the principal amount of such Old Securities that the
undersigned wishes to tender, should be indicated in the appropriate boxes
herein under "Description of Old Securities."
-4-
<PAGE>
The undersigned agrees that acceptance of any tendered Old Securities by
the Company and the issuance of New Securities in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreements and that, upon the issuance of the New
Securities, the Company will have no further obligations or liabilities
thereunder.
The undersigned understands that the tender of Old Securities pursuant to
one of the procedures described in the Prospectus under "The Exchange
Offer--Procedures for Tendering Old Securities" and the Instructions hereto
will constitute the tendering Holder's acceptance of the terms and the
conditions of the Exchange Offer. The undersigned hereby represents and
warrants to the Company that the New Securities to be acquired by such Holder
pursuant to the Exchange Offer are being acquired in the ordinary course of
such Holder's business, that such Holder has no arrangement or understanding
with any person to participate in the distribution of the New Securities. The
Company's acceptance for exchange of Old Securities tendered pursuant to the
Exchange Offer will constitute a binding agreement between the tendering Holder
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED IN,
AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE NEW SECURITIES.
The undersigned also acknowledges that this Exchange Offer is being made
based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no action letters issued to third
parties in other transactions substantially similar to the Exchange Offer,
which lead the Company to believe that the New Securities issued in exchange
for the Old Securities pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than (i)
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act, (ii) an Initial Purchaser or holder of Old
Discount Debentures who acquired the Old Securities directly from the Company
solely in order to resell pursuant to Rule 144A of the Securities Act or any
other available exemption under the Securities Act, or (iii) a broker-dealer
who acquired the Old Securities as a result of market making or other trading
activities), without further compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Securities
are acquired in the ordinary course of such holders' business and such
holders are not participating and have no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act) of such New Securities. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of New Securities and has no
arrangement or understanding to participate in a distribution of New
Securities. If any holder is an affiliate of the Company or is engaged in or
has any arrangement or understanding with respect to the distribution of the
New Securities to be acquired pursuant to the Exchange Offer, such holder (i)
could not rely on the applicable interpretations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act. If the undersigned is a broker-dealer
that will receive New Securities for its own account in exchange of Old
Securities, it represents that the Old Securities to be exchanged for the New
Securities were acquired by it as a result of market-making activities or
other trading activities and acknowledges that it will deliver a prospectus
in connection with any resale of such New Securities; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of Section
2(11) of the Securities Act.
The undersigned understands that the New Securities issued in
consideration of Old Securities accepted for exchange, and/or any principal
amount of Old Securities not tendered or not accepted for exchange, will only
be issued in the name of the Holder(s) appearing herein under "Description of
Old Securities." Unless otherwise indicated under "Special Delivery
Instructions," please mail the New Securities issued in consideration of Old
Securities accepted for exchange, and/or any principal amount of Old
Securities not tendered or not accepted for exchange (and accompanying
documents, as appropriate), to the Holder(s) at the address(es)
-5-
<PAGE>
appearing herein under "Description of Old Securities." In the event that the
Special Delivery Instructions are completed, please mail the New Securities
issued in consideration of Old Securities accepted for exchange, and/or any Old
Securities for any principal amount or liquidation preference not tendered or
not accepted for exchange, in the name of the Holder(s) appearing herein under
"Description of Old Securities," and send such New Securities and/or Old
Securities to the address(es) so indicated. Any transfer of Old Securities to a
different holder must be completed, according to the provisions on transfer of
Old Securities contained in the Indentures.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
SECURITIES" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED
THE OLD SECURITIES AS SET FORTH IN SUCH BOX BELOW.
-6-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal or
notice of withdrawal, as the case may be, must be guaranteed by an
institution which falls within the definition of "eligible guarantor
institution" contained in Rule 17Ad 15 as promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended
(hereinafter, an "Eligible Institution") unless (i) the Old Securities
tendered hereby are tendered by the Holder(s) of the Old Securities who has
(have) not completed the box entitled "Special Delivery Instructions" on this
Letter of Transmittal or (ii) the Old Securities are tendered for the account
of an Eligible Institution.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD SECURITIES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be used: (i) by all
Holders who are not ATOP members, (ii) by Holders who are ATOP members but
choose not to use ATOP or (iii) if the Old Securities are to be tendered in
accordance with the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." To
validly tender Old Securities, a Holder must physically deliver a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees and all other required documents to the
Exchange Agent at its address set forth on the cover of this Letter of
Transmittal prior to the Expiration Date (as defined below) or the Holder
must properly complete and duly execute an ATOP ticket in accordance with DTC
procedures. Otherwise, the Holder must comply with the guaranteed delivery
procedures set forth in the next paragraph. Notwithstanding anything to the
contrary in the Registration Rights Agreements, the term "Expiration Date"
means 5:00 p.m., New York City time, on , 1997 (or such later date to
which the Company may, in its sole discretion, extend the Exchange Offer). If
this Exchange Offer is extended, the term "Expiration Date" shall mean the
latest time and date to which the Exchange Offer is extended. The Company
expressly reserves the right, at any time or from time to time, to extend the
period of time during which the Exchange Offer is open by giving oral
(confirmed in writing) or written notice of such extension to the Exchange
Agent and by making a public announcement of such extension prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC.
If a Holder of the Old Securities desires to tender such Old Securities
and time will not permit such Holder's required documents to reach the
Exchange Agent before the Expiration Date, a tender may be effected if (a)
the tender is made through an Eligible Institution; (b) on or prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and Notice of Guaranteed Delivery (by telegram, facsimile
transmission, mail or hand delivery) setting forth the name and address of
the Holder of the Old Securities and the principal amount Old Securities
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange trading days after the Expiration Date,
any documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and (c) all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within three New York Stock Exchange trading days after the Expiration Date.
See "The Exchange Offer--Guaranteed Delivery Procedures" as set forth in the
Prospectus.
Only a Holder of Old Securities may tender Old Securities in the Exchange
Offer. The term "Holder" as used herein with respect to the Old Securities
means any person in whose name Old Securities are registered on the books of
the Trustee. If the Letter of Transmittal or any Old Securities are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or
-7-
<PAGE>
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be so submitted.
Any beneficial Holder whose Old Securities are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to validly surrender those Old Securities in the Exchange Offer should
contact such registered Holder promptly and instruct such registered Holder to
tender on his behalf. If such beneficial Holder wishes to tender on his own
behalf, such beneficial Holder must, prior to completing and executing the
Letter of Transmittal, make appropriate arrangements to register ownership of
the Old Securities in such beneficial holder's name. It is the responsibility
of the beneficial holder to register ownership in his own name if he chooses to
do so. The transfer of record ownership may take considerable time.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF)
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
EXCHANGING HOLDER, but, except as otherwise provided below, the delivery will
be deemed made only when actually received or confirmed by the Exchange
Agent. If sent by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to assure timely delivery to the Exchange Agent before the Expiration
Date. No Letters of Transmittal or Old Securities should be sent to the
Company.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old
Securities for exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and principal amount of the Old Securities to which this
Letter of Transmittal relates should be listed on a separate signed schedule
attached hereto.
4. WITHDRAWAL OF TENDER. Tenders of Old Securities may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must (i) be received by the Exchange Agent at the address set forth herein
prior to 5:00 p.m., New York City time, on the Expiration Date: (ii) specify
the name of the person having tendered the Old Securities to be withdrawn;
(iii) identify the Old Securities to be withdrawn; and (iv) be (a) signed by
the Holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Securities were tendered (including any
required signature guarantees) or (b) accompanied by evidence satisfactory to
the Company that the Holder withdrawing such tender has succeeded to
beneficial ownership of such Old Securities. If Old Securities have been
tendered pursuant to the ATOP procedure with DTC, any notice of withdrawal
must otherwise comply with the procedures of DTC. Old Securities properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer; provided, however, that withdrawn Old Securities may be
retendered by again following one of the procedures described herein at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. All
questions as to the validity, form and eligibility (including time of
receipt) of notice of withdrawal will be determined by the Company, whose
determinations will be final and binding on all parties. Neither the Company,
the Exchange Agent, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification. The Exchange
Agent intends to use reasonable efforts to give notification of such defects
and irregularities.
5. PARTIAL TENDERS; PRO RATA EFFECT. Tenders of the Old Securities will be
accepted only in integral multiples of $1,000. If less than the entire
principal amount evidenced by any Old Securities is to be tendered, fill in
the principal amount that is to be tendered in the box entitled "Principal
Amount Tendered" below. The
-8-
<PAGE>
entire principal amount of all Old Securities delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
Holder(s) of the Old Securities tendered hereby, the signature must
correspond with the name as written on the face of the certificate
representing such Old Securities without alteration, enlargement or any
change whatsoever.
If any of the Old Securities tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any of the Old Securities tendered hereby are registered in different
names, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal and any necessary accompanying documents
as there are different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old
Securities listed and tendered hereby, no endorsements or separate bond
powers are required.
If this Letter of Transmittal is 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, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
7. SPECIAL DELIVERY INSTRUCTIONS. Tendering Holders should indicate in the
applicable box the name and address to which New Securities issued in
consideration of Old Securities accepted for exchange, or Old Securities for
principal amounts not exchanged or not tendered, are to be sent, if different
from the name and address of the person signing this Letter of Transmittal.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
any of the specified conditions in the Exchange Offer, in whole at any time
or in part from time to time, in the case of any Old Securities tendered
hereby. See "The Exchange Offer--Conditions to the Exchange Offer" in the
Prospectus.
9. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Securities pursuant to the Exchange Offer.
If, however, New Securities and/or substitute Old Securities for principal
amounts not exchanged are to be delivered to any person other than the Holder
of the Old Securities or if a transfer tax is imposed for any reason other
than the exchange of Old Securities pursuant to the Exchange Offer, 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, the amount of such transfer taxes will be billed directly to such
tendering Holder.
10. IRREGULARITIES. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old
Securities will be resolved by the Company, in its sole discretion, whose
determination shall be final and binding. The Company reserves the absolute
right to reject any or all tenders of any particular Old Securities that are
not in proper form, or the acceptance of which would, in the opinion of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defect, irregularity or condition of tender with regard to
any particular Old Securities. The Company's interpretation of the terms of,
and conditions to, the Exchange Offer (including the instructions herein)
will be final and binding. Unless waived, any defects or irregularities in
connection with tenders must be cured within such time as the Company shall
determine. Neither the Company nor the Exchange Agent shall be under any duty
to give notification of defects in such tenders or shall incur any liability
for failure to give such notification. The Exchange Agent intends to use
reasonable efforts to give notification of such defects and irregularities.
Tenders of Old
-9-
<PAGE>
Securities will not be deemed to have been made until all defects and
irregularities have been cured or waived. Any Old Securities received by the
Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holder, unless otherwise provided by this Letter of
Transmittal, as soon as practicable following the Expiration Date.
11. INTEREST ON EXCHANGED OLD SECURITIES. Holders whose Old Securities are
accepted for exchange will not receive accrued interest or dividends thereon
on the date of exchange. Instead, interest accruing from July 25, 1997
through the Expiration Date will be payable on the New Senior Notes on
February 1, 1998, in accordance with the terms of the New Securities. No
interest will accrue on the Discount Debentures prior to April 1, 2002. See
"The Exchange Offer--Acceptance of Old Securities for Exchange; Delivery of
New Securities" and "Description of Notes" as set forth in the Prospectus.
12. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Holders whose
certificates for Old Securities have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above
for further instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
-10-
<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
- -------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1 AND 7)
To be completed ONLY if the New Securities issued in consideration of Old
Securities exchanged, or certificates for Old Securities in a principal amount
not surrendered for exchange, are to be mailed to someone other than the
undersigned or to the undersigned at an address other than that below.
Mail to:
Name:
--------------------------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------------------------
(Zip Code)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION OF OLD SECURITIES
(SEE INSTRUCTIONS 2 AND 7)
- ----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S) CERTIFICATE(S)
(PLEASE FILL IN, IN BLANK) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------
PRINCIPAL AMOUNT OF OLD
AGGREGATE PRINCIPAL SECURITIES
AMOUNT OF OLD TENDERED(2)(MUST BE
SECURITIES EVIDENCED BY INTEGRAL MULTIPLES OF
CERTIFICATE NUMBER(S)(1) CERTIFICATE(S) $1,000)
------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
(Boxes below to be checked by Eligible Institutions only)
[ ] CHECK HERE IF TENDERED OLD SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
---------------------------------------------
DTC Account Number
--------------------------------------------------------
Transaction Code Number
---------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED OLD SECURITIES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s)
-------------------------------------------
Window Ticket Number (if any)
---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
------------------------
Name of Institution which Guaranteed Delivery
-----------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
---------------------------------------------
DTC Account Number
--------------------------------------------------------
Transaction Code Number
---------------------------------------------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD
SECURITIES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET
FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD SECURITIES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name
---------------------------------------------------------------------------
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
-12-
<PAGE>
PLEASE SIGN HERE
WHETHER OR NOT OLD SECURITIES ARE BEING
PHYSICALLY TENDERED HEREBY
X
---------------------------------- --------------------
X
---------------------------------- --------------------
SIGNATURE(S) OF OWNER(S) DATED
OF AUTHORIZED SIGNATORY
Area Code and Telephone Number:
------------------------------------------------
This box must be signed by registered holder(s) of Old Securities as their
name(s) appear(s) on certificate(s) for Old Securities hereby tendered or on
a security position listing, or by any person(s) authorized to become
registered holder(s) by endorsement and documents transmitted with this
Letter (including such opinions of counsel, certifications and other
information as may be required by the Company or the Trustee for the Old
Securities to comply with the restrictions on transfer applicable to the Old
Securities). If signature is by an attorney-in-fact, trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below.
Name(s)
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
----------------------------------------------------------
Address
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Tax Identification or Social Security Number(s)
--------------------------------
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 6 to determine if required)
Authorized Signature
-----------------------------------------------------------
Name
---------------------------------------------------------------------------
Name of Firm
-------------------------------------------------------------------
Title
--------------------------------------------------------------------------
Address
------------------------------------------------------------------------
-13-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local
office of the SocialSecurity Administration or the Internal Revenue Service
and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for
which no information reporting is required. For interest and dividends, all
listed payees are exempt except item (9). For broker transactions, payees
listed in items (1) through (13) and a person registered under the Investment
Advisers Act of 1940 who regularly acts as a broker are exempt. Payments
subject to reporting under sections 6041 and 6041A are generally exempt from
backup withholding only if made to payees described in items (1) through (7),
except a corporation that provides medical and health care services or bills
and collects payments for such services is not exempt from backup withholding
or information reporting. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions, patronage
dividends, and payments by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan or custodial account under section 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government, or
an agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times under the Investment Company Act of
1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
Interest payments that are generally exempt from back-up withholding include:
o Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
<PAGE>
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------- ---------------------------
<S> <C>
1. Individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first individual
on the account(2)
3. Custodian account of a The minor(4)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee(2)
savings trust (grantor
is also trustee)
b. So-called trust account The actual owner(2)
that is not a legal or
valid trust under state
law.
5. Sole proprietorship The owner(1)
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------ ---------------------
<S> <C>
6. Sole proprietorship The owner (1)
7. A valid trust, estate, or Legal entity (3)
pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a state or
local government, school
district, or prison) that
receives agricultural
program payments
</TABLE>
- -------------------
(1) You must show your individual name, but you may also enter your
business or "doing business as" name. You may use either your SSN or
EIN.
(2) List first and circle the name of the person whose number you furnish.
(3) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the identifying number of the personal
representative or trustee unless the legal entity itself is not
designated in the account title.)
(4) Circle the minor's name and furnish the minor's social security number.
