<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
AMTROL INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
RHODE ISLAND 2052 05-0246955
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
1400 DIVISION ROAD
WEST WARWICK, RHODE ISLAND 02893
(401) 884-6300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------
EDWARD J. COONEY
CHIEF FINANCIAL OFFICER
AMTROL INC.
1400 DIVISION ROAD
WEST WARWICK, RHODE ISLAND 02893
(401) 884-6300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
VINCENT PAGANO, JR.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NY 10017
(212) 455-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If any of 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 6, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C>
TITLE OF EACH Proposed Proposed
CLASS OF SECURITIES TO Amount to Offering Price Aggregate
BE REGISTERED be Registered Per Note(1) Offering Price(1)
10 5/8% Senior Subordinated Notes due 2006......... $115,000,000 100% $115,000,000
<CAPTION>
TITLE OF EACH
CLASS OF SECURITIES TO Amount of
BE REGISTERED Registration Fee
10 5/8% Senior Subordinated Notes due 2006......... $39,656
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 17, 1996
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.
<PAGE>
PROSPECTUS
[LOGO]
AMTROL INC.
OFFER TO EXCHANGE $115,000,000 OF ITS 10 5/8% SENIOR SUBORDINATED NOTES DUE 2006
WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT FOR ITS OUTSTANDING 10 5/8% SENIOR
SUBORDINATED NOTES DUE 2006
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
AMTROL Inc., a Rhode Island corporation ("AMTROL" or the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter
of Transmittal"), to exchange $1,000 principal amount of its 10 5/8% Senior
Subordinated Notes due 2006 (the "New Notes"), which have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), for each $1,000
principal amount of the outstanding 10 5/8% Senior Subordinated Notes due 2006
(the "Old Notes"; collectively with the New Notes, the "Notes") of the Company
of which $115.0 million aggregate principal amount is outstanding.
Pursuant to a merger agreement with AMTROL Acquisition, Inc. ("Acquisition")
and AMTROL Holdings, Inc. ("Holdings"), each a company formed by affiliates of
The Cypress Group L.L.C. ("Cypress"), on November 13, 1996, Acquisition merged
(the "Merger") with and into AMTROL and AMTROL became a wholly owned subsidiary
of Holdings. The Old Notes were issued by Acquisition as part of the financings
to consummate the Merger and, thereupon, became obligations of AMTROL.
The New Notes will be obligations of the Company entitled to the benefits of
the Indenture (as defined herein) relating to the Old Notes. The form and terms
of the New Notes are identical in all material respects to the form and terms of
the Old Notes except that the New Notes have been registered under the
Securities Act and following the completion of the Exchange Offer, the Notes
generally will not be entitled to a contingent increase in the interest rate
otherwise provided under certain circumstances. See "The Exchange Offer."
Interest on the New Notes is payable semi-annually on June 30 and December 31 of
each year, commencing June 30, 1997, accruing from November 13, 1996 at a rate
of 10 5/8% per annum.
The New Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after December 31, 2001 at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at the option of the Company, at any time prior to
December 31, 1999, up to 35% of the original principal amount of the New Notes
will be redeemable from the proceeds of one or more Public Equity Offerings (as
defined herein), at 110.625% of their principal amount plus accrued interest.
Upon the occurrence of a Change of Control, each holder of the New Notes has the
option to require the Company to make an offer to repurchase such holder's Notes
at a redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption.
The New Notes are unsecured senior subordinated obligations of the Company
and are subordinated in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company, including indebtedness under its Bank
Credit Facility (as defined). In addition, the New Notes are effectively
subordinated to the obligations of the Company's subsidiaries. As of September
28, 1996, after giving pro forma effect to the Merger and related financing
transactions, the aggregate outstanding amount of Senior Indebtedness of the
Company excluding its subsidiaries, would have been approximately $160 million,
of which $45.0 million would have been Senior Indebtedness, and the aggregate
outstanding amount of indebtedness of the Company's subsidiaries would have been
approximately $2.6 million excluding guarantees of the Company's obligations
under the Bank Credit Facility.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for resale, resold and otherwise transferred by any holder
thereof (other than (i) a broker-dealer who purchased such Old Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that the holder is acquiring the New Notes in its
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Holders of Old Notes wishing to accept the Exchange Offer must represent
to the Company that such conditions have been met. In the event that the
Company's belief is inaccurate, holders of New Notes, who transfer New Notes in
violation of the prospectus delivery provisions of the Securities Act and
without an exemption from registration thereunder may incur liability under the
Securities Act. The Company does not assume or indemnify holders against such
liability. Each broker-dealer that receives New Notes in exchange for Old Notes
held for its own account, as a result of market-making or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, such 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 such broker-dealer in connection with resales of New Notes where
such New Notes were acquired by such broker-dealer as a result of market-making
or trading activities. The Company has agreed that, for a period of 120 days
after the Expiration Date, it will make this Prospectus and any amendment or
supplement to this Prospectus available to any such broker-dealer for use in
connection with any such resale. See "Plan of Distribution".
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the Exchange Notes. The Company does not
currently intend to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The date of acceptance and
exchange of the Old Notes (the "Exchange Date") will be the first business day
following the Expiration Date (as defined herein). Old Notes tendered pursuant
to the Exchange Offer may be withdrawn at any time prior to the Expiration Date.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all of the expenses incident to the Exchange Offer.
<PAGE>
SEE "RISK FACTORS", BEGINNING ON P. 17, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY INVESTORS IN CONNECTION WITH THE EXCHANGE OFFER.
------------------------------
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>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Securities and Exchange
Commission (the "Commission"):
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) The Company's Quarterly Reports on Form 10-Q for the periods ended March
31, 1996, June 30, 1996 and September 28, 1996;
(c) The Company's Current Reports on Form 8-K dated February 20, 1996,
February 28, 1996 and September 5, 1996;
(d) The Company's Proxy Statement dated April 19, 1996 for the annual
meeting of shareholders on June 19, 1996; and
(e) The Company's Proxy Statement dated October 9, 1996 for the special
meeting of shareholders on November 12, 1996.
Any statement contained in any documents incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purpose of this Prospectus to the extent that a subsequent statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
REPRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON WRITTEN OR ORAL REQUEST FROM EDWARD J. COONEY, CHIEF FINANCIAL
OFFICER OF THE COMPANY, AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT
1400 DIVISION ROAD, WEST WARWICK, RHODE ISLAND 02893, TELEPHONE NUMBER (401)
884-6300. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST
SHOULD BE MADE AT LEAST 5 DAYS PRIOR TO THE EXPIRATION DATE.
AVAILABLE INFORMATION
The Company prior to the Merger was subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith filed periodic reports, proxy statements and
other information with the Commission. In addition, pursuant to the Indenture
covering the Notes, the Company has agreed to file with the Commission the
annual reports and the information, documents and other reports otherwise
required pursuant to Section 13 of the Exchange Act. All such information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and the website (http://www.sec.gov) maintained by the Commission and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily
2
<PAGE>
complete, and in each instance reference is made to the copy of such document so
filed. Each such statement is qualified in its entirety by such reference.
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
DISCLOSURE REGARDING FORWARD LOOKING-STATEMENTS
Market data and certain industry forecasts used throughout this Prospectus
were obtained from internal surveys, market research, publicly available
information and industry publications. Industry publications generally state
that the information contained therein has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information is
not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified,
and the Company makes no representation as to the accuracy of such information.
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this Prospectus
regarding the Company's financial position and cost cutting plans are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from such
expectations ("Cautionary Statements") are disclosed in this Prospectus,
including, without limitation, in conjunction with the forward-looking
statements included in this Prospectus and under "Risk Factors." All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY, INCLUDING THE RELATED NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT
OTHERWISE REQUIRES, "AMTROL" AND THE "COMPANY" REFER TO AMTROL INC., A RHODE
ISLAND CORPORATION, AND ITS SUBSIDIARIES. AS USED IN THIS PROSPECTUS, "DOMESTIC"
REFERS TO THE U.S. AND CANADIAN MARKETS.
THE COMPANY
AMTROL, founded in 1946, is a leading designer, manufacturer and marketer of
water flow and control products used in the water systems markets and selected
sectors of the heating, ventilating and air conditioning ("HVAC") market. The
Company's principal products include well water accumulators, hot water
expansion controls, water treatment products, indirect-fired water heaters and
non-returnable pressure-rated cylinders used primarily to store, transport and
dispense refrigerant gases. Many of these products are based on a technology
originated and developed by the Company, which uses a pre-pressurized vessel
with an internal diaphragm to handle fluids under pressure. The Company's pro
forma net sales and pro forma EBITDA (as defined) were $169.9 million and $28.5
million, respectively, for the year ended December 31, 1995 and $131.4 million
and $21.3 million, respectively, for the nine months ended September 28, 1996.
The Company believes that its leading market positions in its key product
categories are attributable to the strength of AMTROL's brand names and product
breadth, quality and innovation, as well as its marketing, distribution and
manufacturing expertise. In addition, AMTROL's principal markets are highly
replacement-oriented, with 60 to 70% of the Company's core business coming from
replacement sales. These factors, combined with the Company's large installed
base of products, have enabled AMTROL to demonstrate sales and earnings
stability over the past five years, even during periods of weak domestic
economic activity.
AMTROL's brand names are among the most widely known in its markets. For
example, the Company's key hot water expansion control product, the
Extrol-Registered Trademark-, is so widely recognized that customers frequently
refer to any hot water expansion control as an "Extrol." Other well-known brand
names of the Company include Well-X-Trol-Registered Trademark-,
Therm-X-Trol-Registered Trademark-, Hot Water Maker-Registered Trademark- and
CHAMPION-Registered Trademark-. The Company also believes that it is the
recognized technology leader in virtually all of its core product lines. In many
of the Company's major product lines, AMTROL's products are considered the
industry standard, a key marketing advantage, because of their recognized
quality and reliability.
The Company's strong reputation and brand recognition ensure that nearly
every significant wholesaler carries at least one AMTROL product. This
facilitates new product introduction, effectively "pulling" the Company's new
products through its distribution system. AMTROL also offers a broad range of
products, including over 100 models of well water accumulators. This broad
product offering allows AMTROL's customers to consolidate their suppliers and to
purchase and manage inventory more efficiently. These factors have established
the Company's products as a preferred brand and allow the Company to realize
premium pricing on most of its branded products.
During its 50-year history, the Company has built a strong franchise with
wholesalers and original equipment manufacturers ("OEMs"), resulting in a broad
distribution network serving more than 5,000 customers throughout North America.
In 1995, approximately 13% of the Company's net sales were derived from
international markets, and the Company is expanding internationally, especially
in the fast growing Asia/Pacific region. The Company recently opened a new
manufacturing facility in Singapore and intends to introduce several new
products which the Company believes will be well received in international
markets. In addition, the Company has recently refocused its efforts to better
serve the do-it-yourself ("DIY") market, a rapidly growing channel of
distribution, primarily through private label arrangements with Lowe's
Companies, Menards, Cotter & Company (True Value) and Ace Hardware.
The Company's principal executive offices are located at 1400 Division Road,
West Warwick, Rhode Island 02893 (telephone number: (401) 884-6300).
4
<PAGE>
NEW MANAGEMENT AND BUSINESS STRATEGY
Upon the Merger, Mr. John P. ("Jack") Cashman became the Chairman, Chief
Executive Officer and President of the Company. Mr. Cashman has over 30 years of
general industrial management experience in the filtration, minerals, building
products and pharmaceutical industries, most recently as Chairman and Co-Chief
Executive Officer of R.P. Scherer Corporation ("R.P. Scherer"). Mr. Cashman
joined R.P. Scherer concurrent with that company's leveraged buyout in 1989.
Under Mr. Cashman's leadership, R.P. Scherer's management successfully
implemented a strategy which resulted in significantly reduced operating costs
and rapid international and U.S. sales growth. Since the announcement of the
Merger on August 29, 1996, Mr. Cashman has worked closely with key members of
AMTROL's management to develop a new strategic plan. To implement this new
strategic plan, a new streamlined management structure has been put in place.
Since the beginning of October 1996, the Company has been executing the new
strategic plan, which is designed to immediately reduce costs and capitalize on
AMTROL's position as a technological and market leader. The new strategic plan
consists of the following key elements:
- REDUCE OPERATING EXPENSES. The Company has already initiated a series of
actions designed to immediately reduce operating expenses and to establish
new managerial and organizational accountability. In addition to cutting
corporate overhead, the Company plans to further reduce manufacturing
costs through the reduction of fixed manufacturing costs, process
improvements and the discontinuation of an unprofitable product line. As a
result, the Company expects to realize approximately $9.7 million of
permanent annual cost savings by the end of 1997.
- ENHANCE SALES AND PROFITABILITY OF CORE PRODUCT OFFERINGS. The Company
intends to implement a series of initiatives to reinvigorate sales growth
and increase profitability of its core product offerings. To accomplish
this, the Company will seek agreements with major pump and boiler OEMs to
incorporate AMTROL products into complete systems solutions and will
modify current products to enhance appearance, facilitate installation or
meet the requirements of specific domestic and international markets. The
Company will also expand its efforts to educate customers about the
benefits of AMTROL products, especially in international markets. These
actions are expected to increase demand for AMTROL's core products and
allow AMTROL to continue to realize premium pricing and achieve a more
favorable product mix.
- INTRODUCE NEW PRODUCTS. The Company intends to use new product
introductions to pursue international growth, broaden existing product
lines and focus on attractive niche market segments within the broader
water systems and HVAC markets. AMTROL is a technological leader and
historically has successfully identified trends in the market and
capitalized on these trends by introducing new products. For example, in
recognition of demand for an energy efficient alternative to conventional
potable water heaters, AMTROL successfully developed and introduced the
Hot Water Maker line of indirect-fired water heaters. Similarly, AMTROL
was able to apply its pressure regulating technology to develop the
Therm-X-Trol, a product designed to facilitate compliance with
increasingly stringent requirements for backflow prevention systems. As a
result of the Company's increased focus on research and development,
AMTROL has developed several new products designed to meet the demands of
both the domestic and international markets. For example, the Company is
currently field testing a potable water heater that efficiently utilizes
the thermal waste energy produced by air conditioning units. New products
expected to be introduced in 1997 include a small pressure boosting system
for international markets, a composite reverse osmosis vessel for both the
domestic and international markets and an indirect-fired water heater
designed for use with European wall-hung boiler units.
- GROW INTERNATIONALLY. As a result of the Company's strong brand names,
broad product offerings and core water systems expertise, AMTROL is well
positioned to capitalize on growing global demand for enhanced water
pressure control and improved water quality and refrigerant systems. In
the developing economies of the Asia/Pacific region and Latin
America/Mexico, demand for
5
<PAGE>
water purification and filtration products, pressure boosting systems and
refrigerant gases is growing rapidly. In Europe, the large hydronic
heating market (believed by the Company to be ten times the size of the
U.S. market) and the general lack of adequate water pressure in municipal
systems represent excellent opportunities for the Company to capitalize on
its core product expertise. The Company believes that establishing local
manufacturing and distribution facilities in international markets is
critical to the Company's ability to build strong customer relationships,
understand local product preferences and be price competitive while
maintaining appropriate profit margins. The Company has recently commenced
manufacturing activities at its new facility in Singapore and the Company
has also increased the number of its distributors in the Asia/Pacific
region from 12 to 45 in the past two years. In addition, the Company has
been pursuing and intends to continue to selectively pursue joint
ventures, OEM alliances and acquisitions to further its international
growth strategy.
THE MERGER
Upon the approval of the shareholders of AMTROL at a special meeting held on
November 12, 1996, Acquisition was merged with and into AMTROL on November 13,
1996. As a result of the Merger, AMTROL became a wholly owned subsidiary of
Holdings, which is controlled by Cypress. Cypress manages a $1.05 billion
private equity fund which seeks to achieve long-term capital appreciation
through investing in a variety of privately negotiated transactions. The Cypress
investment philosophy is based on its strategy of teaming with manager/partners
to invest in established operating businesses that have historically
demonstrated strong cash flow generating ability and that have a favorable
outlook for growth. Prior to founding Cypress, the Cypress professionals worked
together managing the 1989 merchant banking fund of Lehman Brothers Inc., which
included investments in R.P. Scherer, Infinity Broadcasting Corporation, Lear
Corporation and Illinois Central Corporation.
The aggregate consideration paid pursuant to the Merger, including amounts
payable to holders of outstanding options for AMTROL common stock, was
approximately $218.9 million. Immediately prior to the Merger, certain members
of management exchanged a portion of their options for AMTROL common stock for
options for Holdings common stock.
The Old Notes were issued by Acquisition as part of the financings to
consummate the Merger and, thereupon, became obligations of AMTROL. The balance
of the proceeds necessary to consummate the Merger was obtained from borrowings
under a credit agreement (the "Bank Credit Facility") entered into by
Acquisition and a group of banks simultaneously with the consummation of the
placement of the Old Notes (the "Offering"), as well as equity contributions
from affiliates of Cypress (the "Equity Contribution"). A portion of the fees
and expenses relating to these transactions was paid from AMTROL's cash. The
Merger, the Offering, the borrowings under the Bank Credit Facility, the Equity
Contribution and the application of the proceeds of the foregoing are
hereinafter referred to as the "Transactions."
The following table sets forth the sources and uses of funds in connection
with the Merger and the other Transactions:
<TABLE>
<CAPTION>
AMOUNT AMOUNT
SOURCES OF FUNDS (IN MILLIONS) USES OF FUNDS (IN MILLIONS)
- ---------------------------------- ------------- ---------------------------------- -------------
<S> <C> <C> <C>
Term loans........................ $ 45.0 Merger consideration.............. $ 210.3
Notes............................. 115.0 Option cancellation............... 8.6
Equity Contribution(a)............ 69.3 Estimated Transaction fees and
Cash.............................. 2.6 expenses(b)....................... 13.0
------ ------
Total......................... $ 231.9 Total............................. $ 231.9
------ ------
------ ------
</TABLE>
- ----------------
(a) Includes the exchange by management of a portion of their options for
AMTROL common stock for options for Holdings common stock.
(b) Includes underwriting discounts and commissions in connection with the
Offering and approximately $3.6 million of costs that were incurred by
the Company during the period immediately prior to the Merger.
6
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $115.0 million aggregate
principal amount of Old Notes for an equal aggregate principal amount of New
Notes. The New Notes are obligations of the Company entitled to the benefits of
the Indenture relating to the Old Notes. The form and terms of the New Notes are
the same as the form and terms of the Old Notes except that the New Notes have
been registered under the Securities Act, and following the completion of the
Exchange Offer, the Notes generally will not be entitled to a contingent
increase in the interest rate otherwise provided under certain circumstances.
<TABLE>
<S> <C>
The Exchange Offer................ $1,000 principal amount of New Notes will be issued in
exchange for each $1,000 principal amount of Old Notes
validly tendered pursuant to the Exchange Offer. As of
the date hereof, $115.0 million in aggregate principal
amount of Old Notes are outstanding. The Company will
issue the New Notes to tendering holders of Old Notes on
or promptly after the Expiration Date.
Resale of the New Notes........... Based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties,
the Company believes that New Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by
any holder thereof (other than (i) a broker-dealer who
purchased such Old Notes directly from the Company for
resale pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that
is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions
of the Securities Act, provided that the holder is
acquiring the New Notes in its ordinary course of
business and is not participating, and has no
arrangement or understanding with any person to
participate, in the distribution of the New Notes. In
the event that the Company's belief is inaccurate,
holders of New Notes who transfer New Notes in violation
of the prospectus delivery provisions of the Securities
Act and without an exemption from registration
thereunder may incur liability under the Securities Act.
The Company does not assume or indemnify holders against
such liability.
Each broker-dealer that receives New Notes in exchange
for Old Notes held for its own account, as a result of
market-making activities or other trading activities,
must acknowledge that it will deliver a Prospectus in
connection with any resale of such New Notes. The Letter
of Transmittal states that by so acknowledging and by
delivering a prospectus, such 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 such broker-dealer in connection with resales of
New Notes received in exchange for Old Notes. The
Company has agreed that, for a period of 120 days after
the Expiration Date it
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
will make this Prospectus and any amendment or
supplement to this Prospectus available to any such
broker-dealer for use in connection with any such
resales. See "Plan of Distribution." The Company
believes that no registered holder of the Old Notes is
an affiliate (as such term is defined in Rule 405 of the
Securities Act) of the Company.
This Exchange Offer is not being made to, nor will the
Company accept surrenders for exchange from, holders of
Old Notes in any jurisdiction in which this Exchange
Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such
jurisdiction.
Expiration of Exchange Offer...... 5:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date and time to
which the Exchange Offer is extended. See "The Exchange
Offer-- Expiration Date; Extensions; Amendments."
Accrued Interest.................. The New Notes bear interest from November 13, 1996.
Holders of Old Notes whose Old Notes are accepted for
exchange will be deemed to have waived the right to
receive any payment in respect of interest on such Old
Notes accrued from November 13, 1996 to the date of the
issuance of the New Notes. Consequently, holders who
exchange their Old Notes for New Notes will receive the
same interest payment on June 30, 1997 (the first
interest payment date with respect to the Old Notes and
the New Notes) that they would have received had they
not accepted the Exchange Offer. See "The Exchange
Offer-- Interest on the New Notes."
Termination of the Exchange The Exchange Offer shall not be subject to any
Offer........................... conditions, other than (i) that the Exchange Offer does
not violate applicable law or any applicable
interpretation of the staff of the Commission, (ii) that
no action or proceeding shall have been instituted or
threatened in any court or by or before any governmental
agency or body with respect to the Exchange Offer, (iii)
that there shall not have been adopted or enacted any
law, statute, rule or regulation that would render the
Exchange Offer illegal, and (iv) such other conditions
as may be reasonably acceptable to the Placement Agents
which, in the Company's judgment, would reasonably be
expected to impair the ability of the Company to proceed
with the Exchange Offer. There can be no assurance that
any such condition will not occur. Holders of Old Notes
will have certain rights against the Company under the
Registration Agreement should the Company fail to
consummate the Exchange Offer. See "The Exchange
Offer--General" and "-- Termination."
Procedures for Tendering Old Each holder of Old Notes wishing to accept the Exchange
Notes........................... Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail
or otherwise deliver such Letter of
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Transmittal, or such facsimile, together with any other
required documentation, to The Bank of New York, as
Exchange Agent, at the address set forth herein and
therein. See "The Exchange Offer--Procedures for
Tendering."
By executing the Letter of Transmittal, each holder will
represent to the Company that, among other things, (i)
the New Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of business of
the person receiving such New Notes, whether or not such
person is the holder, (ii) neither the holder nor any
such other person has an arrangement or understanding
with any person to participate in the distribution of
such New Notes and (iii) neither the holder nor any such
other person is an "affiliate," as defined in Rule 405
under the Securities Act, of the Company or, if an
affiliate, such holder will comply with the registration
and prospectus delivery requirements of the Securities
Act to the extent applicable.
Special Procedures for Any beneficial holder whose Old Notes are registered in
Beneficial...................... the name of a broker, dealer, commercial bank, trust
Holders company or other nominee and who wishes to tender in the
Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender
on its 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 and delivering its Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such holder's name or obtain a properly
competed bond power from the registered holder. The
transfer of record ownership may take considerable time.
See "The Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes (or who cannot complete
the procedure for book-entry transfer on a timely basis)
and a properly completed Letter of Transmittal or any
other documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date may
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights................. Tenders of Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration
Date. See "The Exchange Offer--Withdrawal of Tenders."
Acceptance of Old Notes and....... Subject to certain conditions (as summarized above in
Delivery of New Notes "Termination of the Exchange Offer" and described more
fully under "The Exchange Offer--Termination"), the
Company will accept for exchange any and all Old Notes
which are properly tendered in the Exchange Offer and
not validly withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
New Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. See
"The Exchange Offer--General."
Certain Tax Considerations........ The exchange pursuant to the Exchange Offer should not
be a taxable event for federal income tax purposes. See
"Certain United States Federal Tax Considerations."
Exchange Agent.................... The Bank of New York, the Trustee under the Indenture,
is serving as exchange agent (the "Exchange Agent") in
connection with the Exchange Offer. The address of the
Exchange Agent is: The Bank of New York, Reorganization
Section, 101 Barclay Street, Floor 7 East, New York, New
York 10286, Attention: Enrique Lopez. For information
with respect to the Exchange Offer, the telephone number
for the Exchange Agent is (212) 815-2742 and the
facsimile number for the Exchange Agent is (212)
517-3080.
Use of Proceeds................... There will be no cash proceeds payable to the Company
from the issuance of the New Notes pursuant to the
Exchange Offer.
</TABLE>
THE NEW NOTES
<TABLE>
<S> <C>
Issuer............................ AMTROL Inc.
Securities Offered................ $115,000,000 aggregate principal amount of 10 5/8%
Senior Subordinated Notes Due 2006.
Maturity.......................... December 31, 2006.
Interest.......................... Payable semi-annually in cash, on June 30 and December
31, commencing on June 30, 1997.
Optional Redemption............... The Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after December
31, 2001, initially at 105.313% of their principal
amount, plus accrued interest, declining ratably to 100%
of their principal amount, plus accrued interest, on or
after December 31, 2003.
In addition, at the option of the Company, at any time
prior to December 31, 1999, up to 35% of the original
principal amount of the Notes will be redeemable from
the proceeds of one or more Public Equity Offerings (as
defined herein), at 110.625% of their principal amount,
plus accrued interest; PROVIDED, HOWEVER, that at least
$74.0 million in aggregate principal amount of Notes
must remain outstanding immediately after the occurrence
of any such redemption. See "Description of the New
Notes--Optional Redemption."
Change of Control................. Upon a Change of Control (as defined herein), the
Company will be required to make an offer to purchase
the Notes at a
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
purchase price equal to 101% of their principal amount,
plus accrued interest. See "Description of the New
Notes--Certain Covenants--Change of Control."
Ranking........................... The Notes will be unsecured, general obligations of the
Company, subordinated in right of payment to all
existing and future Senior Indebtedness of the Company,
including indebtedness under the Bank Credit Facility.
The Notes will rank PARI PASSU in right of payment with
any future senior subordinated indebtedness of the
Company and will be senior in right of payment to all
existing and future subordinated indebtedness of the
Company. In addition, the Notes will be effectively
subordinated to all liabilities of the Company's
subsidiaries, including trade payables. At September 28,
1996, on a pro forma basis after giving effect to the
Transactions, the Company (excluding its subsidiaries)
would have had approximately $160.0 million of
Indebtedness outstanding, of which $45.0 million would
have been Senior Indebtedness, and the Company's
subsidiaries would have had approximately $2.6 million
of liabilities (excluding guarantees of the Company's
obligations under the Bank Credit Facility). See "Risk
Factors-- Subordination of the Notes" and "Description
of the New Notes-- Ranking."
Certain Covenants................. The indenture pursuant to which the Notes will be issued
(the "Indenture") will contain certain covenants for the
benefit of the holders of the Notes (the "Holders"),
including, among others, covenants limiting the
incurrence of additional indebtedness, the payment of
dividends, the redemption of capital stock, the making
of certain investments, the issuance of capital stock of
subsidiaries, the creation of dividend and other
restrictions affecting subsidiaries, transactions with
affiliates, asset sales and certain mergers and
consolidations. However, these limitations will be
subject to a number of important qualifications and
exceptions. See "Description of the New Notes--Certain
Covenants."
Use of Proceeds................... There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Registration Rights............... In connection with the sale of the Old Notes, the
Company agreed in the Registration Agreement to use its
best efforts to cause the registration statement (the
"Registration Statement") of which this Prospectus is a
part to become effective with respect to the Exchange
Offer for the New Notes and to consummate the Exchange
Offer by May 12, 1997.
In the event that the applicable interpretations of the
staff of Commission do not permit the Company to effect
the Exchange Offer, or if for any other reason the
Exchange Offer is not consummated within 180 days of
November 13, 1996 (the "Issue Date"), or if the
Placement Agents so request with respect to Old Notes
not eligible to be exchanged for New Notes in the
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Exchange Offer or if any holder of Old Notes is not
eligible to participate in the Exchange Offer or does
not receive a freely tradeable New Note in the Exchange
Offer, the Company will use its best efforts to file a
shelf registration statement with respect to the resale
of the Old Notes (the "Shelf Registration Statement"),
and to keep the Shelf Registration Statement effective
until November 13, 1999 or such shorter period as may be
necessary for the resale of all Old Notes pursuant
thereto.
If (i) by December 28, 1996, neither the Exchange Offer
Registration Statement nor the Shelf Registration
Statement has been filed with the Commission; (ii) by
May 12, 1997, neither the Exchange Offer is consummated
nor the Shelf Registration Statement is declared
effective; or (iii) after May 12, 1997, and after either
the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such
Registration Statement thereafter ceases to be effective
or usable (subject to certain exceptions) in connection
with resales of Old Notes or New Notes in accordance
with and during the periods specified in the
Registration Agreement (each such event referred to in
clauses (i) through (iii), a "Failure to Register"), the
interest rate borne by the Old Notes shall increase by
an additional .50% per annum until such time as such
Failure to Register is cured. See "The Exchange Offer."
</TABLE>
RISK FACTORS
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY HOLDERS OF THE OLD NOTES PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
12
<PAGE>
SUMMARY HISTORICAL
CONSOLIDATED FINANCIAL DATA
The summary historical consolidated financial data presented below for and
as of each of the years in the five-year period ended December 31, 1995 have
been derived from the Consolidated Financial Statements of the Company,
including the related notes thereto, which have been audited by Arthur Andersen
LLP, independent certified public accountants. The summary historical
consolidated financial data for each of the nine-month periods ended September
30, 1995 and September 28, 1996 and as of September 28, 1996 have been derived
from unaudited consolidated financial statements of the Company which, in the
opinion of management, include all adjustments (consisting only of normal
recurring items) necessary for a fair and consistent presentation of such data.
The results for the nine months ended September 28, 1996 are not necessarily
indicative of results to be expected for the full fiscal year. The information
set forth below should be read in conjunction with "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Company, including the related notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ----------------------------
----------------------------------------------------- SEPTEMBER 30, SEPTEMBER 28,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT RATIO DATA)
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $ 134,421 $ 148,462 $ 164,295 $ 173,472 $ 172,454 $ 134,620 $ 134,816
Cost of goods sold................. 95,468 103,521 116,180 123,184 124,303 96,491 98,018
--------- --------- --------- --------- --------- ------------- -------------
Gross profit..................... 38,953 44,941 48,115 50,288 48,151 38,129 36,798
Selling, general and administrative
expenses......................... 26,491 28,731 29,099 30,402 29,943 22,568 22,793
Plant closing charges.............. -- -- -- -- 3,825 1,875 --
--------- --------- --------- --------- --------- ------------- -------------
Income from operations........... 12,462 16,210 19,016 19,886 14,383 13,686 14,005
Interest income (expense), net..... (3,414) (2,677) (805) (7) 60 30 31
License and distributorship fees... 276 283 254 254 258 196 156
Other income (expense), net........ 112 (534) (141) (179) 65 104 84
--------- --------- --------- --------- --------- ------------- -------------
Income before provision for
income taxes and extraordinary
item........................... 9,436 13,282 18,324 19,954 14,766 14,016 14,276
Provision for income taxes......... 3,409 5,090 7,149 7,683 5,681 5,466 5,496
--------- --------- --------- --------- --------- ------------- -------------
Income before extraordinary
item........................... 6,027 8,192 11,175 12,271 9,085 8,550 8,780
Extraordinary item................. (522 (a) -- (911 (a) -- -- -- --
--------- --------- --------- --------- --------- ------------- -------------
Net income....................... $ 5,505 $ 8,192 $ 10,264 $ 12,271 $ 9,085 $ 8,550 $ 8,780
--------- --------- --------- --------- --------- ------------- -------------
--------- --------- --------- --------- --------- ------------- -------------
OTHER DATA:
Depreciation and amortization...... $ 4,779 $ 4,349 $ 4,520 $ 4,330 $ 4,673 $ 3,659 $ 3,933
Capital expenditures............... 12,193 2,849 7,382 4,902 5,492 4,531 8,053
EBITDA(b).......................... 17,517 20,842 23,790 24,470 23,139 19,416 18,094
Ratio of earnings to fixed charges
(c).............................. 2.9x 5.3x 16.3x 38.0x 41.5x 51.5x 42.1x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------------- SEPTEMBER 28,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital......................................... $ 17,956 $ 20,833 $ 28,454 $ 37,293 $ 43,303 $ 42,743
Total assets............................................ 71,930 74,499 82,612 91,634 93,909 96,642
Long-term debt, less current installments............... 32,774 29,676 3,333(d) 2,381 -- --
Shareholders' equity.................................... 9,172 16,656 53,017(d) 64,174 70,206 72,838
</TABLE>
- --------------
(a) Reflects an extraordinary loss of $.9 million ($.5 million net of tax
benefits) in 1991 and $1.5 million ($.9 million net of tax benefits) in 1993
from the early extinguishment of debt.
(b) EBITDA represents income from operations before plant closing charges, plus
depreciation and amortization and license and distributorship fees. EBITDA
is presented because it is a widely accepted indicator of a company's
ability to incur and service indebtedness. EBITDA (subject to certain
adjustments) will be used to determine compliance with certain covenants in
the Indenture. EBITDA, however, should not be considered as an alternative
to net income, as a measure of the Company's operating results, or as an
alternative to cash flow, as a measure of liquidity.
(c) For purposes of this computation, earnings represent net income before
extraordinary item, income taxes, plant closing charges and fixed charges.
Fixed charges consist of interest expense, capitalized interest, the
interest component of operating leases and amortization of deferred
financing costs.
(d) As described in Note 3 of the Notes to the Consolidated Financial Statements
of the Company appearing elsewhere in this Prospectus, in 1993 the Company
completed an initial public offering of its common stock and used the net
proceeds to reduce its indebtedness.
13
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
The summary unaudited pro forma financial data presented below (the "Pro
Forma Financial Data") are based on the Consolidated Financial Statements of the
Company, including the related notes thereto, appearing elsewhere in this
Prospectus, adjusted to give effect to the Transactions. The pro forma statement
of operations data for the year ended December 31, 1995 and the nine months
ended September 28, 1996 give effect to the Transactions as if they were
consummated on January 1, 1995. The pro forma balance sheet data give effect to
the Transactions as if they were consummated on September 28, 1996. The pro
forma adjustments are based upon available information and certain assumptions
that management of the Company believes are reasonable. The Pro Forma Financial
Data do not purport to represent what the Company's results of operations or
financial position would actually have been had the Transactions, in fact,
occurred on such dates, or to project the Company's results of operations or
financial position for any future period or date. The Pro Forma Financial Data
should be read in conjunction with "Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company, including
the related notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
---------------------- ----------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
--------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT RATIO DATA)
Statement of Operations Data:
Net sales...................................... $ 172,454 $ 169,862(a) $ 134,816 $ 131,386(a)
Cost of goods sold............................. 124,303 121,053 )(d 98,018 94,278 (a)(b)(c)(d
--------- ----------- --------- -----------
Gross profit................................ 48,151 48,809 36,798 37,108
Selling, general and administrative expenses... 29,943 26,249 )(e 22,793 20,645 (a)(b)(c)(e
Amortization expense........................... -- 3,773 )(g -- 2,830(f)(g)
Plant closing charges.......................... 3,825 3,825 -- --
--------- ----------- --------- -----------
Income from operations...................... 14,383 14,962 14,005 13,633
Interest income (expense), net................. 60 (16,841)(h) 31 (12,645)(h)
License and distributorship fees............... 258 258 156 156
Other income, net.............................. 65 65 84 84
--------- ----------- --------- -----------
Income before provision for income taxes.... 14,766 (1,556) 14,276 1,228
Provision for income taxes..................... 5,681 854(i) 5,496 1,562(i)
--------- ----------- --------- -----------
Net income................................ $ 9,085 $ (2,410) $ 8,780 $ (334)
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Other Data:
Depreciation and amortization.................. $ 4,673 $ 9,430 $ 3,933 $ 7,502
Capital expenditures........................... 5,492 5,492 8,053 8,053
EBITDA(j)...................................... 23,139 28,475 18,094 21,291
Ratio of EBITDA to total cash interest
expense(k)................................... 1.8x 1.8x
Ratio of earnings to fixed charges(l).......... 1.1x 1.1x
</TABLE>
- ------------------
(a) Reflects reductions in net sales, cost of goods sold and selling, general
and administrative expenses that the Company expects to realize from the
discontinuance of the Company's "4BA" reusable pressure-rated cylinder
product line in the fourth quarter of 1996 as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
------------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Net sales.................................................. $ (2,592) $ (3,430)
Cost of goods sold......................................... (3,836) (4,180)
Selling, general and administrative expenses............... (70) (55)
</TABLE>
(b) Reflects cost savings the Company expects to realize from its targeted
workforce reduction program undertaken in the fourth quarter of 1996 and the
reorganization within the Chairman's office in connection with the Merger as
follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
------------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Cost of goods sold......................................... $ (300) $ (225)
Selling, general and administrative expenses............... (3,287) (1,841)
</TABLE>
(FOOTNOTES CONTINUE ON NEXT PAGE)
14
<PAGE>
(c) Reflects adjustments related to increased depreciation resulting from the
preliminary purchase price allocation as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
------------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Cost of goods sold......................................... $ 886 $ 665
Selling, general and administrative expenses............... 98 74
</TABLE>
(d) Excludes a non-recurring adjustment to cost of goods sold resulting from the
preliminary purchase price allocation, which increased the estimated fair
value of finished goods inventories acquired by $2.5 million at September
28, 1996. This amount will be recorded in cost of goods sold subsequent to
the Merger as the acquired inventory is sold.
(e) Reflects the elimination of annual costs of $435,000 related to operating as
a public company that the Company expects to realize as a result of the
Merger and subsequent operation as a privately held company.
(f) Excludes a non-recurring adjustment to amortization expense of $1.0 million
resulting from the preliminary purchase price allocation related to
in-process research and development costs. This amount will be recorded in
amortization expense in the first quarter following the effective date of
the Merger.
(g) Reflects increases in amortization expense resulting from the preliminary
purchase price allocation based on the estimated useful lives of the related
intangible assets. Pro forma amortization of intangible assets for the
Merger is calculated based on estimated useful lives of 40 years.
(h) Reflects pro forma interest expense on indebtedness incurred in connection
with the Merger as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
------------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Revolving credit facility(i)............................... $ 150 $ 113
Term loans(ii)............................................. 3,825 2,869
Notes(ii).................................................. 12,219 9,164
Amortization of debt issuance costs(iii)................... 707 530
------- -------
Total................................................ $ 16,901 $ 12,676
------- -------
------- -------
</TABLE>
-------------------------
(i) Reflects a commitment fee related to the total unused portion of
available credit.
(ii) Reflects term loans under the Bank Credit Facility of $45.0 million
(assuming for pro forma purposes a weighted average interest rate of
8.5%) and the sale of $115.0 million of the Notes. A .125% change in
the interest rate on the Bank Credit Facility would change the
Company's pro forma interest expense for the periods presented above by
$56,250 and $42,188, respectively.
(iii) The financing costs incurred of $6.5 million associated with the
term loans under the Bank Credit Facility and the Notes have been
capitalized as deferred charges and are being amortized over the
assumed term of the related debt, 7.5 years and 10 years, respectively.
(i) Income tax adjustments have been calculated using a combined state and
federal statutory income tax rate of approximately 38.5%. The primary
difference between the provision calculated at statutory rates and the
amount reflected in the pro forma statements is attributable to
nondeductible goodwill.
(j) EBITDA represents income from operations before plant closing charges, plus
depreciation and amortization and license and distributorship fees. EBITDA
is presented because it is a widely accepted indicator of a company's
ability to incur and service indebtedness. EBITDA (subject to certain
adjustments) will be used to determine compliance with certain covenants in
the Indenture. EBITDA, however, should not be considered as an alternative
to net income, as a measure of the Company's operating results, or as an
alternative to cash flow, as a measure of liquidity.
(k) Cash interest expense represents total interest expense less amortization of
debt issuance costs and interest income.
(l) For purposes of this computation, earnings represent net income before
income taxes, plant closing charges and fixed charges. Fixed charges consist
of interest expense, capitalized interest, the interest component of
operating leases and amortization of deferred financing costs.
15
<PAGE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 28, 1996
----------------------
ACTUAL PRO FORMA
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Balance Sheet Data:
Assets
Current assets:
Cash and cash equivalents............................................................ $ 3,422 $ 800(a)
Accounts receivable, net............................................................. 30,451 30,451
Inventories.......................................................................... 22,686 25,186(b)
Prepaid income taxes................................................................. 1,714 865(b)
Prepaid expenses and other........................................................... 1,372 1,372
Net assets held for sale............................................................. 1,786 1,786
--------- -----------
Total current assets............................................................... 61,431 60,460
--------- -----------
Other assets:
Property, plant and equipment, net................................................... 32,089 37,089(b)
Intangible assets.................................................................... 489 151,422(b)
Other assets......................................................................... 2,633 9,133(b)
--------- -----------
Total assets..................................................................... $ 96,642 $ 258,104
--------- -----------
--------- -----------
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt............................................... $ -- $ --
Accounts payable..................................................................... 9,203 9,203
Accrued expenses..................................................................... 8,620 13,620(b)
Accrued income taxes................................................................. 865 865
--------- -----------
Total current liabilities.......................................................... 18,688 23,688
Non-current liabilities:
Other non-current liabilities........................................................ 4,669 4,669
Deferred income taxes................................................................ 447 447
Long-term debt....................................................................... -- 160,000(a)
--------- -----------
Total liabilities................................................................ 23,804 188,804
Shareholders' equity............................................................. 72,838 69,300(c)
--------- -----------
Total liabilities and shareholders' equity................................... $ 96,642 $ 258,104
--------- -----------
--------- -----------
</TABLE>
- ------------------
(a) Reflects the acquisition of the common stock of the Company in the Merger
and the related financing transactions as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Uses of Funds:
Merger consideration............................................................... $ 210.3
Option cancellation................................................................ 8.6
Estimated Transaction fees and expenses (i)........................................ 13.0
------
Total.......................................................................... $ 231.9
------
------
Sources of Funds:
Term loans......................................................................... $ 45.0
Notes.............................................................................. 115.0
Equity Contribution (ii)........................................................... 69.3
Cash............................................................................... 2.6
------
Total.......................................................................... $ 231.9
------
------
</TABLE>
-------------------------
(i) Includes underwriting discounts and commissions in connection with
the Offering and approximately $3.6 million of costs that were incurred
by the Company during the period immediately prior to the Merger.
(ii) Includes the exchange by management of a portion of their options
for AMTROL common stock for options for Holdings common stock.
(b) Reflects the estimated allocation of the purchase price as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Total consideration.................................................................. $ 231.9
Historical net assets................................................................ 72.8
------
Amount to be allocated........................................................... $ 159.1
------
------
Allocated to:
Inventories........................................................................ $ 2.5
Property, plant and equipment...................................................... 5.0
Intangible assets.................................................................. 150.9
Deferred charges................................................................... 6.5
Accrued expenses................................................................... (5.0)
Income tax valuation allowance..................................................... (.8)
------
Total.......................................................................... $ 159.1
------
------
</TABLE>
(c) Represents the elimination of historical equity of $72.8 million and the
Equity Contribution of $69.3 million.
16
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS, AS
WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE TENDERING OLD
NOTES IN EXCHANGE FOR THE NEW NOTES OFFERED HEREBY. THE RISK FACTORS SET FORTH
BELOW ARE GENERALLY APPLICABLE TO THE NEW NOTES AS WELL AS THE OLD NOTES.
CONSEQUENCE OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the offer or sale of the Old Notes pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
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 Notes under the Securities
Act or any state securities laws. Based on interpretations by the staff of the
Commission, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such New Notes. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such New Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The interpretations
by the staff of the Commission on which the Company has relied were based on
no-action letters issued by the staff of Commission to third parties. The
Company has not sought, and does not intend to seek, 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. See "Plan of
Distribution."
SUBSTANTIAL LEVERAGE
The Company incurred substantial indebtedness in connection with the
Transactions and is highly leveraged. At September 28, 1996, on a pro forma
basis after giving effect to the Transactions, the Company's total consolidated
indebtedness would have been approximately $160.0 million, and the Company's
ratio of total debt to total capitalization on a consolidated basis would have
been approximately 70%. See "Capitalization."
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions or other purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations will be required for the
payment of principal and interest on its indebtedness, thereby reducing the
funds available to the Company for its operations and other purposes; (iii) the
Company may be substantially more leveraged than certain of its competitors,
which may place the Company at a competitive disadvantage; and (iv) the
Company's substantial degree of leverage may hinder its ability to adjust
rapidly to changing market conditions and could make it more vulnerable in the
event of a downturn in general economic conditions or its business. In addition,
certain of the Company's borrowings are, and will continue to be, at variable
rates of interest, which exposes the Company to the risk of increased interest
rates. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Description of the New Notes" and "Description of Bank
Credit Facility."
The Company will be required to make scheduled principal payments under the
Bank Credit Facility commencing at the end of the Company's first fiscal quarter
of 1997 and pay principal on the Notes at maturity in 2006. The Company's
ability to make scheduled principal payments, or to refinance its obligations,
with respect to its indebtedness, and to pay interest thereon, will depend on
its financial and operating performance, which, in turn, is subject to
prevailing economic conditions and to certain financial, business and other
factors beyond the Company's control. If the Company's cash flow and capital
resources
17
<PAGE>
are insufficient to fund its debt service obligations, the Company may be forced
to refinance all or a portion of its existing indebtedness (including the Notes)
or to sell all or a portion of its assets. There can be no assurance as to the
timing of any asset sales or the proceeds which the Company could realize
therefrom. In addition, the terms of the Bank Credit Facility and the Indenture
restrict the ability of the Company to sell assets and the Company's use of the
proceeds therefrom. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Bank Credit Facility" and "Description of the New Notes."
An element of the Company's new business strategy is to achieve significant
annual cost savings. See "Business--New Management and Business Strategy--Reduce
Operating Expenses." The Company's ability to successfully implement its new
business strategy, and to achieve the estimated cost savings, is subject to a
number of factors, many of which are beyond the control of the Company. There
can be no assurance that the Company will be able to achieve the estimated cost
savings or the timing of achieving such cost savings. A failure to achieve the
estimated cost savings could have a material effect on the Company's ability to
service its indebtedness.
RESTRICTIVE DEBT COVENANTS
The terms of the Bank Credit Facility and the Indenture include certain
restrictive covenants, including, among others, covenants significantly limiting
or prohibiting the ability of the Company and certain of its subsidiaries to
incur indebtedness, prepay certain indebtedness, pay dividends, make
investments, engage in transactions with shareholders and affiliates, incur
liens, create restrictions on the ability of certain subsidiaries to pay
dividends or make certain payments to the Company, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company. The covenants may
significantly limit the operating and financial flexibility of the Company and
may limit its ability to respond to changes in its business or competitive
activities. In addition, the Company is required under the Bank Credit Facility
to maintain certain specified financial ratios. The ability of the Company to
comply with such provisions may be affected by events beyond its control. The
breach of any of these covenants or the inability of the Company to comply with
the required financial ratios could result in a default under the Bank Credit
Facility or the Indenture. In the event of any such default, depending on the
actions taken by the lenders under the Bank Credit Facility (the "Lenders"), the
Company could be prohibited from making any payments of principal or interest on
the Notes. In addition, the Lenders could elect to declare all amounts borrowed
under the Bank Credit Facility, together with accrued interest, to be due and
payable. If the Company were unable to repay such borrowings, the Lenders could
proceed against their collateral. If the indebtedness under the Bank Credit
Facility were to be accelerated, there can be no assurance that the assets of
the Company would be sufficient to repay such indebtedness and the Notes in
full. See "--Subordination of the Notes," "Description of Bank Credit Facility"
and "Description of the New Notes."
SUBORDINATION OF THE NOTES
The Notes are unsecured, general obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company,
including indebtedness under the Bank Credit Facility. Amounts outstanding under
the Bank Credit Facility are secured by substantially all assets of the Company
and its subsidiaries. At September 28, 1996, on a pro forma basis after giving
effect to the Transactions, the Company (excluding its subsidiaries) would have
had approximately $160.0 million of Indebtedness outstanding, of which $45.0
million would have been Senior Indebtedness and secured by substantially all the
assets of the Company and its subsidiaries. In addition, at September 28, 1996,
on a pro forma basis after giving effect to the Transactions, the Company
(including its subsidiaries) would have had $27.8 million of unused capacity
under the Bank Credit Facility (net of $2.2 million of outstanding letters of
credit). In the event of bankruptcy, liquidation or reorganization of the
Company, the assets of the Company would be available to pay obligations on the
Notes only after all Senior Indebtedness of the Company has been repaid in full.
Consequently, sufficient assets may not exist to pay amounts due on the Notes.
In addition, the subordination provisions of the Indenture provide that no cash
payments may be made with respect to the Notes during the continuance of a
payment default under certain Senior
18
<PAGE>
Indebtedness of the Company. Furthermore, if certain nonpayment defaults exist
with respect to certain Senior Indebtedness, the holders of such Senior
Indebtedness would be able to prevent payments on the Notes for certain periods
of time.
In addition, the Notes are effectively subordinated to all liabilities of
the Company's subsidiaries, including trade payables and the guarantees by such
subsidiaries of the Company's obligations under the Bank Credit Facility. At
September 28, 1996, on a pro forma basis after giving effect to the
Transactions, the Company's subsidiaries would have had $2.6 million of
liabilities (excluding guarantees of the Company's obligations under the Bank
Credit Facility). The right of the Company to receive assets of any of its
subsidiaries upon liquidation or reorganization of such subsidiary will be
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent the Company itself is recognized as a creditor
of such subsidiary. See "Description of the New Notes--Ranking."
INTERNATIONAL EXPANSION
The Company's strategy to expand in international markets will depend on
numerous factors which are beyond its control, including its ability to develop
or acquire additional manufacturing and distribution capabilities outside the
United States. In addition, international expansion may increase the Company's
exposure to certain risks inherent in doing business outside the United States,
such as currency exchange rate fluctuations, restrictions on the repatriation of
profits, compliance with foreign codes and standards and political risks.
COMPETITION
The Company experiences substantial competition in each of its markets. In
many of its product lines, the Company competes on the basis of technology,
quality, service and price with companies that have greater financial and other
resources. In international markets, the Company may experience competition from
local companies that are more familiar with the markets in the relevant region.
There can be no assurance that competition will not adversely affect the
Company's business in the future.
GOVERNMENT REGULATIONS
The Company's business may be affected by government regulation. For
example, growth of the market for the Company's Therm-X-Trol expansion
accumulators has depended, and will continue to depend, upon increased
enforcement by state and local governments of laws which require reverse flow
prevention devices within water supply lines in order to prevent contamination
of public water supplies. Similarly, regulations requiring the phase out of
certain chlorofluorocarbon-based refrigerant gases in the United States, Europe
and elsewhere have created disruptions in the market for the Company's line of
pressure-rated cylinders. There can be no assurance that any changes in
government regulations, or the enforcement of existing regulations, relating to
the Company's markets will not adversely affect the Company's business in the
future.
LIMITATIONS ON CHANGE OF CONTROL
The Indenture requires the Company, in the event of a Change of Control, to
make an offer to purchase the Notes at 101% of the principal amount thereof,
plus accrued interest to the purchase date. Certain events involving a Change of
Control may be an event of default under the Bank Credit Facility or
indebtedness of the Company that may be incurred in the future. Moreover, the
exercise by the holders of the Notes of their right to require the Company to
purchase the Notes may cause a default under the Bank Credit Facility or such
other indebtedness, even if the Change of Control does not. There can be no
assurance that the Company will have the financial resources necessary to
repurchase the Notes upon a Change of Control. See "Description of the New
Notes--Certain Covenants--Change of Control."
RISK OF FRAUDULENT TRANSFER LIABILITY
Management believes that the indebtedness represented by the Notes was
incurred for proper purposes and in good faith, and that, based on present
forecasts, asset valuations and other financial information, the Company is and,
after the consummation of the Transactions, was, solvent, will have
19
<PAGE>
sufficient capital for carrying on its businesses and will be able to pay it
debts as they mature. Notwithstanding management's belief, if a court of
competent jurisdiction in a suit by an unpaid creditor or a representative of
creditors (such as a trustee in bankruptcy or a debtor-in-possession) were to
find that either the Company did not receive fair consideration or reasonably
equivalent value for issuing the Notes and, at the time of the incurrence of
indebtedness represented by the Notes, the Company was insolvent, was rendered
insolvent by reason of such incurrence, was engaged in a business or transaction
for which its remaining assets constituted unreasonably small capital, intended
to incur, or believed that it would incur, debts beyond its ability to pay as
such debts matured, or intended to hinder, delay or defraud its creditors, such
court could avoid such indebtedness or subordinate such indebtedness to other
existing and future indebtedness of the Company. The measure of insolvency for
purposes of the foregoing will vary depending upon the law of the relevant
jurisdiction. Generally, however, a company would be considered insolvent for
purposes of the foregoing if the sum of the company's debts is greater than all
the company's property at a fair valuation, or if the present fair saleable
value of the company's assets is less than the amount that will be required to
pay its probable liability on its existing debts as they become absolute and
matured.
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to holders of the Old Notes. The Old Notes
were offered and sold in November 1996 to a small number of institutional
investors and are eligible for trading at the PORTAL market. The Notes are a new
issue of securities for which there is currently no trading market. If the Notes
are traded after their initial issuance, they may trade at a discount from their
initial offering price, depending upon prevailing interest rates, the market for
similar securities and other factors, including general economic conditions and
the financial condition and performance of, and prospects for, the Company.
Although the Placement Agents have advised the Company that they currently
intend to make a market in the Notes, they are not obligated to do so, and any
market making activity with respect to the Notes may be discontinued at any time
without notice. See "Description of the New Notes" and "Transfer Restrictions."
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
The net proceeds of the Offering, together with borrowings under the Bank
Credit Facility and the Equity Contribution, were used to pay approximately
$210.3 million of merger consideration and $8.6 million in connection with the
cancellation of existing AMTROL stock options pursuant to the Merger. In
addition, AMTROL's cash was used to pay a portion of the estimated $13.0 million
of fees and expenses related to the Transactions. See "Summary--The Merger,"
"Pro Forma Consolidated Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Description of Bank
Credit Facility."
The following table sets forth the sources and uses of funds in connection
with the Merger and the other Transactions:
<TABLE>
<CAPTION>
AMOUNT AMOUNT
SOURCES OF FUNDS (IN MILLIONS) USES OF FUNDS (IN MILLIONS)
- -------------------------------- ------------- -------------------------------- -------------
<S> <C> <C> <C>
Term loans...................... $ 45.0 Merger consideration............ $ 210.3
Notes........................... 115.0 Option cancellation............. 8.6
Equity Contribution(a).......... 69.3 Estimated Transaction fees and
Cash............................ 2.6 expenses(b) .................... 13.0
------ ------
Total..................... $ 231.9 Total........................... $ 231.9
------ ------
------ ------
</TABLE>
- ----------------
(a) Includes the exchange by management of a portion of their options for AMTROL
common stock for options for Holdings common stock.
(b) Includes underwriting discounts and commissions in connection with the
Offering and approximately $3.6 million of costs that were incurred by the
Company during the period immediately prior to the Merger.
20
<PAGE>
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights. Pursuant to the
Registration Agreement, the Company agreed to use its best efforts to cause the
Registration Statement, of which this Prospectus is a part, to become effective
with respect to the Exchange Offer for the New Notes and to consummate the
Exchange Offer by May 12, 1997. Subject to the terms and conditions stated
herein, all Old Notes validly tendered and not withdrawn will be accepted for
exchange upon consummation of the Exchange Offer.
In the event that the Company determines that the Exchange Offer is not
available or may not be consummated, if the Exchange Offer is not consummated by
May 12, 1997, or if counsel to the Placement Agents under certain circumstances
opines that the Placement Agents cannot resell the Notes without so registering,
the Company will use it best efforts to file the Shelf Registration Statement
and keep it effective until November 13, 1999, or such shorter period as may be
necessary to allow for the resale of all Old Notes.
If (i) by December 28, 1996, neither the Exchange Offer Registration
Statement nor the Shelf Registration Statement has been filed with the
Commission; (ii) by May 12, 1997, neither the Exchange Offer is consummated nor
the Shelf Registration Statement is declared effective; or (iii) after May 12,
1997, and after either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration Statement
thereafter ceases to be effective or usuable (subject to certain exceptions) in
connection with resales of Old Notes or New Notes in accordance with and during
the periods specified in the Registration Agreement (each such event referred to
in clauses (i) through (iii), a "Failure to Register"), the interest rate borne
by the Old Notes shall increase by .50% per annum until such Failure to Register
is cured.
The New Notes have terms identical in all material respects to the terms of
the Old Notes except that the New Notes have been registered under the
Securities Act and, following the completion of the Exchange Offer, the Notes
generally will not be entitled to a contingent increase in the interest rate
otherwise provided under certain circumstances.
In the event the Exchange Offer is consummated prior to May 12, 1997, the
Company will not be required to file a Shelf Registration Statement relating to
the registration of any outstanding Old Notes (unless in the opinion of counsel
for the Placement Agents a Registration Statement must be filed and a Prospectus
must be delivered by the Placement Agents in connection with any offering or
sale of Old Notes), and the interest rate on such Old Notes will remain at its
initial level of 10 5/8%. The Exchange Offer shall be deemed to have been
consummated upon the earlier to occur of (i) the Company having exchanged New
Notes for all outstanding Old Notes (other than Old Notes held by persons not
eligible to participate in the Exchange Offer) pursuant to the Exchange Offer
and (ii) the Company having exchanged, pursuant to the Exchange Offer, New Notes
for all Old Notes that have been tendered and not withdrawn prior to the close
of business on the Expiration Date. Upon consummation of the Exchange Offer,
holders of Old Notes seeking liquidity in their investment (except under certain
circumstances Participating Broker Dealers, as defined in the Registration
Agreement, and the Placement Agents) would have to rely on exemptions to
registration requirements under the securities laws, including the Securities
Act, and such holders will retain no rights under the Registration Agreement.
See "Risk Factors-- Consequences of Failure to Exchange."
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
New Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the
21
<PAGE>
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Exchange Offer in denominations of $1,000 and integral multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than (i) a broker-dealer who purchased
such Old Notes directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act provided that the holder is acquiring the New
Notes in its ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes. Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company that such conditions have been met.
Each broker-dealer that receive New Notes in exchange for Old Notes held for
its own account, as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, such 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 such
broker-dealer in connection with resales of New Notes where such New Notes were
acquired by such broker-dealer as a result of market-making or trading
activities. The Company has agreed that, for a period of 120 days after the
Expiration Date, it will make this Prospectus and any amendment or supplement to
this Prospectus available to any such broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
As of the date of this Prospectus, $115.0 million aggregate principal amount
of the Old Notes is outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes initially purchased by Qualified
Institutional Buyers or in offshore transactions in reliance on Regulation S
under the Securities Act to be issued and transferable in book entry form though
the facilities of DTC, acting as depositary. The New Notes are also issuable and
transferable in book-entry form through DTC. See "Description of the New Notes--
Book-Entry Delivery and Form."
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. See "--Exchange Agent." The Exchange Agent will act as agent for
the tendering holders of Old Notes for the purpose of receiving New Notes from
the Company and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein, any
such unaccepted Old Notes will be returned without expenses, to the tendering
holder thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all reasonable charges and
expenses, other than certain applicable taxes and counsel fees, incurred in
connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1997 unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice prior to 9:00 a.m., New York
City time, on the next business day after the
22
<PAGE>
previously scheduled Expiration Date. Such notice may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of the Old Notes, to
extend the Exchange Offer or terminate the Exchange Offer and refuse to accept
Old Notes not previously accepted, if any of the conditions set forth herein
under "--Termination" shall have occurred and shall not have been waived by the
Company (if permitted to be waived by the Company), by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, and (ii)
to amend the terms of the Exchange Offer in any manner deemed by it to be
advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of the Old Notes of such amendment.
Without limiting the manner to which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from November 13, 1996, payable
semiannually on June 30 and December 31 of each year commencing on June 30,
1997, at the rate of 10 5/8% per annum. Holders of Old Notes accepted for
exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued from November 13, 1996 until the
date of the issuance of the New Notes. Consequently holders who exchange their
Old Notes for New Notes will receive the same interest payment on June 30, 1997
(the first interest payment date with respect to the Old Notes and the New
Notes) that they would have received had they not accepted the Exchange Offer.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such tender is being effected pursuant to the procedure for
book-entry transfer described below) and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account in accordance with
DTC's procedure for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
herein under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
23
<PAGE>
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
the holders.
The method of delivery of Old Notes and the Letters of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose Old Notes are held of record by DTC who desires to deliver such
Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder properly 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 and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office of correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act (an "Eligible Institution") unless the Old Notes tendered
pursuant thereto are tendered (i) by a registered holder 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.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender the
Old Notes on behalf of the registered holder, in either case signed as the name
of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such 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 defects or irregularities with respect to
24
<PAGE>
tenders of Old Notes nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
By tendering, each holder of Old Notes will represent to the Company that,
among that things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, that neither the holder nor
any other person has an arrangement or understanding with any person to
participate in the distribution of the New Notes and that neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act or, if an affiliate, such holder or such other
person will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal, or any other required documents to the Exchange Agent prior to the
Expiration Date, or if such Holder cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder of the Old Notes, the certificate number or
numbers of such Old Notes and the principal amount of Old Notes tendered,
stating that the tender is being made thereby, and guaranteeing that, within
five business days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing the Old Notes
to be tendered in proper form for transfer and any other documents required by
the Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing all tendered Old Notes
in proper form for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of Old Notes delivered electronically) and all
other documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a facsimile
transmission or letter notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) include a statement that
25
<PAGE>
the Depositor is withdrawing its election to have Old Notes exchanged, and
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Notes to register the transfer of such
Old Notes into the name of the Depositor withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) for such withdrawal notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be re-tendered by following one of the
procedures described above under "--Procedures for Tendering" at any time prior
to the Expiration Date.
TERMINATION
The Exchange Offer shall not be subject to any conditions, other than (i)
that the Exchange Offer does not violate applicable law or any applicable
interpretation of the staff of the Commission, (ii) that no action or proceeding
shall have been instituted or threatened in any court or by or before any
governmental agency or body with respect to the Exchange Offer, (iii) that there
shall not have adopted or enacted any law, statute, rule or regulation that
would render the Exchange Offer illegal, and (iv) such other conditions as may
be reasonably acceptable to the Placement Agents which, in the Company's
judgment, would reasonably be expected to impair the ability of the Company to
proceed with the Exchange Offer. There can be no assurance that any such
condition will not occur.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration Date,
subject to the rights of such holders of tendered Old Notes to withdraw their
tendered Old Notes, or (iii) waive such termination event with respect to the
Exchange Offer and accept all properly tendered Old Notes that have not been
withdrawn. If such waiver constitutes a material change in the Exchange Offer,
the Company will disclose such change by means of a supplement to this
Prospectus that will be distributed to each registered holder of Old Notes, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of disclosure
to the registered holders of the Old Notes, if the Exchange Offer would
otherwise expire during such period.
EXCHANGE AGENT
The Bank of New York, the Trustee under the Indenture, has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for assistance and
inquiries for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
By Mail or Hand Delivery:
The Bank of New York
101 Barclay Street
Floor 7 East
New York, New York 10286
Attention: Enrique Lopez
Facsimile Transmission: (212) 571-3080
Confirm by Telephone: (212) 815-2742
26
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage house and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
Reasonable expenses incurred in connection with the Exchange Offer,
including expenses of the Exchange Agent and Trustee and accounting and legal
fees, other than certain applicable taxes and counsel fees, will be paid by the
Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the person signing the Letter of
Transmittal, as if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
27
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 28, 1996 (i) on an actual historical basis and (ii) on a
pro forma basis after giving effect to the Transactions as if the Transactions
had occurred on September 28, 1996. The following table should be read in
conjunction with "Pro Forma Consolidated Financial Data" and the Consolidated
Financial Statements of the Company, and the related notes thereto, appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 28,
1996
----------------------
ACTUAL PRO FORMA
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents........................................................... $ 3,422 $ 800
--------- -----------
--------- -----------
Long-term debt:
Bank Credit Facility:
Revolving credit facility(a).................................................... $ -- $ --
Term loans...................................................................... -- 45,000
Senior Subordinated Notes Due 2006................................................ -- 115,000
--------- -----------
Total long-term debt........................................................ -- 160,000
Total shareholders' equity.......................................................... 72,838 69,300
--------- -----------
Total capitalization........................................................ $ 72,838 $ 229,300
--------- -----------
--------- -----------
</TABLE>
- --------------
(a) Immediately following the consummation of the Transactions, the availability
under the revolving credit facility of the Bank Credit Facility was
approximately $27.8 million (net of $2.2 million of outstanding letters of
credit). See "Description of Bank Credit Facility."
28
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMTROL Inc.:
We have reviewed the pro forma adjustments reflecting the transactions and
items described in the notes and the introduction to the unaudited pro forma
consolidated financial data and the application of those adjustments to the
historical amounts in the accompanying unaudited consolidated pro forma balance
sheet as of September 28, 1996, and the unaudited consolidated pro forma
statements of operations for the nine-month period ended September 28, 1996 and
for the fiscal year ended December 31, 1995. The historical consolidated
financial data are derived from the December 31, 1995 historical financial
statements of AMTROL Inc., which were audited by us, and the September 28, 1996
historical unaudited financial statements of AMTROL Inc., which were reviewed by
us, appearing elsewhere herein. Such pro forma adjustments are based on
management's assumptions, as described in the notes to the unaudited pro forma
consolidated financial data. Our review was conducted in accordance with
standards established by the American Institute of Certified Public Accountants.
A review is substantially less in scope than an examination, the objective
of which is the expression of an opinion on management's assumptions, the pro
forma adjustments and the application of those adjustments to historical
financial data. Accordingly, we do not express such an opinion.
The objective of this pro forma financial data is to show what the
significant effects on the historical data might have been had the
above-mentioned transactions and items occurred at an earlier date. However, the
unaudited pro forma consolidated financial data are not necessarily indicative
of the results of operations or related effects on financial position that would
have been attained had the above-mentioned transactions and items actually
occurred earlier.
Based on our review, nothing came to our attention that caused us to believe
that management's assumptions do not provide a reasonable basis for presenting
the significant effects directly attributable to the above-mentioned
transactions and items described in the notes and the introduction to the
unaudited pro forma consolidated financial data, that the related pro forma
adjustments do not give appropriate effect to those assumptions, or that the pro
forma columns do not reflect the proper application of those adjustments to the
historical financial data contained in the unaudited consolidated pro forma
balance sheet as of September 28, 1996, and the unaudited consolidated pro forma
statements of operations for nine-month period ended September 28, 1996 and for
the fiscal year ended December 31, 1995.
Boston, Massachusetts ARTHUR ANDERSEN LLP
November 4, 1996
29
<PAGE>
INTRODUCTION
The following Pro Forma Financial Data have been derived by the application
of pro forma adjustments to the Consolidated Financial Statements of the Company
appearing elsewhere in this Prospectus. The unaudited pro forma consolidated
statements of operations for the periods presented give effect to the
Transactions and the items described in the following paragraph as if they were
consummated on January 1, 1995. The unaudited pro forma consolidated balance
sheet gives effect to the Transactions and such items as if they were
consummated on September 28, 1996. The adjustments are described in the
accompanying notes.
The Company is implementing a new business strategy under its new management
team. The Company has made targeted workforce and related expense reductions
during the fourth quarter of 1996. In addition, the Company discontinued its
"4BA" reusable pressure-rated cylinder business in the fourth quarter of 1996.
The unaudited pro forma consolidated statements of operations include the cost
savings the Company expects to realize from these initiatives. The pro forma
adjustments do not reflect other cost savings and operating efficiencies or the
cost of achieving any such other cost savings and operating efficiencies. See
"Business--New Management and Business Strategy--Reduce Operating Expenses."
The Pro Forma Financial Data are provided for informational purposes only
and are not necessarily indicative of the operating results that would have
occurred had the Transactions and the items described in the preceding paragraph
been consummated at the beginning of the period, or the financial position that
would have existed on the date, for which the consummation of the Transactions
and such items are being given effect, nor are they necessarily indicative of
the Company's future operating results or financial position.
The Pro Forma Financial Data have been prepared using the purchase method of
accounting, whereby the total cost of the Merger will be allocated to the
tangible and intangible assets acquired and liabilities assumed based upon their
respective fair values at November 13, 1996, the effective date of the Merger.
Such allocations will be based on studies and valuations which have not yet been
completed. Accordingly, the allocations reflected in the Pro Forma Financial
Data are preliminary and subject to revision. However, the Company does not
expect material changes to the allocation of the purchase price.
The following Pro Forma Financial Data have been prepared from the
Consolidated Financial Statements of the Company, including the related notes
thereto, appearing elsewhere in this Prospectus and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
30
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------
<S> <C> <C> <C>
ACTUAL ADJUSTMENTS PRO FORMA
----------- --------------------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................................... $ 172,454 $ (2,592)(a) $ 169,862
Cost of goods sold................................................ 124,303 (3,250)(a)(b)(c)(d) 121,053
----------- -------- -----------
Gross profit.................................................... 48,151 658 48,809
Selling, general and administrative expenses...................... 29,943 (3,694)(a)(b)(c)(e) 26,249
Amortization expense.............................................. -- 3,773 (f)(g 3,773
Plant closing charges............................................. 3,825 -- 3,825
----------- -------- -----------
Income from operations.......................................... 14,383 579 14,962
Interest income (expense), net.................................... 60 (16,901)(h) (16,841)
License and distributorship fees.................................. 258 -- 258
Other income, net................................................. 65 -- 65
----------- -------- -----------
Income before provision for income taxes........................ 14,766 (16,332) (1,556)
Provision for income taxes........................................ 5,681 (4,827)(i) 854
----------- -------- -----------
Net income.................................................... $ 9,085 $ (11,495) $ (2,410)
----------- -------- -----------
----------- -------- -----------
OTHER DATA:
Depreciation and amortization..................................... $ 4,673 $ 4,757 $ 9,430
Capital expenditures.............................................. 5,492 -- 5,492
EBITDA(j)......................................................... 23,139 5,336 28,475
Ratio of EBITDA to total cash interest expense(k)................. 1.8x
Ratio of earnings to fixed charges(l)............................. 1.1x
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 28, 1996
-----------------------------------------------
<S> <C> <C> <C>
ACTUAL ADJUSTMENTS PRO FORMA
----------- --------------------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................................... $ 134,816 $ (3,430)(a) $ 131,386
Cost of goods sold................................................ 98,018 (3,740)(a)(b)(c)(d) 94,278
----------- -------- -----------
Gross profit.................................................... 36,798 310 37,108
Selling, general and administrative expenses...................... 22,793 (2,148)(a)(b)(c)(e) 20,645
Amortization expense.............................................. -- 2,830 (f)(g 2,830
----------- -------- -----------
Income from operations.......................................... 14,005 (372) 13,633
Interest income (expense), net.................................... 31 (12,676)(h) (12,645)
License and distributorship fees.................................. 156 -- 156
Other income, net................................................. 84 -- 84
----------- -------- -----------
Income before provision for income taxes........................ 14,276 (13,048) 1,228
Provision for income taxes........................................ 5,496 (3,934)(i) 1,562
----------- -------- -----------
Net income.................................................... $ 8,780 $ (9,114) $ (334)
----------- -------- -----------
----------- -------- -----------
OTHER DATA:
Depreciation and amortization..................................... $ 3,933 $ 3,569 $ 7,502
Capital expenditures.............................................. 8,053 -- 8,053
EBITDA(j)......................................................... 18,094 3,197 21,291
Ratio of EBITDA to total cash interest expense(k)................. 1.8x
Ratio of earnings to fixed charges(l)............................. 1.1x
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
31
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Reflects reductions in net sales, cost of goods sold and selling, general
and administrative expenses that the Company expects to realize from the
discontinuance of the Company's "4BA" reusable pressure-rated cylinder
product line in the fourth quarter of 1996 as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
----------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Net sales.............................................................. $ (2,592) $ (3,430)
Cost of goods sold..................................................... (3,836) (4,180)
Selling, general and administrative expenses........................... (70) (55)
</TABLE>
(b) Reflects cost savings the Company expects to realize from its targeted
workforce reduction program undertaken in the fourth quarter of 1996 and the
reorganization within the Chairman's office in connection with the Merger as
follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
------------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Cost of goods sold..................................................... $ (300) $ (225)
Selling, general and administrative expenses........................... (3,287) (1,841)
</TABLE>
(c) Reflects adjustments related to increased depreciation resulting from the
preliminary purchase price allocation as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
------------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Cost of goods sold..................................................... $ 886 $ 665
Selling, general and administrative expenses........................... 98 74
</TABLE>
(d) Excludes a non-recurring adjustment to cost of goods sold resulting from the
preliminary purchase price allocation, which increased the estimated fair
value of finished goods inventories acquired by $2.5 million at September
28, 1996. This amount will be recorded in cost of goods sold subsequent to
the Merger as the acquired inventory is sold.
(e) Reflects the elimination of annual costs of $435,000 related to operating as
a public company that the Company expects to realize as a result of the
Merger and subsequent operation as a privately held company.
(f) Excludes a non-recurring adjustment to amortization expense of $1.0 million
resulting from the preliminary purchase price allocation related to
in-process research and development costs. This amount will be recorded in
amortization expense in the first quarter following the effective date of
the Merger.
(g) Reflects increases in amortization expense resulting from the preliminary
purchase price allocation based on the estimated useful lives of the related
intangible assets. Pro forma amortization of intangible assets for the
Merger is calculated based on estimated useful lives of 40 years.
(h) Reflects pro forma interest expense on indebtedness incurred in connection
with the Merger as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 28, 1996
----------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Revolving credit facility(i)........................................... $ 150 $ 113
Term loans(ii)......................................................... 3,825 2,869
Notes(ii).............................................................. 12,219 9,164
Amortization of debt issuance costs(iii)............................... 707 530
------- -------
Total............................................................ $ 16,901 $ 12,676
------- -------
------- -------
</TABLE>
-------------------------
(i) Reflects a commitment fee related to the total unused portion of
available credit.
(ii) Reflects term loans under the Bank Credit Facility of $45.0 million
(assuming for pro forma purposes a weighted average interest rate of
8.5%) and the sale of $115.0 million of the Notes. A .125% change in
the interest rate on the Bank Credit Facility would change the
Company's pro forma interest expense for the periods presented above by
$56,250 and $42,188, respectively.
(iii) The financing costs incurred of $6.5 million associated with the
term loans under the Bank Credit Facility and the Notes have been
capitalized as deferred charges and are being amortized over the
assumed term of the related debt, 7.5 years and 10 years, respectively.
(i) Income tax adjustments have been calculated using a combined state and
federal statutory income tax rate of approximately 38.5%. The primary
difference between the provision calculated at statutory rates and the
amount reflected in the pro forma statements is attributable to
nondeductible goodwill.
(j) EBITDA represents income from operations before plant closing charges, plus
depreciation and amortization and license and distributorship fees. EBITDA
is presented because it is a widely accepted indicator of a company's
ability to incur and service indebtedness. EBITDA (subject to certain
adjustments) will be used to determine compliance with certain covenants in
the Indenture. EBITDA, however, should not be considered as an alternative
to net income, as a measure of the Company's operating results, or as an
alternative to cash flow, as a measure of liquidity.
(k) Cash interest expense represents total interest expense less amortization of
debt issuance costs and interest income.
(l) For purposes of this computation, earnings represent net income before
income taxes, plant closing charges and fixed charges. Fixed charges consist
of interest expense, capitalized interest, the interest component of
operating leases and amortization of deferred financing costs.
32
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF SEPTEMBER 28, 1996
-----------------------------------
<S> <C> <C> <C>
ACTUAL ADJUSTMENTS PRO FORMA
--------- ----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 3,422 $ (2,622)(a) $ 800
Accounts receivable, net.................................................. 30,451 -- 30,451
Inventories............................................................... 22,686 2,500(b) 25,186
Prepaid income taxes...................................................... 1,714 (849)(b) 865
Prepaid expenses and other................................................ 1,372 -- 1,372
Net assets held for sale.................................................. 1,786 -- 1,786
--------- ----------- -----------
Total current assets.................................................... 61,431 (971) 60,460
--------- ----------- -----------
Other assets:
Property, plant and equipment, net........................................ 32,089 5,000(b) 37,089
Intangible assets......................................................... 489 150,933(b) 151,422
Other assets.............................................................. 2,633 6,500(b) 9,133
--------- ----------- -----------
Total assets........................................................ $ 96,642 $ 161,462 $ 258,104
--------- ----------- -----------
--------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt.................................... $ -- $ -- $ --
Accounts payable.......................................................... 9,203 -- 9,203
Accrued expenses.......................................................... 8,620 5,000(b) 13,620
Accrued income taxes...................................................... 865 -- 865
--------- ----------- -----------
Total current liabilities............................................... 18,688 5,000 23,688
--------- ----------- -----------
Non-current liabilities:
Other non-current liabilities............................................. 4,669 -- 4,669
Deferred income taxes..................................................... 447 -- 447
Long-term debt............................................................ -- 160,000(a) 160,000
--------- ----------- -----------
Total liabilities................................................... 23,804 165,000 188,804
Shareholders' equity................................................ 72,838 (3,538)(c) 69,300
--------- ----------- -----------
Total liabilities and shareholders' equity...................... $ 96,642 $ 161,462 $ 258,104
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
33
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects the acquisition of the common stock of the Company in the Merger
and the related financing transactions as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Uses of Funds:
Merger consideration............................................................. $ 210.3
Option cancellation.............................................................. 8.6
Estimated Transaction fees and expenses(i)....................................... 13.0
-------------
Total........................................................................ $ 231.9
-------------
-------------
Sources of Funds:
Term loans....................................................................... $ 45.0
Notes............................................................................ 115.0
Equity Contribution(ii).......................................................... 69.3
Cash............................................................................. 2.6
-------------
Total........................................................................ $ 231.9
-------------
-------------
</TABLE>
- -----------------
(i) Includes underwriting discounts and commissions in connection with
the Offering and approximately $3.6 million of costs that were incurred
by the Company during the period immediately prior to the Merger.
(ii) Includes the exchange by management of a portion of their options
for AMTROL common stock for options for Holdings common stock.
(b) Reflects the estimated allocation of the purchase price as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Total consideration.................................................................. $ 231.9
Historical net assets................................................................ 72.8
-------------
Amount to be allocated........................................................... $ 159.1
-------------
-------------
Allocated to:
Inventories...................................................................... $ 2.5
Property, plant and equipment.................................................... 5.0
Intangible assets................................................................ 150.9
Deferred charges................................................................. 6.5
Accrued expenses................................................................. (5.0)
Income tax valuation allowance................................................... (.8)
-------------
Total........................................................................ $ 159.1
-------------
-------------
</TABLE>
(c) Represents the elimination of historical equity of $72.8 million and the
Equity Contribution of $69.3 million.
34
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for and as of each
of the years in the five-year period ended December 31, 1995 have been derived
from the Consolidated Financial Statements of the Company, including the related
notes thereto, which have been audited by Arthur Andersen LLP, independent
certified public accountants. The selected consolidated financial data for each
of the nine-month periods ended September 30, 1995 and September 28, 1996 and as
of September 28, 1996 have been derived from unaudited consolidated financial
statements of the Company which, in the opinion of management, include all
adjustments (consisting only of normal recurring items) necessary for a fair and
consistent presentation of such data. The results for the nine months ended
September 28, 1996 are not necessarily indicative of results to be expected for
the full fiscal year. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Consolidated Financial Statements of the
Company, including the related notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ----------------------------
----------------------------------------------------- SEPTEMBER 30, SEPTEMBER 28,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT RATIO DATA)
STATEMENT OF OPERATIONS DATA:
Net sales......................... $ 134,421 $ 148,462 $ 164,295 $ 173,472 $ 172,454 $ 134,620 $ 134,816
Cost of goods sold................ 95,468 103,521 116,180 123,184 124,303 96,491 98,018
--------- --------- --------- --------- --------- ------------- -------------
Gross profit.................... 38,953 44,941 48,115 50,288 48,151 38,129 36,798
Selling, general and
administrative
expenses........................ 26,491 28,731 29,099 30,402 29,943 22,568 22,793
Plant closing charges............. -- -- -- -- 3,825 1,875 --
--------- --------- --------- --------- --------- ------------- -------------
Income from operations.......... 12,462 16,210 19,016 19,886 14,383 13,686 14,005
Interest income (expense), net.... (3,414) (2,677) (805) (7) 60 30 31
License and distributorship
fees............................ 276 283 254 254 258 196 156
Other income (expense), net....... 112 (534) (141) (179) 65 104 84
--------- --------- --------- --------- --------- ------------- -------------
Income before provision for
income
taxes and extraordinary
item.......................... 9,436 13,282 18,324 19,954 14,766 14,016 14,276
Provision for income taxes........ 3,409 5,090 7,149 7,683 5,681 5,466 5,496
--------- --------- --------- --------- --------- ------------- -------------
Income before extraordinary
item.......................... 6,027 8,192 11,175 12,271 9,085 8,550 8,780
Extraordinary item................ (522 (a) -- (911 (a) -- -- -- --
--------- --------- --------- --------- --------- ------------- -------------
Net income...................... $ 5,505 $ 8,192 $ 10,264 $ 12,271 $ 9,085 $ 8,550 $ 8,780
--------- --------- --------- --------- --------- ------------- -------------
--------- --------- --------- --------- --------- ------------- -------------
OTHER DATA:
Depreciation and amortization..... $ 4,779 $ 4,349 $ 4,520 $ 4,330 $ 4,673 $ 3,659 $ 3,933
Capital expenditures.............. 12,193 2,849 7,382 4,902 5,492 4,531 8,053
EBITDA(b)......................... 17,517 20,842 23,790 24,470 23,139 19,416 18,094
Ratio of earnings to
fixed charges(c)................ 2.9x 5.3x 16.3x 38.0x 41.5x 51.5x 42.1x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------------- SEPTEMBER 28,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital.................................... $ 17,956 $ 20,833 $ 28,454 $ 37,293 $ 43,303 $ 42,743
Total assets....................................... 71,930 74,499 82,612 91,634 93,909 96,642
Long-term debt, less current installments.......... 32,774 29,676 3,333(d) 2,381 -- --
Shareholders' equity............................... 9,172 16,656 53,017(d) 64,174 70,206 72,838
</TABLE>
- --------------
(a) Reflects an extraordinary loss of $.9 million ($.5 million net of tax
benefits) in 1991 and $1.5 million ($.9 million net of tax benefits) in 1993
from the early extinguishment of debt.
(b) EBITDA represents income from operations before plant closing charges, plus
depreciation and amortization and license and distributorship fees. EBITDA
is presented because it is a widely accepted indicator of a company's
ability to incur and service indebtedness. EBITDA (subject to certain
adjustments) will be used to determine compliance with certain covenants in
the Indenture. EBITDA, however, should not be considered as an alternative
to net income, as a measure of the Company's operating results, or as an
alternative to cash flow, as a measure of liquidity.
(c) For purposes of this computation, earnings represent net income before
extraordinary item, income taxes, plant closing charges and fixed charges.
Fixed charges consist of interest expense, capitalized interest, the
interest component of operating leases and amortization of deferred
financing costs.
(d) As described in Note 3 of the Notes to the Consolidated Financial Statements
of the Company appearing elsewhere in this Prospectus, in 1993 the Company
completed an initial public offering of its common stock and used the net
proceeds to reduce its indebtedness.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE CONSOLIDATED FINANCIAL STATEMENTS
OF THE COMPANY, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
Since the announcement of the Merger on August 29, 1996, management has
developed and begun to execute a new strategic plan to immediately reduce costs
and capitalize on AMTROL's position as a technological and market leader. The
Company's future results of operations will depend in large part on management's
ability to implement this strategy. See "Business--New Management and Business
Strategy."
AMTROL's principal markets are highly replacement-oriented with 60 to 70% of
the Company's core business coming from replacement sales. The installed base of
AMTROL's products in these core markets, combined with their stable nature,
provide the Company with a consistent and predictable base business. Although
generally stable, sales are affected by weather, as well as general economic
activity. The Company monitors well water pump sales, existing home sales and
boiler shipments in order to gauge activity in its markets. Although sales of
certain of AMTROL's product lines are seasonal in nature, its overall business
is not seasonal to any significant extent, as seasonal variations of individual
product lines tend to offset each other.
As a result of the Transactions, the Company will have a higher level of
depreciation and amortization and interest expense. See "Pro Forma Consolidated
Financial Data."
NET SALES. Net sales of the Company's water systems products accounted for
approximately 55.9% and 57.3% of the Company's total net sales in 1995 and the
nine-month period ended September 28, 1996, respectively, with the balance
represented by sales to the HVAC market. Over the past three years, the
percentage of water systems net sales to total net sales has been fairly
constant. The Company generally competes on the basis of quality, technology,
service and brand name recognition. AMTROL, from time to time, will respond to
price competition to protect its market position.
AMTROL's well water accumulators, marketed under the brand names Well-X-Trol
and CHAMPION, account for over half of the Company's total water systems net
sales and generally carry higher gross profit margins than other product sales.
These pre-pressurized vessels are distributed through a network of pump
specialty and plumbing and heating wholesalers and the DIY retail network. The
market is experiencing a modest shift in the channels of distribution from
wholesalers to DIY retailers, which generally carry slightly lower selling
prices. Sales of water system accumulators are generally correlated to shipments
of well water pumps.
The Company's HVAC products include indirect-fired water heaters and water
expansion accumulators for hydronic heating systems and non-returnable
pressure-rated cylinders for refrigerant gas. AMTROL's plumbing and heating
sales outside of North America are currently not significant. AMTROL believes it
has opportunities to increase its sales in Europe, currently the world's largest
hydronic heating market, as well as emerging markets in Northern Asia through a
combination of planned new products and joint ventures. Therm-X-Trol product
sales combined with planned new product introductions will provide growth
opportunities in the plumbing and heating product group.
The market for refrigerant gas pressure-rated cylinders is seasonal in
nature, with roughly 60% of annual sales coming in the first six months of the
year as producers build inventory in preparation for air conditioner use in the
summer season. An unseasonably hot spring and early summer favorably impact unit
volume demand. AMTROL and Worthington Industries are the major manufacturers of
non-returnable
36
<PAGE>
refrigerant cylinders for a world market dominated by a few major customers. The
Company expects that rapidly increasing demand for air conditioning and
refrigerant products in the Asia/Pacific region will generate sales growth.
COST OF GOODS SOLD. The principal elements comprising the Company's cost of
goods sold are raw materials, labor and manufacturing overhead. The major raw
materials used by the Company in its production process are steel, corrugated
paper, plastic resins and synthetic rubber. Significant increases in raw
material prices can adversely impact margins if the Company is unable to pass on
such increases to its customers. In 1995, the Company experienced increased raw
material costs, particularly steel and corrugated paper, which it was unable to
offset and, as a result, gross margin was adversely impacted. During 1996, the
Company has experienced reductions in raw material prices, offsetting much of
the increases experienced in the prior year. The Company has an infrastructure
of capital equipment, buildings and related support costs and, accordingly,
decreases in volume can have a significant adverse effect on margins. Cost of
goods sold can also be significantly affected by changes in product mix.
Since the fourth quarter of 1995, the Company has significantly reduced its
manufacturing cost base. The Company reduced its workforce by approximately 15%,
or 150 people, by closing its Plano, Texas facility in September 1995 and its
Rogers, Arkansas facility in April 1996. Production previously performed in
these facilities was transferred to other existing production plants. In the
fourth quarter of 1995 and the first half of 1996, the Company experienced
certain inefficiencies and additional costs assimilating the production into the
remaining plants. Historically, the Company's labor rate increases have been
generally in line with inflation, but the Company is moving away from a straight
cost of living increase to a pay-for-performance merit system.
During 1996, the Company began to make increased capital investments to
enhance production capabilities, eliminate production bottlenecks and improve
production yield. As a result, plant efficiencies are expected to improve in
1997 and in the future as this program continues. In addition, to better service
and reduce distribution costs in its growing customer base in the Asia/Pacific
region, the Company recently opened a production facility in Singapore. This
facility initially will manufacture non-returnable pressure-rated cylinders with
plans to expand manufacturing capability to other products.
In 1994, the Company introduced the "4BA" reusable pressure-rated cylinder
product line to service the anticipated expanding reclamation and refrigerant
recovery market. As a result of lower than expected demand, competitive pricing,
and a high cost manufacturing process, the 4BA product line's cost of goods sold
exceeded its net sales in 1994, 1995, and the first nine months of 1996,
adversely impacting the Company's gross profits in those periods. The Company
discontinued this product line in the fourth quarter of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. During 1994, the Company
reorganized its sales force and consolidated multiple product lines under one
sales organization. This program resulted in reduced selling expenses in 1995.
Generally, selling expenses will increase proportionally to increases in net
sales.
In 1994, to better position itself for future growth, the Company increased
its spending on engineering and development. Additionally, in 1994, the Company
organized itself into three separate business units: water systems, plumbing and
heating systems and chemical containers. As a result of these actions, the
Company experienced increased operating expenses, primarily due to higher
staffing levels necessary to support the new organizational structure. As part
of the Company's new business strategy, the three separate business units have
been consolidated into one, which will result in annual expense savings of
approximately $600,000. The Company expects to begin realizing the benefits of
this consolidation during the fourth quarter of 1996. During 1995, AMTROL
continued to increase its investment in engineering and development. To support
its planned expansion in international markets, the Company began to increase
its investment in staff and marketing in 1995 and this has continued in 1996,
resulting in increased operating expenses.
37
<PAGE>
After the Merger, the Company will realize savings from not being a publicly
traded entity and also from the elimination of certain expenses in connection
with a reorganization within the Chairman's office. The Company will realize
additional savings from its targeted workforce reduction plan which was
undertaken in the fourth quarter of 1996.
PLANT CLOSING CHARGES. In 1995, the Company recorded a $3.8 million charge
to operating expenses for severance and other costs in anticipation of the
closures of the Plano, Texas and Rogers, Arkansas plants.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items included in the Company's statement
of operations:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, --------------------------------
------------------------------- SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
--------- --------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net sales.............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold..................................... 70.7 71.0 72.1 71.7 72.7
--------- --------- --------- ----- -----
Gross profit......................................... 29.3 29.0 27.9 28.3 27.3
Selling, general and administrative expenses........... 17.7 17.6 17.4 16.7 16.9
Plant closing charges.................................. -- -- 2.2 1.4 --
--------- --------- --------- ----- -----
Income from operations............................... 11.6 11.4 8.3 10.2 10.4
Interest income (expense), net......................... (.5) -- .1 -- --
Other income, net...................................... .1 .1 .2 .2 .2
--------- --------- --------- ----- -----
Income before provision for income taxes and
extraordinary item................................. 11.2 11.5 8.6 10.4 10.6
Provision for income taxes............................. 4.4 4.4 3.3 4.0 4.1
--------- --------- --------- ----- -----
Income before extraordinary item..................... 6.8% 7.1% 5.3% 6.4% 6.5%
--------- --------- --------- ----- -----
--------- --------- --------- ----- -----
</TABLE>
Composition of net sales for the Company's water systems and HVAC products
for the periods indicated is listed below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
---------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SEPTEMBER
SEPTEMBER 30, 28,
1993 1994 1995 1995 1996
---------------------- ---------------------- ---------------------- ---------------------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales
Water Systems...... $ 91.8 55.9% $ 98.2 56.6% $ 96.4 55.9% $ 76.0 56.5% $ 77.2
HVAC............... 72.5 44.1 75.3 43.4 76.1 44.1 58.6 43.5 57.6
--------- ----- --------- ----- --------- ----- --------- ----- ---------
Total............ $ 164.3 100.0% $ 173.5 100.0% $ 172.5 100.0% $ 134.6 100.0% $ 134.8
--------- ----- --------- ----- --------- ----- --------- ----- ---------
--------- ----- --------- ----- --------- ----- --------- ----- ---------
<CAPTION>
<S> <C>
<S> <C>
Net Sales
Water Systems...... 57.3%
HVAC............... 42.7
-----
Total............ 100.0%
-----
-----
</TABLE>
NINE MONTHS ENDED SEPTEMBER 28, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
NET SALES. Net sales increased $.2 million (or .2%) in the first nine
months of 1996 to $134.8 million from $134.6 million in the corresponding period
of 1995. This increase was primarily attributable to increased sales of
residential plumbing and heating products due to stronger demand in the new and
replacement hydronic heating market, as well as increased sales of residential
well water products and increased international sales of refrigerant
pressure-rated cylinders, offset by weak domestic demand for refrigerant
pressure-rated cylinders. Net sales attributable to the Company's water systems
products
38
<PAGE>
increased $1.2 million (or 1.6%) in the nine months ended September 28, 1996 to
$77.2 million, primarily due to increased sales of well water accumulators. Net
sales attributable to the Company's HVAC products decreased $1.0 million (or
1.7%) to $57.6 million in the nine months ended September 28, 1996, primarily
due to a decrease of $3.2 million in sales of refrigerant pressure-rated
cylinders resulting from a pre-buy of domestic non-returnable cylinders in 1995,
offset by increased sales of the Company's core HVAC products. The decline in
domestic sales of non-returnable pressure-rated cylinders also reflects the
continued transition from chlorofluorocarbons ("CFCs") to new alternative
refrigerant gases which is expected to continue until the after-market service
demand for new refrigerant gases grows to previous CFC levels.
COST OF GOODS SOLD. Cost of goods sold increased $1.5 million (or 1.5%) in
the first nine months of 1996 to $98.0 million from $96.5 million in the
corresponding period of 1995. This increase was due to inefficiencies associated
with assimilating production requirements of the two manufacturing facilities
closed during the prior twelve months. As a percentage of net sales, cost of
goods sold increased in the first nine months of 1996 to 72.7% as compared to
71.7% in the corresponding period of 1995. This increase was due to the cost of
production interruptions associated with plant closings and inclement weather.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $.2 million (or .9%) in the first nine months
of 1996 to $22.8 million from $22.6 million in the corresponding period of 1995.
As a percentage of net sales, selling, general and administrative expenses
increased in the first nine months of 1996 to 16.9% as compared to 16.7% in the
corresponding period of 1995. This increase was due to increased selling costs
associated with the DIY channel and certain one-time promotional expenses,
offset in part by reduced administrative expenses associated with the Chairman's
office.
INCOME FROM OPERATIONS. For the reasons set forth above, income from
operations decreased $1.5 million (or 10.0%) in the first nine months of 1996 to
$14.0 million from $15.6 million (before plant closing charges of $1.9 million)
in the corresponding period of 1995. This decrease was primarily due to the
lower gross profit percentage.
INTEREST INCOME (EXPENSE), NET. Net interest income increased to $31,000 in
the first nine months of 1996 from $30,000 in the corresponding period of 1995.
INCOME TAXES. Income tax expenses increased $30,000 in the first nine
months of 1996 as compared to the corresponding period of 1995.
NET INCOME BEFORE EXTRAORDINARY ITEM. Net income before extraordinary item
increased $.2 million (or 2.3%) in the first nine months of 1996 to $8.8 million
from $8.6 million (including plant closing charges of $1.9 million) in the
corresponding period of 1995.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
NET SALES. Net sales decreased $1.0 million (or .6%) in 1995 to $172.5
million from $173.5 million in 1994. This decrease was primarily attributable to
a decline in the sales of certain water systems accessories and a softness in
the residential plumbing and heating market. Net sales attributable to the
Company's water systems products decreased $1.8 million (or 1.8%) in 1995 to
$96.4 million from $98.2 million in 1994, primarily due to the elimination of
certain lower margin water systems accessory product offerings partially offset
by increased sales of water system accumulators. Net sales attributable to the
Company's HVAC products increased $.8 million (or 1.1%) in 1995 to $76.1 million
from $75.3 million in 1994, principally due to increased sales of Therm-X-Trols,
commercial and industrial heating products and certain refrigerant cylinder
products; these increases were partially offset by a decrease in sales of
residential plumbing and heating products, primarily due to weak domestic demand
for new and replacement hydronic heating systems resulting from a relatively
warm winter in 1995. In addition, international sales in 1995 were adversely
affected by depressed economic conditions in Mexico and Europe.
39
<PAGE>
COST OF GOODS SOLD. Cost of goods sold increased $1.1 million (or .9%) in
1995 to $124.3 million from $123.2 million in 1994. This increase was due to
increased raw material costs. As a percentage of net sales, cost of goods sold
increased in 1995 to 72.1% as compared to 71.0% in 1994. This increase was due
to the poor performance of the 4BA reusable pressure-rated cylinder product line
as well as increased raw material costs that the Company was unable to offset.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $.5 million (or 1.6%) in 1995 to $29.9 million
from $30.4 million in 1994. This decrease in expenses was primarily due to a
reduction in selling expenses resulting from a reorganization of the Company's
sales force and consolidation of multiple lines of business partially offset by
increased investment in engineering, research and development expenses. As a
percentage of net sales, selling, general and administrative expenses decreased
slightly in 1995 to 17.4% as compared to 17.6% in 1994.
INCOME FROM OPERATIONS. Income from operations decreased $5.5 million (or
27.6%) in 1995 to $14.4 million from $19.9 million in 1994. This decrease was
primarily due to plant closing charges of $3.8 million incurred in 1995 and
reduced gross profits.
INTEREST INCOME (EXPENSE), NET. Net interest income increased $67,000 in
1995 to $60,000 from net interest expense of $7,000 in 1994.
INCOME TAXES. Income tax expenses decreased $2.0 million (or 26.0%) in 1995
to $5.7 million from $7.7 million in 1994.
NET INCOME BEFORE EXTRAORDINARY ITEM. For the reasons set forth above, net
income before extraordinary item decreased $3.2 million (or 26.0%) in 1995 to
$9.1 million from $12.3 million in 1994.
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1993
NET SALES. Net sales increased $9.2 million (or 5.6%) in 1994 to $173.5
million from $164.3 million in 1993. This increase was primarily attributable to
a strong economy and the impact of new marketing programs introduced in 1993.
Net sales attributable to the Company's water systems products increased $6.4
million (or 7.0%) in 1994 to $98.2 million from $91.8 million in 1993, primarily
due to the stronger economy and these new marketing programs. Net sales
attributable to the Company's HVAC products increased $2.8 million (or 3.9%) in
1994 to $75.3 million from $72.5 million in 1993, primarily as a result of
generally increased demand for the Company's HVAC products associated with the
U.S. economic recovery offset by decreased international demand for the
Company's pressure-rated cylinders. The Company believes the decreased
international demand for pressure-rated cylinders was influenced by pre-buying
and stockpiling of cylinders in 1993 in anticipation of lower manufacturing
quotas for certain refrigerant gases in Europe.
COST OF GOODS SOLD. Cost of goods sold increased $7.0 million (or 6.0%) in
1994 to $123.2 million from $116.2 million in 1993. This increase was due to
increased volume and increased start-up costs incurred in connection with the
introduction of the 4BA reusable pressure-rated cylinder product line. As a
percentage of net sales, cost of goods sold increased slightly in 1994 to 71.0%
as compared to 70.7% in 1993. This increase was primarily a result of the
start-up costs related to the introduction of the 4BA reusable pressure-rated
cylinder line and competitive pricing actions, substantially offset by increased
water systems product sales, which carry higher profit margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.3 million (or 4.5%) in 1994 to $30.4
million from $29.1 million in 1993. This increase in expenses was primarily due
to increases in selling expenses attributable to higher sales volumes, increased
spending in research and development, and increased spending related to a
reorganization of the business units and investments in new systems, people and
process improvements. As a percentage of net sales, selling, general and
administrative expenses decreased slightly in 1994 to 17.6% as compared to 17.7%
in 1993.
40
<PAGE>
INCOME FROM OPERATIONS. Income from operations increased $.9 million (or
4.7%) in 1994 to $19.9 million from $19.0 million in 1993.
INTEREST INCOME (EXPENSE), NET. Net interest expense decreased $798,000 in
1994 to $7,000 from $805,000 in 1993.
INCOME TAXES. Income tax expenses increased $.5 million (or 6.9%) in 1994
to $7.7 million from $7.2 million in 1993.
NET INCOME BEFORE EXTRAORDINARY ITEM. For the reasons set forth above, net
income before extraordinary item increased $1.1 million (or 9.8%) in 1994 to
$12.3 million from $11.2 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations was $6.6 million for the nine months ended
September 28, 1996, representing an increase of $.5 million, as compared to $6.1
million for the corresponding period in 1995. The increase was primarily due to
proceeds from life insurance policies and a reduction in prepaid income taxes.
Cash was utilized during the latest period to fund capital expenditures,
ordinary dividends and a special dividend of $5.5 million, which represented the
proceeds from the sale of the Company's Rogers, Arkansas manufacturing facility,
expected proceeds from the sale of the Company's Plano, Texas facility and
proceeds from life insurance policies. The Company's cash flows from operating
activities were approximately $12.0 million, $10.7 million and $11.9 million for
the years ended December 31, 1993, 1994 and 1995, respectively.
The Company intends to fund its future working capital, capital expenditures
and debt service requirements through cash flows generated from operations
(including the results of significantly reduced operating expenses) and
borrowings under the revolving credit facility (the "Revolving Credit Facility")
of the Bank Credit Facility. Upon consummation of the Merger on November 13,
1996, the Company became party to the Bank Credit Facility. The Bank Credit
Facility consists of $45.0 million of senior term loans (the "Term Loans") and a
$30.0 million Revolving Credit Facility. A portion ($20.0 million) of the Term
Loans (the "Tranche A Term Loans") will mature five and one-half years after the
effective date of the Merger, with quarterly amortization payments during the
term of such loans. The remainder ($25.0 million) of the Term Loans (the
"Tranche B Term Loans") will mature seven and one-half years after the effective
date of the Merger, with nominal quarterly amortization prior to the maturity of
the Tranche A Term Loans and with the remaining amounts amortizing on a
quarterly basis thereafter. The Revolving Credit Facility includes a sublimit
providing for up to $20.0 million of availability on a revolving credit basis to
finance permitted acquisitions. The commitments under the Revolving Credit
Facility and the acquisition sublimit will each reduce by $5.0 million in the
fourth year and $10.0 million in the fifth year after the effective date of the
Merger. The Revolving Credit Facility will mature five and one-half years after
the effective date of the Merger. The Bank Credit Facility is secured by
substantially all assets of the Company and its subsidiaries. See "Description
of Bank Credit Facility." Assuming that the Merger had been consummated on
September 28, 1996, there would have been $27.8 million unused and available
under the Bank Credit Facility (net of $2.2 million of outstanding letters of
credit).
Capital expenditures for the nine months ended September 28, 1996 were $8.1
million, an increase of $3.6 million, as compared to $4.5 million for the
corresponding period in 1995. Capital expenditures were $7.4 million, $4.8
million and $5.5 million in the years ended December 31, 1993, 1994 and 1995,
respectively. These expenditures related primarily to ongoing maintenance and
upgrading of the Company's manufacturing technology and, in 1993, included
capital expenditures related to the installation of the Company's 4BA reusable
pressure-rated cylinder production line and, in 1996, included capital
expenditures related to the establishment of the Company's Singapore facility.
As part of its new business strategy, the Company intends to increase the amount
allocated to capital expenditures in order to benefit from a rationalization of
manufacturing capacity, reduced manufacturing costs and higher productivity.
41
<PAGE>
Total capital expenditures are expected to be approximately $10.5 million for
1996, $7.0 million for 1997 and $7.0 million for 1998.
Cash used for financing activities was $6.1 million for the nine months
ended September 28, 1996, an increase of $1.2 million as compared to $4.9
million for the corresponding period in 1995. In the years ended December 31,
1993, 1994 and 1995, cash flows used for financing activities were approximately
$5.6 million, $2.1 million and $6.4 million, respectively. In each period, such
cash flows were used primarily to pay cash dividends, make net repayments of
borrowings and to repurchase the Company's common stock.
Management believes that cash generated from operations, together with
borrowings available under the Revolving Credit Facility, will be sufficient to
meet the Company's working capital and capital expenditure needs in the
foreseeable future. The Company may consider other options available to it in
connection with funding future working capital and capital expenditure needs,
including the issuance of additional debt and equity securities.
INFLATION
The Company believes that inflation has not had a material effect on its
results of operations or financial condition during 1993 and 1994. However, in
1995, the Company experienced increased raw material costs, particularly steel
and corrugated paper. During 1996, the Company has experienced reductions in raw
material prices, offsetting many of the increases experienced in the prior year.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," is effective for financial statements for
fiscal years beginning after December 15, 1995. This standard, among other
things, requires entities to review long-lived assets for impairment whenever
events or changes in circumstances indicate that their carrying value may not be
recoverable. Based upon current facts and circumstances, adoption of this
standard is not expected to have a material effect on the Company's financial
condition, results of operations or cash flows.
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for
financial statements for fiscal years beginning after December 15, 1995. This
standard, among other things, defines a fair value based method of accounting
for employee stock option and similar plans and requires certain disclosures.
Management has not yet determined whether it will adopt the measurement
provisions of SFAS No. 123 at this time.
42
<PAGE>
BUSINESS
AMTROL, founded in 1946, is a leading designer, manufacturer and marketer of
water flow and control products used in the water systems markets and selected
sectors of the HVAC market. The Company's principal products include well water
accumulators, hot water expansion controls, water treatment products,
indirect-fired water heaters and non-returnable pressure-rated cylinders used
primarily to store, transport and dispense refrigerant gases. Many of these
products are based on a technology originated and developed by the Company,
which uses a pre-pressurized vessel with an internal diaphragm to handle fluids
under pressure. The Company's pro forma net sales and pro forma EBITDA were
$169.9 million and $28.5 million, respectively, for the year ended December 31,
1995 and $131.4 million and $21.3 million, respectively, for the nine months
ended September 28, 1996.
The Company believes that its leading market positions in its key product
categories are attributable to the strength of AMTROL's brand names and product
breadth, quality and innovation, as well as its marketing, distribution and
manufacturing expertise. In addition, AMTROL's principal markets are highly
replacement-oriented, with 60 to 70% of the Company's core business coming from
replacement sales. These factors, combined with the Company's large installed
base of products, have enabled AMTROL to demonstrate sales and earnings
stability over the past five years, even during periods of weak domestic
economic activity.
AMTROL's brand names are among the most widely known in its markets. For
example, the Company's key hot water expansion control product, the Extrol, is
so widely recognized that customers frequently refer to any hot water expansion
control as an "Extrol." Other well-known brand names of the Company include
Well-X-Trol, Therm-X-Trol, Hot Water Maker and CHAMPION. The Company also
believes that it is the recognized technology leader in virtually all of its
core product lines. In many of the Company's major product lines, AMTROL's
products are considered the industry standard, a key marketing advantage,
because of their recognized quality and reliability.
The Company's strong reputation and brand recognition ensure that nearly
every significant wholesaler carries at least one AMTROL product. This
facilitates new product introduction, effectively "pulling" the Company's new
products through its distribution system. AMTROL also offers a broad range of
products, including over 100 models of well water accumulators. This broad
product offering allows AMTROL's customers to consolidate their suppliers and to
purchase and manage inventory more efficiently. These factors have established
the Company's products as a preferred brand and allow the Company to realize
premium pricing on most of its branded products.
During its 50-year history, the Company has built a strong franchise with
wholesalers and OEMs, resulting in a broad distribution network serving more
than 5,000 customers throughout North America. In 1995, approximately 13% of the
Company's net sales were derived from international markets, and the Company is
expanding internationally, especially in the fast growing Asia/Pacific region.
The Company recently opened a new manufacturing facility in Singapore and
intends to introduce several new products which the Company believes will be
well received in international markets. In addition, the Company has recently
refocused its efforts to better serve the DIY market, a rapidly growing channel
of distribution, primarily through private label arrangements with Lowe's
Companies, Menards, Cotter & Company (True Value) and Ace Hardware.
The Company's principal executive offices are located at 1400 Division Road,
West Warwick, Rhode Island 02893 (telephone number: (401) 884-6300).
NEW MANAGEMENT AND BUSINESS STRATEGY
Upon the Merger, Mr. Cashman became the Chairman, Chief Executive Officer
and President of the Company. Mr. Cashman has over 30 years of general
industrial management experience in the filtration, minerals, building products
and pharmaceutical industries, most recently as Chairman and Co-Chief
43
<PAGE>
Executive Officer of R.P. Scherer. Mr. Cashman joined R.P. Scherer concurrent
with that company's leveraged buyout in 1989. Under Mr. Cashman's leadership,
R.P. Scherer's management successfully implemented a strategy which resulted in
significantly reduced operating costs and rapid international and U.S. sales
growth. Since the announcement of the Merger on August 29, 1996, Mr. Cashman has
worked closely with key members of AMTROL's management to develop a new
strategic plan. To implement this new strategic plan, a new streamlined
management structure has been put in place.
Since the beginning of October 1996, the Company has been executing the new
strategic plan, which is designed to immediately reduce costs and capitalize on
AMTROL's position as a technological and market leader. The new strategic plan
consists of the following key elements: (i) reduce operating expenses, (ii)
enhance sales and profitability of core product offerings, (iii) introduce new
products and (iv) grow internationally.
REDUCE OPERATING EXPENSES
The Company has already initiated a series of actions designed to
immediately reduce operating expenses and to establish new managerial and
organizational accountability. Actions already implemented or announced are
expected to generate approximately $9.7 million of permanent annual cost savings
by the end of 1997 (see table below). These actions are expected to result in
related one-time costs of approximately $1.0 million of severance and other
expenses and $2.0 million in connection with the writedown of certain assets
related to the discontinuation of the 4BA product line, which will be reserved
for on the Company's consolidated balance sheet as part of purchase accounting.
The cost savings estimates described herein are forward-looking statements based
on management budgets, and there can be no assurance that such cost savings can
be achieved.
<TABLE>
<CAPTION>
TOTAL
ESTIMATED PERMANENT
ACTIONS IMPLEMENTED OR ANNOUNCED ANNUALIZED SAVINGS
- ------------------------------------------------------------------------- ---------------------
<S> <C>
(IN MILLIONS)
Reduce corporate overhead expenses....................................... $ 4.5
Continue to rationalize manufacturing facilities......................... 3.0
Reduce manufacturing and distribution costs.............................. 2.2
-----
Total.............................................................. $ 9.7
-----
-----
</TABLE>
REDUCE CORPORATE OVERHEAD EXPENSES. The Company believes that
significant and immediate cost savings can be realized from restructuring
its general and administrative staff and consolidating its three autonomous
strategic business units to eliminate redundant and unnecessary functions.
These actions have been substantially completed and the Company expects to
realize permanent annual cost savings aggregating approximately $4.5
million, including non-personnel expense reductions commencing in 1997. As a
result of the headcount reductions undertaken in 1996, the number of persons
employed at corporate headquarters has decreased by approximately 15% since
January 1, 1996. The Company estimates that one-time costs related to these
measures will total approximately $1.0 million, which will be reserved for
on its consolidated balance sheet as part of purchase accounting.
CONTINUE TO RATIONALIZE MANUFACTURING FACILITIES. Since September 1995,
the Company has closed two manufacturing facilities and relocated their
production to remaining facilities. As a result of these plant
consolidations, 150 salaried and non-salaried positions have been
eliminated. The Company also discontinued its unprofitable 4BA reusable
pressure-rated cylinder business in the fourth quarter of 1996 as part of
its cost reduction initiatives. The Company recently introduced a new
reusable pressure-rated cylinder which serves the same growing market as the
4BA product line, but has significantly lower manufacturing costs. These
actions are expected to generate permanent annual manufacturing cost savings
of approximately $3.0 million. The Company recorded a $3.8 million charge to
operating expense in 1995 in connection with the two plant closures. The
discontinuation of
44
<PAGE>
the 4BA reusable pressure-rated cylinder business will result in a $2.0
million writedown of certain assets, which will be reserved for on the
Company's consolidated balance sheet as part of purchase accounting. In
addition, the Company is currently evaluating its manufacturing capacity and
expects to take actions to further reduce manufacturing costs by maximizing
production at lower cost facilities and reducing or eliminating production
at higher cost facilities.
REDUCE MANUFACTURING AND DISTRIBUTION COSTS. The Company intends to
reduce labor costs through automating certain labor-intensive manufacturing
processes and redesigning existing product lines. For example, the Company
is currently automating its small vessel manufacturing line in its West
Warwick, Rhode Island facility. These projects are expected to generate
approximately $2.2 million in permanent annual cost savings by the end of
1997. The Company has identified and intends to implement several other
manufacturing improvement projects which are expected to yield additional
annual savings by the end of 1998. In addition, the new Singapore
manufacturing facility is expected to result in significant savings in
shipping and distribution costs of sales to the Asia/Pacific region.
ENHANCE SALES AND PROFITABILITY OF CORE PRODUCT OFFERINGS
The Company intends to implement a series of initiatives to reinvigorate
sales growth and increase profitability of its core product offerings. To
accomplish this, the Company will seek agreements with major pump and boiler
OEMs to incorporate AMTROL products into complete systems solutions and will
modify current products to enhance appearance, facilitate installation or meet
the requirements of specific domestic and international markets. The Company
will also expand its efforts to educate customers about the benefits of AMTROL
products. These actions are expected to increase demand for AMTROL's core
products and allow AMTROL to continue to realize premium pricing and achieve a
more favorable product mix, especially in international markets.
INTRODUCE NEW PRODUCTS
The Company intends to use new product introductions to pursue international
growth, broaden existing product lines and focus on attractive niche market
segments within the broader water systems and HVAC markets. AMTROL is a
technological leader and historically has successfully identified trends in the
market and capitalized on these trends by introducing new products. For example,
in recognition of demand for an energy efficient alternative to conventional
potable water heaters, AMTROL successfully developed and introduced the Hot
Water Maker line of indirect-fired water heaters. Similarly, AMTROL was able to
apply its pressure regulating technology to develop the Therm-X-Trol, a product
designed to facilitate compliance with increasingly stringent requirements for
backflow prevention systems. As a result of the Company's increased focus on
research and development, AMTROL has developed several new products designed to
meet the demands of both the domestic and international markets. For example,
the Company is currently field testing a potable water heater that efficiently
utilizes the thermal waste energy produced by air conditioning units. New
products expected to be introduced in 1997 include a small pressure boosting
system for international markets, a composite reverse osmosis vessel for both
the domestic and international markets and an indirect-fired water heater
designed for use with European wall-hung boiler units.
GROW INTERNATIONALLY
As a result of the Company's strong brand names, broad product offerings and
core water systems expertise, AMTROL is well positioned to capitalize on growing
global demand for enhanced water pressure control and improved water quality and
refrigerant systems. The Company believes that establishing local manufacturing
and distribution facilities in international markets is critical to the
Company's ability to build strong customer relationships, understand local
product preferences and be price competitive while maintaining appropriate
profit margins. In order to achieve the Company's goal of increasing its
international presence, the Company has been pursuing and intends to continue to
selectively pursue joint
45
<PAGE>
ventures, OEM alliances and acquisitions. The Company will focus its
international expansion on the target markets of the Asia/Pacific region and
Europe and, to a lesser extent, Latin America/Mexico.
ASIA/PACIFIC. In the developing economies of the Asia/Pacific region,
rapid economic growth and the emergence of a middle class has spurred demand
in many markets served by AMTROL products. For example, economic development
and the commercial building boom underway in Asia are fueling demand for air
conditioning and refrigeration equipment which in turn increases demand for
refrigerant gas pressure-rated cylinders. New commercial high-rise
structures also require potable water pressure boosting systems and
expansion control products for chilled-water air conditioning systems. In
addition, as Asian consumers achieve higher living standards, they are
demanding residential water pressure boosting and water treatment systems
because municipal water supplies often lack the pressure required to operate
modern appliances such as dishwashers or washing machines and fail to meet
acceptable standards for clean and safe water. Consequently, this region
represents a large potential market for the Company's pressure-rated
cylinders for refrigerant gases, water control systems and water treatment
products. To better serve these markets, AMTROL has increased the number of
distributors in this region from 12 to 45 over the past two years and has
recently commenced manufacturing at its Singapore facility.
EUROPE. In Europe, the large hydronic heating market (believed by the
Company to be ten times the size of the U.S. market) and the general lack of
adequate water pressure in municipal systems represent excellent
opportunities for the Company in light of its core products expertise. The
Company's brand names are already well recognized in Europe. The Company
plans to apply its technical expertise to the special needs of the European
market. For example, the Company is currently in discussions with leading
European OEMs for developing an indirect-fired water heater designed for use
with European wall-hung boiler units. The Company plans to accelerate
AMTROL's European growth through selective acquisitions, strategic joint
ventures or distribution agreements.
LATIN AMERICA/MEXICO. Because the market dynamics in emerging Latin
American and Mexican economies are comparable to those of the Asia/Pacific
region, the Company intends to pursue a similar strategy to accelerate
growth. AMTROL has taken preliminary steps towards increasing its presence
by initiating a licensing program with local distributors and pump
manufacturers to build and sell water pressure boosters utilizing AMTROL's
accumulators. The Company intends to establish local sales, distribution and
service capability in this region, which will enable the Company to better
service its existing customers and provide a base for new business.
PRODUCTS AND MARKETS
The Extrol, the first product to utilize the technology developed by AMTROL
for handling fluid under pressure in hydronic heating systems, redefined the
standards for controlling the expansion of water in these systems. Older systems
consisted simply of a vessel containing air, resulting in excessive pressure,
less efficiency and excessive corrosion. AMTROL developed a technology which
uses a flexible diaphragm inside a pre-pressurized vessel to maintain the
separation of air and water in the vessel, and has applied this technology in
both water systems products and HVAC products.
WATER SYSTEMS PRODUCTS
AMTROL's net sales of its water systems products accounted for approximately
$96.4 million (or 55.9%) of the Company's total net sales in 1995 and
approximately $77.2 million (or 57.3%) of the Company's total net sales for the
nine months ended September 28, 1996. These products consist primarily of water
accumulators and related accessories for residential and commercial well water
systems and systems and components for residential water softening and
purification.
46
<PAGE>
WELL WATER SYSTEMS. AMTROL produces and sells well water accumulators for
both residential and commercial applications under the brand names Well-X-Trol
and CHAMPION, as well as under several private label programs. Virtually all of
the water accumulators sold by the Company incorporate an internally mounted
rubber diaphragm that seals an air charge and allows pressure to increase as
water fills the plastic lined vessel. This design serves to control pressure
while maintaining the separation of air and water in the vessel, thereby
eliminating water logging (absorption of air into water) as well as reducing
wear on switches, pump motors and other system components caused by unnecessary
on/off cycling. A typical well water system consists of a submersible or jet
pump located in the well water that is attached to an AMTROL pre-pressurized
vessel. The pre-pressurized vessel is connected to the plumbing system in order
to provide water on demand at a constant pressure. As the water level and
pressure in the vessel lowers, the diaphragm flexes, which in turn causes the
pump to cycle on until a sufficient level of water pressure is achieved in the
system. The Company also provides a complete line of water systems accessories.
The Company believes it has a domestic market share of at least 50% in
accumulators for well water systems and believes that none of its competitors
has more than a 15% share of this market.
WATER TREATMENT/FILTRATION PRODUCTS. AMTROL offers a range of products to
meet increasing global demand for improved water quality and water pressure.
AMTROL manufactures and markets water softeners, reverse osmosis accumulators
and other related systems that may be utilized to purify or treat residential
municipal-supplied and well water. In industrialized nations, aging municipal
water systems, groundwater contamination and recent outbreaks of water-borne
illnesses are causing increased concern over water resources. The demand for
clean water is growing even faster in developing countries, where the United
Nations calculates that unclean water causes 80% of disease and kills 10 million
people annually. The Company also manufactures and markets products that address
the need to boost water pressure in many domestic and international locations
where the available pressure is not adequate. The Company believes there will be
increased market demand for its water treatment/filtration and pressure boosting
systems, especially in certain developing markets, including Latin
America/Mexico and the Asia/ Pacific region, where local water quality and
pressure may not satisfy increasing demands for clean water and adequate
pressure.
HVAC PRODUCTS
AMTROL's net sales to selected sectors of the HVAC market, which include net
sales of products such as expansion accumulators, water heaters and
pressure-rated cylinders for refrigerant gases, accounted for approximately
$76.1 million (or 44.1%) of the Company's total net sales in 1995 and
approximately $57.6 million (or 42.7%) of the Company's total net sales for the
nine months ended September 28, 1996. AMTROL's residential HVAC products include
expansion vessels for heated water, potable water heaters and other accessories
used in residential HVAC systems. Commercial HVAC products are substantially
identical in function to those used in residential applications, with the most
significant difference being variations required by design codes to meet the
higher operating pressures of larger systems. AMTROL's pressure-rated cylinders
for refrigerant gases are used in the storage, transport and dispensing of gases
used in air conditioning and refrigeration systems.
EXTROLS. Extrol expansion accumulators, the first AMTROL product line to
incorporate the Company's diaphragm technology for handling fluid under
pressure, are used in conjunction with hydronic heating systems, which provide
heat by circulating hot water through baseboard piping and radiators. The Extrol
product eliminates the corrosive effects of oxygen in the heating system and
eliminates problems related to hot water expansion by allowing the volume of
water to increase as the temperature of the water increases within a closed
system, preventing operating problems resulting from excessive or deficient
water pressure in the system. The Company believes it has a domestic market
share of at least 50% in the hot water expansion control market and believes
that none of its competitors has more than a 10% share of this market.
47
<PAGE>
THERM-X-TROLS. Therm-X-Trols accumulate expanded hot water escaping from
potable water heaters that has been prevented from flowing back into the public
water supply by backflow prevention devices. In response to the Clean Water Act
of 1984 certain jurisdictions established local codes to require owners of
commercial and residential buildings to install backflow prevention devices in
order to prevent the contamination of the public water supply. Local codes
adopted by organizations that set standards for approximately 90% of the United
States also require a separate device to handle the expanded water prevented
from flowing back into the public water supply. The principal alternatives are
relief valves, which permit water to drain inside the building, and thermal
expansion accumulators, such as the Therm-X-Trol, which capture the water.
Therm-X-Trol satisfies these code requirements, as well as the codes of some
cities that specifically require a thermal expansion accumulator. Additionally,
the two largest domestic water heater manufacturers will void their warranties
if thermal expansion accumulators are not used in conjunction with their
products where backflow prevention devices are installed. The Company believes
it has a domestic market share of at least 50% in this market and believes that
none of its competitors has more than a 15% share of this market.
INDIRECT-FIRED WATER HEATERS. In response to market demands for energy
conservation, AMTROL has developed a line of indirect-fired residential and
commercial water heaters, which it manufactures and distributes under the brand
name Hot Water Maker. Used in conjunction with a new or existing boiler
installed to heat living and work areas, these water heaters offer an
alternative to conventional gas and electric potable water heaters and tankless
coils by generating hot water through the use of heat exchangers and circulators
which circulate heated water from the boiler through a coil in the core of the
water heater's reservoir. Hot Water Makers are sold for use in both commercial
and residential applications. In addition to selling products under its own
brand name, AMTROL is presently pursuing an OEM partnership strategy in this
business whereby the Company supplies hydronic products manufacturers with
private branded indirect-fired water heaters. The Company believes that in the
U.S. it is the leader in this market.
REFRIGERANT CYLINDERS. AMTROL is one of two significant manufacturers of
non-returnable pressure-rated cylinders used in the storage, transport and
dispensing of refrigerant gases for air conditioning and refrigeration systems.
These gases include CFCs and hydrochlorofluorocarbons ("HCFCs"), as well as
newly developed alternative refrigerants designed to mimic the desirable
characteristics of CFCs and HCFCs. The Montreal Protocol on Substances that
deplete the Ozone Layer (to which 140 countries are signatories) required the
phase out of CFC production by the end of 1995 and established an HCFC
consumption limit beginning January 1, 1996, with a complete phase out of HCFCs
by 2030. The United States has accelerated the HCFC phase out, requiring the
phase out of certain HCFCs by 2003, others by 2020 and the remainder by 2030.
During the past three years, these regulatory phase outs and consumption limits
on CFCs and HCFCs have created disruptions in the market and have resulted in
uneven and less predictable demand for the Company's pressure-rated cylinders.
These conditions may continue during the transition to new alternative
refrigerant gases until the aftermarket service demand for the new alternative
refrigerant gases grows to previous CFC levels. However, the Company believes
that the increasing use of refrigeration and air conditioning in developing
nations will generate increased international sales of refrigerant gas
cylinders.
DISTRIBUTION AND MARKETING
AMTROL's principal channel of distribution is plumbing, heating and pump
specialty wholesalers. The Company maintains its presence in the United States
and Canadian wholesale markets through a network of approximately 40 independent
firms that represent multiple manufacturers, arranging sales on a commission
basis, as well as approximately 20 salaried direct sales professionals. To
service its customers with greater efficiency, the Company has streamlined its
representative network and, through consolidation of multiple lines of business,
has brought a broader range of products to its wholesalers. The Company also
provides certain of its products to the DIY market segment through a separate
sales force and
48
<PAGE>
marketing division to better service this rapidly growing segment. AMTROL has
private label arrangements with Lowe's Companies, Menards, Cotter & Company
(True Value) and Ace Hardware.
At its Education Center, which is an integral part of the Company's
marketing organization, and at Company-sponsored seminars throughout the United
States and selected international locations, AMTROL provides education and
training to wholesalers, contractors and engineers, independent sales
representatives and their employees to assist them in understanding the
technical aspects of their respective customers' requirements and AMTROL's
product lines. By educating customers about the benefits of AMTROL's products,
the Company's products are effectively "pulled" through its distribution system.
During 1995, over 2,000 customers and contractors attended technical programs at
the Company's Education Center.
AMTROL's major customers for reusable refrigerant gas cylinders are
wholesale distributors who sell the products to service providers and
refrigerant recovery equipment manufacturers. Non-returnable refrigerant
pressure-rated cylinders are also sold to major chemical companies, which
produce and package refrigerant gases, and to independent contractors that
purchase bulk refrigerants and fill the cylinders.
No single customer represented more than 5% of the Company's net sales in
1995.
INTERNATIONAL SALES
Sales in geographic regions outside of the United States and Canada,
primarily Western Europe, Asia and Mexico, accounted for 13.6%, 13.0% and 13.2%
of the Company's total net sales in fiscal years 1993, 1994 and 1995,
respectively, and 13.0% and 13.2% of the Company's total net sales for the nine
months ended September 30, 1995 and September 28, 1996, respectively. The
majority of these sales were refrigerant gas pressure-rated cylinders sold into
Europe. In 1995, AMTROL believes that its international business was adversely
affected by depressed economic conditions in Mexico and Europe.
Historically, the Company's international expansion efforts were hampered by
the lack of an international manufacturing presence and competitively priced
AMTROL products suitable for use in international markets. To address these
issues, the Company recently commenced manufacturing activities at its Singapore
facility and has developed new products and modified existing products for use
in specific international markets. The Singapore facility will enable AMTROL to
better service its existing customers and will provide a base for new business
in the Asia/Pacific region. The local manufacturing presence will result in
significantly lower distribution costs, allowing the Company to more effectively
compete in the Asia/Pacific region. The Singapore facility commenced
manufacturing non-returnable pressure-rated cylinders in October 1996 and will
be able to manufacture pre-pressurized vessels in 1997. The Company plans to
focus on international expansion as a key part of its strategy. See "--New
Management and Business Strategy--Grow Internationally."
Over the last two years, AMTROL has opened international sales offices in
Hong Kong and Singapore and plans to establish a sales office in Europe in early
1997. In addition to these initiatives, AMTROL is building its own distribution
networks in the Asia/Pacific region and Latin America/Mexico. To further
penetrate European markets, AMTROL is selectively pursuing acquisitions and
distribution, OEM and manufacturing alliances.
MANUFACTURING, RAW MATERIALS AND SUPPLIERS
The Company manufactures water systems and HVAC products using components
produced in its own facilities, as well as those of outside suppliers. To assure
quality in its product lines and to enable the Company to respond quickly to
changing market demands, AMTROL manufactures most critical components in its own
facilities. The Company has a "Continuous Improvement Program" for quality
control that has resulted in higher yields, lower controllable costs per unit,
higher order fill rates, better on-time
49
<PAGE>
delivery and decreased warranty claims. AMTROL believes it has developed
substantial manufacturing expertise related to its technology and its expertise
in high quality, low cost manufacturing. This expertise, combined with its
extensive knowledge of the manufacturing tolerances required to handle fluids
under pressure, provides a competitive advantage. Principal manufacturing
processes include thin-wall steel deep drawing, welding and rubber injection
molding.
The Company's engineering and development efforts are focused on developing
new products and processes, adapting existing products for new applications and
improving the performance, quality and manufacturing cost of its products.
With significant productivity gains achieved at its principal manufacturing
facilities, decisions were made to close two production facilities. The
Company's Plano, Texas plant ceased operations in September 1995 and the Rogers,
Arkansas plant ceased operations in April 1996. To better service its customers
in Southeast Asia, the Company recently opened a manufacturing facility in
Singapore. In connection with this start-up, certain equipment from the Plano,
Texas plant has been refurbished and redeployed.
In addition to its ongoing facilities rationalization program, AMTROL has
implemented a significant capital improvement program with the intention of
further reducing manufacturing costs. During 1996, the Company expects to spend
approximately $10.5 million on capital expenditures, of which $8.1 million has
been spent as of September 28, 1996. Most significantly, the Company has spent
$2.4 million to automate the small diameter vessel production line in West
Warwick, Rhode Island, and has spent $2.1 million in conjunction with the
opening of its Singapore facility.
AMTROL's three principal export manufacturing facilities hold ISO 9001
Certification, the most complete certification in the ISO 9000 Series from the
International Organization for Standardization ("ISO"). ISO certification
requires periodic audits of AMTROL's systems for product design, development,
production, installation and servicing, and has become the international
standard of quality required for manufacturers serving the European Economic
Community, Southeast Asia, the Middle East and Latin America.
Raw material suppliers generally offer commodities used by the Company, such
as steel, synthetic rubber and plastic resins, to all manufacturers on
substantially similar terms. Significant increases in raw material prices can
adversely impact margins if the Company is unable to pass on such increases to
its customers. In 1995, the Company experienced increased raw material costs,
particularly steel and corrugated paper, which it was unable to offset and, as a
result, its gross margin was adversely impacted. During 1996, the Company has
experienced reductions in raw material prices offsetting many of the increases
experienced in the prior year. Manufacturers of component parts also generally
offer their products to others on substantially similar terms. Although certain
components are only available from a limited number of manufacturers, the
Company anticipates that it will be able to purchase all of the components it
requires without disruption. The Company believes that its relationships with
its suppliers are good.
SEASONALITY; BACKLOG
Although AMTROL's sales are related to economic activity generally and sales
of certain of its products are seasonal, its overall business is not seasonal to
any significant extent. Due to the generally short lead time in orders, the
Company historically has not carried any material backlog.
PATENTS, TRADEMARKS AND LICENSES
While the Company owns a number of patents that are important to its
business, the Company believes that its position in its markets depends
primarily on factors such as manufacturing expertise, technological leadership,
superior service and quality and strong brand name recognition, rather than on
patent protection. The Company believes that foreign and domestic competitors
have been unable to
50
<PAGE>
match the quality of AMTROL's branded products. The Company licenses certain of
its technology to manufacturers in the Asia/Pacific region.
The Company also has a number of registered and unregistered trademarks for
its products. The Company believes the following registered trademarks, which
appear on its products and are widely recognized in its markets, are material to
its business: the AMTROL-Registered Trademark- name,
Well-X-Trol-Registered Trademark-, Therm-X-Trol-Registered Trademark-,
Extrol-Registered Trademark-, Hot Water Maker-Registered Trademark- and
CHAMPION-Registered Trademark-.
COMPETITION
Although the Company experiences substantial competition from a limited
number of competitors in each of its markets, the Company believes that it is a
market leader in its core products. The principal means of competition in the
water systems products and HVAC markets are technology, quality, service and
price. AMTROL brand name products generally compete on the basis of technology,
quality, service and product line breadth and generally do not compete on the
basis of price. No single company competes with AMTROL over a significant number
of its product lines. As the Company expands into international markets, it may
experience competition from local companies.
EMPLOYEES
As of September 28, 1996, the Company had approximately 915 employees, none
of whom were represented by collective bargaining units. AMTROL considers
relations with its employees to be good.
ENVIRONMENTAL MATTERS
Some of the Company's operations generate waste materials that may give rise
to liability under environmental laws. Some risk of environmental and other
damage is inherent in these operations, and certain of the Company's operations
have been named a party in government enforcement and private actions associated
with hazardous waste sites (including several sites under the federal
Comprehensive Environmental Response, Compensation and Liability Act, known as
"Superfund") and, in several matters, have been identified as being potentially
responsible for a share of cleanup costs associated with such sites. Based upon
the Company's experience in such matters, the amount of hazardous waste shipped
to such sites attributable to the Company and the status of settlement
proceedings, the Company estimates that its share of the aggregate cleanup costs
for all of these sites will not be material. In addition, the Company is in the
process of remediating contaminants discovered at its Plano, Texas facility, but
does not anticipate that the costs associated with such remediation will be
material. There can be no assurance that such liability arising from, for
example, contamination at facilities the Company (or an entity or business the
Company has acquired or disposed of) currently owns or operates or formerly
owned or operated, or locations at which wastes or contaminants generated by the
Company (or an entity or business the Company has acquired or disposed of) have
been disposed of, will not arise or be asserted against the Company or entities
for which the Company may be responsible in a manner that could materially and
adversely affect the Company.
The Company monitors and reviews its procedures and policies for compliance
with environmental laws. Based upon the Company's experience to date, the
Company operates in substantial compliance with environmental laws, and the cost
of compliance with existing regulations is not expected to have a material
adverse effect on the Company's results of operations, financial condition or
competitive position. However, future events, such as changes in existing laws
and regulations or enforcement policies, may give rise to additional compliance
costs which could have a material adverse effect on the Company's results of
operations, financial condition or competitive position.
51
<PAGE>
LEGAL PROCEEDINGS
From time to time, the Company is named as a defendant in legal actions
arising in the normal course of business. The Company is not a party to any
pending legal proceeding the resolution of which management believes will have a
material adverse effect on the Company's results of operations or financial
condition or to any pending legal proceedings other than ordinary, routine
litigation incidental to its business. See "--Environmental Matters."
PROPERTIES
The following table sets forth information regarding the Company's principal
properties each of which is owned by the Company unless otherwise indicated:
<TABLE>
<CAPTION>
SQUARE FOOTAGE
LOCATION (APPROXIMATE) PRINCIPAL USE
- ------------------------------------------------ -------------- ------------------------------------------------
<S> <C> <C>
West Warwick, RI................................ 270,000 Corporate Headquarters, Manufacturing All AMTROL
Product Lines, Education Center
Nashville, TN................................... 121,600 Manufacturing Water Systems Products and
Pressure-rated Cylinders
Peru, IN........................................ 60,600 Manufacturing Pumps, HVAC Products and
Accessories (Residential and Commercial)
Baltimore, MD................................... 37,000 Manufacturing Metal Stampings
Liverpool, NY(a)................................ 68,000 Distribution of Water Systems Products and
Accessories for Irrigation, Pools/ Spas, HVAC
Lithonia, GA(a)................................. 30,000 Distribution of Water Systems Products and
Accessories for Irrigation, Pools/ Spas, HVAC
Paducah, KY..................................... 46,300 Manufacturing Pressure-rated Cylinders
Ashland, OH(a).................................. 37,000 Manufacturing Water Treatment/Filtration
Products
Mansfield, OH(a)................................ 45,000 Distribution Center for Do-It-Yourself Market
Singapore(a).................................... 30,000 Manufacturing Pressure-rated Cylinders; Sales
Office for Southeastern Asia
Hong Kong(a).................................... 600 Sales Office for Northern Asia
Miami, FL(a).................................... 600 Sales Office for Latin America/Mexico
Antwerp, Belgium(a)............................. --(b) Distribution
Kitchener, Ontario(a)........................... 18,400 Distribution
Plano, TX....................................... 40,000 Held for Sale
-------
Total....................................... 805,100
-------
-------
</TABLE>
- --------------
(a) Leased facilities
(b) The distribution center in Antwerp operates under a lease for space on an
as-needed basis.
AMTROL believes that its properties and equipment are generally well
maintained, in good operating condition and adequate for its present needs. The
Company regularly evaluates its manufacturing requirements and believes that it
has sufficient capacity to meet its current and anticipated needs. The inability
to renew any short-term real property lease would not have a material adverse
effect on AMTROL's results of operations.
52
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth certain information regarding each of the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
John P. Cashman............................ 56 Chairman of the Board, Chief Executive
Officer and President
Samuel L. Daniels.......................... 47 Executive Vice President and Director
Clifford A. Peterson....................... 61 Senior Vice President--Operations &
Technology and Director
Edward J. Cooney........................... 49 Senior Vice President, Chief Financial
Officer and Treasurer
David P. Spalding.......................... 42 Director
James A. Stern............................. 46 Director
Anthony D. Tutrone......................... 32 Director
</TABLE>
John P. ("Jack") Cashman became Chairman of the Board, Chief Executive
Officer and President of the Company upon the Merger. Mr. Cashman has over 30
years of general industrial management experience in the filtration, minerals,
building products and pharmaceutical industries. From 1989 until March 1996, Mr.
Cashman served as Chairman and Co-Chief Executive Officer of R.P. Scherer. Mr.
Cashman joined R.P. Scherer concurrent with that company's leveraged buyout in
1989. Prior to R.P. Scherer, Mr. Cashman had an extensive career at
Johns-Manville Corporation as the President of Manville International, President
of Manville Canada Inc. and Senior Vice President of Manville Corporation, as
well as numerous other positions in general management, marketing and
operations.
Samuel L. Daniels, Executive Vice President since October 1996, has been
with the Company since 1987 and became a director of the Company upon the
Merger. From 1993 to 1996, Mr. Daniels served as Vice President--Water Systems.
From 1991 to 1993, he served as General Manager of all AMTROL subsidiaries, and
from 1989 to 1991, he was General Manager of the Company's Clayton Mark
subsidiary. He originally joined the Company in 1987 as Vice President of
Marketing for Clayton Mark Inc. Prior to joining the Company, he was Vice
President of Mueller Pump.
Clifford A. Peterson, Senior Vice President--Operations & Technology since
October 1996, joined the Company in July 1995 as Vice President of Technology
and became a director of the Company upon the Merger. Mr. Peterson served as
Executive Vice President and Chief Operating Officer from February to September
1996. From 1989 to 1994, he was Vice President--General Manager of the
Production Mail Division of Pitney Bowes Inc. Prior to that, he served as Vice
President--Operations of the Dictaphone Corporation.
Edward J. Cooney, Senior Vice President, Chief Financial Officer and
Treasurer, joined the Company in 1978, serving as Chief Financial Officer since
1991, as Senior Vice President--Operations from 1988 to 1991, as Vice President
from 1985 to 1988 and as Treasurer since 1982. Prior to joining the Company, Mr.
Cooney was associated for nine years with Arthur Andersen LLP, independent
public accountants.
David P. Spalding became a director of the Company upon the Merger. Mr.
Spalding has been Vice Chairman of Cypress since its formation in April 1994.
Prior to joining Cypress, he was Managing Director in the Merchant Banking Group
of Lehman Brothers Inc. from February 1991. Previously, he held the
53
<PAGE>
position of Senior Vice President of Lehman Brothers Inc. from September 1988 to
February 1991. From April 1987 to September 1988, he was Senior Vice President
of General Electric Capital Corporation Corporate Finance Group, Inc. Prior to
1987 he was a Vice President of The First National Bank of Chicago. Mr. Spalding
is also a director of Lear Corporation.
James A. Stern became a director of the Company upon the Merger. Mr. Stern
has been Chairman of Cypress since its formation in April 1994. Prior to joining
Cypress, Mr. Stern spent his entire career with Lehman Brothers Inc., most
recently as head of the Merchant Banking Group. He served as head of Lehman's
High Yield and Primary Capital Markets Groups, and was co-head of Investment
Banking. In addition, Mr. Stern was a member of the firm's Operating Committee.
Mr. Stern is a director of Noel Group, Inc., Lear Corporation, Cinemark USA,
Inc., R.P. Scherer and K&F Industries, Inc.
Anthony D. Tutrone became a director of the Company upon the Merger. Mr.
Tutrone has been a Principal of Cypress since its formation in April 1994. Prior
to joining Cypress, he was a member of the Merchant Banking Group of Lehman
Brothers Inc. from 1986 to 1994, except from 1990 to 1992 when he attended
Harvard Business School.
SPECIAL TERMINATION AGREEMENTS
The Company has entered into special termination agreements (collectively,
the "Termination Agreements"), effective April 11, 1996, with eleven executives,
including Messrs. Daniels, Peterson and Cooney to secure the continued
employment of those executives with the Company.
The Termination Agreements provide that if a "terminating event" occurs
within one year after a "change in control," the Company will pay the executive
an amount equal to the executive's annual base salary in effect immediately
prior to the change in control plus the executive's average bonus for the two
fiscal years prior to the change in control. A "terminating event" is defined
generally as termination of the executive's employment by the Company for any
reason other than death, disability, retirement or for cause or the resignation
of the executive subsequent to a significant reduction in the executive's
responsibilities, authorities, functions or duties exercised prior to the change
in control, a decrease in the executive's salary (other than across-the-board
reductions) from that payable prior to the change in control or a substantial
relocation of the executive by the Company following a change in control. The
consummation of the Merger constituted a "change in control." The amounts
expected to be payable under the Termination Agreements are included in the
amounts reserved for on the Company's consolidated balance sheet as part of
purchase accounting with respect to the planned reduction of certain corporate
overhead expenses. See "Business--New Management and Business Strategy--Reduce
Operating Expenses."
54
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As a result of the Merger, the Company is a direct, wholly owned subsidiary
of Holdings. The following table sets forth information with respect to the
beneficial ownership of Holdings' common stock by (i) each person known to the
Company to beneficially own more than 5% of Holdings' outstanding common stock,
(ii) each of the Company's directors and certain executive officers and (iii)
all directors and executive officers of the Company as a group. Unless otherwise
indicated below, the persons and entities named in the table have sole voting
and sole investment power with respect to all shares beneficially owned.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OF
HOLDINGS'
COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK PERCENTAGE
- ---------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Cypress Merchant Banking Partners L.P.(1)............................................... 637,957 90.7%
c/o The Cypress Group L.L.C.
65 East 55th Street, 19th Floor
New York, New York 10022
Cypress Offshore Partners L.P.(1)....................................................... 33,043 4.7%
c/o The Cypress Group L.L.C.
65 East 55th Street, 19th Floor
New York, New York 10022
John P. Cashman......................................................................... 15,000 2.1%
Samuel L. Daniels(2).................................................................... 4,662 *
Clifford A. Peterson(2)................................................................. 7,062 1.0%
Edward J. Cooney(2)..................................................................... 2,839 *
David P. Spalding(1).................................................................... -- --
James A. Stern(1)....................................................................... -- --
Anthony P. Tutrone(1)................................................................... -- --
All directors and executive officers as a group
(consisting of 7 persons)............................................................. 29,563 4.2%
</TABLE>
- --------------
* Less than 1%.
(1) Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P.
are controlled by Cypress. Messrs. Spalding, Stern and Tutrone are
executives of Cypress and may be deemed to share beneficial ownership of the
shares shown as beneficially owned by such Cypress entities. Each of such
individuals disclaims beneficial ownership of such shares. See "Summary--The
Merger" and "Management."
(2) Immediately prior to the Merger, each of these individuals exchanged options
exercisable for AMTROL common stock for options exercisable for Holdings
common stock. All shares shown to be beneficially owned by these individuals
represent shares issuable upon exercise of such options. See "Summary--The
Merger" and "Management."
55
<PAGE>
DESCRIPTION OF BANK CREDIT FACILITY
In connection with the Merger, the Company entered into the Bank Credit
Facility provided by a syndicate of banks and other financial institutions led
by Bankers Trust Company, as administrative agent (the "Agent"), and Morgan
Stanley Senior Funding, Inc., as documentation agent. The following summary of
certain provisions of the Bank Credit Facility does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
provisions of the Credit Agreement.
The Bank Credit Facility provides for loans in an aggregate principal amount
not to exceed $75.0 million, of which (i) $45.0 million in Term Loans was
borrowed at closing and (ii) up to $30.0 million will be available on a
revolving credit basis under the Revolving Credit Facility for working capital
needs and general corporate purposes. The Revolving Credit Facility includes a
$20.0 million sublimit which is available to finance permitted acquisitions.
The facilities under the Bank Credit Facility consist of (a) (i) a senior
secured five and one-half year term loan facility providing for Tranche A Term
Loans in an aggregate principal amount of $20.0 million and (ii) a senior
secured seven and one-half year term loan facility providing for Tranche B Term
Loans in an aggregate principal amount of $25.0 million, and (b) a senior
secured five and one-half year Revolving Credit Facility providing for revolving
loans, the issuance of letters of credit and same-day loans ("Swingline Loans")
in an aggregate principal amount not to exceed $30.0 million.
Tranche A Term Loans amortize on a quarterly basis over the term of the
loans. The Tranche B Term Loans have nominal quarterly amortization prior to the
maturity of the Tranche A Term Loans, and will amortize remaining amounts on a
quarterly basis thereafter. The commitments under the Revolving Credit Facility
and the acquisition sublimit will each reduce by $5.0 million in the fourth year
and $10.0 million in the fifth year after the effective date of the Merger. The
Revolving Credit Facility will mature five and one-half years after the
effective date of the Merger. In addition, the Bank Credit Facility will provide
for mandatory prepayments, subject to certain exceptions, of the Term Loans with
the net proceeds of certain asset sales, with the net proceeds of certain debt
and equity issuances and from a portion of the Company's excess cash flow.
The Company's obligations under the Bank Credit Facility are guaranteed by
Holdings and each direct and indirect domestic subsidiary of the Company. The
Company's obligations under the Bank Credit Facility are secured by
substantially all assets of the Company and its subsidiaries. See "Description
of the Notes--Ranking" and "Risk Factors--Subordination of the Notes."
The loans under the Bank Credit Facility bear interest, at the Company's
option, at either (A) a "base rate" equal to the higher of (i) the Federal funds
rate plus .5% or (ii) the Agent's prime lending rate plus (x) in the case of
Tranche A Term Loans and loans under the Revolving Credit Facility, an
applicable spread ranging from .75% to 1.50% (determined based on the Company's
leverage ratio) or (y) in the case of Tranche B Term Loans, 2.00%; or (B) a
"Eurodollar rate" plus (x) in the case of Tranche A Term Loans and loans under
the Revolving Credit Facility, an applicable spread ranging from 1.75% to 2.50%
(determined based on the Company's leverage ratio), or (y) in the case of
Tranche B Term Loans, 3.00%. Swingline Loans may only be "base rate" loans.
The Bank Credit Facility contains a number of covenants that, among other
things, restrict the ability of the Company and its subsidiaries to dispose of
assets, incur additional indebtedness, incur guaranty obligations, repay other
indebtedness or amend other debt instruments, pay dividends, create liens on
assets, enter into leases, make investments, make acquisitions, engage in
mergers or consolidations, make capital expenditures, engage in certain
transactions with subsidiaries and affiliates and otherwise restrict corporate
activities. In addition, the Bank Credit Facility requires compliance with
certain financial covenants, including requiring the Company to maintain a
minimum EBITDA level, a minimum ratio of EBITDA to interest expense and a
maximum ratio of Indebtedness to EBITDA, in each case tested at the end of each
fiscal quarter of the Company. The Company does not expect that such covenants
will materially impact the Company's ability to operate its business.
56
<PAGE>
DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued under an Indenture,
dated as of November 1, 1996 (the "Indenture"), between the Issuer and The Bank
of New York, as Trustee (the "Trustee").
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes is available upon request
to the Issuer at its address set forth in this Prospectus. The following summary
of certain provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Indenture, including the definitions of certain terms therein and those
terms made a part thereof by the Trust Indenture Act of 1939, as amended.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Issuer in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee, at 101 Barclay Street, New York,
New York 10286).
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
shall be made for any registration of transfer or exchange of Notes, but the
Issuer may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes will be unsecured senior subordinated obligations of the Issuer,
limited to $115.0 million aggregate principal amount, and will mature on
December 31, 2006. Each Note will bear interest at the rate per annum shown on
the cover page hereof from November 13, 1996, or from the most recent date to
which interest has been paid or provided for, payable semiannually to Holders of
record at the close of business on the June 15 or December 15 immediately
preceding the interest payment date on June 30 and December 31 of each year,
commencing June 30, 1997.
Old Notes that remain outstanding after the consummation of the Exchange
Offer and New Notes issued in connection with the Exchange Offer will be treated
as a single class of securities under the Indenture.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Issuer prior to December 31, 2001. Thereafter,
the Notes will be redeemable, at the Issuer's option, in whole or in part, at
any time or from time to time, upon not less than 30 nor more than 60 days'
prior notice mailed by first-class mail to each Holder's registered address, at
the following redemption prices (expressed in percentages of principal amount),
plus accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
December 31 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------------------------------------------------------------------------------------- -----------
<S> <C>
2001................................................................................. 105.313%
2002................................................................................. 102.656
2003 and thereafter.................................................................. 100.000
</TABLE>
In addition, at any time and from time to time prior to December 31, 1999,
the Issuer may redeem in the aggregate up to 35% of the original principal
amount of the Notes with the proceeds of one or more
57
<PAGE>
Public Equity Offerings (provided that if the Public Equity Offering is a public
offering of any class of common stock of Holdings, a portion of the Net Cash
Proceeds thereof equal to the amount required to redeem any such Notes is
contributed to the equity capital of the Issuer), at a redemption price
(expressed as a percentage of principal amount) of 110.625% plus accrued
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date); PROVIDED, HOWEVER, that at least $74.0 million aggregate
principal amount of the Notes must remain outstanding after each such
redemption.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The indebtedness evidenced by the Notes are unsecured senior subordinated
obligations of the Issuer. The payment of the principal of, premium (if any) and
interest on the Notes is subordinate in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness, whether
outstanding on the Issue Date or thereafter incurred, including the Issuer's
obligations under the Credit Agreement.
As of September 28, 1996, after giving pro forma effect to the Transactions,
AMTROL's Senior Indebtedness would have been approximately $45.0 million.
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Issuer may incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be Senior Indebtedness. See "--Certain Covenants--Limitation on
Indebtedness."
A portion of the operations of AMTROL are conducted through its
subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors, secured creditors and creditors holding indebtedness and guarantees
issued by such subsidiaries (including guarantees of the Company's obligations
under the Bank Credit Facility), and claims of preferred shareholders (if any)
of such subsidiaries generally will have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the Issuer,
including holders of the Notes, even though such obligations will not constitute
Senior Indebtedness. The Notes, therefore, are effectively subordinated to
creditors (including trade creditors) and preferred shareholders (if any) of
subsidiaries of AMTROL. At September 28, 1996, the total liabilities of AMTROL's
subsidiaries were approximately $2.6 million, including trade payables (but
excluding guarantees of the Company's obligations under the Bank Credit
Facility). Although the Indenture limits the incurrence of Indebtedness and the
issuance of preferred stock of certain of AMTROL's subsidiaries, such limitation
is subject to a number of significant qualifications. Moreover, the Indenture
does not impose any limitation on the incurrence by such subsidiaries of
liabilities that are not considered Indebtedness under the Indenture. See
"--Certain Covenants--Limitation on Indebtedness."
Only Indebtedness of the Issuer that is Senior Indebtedness will rank senior
to the Notes in accordance with the provisions of the Indenture. The Notes will
in all respects rank PARI PASSU with all other Senior Subordinated Indebtedness
of the Issuer. The Issuer has agreed in the Indenture that it will not Incur,
directly or indirectly, any Indebtedness that is subordinate or junior in
ranking in right of payment to its Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinated or junior to Secured Indebtedness merely because it is
unsecured.
58
<PAGE>
The Issuer may not pay principal of, premium (if any) or interest on the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Designated Senior Indebtedness is not
paid when due or (ii) any other default on Designated Senior Indebtedness occurs
and the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full. However, the Issuer may pay the Notes
without regard to the foregoing if the Issuer and the Trustee receive written
notice approving such payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth in clause (i)
or (ii) of the immediately preceding sentence has occurred and is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the second preceding sentence) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Issuer may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Issuer) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Issuer from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the first sentence of this paragraph), unless the holders of
such Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, the Issuer may
resume payments on the Notes after the end of such Payment Blockage Period. The
Notes shall not be subject to more than one Payment Blockage Period in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness during such period.
Upon any payment or distribution of the assets of the Issuer upon a total or
partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Issuer or its property, the holders of Senior Indebtedness will
be entitled to receive payment in full of such Senior Indebtedness before the
Noteholders are entitled to receive any payment, and until the Senior
Indebtedness is paid in full, any payment or distribution to which Noteholders
would be entitled but for the subordination provisions of the Indenture will be
made to holders of such Senior Indebtedness as their interests may appear. If a
distribution is made to Noteholders that, due to the subordination provisions,
should not have been made to them, such Noteholders are required to hold it in
trust for the holders of Senior Indebtedness and pay it over to them as their
interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Issuer or the Trustee shall promptly notify the holders of Designated Senior
Indebtedness or the Representative of such holders of the acceleration.
By reason of the subordination provisions contained in the Indenture, in the
event of insolvency, creditors of the Issuer who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Issuer who are not holders of Senior Indebtedness may recover less, ratably,
than holders of Senior Indebtedness and may recover more, ratably, than the
Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "--Defeasance."
59
<PAGE>
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Issuer or another Restricted Subsidiary; or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Adjusted Consolidated Assets" means at any time the total amount of assets
of the Issuer and its consolidated Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), after deducting
therefrom all current liabilities of the Issuer and its consolidated Restricted
Subsidiaries (excluding intercompany items), all as set forth on the
consolidated balance sheet of the Issuer and its consolidated Restricted
Subsidiaries as of the end of the most recent fiscal quarter for which financial
statements are available prior to the date of determination.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants--Limitation on
Restricted Payments," "--Certain Covenants--Limitation on Affiliate
Transactions" and "--Certain Covenants--Limitations on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 5% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Issuer or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Issuer or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Issuer or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Issuer or any Restricted Subsidiary or (iii) any
other assets of the Issuer or any Restricted Subsidiary outside of the ordinary
course of business of the Issuer or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (x) a disposition by a Restricted
Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to a Wholly
Owned Subsidiary, (y) for purposes of the covenant described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the covenant
described under "--Certain Covenants--Limitation on Restricted Payments" and (z)
disposition of assets with a fair market value of less than $500,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
60
<PAGE>
"Banks" has the meaning specified in the Credit Agreement.
"Board of Directors" means the Board of Directors of the Issuer or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting 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; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
(i) prior to the first Public Equity Offering, the Permitted Holders
cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of a majority in the
aggregate of the total voting power of the Voting Stock of the Issuer,
whether as a result of issuance of securities of the Issuer, any merger,
consolidation, liquidation or dissolution of the Issuer, any direct or
indirect transfer of securities or otherwise (for purposes of this clause
(i) and clause (ii) below, the Permitted Holders shall be deemed to
beneficially own any Voting Stock of a corporation (the "specified
corporation") held by any other corporation (the "parent corporation") so
long as the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the voting power of the Voting
Stock of the parent corporation);
(ii) on or after the first Public Equity Offering, any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
one or more Permitted Holders, is or becomes the beneficial owner (as
defined in clause (i) above, except that for purposes of this clause (ii)
such person shall be deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock
of the Issuer; PROVIDED, HOWEVER, that the Permitted Holders beneficially
own (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of the Issuer than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors (for the purposes of this clause (ii),
such other person shall be deemed to beneficially own any Voting Stock of a
specified corporation held by a parent corporation, if such other person is
the beneficial owner (as defined in this clause (ii)), directly or
indirectly, of more than 35% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holders beneficially own (as defined in
clause (i) above), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation);
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Issuer was approved by a
vote of 66 2/3% of the directors of the Issuer then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or
61
<PAGE>
(iv) the merger or consolidation of the Issuer with or into another
Person or the merger of another Person with or into the Issuer, or the sale
of all or substantially all the assets of the Issuer to another Person
(other than a Person that is controlled by the Permitted Holders), and, in
the case of any such merger or consolidation, the securities of the Issuer
that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of the
Issuer are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent, immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which financial statements are available
prior to the date of such determination to (ii) Consolidated Interest Expense
for such four fiscal quarters; PROVIDED, HOWEVER, that (1) if the Issuer or any
Restricted Subsidiary has Incurred any Indebtedness since the beginning of such
period that remains outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
outstanding on the date of such calculation shall be computed based on (A) the
average daily balance of such Indebtedness during such four fiscal quarters or
such shorter period when such facility was outstanding or (B) if such facility
was created after the end of such four fiscal quarters, the average daily
balance of such Indebtedness during the period from the date of creation of such
facility to the date of the calculation), (2) if the Company or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Company or such Restricted Subsidiary has
not earned the interest income actually earned during such period in respect of
cash or Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness, (3) if since the beginning of such period
the Issuer or any Restricted Subsidiary shall have made any Asset Disposition,
the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Issuer or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Issuer and its continuing Restricted Subsidiaries
in connection with such Asset Disposition for such period (or, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent the Issuer and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale), (4) if since the
beginning of such period the Issuer or any Restricted Subsidiary (by merger or
otherwise) shall have made an Investment in any Restricted Subsidiary (or any
person which becomes a Restricted Subsidiary) or an acquisition of assets,
including any acquisition of assets occurring in connection with a transaction
requiring a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving
62
<PAGE>
pro forma effect thereto (including the Incurrence of any Indebtedness) as if
such Investment or acquisition occurred on the first day of such period and (5)
if since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Issuer or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (3) or (4) above if made by the Issuer or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition occurred on the
first day of such period. For purposes of this definition, whenever pro forma
effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of the Issuer, and such pro forma calculations shall include
(A)(x) the savings in cost of goods sold that would have resulted from using the
Issuer's actual costs for comparable goods and services during the comparable
period and (y) other savings in cost of goods sold or eliminations of selling,
general and administrative expenses as determined by a responsible financial or
accounting Officer of the Issuer in good faith in connection with the Issuer's
consideration of such acquisition and consistent with the Issuer's experience in
acquisitions of similar assets, less (B) the incremental expenses that would be
included in cost of goods sold and selling, general and administrative expenses
that would have been incurred by the Issuer in the operation of such acquired
assets during such period. If any Indebtedness bears a floating rate of interest
and is being given pro forma effect, the interest of such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Issuer and its consolidated Restricted Subsidiaries, net of any
interest income of the Issuer and its consolidated Restricted Subsidiaries for
such period, as determined in accordance with GAAP, PLUS, to the extent not
included in such total interest expense, and to the extent incurred by the
Issuer or its Restricted Subsidiaries, without duplication, (i) interest expense
attributable to capital leases and the interest expense attributable to leases
constituting part of a Sale/Leaseback Transaction, (ii) amortization of debt
discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash
interest expenses, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Hedging Obligations (including amortization of fees),
(vii) Preferred Stock dividends in respect of all Preferred Stock held by
Persons other than the Issuer or a Wholly Owned Subsidiary, (viii) interest
incurred in connection with Investments in discontinued operations, (ix)
interest accruing on any Indebtedness of any other Person to the extent such
Indebtedness is Guaranteed by (or secured by the assets of) the Issuer or any
Restricted Subsidiary and (x) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the Issuer)
in connection with Indebtedness Incurred by such plan or trust and LESS, to the
extent included in such total interest expense, (A) the amortization during such
period of capitalized financing costs associated with the Merger and the
financing thereof and (B) the amortization during such period of other
capitalized financing costs; PROVIDED, HOWEVER, that the aggregate amount of
amortization relating to any such other capitalized financing costs deducted in
calculating Consolidated Interest Expense shall not exceed 3.5% of the aggregate
amount of the financing giving rise to such capitalized financing costs.
63
<PAGE>
"Consolidated Net Income" means, for any period, the net income of the
Issuer and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Issuer) if such Person
is not a Restricted Subsidiary, except that (A) subject to the exclusion
contained in clause (iv) below, the Issuer's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Issuer or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained
in clause (iii) below) and (B) the Issuer's equity in a net loss of any such
Person for such period shall be included in determining such Consolidated
Net Income;
(ii) any net income (or loss) of any Person acquired by the Issuer or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Issuer, except that (A) subject
to the exclusion contained in clause (iv) below, the Issuer's equity in the
net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
that could have been distributed by such Restricted Subsidiary during such
period to the Issuer or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid
to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Issuer's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(iv) any gain (or loss) realized upon the sale or other disposition of
any assets of the Issuer or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (or
loss) realized upon the sale or other disposition of any Capital Stock of
any Person;
(v) extraordinary gains or losses;
(vi) the cumulative effect of a change in accounting principles; and
(vii) (A) any non-cash charges (including from the write-up of assets) or
write-offs associated with the Merger and the financing thereof, LESS (B)
any tax benefit received from any such non-cash charge being deducted from
the taxable income of the Issuer or any of its Restricted Subsidiaries;
PROVIDED, HOWEVER, that such non-cash charges or write-offs described in
this clause (vii) are charged within 12 months of the Issue Date and the
maximum amount of non-cash charges that may be added pursuant to this clause
(vii) shall be $5.0 million.
Notwithstanding the foregoing, for the purposes of the covenant described
under "Certain Covenants--Limitation on Restricted Payments" only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets (including any sale of an Investment) to
the Issuer or a Restricted Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Issuer and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Issuer for which financial statements are available, as
(i) the par or stated value of all outstanding Capital Stock of the Issuer plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
64
<PAGE>
"Credit Agreement" means, collectively, the Credit Agreement dated as of
November 13, 1996, among the Issuer, Holdings, the Banks, Bankers Trust Company,
as administrative agent, and Morgan Stanley Senior Funding, Inc., as
documentation agent, and the documents related thereto (including any guarantee
agreements and security documents, and any related Interest Rate Agreement or
Currency Agreement entered into with any of the Banks), in each case as such
agreements or documents may be amended (including any amendment, restatement or
restructuring thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refunding, refinancing,
increasing the amount available under or replacing such agreement or document or
any successor or replacement agreement or document and whether by the same or
any other agent, lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Indebtedness and all other
monetary obligations (including interest, Post-Petition Interest, expenses and
fees) under the Credit Agreement and (ii) any other Senior Indebtedness of the
Issuer which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $10.0 million and is specifically
designated by the Issuer in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in part, in
each case on or prior to the 123rd day following the Stated Maturity of the
Notes; PROVIDED, HOWEVER, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" and "--Certain
Covenants--Change of Control."
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense, plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Issuer and its consolidated Restricted Subsidiaries, (b) depreciation expense of
the Issuer and its consolidated Restricted Subsidiaries, (c) amortization
expense of the Issuer and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period), (d) all other non-cash charges of the Issuer and its consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the extent that
it represents an accrual of or reserve for cash expenditures in any future
period) and (e) any cash charges (including from the write-up of assets) or
write-offs associated with the Merger and the financing thereof; PROVIDED,
HOWEVER, that such cash charges or write-offs described in this clause (e) are
charged within 12 months of the Issue Date and the maximum amount of cash
charges that may be added pursuant to this clause (e) is $6.0 million.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Net Income
and only if
65
<PAGE>
a corresponding amount would be permitted at the date of determination to be
dividended to the Issuer by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
take-or-pay or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); PROVIDED,
HOWEVER, that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning. The term "Guarantor" shall mean any Person
Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Holdings" means AMTROL Holdings, Inc. and its successors.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/ Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
66
<PAGE>
(iv) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i) through (iii)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the 30th day following
payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of such Person, the liquidation preference with
respect to, any Preferred Stock (but excluding, in each case, any accrued
dividends);
(vi) all obligations of the type referred to in clauses (i) through (v)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through (vi)
of other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value of such property
or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; PROVIDED, HOWEVER, that
the amount outstanding at any time of any Indebtedness Incurred with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Issuer or its assets, or (ii) any liquidation, dissolution or other winding up
of the Issuer, whether voluntary or involuntary or whether or not involving
insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors
or any other marshalling of assets or liabilities of the Issuer.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect the Issuer or any Restricted Subsidiary against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance (other than
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of the lender), loan or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Issuer's equity interest in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of the Issuer at the time that such Subsidiary is
designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Issuer's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Issuer's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any
67
<PAGE>
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means November 13, 1996, the date on which the Old Notes were
originally issued.
"Issuer" means AMTROL Acquisition, Inc. and, following the Merger, AMTROL
Inc. and its successors.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Merger" means the merger of AMTROL Acquisition, Inc. with and into AMTROL
Inc. pursuant to the terms of the merger agreement among such parties and
Holdings dated August 28, 1996.
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be, repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed in such Asset Disposition and retained by the
Issuer or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Permitted Holders" means (i) Cypress Merchant Banking Partners L.P.,
Cypress Offshore Partners L.P. and any Person who on the Issue Date is an
Affiliate of either of the foregoing and (ii) any Person who is a member of the
senior management of the Issuer or Holdings, and a shareholder of Holdings, on
the Issue Date.
"Permitted Investment" means an Investment by the Issuer or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon the making
of such Investment, become a Restricted Subsidiary; (ii) another Person if as a
result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets to, the Issuer
or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary
business is a Related Business; (iii) Temporary Cash Investments; (iv)
Investments existing on the Issue Date; (v) receivables owing to the Issuer or
any Restricted Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
PROVIDED, HOWEVER, that such trade terms may include such concessionary trade
terms as the Issuer or any such Restricted Subsidiary deems reasonable under the
circumstances; (vi) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vii) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Issuer or such Restricted Subsidiary;
(viii) stock, obligations
68
<PAGE>
or securities received in settlement of debts created in the ordinary course of
business and owing to the Issuer or any Restricted Subsidiary or in satisfaction
of judgments; and (ix) additional Investments in an aggregate amount which,
together with all other Investments made pursuant to this clause (ix) that are
then outstanding, does not exceed $10.0 million.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any Insolvency or Liquidation Proceeding (and interest that
would accrue but for 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, 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) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of Holdings or the Issuer pursuant to an effective registration
statement under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Issuer or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED FURTHER,
HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Issuer or (y) Indebtedness of the
Issuer or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary to
the businesses of AMTROL Inc. and its subsidiaries on the Issue Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Issuer.
"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any such payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Issuer or a
69
<PAGE>
Restricted Subsidiary, and other than pro rata dividends or other distributions
made by a Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation)), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Issuer
held by any Person or of any Capital Stock of a Restricted Subsidiary held by
any Affiliate of the Issuer (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Issuer that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) the making
of any Investment (other than a Permitted Investment) in any Person.
"Restricted Subsidiary" means any Subsidiary of the Issuer that is not an
Unrestricted Subsidiary.
"Revolving Credit Provisions" means the provisions of the Credit Agreement
pursuant to which lenders thereunder have committed to make available to the
Issuer a revolving credit facility.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Issuer or a Restricted Subsidiary
transfers such property to a Person and the Issuer or a Restricted Subsidiary
leases it from such Person.
"Scheduled Asset Dispositions" means an Asset Disposition of any of the
assets of the Issuer's Plano, Texas facility that were assets of the Issuer's
Plano, Texas facility on the Issue Date.
"Secured Indebtedness" means any Indebtedness of the Issuer secured by a
Lien.
"Senior Indebtedness" means (i) Indebtedness and all other monetary
obligations referred to in clause (i) of the definition of "Designated Senior
Indebtedness," (ii) Indebtedness of the Issuer, whether outstanding on the Issue
Date or thereafter Incurred, and (iii) accrued and unpaid interest (including
Post-Petition Interest) in respect of (A) Indebtedness of the Issuer for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which the Issuer is responsible or liable
unless, in the case of (ii) and (iii), the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are subordinate in right of payment to the Notes; PROVIDED, HOWEVER,
that Senior Indebtedness shall not include (1) any obligation of the Issuer to
any Subsidiary, (2) any liability for Federal, state, local or other taxes owed
or owing by the Issuer, (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 (other than letters of credit
in respect thereof to the extent otherwise included in Senior Indebtedness)),
(4) any Indebtedness of the Issuer (and any accrued and unpaid interest in
respect thereof) which is expressly subordinate or junior in any respect to any
other Indebtedness or other obligation of the Issuer or (5) that portion of any
Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Issuer that specifically provides that such Indebtedness is
to rank PARI PASSU with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Issuer which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Issuer within the meaning of Rule 1-02 under
Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security
70
<PAGE>
at the option of the holder thereof upon the happening of any contingency unless
such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Issuer (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Tax Sharing Agreement" means any tax sharing agreement between the Issuer
and Holdings or any other Person with which the Issuer is required to, or is
permitted to, file a consolidated tax return or with which the Issuer is or
could be part of a consolidated group for tax purposes.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of America
or any agency thereof or obligations guaranteed by the United States of
America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 180 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Issuer) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Group,
and
(v) investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Term Loan Provisions" means the provisions of the Credit Agreement pursuant
to which lenders thereunder have committed to make term loans available to the
Issuer.
71
<PAGE>
"Unrestricted Subsidiary" means (i) any Subsidiary of the Issuer that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Issuer (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "--Certain Covenants--Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately
after giving effect to such designation (x) the Issuer could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"--Certain Covenants--Limitation on Indebtedness" and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be by the Issuer to the Trustee by promptly filing with the Trustee a copy of
the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Issuer
or one or more Wholly Owned Subsidiaries.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) The Issuer shall not, and shall not permit
its Restricted Subsidiaries to, Incur, directly or indirectly, any Indebtedness;
PROVIDED, HOWEVER, that the Issuer may Incur Indebtedness if, on the date of
such Incurrence and after giving effect thereto, the Consolidated Coverage Ratio
exceeds 2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Issuer and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness of the Issuer Incurred pursuant to the Term Loan
Provisions of the Credit Agreement in an aggregate principal amount that,
when taken together with the principal amount of all other Indebtedness
Incurred pursuant to this clause (1) and then outstanding, does not exceed
$45.0 million (less the amount of such Indebtedness permanently repaid as
provided in the covenant described under "--Limitation on Sales of Assets
and Subsidiary Stock" below);
(2) Indebtedness of the Issuer Incurred pursuant to the Revolving Credit
Provisions of the Credit Agreement; PROVIDED, HOWEVER, that, after giving
effect to any such Incurrence, the aggregate principal amount of such
Indebtedness then outstanding does not exceed the greater of $30.0 million
and the sum of (i) 50% of the book value of the inventory of the Issuer and
its Restricted Subsidiaries and (ii) 80% of the book value of the accounts
receivables of the Issuer and its Restricted Subsidiaries;
(3) Indebtedness owed to and held by the Issuer or a Wholly Owned
Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or transfer of
any Capital Stock which results in any such
72
<PAGE>
Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Issuer or
another Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(4) the Notes;
(5) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2), (3) or (4) of this covenant);
(6) Indebtedness or Preferred Stock of a Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary was acquired by
the Issuer (other than Indebtedness or Preferred Stock Incurred in
connection with, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Issuer); PROVIDED, HOWEVER, that on the date of such
acquisition and after giving effect thereto, the Issuer would have been able
to Incur at least $1.00 of additional Indebtedness pursuant to clause (a)
above;
(7) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (4), (5) or (6) or this
clause (7); PROVIDED, HOWEVER, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness or Preferred
Stock of a Subsidiary described in clause (6), such Refinancing Indebtedness
shall be Incurred only by such Subsidiary;
(8) Hedging Obligations consisting of Interest Rate Agreements directly
related to Indebtedness permitted to be Incurred by the Issuer and its
Restricted Subsidiaries pursuant to the Indenture and Currency Agreements
Incurred in the ordinary course of business;
(9) Indebtedness (including Capitalized Lease Obligations) of the Issuer
or any Restricted Subsidiary financing the purchase, lease or improvement of
property (real or personal) or equipment (whether through the direct
purchase of assets or the Capital Stock of any Person owning such assets),
in each case Incurred no more than 180 days after such purchase, lease or
improvement of such property and any Refinancing Indebtedness in respect of
such Indebtedness; PROVIDED, HOWEVER, at the time of the Incurrence of such
Indebtedness and after giving effect thereto, the aggregate principal amount
of all Indebtedness Incurred pursuant to this clause (9) and then
outstanding shall not exceed the greater of $10.0 million and 10% of
Adjusted Consolidated Assets;
(10) any Guarantee by the Issuer of Indebtedness of any Restricted
Subsidiary so long as the Incurrence of such Indebtedness Incurred by such
Restricted Subsidiary is permitted under the terms of the Indenture and any
Guarantee by any Restricted Subsidiary of Indebtedness of the Issuer
Incurred pursuant to clause (1) or (2);
(11) Indebtedness of the Issuer Incurred in connection with the
acquisition of a Related Business and any Refinancing Indebtedness in
respect of such Indebtedness; PROVIDED, HOWEVER, that the aggregate amount
of Indebtedness Incurred pursuant to this clause (11) and then outstanding
shall not exceed $15.0 million; and
(12) Indebtedness of the Issuer in an aggregate principal amount which,
together with all other Indebtedness of the Issuer outstanding on the date
of such Incurrence (other than Indebtedness permitted by clauses (1) through
(11) above or paragraph (a)) does not exceed $25.0 million.
(c) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above, the Issuer, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (ii) an
item of Indebtedness may be divided and classified in more than one of the types
of Indebtedness described above.
73
<PAGE>
(d) Notwithstanding paragraphs (a) and (b) above, the Issuer shall not Incur
(i) any Indebtedness if such Indebtedness is subordinate or junior in ranking in
any respect to any Senior Indebtedness, unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness or (ii) any Secured Indebtedness that is not
Senior Indebtedness unless contemporaneously therewith effective provision is
made to secure the Notes equally and ratably with such Secured Indebtedness for
so long as such Secured Indebtedness is secured by a Lien.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Issuer shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Issuer or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Issuer is not able to Incur an additional $1.00
of Indebtedness pursuant to paragraph (a) of the covenant described under
"--Limitation on Indebtedness;" or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date would exceed the
sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter for which
financial statements are available prior to the date of such Restricted
Payment (or, in case such Consolidated Net Income shall be a deficit, minus
100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Issuer from the
issuance or sale of its Capital Stock (other than Disqualified Stock) and
the aggregate cash received by the Issuer as a capital contribution from its
shareholders, in each case subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Issuer and other than an issuance or
sale to an employee stock ownership plan or to a trust established by the
Issuer or any of its Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of the Issuer is reduced on the
Issuer's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Issuer) subsequent to the Issue Date, of any Indebtedness
of the Issuer convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Issuer (less the amount of any cash, or the fair
value of any other property, distributed by the Issuer upon such conversion
or exchange);
(D) an amount equal to the sum of (i) the net reduction in Investments
in any Person resulting from dividends, repayments of loans or advances or
other transfers of assets (including any sale of such Investment), in each
case to the Issuer or any Restricted Subsidiary, and (ii) the portion
(proportionate to the Issuer's equity interest in such Subsidiary) of the
fair market value of the net assets of an Unrestricted Subsidiary at the
time such Unrestricted Subsidiary is designated a Restricted Subsidiary;
PROVIDED, HOWEVER, that the foregoing sum shall not exceed, in the case of
any Person (including any Unrestricted Subsidiary), the amount of
Investments previously made in such Person (and treated as a Restricted
Payment) by the Issuer and the Restricted Subsidiaries; and
(E) $5.0 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the proceeds
of the substantially concurrent sale of, or capital contribution in respect
of, Capital Stock of the Issuer (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of the Issuer or an
employee stock ownership plan or to a trust established by the Issuer or any
of its Subsidiaries for the benefit of their employees); PROVIDED, HOWEVER,
that (A) such Restricted Payment shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such sale
shall be excluded from the calculation of amounts under clause (3)(B) of
paragraph (a) above;
74
<PAGE>
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Issuer which is permitted to be Incurred pursuant to
the covenant described under "--Limitation on Indebtedness"; PROVIDED,
HOWEVER, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation of
the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied with this
covenant; PROVIDED, HOWEVER, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
(iv) the repurchase of shares of, or options to purchase shares of,
common stock of Holdings, the Issuer or any of its Subsidiaries from
employees, former employees, directors or former directors of Holdings, the
Issuer or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to the
terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the board of directors of Holdings or the
Issuer under which such individuals purchase or sell or are granted the
option to purchase or sell, shares of such common stock; PROVIDED, HOWEVER,
that the aggregate amount of such repurchases shall not exceed $500,000 in
any calendar year; PROVIDED FURTHER, HOWEVER, that such repurchases shall be
excluded in the calculation of the amount of Restricted Payments;
(v) following the initial Public Equity Offering of common stock,
dividends in an aggregate amount in any year not to exceed 6% of the
aggregate Net Cash Proceeds received by the Issuer in connection with such
initial Public Equity Offering and any subsequent Public Equity Offering of
common stock; PROVIDED, HOWEVER, that at the time of payment of such
dividends, no other Default shall have occurred and be continuing (or result
therefrom); PROVIDED FURTHER, HOWEVER, that such dividends shall be included
in the calculation of the amount of Restricted Payments;
(vi) repurchases of Capital Stock deemed to occur upon exercise of stock
options if such Capital Stock represents a portion of the exercise price of
such options; PROVIDED, HOWEVER, that such repurchase shall be excluded in
the calculation of the amount of Restricted Payments;
(vii) any payment by the Issuer to Holdings pursuant to the Tax Sharing
Agreement; PROVIDED, HOWEVER, that the amount of any such payment shall not
exceed the amount of taxes that the Issuer would have been liable for on a
stand-alone basis; PROVIDED FURTHER, HOWEVER, that such dividends shall be
excluded in the calculation of the amount of Restricted Payments; and
(viii) dividends to Holdings to the extent required to pay for general
corporate and overhead expenses incurred by Holdings; PROVIDED, HOWEVER,
that such dividends shall not exceed $200,000 in any calendar year; PROVIDED
FURTHER, HOWEVER, that such dividends shall be excluded in the calculation
of the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Issuer shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary (a) to pay dividends or make any other distributions on its Capital
Stock to the Issuer or a Restricted Subsidiary or pay any Indebtedness owed to
the Issuer, (b) to make any loans or advances to the Issuer or (c) to transfer
any of its property or assets to the Issuer, except:
(i) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date (including the Credit Agreement and
related security documents);
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by
such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Issuer (other than Indebtedness Incurred as
75
<PAGE>
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Issuer) and outstanding on such
date;
(iii) any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred to in
clause (i) or (ii) of this covenant or this clause (iii) or contained in any
amendment to an agreement referred to in clause (i) or (ii) of this covenant
or this clause (iii); PROVIDED, HOWEVER, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any
such refinancing agreement or amendment are no less favorable to the
Noteholders than encumbrances and restrictions with respect to such
Restricted Subsidiary contained in such agreements;
(iv) any such encumbrance or restriction consisting of customary
non-assignment or subletting provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the lease
or the property leased thereunder;
(v) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing Indebtedness of a Restricted Subsidiary to
the extent such restrictions restrict the transfer of the property subject
to such security agreements or mortgages; and
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) In the event and to
the extent that the Net Available Cash received by the Issuer or any Restricted
Subsidiary from one or more Asset Dispositions (other than the Scheduled Asset
Dispositions) occurring on or after the Issue Date in any period of 12
consecutive months exceeds the greater of $10.0 million and 10% of Adjusted
Consolidated Assets as of the beginning of such 12-month period, then the Issuer
shall (i) no later than 360 days after the date such Net Available Cash so
received exceeds such $10.0 million or 10% of Adjusted Consolidated Assets (A)
apply an amount equal to such excess Net Available Cash to repay Senior
Indebtedness or Indebtedness of any Restricted Subsidiary, in each case owing to
a Person other than the Issuer or any Affiliate of the Issuer or (B) invest or
commit to invest an equal amount, or the amount not so applied pursuant to
clause (A), in Additional Assets; PROVIDED, HOWEVER, that in the case of any
commitment to invest, such investment must be made within six months thereafter,
and any amount not so invested shall be treated as Excess Proceeds (as defined
below); and (ii) apply such excess Net Available Cash (to the extent not applied
pursuant to clause (i)) as provided in the following paragraphs of the covenant
described hereunder. The amount of such excess Net Available Cash required to be
applied during the applicable period and not applied as so required by the end
of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined
below) totals at least $10.0 million, the Issuer must, not later than the
fifteenth Business Day of such month, make an offer (an "Excess Proceeds Offer")
to purchase from the Holders on a pro rata basis an aggregate principal amount
of Notes equal to the Excess Proceeds (rounded down to the nearest multiple of
$1,000) on such date, at a purchase price equal to 100% of the principal amount
of such Notes, plus, in each case, accrued interest (if any) to the date of
purchase (the "Excess Proceeds Payment").
The Issuer will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
thereunder in the event that such Excess Proceeds are received by the Issuer
under the covenant described hereunder and the Issuer is required to repurchase
Notes as described above. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the covenant described
hereunder, the Issuer shall comply with the
76
<PAGE>
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the covenant described hereunder by virtue
thereof.
(b) In the event of the transfer of substantially all (but not all) the
property and assets of the Issuer as an entirety to a Person in a transaction
permitted by the covenant described under "--Merger and Consolidation," the
Successor Company (as defined therein) shall be deemed to have sold the
properties and assets of the Issuer not so transferred for purposes of the
covenant described hereunder, and shall comply with the provisions of the
covenant described hereunder with respect to such deemed sale as if it were an
Asset Disposition and the Successor Company shall be deemed to have received Net
Available Cash in an amount equal to the fair market value (as determined in
good faith by the Board of Directors) of the properties and assets not so
transferred or sold.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Issuer shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Issuer (an "Affiliate Transaction") unless the terms thereof
(1) are no less favorable to the Issuer or such Restricted Subsidiary than those
that could be obtained at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate, (2) if such Affiliate Transaction
involves an amount in excess of $2.0 million, (i) are set forth in writing and
(ii) have been approved by a majority of the members of the Board of Directors
having no personal stake in such Affiliate Transaction and (3) if such Affiliate
Transaction involves an amount in excess of $5.0 million, have been determined
by a nationally recognized accounting or investment banking firm (an
"Independent Financial Advisor") to be fair, from a financial standpoint, to the
Issuer and its Restricted Subsidiaries. Notwithstanding clause (2)(ii) above, in
the event that there are less than three members of the Board of Directors not
having a personal stake in any Affiliate Transaction, such Affiliate Transaction
shall be permitted to exist so long as an Independent Financial Advisor has
determined the terms of such Affiliate Transaction to be fair, from a financial
standpoint, to the Issuer and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"--Limitation on Restricted Payments," (ii) any issuance of securities, or other
payments, benefits, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) the grant of stock
options or similar rights to employees and directors of the Issuer pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business in accordance with the past practices of the
Issuer or its Restricted Subsidiaries, but in any event not to exceed $1.0
million in the aggregate outstanding at any one time, (v) the payment of
reasonable fees to directors of the Issuer and its Restricted Subsidiaries who
are not employees of the Issuer or its Restricted Subsidiaries, (vi) any Tax
Sharing Agreement; PROVIDED, HOWEVER, that the aggregate amount payable by the
Issuer pursuant thereto shall not exceed the amount of taxes that the Issuer
would have been liable for on a stand-alone basis, (vii) indemnification
agreements with, and the payment of fees and indemnities to, directors, officers
and employees of the Issuer and its Restricted Subsidiaries, in each case in the
ordinary course of business, (viii) any employment, non-competition or
confidentiality agreement entered into by the Issuer and its Restricted
Subsidiaries with its employees in the ordinary course of business, (ix) the
payment by the Issuer of fees, expenses and other amounts to Cypress and its
Affiliates in connection with the Merger, (x) payments by the Issuer or any of
its Restricted Subsidiaries to Cypress and its Affiliates made pursuant to any
financial advisory, financing, underwriting or placement agreement, or in
respect of other investment banking activities, in each case as determined by
the Board of Directors in good faith, and (xi) any Affiliate Transaction between
the Issuer and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries.
CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, each
Holder shall have the right to require that the Issuer repurchase such Holder's
Notes at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase (subject to
77
<PAGE>
the right of holders of record on the relevant record date to receive interest
on the relevant interest payment date), in accordance with the terms
contemplated in paragraph (b) below.
(b) Within 30 days following any Change of Control, the Issuer shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Issuer to
purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest on the relevant interest payment date); (2) the
circumstances and relevant facts regarding such Change of Control; (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by the
Issuer, consistent with the covenant described hereunder, that a Holder must
follow in order to have its Notes purchased.
(c) The Issuer shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Issuer shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Issuer and the Placement Agents. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Issuer would decide to do so in the future. Subject to the limitations
discussed below, the Issuer could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Issuer's capital structure or credit ratings. Restrictions on the
ability of the Issuer to incur additional Indebtedness are contained in the
covenant described under "--Limitation on Indebtedness." Such restrictions can
only be waived with the consent of the holders of a majority in principal amount
of the Notes then outstanding. Except for the limitations contained in such
covenants, however, the Indenture will not contain any covenants or provisions
that may afford holders of the Notes protection in the event of a highly
leveraged transaction.
The Credit Agreement will prohibit the Issuer from purchasing any Notes
prior to the repayment in full of Indebtedness outstanding under the Credit
Agreement, and will also provide that the occurrence of certain change of
control events with respect to the Issuer would constitute a default thereunder.
In the event a Change of Control occurs at a time when the Issuer is prohibited
from purchasing Notes, the Issuer could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Issuer does not obtain such a consent or repay such
borrowings, the Issuer will remain prohibited from purchasing Notes. In such
case, the Issuer's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the Credit Agreement. In such circumstances, the subordination provisions in the
Indenture would likely restrict payment to the holders of Notes.
Future indebtedness of the Issuer may contain prohibitions on the occurrence
of certain events that would constitute a Change of Control or require such
indebtedness to be repurchased upon a Change of Control. Moreover, the exercise
by the holders of their right to require the Issuer to repurchase the Notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on the Issuer.
Finally, the Issuer's ability to pay cash to the holders of Notes following the
occurrence of a Change of Control may be limited by the Issuer's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases.
78
<PAGE>
The provisions under the Indenture relative to the Issuer's obligation to
make an offer to repurchase the Notes as a result of a Change of Control may be
waived or modified with the written consent of the holders of a majority in
principal amount of the Notes.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Issuer shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Issuer or a Wholly Owned Subsidiary or to
any director of a Restricted Subsidiary to the extent required as director's
qualifying shares, (ii) if, immediately after giving effect to such issuance,
sale or other disposition, neither the Issuer nor any of its Subsidiaries own
any Capital Stock of such Restricted Subsidiary or (iii) if, immediately after
giving effect to such issuance, sale or other disposition, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect thereto would have been permitted
to be made under the covenant described under "--Limitation on Restricted
Payments" if made on the date of such issuance, sale or other disposition.
MERGER AND CONSOLIDATION. The Issuer shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") shall be
a Person organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Company (if not
the Issuer) shall expressly assume, by an indenture supplemental thereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Issuer under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing, (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "--Limitation on Indebtedness"; (iv) immediately after giving
effect to such transaction, the Successor Company shall have Consolidated Net
Worth in an amount that is not less than the Consolidated Net Worth of the
Issuer prior to such transaction; and (v) the Issuer shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture. Notwithstanding clause (iii) above, the Issuer may
consolidate with or merge with or into (A) another Person if such Person is a
single purpose corporation that has not conducted any business or Incurred any
Indebtedness or other liabilities and such transaction is being consummated
solely to change the state of incorporation of the Issuer and (B) Holdings;
PROVIDED, HOWEVER, that, in the case of clause (B), (x) Holdings shall not have
owned any assets other than the Capital Stock of the Issuer (and other
immaterial assets incidental to its ownership of such Capital Stock) or
conducted any business other than owning the Capital Stock of the Issuer, (y)
Holdings shall not have any Indebtedness or other liabilities (other than
ordinary course liabilities incidental to its ownership of the Capital Stock of
the Issuer) and (z) immediately after giving effect to such consolidation or
merger, the Successor Company shall have a pro forma Consolidated Coverage Ratio
that is not less than the Consolidated Coverage Ratio of the Issuer immediately
prior to such consolidation or merger.
The Successor Company shall be the successor to the Issuer and shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
COMMISSION REPORTS. Notwithstanding that the Issuer may not be required to
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Issuer shall file with the Commission and provide the Trustee
and Noteholders with such annual reports and such information,
79
<PAGE>
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Issuer to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above, (iv) the failure by the Issuer to
comply for 30 days after notice with any of its obligations in the covenants
described above under "--Certain Covenants" under "--Limitation on
Indebtedness," "--Limitation on Restrictions on Distributions from Restricted
Subsidiaries," "--Limitation on Restricted Payments," "--Limitation on Sales of
Assets and Subsidiary Stock" (other than a failure to purchase Notes),
"--Limitation on Affiliate Transactions," "--Limitation on the Sale or Issuance
of Capital Stock of Restricted Subsidiaries," "--Change of Control" (other than
a failure to purchase Notes) or "--Commission Reports," (v) the failure by the
Issuer to comply for 60 days after notice with its other agreements contained in
the Indenture, (vi) Indebtedness of the Issuer or any Significant Subsidiary is
not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds $10.0 million (the "cross
acceleration provision"), (vii) certain events of bankruptcy, insolvency or
reorganization of the Issuer or a Significant Subsidiary (the "bankruptcy
provisions") or (viii) any judgment or decree for the payment of money in excess
of $10.0 million is rendered against the Issuer or a Significant Subsidiary,
remains outstanding for a period of 60 days following such judgment and is not
discharged, waived or stayed within 10 days after notice or an enforcement
proceeding is commenced upon such judgment or decree (the "judgment default
provision"). However, a default under clauses (iv), (v) and (viii) will not
constitute an Event of Default until the Trustee or the holders of 25% in
principal amount of the outstanding Notes notify the Issuer of the default and
the Issuer does not cure such default within the time specified after receipt of
such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer occurs and is continuing,
the principal of and interest on all the Notes will 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 the Notes. Under certain circumstances, the
holders of a majority in principal amount of the outstanding Notes may rescind
any such acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to
80
<PAGE>
certain restrictions, the holders of a majority in principal amount of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
holder of a Note or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Issuer is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Issuer
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Issuer is taking or proposes to take in respect
thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with the consent of the holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each holder of an
outstanding Note affected thereby, no amendment may, among other things, (i)
reduce the amount of Notes whose holders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest on any Note, (iii)
reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce
the premium payable upon the redemption of any Note or change the time at which
any Note may be redeemed as described under "--Optional Redemption" above, (v)
make any Note payable in money other than that stated in the Note, (vi) impair
the right of any holder of the Notes to receive payment of principal of and
interest on such holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
holder's Notes, (vii) make any change in the amendment provisions which require
each holder's consent or in the waiver provisions or (viii) make any change to
the subordination provisions of the Indenture that would adversely affect the
Noteholders.
Without the consent of any holder of the Notes, the Issuer and Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of the obligations of the
Issuer under the Indenture, to provide for uncertificated Notes in addition to
or in place of certificated Notes (provided that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in Section 163(f)(2)(B)
of the Code), to add guarantees with respect to the Notes, to secure the Notes,
to add to the covenants of the Issuer for the benefit of the holders of the
Notes or to surrender any right or power conferred upon the Issuer, to make any
change that does not adversely affect the rights of any holder of the Notes or
to comply with any requirement of the Commission in connection with the
qualification of the Indenture under the Trust Indenture Act. However, no
amendment may be made to the subordination provisions of the Indenture that
adversely affects the rights of any holder of Senior Indebtedness then
outstanding unless the holders of such Senior Indebtedness (or their
Representative) consents to such change.
The consent of the holders of the Notes is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
81
<PAGE>
After an amendment under the Indenture becomes effective, the Issuer is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Issuer may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges.
DEFEASANCE
The Issuer at any time may terminate all its obligations under the Notes and
the Indenture ("legal defeasance"), except for certain obligations, including
those respecting the defeasance trust and obligations to register the transfer
or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes
and to maintain a registrar and paying agent in respect of the Notes. The Issuer
at any time may terminate its obligations under the covenants described under
"--Certain Covenants" (other than the covenant described under "--Merger and
Consolidation"), the operation of the cross acceleration provision, the
bankruptcy provisions with respect to Significant Subsidiaries and the judgment
default provision described under "--Defaults" above and the limitations
contained in clauses (iii) and (iv) under "--Certain Covenants--Merger and
Consolidation" above ("covenant defeasance").
The Issuer may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Issuer exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Issuer exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "--Defaults" above or because of the
failure of the Issuer to comply with clause (iii) or (iv) under "--Certain
Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Issuer must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Issuer as Registrar and Paying Agent with regard to the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
82
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form. Except as described in the next paragraph, the New Notes
initially will be represented by a single, permanent global New Note, in
definitive, fully registered form without interest coupons (the "Global New
Note") and will be deposited with the Trustee as custodian for the Depository
Trust Company, New York, New York ("DTC") and registered in the name of a
nominee of DTC.
Holders of New Notes who elect to take physical delivery of their
certificates instead of holding their interest through the Global New Note
(collectively referred to herein as the "Non-Global Holders") will be issued in
registered form (a "Certificated New Note"). Upon the transfer of any
Certificated New Note initially issued to a Non-Global Holder, such Certificated
New Note will, unless the transferee requests otherwise or a Global Exchange
Note has previously been exchanged in whole for Certificated New Notes, be
exchanged for an interest in such Global New Note.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold securities
for its participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Upon the issuance of the Global New Note, DTC or its custodian will credit,
on its internal system, the respective principal amount of the individual
beneficial interests represented by such Global New Note to the accounts of
persons who have accounts with such depositary. Such accounts initially will be
designated by or on behalf of the Placement Agents. Ownership of beneficial
interests in the Global New Note will be limited to persons who have accounts
with DTC ("participants") or persons who hold interests through participants.
Ownership of beneficial interests in the Global New Note will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants).
So long as DTC or its nominee is the registered owner or holder of the
Global New Note, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the New Notes represented by such Global New Note
for all purposes under the Indenture and the New Notes. No beneficial owners of
an interest in the Global Exchange Note will be able to transfer that interest
except in accordance with DTC's applicable procedures.
Payments of the principal of, premium, if any, and interest on the Global
New Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Issuer, the Trustee, nor any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
New Note or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Issuer expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global New Note will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial ownership interests in the principal amount of such Global
New Note, as shown on the records of DTC or its nominee. The Issuer also expects
that payments by participants to owners of beneficial interests in such Global
New Note held through such participants
83
<PAGE>
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a Holder requires physical delivery of
Certificated New Notes for any reason, including to sell Notes to persons in
states which require such delivery of such New Notes or to pledge such Notes,
such holder must transfer its interest in the Global New Note, in accordance
with the normal procedures of DTC and the procedures set forth in the Indenture.
Neither the Issuer nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Subject to certain conditions, any person having a beneficial interest in
the Global New Note may, upon request to the Trustee, exchange such beneficial
interest for New Notes in the form of Certificated New Notes. Upon any such
issuance, the Trustee is required to register such Certificated New Notes in the
name of, and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). In addition, if DTC is at any time unwilling or unable
to continue as a depositary for the Global New Note and a successor depositary
is not appointed by the Issuer within 90 days, the Issuer will issue
Certificated New Notes in exchange for the Global New Note.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS
The Issuer has agreed pursuant to the Registration Agreement with the
Initial Purchasers, for the benefit of the holders of the Notes, that the Issuer
will, at its cost, (i) within 45 days after the date of original issue of the
Old Notes, file the Registration Statement with the Commission with respect to a
registered offer to exchange the Old Notes for New Notes of the Issuer having
terms substantially identical in all material respects to the Old Notes (except
that the New Notes will not contain terms with respect to transfer restrictions)
and (ii) use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act within 150 days after the date of original
issue of the Old Notes. Upon the effectiveness of the Registration Statement,
the Issuer will offer the New Notes in exchange for surrender of the Old Notes.
The Issuer will keep the Exchange Offer open for not less than 30 days (or
longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the holders of the Notes. For each Old Note surrendered to
the Issuer pursuant to the Exchange Offer, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Note. Interest on each New Note will accrue from the last interest payment date
on which interest was paid on the Note surrendered in exchange thereof or, if no
interest has been paid on such Note, from the date of its original issue. Under
existing Commission interpretations, the New Notes would be freely transferable
by holders other than affiliates of the Issuer after the Exchange Offer without
further registration under the Securities Act if the holder of the New Notes
represents that it is acquiring the New Notes in the ordinary course of its
business, that it has no arrangement or understanding with any person to
participate in the distribution of the New Notes and that it is not an affiliate
of the Issuer, as such terms are interpreted by the Commission; PROVIDED,
HOWEVER, that broker-dealers ("Participating Broker-Dealers") receiving New
Notes in the Exchange Offer will have a prospectus delivery requirement with
respect to resales of such New Notes. The Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to New Notes (other than a resale of an unsold allotment
84
<PAGE>
from the original sale of the Notes) with the prospectus contained in the
Registration Statement. Under the Registration Agreement, the Issuer is required
to allow Participating Broker-Dealers and other persons, if any, with similar
prospectus delivery requirements to use the prospectus contained in the
Registration Statement in connection with the resale of such New Notes.
A Holder of Old Notes (other than certain specified holders) who wishes to
exchange such Old Notes for New Notes in the Exchange Offer will be required to
represent that any New Notes to be received by it will be acquired in the
ordinary course of its business and that at the time of the commencement of the
Exchange Offer it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the New Notes and that it is not an "affiliate" of the Issuer, as defined in
Rule 405 of the Securities Act, or if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
In the event that applicable interpretations of the staff of the Commission
do not permit the Issuer to effect such a Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days of the Issue Date,
or if the Initial Purchasers so request with respect to Old Notes not eligible
to be exchanged for New Notes in the Exchange Offer, or if any holder of Old
Notes is not eligible to participate in the Exchange Offer or does not receive
freely tradeable Exchange Notes in the Exchange Offer, the Issuer will, at its
cost, (a) as promptly as practicable, file a Shelf Registration Statement
covering resales of the Old Notes or the New Notes, as the case may be, (b) use
all reasonable efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act and (c) keep the Shelf Registration Statement
effective until the earlier of (i) the time when the Notes covered by the Shelf
Registration Statement can be sold pursuant to Rule 144 without any limitations
under clauses (c), (e), (f) and (h) of Rule 144 and (ii) three years from the
Issue Date. The Issuer will, in the event a Shelf Registration Statement is
filed, among other things, provide to each holder for whom such Shelf
Registration Statement was filed copies of the prospectus which is a part of the
Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Old Notes or the New Notes,
as the case may be. A holder selling such Old Notes or New Notes pursuant to the
Shelf Registration Statement generally would be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement which are applicable to such holder
(including certain indemnification obligations).
If (i) by December 28, 1996, neither the Registration Statement nor the
Shelf Registration Statement has been filed with the Commission; (ii) by May 12,
1997, neither the Exchange Offer is consummated nor the Shelf Registration
Statement is declared effective; or (iii) after May 12, 1997, and after either
the Registration Statement or the Shelf Registration Statement is declared
effective, such Registration Statement thereafter ceases to be effective or
usable (subject to certain exceptions) in connection with resales of Old Notes
or New Notes in accordance with and during the periods specified in the
Registration Agreement (each such event referred to in clauses (i) through
(iii), a "Failure to Register"), additional interest will accrue on the Old
Notes and the New Notes at the rate of .5% per annum from and including the date
on which any such Failure to Register shall occur to but excluding the date on
which all Failures to Register have been cured. Such interest is payable in
addition to any other interest payable from time to time with respect to the Old
Notes and the New Notes.
The Issuer will be entitled to close the Exchange Offer 30 days after the
commencement thereof provided that it has accepted all Old Notes theretofore
validly tendered in accordance with the terms of the Exchange Offer.
The summary herein of certain provisions of the Registration Agreement 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 Agreement, a copy of
which is available upon request to the Issuer.
85
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The exchange of Old Notes for New Notes in the Exchange Offer should not
constitute a taxable event to holders for United States federal income tax
purposes. Consequently, no gain or loss will be recognized by a United States
Holder upon receipt of a New Note, the holding period of the New Note will
include the holding period the Old Note and the basis of the New Note will be
the same as the basis of the Old Note immediately before the exchange.
PERSONS CONSIDERING THE EXCHANGE OF OLD NOTES FOR NEW NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS, AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 120 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resales. In
addition, until , 1997, all dealers effecting transactions in the New Notes
may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
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.
For a period of 120 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer other than commissions or concessions of any brokers or dealers
and will indemnify the holders of the Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Simpson Thacher
& Bartlett, New York, New York (a partnership which includes professional
corporations).
INDEPENDENT PUBLIC ACCOUNTANTS
The audited consolidated financial statements included in this Prospectus
have been audited and the pro forma balance sheet and pro forma income statement
included in this Prospectus have been reviewed by Arthur Andersen LLP,
independent public accountants as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
86
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................. F-2
Consolidated Balance Sheets.......................................................... F-3
Consolidated Statements of Income.................................................... F-4
Consolidated Statements of Shareholders' Equity...................................... F-5
Consolidated Statements of Cash Flows................................................ F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMTROL Inc.:
We have audited the accompanying consolidated balance sheets of AMTROL Inc.
(a Rhode Island corporation) and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AMTROL Inc. and subsidiaries
as of December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 29, 1996
F-2
<PAGE>
AMTROL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
SEPTEMBER 28, --------- ---------
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2)............................................ $ 3,422 $ 9,078 $ 9,038
Accounts receivable, less allowance for doubtful accounts of $1,078, $990 and
$1,094 in 1996, 1995 and 1994, respectively................................. 30,451 24,108 23,669
Inventories (Notes 2 and 4)................................................... 22,686 21,315 20,817
Prepaid income taxes (Notes 2 and 6).......................................... 1,714 2,793 2,108
Prepaid expenses and other.................................................... 1,372 462 310
Net assets held for sale...................................................... 1,786 3,736 --
------------- --------- ---------
Total current assets........................................................ 61,431 61,492 55,942
------------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 2):
Land.......................................................................... 1,796 1,796 3,020
Buildings and improvements.................................................... 11,053 11,107 15,006
Machinery and equipment....................................................... 49,635 51,031 46,216
Furniture and fixtures........................................................ 2,830 2,935 2,491
Construction-in-progress and other............................................ 7,089 1,104 1,697
------------- --------- ---------
72,403 67,973 68,430
Less--accumulated depreciation and amortization............................... 40,314 40,040 36,613
------------- --------- ---------
32,089 27,933 31,817
------------- --------- ---------
OTHER ASSETS:
Cash surrender value of officers' life insurance.............................. 1,737 3,156 3,024
Other (Note 2)................................................................ 1,385 1,328 851
------------- --------- ---------
3,122 4,484 3,875
------------- --------- ---------
$ 96,642 $ 93,909 $ 91,634
------------- --------- ---------
------------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long term debt (Note 5)............................... $ -- $ -- $ 952
Accounts payable.............................................................. 9,203 6,526 6,157
Accrued expenses (Note 2)..................................................... 8,620 11,104 10,186
Accrued income taxes.......................................................... 865 559 1,354
------------- --------- ---------
Total current liabilities................................................... 18,688 18,189 18,649
------------- --------- ---------
OTHER NONCURRENT LIABILITIES (Note 9)........................................... 4,669 4,903 5,867
------------- --------- ---------
DEFERRED INCOME TAXES........................................................... 447 611 563
------------- --------- ---------
LONG TERM DEBT, less current installments....................................... -- -- 2,381
------------- --------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 8 and 9)
SHAREHOLDERS' EQUITY (Notes 3 and 10):
Preferred stock $.01 par value--Authorized--5,000,000 shares and Issued--None
Common stock $.01 par value--Authorized--15,000,000 shares Issued--7,658,420,
7,641,398 and 7,584,373 shares in 1996, 1995 and 1994, respectively......... 76 76 76
Additional paid-in capital.................................................... 29,271 29,083 28,377
Retained earnings............................................................. 46,772 44,313 36,728
Treasury stock, at cost--214,200, 213,200 and 67,300 shares in 1996, 1995 and
1994, respectively (Note 3)................................................. (3,281) (3,266) (1,007)
------------- --------- ---------
Total shareholders' equity.................................................. 72,838 70,206 64,174
------------- --------- ---------
$ 96,642 $ 93,909 $ 91,634
------------- --------- ---------
------------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-3
<PAGE>
AMTROL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------- YEAR ENDED DECEMBER 31,
SEPTEMBER 28, SEPTEMBER 30, -------------------------------
1996 1995 1995 1994 1993
------------- ------------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES........................................... $ 134,816 $ 134,620 $ 172,454 $ 173,472 $ 164,295
COST OF GOODS SOLD.................................. 98,018 96,491 124,303 123,184 116,180
------------- ------------- --------- --------- ---------
Gross profit...................................... 36,798 38,129 48,151 50,288 48,115
OPERATING EXPENSES:
Selling........................................... 12,420 11,176 15,171 15,561 15,128
General and administrative (Note 2)............... 10,373 11,392 14,772 14,841 13,971
Plant closing charges (Note 11)................... -- 1,875 3,825 -- --
------------- ------------- --------- --------- ---------
Income from operations............................ 14,005 13,686 14,383 19,886 19,016
OTHER INCOME (EXPENSE):
Interest expense.................................. (149) (117) (195) (276) (936)
Interest income................................... 180 147 255 269 131
License and distributorship fees.................. 156 196 258 254 254
Other, net........................................ 84 104 65 (179) (141)
------------- ------------- --------- --------- ---------
Income before provision for income taxes and
extraordinary item............................ 14,276 14,016 14,766 19,954 18,324
PROVISION FOR INCOME TAXES (Notes 2 and 6).......... 5,496 5,466 5,681 7,683 7,149
------------- ------------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM.................... 8,780 8,550 9,085 12,271 11,175
EXTRAORDINARY ITEM, net of tax:
Early extinguishment of debt (Note 5)............. -- -- -- -- (911)
------------- ------------- --------- --------- ---------
NET INCOME.......................................... $ 8,780 $ 8,550 $ 9,085 $ 12,271 $ 10,264
------------- ------------- --------- --------- ---------
------------- ------------- --------- --------- ---------
INCOME PER SHARE BEFORE EXTRAORDINARY ITEM.......... $ 1.15 $ 1.13 $ 1.20 $ 1.61 $ 1.56
EXTRAORDINARY ITEM.................................. -- -- -- -- (0.13)
------------- ------------- --------- --------- ---------
NET INCOME PER SHARE................................ $ 1.15 $ 1.13 $ 1.20 $ 1.61 $ 1.43
------------- ------------- --------- --------- ---------
------------- ------------- --------- --------- ---------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING....................................... 7,603 7,586 7,565 7,633 7,158
------------- ------------- --------- --------- ---------
------------- ------------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE>
AMTROL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TREASURY STOCK
ADDITIONAL ---------------
COMMON PAID-IN RETAINED NUMBER OF
STOCK CAPITAL EARNINGS SHARES
------------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992........................................ $ 54 $ 167 $ 17,090 57
Net income...................................................... -- -- 10,264 --
Dividend ($.20 per share)....................................... -- -- (1,388) --
Exercise of stock options....................................... -- (342) -- (58)
Repurchase of common stock...................................... -- -- -- 1
Amortization of deferred compensation........................... -- 219 -- --
Tax effect of disqualifying dispositions of stock options
(Note 10)..................................................... -- 175 -- --
Issuance of common stock--
Public offering, net (Note 3)............................. 20 26,214 -- --
Exercise of stock options................................. 1 543 -- --
--- ----------- --------- ---
BALANCE, December 31, 1993........................................ 75 26,976 25,966 --
Net income...................................................... -- -- 12,271 --
Dividend ($.20 per share)....................................... -- -- (1,509) --
Exercise of stock options (Note 10)............................. 1 1,137 -- --
Repurchase of common stock (Note 3)............................. -- -- -- 67
Amortization of deferred compensation........................... -- 204 -- --
Tax effect of disqualifying dispositions of stock options....... -- 60 -- --
--- ----------- --------- ---
BALANCE, December 31, 1994........................................ 76 28,377 36,728 67
Net income...................................................... -- -- 9,085 --
Dividend ($.20 share)........................................... -- -- (1,500) --
Exercise of stock options (Note 10)............................. -- 598 -- --
Repurchase of common stock (Note 3)............................. -- -- -- 146
Tax effect of disqualifying dispositions of stock options....... -- 108 -- --
--- ----------- --------- ---
BALANCE, December 31, 1995........................................ 76 29,083 44,313 213
Net income...................................................... -- -- 8,780 --
Dividend ($.85 per share)....................................... -- -- (6,321) --
Exercise of stock options (Note 10)............................. -- 188 -- --
Repurchase of common stock (Note 3)............................. -- -- -- 1
--- ----------- --------- ---
BALANCE, September 28, 1996 (unaudited)........................... $ 76 $ 29,271 $ 46,772 214
--- ----------- --------- ---
--- ----------- --------- ---
<CAPTION>
COST
---------
<S> <C>
BALANCE, December 31, 1992........................................ $ 655
Net income...................................................... --
Dividend ($.20 per share)....................................... --
Exercise of stock options....................................... (667)
Repurchase of common stock...................................... 12
Amortization of deferred compensation........................... --
Tax effect of disqualifying dispositions of stock options
(Note 10)..................................................... --
Issuance of common stock--
Public offering, net (Note 3)............................. --
Exercise of stock options................................. --
---------
BALANCE, December 31, 1993........................................ --
Net income...................................................... --
Dividend ($.20 per share)....................................... --
Exercise of stock options (Note 10)............................. --
Repurchase of common stock (Note 3)............................. 1,007
Amortization of deferred compensation........................... --
Tax effect of disqualifying dispositions of stock options....... --
---------
BALANCE, December 31, 1994........................................ 1,007
Net income...................................................... --
Dividend ($.20 share)........................................... --
Exercise of stock options (Note 10)............................. --
Repurchase of common stock (Note 3)............................. 2,259
Tax effect of disqualifying dispositions of stock options....... --
---------
BALANCE, December 31, 1995........................................ 3,266
Net income...................................................... --
Dividend ($.85 per share)....................................... --
Exercise of stock options (Note 10)............................. --
Repurchase of common stock (Note 3)............................. 15
---------
BALANCE, September 28, 1996 (unaudited)........................... $ 3,281
---------
---------
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE>
AMTROL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------- YEAR ENDED DECEMBER 31,
SEPTEMBER 28, SEPTEMBER 30, -------------------------------
1996 1995 1995 1994 1993
------------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net Income........................................... $ 8,780 $ 8,550 $ 9,085 $ 12,271 $ 10,264
------------- ------------- --------- --------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization...................... 3,933 3,659 4,673 4,330 4,520
Writedown of net assets held for sale to realizable
value............................................ -- -- 980 -- --
Extraordinary loss on early extinguishment of debt,
net of tax....................................... -- -- -- -- 911
Provision for losses on accounts receivable........ 181 148 93 206 240
Loss on sale of fixed assets....................... 92 7 83 12 19
Changes in assets and liabilities --
(Increase) decrease in assets --
Accounts receivable, net....................... (6,524) (5,164) (532) (4,798) (1,955)
Inventory...................................... (1,371) (1,934) (498) (866) (4,089)
Prepaid income taxes........................... 1,079 (75) (685) (100) (3)
Prepaid expenses and other..................... (910) (208) (152) 1,027 (954)
Cash surrender value of officers' life
insurance.................................... 1,419 (160) (132) (191) (39)
Other assets................................... (226) (51) (602) (8) 728
Increase (decrease) in liabilities--
Accounts payable............................... 2,677 1,070 369 (1,865) 383
Accrued expenses............................... (2,484) 1,444 918 783 1,395
Accrued income taxes........................... 306 (777) (795) 567 573
Other noncurrent liabilities................... (234) (566) (965) (39) 874
Deferred income taxes.......................... (164) 130 48 (629) (910)
------------- ------------- --------- --------- ---------
(2,226) (2,477) 2,803 (1,571) 1,693
------------- ------------- --------- --------- ---------
Net cash provided by operating activities...... 6,554 6,073 11,888 10,700 11,957
------------- ------------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and
equipment.......................................... 1,991 20 30 119 11
Capital expenditures................................. (8,053) (4,531) (5,492) (4,902) (7,382)
------------- ------------- --------- --------- ---------
Net cash used in investing activities.......... (6,062) (4,511) (5,462) (4,783) (7,371)
------------- ------------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends....................................... (6,321) (1,127) (1,500) (1,509) (1,388)
Repayment of long-term debt.......................... -- (4,947) (4,948) (1,952) (31,473)
Issuance of long-term debt........................... -- 1,615 1,615 1,000 --
Prepayment of short-term debt........................ (3,500) -- -- -- --
Issuance of short-term debt.......................... 3,500 -- -- -- --
Repurchase of common stock, net...................... -- -- -- -- (12)
Issuance of common stock --public offering, net (Note
3)................................................. -- -- -- -- 26,234
Issuance of common stock --exercise of stock
options............................................ 188 276 598 1,137 869
Repurchase of treasury stock......................... (15) (711) (2,259) (1,007) --
Tax effect of disqualifying dispositions of incentive
stock options (Note 10)............................ -- -- 108 60 175
Tax effect on restricted stock (Note 10)............. -- -- -- 147 --
------------- ------------- --------- --------- ---------
Net cash used in financing activities.......... (6,148) (4,894) (6,386) (2,124) (5,595)
------------- ------------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... (5,656) (3,332) 40 3,793 (1,009)
CASH AND CASH EQUIVALENTS, beginning of period......... 9,078 9,038 9,038 5,245 6,254
------------- ------------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period............... $ 3,422 $ 5,706 $ 9,078 $ 9,038 $ 5,245
------------- ------------- --------- --------- ---------
------------- ------------- --------- --------- ---------
CASH PAID FOR:
Interest........................................... $ 121 $ 161 $ 126 $ 351 $ 932
Income taxes....................................... 4,258 6,079 7,083 6,936 8,225
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION AND OPERATIONS
AMTROL Inc. designs, manufactures and markets products used principally in
flow control, storage, heating and other treatment of fluids in the water
systems market and selected sectors of the heating, ventilating and air
conditioning ("HVAC") market. AMTROL Inc. offers a broad product line of quality
fluid handling products and services marketed under widely recognized brand
names.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
AMTROL Inc. and its wholly owned subsidiaries (the "Company"). All material
intercompany balances and transactions have been eliminated in consolidation.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FISCAL YEAR
The Company uses a calendar fiscal year and four quarterly interim periods
ended on Saturday of the thirteenth week of the quarter.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and short-term investments
that are readily convertible into cash with an original maturity to the Company
of three months or less.
DEPRECIABLE PROPERTY AND EQUIPMENT
The Company provides for depreciation by charges to income (computed on the
straight-line method) in amounts estimated to amortize the cost of properties
over their estimated useful lives which generally fall within the following
ranges:
<TABLE>
<S> <C>
10-40
Building and improvements....................................... years
Machinery and equipment......................................... 3-12 years
Furniture and fixtures.......................................... 5-20 years
Other........................................................... 3-10 years
</TABLE>
Leasehold improvements are amortized over the life of the lease or the
estimated useful life of the improvement, whichever is shorter.
Interest costs, during the construction period, on borrowings used to
finance construction of buildings and related property are included in the cost
of the constructed property.
F-7
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
The Company's inventories are stated at the lower of cost or market
including material, labor and manufacturing overhead (see Note 4).
GOODWILL
The excess of purchase price over the fair value of net assets acquired is
allocated to goodwill and is included in other assets. Goodwill is being
amortized over 40 years. Goodwill (net of accumulated amortization) at December
31, 1995 and 1994 is approximately $.5 million. The Company accounts for
long-lived and intangible assets in accordance with SFAS No. 121, ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF.
ENGINEERING AND DEVELOPMENT EXPENSES
All costs for engineering and development, which amounted to approximately
$.9 million in 1995, $.8 million in 1994 and $.7 million in 1993, are charged to
general and administrative expense as incurred.
INCOME TAXES
The Company utilizes an asset and liability approach to determine income tax
liabilities in accordance with SFAS No. 109. The standard recognizes tax assets
and liabilities for the cumulative effect of all temporary differences between
financial statement carrying amounts and the tax basis of assets and
liabilities. The standard also requires the adjustment of deferred tax
liabilities or assets for an enacted change in tax laws or rates.
INCOME PER SHARE
Income per share amounts have been computed by dividing income by the
weighted average number of common and common equivalent shares outstanding
during each period.
ACCRUED EXPENSES
Certain customers are allowed a rebate if agreed upon sales targets are
achieved for a given year. At December 31, 1995 and 1994, the Company has
accrued $2.7 million and $3.0 million for such volume allowances. These amounts
are included in accrued expenses in the accompanying consolidated balance
sheets.
INTERNATIONAL SALES
In fiscal 1995, 1994 and 1993, net sales to customers in various geographic
areas outside the United States and Canada, primarily, Mexico, Western Europe
and Asia, amounted to $22.7 million, $22.9 million and $22.6 million,
respectively.
RECLASSIFICATION
Certain prior year balances have been reclassified to conform with the
current year presentation.
F-8
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) COMMON STOCK TRANSACTIONS
On March 18, 1993, the Company sold 1,955,000 shares in an initial public
offering of its common stock (the "Offering") at $15.00 per share. The net
proceeds from the Offering, after underwriting discounts and expenses paid by
the Company, were approximately $26.2 million and were used to reduce
indebtedness.
During December 1994, the Board of Directors authorized a program to
purchase up to 500,000 shares of the Company's common stock over the next year.
Through the end of 1995, the Company had purchased 213,200 shares at an
approximate cost of $3.3 million.
(4) INVENTORIES
Inventories were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
SEPTEMBER 28, --------- ---------
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials and work in process........................ $ 8,655 $ 10,388 $ 10,814
Finished goods........................................... 14,031 10,927 10,003
------------- --------- ---------
$ 22,686 $ 21,315 $ 20,817
</TABLE>
Inventories valued under the last-in, first-out (LIFO) cost method comprised
approximately 57.0% of the 1995 totals and 57.9% of the 1994 totals. If the
first-in, first-out (FIFO) cost method of inventory accounting had been used,
inventories would have been approximately $2.3 and $2.4 million higher than
reported at December 31, 1995 and 1994, respectively.
(5) LONG-TERM DEBT AND NOTES PAYABLE TO BANKS
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C> <C>
DESCRIPTION: INTEREST RATE: 1995 1994
- ------------------------------------ ------------------------------------ --------- ---------
Bank term loan...................... CD rate plus 1% $ -- $ 3,333
Less--Current installments.......... -- 952
--------- ---------
$ -- $ 2,381
</TABLE>
The bank term loan was unsecured and the principal was repaid in advance on
February 15, 1995. Interest is payable quarterly in arrears at either the bank's
prime rate, 1% in excess of the cost of funds rate or 1% in excess of
certificate of deposit rates. The weighted average interest rate paid during
1995, 1994 and 1993 was approximately 7.49%, 5.36% and 4.30%, respectively.
F-9
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has a revolving credit loan agreement with a bank which provides
for borrowings of up to $30.0 million under an unsecured line of credit with an
expiration date of May 31, 1997. $5.0 million of this facility has been
allocated as available for letters of credit (Note 9). The Company had no
borrowings outstanding under this line during 1994. During 1995, the Company
borrowed and repaid $1.6 million against this facility at a weighted average
interest rate of 7.0% for the period the loan was outstanding. A commitment fee
on the average daily unused portion of the revolver loan is charged at the rate
of .25% per annum. Interest on borrowings under the revolving credit agreement
is payable in arrears at either the bank's prime rate, or the rates based on the
bank's cost of funds or CD rates plus 1%.
In March 1993, the Company prepaid the remaining balance of certain senior
indebtedness. As a result, the Company incurred a loss of $.9 million (net of
applicable tax benefits of $.6 million).
The Company is subject to certain restrictive covenants under the term loan
and revolving credit loan agreements, including restrictions on incurring
certain additional indebtedness, and maintenance of certain financial ratios,
such as minimum levels of net worth and ratio of funded debt to total equity.
(6) INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1994 1993
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................................................... $ 5,798 $ 7,351 $ 7,180
State............................................................................. 586 1,150 986
--------- --------- ---------
6,384 8,501 8,166
Deferred:
Federal........................................................................... (591) (712) (913)
State............................................................................. (112) (106) (104)
--------- --------- ---------
(703) (818) (1,017)
--------- --------- ---------
$ 5,681 $ 7,683 $ 7,149
</TABLE>
The deferred income tax provision in 1995, 1994 and 1993 resulted primarily
from temporary differences due to the use of accelerated depreciation for income
tax purposes and straight-line depreciation for financial statement purposes,
temporary differences related to deferred compensation and the reversal of
temporary differences related to safe-harbor lease transactions that had
previously transferred tax benefits to the Company.
F-10
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) INCOME TAXES (CONTINUED)
The difference between a provision computed using the statutory U.S. federal
income tax rate of 35% for 1995, 1994 and 1993 and the provision for income
taxes in the accompanying consolidated financial statements is summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
United States statutory income tax.......................................................... 35.0% 35.0% 35.0%
Increases (decreases) in taxes resulting from:
State income taxes, net of federal income tax benefit..................................... 4.3 3.4 3.8
Other, net................................................................................ (.8) .1 .2
--- --- ---
Provision for income taxes.................................................................. 38.5% 38.5% 39.0%
</TABLE>
Significant items giving rise to deferred tax assets and deferred tax
liabilities at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
DECEMBER, 31,
--------------------
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Prepaid Income Taxes:
Warranty reserves--current............................................... $ 167 $ 215
Allowance for doubtful accounts.......................................... 265 299
Plant closing reserve.................................................... 1,035 --
Reserves not currently deductible........................................ 389 625
Accrued vacation......................................................... 307 301
UNICAP adjustment........................................................ 238 196
Other.................................................................... 392 472
--------- ---------
$ 2,793 $ 2,108
Deferred Income Taxes:
Accelerated depreciation................................................. $ 1,370 $ 1,280
Safe Harbor leases....................................................... 801 1,104
Warranty reserves--long-term............................................. (753) (951)
Deferred compensation and restricted stock plan.......................... (761) (809)
Other.................................................................... (46) (61)
--------- ---------
$ 611 $ 563
</TABLE>
(7) PENSION AND PROFIT SHARING PLANS
The Company has a defined contribution 401(k) plan covering substantially
all of its employees. Under the plan, eligible employees are permitted to
contribute up to 10% of gross pay, not to exceed the maximum allowed under the
Internal Revenue Code. The Company matches each employee contribution up to 6%
of gross pay at a rate of $.25 per $1 of employee contribution. The Company also
contributes 3% of each employee's gross pay up to the Social Security taxable
wage base and 4% of amounts in excess of that level up to approximately $.2
million of wages. Company contributions to the 401(k) plan totaled approximately
$1.1 million in 1995, $1.2 million in 1994 and $1.0 million in 1993.
F-11
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) PENSION AND PROFIT SHARING PLANS (CONTINUED)
The Company maintains the Profitability Rewards In recognition of Dedicated
Employees Bonus Plan (the "PRIDE Bonus Plan") for the purpose of providing
non-executive employees with an annual year-end cash bonus based on the
profitability of the Company during such year. All employees of AMTROL Inc. at
year-end, and employees who have retired, died or become disabled during the
calendar year, are eligible for a bonus award under the PRIDE Bonus Plan. The
total amount to be awarded under the PRIDE Bonus Plan each year is determined by
the Board of Directors. Awards are allocated to eligible employees on the basis
of years of service and compensation.
(8) LEASE COMMITMENTS
The Company leases certain plant facilities and equipment. Total rental
expenses charged to operations amounted to approximately $.8 million in 1995,
1994 and 1993. Minimum rental commitments under all noncancelable operating
leases are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996............................................ $ 741
1997............................................ 461
1998............................................ 351
1999............................................ 48
2000............................................ 32
---------
Total................................... $ 1,633
---------
---------
</TABLE>
Certain of the leases provide for renewal options.
(9) COMMITMENTS AND CONTINGENCIES
COMPENSATION PLANS
The Company maintains an executive incentive bonus plan for certain officers
based on the Company's attainment of specified operating results.
The Company maintains a supplemental pension program for certain officers
which provides pre-retirement death and retirement benefits in addition to the
benefits in the defined contribution 401(k) plan. The retirement benefits are
being accrued currently by charges to income over the officers' expected
employment periods. Compensation expense under this program totaled
approximately $.1 million in 1995, 1994 and 1993.
OTHER COMMITMENTS AND CONTINGENCIES
At December 31, 1995, the Company had a credit agreement to support the
issuance of letters of credit in the amount of $5.0 million with approximately
$.7 million outstanding. The Company is self-insured for worker's compensation
claims in the State of Rhode Island. The State of Rhode Island requires the
Company to post a $.7 million standby letter of credit.
The Company is involved in various legal proceedings which, in the opinion
of management, will not result in a material adverse effect on it financial
condition or results of operations.
F-12
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has received three "Notice Letters" from the Environmental
Protection Agency ("EPA") stating that it is one of several potential
responsible parties pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, and that it will be required to share in the
cost of cleaning up the sites identified by the EPA. The Company's degree of
responsibility, if any, is not presently determinable in all cases; however,
management is of the opinion that these will not have a material adverse effect
on the accompanying consolidated financial statements.
(10) STOCK PLANS
During 1983, the Company adopted an Incentive Stock Option Plan under which
options to purchase a total of 1,100,000 shares of the Company's stock were
granted to certain officers and employees. This plan was discontinued in 1992.
Under the terms of the plan, options were granted at not less than 100% of the
fair market value of the common stock on the date of grant. Options are
exercisable after one to three years of continuous employment from the date the
option is granted and have terms of 5 to 10 years. No accounting recognition is
given to these stock options until they are exercised.
In 1989, the Company issued 64,064 shares to certain officers in the form of
restricted stock. The restriction stipulates that the recipient of the shares
complete five years of service beginning on the date of issuance, June 1989. In
1990 and 1991, the Company issued 70,092 shares and 5,500 shares, respectively,
to certain directors and officers in the form of restricted stock. The
restriction stipulates that the recipient of the shares complete three years of
service beginning on the date of issuance, December 1990 and September 1991,
respectively. The restrictions automatically lift upon the death of a
participant.
The award of restricted stock does not result in a charge against the
earnings of the Company at the award date. The deferred compensation, based on
the estimated fair market value at the award date, was fully amortized by a
charge against earnings over the three- or five-year period of restriction.
During 1992, the Company established the 1992 Stock Plan, which provides for
awards covering a maximum of 800,000 shares of common stock to be granted to
directors, officers and certain key employees of the Company in the form of (i)
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code, (ii) non-qualified stock options, (iii) shares of common stock
subject to specified restrictions, (iv) restricted units that entitle the holder
thereof to receive one share of common stock (or equivalent cash payments) for
each unit in increments during a restricted period, (v) stock appreciation
rights accompanying options or granted separately, or (vi) limited stock
appreciation rights accompanying options. Options granted in 1993, 1994 and 1995
are exercisable in four equal annual installments generally commencing one year
from grant and have terms of ten years.
In 1994, the shareholders approved the AMTROL Inc. Non-Employee Director
Compensation Plan. The Plan provides for annual automatic grants of options to
purchase common stock up to a maximum of 2,000 shares annually to each director.
On April 22, 1994 options were granted to purchase 10,000 shares of common stock
at $19.00 per share, the price on the grant date. These shares become
exercisable in three equal installments on October 22, 1994, April 22, 1995 and
April 22, 1996 and have terms of ten years. On April 21, 1995, options were
granted to purchase 7,873 shares of common stock at $18.25 per share, the price
on the grant date. These shares become exercisable in three equal installments
on October 21, 1995, April 21, 1996 and April 21, 1997.
F-13
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A disqualifying disposition occurs when shares acquired by the exercise of
incentive stock options are sold within one year. Because of the tax deduction
received for disqualifying dispositions, the Company has included a related tax
benefit of $.1 million in additional paid-in capital for each year 1995 and
1994.
The following is a summary of 1993, 1994 and 1995 option activity in the
Company's stock plans:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS PRICE RANGE
----------- --------------------
<S> <C> <C> <C>
Options outstanding, December 31, 1992.......................................... 355,135 $ 2.55 $ 11.55
Granted....................................................................... 178,060 15.00 15.00
Exercised..................................................................... (128,414) 2.55 7.70
Forfeited..................................................................... (1,100) 11.55 15.00
----------- --------- ---------
Options outstanding, December 31, 1993.......................................... 403,681 $ 3.45 $ 15.00
Granted....................................................................... 172,500 16.38 19.00
Exercised..................................................................... (121,227) 3.45 15.00
Forfeited..................................................................... (12,875) 11.55 15.00
----------- --------- ---------
Options outstanding, December 31, 1994.......................................... 442,079 $ 7.00 $ 19.00
Granted....................................................................... 192,973 15.75 18.25
Exercised..................................................................... (57,025) 7.00 15.00
Forfeited..................................................................... (31,721) 15.00 18.31
----------- --------- ---------
Options outstanding, December 31, 1995.......................................... 546,306 $ 7.00 $ 19.00
</TABLE>
At December 31, 1995, there were 172,337 currently exercisable options.
(11) OTHER INCOME AND EXPENSE
PLANT CLOSING
In September 1995, the Company ceased operations at its Plano, Texas
facility. In December 1995, the Company decided to proceed with closing its
Rogers, Arkansas plant. Production at this facility ceased in April 1996.
Programs to raise productivity in other facilities and free-up production
capacity have made these plant consolidations possible. As a result of these
plant closings, all jobs at these locations have been eliminated resulting in a
worldwide workforce reduction of approximately 150 jobs.
The Company recorded a $3.8 million charge to operating expense for
severance and other costs in connection with the closures. Included in this
charge is an amount of $2.0 million for accrued termination benefits of which
approximately $.7 million had been paid at December 31, 1995. Included in
current assets as "Assets Held for Sale" is an amount of $3.7 million
representing the estimated net market value of the land and buildings for these
two facilities which the Company is holding for sale.
(12) SUPPLEMENTARY QUARTERLY INFORMATION (UNAUDITED)
Historically, the Company has experienced higher sales in the second and
third quarters of its fiscal year. The following table sets forth selected
operating results for each quarter of 1995 and 1994. The information for each of
these quarters is unaudited but includes all normal recurring adjustments that
the Company considers necessary for a fair presentation. These results, however,
are not necessarily indicative of results for any future period.
F-14
<PAGE>
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) SUPPLEMENTARY QUARTERLY INFORMATION (UNAUDITED) (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................................................. $ 43.2 $ 47.6 $ 43.8 $ 37.8
Gross profit............................................................... 12.4 13.4 12.4 10.0
Income from operations..................................................... 4.6 5.9 3.2(a) .7(b)
Net income................................................................. 2.8 3.7 2.0 .5
Net income per share....................................................... .38 .49 .26 .07
</TABLE>
- --------------
(a) Reflects pretax plant closing charge of $1.9 million.
(b) Reflects pretax plant closing charge of $1.9 million.
YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................................................. $ 41.7 $ 47.5 $ 45.5 $ 38.7
Gross profit............................................................... 11.9 14.1 13.7 10.5
Income from operations..................................................... 4.2 6.4 6.4 2.9
Net income................................................................. 2.5 3.9 3.9 2.0
Net income per share....................................................... .33 .51 .51 .26
</TABLE>
(13) MERGER AGREEMENT (UNAUDITED)
On August 28, 1996, the Board of Directors of the Company approved a merger
agreement pursuant to which AMTROL Holdings, Inc. ("Holdings") would acquire the
Company, subject to shareholder approval, for approximately $218.9 million,
representing a price of $28.25 per share based upon 7,444,220 shares and options
to purchase 679,223 shares issued and outstanding on October 4, 1996. Holdings
is an affiliate of The Cypress Group L.L.C.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE NEW NOTES OFFERED
BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE NEW NOTES BY ANYONE IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN ANY CHANGE IN THE FACTS
SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Incorporation of Certain Documents by
Reference.................................... 2
Available Information.......................... 2
Disclosure Regarding Forward-Looking
Statements................................... 3
Summary........................................ 4
Risk Factors................................... 17
Use of Proceeds................................ 20
The Exchange Offer............................. 21
Capitalization................................. 28
Pro Forma Consolidated Financial Data.......... 29
Selected Historical Financial Data............. 35
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 36
Business....................................... 43
Management..................................... 53
Security Ownership of Certain Beneficial Owners
and Management............................... 55
Description of Bank Credit Facility............ 56
Description of New Notes....................... 57
Registered Exchange Offer; Registration
Rights....................................... 84
Certain United States Federal Tax
Consequences................................. 86
Plan of Distribution........................... 86
Legal Matters.................................. 86
Independent Public Accountants................. 86
Index to Consolidated Financial Statements..... F-1
</TABLE>
------------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
PROSPECTUS
[LOGO]
AMTROL INC.
OFFER TO EXCHANGE
$115,000,000 OF ITS
10 5/8% SENIOR SUBORDINATED
NOTES DUE 2006,
WHICH HAVE BEEN
REGISTERED UNDER THE
SECURITIES ACT, FOR
$115,000,000 OF ITS
OUTSTANDING 10 5/8% SENIOR
SUBORDINATED NOTES DUE 2006
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article SIXTH of the Company's Restated Articles of Incorporation provides
that no director of the Company shall be personally liable for monetary damages
except to the extent required by law in effect at the time the claim of
liability is asserted.
Section 4.1 of the Rhode Island Business Corporation Act authorizes
indemnification of directors and officers of Rhode Island corporations. Article
XI of the Company by-laws (i) authorizes the indemnification of directors and
officers (the "Indemnified Person") under specified circumstances to the fullest
extent authorized, (ii) provides for the advancement of expenses to the
Indemnified Persons for defending any proceedings related to the specified
circumstances and (iii) gives the Indemnified Persons the right to bring suit
against the Company to enforce the foregoing rights to indemnification and
advancement of expenses. The Company currently maintains one or more policies of
insurance under which the directors and officers of the Company are insured,
within the limits and subject to the limitations of the policies, against
certain expenses in connection with the defense of actions, suits, or
proceedings, and certain liabilities which might be imposed as a result of such
action, suits or proceedings, to which they are parties by reason of being or
having been such directors or officers.
The Placement Agreement filed as Exhibit 1.1 to this Registration Statement
provides for indemnification of the Company, its directors and officers and
certain other persons against certain liabilities including liabilities under
the Exchange Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) See list of Exhibits.
(b) Schedules other than that listed above are omitted because the
conditions requiring their filing do not exist, or because the required
information is provided in the Consolidated Financial Statements, including the
notes hereto.
ITEM 22. UNDERTAKINGS.
That insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the 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 Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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;
II-1
<PAGE>
(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;
(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, 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 post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) 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 business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This include information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning the Exchange Offer that was not the subject of and included in
the Registration Statement when it became effective.
(6) That prior to any public reoffering of the securities hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the meaning
of Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(7) That every prospectus: (i) that is filed pursuant to paragraph (7)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act, 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Providence, Rhode Island, on the 17th
day of December, 1996.
AMTROL INC.
By: /s/ EDWARD J. COONEY
------------------------------------------
Edward J. Cooney
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
We, the undersigned directors and officers of AMTROL Inc., do hereby
constitute and appoint Edward J. Cooney, David P. Spalding and Anthony D.
Tutrone, or any one of them, our true and lawful attorneys and agents, to do any
and all acts and things in our name and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and agents, or any
one of them, may deem necessary or advisable to enable the Company to comply
with the Securities Act of 1933 and any rules, regulations and requirements of
the Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorney and agents, or either of them, shall
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<C> <S> <C>
Chairman of the Board
/s/ JOHN P. CASHMAN President and Chief Executive
------------------------------------------- Officer (principal executive December 17, 1996
John P. Cashman officer) and Director
/s/ SAMUEL L. DANIELS
------------------------------------------- Executive Vice President and December 17, 1996
Samuel L. Daniels Director
/s/ CLIFFORD A. PETERSON
------------------------------------------- Senior Vice President and December 17, 1996
Clifford A. Peterson Director
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<C> <S> <C>
Senior Vice President, Chief
/s/ EDWARD J. COONEY Financial Officer and Treasurer
------------------------------------------- (principal financial and December 17, 1996
Edward J. Cooney accounting officer)
/s/ DAVID P. SPALDING
------------------------------------------- Director December 17, 1996
David P. Spalding
/s/ JAMES A. STERN
------------------------------------------- Director December 17, 1996
James A. Stern
/s/ ANTHONY D. TUTRONE
------------------------------------------- Director December 17, 1996
Anthony D. Tutrone
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT # DOCUMENT DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Placement Agreement, dated as of November 7, 1996, among AMTROL Acquisition, Inc., Morgan Stanley & Co.
Incorporated and BT Securities Corporation.
3.1 Restated Articles of Incorporation of AMTROL Inc.
3.2 Bylaws of AMTROL Inc.
4.1 Indenture, dated as of November 1, 1996, between AMTROL Acquisition, Inc. and The Bank of New York.
4.2 Form of 10 5/8% Senior Subordinated Notes due 2006 (included in Exhibit 4.1).
4.3 First Supplemental Indenture, dated as of November 13, 1996, between AMTROL Inc. and The Bank of New
York.
4.4 Registration Agreement, dated as of November 7, 1996, among AMTROL Acquisition, Inc., Morgan Stanley &
Co. Incorporated and BT Securities Corporation.
5.1 Opinion of Simpson Thacher & Bartlett.
10.1 Credit Agreement, dated as of November 13, 1996, among AMTROL Acquisition, Inc. and AMTROL Holdings,
Inc., various lending institutions party thereto, Morgan Stanley Senior Funding, Inc. as
documentation agent, and Bankers Trust Company, as administrative agent.
10.2 AMTROL Inc. Pension Plan and Trust (incorporated by reference from the Company's Registration Statement
on Form S-1, Registration No. 33-48413, declared effective by the Commission on March 18, 1993).
10.3 Amendments to AMTROL Inc. Pension Plan and Trust (incorporated by reference from the Company's
Registration Statement on Form S-1, Registration No. 33-48413, declared effective by the Securities
and Exchange Commission on March 18, 1993).
10.4 AMTROL Inc. Executive Cash Bonus Plan (incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994).
10.5 AMTROL Inc. Supplemental Retirement Plan II (incorporated by reference from the Company's Registration
Statement on Form S-1, Registration No. 33-48413, declared effective by the Commission on March 18,
1993).
10.6 First Amendment to AMTROL Inc. Supplemental Retirement Plan II (incorporated by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
12 Computation of ratio of earnings to fixed charges.
21 Subsidiaries of AMTROL Inc.
23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24 Power of Attorney (included on page II-3 of this Registration Statement).
25 Statement of Eligibility on Form T-1 of The Bank of New York.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement, betwen AMTROL Inc. and The Bank of New York.
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Exhibit 1.1
AMTROL ACQUISITION, INC.
PLACEMENT AGREEMENT
November 7, 1996
Morgan Stanley & Co. Incorporated
BT Securities Corporation
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
AMTROL Acquisition, Inc., a Rhode Island corporation ("Acquisition"),
proposes to issue and sell to you (the "Managers") and the other several
purchasers named in Schedule I hereto (collectively with the Managers, the
"Purchasers") $115,000,000 principal amount of its 10-5/8% Senior Subordinated
Notes Due 2006 (the "Securities") to be issued pursuant to the provisions of an
Indenture dated as of November 1, 1996 (the "Indenture"), between Acquisition,
as issuer, and The Bank of New York, as Trustee (the "Trustee").
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on
exemptions therefrom.
Immediately prior to or concurrent with the consummation of the sales
of the Securities, pursuant to a Merger Agreement dated as of August 28, 1996
(the "Merger Agreement") among AMTROL Holdings, Inc., a Delaware corporation
("Holdings"), Acquisition and AMTROL Inc., a Rhode Island corporation (the
"Company"), Acquisition will merge with and into the Company (the "Merger"), and
the Company will be the surviving corporation.
As a result of the Merger, all of Acquisition's obligations under this
Agreement, the Registration Agreement (as defined herein), the Credit Agreement
(as defined herein), the Indenture and the Securities will, by operation of law,
become obligations of the Company and, in connection with the Merger, the
Company will enter into a supplemental
<PAGE>
2
indenture relating to the Indenture (the "Supplemental Indenture").
It is understood that, in connection with the Merger, Acquisition, the
lenders named therein and Bankers Trust Company, as administrative agent, and
Morgan Stanley Senior Funding, Inc., as documentation agent, will enter into a
credit agreement (the "Credit Agreement").
In connection with the sale of the Securities, Acquisition has
prepared a preliminary private placement memorandum dated October 21, 1996 (the
"Preliminary Memorandum") and will prepare a final private placement memorandum
(the "Final Memorandum" and, with the Preliminary Memorandum, each a
"Memorandum") setting forth or including a description of the terms of the
Securities, the terms of the offering, a description of the Company and any
material developments relating to the Company occurring after the date of the
most recent financial statements included therein.
1. REPRESENTATIONS AND WARRANTIES. Acquisition represents and
warrants to, and agrees with, each of the Purchasers that as of the date hereof:
(a) The Preliminary Memorandum does not contain and the Final
Memorandum will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this
Section l(a) do not apply to statements or omissions in either Memorandum
based upon information relating to any Purchaser furnished to Acquisition
in writing by such Purchaser through you expressly for use therein.
(b) Each of Acquisition and the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in each
Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing
<PAGE>
3
would not have a material adverse effect on Acquisition or on the Company
and its subsidiaries, taken as a whole.
(c) Each "significant subsidiary" (within the meaning of Rule 1-02 of
Regulation S-X) of the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in each
Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries, taken
as a whole. The Company's only significant subsidiaries are American
Granby, Inc. and Water Soft Inc.
(d) Each of this Agreement and the Registration Agreement, dated of
even date herewith, between Acquisition and the Purchasers (the
"Registration Agreement"), has been duly authorized, executed and delivered
by Acquisition.
(e) The Securities have been duly authorized by Acquisition and, when
executed, authenticated and delivered by Acquisition in accordance with the
terms of the Indenture and paid for by the Purchasers in accordance with
the terms of this Agreement, will be entitled to the benefits of the
Indenture and will be valid and binding obligations of Acquisition (and,
after the Merger, the Company) enforceable in accordance with their terms,
except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
(y) rights of acceleration, if applicable, and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(f) The Indenture has been duly authorized by Acquisition and, when
executed and delivered by Acquisition and the Trustee, will be, a valid and
binding agreement of Acquisition (and, after the Merger, the Company),
enforceable in accordance with
<PAGE>
4
its terms except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
of general applicability.
(g) The Merger Agreement has been duly authorized, executed and
delivered by each of Acquisition, Holdings and the Company. The Merger
Agreement is a valid and binding agreement of each of Acquisition, Holdings
and the Company, enforceable as to each in accordance with its terms except
as (x) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and (y) rights of
acceleration, if applicable, and the availability of equitable remedies may
be limited by equitable principles of general applicability.
(h) The Credit Agreement has been duly authorized by Acquisition and,
as of the Closing Date, will have been executed and delivered by
Acquisition. The Credit Agreement will be when so executed and delivered,
a valid and binding agreement of Acquisition (and, after the Merger, the
Company), enforceable in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (y) rights of acceleration,
if applicable, and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(i) Neither the execution and delivery by Acquisition of, and the
performance by Acquisition (and, after the Merger, the Company) of its
obligations under, this Agreement, the Registration Agreement, the Merger
Agreement, the Indenture, the Securities and the Supplemental Indenture nor
the consummation of the Merger will contravene (i) the articles of
incorporation or by-laws of Acquisition or the Company or (ii) any
agreement or other instrument binding upon Acquisition or the Company or
any of its subsidiaries or (iii) any provision of applicable law or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over Acquisition or the Company or its subsidiaries, except,
in the case of clause (ii) or (iii), contraventions which would not,
<PAGE>
5
individually or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole. No consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by Acquisition or the Company of
their respective obligations (both before and after the Merger) under this
Agreement, the Registration Agreement, the Merger Agreement, the Indenture,
the Securities or the Supplemental Indenture, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities or such the failure to
obtain would not, individually or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole. Each of
Acquisition and the Company has, subject to shareholder approval, full
power and authority to consummate the Merger.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
business, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole, from that set forth in the Preliminary
Memorandum.
(k) There are no legal or governmental proceedings pending or, to the
knowledge of Acquisition or the Company, threatened to which Acquisition or
the Company or any of its subsidiaries is a party or to which any of the
properties of Acquisition or the Company or any of its subsidiaries is
subject other than proceedings disclosed in each Memorandum and proceedings
that would not have a material adverse effect on Acquisition or the Company
and its subsidiaries, taken as a whole, or on the power or ability of
Acquisition or the Company to perform their respective obligations (both
before and after the Merger) under this Agreement, the Registration
Agreement, the Merger Agreement, the Indenture, the Securities or the
Supplemental Indenture or to consummate the Merger and the other
Transactions (as defined in the Final Memorandum) contemplated by the Final
Memorandum.
(l) Neither Acquisition, the Company nor any of their respective
affiliates (as defined in Rule 501(b) of Regulation D under the Securities
Act, an
<PAGE>
6
"Affiliate") has directly, or through any agent, (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be integrated
with the sale of the Securities in a manner that would require the
registration under the Securities Act of the Securities or (ii) engaged in
any form of general solicitation or general advertising in connection with
the offering of the Securities (as those terms are used in Regulation D
under the Securities Act), or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act.
(m) Acquisition (and, after the Merger, the Company) is not, and,
after giving effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the Final Memorandum,
will not be, an "investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the Investment Company
Act of 1940, as amended.
(n) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Purchasers in the manner contemplated by
this Agreement to register the Securities under the Securities Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended.
(o) Except as described in the Final Memorandum, the Company and its
subsidiaries (i) are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses
(collectively "Environmental Permits") and (iii) are in compliance with all
terms and conditions of all Environmental Permits except where any
noncompliance with Environmental Laws, failure to receive Environmental
Permits or failure to comply with the terms and conditions of such
Environmental Permits would not, singly or in the aggregate, have a
material adverse
<PAGE>
7
effect on the Company and its subsidiaries, taken as a whole.
(p) Except as described in the Final Memorandum, there are no costs
or liabilities associated with or arising from the application of
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any Environmental Permits, any related
constraints on operating activities and any potential liabilities to third
parties, including governmental authorities) which would, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) Acquisition has delivered to the Purchasers true and correct
copies of the Merger Agreement in the form as originally executed, and
there have been no amendments or waivers thereto or in the exhibits or
schedules thereto other than those as to which the Purchasers shall have
been advised.
(r) Each of Acquisition and the Company has complied with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida) relating to doing business with the Government of Cuba or with any
person or affiliate located in Cuba.
(s) None of Acquisition, the Company, their respective Affiliates or
any person acting on its or their behalf (other than the Purchasers) has
engaged in any directed selling efforts (as that term is defined in
Regulation S under the Securities Act ("Regulation S")) with respect to the
Securities, and Acquisition, the Company and their respective Affiliates
and any person acting on its or their behalf (other than the Purchasers)
have complied with the offering restrictions requirement of Regulation S.
(t) Acquisition has no subsidiaries and has conducted no business
prior to the date hereof other than in connection with the transactions
contemplated by this Agreement and the Final Memorandum, including the
Merger.
2. OFFERING. You have advised Acquisition that the Purchasers will
make an offering of the Securities
<PAGE>
8
purchased by the Purchasers hereunder on the terms set forth in the Final
Memorandum, as soon as practicable after this Agreement is entered into as in
your judgment is advisable.
3. PURCHASE AND DELIVERY. Acquisition hereby agrees to sell to the
several Purchasers, and each Purchaser, upon the basis of the representations
and warranties herein contained, but subject to the conditions hereinafter
stated, agrees, severally and not jointly, to purchase from Acquisition, the
respective principal amount of Securities set forth in Schedule I hereto
opposite their names at a purchase price of 96.5% of the principal amount
thereof plus accrued interest, if any, from November 13, 1996, to the date of
payment and delivery.
Payment for the Securities shall be made in Federal or other funds
immediately available in New York City against delivery of the Securities for
the respective accounts of the several Purchasers at 10:00 a.m., local time, on
November 13, 1996, or at such other time on the same or such other date, not
later than November 15, 1996, as shall be designated in writing by you. The
time and date of such payment are herein referred to as the "Closing Date".
Certificates for the Securities shall be in definitive form and
registered in such names and in such denominations as you shall request in
writing not less than one full business day prior to the Closing Date. The
certificates evidencing the Securities shall be delivered to you on the Closing
Date, for the respective accounts of the several Purchasers, with any transfer
taxes payable in connection with the transfer of the Securities to the
Purchasers duly paid, against payment of the purchase price therefor.
4. CONDITIONS TO THE PURCHASERS' OBLIGATIONS. The several
obligations of the Purchasers under this Agreement to purchase the Securities
will be subject to the following conditions:
(a) Subsequent to the date of this Agreement and prior to the Closing
Date,
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not
<PAGE>
9
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the business, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Preliminary
Memorandum that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Securities on
the terms and in the manner contemplated in the Final Memorandum.
(b) You shall have received on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of Acquisition, to the
effect set forth in clause (a)(i) and (ii) above and to the effect that the
representations and warranties of Acquisition contained in this Agreement
are true and correct as of the Closing Date and that Acquisition has
complied with all of the agreements and satisfied all the conditions on its
part to be performed or satisfied on or before the Closing Date.
(c) You shall have received on the Closing Date an opinion of
Hinckley, Allen & Snyder, counsel to the Company, dated the Closing Date,
that the Merger Agreement and the Merger have been duly and validly
approved by the stockholders of the Company in accordance with the laws of
the state of Rhode Island and the Company's articles of incorporation.
(d) You shall have received on the Closing Date an opinion of Simpson
Thacher & Bartlett, independent counsel to Acquisition, dated the Closing
Date, to the effect set forth in Exhibit A; PROVIDED, HOWEVER, that any of
the opinions set forth in Exhibit A with respect to the Company may be
given by Hinckley, Allen & Snyder.
(e) You shall have received on the Closing Date an opinion of
Cravath, Swaine & Moore, counsel to the
<PAGE>
10
Purchasers, dated the Closing Date, to the effect set forth in Exhibit B.
(f) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof and the Closing Date, as the
case may be, in form and substance satisfactory to you, from Arthur
Andersen LLP, independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information, including the pro forma financial
information, contained in the Final Memorandum as identified by you;
provided that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than the date hereof.
(g) Prior to or concurrently with the issue and sale of the
Securities by Acquisition, the Merger shall be consummated on terms that
conform in all material respects to the Merger Agreement and the Purchasers
shall have received true and correct copies of all documents pertaining
thereto and evidence reasonably satisfactory to the Purchasers of the
consummation thereof.
(h) Prior to or concurrently with the issue and sale of the
Securities by Acquisition, Acquisition shall have entered into the Credit
Agreement and the initial borrowings thereunder shall have occurred. The
Purchasers shall have received conformed counterparts thereof and all other
documents and agreements entered into and received thereunder in connection
with the closing of the Credit Agreement. There shall exist at and as of
the Closing Date (after giving effect to the transactions contemplated by
this Agreement and the Merger Agreement) no condition that would constitute
a default (or an event that with notice or lapse of time or both would
constitute a default) under the Credit Agreement.
5. COVENANTS OF ACQUISITION. In further consideration of the
agreements of the Purchasers contained in this Agreement, Acquisition covenants
with each Purchaser as follows:
(a) To furnish to you, without charge, during the period mentioned in
paragraph (c) below, as many copies
<PAGE>
11
of the Final Memorandum, any documents incorporated by reference therein
and any supplements and amendments thereto as you may reasonably request.
(b) Before amending or supplementing the Final Memorandum, to furnish
to you a copy of each such proposed amendment or supplement and not to use
any such proposed amendment or supplement to which you reasonably object.
(c) If, during the period after the date hereof and prior to the date
on which all the Securities shall have been sold by the Purchasers, any
event shall occur or condition exist as a result of which it is necessary
in your judgment to amend or supplement the Final Memorandum in order to
make the statements therein, in light of the circumstances when such
Memorandum is delivered to a purchaser, not misleading, or if, in the
opinion of counsel to the Purchasers it is necessary to amend or supplement
such Memorandum to comply with applicable law, forthwith to prepare and
furnish, at its own expense, to the Purchasers, either amendments or
supplements to such Memorandum so that the statements in such Memorandum as
so amended or supplemented will not, in light of the circumstances when
such Memorandum is delivered to a purchaser, be misleading or so that such
Memorandum, as so amended or supplemented, will comply with applicable law.
(d) To endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request; PROVIDED, HOWEVER, that neither Acquisition nor the
Company shall not be required to (i) qualify generally or as a foreign
corporation to do business in any jurisdiction where it is not then so
qualified or (ii) take any action that would subject it to general service
of process or to taxation in any jurisdiction where it is not then so
subject.
(e) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including (i) the fees, disbursements and expenses of
Acquisition's and the Company's counsel and accountants and all other fees
or expenses in connection with the preparation of each Memorandum and
<PAGE>
12
all amendments and supplements thereto, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to
the Purchasers, in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Securities to the
Purchasers, including any transfer or other taxes payable thereon,
(iii) the cost of printing or producing any Blue Sky or Legal Investment
memorandum in connection with the offer and sale of the Securities under
state securities laws and all expenses in connection with the qualification
of the Securities for offer and sale under state securities laws as
provided in Section 5(d) hereof, including filing fees and the reasonable
fees and disbursements of counsel to the Purchasers in connection with such
qualification and in connection with the Blue Sky or Legal Investment
memorandum, (iv) any fees charged by rating agencies for the rating of such
Securities, (v) all fees and expenses, in any, incurred in connection with
the admission of such Securities for trading in PORTAL, (vi) 50% of the
chartered airplane used in connection with the road show, (vii) all
document production charges and expenses of counsel to the Purchasers (but
not including their fees for professional services) in connection with the
preparation of this Agreement and (viii) all other costs and expenses
incident to the performance of the obligations of Acquisition or the
Company hereunder for which provision is not otherwise made in this
Section.
(f) Neither Acquisition, the Company nor any of their respective
Affiliates will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act)
which could be integrated with the sale of the Securities in a manner which
would require the registration under the Securities Act of the Securities.
(g) Neither Acquisition, the Company nor any of their respective
Affiliates will solicit any offer to buy or offer to sell the Securities by
means of any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act.
<PAGE>
13
(h) While any of the Securities remain outstanding, to make
available, upon request, to any seller of such Securities the information
specified in Rule 144A(d)(4) under the Securities Act, unless the Company
is then subject to Section 13 or 15(d) of the Exchange Act.
(i) To include in each Memorandum information substantially in the
form set forth in Exhibit C.
(j) To use its best efforts to permit the Securities to be designated
PORTAL securities in accordance with the rules and regulations adopted by
the National Association of Securities Dealers, Inc. relating to trading in
the PORTAL Market.
(k) None of Acquisition, the Company, their respective Affiliates or
any person acting on its or their behalf (other than the Purchasers) will
engage in any directed selling efforts (as that term is defined in
Regulation S of the Securities Act) with respect to the Securities, and
Acquisition, the Company, their respective Affiliates and each person
acting on its or their behalf (other than the Purchasers) will comply with
the offering restrictions of Regulation S.
(l) To use the net proceeds from the sale of the Securities as
described in the Final Memorandum.
6. OFFERING OF THE SECURITIES; RESTRICTIONS ON TRANSFER. (a) Each
Purchaser, severally and not jointly, represents and warrants that such
Purchaser is a qualified institutional buyer as defined in Rule 144A under the
Securities Act (a "QIB"). Each Purchaser, severally and not jointly, agrees
with Acquisition that (i) it will not solicit offers for, or offer or sell, the
Securities by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act and (ii) it will solicit offers for such Securities only from, and will
offer such Securities only to, persons that it reasonably believes to be (A) in
the case of offers inside the United States (1) QIBs or (2) other institutional
accredited investors (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act ("institutional accredited investors") that, prior to their
purchase of the Securities, deliver to such Purchaser a letter containing the
<PAGE>
14
representations and agreements set forth in Appendix A to the Final Memorandum
and (B) in the case of offers outside the United States, to persons other than
U.S. persons ("foreign purchasers", which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust)) that, in each
case, in purchasing the Securities are deemed to have represented and agreed as
provided in Exhibit C.
(b) Each Purchaser, severally and not jointly, represents, warrants,
and agrees with respect to offers and sales outside the United States that:
(i) it understands that no action has been or will be taken in any
jurisdiction by Acquisition or the Company that would permit a public
offering of the Securities, or possession or distribution of either
Memorandum or any other offering or publicity material relating to the
Securities, in any country or jurisdiction where action for that purpose is
required;
(ii) it will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Securities or
has in its possession or distributes either Memorandum or any such other
material, in all cases at its own expense;
(iii) the Securities have not been and will not be registered under
the Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except in accordance
with Regulation S under the Securities Act or pursuant to another exemption
from the registration requirements of the Securities Act;
(iv) it has offered the Securities and will offer and sell the
Securities (A) as part of its distribution at any time and (B) otherwise
until 40 days after the later of the commencement of the offering of the
Securities and the Closing Date, in each case only in accordance with
Rule 903 of Regulation S or (C) pursuant to another exemption from the
registration requirements of the Securities Act. Accordingly, neither such
Purchaser, its Affiliates nor any persons acting on its or their behalf has
engaged or will engage in any directed selling efforts (within the meaning
of Regulation S) with respect to the
<PAGE>
15
Securities, and such Purchaser, its Affiliates and any such persons has
complied and will comply with the offering restrictions requirements of
Regulation S in connection with the offering of the Securities;
(v) it represents and, during the period of six months from the date
hereof, agrees that (1) it has not offered or sold and will not offer or
sell any Securities to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (2) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with
respect to anything done by it in relation to the Securities in, from or
otherwise involving the United Kingdom; and (3) it has only issued or
passed on and will only issue or pass on to any person in the United
Kingdom any document received by it in connection with the issue of the
Securities if that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisement) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be
issued or passed on;
(vi) it understands that the Securities have not been and will not be
registered under the Securities and Exchange Law of Japan, and represents
that it has not offered or sold, and agrees that it will not offer or sell,
any Securities, directly or indirectly, in Japan or to or from any resident
of Japan except (A) pursuant to an exemption from the registration
requirements of the Securities and Exchange Law of Japan and (B) in
compliance with any other applicable requirements of Japanese law; and
(vii) it agrees that, at or prior to confirmation of sales of the
Securities, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
<PAGE>
16
Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
"The securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing of the offering, except in either case in
accordance with Regulation S (or Rule 144A if available) under the
Securities Act. Terms used above have the meaning given to them by
Regulation S."
Terms used in this Section 6 have the meanings given to them by Regulation S.
7. INDEMNITY AND CONTRIBUTION. (a) Acquisition (and, after the
Merger, the Company) agrees to indemnify and hold harmless each Purchaser, and
each person, if any, who controls any Purchaser within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under
common control with, or is controlled by, such Purchaser, from and against any
and all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if Acquisition shall have furnished any amendments or
supplements 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 not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Purchaser furnished to Acquisition in writing by such Purchaser through you
expressly for use therein; PROVIDED that the foregoing indemnity with respect to
any Preliminary Memorandum shall not inure to the benefit of any Purchaser from
whom the person asserting any such losses, claims, damages or liabilities
purchased Securities, or any person controlling such Purchaser, if it is
established that a copy of the Final Memorandum (as then amended or supplemented
if
<PAGE>
17
the Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of the Purchasers to such person, if required by
law so to have been delivered, at or prior to the written confirmation of the
sale of the Securities to such person, and if the Final Memorandum (as so
amended or supplemented) would have cured the defect giving rise to such loss,
claim, damage or liability, unless such failure was the result of noncompliance
by Acquisition with Section 5(a) hereof.
(b) Each Purchaser agrees, severally and not jointly, to indemnify
and hold harmless Acquisition (and, after the Merger, the Company), its
directors, its officers and each person, if any, who controls Acquisition (and,
after the Merger, the Company) within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from Acquisition (and, after the Merger, the Company) to the
Purchasers, but only with reference to information relating to such Purchaser
furnished to Acquisition in writing by such Purchaser through you expressly for
use in either Memorandum or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and expenses of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate because of actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same
<PAGE>
18
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for (i) all Purchasers and all persons, if
any, who control any Purchaser within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and (ii) Acquisition (or, after
the Merger, the Company), its directors, its officers and each person, if any,
who controls Acquisition (or, after the Merger, the Company) within the meaning
of either such Section, and that all such fees and expenses shall be reimbursed
as they are incurred. In the case of any such separate firm for the Purchasers
and such control persons of the Purchasers, such firm shall be designated in
writing by Morgan Stanley & Co. Incorporated. In the case of any such separate
firm for Acquisition (or, after the Merger, the Company), and such directors,
officers and control persons of Acquisition (or, after the Merger, the Company),
such firm shall be designated in writing by Acquisition (or, after the Merger,
the Company). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 7 is unavailable to an indemnified party or insufficient
in respect of any
<PAGE>
19
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by Acquisition and the Company on the one hand and the Purchasers on
the other hand in connection with the offering of the Securities shall be deemed
to be in the same respective proportions as the net proceeds from the offering
of such Securities (before deducting expenses) received by Acquisition and the
Company and the total discounts and commissions received or realized by the
Purchasers in respect thereof, in each case as set forth in the Final
Memorandum, bear to the aggregate offering price of such Securities. The
relative fault of Acquisition and the Company on the one hand and of the
Purchasers on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by Acquisition and the Company or by the Purchasers and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Purchasers' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective amount of Securities they have purchased hereunder, not joint.
(e) Acquisition (and, after the Merger, the Company) and the
Purchasers agree that it would not be just or equitable if contribution pursuant
to this Section 7 were determined by PRO RATA allocation (even if the Purchasers
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in paragraph (d) of
<PAGE>
20
this Section 7. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages and liabilities referred to in paragraph (d)
above 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 7, no Purchaser shall be required
to contribute any amount in excess of the amount by which the total price at
which the Securities resold by it in the initial placement of such Securities
were offered to investors exceeds the amount of any damages that such Purchaser
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of
Acquisition contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Purchaser or any person controlling
such Purchaser or by or on behalf of Acquisition or the Company, their
respective officers or directors or any person controlling Acquisition or the
Company and (iii) acceptance of and payment for any of the Securities. The
remedies provided for in this Section 7 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified party
at law or in equity.
8. TERMINATION. This Agreement shall be subject to termination by
notice given by you to Acquisition, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange or the National Association
of Securities Dealers, Inc. (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of
<PAGE>
21
hostilities or any change in financial markets or any calamity or crisis that,
in your judgment, is material and adverse and (b) in the case of any of the
events specified in clauses (a)(i) through (iv), such event, singly or together
with any other such event, makes it, in your judgment, impracticable to market
the Securities on the terms and in the manner contemplated in the Final
Memorandum.
9. EFFECTIVENESS; DEFAULTING PURCHASERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, any one or more of the Purchasers shall fail
or refuse to purchase Securities that it has or they have agreed to purchase
hereunder on such date, and the aggregate principal amount of Securities which
such defaulting Purchaser or Purchasers agreed but failed or refused to purchase
is not more than one-tenth of the aggregate principal amount of the Securities
to be purchased on such date, the other Purchasers shall be obligated severally
in the proportions that the principal amount of Securities set forth opposite
their respective names in Schedule I bears to the aggregate principal amount of
Securities set forth opposite the names of all such non-defaulting Purchasers,
or in such other proportions as you may specify, to purchase the Securities
which such defaulting Purchaser or Purchasers agreed but failed or refused to
purchase on such date; PROVIDED that in no event shall the principal amount of
Securities that any Purchaser has agreed to purchase pursuant to this Agreement
be increased pursuant to this Section 9 by an amount in excess of one-ninth of
such principal amount of Securities without the written consent of such
Purchaser. If, on the Closing Date, any one or more of the Purchasers shall
fail or refuse to purchase Securities that it has or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Purchaser or Purchasers agreed but failed or
refused to purchase is more than one-tenth of the aggregate principal amount of
Securities to be purchased on such date, and arrangements satisfactory to you
and Acquisition for the purchase of such Securities are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Purchaser or of Acquisition. In any such case either you
or the Company shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
<PAGE>
22
the Final Memorandum or in any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting Purchaser
from liability in respect of any default of such Purchaser under this Agreement.
If this Agreement shall be terminated by the Purchasers, or any of
them, because of any failure or refusal on the part of Acquisition to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason Acquisition shall be unable to perform its obligations under this
Agreement, Acquisition will reimburse the Purchasers or such Purchasers as have
so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Purchasers in connection with this Agreement or the
offering contemplated hereunder.
10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
Acquisition hereby submits to the non-exclusive jurisdiction of the Federal and
state courts in the Borough of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
11. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
<PAGE>
23
Please confirm your agreement to the foregoing by signing in the space
provided below for that purpose and returning to us a copy hereof, whereupon
this Agreement shall constitute a binding agreement between us.
Very truly yours,
AMTROL ACQUISITION, INC.,
By: /s/ Anthony D. Tutrone
---------------------------
Name: Anthony D. Tutrone
Title: Secretary
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
BT Securities Corporation
Acting severally on behalf of
themselves and the several
Purchasers named herein
By MORGAN STANLEY & CO. INCORPORATED,
By: /s/ Charles J. Ditkoff
---------------------------
Name: Charles J. Ditkoff
Title: Vice President
<PAGE>
Exhibit 3.1
FILING FEE: $70.00
DUPLICATE ORIGINAL OF
RESTATED ARTICLES OF INCORPORATION
OF
AMTROL Inc.
------------------------------------
Pursuant to the provisions of Section 7-1.1-59 of the General Laws, 1956,
as amended, the undersigned corporation adopts the following Restated Articles
of Incorporation:
FIRST: The name of the corporation is : AMTROL Inc.
-----------------------------
SECOND: The period of its duration is perpetual
-----------------------------
THIRD: The purpose or purposes which the corporation is authorized to
pursue are:
To engage in the invention, design, development, manufacture,
production, operation, sale or lease of component products for the
residential and commercial hot water heating industry, the well water
industry and the refrigeration and air-conditioning industries, and
any and all articles consisting, or partly consisting thereof, and all
products and by-products which are or may be designed, produced,
processed or manufactured therefrom in whole or in part;
To purchase, lease or otherwise acquire, own, hold, sell, mortgage,
change or otherwise dispose of, invest, trade and deal in and with
real and personal property of every kind and description;
To transact any other lawful business for which corporations may be
incorporated under the Rhode Island Business Corporations Act; and to
have all the powers conferred upon corporations organized under the
Rhode Island Business Corporations Act.
FOURTH: The aggregate number of shares which the corporation has
authority to issue is
1,000 shares Common Stock, $.01 par value each
---------------------------------------------------------------------
Note: If the authorized shares consist of one class only, insert a statement
of the par value of such shares or a statement that all of such shares
are without par value.
If the authorized shares are divided into classes, insert a statement of
the number of shares of each class, a statement of the par value of the
shares of each such class or that such shares are without par value, and
a statement of the preferences, limitations and relative rights in
respect of the shares of each class.
If the authorized shares of any preferred or special class are issuable
in series, insert a statement of the designation of each series, a
statement of the variations in the relative rights and preferences as
between series in so far as the same are fixed in the articles of
incorporation and a statement of any authority vested in the board of
directors to establish series and fix and determine the variations in
the relative rights and preferences as between series.
<PAGE>
FIFTH: Existing provisions limiting or denying to shareholders the
preemptive right to acquire additional or treasury shares of the
corporation are:
No holder of stock of any class of the corporation whether now or
hereafter authorized shall have any preemptive, preferential or other
rights to subscribe for or purchase or acquire any shares of any class
or any other securities of the corporation whether now or hereafter
authorized, and whether or not convertible into, or evidencing or
carrying the right to purchase, shares of any class or any other
securities, now or hereafter authorized, and whether the same shall be
issued for cash, services or property, or by way of dividend or
otherwise.
SIXTH: Existing provisions of the articles of incorporation for the
regulation of the internal affairs of the corporation are:
A. ELIMINATION OF DIRECTORS' LIABILITY. A director of the
Corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of the director's duty as
a director, except for (i) liability for any breach of the director's
duty of loyalty to the Corporation or its shareholders, (ii) liability
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) liability imposed
pursuant to the provisions of Section 43 of the Rhode Island Business
Corporation Act, as amended, or (iv) liability for any transaction
from which the director derived an improper personal benefit (unless
said transaction is permitted by Section 37.1 of the Rhode Island
Business Corporation Act, as amended). If the Rhode Island Business
Corporation Act is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Rhode Island Business
Corporation Act. Any repeal or modification of this Section A of
Article SIXTH by the Corporation shall not adversely affect any right
or protection of a director of the Corporation existing at the time of
such repeal or modification.
B. INDEMNIFICATION. (i) BY-LAW AND INDEMNITY AGREEMENT: STATUTORY
PROVISIONS. The Board of Directors of the Corporation may include
provisions in its By-laws, or may authorize agreements to be entered
into with each director, officer, employee or other agent of the
Corporation (an "Indemnified Person") for the purpose of indemnifying
an Indemnified Person in the manner and to the extent permitted by
Section 4.1 of the Rhode Island Business Corporation Act, as amended.
(ii) BY-LAW AND INDEMNITY AGREEMENTS: OTHER PROVISIONS. In
addition to the authority conferred upon the Board of Directors of the
Corporation by Paragraph B(i) hereof, the Board of Directors of the
Corporation may include provisions in its By-laws, or may authorize
agreements to be entered into with each Indemnified Person, for the
purpose of indemnifying such person in the manner and to the extent
provided herein:
(a) The By-law provisions or agreements authorized hereby
may provide that the Corporation shall, subject to the provisions of
this Section B of Article SIXTH, pay, on behalf of an Indemnified
Person any Loss or Expenses arising from any claim or claims which are
made against the Indemnified Person (whether individually or jointly
with other Indemnified Persons) by reason of any Covered Act of the
Indemnified Person.
<PAGE>
(b) For the purposes of this Section B of Article SIXTH,
when used herein:
1. "Loss" means any amount which an Indemnified Person
is legally obligated to pay for any claim for Covered Acts and shall
include, without being limited to, damages, settlements, fines,
penalties or, with respect to employee plans, excise taxes;
2. "Expenses" means any expenses incurred in
connection with the defense against any claim for Covered Acts,
including, without being limited to, legal, accounting or
investigative fees and expenses; and
3. "Covered Act" means any act or omission of an
Indemnified Person in the Indemnified Person's capacity as an official
capacity with the Corporation.
(c) The By-law provisions or agreements authorized hereby
may cover Loss or Expenses arising from any claims made against a
retired Indemnified Person, the estate, heirs or legal representative
of a deceased Indemnified Person or the legal representative of an
incompetent, insolvent or bankrupt Indemnified Person, where the
Indemnified Person was an Indemnified Person at the time the Covered
Act upon which such claims are based occurred.
(d) Any By-law provisions or agreements authorized hereby
may provide for the advancement of Expenses to an Indemnified Person
prior to the final disposition of any action, suit or proceeding, or
any appeal therefrom, involving such Indemnified Person and based on
the alleged commission by such Indemnified Person of a Covered Act,
subject to an undertaking by or on behalf of such Indemnified Person
to repay the same to the Corporation if the Covered Act involves a
claim for which indemnification is not permitted under clause (e)
below, and the final disposition of such action, suit, proceeding or
appeal results in an adjudication adverse to such director or officer.
(e) The By-law provisions or agreements authorized hereby
may not indemnify an Indemnified Person from and against any Loss, and
the Corporation shall not reimburse for any Expenses, in connection
with any claim or claims made against an Indemnified person: (1) any
breach of the Indemnified Person's duty of loyalty to the Corporation
or its shareholders; (2) acts or omissions not in good faith or which
involve intentional misconduct or knowing violation of law; (3) action
contravening Section 43 of the Rhode Island Business Corporation Act,
as amended; (4) the realization by the Indemnified Person of profits
subject to the provisions of Section 16(b) of the Securities Exchange
Act of 1934; or (5) a transaction from which the person seeking
indemnification derived improper personal benefit (unless the
transaction is permitted by Section 37.1 of the Rhode Island Business
Corporation Act, as amended).
(f) The By-law provisions or agreements authorized hereby
may contain such other terms and conditions as the Board of Directors,
in its sole discretion, determines to be consistent with the
provisions of this Article.
C. DISTRIBUTION OF CAPITAL SURPLUS. The Board of Directors
shall have the authority to make distributions to shareholders from
the capital surplus of the Corporation without the approval of the
holders of shares of any class.
D. AMENDMENT TO ARTICLES OF INCORPORATION. The Corporation
reserves the right to amend, alter, change or repeal any provision
contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon
shareholders herein are granted subject to this reservation.
<PAGE>
SEVENTH: The restated articles of incorporation correctly set forth
without change the corresponding provisions of the articles of
incorporation as heretofore amended, and superseded the original
articles of incorporation and all amendments thereto.
Dated: December 12, 1996 AMTROL Inc.
By /s/ Samuel L. Daniels
------------------------
Its President
and /s/ Edward J. Cooney
------------------------
Its Secretary
STATE OF RHODE ISLAND
SC.
COUNTY OF Kent
At West Warwick in said county on this 12th day of December, 1996,
personally appeared before me Edward J. Cooney, who being by me first duly
sworn, declared that he is the Secretary of AMTROL Inc. that he signed the
foregoing document as Secretary of the corporation, and that the statements
therein contained are true.
/s/ Diane L. Yeaton
-----------------------
Notary Public
(NOTARIAL SEAL)
_______________________
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
OFFICE OF THE SECRETARY OF STATE
RESTATED CERTIFICATE OF INCORPORATION
OF
AMTROL Inc.
I, Jane Berthiaume, Acting Deputy Secretary of State hereby certify that
duplicate originals of Restated Articles of Incorporation of AMTROL Inc., duly
signed and verified pursuant to the provisions of Chapter 7-1.1 of the General
Laws, 1956, as amended, have been received in this office and are found to
conform to law, and that the foregoing is a duplicate original of the restated
Articles of Incorporation.
Witness my hand and seal of the State of
Rhode Island this 15th day of December
1996
/s/ Jane Berthiaume
----------------------------------------
Acting Deputy Secretary of State
<PAGE>
Exhibit 3.2
BY-LAWS
OF
AMTROL, Inc.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place within or without the State of Rhode Island as
may be determined by the Board of Directors of the Corporation (the "Board")
from time to time.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices and keep the books and records of the Corporation, except as otherwise
may be required by law, in such other place or places, either within or without
the State of Rhode Island, as the Board may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of holders of shares of
capital stock of the Corporation shall be held at the principal office of the
Corporation or at such other place, within or without the State of Rhode Island,
as may from time to time be fixed by the Board or specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 2. ANNUAL MEETINGS. An annual meeting of shareholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting (an "Annual Meeting") shall be
held at a date, time and place fixed by the Board and stated in the notice of
meeting. If the Annual Meeting shall not be held on the day designated, the
Board shall call a special meeting of shareholders as soon as practicable for
the election of directors. Failure to hold the Annual Meeting at the designated
time shall not work a forfeiture or dissolution of the Corporation.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
may be called by the President for any purpose and shall be called by the
President or Secretary if directed by the Board of Directors or requested in
writing by the holders of not less than 25% of the capital stock of the
Corporation. Each such shareholder request shall state the purpose of the
proposed meeting.
<PAGE>
2
SECTION 4. NOTICE OF MEETINGS. Except as otherwise may be required
by law, notice of each meeting of shareholders shall be in writing, shall state
the place, date and hour of the meeting and, in the case of a special meeting,
shall state the purpose or purposes of the meeting and indicate that the notice
is being issued by or at the direction of the person or persons calling the
meeting, and a copy of such notice shall be delivered or sent by mail, not less
than 10 or more than 60 days before the date of said meeting, to each
shareholder entitled to vote at such meeting. If mailed, such notice shall be
directed to such shareholder at his address as it appears on the stock records
of the Corporation, unless he shall have filed with the Secretary a written
request that notices to him be mailed to some other address, in which case it
shall be directed to him at such other address. Notice of an adjourned meeting
need not be given if the time and place to which the meeting is to be adjourned
was announced at the meeting at which the adjournment was taken, unless (i) the
adjournment is for more than 30 days, or (ii) the Board shall fix a new record
date for such adjourned meeting after the adjournment.
SECTION 5. QUORUM. At any meeting of stockholders, the holders of
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding capital stock entitled to vote at such meeting shall constitute
a quorum for the transaction of business, except as otherwise provided by law or
the Corporation's Certificate of Incorporation. In the absence of a quorum, any
officer entitled to preside at or to act as secretary of the meeting shall have
power to adjourn the meeting from time to time until a quorum is present.
SECTION 6. VOTING. Except as otherwise provided in the Articles of
Incorporation, at each meeting of shareholders, every shareholder of the
Corporation shall be entitled to one vote for every share of capital stock
standing in his name on the stock records of the Corporation (i) at the time
fixed pursuant to Section 6 of Article VII of these By-laws as the record date
for the determination of shareholders entitled to vote at such meeting, or (ii)
if no such record date shall have been fixed, then at the close of business on
the day next preceding the day on which notice thereof shall be given. At each
meeting of shareholders, all matters (except in cases where a larger vote is
required by law or by the Articles of Incorporation of the Corporation or these
By-laws) shall be decided by a majority of the votes cast at such meeting by the
holders of shares of capital stock present or represented by proxy and entitled
to vote thereon, a quorum being present.
<PAGE>
3
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. POWERS. The business of the Corporation shall be managed
under the direction of the Board. The Board may exercise all such authority and
powers of the Corporation and do all such lawful acts and things as are not by
law or otherwise directed or required to be exercised or done by the
shareholders.
SECTION 2. NUMBER, ELECTION AND TERMS. The number of Directors that
shall constitute the Board of Directors shall not be less than one or more than
fifteen. The first Board of Directors shall consist of one Director.
Thereafter, within the limits specified above, the number of Directors shall be
determined by the Board of Directors or the shareholders. Directors shall be
elected by the shareholders at each annual meeting of shareholders. Each
director shall hold office until the next annual election of directors and until
his or her successor shall have been duly elected and qualified, or until the
death, resignation or removal of such directors in the manner herein provided.
No director need be a shareholder.
SECTION 3. ELECTION OF DIRECTORS. Subject to any provisions in the
Articles of Incorporation providing for cumulative voting, at each meeting of
the shareholders for the election of directors at which a quorum is present, the
persons receiving the greatest number of votes shall be the directors. Each
shareholder entitled to vote at such election shall have the right to vote, in
person or by proxy, for as many nominees as the number of directors fixed as
constituting the Board of Directors and to cast for each such nominee as many
votes as the number of shares which such shareholder is entitled to vote,
without the right to cumulate such votes.
SECTION 4. PLACE OF MEETINGS. Meetings of the Board shall be held at
the Corporation's office in the State of Rhode Island or at such other place,
within or without such State, as the Board may from time to time determine or as
shall be specified or fixed in the notice or waiver of notice of any such
meeting.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board shall be
held in accordance with a yearly meeting schedule as determined by the Board; or
such meetings may be held on such other days and at such other times as the
Board may from time to time determine. Notice of regular meetings of the Board
need not be given except as otherwise required by these By-laws.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chairman or President and shall be called by the Secretary at the
request of any two of the other directors.
<PAGE>
4
SECTION 7. NOTICE OF MEETINGS. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required), stating
the time, place and purposes thereof, shall be mailed to each director,
addressed to him at his residence or usual place of business, or shall be sent
to him by telex, cable or telegram so addressed, or shall be given personally or
by telephone, on 24 hours' notice.
SECTION 8. QUORUM AND MANNER OF ACTING. The presence of at least a
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business at any meeting of the
Board. If a quorum shall not be present at any meeting of the Board, a majority
of the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present. Except where a different vote is required or permitted by law or these
By-laws or otherwise, the act of a majority of the directors present at any
meeting at which a quorum shall be present shall be the act of the Board. Any
action required or permitted to be taken by the Board may be taken without a
meeting if all the directors consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
directors shall be filed with the minutes of the proceedings of the Board. Any
one or more directors may participate in any meeting of the Board by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall be deemed to constitute presence in person at a meeting of
the Board.
SECTION 9. RESIGNATION. Any director may resign at any time by
giving written notice to the Corporation; PROVIDED, HOWEVER, that written notice
to the Board, the Chairman of the Board, the President or the Secretary shall be
deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein and,
unless otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective.
SECTION 10. REMOVAL OF DIRECTORS. Any director may be removed,
either with or without cause, at any time, by the affirmative vote of the
holders of record of a majority of the issued and outstanding shares entitled to
vote for the election of directors of the Corporation given at a special meeting
of the shareholders called and held for the purpose.
<PAGE>
5
ARTICLE IV
COMMITTEES OF THE BOARD
SECTION 1. APPOINTMENT AND POWERS OF EXECUTIVE COMMITTEE. The Board
may, by resolution adopted by the affirmative vote of a majority of the
authorized number of directors, designate an Executive Committee of the Board
which shall consist of such number of members as the Board shall determine.
Except as provided by Rhode Island law, during the interval between the meetings
of the Board, the Executive Committee shall possess and may exercise all the
powers of the Board in the management and direction of all the business and
affairs of the Corporation (except the matters hereinafter assigned to any other
Committee of the Board), in such manner as the Executive Committee shall deem in
the best interests of the Corporation in all cases in which specific directions
shall not have been given by the Board. A majority of the members of the
Executive Committee shall constitute a quorum for the transaction of business by
the committee and the act of a majority of the members of the committee present
at a meeting at which a quorum shall be present shall be the act of the
committee. Either the President or the Chairman of the Executive Committee may
call the meetings of the Executive Committee.
SECTION 2. ACTION BY CONSENT; PARTICIPATION BY TELEPHONE OR SIMILAR
EQUIPMENT. Unless the Board shall otherwise provide, any action required or
permitted to be taken by any committee may be taken without a meeting if all
members of the committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
members of the committee shall be filed with the minutes of the proceedings of
the committee. Unless the Board shall otherwise provide, any one or more
members of any such committee may participate in any meeting of the committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting of
the committee.
SECTION 3. CHANGES IN COMMITTEES; RESIGNATIONS; REMOVALS. The Board
shall have power, by the affirmative vote of a majority of the authorized number
of directors, at any time to change the members of, to fill vacancies in, and to
discharge any committee of the Board. The Chairman of the Board may designate
one or more directors as alternate members of any committee who may act in the
place and stead of members who temporarily cannot attend any such meeting. Any
member of any such committee may resign at any time by giving notice to the
Corporation; PROVIDED, HOWEVER, that notice to the Board, the Chairman of the
Board, the President, the chairman of such committee or the Secretary shall be
deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified
<PAGE>
6
therein; and, unless otherwise specified therein, acceptance of such resignation
shall not be necessary to make it effective. Any member of any such committee
may be removed at any time, either with or without cause, by the affirmative
vote of a majority of the authorized number of directors at any meeting of the
Board called for that purpose.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary, a Treasurer, and such other
officers as the Board of Directors may from time to time appoint, including a
Chairman of the Board, one or more Assistant Secretaries and one or more
Assistant Treasurers. One person may hold the offices and perform the duties of
any two or more of said officers.
SECTION 2. ELECTION, QUALIFICATIONS AND TERM OF OFFICE. Each officer
shall be elected annually by the Board of Directors, or from time to time to
fill any vacancy, and shall hold office until a successor shall have been duly
elected and qualified, or until the death, resignation or removal of such
officer.
SECTION 3. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Corporation; PROVIDED, HOWEVER, that notice to the
Board, Chairman of the Board, the President or the Secretary shall be deemed to
constitute notice to the Corporation. Such resignation shall take effect upon
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 4. REMOVAL. Any officer may be removed by the vote of a
majority of the whole Board of Directors at a special meeting called for the
purpose, whenever in the judgment of the Board of Directors the best interests
of the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the officer so removed. Election
or appointment of an officer or agent shall not of itself create contract
rights.
SECTION 5. VACANCIES. Any vacancy among the officers, whether caused
by death, resignation, removal or any other cause, shall be filled in the manner
prescribed for election or appointment to such office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board shall,
if present, preside at all meetings of the Board and, if present, at all
meetings of the shareholders. He shall perform the duties incident to the
office of the Chairman of the
<PAGE>
7
Board and all such other duties as are specified in these By-laws or as shall be
assigned to him from time to time by the Board.
SECTION 7. VICE CHAIRMAN OF THE BOARD. Subject to the Chairman of
the Board of Directors, the Executive Committee and the Board of Directors
itself, the Vice Chairman of the Board of Directors shall preside at all
meetings of the Board of Directors in the Chairman's absence, and shall, in
general, during the Chairman's absence perform all duties incident to the office
of Chairman of the Board. The Vice Chairman of the Board have such other duties
as may be assigned to him by the Board of Directors or the Executive Committee.
SECTION 8. PRESIDENT. The President shall have, under the control of
the Board, active management of the operations, business and affairs of the
Corporation. In addition, he shall have such other powers and perform such
duties as provided in these By-laws or as the Board of Directors, the Chairman,
or in the absence of the Chairman, the Vice Chairman, may assign to him. He
shall at all times see that all resolutions or determinations of the Board are
carried into effect. He may from time to time appoint, remove or change members
of and discharge one or more advisory committees, each of which shall consist of
such number of persons (who may, but need not, be directors or officers of the
Corporation), and have such advisory duties, as he shall determine. He shall
perform the duties incident to the office of the President and all such other
duties as are specified in these By-laws or as shall be assigned to him from
time to time by the Board. In the event that there is a vacancy in the position
of President, which shall not have been filled as provided in the By-laws, the
Board of Directors may designate one or more of the principal officers of the
Corporation to perform such duties as may be required of the President by the
By-laws or by law. In the absence of the Chairman of the Board and the Vice
Chairman of the Board, the President shall preside at all meetings of the Board
of Directors and all meetings of the shareholders.
SECTION 9. EXECUTIVE VICE-PRESIDENT AND VICE PRESIDENT. There may be
one or more Executive Vice-Presidents and as many Vice-Presidents as the Board
of Directors or the Executive Committee may elect or appoint. Any Executive
Vice-President and each Vice-President shall have such power and perform such
duties as the Board of Directors of the Executive Committee may prescribe or as
the President may delegate to him.
SECTION 10. TREASURER. The Treasurer shall have charge and custody
of, and be responsible for, all funds and securities of the Corporation, shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation, shall deposit all moneys and other valuables to the credit
of the Corporation in such depositories as may be designated pursuant to these
By-laws, shall receive, and give receipts for, moneys due and payable to the
Corporation from any
<PAGE>
8
source whatsoever, shall disburse the funds of the Corporation and shall render
to all regular meetings of the Board, or whenever the Board may require, an
account of all his transactions as Treasurer. He shall, in general, perform all
the duties incident to the office of Treasurer and all such other duties as may
be assigned to him from time to time by the President or such other officer to
whom the Treasurer reports.
SECTION 11. SECRETARY. The Secretary shall, if present, act as
secretary of, and keep the minutes of, all meetings of the Board, the Executive
Committee and other committees of the Board and the shareholders in one or more
books provided for that purpose, shall see that all notices are duly given in
accordance with these By-laws and as required by law, shall be custodian of the
seal of the Corporation and shall affix and attest the seal to all documents to
be executed on behalf of the Corporation under its seal. He shall, in general,
perform all the duties incident to the office of Secretary and all such other
duties as may be assigned to him from time to time by the President or such
other officer to whom the Secretary reports.
SECTION 12. BONDS OF OFFICERS. If required by the Board, any officer
of the Corporation shall give a bond for the faithful discharge of his duties in
such amount and with such surety or sureties as the Board may require.
SECTION 13. COMPENSATION. The salaries of the officers shall be
fixed from time to time by the Board; PROVIDED, HOWEVER, that the President may
fix or delegate to others the authority to fix the salaries of any agents
appointed by the President. No officer shall be prevented from receiving his
salary by reason of the fact that he is also a director of the Corporation.
SECTION 14. OFFICERS OF OPERATING COMPANIES OR DIVISIONS. The
President shall have the power to appoint, remove, and prescribe the terms of
office, responsibilities, duties and salaries of, the officers of the operating
companies or divisions, other than those who are officers of the Corporation.
ARTICLE VI
CONTRACTS, CHECKS, LOANS, DEPOSITS, ETC.
SECTION 1. CONTRACTS. The Board may authorize any officer or
officers, agent or agents, in the name and on behalf of the Corporation, to
enter into any contract or to execute and deliver any instrument, which
authorization may be general or confined to specific instances; and, unless so
authorized by the Board, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement
<PAGE>
9
or to pledge its credit or to render it liable pecuniarily for any purpose or
for any amount.
SECTION 2. CHECKS, ETC. All checks, drafts, bills of exchange or
other orders for the payment of money out of the funds of the Corporation, and
all notes or other evidences of indebtedness of the Corporation, shall be signed
in the name and on behalf of the Corporation in such manner as shall from time
to time be authorized by the Board, which authorization may be general or
confined to specific instances.
SECTION 3. LOANS. No loan shall be contracted on behalf of the
Corporation, and no negotiable paper shall be issued in its name, unless
authorized by the Board, which authorization may be general or confined to
specific instances. All bonds, debentures, notes and other obligations or
evidences of indebtedness of the Corporation issued for such loans shall be
made, executed and delivered as the Board shall authorize.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as may be selected by or in
the manner designated by the Board. The Board or its designees may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of the Certificate of Incorporation or these
By-laws, as they may deem advisable.
ARTICLE VII
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES. Each shareholder shall be entitled to
have, in such form as shall be approved by the Board, a certificate or
certificates signed by the Chairman of the Board or President and by either the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
(except that, when any such certificate is countersigned by a transfer agent or
registered by a registrar other than the Corporation or an employee of the
Corporation, the signatures of any such officers may be facsimiles, engraved or
printed), which may be sealed with the seal of the Corporation (which seal may
be a facsimile, engraved or printed), certifying the number of shares of capital
stock of the Corporation owned by such shareholder. In the event any officer
who has signed or whose facsimile signature has been placed upon any such
certificate shall have ceased to be such officer before such certificate is
issued, such certificate may be issued by the Corporation with the same effect
as if he were such officer at the date of its issue.
SECTION 2. LISTS OF SHAREHOLDERS ENTITLED TO VOTE. The officer of
the Corporation who has charge of the stock ledger
<PAGE>
10
of the Corporation shall prepare and make or cause to be prepared or made, at
least 10 days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each shareholder and the number of shares of capital
stock registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting for the duration thereof,
and may be inspected by any shareholder of the Corporation who is present.
SECTION 3. STOCK LEDGER. The stock ledger of the Corporation shall
be the only evidence as to who are the shareholders entitled to examine the
stock ledger, the list required by Section 2 of this Article VII or the books of
the Corporation, or to vote in person or by proxy at any meeting of
shareholders.
SECTION 4. TRANSFERS OF CAPITAL STOCK. Transfers of shares of
capital stock of the Corporation shall be made only on the stock ledger of the
Corporation by the holder of record thereof, by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, or by the transfer agent of the Corporation, and only on
surrender of the certificate or certificates representing such shares, properly
endorsed or accompanied by a duly executed stock transfer power. The Board may
make such additional rules and regulations as it may deem advisable concerning
the issue and transfer of certificates representing shares of the capital stock
of the Corporation.
SECTION 5. LOST CERTIFICATES. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 6. FIXING OF RECORD DATE. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividends or other
<PAGE>
11
distributions or allotments of any rights, or entitled to exercise any rights in
respect to any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board may fix, in advance, a record date, which
shall not be more than 60 days nor less than 10 days before the date of such
meeting, nor more than 60 days prior to any other action. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 7. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, except as otherwise provided by law.
ARTICLE VIII
FISCAL YEAR
The Corporation's fiscal year shall be determined by the Board of
Directors.
ARTICLE IX
SEAL
The Corporation's seal shall be circular in form and shall include the
words "AMTROL, Inc., Rhode Island, 1973, Corporate Seal."
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required by law, the Articles of Incorporation
or these By-Laws to be given to any director, member of a committee or
shareholder, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether signed before or after the time stated in such
written waiver, shall be deemed equivalent to such notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when such person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds that
the meeting is not lawfully called or convened. Neither the business to be
<PAGE>
12
transacted at, nor the purpose of, any meeting of the shareholders, directors,
or members of a committee of directors need be specified in any written waiver
of notice.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. RIGHT TO INDEMNIFICATION. (A) Each person who was or is
made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or the person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action or inaction in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Rhode Island Business Corporation Act, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment), against all expense, liability and loss
(including attorney's fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators;
PROVIDED, HOWEVER, that, except as provided in this Article XI, the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Article XI shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the Rhode Island Business Corporation Act requires,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer of the Corporation (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer,
<PAGE>
13
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under SECTION
I is not paid in full by the Corporation within 30 days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled to be
paid also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceedings in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Rhode Island Business Corporation Act for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification or the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Rhode Island Business Corporation Act, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article XI shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, By-laws, agreement, vote of
shareholders or disinterested directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Rhode Island Business Corporation Act.
<PAGE>
14
ARTICLE XII
AMENDMENTS
These By-laws or any of them may be amended or supplemented in any
respect at any time, either (i) at any meeting of shareholders, provided that
any amendment or supplement proposed to be acted upon at any such meeting shall
have been described or referred to in the notice of such meeting; or (ii) at any
meeting of the Board, provided that any amendment or supplement proposed to be
acted upon at any such meeting shall have been described or referred to in the
notice of such meeting or an announcement with respect thereto shall have been
made at the last previous Board meeting, and provided further that no amendment
or supplement adopted by the Board shall vary or conflict with any amendment or
supplement adopted by the shareholders. Notwithstanding the preceding sentence,
the affirmative vote of holders of at least 75% of the voting power of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend or repeal, or adopt any provisions inconsistent with,
Section 3 of Article II of these By-laws, Section 2 or Section 10 of Article III
of these By-laws, or this sentence.
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
AMTROL ACQUISITION, INC., Issuer
10-5/8% Senior Subordinated Notes Due 2006
INDENTURE
Dated as of November 1, 1996
THE BANK OF NEW YORK,
as Trustee
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.08; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.05
(b) .............................. 11.03
(c) .............................. 11.03
313(a) .............................. 7.06
(b)(1) .............................. N.A.
(b)(2) .............................. 7.06
(c) .............................. 11.02
(d) .............................. 7.06
314(a) .............................. 4.02; 4.10;
11.02
(b) .............................. N.A.
(c)(1) .............................. 11.04
(c)(2) .............................. 11.04
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 11.05
(f) .............................. N.A.
315(a) .............................. 7.01
(b) .............................. 7.05; 11.02
(c) .............................. 7.01
(d) .............................. 7.01
(e) .............................. 6.11
316(a)(last sentence) ....................... 11.06
(a)(1)(A) .............................. 6.05
(a)(1)(B) .............................. 6.04
(a)(2) .............................. N.A.
(b) .............................. 6.07
317(a)(1) .............................. 6.08
(a)(2) .............................. 6.09
(b) .............................. 2.04
318(a) .............................. 11.01
N.A. means Not Applicable.
- --------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE I Page
----
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions ............................................... 1
SECTION 1.02. Other Definitions ......................................... 26
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act ........................................... 26
SECTION 1.04. Rules of Construction ..................................... 27
ARTICLE II
THE SECURITIES
SECTION 2.01. Form and Dating ........................................... 28
SECTION 2.02. Execution and Authentication .............................. 28
SECTION 2.03. Registrar and Paying Agent ................................ 29
SECTION 2.04. Paying Agent To Hold Money in Trust ....................... 29
SECTION 2.05. Securityholder Lists ...................................... 30
SECTION 2.06. Replacement Securities .................................... 30
SECTION 2.07. Outstanding Securities .................................... 30
SECTION 2.08. Temporary Securities ...................................... 31
SECTION 2.09. Cancelation ............................................... 31
SECTION 2.10. Defaulted Interest ........................................ 31
SECTION 2.11. CUSIP Numbers ............................................. 31
ARTICLE III
REDEMPTION
SECTION 3.01. Notices to Trustee ........................................ 32
SECTION 3.02. Selection of Securities To Be
Redeemed ................................................ 32
SECTION 3.03. Notice of Redemption ...................................... 33
SECTION 3.04. Effect of Notice of Redemption ............................ 33
SECTION 3.05. Deposit of Redemption Price ............................... 34
SECTION 3.06. Securities Redeemed in Part ............................... 34
i
<PAGE>
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Securities ..................................... 34
SECTION 4.02. SEC Reports ............................................... 34
SECTION 4.03. Limitation on Indebtedness ................................ 35
SECTION 4.04. Limitation on Restricted Payments ......................... 38
SECTION 4.05. Limitation on Restrictions on
Distributions from Restricted
Subsidiaries ............................................ 41
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock ........................................ 42
SECTION 4.07. Limitation on Affiliate Transactions....................... 45
SECTION 4.08. Change of Control ......................................... 46
SECTION 4.09. Limitation on the Sale or Issuance
of Capital Stock of Restricted
Subsidiaries............................................. 48
SECTION 4.10. Compliance Certificates ................................... 48
SECTION 4.11. Further Instruments and Acts .............................. 49
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. When Company May Merge or Transfer
Assets .................................................. 49
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default ......................................... 50
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
SECTION 6.12. Waiver of Stay or Extension Laws .......................... 56
ii
<PAGE>
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee ......................................... 57
SECTION 7.02. Rights of Trustee ......................................... 58
SECTION 7.03. Individual Rights of Trustee .............................. 59
SECTION 7.04. Trustee's Disclaimer ...................................... 59
SECTION 7.05. Notice of Defaults ........................................ 59
SECTION 7.06. Reports by Trustee to Holders ............................. 60
SECTION 7.07. Compensation and Indemnity ................................ 60
SECTION 7.08. Replacement of Trustee .................................... 61
SECTION 7.09. Successor Trustee by Merger ............................... 62
SECTION 7.10. Eligibility; Disqualification ............................. 62
SECTION 7.11. Preferential Collection of Claims
Against Company ......................................... 62
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securities;
Defeasance .............................................. 63
SECTION 8.02. Conditions to Defeasance .................................. 64
SECTION 8.03. Application of Trust Money ................................ 65
SECTION 8.04. Repayment to Company ...................................... 66
SECTION 8.05. Indemnity for Government
Obligations ............................................. 66
SECTION 8.06. Reinstatement ............................................. 66
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders ................................ 67
SECTION 9.02. With Consent of Holders ................................... 68
SECTION 9.03. Compliance with Trust Indenture Act ....................... 69
SECTION 9.04. Revocation and Effect of Consents
and Waivers ............................................. 69
SECTION 9.05. Notation on or Exchange of
Securities .............................................. 69
SECTION 9.06. Trustee To Sign Amendments ................................ 70
iii
<PAGE>
ARTICLE X
SUBORDINATION
SECTION 10.01. Agreement To Subordinate .................................. 70
SECTION 10.02. Liquidation, Dissolution,
Bankruptcy .............................................. 71
SECTION 10.03. Default on Designated Senior
Indebtedness ............................................ 71
SECTION 10.04. Acceleration of Payment of
Securities .............................................. 72
SECTION 10.05. When Distribution Must Be Paid
Over .................................................... 73
SECTION 10.06. Subrogation ............................................... 73
SECTION 10.07. Relative Rights ........................................... 73
SECTION 10.08. Subordination May Not Be Impaired
by Company .............................................. 73
SECTION 10.09. Rights of Trustee and Paying
Agent ................................................... 73
SECTION 10.10. Distribution or Notice to
Representative .......................................... 74
SECTION 10.11. Article 10 Not To Prevent Events of
Default or Limit Right To
Accelerate .............................................. 74
SECTION 10.12. Trust Moneys Not Subordinated ............................. 74
SECTION 10.13. Trustee Entitled To Rely .................................. 75
SECTION 10.14. Trustee To Effectuate
Subordination ........................................... 75
SECTION 10.15. Trustee Not Fiduciary for Holders
of Senior Indebtedness .................................. 75
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions .............................................. 76
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls .............................. 76
SECTION 11.02. Notices ................................................... 76
SECTION 11.03. Communication by Holders with Other
Holders ................................................. 77
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent .................................... 77
SECTION 11.05. Statements Required in Certificate
or Opinion .............................................. 78
SECTION 11.06. When Securities Disregarded ............................... 78
iv
<PAGE>
SECTION 11.07. Rules by Trustee, Paying Agent and
Registrar ............................................... 78
SECTION 11.08. Legal Holidays ............................................ 78
SECTION 11.09. Governing Law ............................................. 79
SECTION 11.10. No Recourse Against Others ................................ 79
SECTION 11.11. Successors ................................................ 79
SECTION 11.12. Multiple Originals ........................................ 79
SECTION 11.13. Table of Contents; Headings ............................... 79
Appendix A - Provisions Relating to Initial Securities, Private Exchange
Securities and Exchange Securities.
Exhibit 1 to
Appendix A - Form of Face of Initial Security.
Exhibit A - Form of Face of Exchange Security and Private Exchange Security.
v
<PAGE>
INDENTURE dated as of November 1, 1996, between AMTROL
ACQUISITION, INC., a Rhode Island corporation (the "Company"),
and THE BANK OF NEW YORK, a New York banking corporation (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 10-5/8% Senior
Subordinated Notes Due 2006 (the "Initial Securities") and, if and when issued
pursuant to a registered exchange for Initial Securities, the Company's 10-5/8%
Senior Subordinated Notes Due 2006 (the "Exchange Securities") and, if and when
issued pursuant to a private exchange for Initial Securities, the Company's
10-5/8% Senior Subordinated Notes Due 2006 (the "Private Exchange Securities",
together with the Exchange Securities and the Initial Securities, the
"Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary; or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Adjusted Consolidated Assets" means at any time the total amount of
assets of the Company and its consolidated Restricted Subsidiaries (less
applicable depreciation, amortization and other valuation reserves), after
deducting therefrom all current liabilities of the Company and its consolidated
Restricted Subsidiaries (excluding intercompany items), all as set forth on the
consolidated balance sheet of the Company and its consolidated Restricted
Subsidiaries as of the end of the
<PAGE>
2
most recent fiscal quarter for which financial statements are available prior to
the date of determination.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 5% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of rights
or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary outside of
the ordinary course of business of the Company or such Restricted Subsidiary
(other than, in the case of (i), (ii) and (iii) above, (x) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (y) for purposes of Section 4.06 only,
a disposition that constitutes a Restricted Payment permitted by Section 4.04
and (z) disposition of assets with a fair market value of less than $500,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
<PAGE>
3
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Banks" has the meaning specified in the Credit Agreement.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting 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; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the first Public Equity Offering, the Permitted Holders
cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange
<PAGE>
4
Act), directly or indirectly, of a majority in the aggregate of the total
voting power of the Voting Stock of the Company, whether as a result of
issuance of securities of the Company, any merger, consolidation,
liquidation or dissolution of the Company, any direct or indirect transfer
of securities or otherwise (for purposes of this clause (i) and clause (ii)
below, the Permitted Holders shall be deemed to beneficially own any Voting
Stock of a corporation (the "specified corporation") held by any other
corporation (the "parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in the aggregate
a majority of the voting power of the Voting Stock of the parent
corporation);
(ii) on or after the first Public Equity Offering, any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than one or more Permitted Holders, is or becomes the beneficial owner (as
defined in clause (i) above, except that for purposes of this clause (ii)
such person shall be deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock
of the Company; PROVIDED, HOWEVER, that the Permitted Holders beneficially
own (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of the Company than such other person and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors (for the purposes of this clause (ii),
such other person shall be deemed to beneficially own any Voting Stock of a
specified corporation held by a parent corporation, if such other person is
the beneficial owner (as defined in this clause (ii)), directly or
indirectly, of more than 35% of the voting power of the Voting Stock of
such parent corporation and the Permitted Holders beneficially own (as
defined in clause (i) above), directly or indirectly, in the aggregate a
lesser percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation);
<PAGE>
5
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a vote of 66-2/3% of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or
(iv) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
Person (other than a Person that is controlled by the Permitted Holders),
and, in the case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of the Voting Stock of
the Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent, immediately after such transaction,
at least a majority of the aggregate voting power of the Voting Stock of
the surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which financial statements are
available prior to the date of such determination to (ii) Consolidated Interest
Expense for such four fiscal quarters; PROVIDED, HOWEVER, that (1) if the
Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning
<PAGE>
6
of such period that remains outstanding or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period (except that, in making
such computation, the amount of Indebtedness under any revolving credit facility
outstanding on the date of such calculation shall be computed based on (A) the
average daily balance of such Indebtedness during such four fiscal quarters or
such shorter period when such facility was outstanding or (B) if such facility
was created after the end of such four fiscal quarters, the average daily
balance of such Indebtedness during the period from the date of creation of such
facility to the date of the calculation), (2) if the Company or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Company or such Restricted Subsidiary has
not earned the interest income actually earned during such period in respect of
cash or Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness, (3) if since the beginning of such period
the Company or any Restricted Subsidiary shall have made any Asset Disposition,
the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or
<PAGE>
7
otherwise discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (4) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such period and (5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company, and such pro forma calculations
shall include (A)(x) the savings in cost of goods sold that would have resulted
from using the Company's actual costs for comparable goods and services during
the comparable period and (y) other savings in cost of goods sold or
eliminations of selling, general and administrative expenses as determined by a
responsible financial or accounting Officer of the Company in good faith in
connection with the Company's consideration of such acquisition and consistent
with the Company's experience in acquisitions of similar assets, LESS (B) the
incremental
<PAGE>
8
expenses that would be included in cost of goods sold and selling, general and
administrative expenses that would have been incurred by the Company in the
operation of such acquired assets during such period. If any Indebtedness bears
a floating rate of interest and is being given pro forma effect, the interest of
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
net of any interest income of the Company and its consolidated Restricted
Subsidiaries for such period, as determined in accordance with GAAP, PLUS, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication, (i)
interest expense attributable to capital leases and the interest expense
attributable to leases constituting part of a Sale/Leaseback Transaction, (ii)
amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock held by Persons other than the Company or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust and LESS, to the extent included in such total interest
expense, (A) the amortization during such period of capitalized financing costs
associated with the Merger and the financing thereof and (B) the amortization
during such period of other capitalized financing costs; PROVIDED, HOWEVER, that
the aggregate amount of amortization relating to any such other capitalized
financing costs deducted in calculating Consolidated Interest Expense shall not
exceed 3.5% of the
<PAGE>
9
aggregate amount of the financing giving rise to such capitalized financing
costs.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
to the exclusion contained in clause (iv) below, the Company's equity in
the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
that could have been distributed by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss of any
such Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income;
<PAGE>
10
(iv) any gain (or loss) realized upon the sale or other disposition of
any assets of the Company or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (or
loss) realized upon the sale or other disposition of any Capital Stock of
any Person;
(v) extraordinary gains or losses;
(vi) the cumulative effect of a change in accounting principles; and
(vii) (A) any non-cash charges (including from the write-up of assets)
or write-offs associated with the Merger and the financing thereof, LESS
(B) any tax benefit received from any such non-cash charge being deducted
from the taxable income of the Company or any of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that such non-cash charges or write-offs
described in this clause (vii) are charged within 12 months of the Issue
Date and the maximum amount of non-cash charges that may be added pursuant
to this clause (vii) shall be $5.0 million.
Notwithstanding the foregoing, for the purposes of Section 4.04 only,
there shall be excluded from Consolidated Net Income any dividends, repayments
of loans or advances or other transfers of assets (including any sale of an
Investment) to the Company or a Restricted Subsidiary to the extent such
dividends, repayments or transfers increase the amount of Restricted Payments
permitted under Section 4.04(a)(3)(D).
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company for which financial statements are available, as
(i) the par or stated value of all outstanding Capital Stock of the Company plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
<PAGE>
11
"Credit Agreement" means, collectively, the Credit Agreement dated as
of November 13, 1996, among the Company, the Banks, Bankers Trust Company, as
administrative agent, and Morgan Stanley Senior Funding, Inc., as documentation
agent, and the documents related thereto (including any guarantee agreements and
security documents, and any related Interest Rate Agreement or Currency
Agreement entered into with any of the Banks), in each case as such agreements
or documents may be amended (including any amendment, restatement or
restructuring thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refunding, refinancing,
increasing the amount available under or replacing such agreement or document or
any successor or replacement agreement or document and whether by the same or
any other agent, lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Cypress" means The Cypress Group L.L.C., a Delaware limited liability
company.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Indebtedness and all
other monetary obligations (including interest, Post-Petition Interest, expenses
and fees) under the Credit Agreement and (ii) any other Senior Indebtedness of
the Company which, at the date of determination, has an aggregate principal
amount outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $10 million and is specifically
designated by the Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or
<PAGE>
12
exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at
the option of the holder thereof, in whole or in part, in each case on or prior
to the 123rd day following the Stated Maturity of the Securities; PROVIDED,
HOWEVER, that any Capital Stock that would not constitute Disqualified Stock but
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the first anniversary of the
Stated Maturity of the Securities shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of Sections 4.06 and 4.08.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense, plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its consolidated Restricted Subsidiaries, (b) depreciation expense
of the Company and its consolidated Restricted Subsidiaries, (c) amortization
expense of the Company and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period), (d) all other non-cash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash expenditures in any
future period) and (e) any cash charges (including from the write-up of assets)
or write-offs associated with the Merger and the financing thereof; PROVIDED,
HOWEVER, that such cash charges or write-offs described in this clause (e) are
charged within 12 months of the Issue Date and the maximum amount of cash
charges that may be added pursuant to this clause (e) is $6.0 million.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
<PAGE>
13
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in (i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any Person and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to take-or-pay or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
<PAGE>
14
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Holdings" means AMTROL Holdings, Inc. and its successors.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is
<PAGE>
15
reimbursed no later than the 30th day following payment on the letter of
credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) above of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including by
means of any Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) above of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; PROVIDED, HOWEVER, that
the amount outstanding at any time of any Indebtedness Incurred with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Company or its assets, or (ii) any liquidation, dissolution or other winding up
of the Company, whether voluntary or involuntary or whether or not involving
insolvency or bankruptcy, or (iii) any assignment for the benefit of
<PAGE>
16
creditors or any other marshalling of assets or liabilities of the Company.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
to protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of the lender), loan or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary", the definition of "Restricted Payment" and Section
4.04, (i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means the date on which the Securities are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
<PAGE>
17
"Merger" means the merger of AMTROL Acquisition, Inc. with and into
AMTROL Inc. pursuant to the terms of the merger agreement among such parties and
Holdings dated August 28, 1996.
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form) in each case net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses incurred, and
all Federal, state, provincial, foreign and local taxes required to be accrued
as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law be, repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts provided by the seller
as a reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and retained by
the Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
<PAGE>
18
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means (i) Cypress Merchant Banking Partners L.P.,
Cypress Offshore Partners L.P. and any Person who on the Issue Date is an
Affiliate of either of the foregoing and (ii) any Person who is a member of the
senior management of the Company or Holdings, and a shareholder of Holdings, on
the Issue Date.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; (ii) another
Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such
Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) Investments existing on the Issue Date; (v) receivables owing
to the Company or any Restricted Subsidiary if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; PROVIDED, HOWEVER, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances; (vi) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vii) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary; (viii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; and (ix)
additional Investments in an aggregate amount which, together with all other
Investments made pursuant to this clause (ix) that are then outstanding, does
not exceed $10.0 million.
<PAGE>
19
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Post-Petition Interest" means all interest accrued or accruing after
the commencement of any Insolvency or Liquidation Proceeding (and interest that
would accrue but for the commencement of any Insolvency or Liquidation
Proceeding) in accordance with and at the contract rate (including, without
imitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing any 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) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time.
"Public Equity Offering" means an underwritten primary public offering
of common stock of Holdings or the Company pursuant to an effective registration
statement under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that
<PAGE>
20
(i) such Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED FURTHER,
HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or
complementary to the businesses of AMTROL Inc. and its subsidiaries on the Issue
Date.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any such payment in connection with
any merger or consolidation involving such Person) or similar payment to the
direct or indirect holders of its Capital Stock (other than dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and other than pro rata dividends or other distributions
made by a Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation)), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Company
held by any Person or of any Capital Stock of a Restricted Subsidiary held by
any Affiliate of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the
<PAGE>
21
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment (other than a Permitted Investment) in any
Person.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Revolving Credit Provisions" means the provisions of the Credit
Agreement pursuant to which lenders thereunder have committed to make available
to the Company a revolving credit facility.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"Scheduled Asset Dispositions" means an Asset Disposition of any of
the assets of the Company's Plano, Texas facility that were assets of the
Company's Plano, Texas facility on the Issue Date.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" means the Securities issued under this Indenture.
"Senior Indebtedness" means (i) Indebtedness and all other monetary
obligations referred to in clause (i) of the definition of "Designated Senior
Indebtedness", (ii) Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter Incurred, and (iii) accrued and unpaid interest
(including Post-Petition Interest) in respect of (A) Indebtedness of the Company
for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the
<PAGE>
22
payment of which the Company is responsible or liable unless, in the case of
(ii) and (iii), the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such obligations are
subordinate in right of payment to the Securities; PROVIDED, HOWEVER, that
Senior Indebtedness shall not 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 (other than letters of credit
in respect thereof to the extent otherwise included in Senior Indebtedness)),
(4) any Indebtedness of the Company (and any accrued and unpaid interest in
respect thereof) which is expressly subordinate or junior in any respect to any
other Indebtedness or other obligation of the Company or (5) that portion of any
Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture.
"Senior Subordinated Indebtedness" means the Securities and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank PARI PASSU with the Securities in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
<PAGE>
23
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Tax Sharing Agreement" means any tax sharing agreement between the
Company and Holdings or any other Person with which the Company is required to,
or is permitted to, file a consolidated tax return or with which the Company is
or could be part of a consolidated group for tax purposes.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
<PAGE>
24
(iv) investments in commercial paper, maturing not more than 180 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and
(v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Term Loan Provisions" means the provisions of the Credit Agreement
pursuant to which lenders thereunder have committed to make term loans available
to the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as (except as provided in Section 9.03) in effect on the date of
this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it 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.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness
<PAGE>
25
of, or holds any Lien on any property of, the Company or any other Subsidiary of
the Company that is not a Subsidiary of the Subsidiary to be so designated;
PROVIDED, HOWEVER, that either (A) the Subsidiary to be so designated has total
assets of $1,000 or less or (B) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.04. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be by the Company to the
Trustee by promptly filing with the Trustee a copy of the board resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or one or more Wholly Owned Subsidiaries.
<PAGE>
26
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Affiliate Transaction" ............................... 4.07
"Bankruptcy Law" ...................................... 6.01
"Blockage Notice" ..................................... 10.03
"covenant defeasance option" .......................... 8.01(b)
"Custodian" ........................................... 6.01
"Event of Default" .................................... 6.01
"Excess Proceeds" ..................................... 4.06(a)
"Excess Proceeds Offer" ............................... 4.06(b)
"Excess Proceeds Payment" ............................. 4.06(b)
"Excess Proceeds Payment Date" ........................ 4.06(b)
"Independent Financial Advisor" ....................... 4.07(a)
"legal defeasance option" ............................. 8.01(b)
"Legal Holiday" ....................................... 11.08
"pay the Securities" .................................. 10.03
"Paying Agent" ........................................ 2.03
"Payment Blockage Period" ............................. 10.03
"Registrar"............................................ 2.03
"Successor Company" ................................... 5.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another
<PAGE>
27
statute or defined by SEC rule have the meanings assigned to them by such
definitions.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the Company dated such date prepared in
accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
(9) all references to the date the Securities were originally issued
shall refer to the date the Initial Securities were originally issued.
<PAGE>
28
ARTICLE II
THE SECURITIES
SECTION 2.01. FORM AND DATING. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in Appendix A, which is hereby incorporated in and expressly made part of
this Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to Appendix A
which is hereby incorporated in and expressly made a part of this Indenture.
The Exchange Securities, the Private Exchange Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule, agreements to which the Company is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit 1 to Appendix
A and Exhibit A are part of the terms of this Indenture.
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 impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the 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 authen-
<PAGE>
29
tication by such agent. An authenticating agent has the same rights as any
Registrar, Paying Agent or agent for service of notices and demands.
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 have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of any such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 7.07.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed by the Paying Agent. Upon
<PAGE>
30
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.05. SECURITYHOLDER 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 Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
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 Securityholders.
SECTION 2.06. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge
the Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.07. OUTSTANDING SECURITIES. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. A Security does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.06, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or
<PAGE>
31
maturity date money sufficient to pay all principal and interest payable on that
date with respect to the Securities (or portions thereof) to be redeemed or
maturing, as the case may be, and the Paying Agent is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture, then on and after that date such Securities (or portions thereof)
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.08. 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 shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.
SECTION 2.09. CANCELATION. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver such canceled Securities to the Company. The Company
may not issue new Securities to replace Securities it has redeemed, paid or
delivered to the Trustee for cancelation.
SECTION 2.10. DEFAULTED INTEREST. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.11. CUSIP NUMBERS. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP"
<PAGE>
32
numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER,
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company shall
promptly notify the Trustee of any change in the "CUSIP" numbers relating to the
Securities.
ARTICLE III
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee
shall make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for
<PAGE>
33
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed (including
"CUSIP" numbers) and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
and
(7) 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 give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
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 and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued
<PAGE>
34
interest to the redemption date. Failure to give notice or any defect in the
notice to any Holder shall not affect the validity of the notice to any other
Holder.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest on all Securities
to be redeemed on that date other than Securities or portions of Securities
called for redemption which have been delivered by the Company to the Trustee
for cancelation.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute 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.
ARTICLE IV
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
SECTION 4.02. SEC REPORTS. Notwithstanding that the Company may not
be, or may not be required to remain, subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall file or continue to
file with the SEC and provide the Trustee and Securityholders with such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, such information, documents and reports to be so filed
and
<PAGE>
35
provided at the times specified for the filing of such information, documents
and reports under such Sections. The Company also shall comply with the other
provisions of TIA Section 314(a).
SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall
not, and shall not permit its Restricted Subsidiaries to, Incur, directly or
indirectly, any Indebtedness; PROVIDED, HOWEVER, that the Company may Incur
Indebtedness if, on the date of such Incurrence and after giving effect thereto,
the Consolidated Coverage Ratio exceeds 2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness of the Company Incurred pursuant to the Term Loan
Provisions of the Credit Agreement in an aggregate principal amount that,
when taken together with the principal amount of all other Indebtedness
Incurred pursuant to this clause (1) and then outstanding, does not exceed
$45.0 million (less the amount of such Indebtedness permanently repaid as
provided in Section 4.06);
(2) Indebtedness of the Company Incurred pursuant to the Revolving
Credit Provisions of the Credit Agreement; PROVIDED, HOWEVER, that, after
giving effect to any such Incurrence, the aggregate principal amount of
such Indebtedness then outstanding does not exceed the greater of $30.0
million and the sum of (i)50% of the book value of the inventory of the
Company and its Restricted Subsidiaries and (ii) 80% of the book value of
the accounts receivables of the Company and its Restricted Subsidiaries;
(3) Indebtedness owed to and held by the Company or a Wholly Owned
Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or transfer of
any Capital Stock which results in any such Wholly Owned Subsidiary ceasing
to be a Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or another Wholly Owned Subsidiary)
shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the issuer thereof;
(4) the Securities;
<PAGE>
36
(5) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3) or (4) of this Section
4.03(b));
(6) Indebtedness or Preferred Stock of a Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary was acquired
by the Company (other than Indebtedness or Preferred Stock Incurred in
connection with, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company); PROVIDED, HOWEVER, that on the date of such
acquisition and after giving effect thereto, the Company would have been
able to Incur at least $1.00 of additional Indebtedness pursuant to Section
4.03(a);
(7) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to Section 4.03(a) or pursuant to clause (4), (5) or (6) of this
Section 4.03(b) or this clause (7); PROVIDED, HOWEVER, that to the extent
such Refinancing Indebtedness directly or indirectly Refinances
Indebtedness or Preferred Stock of a Subsidiary described in clause (6) of
this Section 4.03(b), such Refinancing Indebtedness shall be Incurred only
by such Subsidiary;
(8) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
and its Restricted Subsidiaries pursuant to this Indenture and Currency
Agreements Incurred in the ordinary course of business;
(9) Indebtedness (including Capitalized Lease Obligations) of the
Company or any Restricted Subsidiary financing the purchase, lease or
improvement of property (real or personal) or equipment (whether through
the direct purchase of assets or the Capital Stock of any Person owning
such assets), in each case Incurred no more than 180 days after such
purchase, lease or improvement of such property and any Refinancing
Indebtedness in respect of such Indebtedness; PROVIDED, HOWEVER, at the
time of the Incurrence of such Indebtedness and after giving effect
thereto, the aggregate principal amount of all Indebtedness Incurred
pursuant to this clause (9) and
<PAGE>
37
then outstanding shall not exceed the greater of $10.0 million and 10% of
Adjusted Consolidated Assets;
(10) any Guarantee by the Company of Indebtedness of any Restricted
Subsidiary so long as the Incurrence of such Indebtedness Incurred by such
Restricted Subsidiary is permitted under the terms of this Indenture and
any Guarantee by any Restricted Subsidiary of Indebtedness of the Company
Incurred pursuant to clause (1) or (2) of this Section 4.03(b);
(11) Indebtedness of the Company Incurred in connection with the
acquisition of a Related Business and any Refinancing Indebtedness in
respect of such Indebtedness; PROVIDED, HOWEVER, that the aggregate amount
of Indebtedness Incurred pursuant to this clause (11) and then outstanding
shall not exceed $15.0 million; and
(12) Indebtedness of the Company in an aggregate principal amount
which, together with all other Indebtedness of the Company outstanding on
the date of such Incurrence (other than Indebtedness permitted by clauses
(1) through (11) of this Section 4.03(b) or Section 4.03(a)) does not
exceed $25.0 million.
(c) For purposes of determining compliance with this Section 4.03,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described herein, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described herein.
(d) Notwithstanding Section 4.03(a) and Section 4.03(b), the Company
shall not Incur (i) any Indebtedness if such Indebtedness is subordinate or
junior in ranking in any respect to any Senior Indebtedness, unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in
right of payment to Senior Subordinated Indebtedness or (ii) any Secured
Indebtedness that is not Senior Indebtedness unless contemporaneously therewith
effective provision is made to secure the Securities equally and ratably with
such Secured Indebtedness for so long as such Secured Indebtedness is secured by
a Lien.
<PAGE>
38
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Securities are
originally issued to the end of the most recent fiscal quarter for which
financial statements are available prior to the date of such Restricted
Payment (or, in case such Consolidated Net Income shall be a deficit, minus
100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock) and
the aggregate cash received by the Company as a capital contribution from
its shareholders, in each case subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company and other than an issuance
or sale to an employee stock ownership plan or to a trust established by
the Company or any of its Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date, of any
Indebtedness of the Company convertible or exchangeable for Capital Stock
(other than Disqualified Stock) of the Company (less the amount of any
cash, or the fair value of any other property, distributed by the Company
upon such conversion or exchange);
<PAGE>
39
(D) an amount equal to the sum of (i) the net reduction in Investments
in any Person resulting from dividends, repayments of loans or advances or
other transfers of assets (including any sale of such Investment), in each
case to the Company or any Restricted Subsidiary, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the
fair market value of the net assets of an Unrestricted Subsidiary at the
time such Unrestricted Subsidiary is designated a Restricted Subsidiary;
PROVIDED, HOWEVER, that the foregoing sum shall not exceed, in the case of
any Person (including any Unrestricted Subsidiary), the amount of
Investments previously made in such Person (and treated as a Restricted
Payment) by the Company and the Restricted Subsidiaries; and
(E) $5.0 million.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, or capital contribution
in respect of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary of the Company
or an employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their employees);
PROVIDED, HOWEVER, that (A) such Restricted Payment shall be excluded in
the calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of amounts
under clause (3)(B) of Section 4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted to be Incurred pursuant
to Section 4.03; PROVIDED, HOWEVER, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value shall
be excluded in the calculation of the amount of Restricted Payments;
<PAGE>
40
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); PROVIDED, HOWEVER, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(iv) the repurchase of shares of, or options to purchase shares of,
common stock of Holdings, the Company or any of its Subsidiaries from
employees, former employees, directors or former directors of Holdings, the
Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to
the terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the board of directors of Holdings or the
Company under which such individuals purchase or sell or are granted the
option to purchase or sell, shares of such common stock; PROVIDED, HOWEVER,
that the aggregate amount of such repurchases shall not exceed $500,000 in
any calendar year; PROVIDED FURTHER, HOWEVER, that such repurchases shall
be excluded in the calculation of the amount of Restricted Payments;
(v) following the initial Public Equity Offering of common stock,
dividends in an aggregate amount in any year not to exceed 6% of the
aggregate Net Cash Proceeds received by the Company in connection with such
initial Public Equity Offering and any subsequent Public Equity Offering of
common stock; PROVIDED, HOWEVER, that at the time of payment of such
dividends, no other Default shall have occurred and be continuing (or
result therefrom); PROVIDED FURTHER, HOWEVER, that such dividends shall be
included in the calculation of the amount of Restricted Payments;
(vi) repurchases of Capital Stock deemed to occur upon exercise of
stock options if such Capital Stock represents a portion of the exercise
price of such options; PROVIDED, HOWEVER, that such repurchase shall be
excluded in the calculation of the amount of Restricted Payments;
(vii) any payment by the Company to Holdings pursuant to the Tax
Sharing Agreement; PROVIDED, HOWEVER, that the amount of any such payment
shall not exceed the amount of taxes that the Company would have
<PAGE>
41
been liable for on a stand-alone basis; PROVIDED FURTHER, HOWEVER, that
such dividends shall be excluded in the calculation of the amount of
Restricted Payments; and
(viii) dividends to Holdings to the extent required to pay for general
corporate and overhead expenses incurred by Holdings; PROVIDED, HOWEVER,
that such dividends shall not exceed $200,000 in any calendar year;
PROVIDED FURTHER, HOWEVER, that such dividends shall be excluded in the
calculation of the amount of Restricted Payments.
SECTION 4.05. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary (a) to pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) to make any loans or advances to the
Company or (c) to transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date (including the Credit Agreement and
related security documents);
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.05 or this clause (iii)
or contained in any amendment to an
<PAGE>
42
agreement referred to in clause (i) or (ii) of this Section 4.05 or this
clause (iii); PROVIDED, HOWEVER, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no less favorable to the
Securityholders than encumbrances and restrictions with respect to such
Restricted Subsidiary contained in such agreements;
(iv) any such encumbrance or restriction consisting of customary
non-assignment or subletting provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the lease
or the property leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; and
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
SECTION 4.06. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(a) In the event and to the extent that the Net Available Cash received by the
Company or any Restricted Subsidiary from one or more Asset Dispositions (other
than the Scheduled Asset Dispositions) occurring on or after the Issue Date in
any period of 12 consecutive months exceeds the greater of $10 million and 10%
of Adjusted Consolidated Assets as of the beginning of such 12-month period,
then the Company shall (i) no later than 360 days after the date such Net
Available Cash so received exceeds such $10.0 million or 10% of Adjusted
Consolidated Assets (A) apply an amount equal to such excess Net Available Cash
to repay Senior Indebtedness or Indebtedness of any Restricted Subsidiary, in
each case owing to a Person other than the Company or any Affiliate of the
Company or (B) invest or commit to invest an equal amount, or the amount not so
applied pursuant to clause (A), in Additional Assets; PROVIDED, HOWEVER, that in
the case of any commitment to invest, such investment must be made within six
months thereafter, and any amount not so invested shall
<PAGE>
43
be treated as Excess Proceeds (as defined below); and (ii) apply such excess Net
Available Cash (to the extent not applied pursuant to clause (i)) as provided in
the following paragraphs of this Section 4.06. The amount of such excess Net
Available Cash required to be applied during the applicable period and not
applied as so required by the end of such period shall constitute "Excess
Proceeds."
(b)(i) If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer
(as defined below) totals at least $10.0 million, the Company must, not later
than the fifteenth Business Day of such month, make an offer (an "Excess
Proceeds Offer") to purchase from the Holders on a pro rata basis an aggregate
principal amount of Securities equal to the Excess Proceeds (rounded down to the
nearest multiple of $1,000) on such date, at a purchase price equal to 100% of
the principal amount of such Securities, plus, in each case, accrued interest
(if any) to the date of purchase (the "Excess Proceeds Payment").
(ii) The Company shall commence any Excess Proceeds Offer with
respect to the Securities by mailing a notice to the Trustee and each Holder
stating: (A) that the Excess Proceeds Offer is being made pursuant to this
Section 4.06 and that all Securities validly tendered will be accepted for
payment on a pro rata basis; (B) the purchase price and the date of purchase
(which shall be a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "Excess Proceeds Payment Date"); (C)
that any Security not tendered will continue to accrue interest pursuant to its
terms; (D) that, unless the Company defaults in the payment of the Excess
Proceeds Payment, any Security accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Excess Proceeds
Payment Date; (E) that Holders electing to have a Security purchased pursuant to
the Excess Proceeds Offer will be required to surrender the Security, together
with the form entitled "Option of Holder to Elect Purchase" on the reverse side
of the Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day immediately
preceding the Excess Proceeds Payment Date; (F) that Holders will be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the third Business Day immediately preceding the Excess Proceeds
Payment Date, a facsimile transmission or letter setting forth the name of such
<PAGE>
44
Holder, the principal amount of Securities delivered for purchase and a
statement that such Holder is withdrawing his election to have such Securities
purchased; and (G) that Holders whose Securities are being purchased only in
part will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; PROVIDED, HOWEVER, that each Security
purchased and each new Security issued shall be in a principal amount of $1,000
or integral multiples thereof.
(iii) On the Excess Proceeds Payment Date, the Company shall (A)
accept for payment on a pro rata basis Securities or portions thereof tendered
pursuant to the Excess Proceeds Offer, (B) deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities or portions thereof so
accepted, and (C) deliver, or cause to be delivered, to the Trustee all
Securities or portions thereof so accepted together with an Officers'
Certificate specifying the Securities or portions thereof so accepted for
payment by the Company. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered; PROVIDED, HOWEVER, that each Security purchased and each new
Security issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company will publicly announce the results of the Excess Proceeds
Offer as soon as practicable after the Excess Proceeds Payment Date. For
purposes of this Section 4.06, the Trustee shall act as the Paying Agent.
(iv) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations thereunder in the event that such Excess Proceeds are received by
the Company under this Section 4.06 and the Company is required to repurchase
Securities as described above. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section
4.06, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.06 by virtue thereof.
(c) In the event of the transfer of substantially all (but not all)
the property and assets of the Company as an entirety to a Person in a
transaction permitted by
<PAGE>
45
Section 5.01, the Successor Company (as defined therein) shall be deemed to have
sold the properties and assets of the Company not so transferred for purposes of
this Section 4.06, and shall comply with the provisions of this Section 4.06
with respect to such deemed sale as if it were an Asset Disposition and the
Successor Company shall be deemed to have received Net Available Cash in an
amount equal to the fair market value (as determined in good faith by the Board
of Directors) of the properties and assets not so transferred or sold.
SECTION 4.07. LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") unless
the terms thereof (1) are no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate, (2) if such
Affiliate Transaction involves an amount in excess of $2 million, (i) are set
forth in writing and (ii) have been approved by a majority of the members of the
Board of Directors having no personal stake in such Affiliate Transaction and
(3) if such Affiliate Transaction involves an amount in excess of $5 million,
have been determined by nationally recognized accounting or investment banking
firm (an "Independent Financial Advisor") to be fair, from a financial
standpoint, to the Company and its Restricted Subsidiaries. Notwithstanding
clause (2)(ii) above, in the event that there are less than three members of the
Board of Directors not having a personal stake in any Affiliate Transaction,
such Affiliate Transaction shall be permitted to exist so long as an Independent
Financial Advisor has determined the terms of such Affiliate Transaction to be
fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, benefits, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Board of Directors,
(iii) the grant of stock options or similar rights to employees and directors
<PAGE>
46
of the Company pursuant to plans approved by the Board of Directors, (iv) loans
or advances to employees in the ordinary course of business in accordance with
the past practices of the Company or its Restricted Subsidiaries, but in any
event not to exceed $1 million in the aggregate outstanding at any one time, (v)
the payment of reasonable fees to directors of the Company and its Restricted
Subsidiaries who are not employees of the Company or its Restricted
Subsidiaries, (vi) any Tax Sharing Agreement; PROVIDED, HOWEVER, that the
aggregate amount payable by the Company pursuant thereto shall not exceed the
amount of taxes that the Company would have been liable for on a stand-alone
basis, (vii) indemnification agreements with, and the payment of fees and
indemnities to, directors, officers and employees of the Company and its
Restricted Subsidiaries, in each case in the ordinary course of business, (viii)
any employment, non-competition or confidentiality agreement entered into by the
Company and its Restricted Subsidiaries with its employees in the ordinary
course of business, (ix) the payment by the Company of fees, expenses and other
amounts to Cypress and its Affiliates in connection with the Merger, (x)
payments by the Company or any of its Restricted Subsidiaries to Cypress and its
Affiliates made pursuant to any financial advisory, financing, underwriting or
placement agreement, or in respect of other investment banking activities, in
each case as determined by the Board of Directors in good faith, and (xi) any
Affiliate Transaction between the Company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries.
SECTION 4.08. CHANGE OF CONTROL. (a) Upon a Change of Control, each
Holder shall have the right to require that the Company repurchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on a record date to receive interest
on the relevant interest payment date), in accordance with the terms
contemplated in Section 4.08(b). In the event that at the time of such Change
of Control the terms of the Senior Indebtedness of the Company restrict or
prohibit the repurchase of Securities pursuant to this Section, then prior to
the mailing of the notice to Holders provided for in Section 4.08(b) below but
in any event within 30 days following any Change of Control, the Company shall
(i) repay in full all such Senior Indebtedness or offer to repay in full all
such Senior
<PAGE>
47
Indebtedness and repay such Senior Indebtedness of each lender who has accepted
such offer or (ii) obtain the requisite consent under the agreements governing
such Senior Indebtedness to permit the repurchase of the Securities as provided
for in Section 4.08(b).
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on a record date to receive interest on the
relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased will be required to
surrender the Security, together with the form entitled "Option of Holder to
Elect Purchase" on the reverse side of the Security completed, to the Company at
the address specified in the notice at least three Business Days prior to the
purchase date. Holders will be entitled to withdraw their election if the
Trustee or the Company receives not later than one Business Day prior to the
purchase date, a facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security which was delivered for purchase by
the Holder and a statement that such Holder is withdrawing his election to have
such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Trustee for cancelation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
<PAGE>
48
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.08, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.08 by virtue
thereof.
SECTION 4.09. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company shall not sell or otherwise dispose of any
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary or
to any director of a Restricted Subsidiary to the extent required as director's
qualifying shares, (ii) if, immediately after giving effect to such issuance,
sale or other disposition, neither the Company nor any of its Subsidiaries own
any Capital Stock of such Restricted Subsidiary or (iii) if, immediately after
giving effect to such issuance, sale or other disposition, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect thereto would have been permitted
to be made under Section 4.04 if made on the date of such issuance, sale or
other disposition.
SECTION 4.10. 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 (one of the signers of which shall be the principal
executive officer, principal financial officer or principal accounting officer
of the Company) stating that in the course of the performance by the signers of
their duties as Officers of the Company they would normally have knowledge of
any Default and whether or not the signers know of any Default that occurred
during such period. If they do, the certificate shall describe the Default, its
status and what action the Company is taking or proposes to take with respect
thereto. The Company also shall comply with TIA Section 314(a)(4).
SECTION 4.11. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be
<PAGE>
49
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture.
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease,
in one transaction or a series of transactions, all or substantially all its
assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) shall expressly assume, by an
indenture supplemental thereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under
the Securities and the Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Subsidiary as a result of such transaction as having been Incurred by
such Successor Company or such Subsidiary at the time of such transaction),
no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is
not less than the Consolidated Net Worth of the Company prior to such
transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
<PAGE>
50
Notwithstanding clause (iii) above, the Company may consolidate with
or merge with or into (A) another Person if such Person is a single purpose
corporation that has not conducted any business or Incurred any Indebtedness or
other liabilities and such transaction is being consummated solely to change the
state of incorporation of the Company and (B) Holdings; PROVIDED, HOWEVER, that,
in the case of clause (B), (x) Holdings shall not have owned any assets other
than the Capital Stock of the Company (and other immaterial assets incidental to
its ownership of such Capital Stock) or conducted any business other than owning
the Capital Stock of the Company, (y) Holdings shall not have any Indebtedness
or other liabilities (other than ordinary course liabilities incidental to its
ownership of the Capital Stock of the Company) and (z) immediately after giving
effect to such consolidation or merger, the Successor Company shall have a pro
forma Consolidated Coverage Ratio that is not less than the Consolidated
Coverage Ratio of the Company immediately prior to such consolidation or merger.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), the
Company may merge into AMTROL Inc. on the Issue Date.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall be
prohibited by Article 10, and such default continues for a period of 30
days;
(2) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and
<PAGE>
51
payable at its Stated Maturity, upon optional redemption, upon required
repurchase or otherwise, whether or not such payment shall be prohibited by
Article 10, or (ii) fails to redeem or purchase Securities when required
pursuant to this Indenture or the Securities, whether or not such
redemption or purchase shall be prohibited by Article 10;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08 or 4.09 (other than a failure to purchase Securities when
required under Section 4.06 or 4.08) and such failure continues for 30 days
after the notice specified below;
(5) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in clause (1),
(2), (3) or (4) above) and such failure continues for 60 days after the
notice specified below;
(6) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $10.0 million or
its foreign currency equivalent at the time;
(7) 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 any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
<PAGE>
52
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess of $10.0
million or its foreign currency equivalent at the time is entered against
the Company or any Significant Subsidiary, remains outstanding for a period
of 60 days following the entry of such judgment or decree and is not
discharged, waived or the execution thereof stayed within 10 days after the
notice specified below.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, UNITED STATES CODE, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clauses (4), (5) or (9) above is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the Securities notify the Company of the Default and the Company does not cure
such Default within the time specified after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
<PAGE>
53
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) above and any event which with the giving
of notice or the lapse of time would become an Event of Default under clause
(4), (5) or (9) above, its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the principal of and accrued interest on
all the Securities to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or (8) with respect to the Company occurs,
the principal of and interest on all the 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 Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
<PAGE>
54
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. LIMITATION ON SUITS. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
<PAGE>
55
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
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 interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
<PAGE>
56
SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Company to the
extent required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court 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 and expenses, 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 Securities.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
<PAGE>
57
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE VII
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any certificate or opinion that by any provision of this
Indenture is required to be furnished to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) 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:
(1) this paragraph (c) does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer
<PAGE>
58
unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
<PAGE>
59
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
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 its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), 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 interests of Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail
<PAGE>
60
to each Securityholder a brief report dated as of May 15 that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to
the Trustee from time to time such compensation as the Company and the Trustee
shall from time to time agree in writing for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Company
shall indemnify the Trustee against any and all loss, liability or expense
(including attorneys' fees and expenses) incurred by it in connection with the
acceptance or administration of this trust and the performance of its duties
hereunder. 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 may have separate counsel and the Company shall pay
the fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(7) or (8) with respect to
<PAGE>
61
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint 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 Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the 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 Securityholder
may petition any court of competent
<PAGE>
62
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50.0 million as set forth in
its most recent published annual report of condition. The Trustee shall comply
with TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from
the operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
<PAGE>
63
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
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 2.06) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities, including interest
thereon to maturity or such redemption date (other than Securities replaced
pursuant to Section 2.06), 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), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, 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,
4.04, 4.05, 4.06, 4.07, 4.08 and 4.09 and the operation of Sections 6.01(4),
6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and
(8), with respect only to Significant Subsidiaries) ("covenant defeasance
option") or contained in Sections 5.01(a)(iii) and (iv). 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 Sections 6.01(4),
6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and
(8), with respect only to Significant Subsidiaries) or because of the failure of
the Company to comply with Section 5.01(a)(iii) or (iv).
<PAGE>
64
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07 and 7.08 and this
Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 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 of principal of and interest
on the Securities to maturity or redemption, 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 on 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 and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Sections 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(5) 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;
<PAGE>
65
(6) 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) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred;
(7) 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
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(8) 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 contemplated by this Article
8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption 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. Money
and securities so held in trust are not subject to Article 10.
SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
<PAGE>
66
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
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 interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
<PAGE>
67
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 that would limit or terminate the
benefits available to any holder of Senior Indebtedness (or Representatives
therefor) under Article 10;
(5) to add guarantees with respect to the Securities or to secure the
Securities;
(6) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA; or
(8) to make any change that does not adversely affect the rights of
any Securityholder.
An amendment under this Section may not make any change that adversely
affects the rights under Article 10 of any holder of Senior Indebtedness then
outstanding unless the holders of such Senior Indebtedness (or any group or
representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in
<PAGE>
68
principal amount of the Securities (including consents obtained in connection
with a tender offer or exchange for the Securities). However, without the
consent of each Securityholder affected thereby, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Article 10 that adversely affects the rights of
any Securityholder under Article 10; or
(7) make any change in Section 6.04 or 6.07 or the second sentence of
this Section.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that adversely
affects the rights under Article 10 of any holder of Senior Indebtedness then
outstanding unless the holders of such Senior Indebtedness (or any group or
representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
<PAGE>
69
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the
<PAGE>
70
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may but need not sign it. In signing such amendment the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it and to receive,
and (subject to Section 7.01) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such amendment is
authorized or permitted by this Indenture.
ARTICLE X
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment of all
Senior Indebtedness and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness. The Securities shall in
all respects rank PARI PASSU with all other Senior Subordinated Indebtedness of
the Company and only Indebtedness which is Senior Indebtedness shall rank senior
to the Securities in accordance with the provisions set forth herein. All
provisions of this Article 10 shall be subject to Section 10.12.
SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of such Senior Indebtedness before Securityholders shall be
entitled to receive any payment of principal of or interest on the
Securities; and
(2) until such Senior Indebtedness is paid in full, any distribution
to which Securityholders would be entitled but for this Article 10 shall be
made to holders of such Senior Indebtedness as their interests may appear,
except that Securityholders may receive shares of stock and any debt
securities that are subor-
<PAGE>
71
dinated to such Senior Indebtedness to at least the same extent as the
Securities.
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. The Company may not
pay the principal of or interest on the Securities or make any deposit pursuant
to Section 8.01 and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (i) any Designated Senior
Indebtedness is not paid when due or (ii) any other default on Designated Senior
Indebtedness occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, (x) the default
has been cured or waived and any such acceleration has been rescinded or (y)
such Designated Senior Indebtedness has been paid in full; PROVIDED, HOWEVER,
that the Company may pay the Securities without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
Representative of such Designated Senior Indebtedness. During the continuance
of any default (other than a default described in clause (i) or (ii) of the
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Securities for a period (a "Payment Blockage Period") commencing upon the
receipt by the Company and the Trustee of written notice (a "Blockage Notice")
of such default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) by repayment in full of such Designated Senior
Indebtedness or (iii) because the default giving rise to such Blockage Notice is
no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 10.03), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have accelerated
the maturity of such Designated Senior Indebtedness, the Company may resume
payments on the Securities after such Payment Blockage Period. Not more than
one Blockage Notice may be given in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness during
such period;
<PAGE>
72
PROVIDED, HOWEVER, that if any Blockage Notice within such 360-day period is
given by or on behalf of any holders of Designated Senior Indebtedness (other
than the lenders under the Credit Agreement), the Representative of the lenders
under the Credit Agreement may give another Blockage Notice within such period;
PROVIDED FURTHER, HOWEVER, that in no event may the total number of days during
which any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360-consecutive-day period. For purposes of this Section,
no default or event of default which existed or was continuing on the date of
the commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or be
made, the basis of the commencement of a subsequent Payment Blockage Period by
the Representative of such Designated Senior Indebtedness, whether or not within
a period of 360 consecutive days, unless such default or event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
SECTION 10.04. ACCELERATION OF PAYMENT OF SECURITIES. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representatives) of the acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and pay it over to
them as their interests may appear.
SECTION 10.06. SUBROGATION. After all Senior Indebtedness is paid in
full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to such Senior Indebtedness. A distribution made under
this Article 10 to holders of such Senior Indebtedness which otherwise would
have been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on such Senior Indebtedness.
<PAGE>
73
SECTION 10.07. RELATIVE RIGHTS. This Article 10 defines the relative
rights of Securityholders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
(1) impair, as between the Company and Securityholders, the obligation
of the Company, which is absolute and unconditional, to pay principal of
and interest on the Securities in accordance with their terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT. The Company shall
give prompt written notice to the Trustee of any fact known to the Company which
would prohibit the making of any payment to or by the Trustee in respect of the
Securities. Failure to give such notice shall not affect the subordination of
the Securities to Senior Indebtedness. Notwithstanding Section 10.03, the
Trustee or Paying Agent may continue to make payments on the Securities and
shall not be charged with knowledge of the existence of facts that would
prohibit the making of any such payments unless, not less than two Business Days
prior to the date of such payment, a Trust Officer of the Trustee receives
notice satisfactory to it that payments may not be made under this Article 10.
The Company, the Registrar or co-registrar, the Paying Agent, a Representative
or a holder of Senior Indebtedness may give the notice; PROVIDED, HOWEVER, that,
if an issue of Senior Indebtedness has a Representative, only the Representative
may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior
<PAGE>
74
Indebtedness which may at any time be held by it, to the same extent as any
other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive
the Trustee of any of its rights as such holder. Nothing in this Article 10
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07.
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).
SECTION 10.11. ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Securities
by reason of any provision in this Article 10 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness or any other creditor of the Company.
SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of such Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed
<PAGE>
75
thereon and all other facts pertinent thereto or to this Article 10. In the
event that the Trustee determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article 10, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article 10, and, if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment. The provisions of Sections 7.01 and
7.02 shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article 10.
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. 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 it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article 10 or otherwise. With respect to the
holders of Senior Indebtedness, the Trustee undertakes to perform or to observe
only such of its covenants or obligations as are specifically set forth in this
Article 10 and no implied covenants or obligations with respect to holders of
Senior Indebtedness shall be read into this Indenture against the Trustee.
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior
<PAGE>
76
Indebtedness was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of such Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
AMTROL Acquisition, Inc.
in care of The Cypress Group L.L.C.
65 East 55th Street, 19th Floor
New York, New York 10022
Attention of: Mr. David P. Spalding
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention of: Corporate Trust Trustee
Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE>
77
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual 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
<PAGE>
78
statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. WHEN SECURITIES DISREGARDED. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee actually knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 11.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.08. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 11.09. GOVERNING LAW. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be
required thereby.
<PAGE>
79
SECTION 11.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not 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 their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.12. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
AMTROL ACQUISITION, INC., Issuer
by /s/ Anthony D. Tutrone
------------------------
Name: Anthony D. Tutrone
Title: Secretary
THE BANK OF NEW YORK, as Trustee
by /s/ Mary Jane Morrissey
------------------------
Name: Mary Jane Morrissey
Title: Vice President
<PAGE>
EXHIBIT 1
to
APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933
(THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT, IF IT IS
A PURCHASER OTHER THAN A FOREIGN PURCHASER OUTSIDE THE UNITED STATES, IT WILL
NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT
AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO AMTROL ACQUISITION, INC. OR ANY SUBSIDIARY THEREOF,
<PAGE>
2
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF
AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES AT THE TIME OF TRANSFER OF LESS THAN
$100,000, AN OPINION OF COUNSEL ACCEPTABLE TO AMTROL ACQUISITION, INC. THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THE
TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE SIDE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND AMTROL ACQUISITION, INC. SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS."
[Regulation S Global Security/Additional Legend]
PRIOR TO THE COMMENCEMENT OF THE REGISTERED EXCHANGE OFFER OR THE EFFECTIVENESS
OF THE SHELF REGISTRATION STATEMENT, TRANSFERS OF INTERESTS IN THE REGULATION S
GLOBAL SECURITY TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED
INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE SECURITIES ACT.
<PAGE>
3
CUSIP No.
No. $
10-5/8% Senior Subordinated Notes Due 2006
AMTROL Acquisition, Inc., a Rhode Island corporation, promises to pay
to , or registered assigns, the principal sum
of Dollars on December 31, 2006.
Interest Payment Dates: June 30 and December 31.
Record Dates: June 15 and December 15.
Additional provisions of this Security are set forth on the other side
of this Security.
AMTROL ACQUISITION, INC.
by
_______________________
President
[Seal] _______________________
Secretary
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
_____________________________
Authorized Signatory
<PAGE>
4
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10-5/8% Senior Subordinated Note Due 2006
1. INTEREST
AMTROL Acquisition, Inc. a Rhode Island corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above; PROVIDED, HOWEVER,
that if a Failure to Register (as defined in the Registration Agreement) occurs,
interest will accrue on this Security at a rate of 11-1/8% per annum from and
including the date on which any such Failure to Register shall occur to but
excluding the date on which all Failures to Register have been cured. The
Company will pay interest semiannually on June 30 and December 31 of each year,
commencing June 30, 1997. Interest on the Securities will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from November 13, 1996. 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 June 15 or December 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments
in respect of a certificated Security (including principal, premium and
interest) by mailing a check to the registered
<PAGE>
5
address of each Holder thereof; PROVIDED, HOWEVER, that payments on a
certificated Security will be made by wire transfer to a U.S. dollar account
maintained by the payee with a bank in the United States if such Holder elects
payment by wire transfer by giving written notice to the Trustee or the Paying
Agent to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the Trustee
may accept in its discretion) and if such Holder holds Securities in an
aggregate principal amount of at least $1,000,000.
3. PAYING AGENT AND REGISTRAR
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Registrar and Paying Agent. The Company may appoint
and change any Paying Agent, Registrar or co-registrar without notice. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar or co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
November 1, 1996 ("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.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $115,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and certain of its Subsidiaries, the payment of
dividends and other distributions on the Capital Stock of the Company and
certain of its Subsidiaries, the purchase or redemption of Capital Stock of the
Company and of certain Capital Stock of such Subsidiaries, the sale or transfer
of assets and Subsidiary
<PAGE>
6
stock and transactions with Affiliates. In addition, the Indenture limits the
ability of the Company and certain of its Subsidiaries to restrict distributions
and dividends from Subsidiaries. The Indenture also restricts the ability of
the Company to consolidate or merge with or into, or to transfer all or
substantially all its assets to, another Person.
5. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to December 31, 2001. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date):
if redeemed during the 12-month period commencing on December 31 of
the years set forth below:
Period Percentage
------ ----------
2001........................................................ 105.313%
2002........................................................ 102.656
2003 and thereafter......................................... 100.000
In addition, at any time prior to December 31, 1999, the Company may
redeem up to 35% of the aggregate principal amount of Securities with the
proceeds of one or more Public Equity Offerings (provided that if the Public
Equity Offering is a public offering of any class of common stock of Holdings, a
portion of the Net Cash Proceeds thereof equal to the amount required to redeem
any such Notes is contributed to the equity capital of the Company), at a
redemption price (expressed as a percentage of principal amount) of 110.625%
plus accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date); PROVIDED, HOWEVER, that at least $74.0 million aggregate
principal amount of the Securities must remain outstanding after each such
redemption.
<PAGE>
7
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest on all Securities (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions, to cause the Company to repurchase all or
any part of the Securities of such Holder at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued interest
to the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees
<PAGE>
8
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) or any Securities for a period beginning 15 Business Days before
a mailing of a notice of an offer to repurchase or redeem Securities or
15 Business Days before an interest payment date.
10. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
it for all purposes.
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and
<PAGE>
9
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to add guarantees with respect to the Securities or
to secure the Securities, or to add additional covenants or surrender rights and
powers conferred on the Company, or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make certain
changes in the subordination provisions, or to make any change that does not
adversely affect the rights of any Securityholder.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon acceleration or otherwise, or failure by the Company to redeem
or purchase Securities when required; (iii) failure by the Company to comply
with other agreements in the Indenture or the Securities, in certain cases
subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds
$10.0 million; (v) certain events of bankruptcy or insolvency with respect to
the Company and the Significant Subsidiaries; and (vi) certain judgments or
decrees for the payment of money in excess of $10.0 million. 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 due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
<PAGE>
10
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not 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 their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. HOLDERS' COMPLIANCE WITH REGISTRATION AGREEMENT.
<PAGE>
11
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
20. GOVERNING LAW.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITY
<PAGE>
12
HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN
LARGER TYPE. REQUESTS MAY BE MADE TO:
ATTENTION OF
_____________________________________________________________________________
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint 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.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
were owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW
<PAGE>
13
(1) / / to the Company; or
(2) / / pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) / / inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) / / outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) / / inside the United States to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act of 1933) that, prior to
such transfer, furnishes to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter can be obtained from the Trustee) and, if such
transfer is in respect of an aggregate principal amount of
Securities at the time of transfer of less than $100,000, an
opinion of counsel acceptable to the Company that such transfer
is in compliance with the restrictions set forth in the legend on
the Securities; or
(6) / / pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; PROVIDED, HOWEVER, that if box
(4), (5) or (6) is checked, the Trustee may
<PAGE>
14
require, prior to registering any such transfer of the Securities, such
legal opinions, certifications and other information as the Company has
reasonably requested to confirm that such transfer is being made pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided
by Rule 144 under such Act.
________________________
Signature
Signature Guarantee:
_____________________ __________________________
Signature must be guaranteed Signature
___________________________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
15
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized
Amount of this Amount of this Security signatory of
Global Security Global Security (following such Trustee or
decrease or Securities
increase) Custodian
</TABLE>
<PAGE>
16
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
/ /
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture,
state the amount in principal amount: $
Date: _______________ Your Signature: ______________________
(Sign exactly as your name appears
on the other side of this
Security.)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
[*/]
[**/]
CUSIP No.
No. $
10-5/8% Senior Subordinated Notes Due 2006
AMTROL Acquisition, Inc., a Rhode Island corporation, promises to pay
to , or registered assigns, the principal sum of
Dollars on December 31, 2006.
Interest Payment Dates: June 30 and December 31.
Record Dates: June 15 and December 15.
Additional provisions of this Security are set forth on the other side of this
Security.
AMTROL ACQUISITION, INC.
by
-----------------------
President
-----------------------
[Seal] Secretary
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE>
2
- ----------------------
*/ [If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".]
**/ [If the Security is a Private Exchange Security issued in a Private Exchange
to a Purchaser holding an unsold portion of its initial allotment, add the
Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit A with the Assignment Form included in
such Exhibit 1.]
<PAGE>
3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
10-5/8% Senior Subordinated Note Due 2006
1. INTEREST
AMTROL Acquisition, Inc. a Rhode Island corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above [; PROVIDED, HOWEVER,
that if a Failure to Register (as defined in the Registration Agreement) occurs,
interest will accrue on this Security at a rate of 11-1/8% per annum from and
including the date on which any such Failure to Register shall occur to but
excluding the date on which all Failures to Register have been cured] ***/. The
Company will pay interest semiannually on June 30 and December 31 of each year,
commencing June 30, 1997. Interest on the Securities will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from November 13, 1996. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
- -----------------------
***/ Insert if at the time of issuance of the Exchange Security or Private
Exchange Security (as the case may be) neither the Registered Exchange Offer has
been consummated nor a Shelf Registration Statement has been declared effective
in accordance with the Registration Agreement, or if a Failure to Register shall
have occurred.
<PAGE>
4
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 June 15 or December 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments
in respect of a certificated Security (including principal, premium and
interest) by mailing a check to the registered address of each Holder thereof;
PROVIDED, HOWEVER, that payments on a certificated Security will be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion) and if
such Holder holds Securities in an aggregate principal amount of at least
$1,000,000.
3. PAYING AGENT AND REGISTRAR
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Registrar and Paying Agent. The Company may appoint
and change any Paying Agent, Registrar or co-registrar without notice. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar or co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
November 1, 1996 ("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
<PAGE>
5
1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the
Indenture (the "Act"). Terms defined in the Indenture and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all such terms, and Securityholders are referred to the Indenture and the Act
for a statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $115,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and certain of its Subsidiaries, the payment of
dividends and other distributions on the Capital Stock of the Company and
certain of its Subsidiaries, the purchase or redemption of Capital Stock of the
Company and of certain Capital Stock of such Subsidiaries, the sale or transfer
of assets and Subsidiary stock and transactions with Affiliates. In addition,
the Indenture limits the ability of the Company and certain of its Subsidiaries
to restrict distributions and dividends from Subsidiaries. The Indenture also
restricts the ability of the Company to consolidate or merge with or into, or to
transfer all or substantially all its assets to, another Person.
5. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to December 31, 2001. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the
<PAGE>
6
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the related interest payment date):
if redeemed during the 12-month period commencing on December 31 of
the years set forth below:
PERIOD PERCENTAGE
------ ----------
2001................................................................... 105.313%
2002................................................................... 102.656
2003 and thereafter.................................................... 100.000
In addition, at any time prior to December 31, 1999, the Company may
redeem up to 35% of the aggregate principal amount of Securities with the
proceeds of one or more Public Equity Offerings (provided that if the Public
Equity Offering is a public offering of any class of common stock of Holdings, a
portion of the Net Cash Proceeds thereof equal to the amount required to redeem
any such Notes is contributed to the equity capital of the Company), at a
redemption price (expressed as a percentage of principal amount) of 110.625%
plus accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date); PROVIDED, HOWEVER, that at least $74.0 million aggregate
principal amount of the Securities must remain outstanding after each such
redemption.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest on all Securities (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
<PAGE>
7
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions, to cause the Company to repurchase all or
any part of the Securities of such Holder at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued interest
to the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period beginning 15 Business Days before a mailing of a notice
of an offer to repurchase or redeem Securities or 15 Business Days before an
interest payment date.
10. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
it for all purposes.
<PAGE>
8
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make certain changes in the subordination
provisions, or to make any change that does not adversely affect the rights of
any Securityholder.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the
<PAGE>
9
Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon acceleration or otherwise, or failure by the Company to redeem
or purchase Securities when required; (iii) failure by the Company to comply
with other agreements in the Indenture or the Securities, in certain cases
subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds
$10.0 million; (v) certain events of bankruptcy or insolvency with respect to
the Company and the Significant Subsidiaries; and (vi) certain judgments or
decrees for the payment of money in excess of $10.0 million. 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 due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the
<PAGE>
10
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
11
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 has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities 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 AGREEMENT.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
21. GOVERNING LAW.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITY
<PAGE>
12
HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN
LARGER TYPE. REQUESTS MAY BE MADE TO:
ATTENTION OF
- ------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint 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.
<PAGE>
13
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE
COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, CHECK THE BOX:
/ /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED
BY THE COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE
AMOUNT:
$
DATE: YOUR SIGNATURE:
--------------- ----------------------------------
(SIGN EXACTLY AS YOUR NAME APPEARS
ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE:
--------------------------------------------------
(SIGNATURE MUST BE GUARANTEED)
<PAGE>
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS AS DEFINED
IN RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7)) AND TO CERTAIN
PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. DEFINITIONS
1.1 DEFINITIONS
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security bearing
the restricted securities legend set forth in Section 2.3(e) and which is held
by an IAI in accordance with Section 2.1(c).
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Exchange Securities" means the 10-5/8% Senior Subordinated Notes Due
2006 to be issued pursuant to this Indenture in connection with a Registered
Exchange Offer pursuant to the Registration Agreement.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Securities" means the 10-5/8% Senior Subordinated Notes Due
2006, issued under this Indenture on or about the date hereof.
"Placement Agreement" means the Placement Agreement dated November 7,
1996, between the Company and the Purchasers.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Agreement, to the Purchasers to issue and deliver to each
Purchaser, in exchange for the Initial Securities held by the Purchaser as part
of its initial distribution, a like aggregate principal amount of Private
Exchange Securities.
<PAGE>
2
"Private Exchange Securities" means the 10-5/8% Senior Subordinated
Notes Due 2006 to be issued pursuant to this Indenture in connection with a
Private Exchange pursuant to the Registration Agreement.
"Purchasers" means Morgan Stanley & Co. Incorporated and BT Securities
Corporation.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Agreement, to certain Holders of Initial Securities, to
issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means the Registration Agreement dated
November 7, 1996, among the Company and the Purchasers.
"Securities" means the Initial Securities, the Exchange Securities and
the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"Securities Custodian" means the custodian with respect to a
Regulation S Global Security or a Restricted Global Security (as appointed by
the Depository), or any successor person thereto and shall initially be the
Trustee.
"Shelf Registration Statement" means the registration statement issued
by the Company, in connection with the offer and sale of Initial Securities or
Private Exchange Securities, pursuant to the Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities and
Securities that bear or are required to bear the legend set forth in Section
2.3(e) hereto.
<PAGE>
3
1.2 OTHER DEFINITIONS
DEFINED IN
TERM SECTION:
"Agent Members"...........................................................2.1(b)
"Cedel"...................................................................2.1(a)
"Euroclear"...............................................................2.1(a)
"Global Security".........................................................2.1(b)
"Regulation S"............................................................2.1(a)
"Regulation S Global Security"............................................2.1(a)
"Restricted Global Security"..............................................2.1(a)
"Rule 144A"...............................................................2.1(a)
2. THE SECURITIES.
2.1 FORM AND DATING.
The Initial Securities are being offered and sold by the Company
pursuant to the Placement Agreement.
(a) GLOBAL SECURITIES. Initial Securities offered and sold to a QIB
in reliance on Rule 144A under the Securities Act ("Rule 144A") as provided in
the Placement Agreement, shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a "Restricted Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, at its New York office, as custodian for
the Depository (or with such other custodian as the Depository may direct), and
registered in the name of the Depository or a nominee of the Depository, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Restricted Global Securities
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee, as the case may be, as
hereinafter provided.
Initial Securities offered and sold in reliance on Regulation S under
the Securities Act ("Regulation S"), as provided in the Placement Agreement,
shall be issued initially in the form of one or more permanent global Securities
in definitive, fully registered form without interest coupons with the global
securities legend and restricted securities
<PAGE>
4
legend set forth in Exhibit 1 hereto (the "Regulation S Global Security"), which
shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, as custodian, for the Depository (or with
such other custodian as the Depository may direct), and registered in the name
of the Depository or the nominee of the Depository duly executed by the Company
and authenticated by the Trustee as hereinafter provided. Prior to the
commencement of the Exchange Offer or the effectiveness of the Shelf
Registration Statement, beneficial interests in the Regulation S Global Security
may only be held for the accounts of designated agents holding on behalf of the
Euroclear System ("Euroclear") or Cedel, S.A. ("Cedel"). Following the
commencement of the Registered Exchange Offer or the effectiveness of the Shelf
Registration Statement, beneficial interests in the Regulation S Global Security
may be held through Euroclear, Cedel or other participants having accounts at
the Depository. The aggregate principal amount of the Regulation S Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee and the Depository or its nominee, as the case may
be, as hereinafter provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply only to
the Regulation S Global Security and the Restricted Global Security (the "Global
Securities") deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as
<PAGE>
5
between the Depository and its Agent Members, the operation of customary
practices of such Depository governing the exercise of the rights of a holder of
a beneficial interest in any Global Security.
(c) CERTIFICATED SECURITIES. Except as provided in this Section 2.1
or Section 2.3 or 2.4, owners of beneficial interests in Global Securities will
not be entitled to receive physical delivery of certificated Securities.
Purchasers of Initial Securities who are IAI's and are not QIBs and did not
purchase Initial Securities sold in reliance on Regulation S will receive
Definitive Securities; PROVIDED, HOWEVER, that upon transfer of such Definitive
Securities to a QIB or in accordance with Regulation S, such Definitive
Securities will, unless the relevant Global Security has previously been
exchanged, be exchanged for an interest in a Global Security pursuant to the
provisions of Section 2.3.
2.2 AUTHENTICATION. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$115,000,000 and (2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Agreement, for a like principal amount of Initial
Securities, in each case upon a written order of the Company signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities or Private Exchange Securities. The aggregate principal
amount of Securities outstanding at any time may not exceed $115,000,000 except
as provided in Section 2.07 of this Indenture.
2.3 TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF DEFINITIVE
SECURITIES. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
<PAGE>
6
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar
or co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section 2.3(b)
or pursuant to clause (A), (B) or (C) below, and are accompanied by the
following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse of the Security); or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse of the Security); or
(C) if such Definitive Securities are being transferred (x)
pursuant to an exemption from registration in accordance with Rule
144; or (y) in reliance on another exemption from the registration
requirements of the Securities Act; or (z) to an IAI that is acquiring
the Security for its own account, or for the account of such an IAI,
in each case 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: (i) a certification to that effect (in the form set
forth on the reverse of the Security) and such other certifications as
the Trustee may reasonably request and (ii) in the case of clause (z),
if the aggregate principal amount of such Definitive Securities being
transferred is less than $100,000, an opinion of counsel addressed to
the Company as to the
<PAGE>
7
compliance with the restrictions set forth in the legend set forth in
Section 2.3(e).
(b) RESTRICTIONS ON 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) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a QIB
in accordance with Rule 144A, or (B) outside the United States in an
offshore transaction within the meaning of Regulation S and in compliance
with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to the Regulation S Global Security or the Restricted Global
Security, as the case may be, to reflect an increase in the aggregate
principal amount of the Securities represented by such Global Security,
such instructions to contain information regarding the Depository account
(or in the case of the Regulation S Global Security only, the Euroclear or
Cedel account) to be credited with such increase;
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian
(including the rules of Euroclear and Cedel, if applicable), the aggregate
principal amount of Securities represented by the Regulation S Global Security
or the Restricted Global Security, as the case may be, to be increased by the
aggregate principal amount of the Definitive Security to be exchanged and shall
credit or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in such Global Security equal to the
principal amount of the Definitive Security so cancelled. If no applicable
Global Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new
<PAGE>
8
Regulation S Global Security or Restricted Global Security, as the case may be,
in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. (i) The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depository therefor, including the rules and procedures of Euroclear and
Cedel, if applicable. A transferor of a beneficial interest in a Global
Security to another Global Security shall deliver to the Registrar:
(A) if applicable, instructions given in accordance with the
Depository's procedures directing the Trustee to credit or cause
to be credited a beneficial interest in the applicable Global
Security in an amount equal to the beneficial interest in the
Global Security to be exchanged; and
(B) a written order given in accordance with the
Depository's procedures containing information regarding the
Euroclear, Cedel or other participant account of the Depository
to be credited with such increase.
The Registrar shall, in accordance with such instructions, instruct
the Depository to increase and reduce, as applicable, the principal amount
of each applicable Global Security to the extent required and to credit to
the account of the Person specified in such instructions a beneficial
interest in the applicable Global Security and to debit the account of the
Person making the transfer the beneficial interest in the Global Security
being transferred.
(ii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(iii) Prior to the commencement of the Registered Exchange Offer or
the effectiveness of the Shelf
<PAGE>
9
Registration Statement, transfers of interests in the Regulation S Global
Security to "U.S. persons" (as defined in Regulation S) shall be limited to
transfers to QIBs pursuant to Rule 144A which Persons shall thereby acquire
a beneficial interest in the Restricted Global Security. The Company shall
advise the Trustee as to the commencement of the Registered Exchange Offer
or the effectiveness of the Shelf Registration Statement and the Trustee
may rely conclusively thereon.
(iv) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 or Section 2.09 of
the Indenture, prior to the consummation of a Registered Exchange Offer or
the effectiveness of a Shelf Registration Statement with respect to such
Securities, such Securities may be exchanged only in accordance with such
procedures as are substantially consistent with the provisions of this
Section 2.3 (including the certification requirements set forth on the
reverse of the Initial Securities intended to ensure that such transfers
comply with Rule 144A or Regulation S, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
DEFINITIVE SECURITY.
(i) Subject to Section 2.3(c)(iii), any person having a beneficial
interest in a Transfer Restricted Security that is a Global Security may
transfer such beneficial interest to an IAI that is acquiring the Security
for its own account, or for the account of such an IAI, in each case 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;
PROVIDED, HOWEVER, that any written order or such other form of
instructions as is customary for the Depository, from the Depository or its
nominee on behalf of any Person having a beneficial interest in such Global
Security shall be accompanied by (i) a certification from the transferee or
transferor with respect to the transfer (in the form set forth on the
reverse of the Security) and such other certifications as the Trustee may
reasonably request and (ii) if the aggregate principal amount of the
applicable Global Security being transferred is less than $100,000, an
opinion of counsel addressed to the Company as to the compliance with the
<PAGE>
10
restrictions set forth in the legend set forth in Section 2.3(e).
Upon receipt by the Trustee of such information and documents, the
Trustee or the Securities Custodian, at the direction of the Trustee, will
cause, in accordance with the standing instructions and procedures existing
between the Depository and the Securities Custodian, including the rules
and procedures of Euroclear or Cedel, if applicable, the aggregate
principal amount of the Global Security to be reduced on its books and
records and, following such reduction, the Company will execute and the
Trustee will authenticate and deliver to the transferee a Definitive
Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.3(d) shall be
registered in such names and in such authorized denominations as Euroclear
or Cedel, if applicable, and the Depository, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Definitive Securities to the
persons in whose names such Securities are so registered in accordance with
the instructions of the Depository.
(e) LEGEND.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933 (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS
<PAGE>
11
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT, IF IT IS A PURCHASER OTHER
THAN A FOREIGN PURCHASER OUTSIDE THE UNITED STATES, IT WILL NOT,
WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES
ACT AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO AMTROL ACQUISITION, INC. OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS
IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES AT THE TIME
OF TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO
AMTROL ACQUISITION, INC. THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS SECURITY WITHIN THE TIME PERIOD REFERRED TO
ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE SIDE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND AMTROL ACQUISITION, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
<PAGE>
12
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN
VIOLATION OF THE FOREGOING RESTRICTIONS."
Each Regulation S Global Security will also bear the following
additional legend:
"PRIOR TO THE COMMENCEMENT OF THE REGISTERED EXCHANGE OFFER OR THE
EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT, TRANSFERS OF
INTERESTS IN THE REGULATION S GLOBAL SECURITY TO U.S. PERSONS SHALL BE
LIMITED TO TRANSFERS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(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 certificated Security
that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
certificated Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security, if the Holder certifies in writing to the
Registrar that its request for such exchange was made following a sale
or transfer in reliance on Rule 144 (such certification to be in the
form set forth on the reverse of the Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to legends on
such Initial Security or such
<PAGE>
13
Private Exchange Security will cease to apply, the requirements requiring
any such Initial Security or such Private Exchange Security issued to
certain Holders be issued in global form will cease to apply, and a
certificated Initial Security or Private Exchange Security without legends
will be available to the transferee of the Holder of such Initial
Securities or Private Exchange Securities upon exchange of such
transferring Holder's certificated Initial Security or Private Exchange
Security or directions to transfer such Holder's interest in the Global
Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
cease to apply and certificated Initial Securities with the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders of such Initial Securities that do not exchange their Initial
Securities, and Exchange Securities in certificated or global form without
any restrictive legends will be available to Holders that exchange such
Initial Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
still apply, and Private Exchange Securities in global form with the
Restricted Securities Legend set forth in Exhibit 1 hereto will be
available to Holders that exchange such Initial Securities in such Private
Exchange.
(f) CANCELLATION OR ADJUSTMENT OF GLOBAL SECURITY. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository for cancellation or retained
and canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for certificated or
Definitive
<PAGE>
14
Securities, redeemed, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(g) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
SECURITIES.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate certificated Securities,
Definitive Securities and Global Securities at the Registrar's or
co-registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 3.06, 4.08 and 9.05).
(iii) The Registrar or co-registrar shall not be required to register
the transfer of or exchange of (a) any certificated or Definitive Security
selected for redemption in whole or in part pursuant to Article 3 of this
Indenture, except the unredeemed portion of any certificated or Definitive
Security being redeemed in part, or (b) any Security for a period beginning
15 Business Days before the mailing of a notice of an offer to repurchase
or redeem Securities or 15 Business Days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
<PAGE>
15
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(h) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depository or other Person with respect to the accuracy of the records of
the Depository or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be
the Depository or its nominee in the case of a Global Security). The
rights of beneficial owners in any Global Security shall be exercised only
through the Depository subject to the applicable rules and procedures of
the Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depository participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
<PAGE>
16
2.4 CERTIFICATED SECURITIES.
(a) A Global Security deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to the
Trustee located in the Borough of Manhattan, The City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Securities of authorized denominations. Any portion of a Global
Security transferred pursuant to this Section shall be executed, authenticated
and delivered only in denominations of $1,000 and any integral multiple thereof
and registered in such names as the Depository shall direct. Any certificated
Initial Security delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.3(e), bear the restricted
securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a), the Company will promptly make available to the Trustee a
reasonable supply of
<PAGE>
17
certificated Securities in definitive, fully registered form without interest
coupons.
<PAGE>
Exhibit 4.3
================================================================================
AMTROL INC.,
Issuer
10-5/8% Senior Subordinated Notes Due 2006
FIRST SUPPLEMENTAL INDENTURE
Dated as of November 13, 1996
THE BANK OF NEW YORK,
as Trustee
================================================================================
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of November 13,
1996, between AMTROL INC., a Rhode Island corporation (the
"Company"), and THE BANK OF NEW YORK, as trustee (the "Trustee"),
amends and supplements the Indenture (as defined below).
RECITALS
1. AMTROL Acquisition, Inc. ("Acquisition") and the Trustee entered
into the Indenture, dated as of November 1, 1996 (the "Indenture), relating to
Acquisition's 10-5/8% Senior Subordinated Notes Due 2006 (the "Notes"); and
2. Acquisition has merged with and into the Company as contemplated
by the Indenture (the "Merger").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally binding, the parties hereto hereby
agree as follows:
Section 1. Capitalized terms used herein and not otherwise defined
herein are used as defined in the Indenture.
Section 2. The Company hereby acknowledges and agrees that, by virtue
of the Merger and by operation of law, it has become a party to the Indenture
and has assumed all of the liabilities and obligations of Acquisition under the
Indenture and the Notes in accordance with Article 5 of the Indenture.
Section 3. Pursuant to Section 9.05 of the Indenture, the Company
shall issue and the Trustee shall authenticate new Notes that reflect this First
Supplemental Indenture.
Section 4. This First Supplemental Indenture shall be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required thereby.
<PAGE>
2
Section 5. This First Supplemental Indenture may be executed in any
number of counterparts, each of which, when so executed, shall be deemed to be
an original, but all of which shall together constitute but one and the same
instrument.
Section 6. This First Supplemental Indenture is an amendment
supplemental to the Indenture and said Indenture and this First Supplemental
Indenture to the Indenture shall henceforth be read together.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be executed as of the day and year first above
written.
AMTROL INC.,
by /s/ Edward J. Cooney
____________________________
Name: Edward J. Cooney
Title: Senior Vice President
THE BANK OF NEW YORK, as Trustee,
by /s/ Mary Jane Morrissey
____________________________
Name: Mary Jane Morrissey
Title: Vice President
<PAGE>
Exhibit 4.4
AMTROL ACQUISITION, INC.
REGISTRATION AGREEMENT
November 7, 1996
Morgan Stanley & Co. Incorporated
BT Securities Corporation
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
AMTROL Acquisition, Inc., a Rhode Island corporation ("Acquisition"),
proposes to issue and sell to Morgan Stanley & Co. Incorporated and BT
Securities Corporation (collectively, the "Purchasers"), upon the terms set
forth in a placement agreement of even date herewith (the "Placement
Agreement"), $115,000,000 principal amount of its 10-5/8% Senior Subordinated
Notes Due 2006 (the "Notes"). The Notes will be issued pursuant to the
provisions of an Indenture, dated as of November 1, 1996 (the "Indenture"),
between Acquisition, as issuer, and The Bank of New York, as Trustee (the
"Trustee").
Immediately prior to or concurrent with the consummation of the sale
of the Notes, pursuant to a Merger Agreement dated as of August 28, 1996, among
AMTROL Holdings, Inc., a Delaware corporation, Acquisition and AMTROL Inc., a
Rhode Island corporation ("AMTROL"), Acquisition will merge with and into
AMTROL (the "Merger"), and AMTROL will assume, by operation of law, all of
Acquisition's obligations under this Agreement, the Placement Agreement, the
Indenture and the Notes. As used herein, the "Company" means Acquisition and,
after the Merger, AMTROL.
As an inducement to the Purchasers to enter into the Placement
Agreement and in satisfaction of a condition to your obligations thereunder, the
Company agrees with the Purchasers, for the benefit of the registered holders of
the Notes (including, without limitation, the Purchasers), the
<PAGE>
2
Exchange Notes (as defined below) and the Private Exchange Notes (as defined
below) (collectively, the "Holders"), as follows:
SECTION 1. REGISTERED EXCHANGE OFFER. The Company shall use its best
efforts to prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to an offer (the "Registered Exchange
Offer") to the Holders of Transfer Restricted Notes (as defined in Section 6
hereof), who are not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer, to issue and deliver to such
Holders, in exchange for the Notes, a like aggregate principal amount of debt
securities (the "Exchange Notes") of the Company issued under the Indenture and
identical in all material respects to the Notes (except for the transfer
restrictions relating to the Notes) that would be registered under the
Securities Act. The Company shall use its best efforts to cause such Exchange
Offer Registration Statement to become effective under the Securities Act within
150 days after the date of original issue of the Notes and shall keep the
Exchange Offer Registration Statement effective for not less than 30 days (or
longer, if required by applicable law) after the date notice of the Registered
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will
be entitled to close the Registered Exchange Offer 30 days after the
commencement thereof provided that the Company has accepted all the Notes
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Notes (as defined below) electing to
exchange such Transfer Restricted Notes for Exchange Notes (assuming that such
Holder is not an affiliate of the Company within the meaning of the Securities
Act, acquires the Exchange Notes in the ordinary course of such Holder's
business and has no arrangements
<PAGE>
3
with any person to participate in the distribution of the Exchange Notes and is
not prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer) to trade such Exchange Notes from and after their
receipt without any limitations or restrictions under the Securities Act and
without material restrictions under the securities laws of the several states of
the United States. In connection with such Registered Exchange Offer, the
Company shall use its best efforts to consummate the Registered Exchange Offer
and shall comply with the applicable requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and other applicable laws and
regulations in connection with the Registered Exchange Offer.
The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Notes, acquired for its own account as a result of
market-making activities or other trading activities, for Exchange Notes (an
"Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Notes received by such
Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if the
Purchasers are permitted to and elect to sell Exchange Notes acquired in
exchange for Notes constituting any portion of an unsold allotment, they are
required to deliver a prospectus containing the information required by
Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in
connection with such sale.
The Company shall include within the prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Purchasers, which shall contain a summary statement
of the positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Registered Exchange Offer (a
<PAGE>
4
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the staff of the Commission or such positions or
policies, in the reasonable judgment of the Purchasers based upon advice of
counsel (which may be in-house counsel), represent the prevailing views of the
staff of the Commission.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by the Purchasers and all Exchanging Dealers subject to the prospectus delivery
requirements of the Securities Act and shall make such prospectuses available to
the Purchasers and such Exchanging Dealers for such period of time after the
consummation of the Registered Exchange Offer as such persons must comply with
such requirements in order to resell the Exchange Notes; PROVIDED, HOWEVER, that
such period shall not exceed 120 days (unless extended pursuant to Section 3(j)
below); and, PROVIDED FURTHER, that such persons shall not be authorized by the
Company to deliver and shall not deliver any such prospectus after the
expiration of such period in connection with the resales contemplated by this
paragraph.
The Company shall make available for a period of 90 days after the
consummation of the Registered Exchange Offer, a copy of the prospectus, and any
amendment or supplement thereto, forming part of the Exchange Offer Registration
Statement to any broker-dealer for use in connection with any resale of any
Exchange Notes.
If, upon consummation of the Registered Exchange Offer, any Purchaser
holds Notes acquired by it as part of its initial distribution, the Company,
simultaneously with the delivery of the Exchange Notes pursuant to the
Registered Exchange Offer, shall issue and deliver to such Purchaser upon the
written request of such Purchaser, in exchange (the "Private Exchange") for the
Notes held by such Purchaser, a like principal amount of debt securities of the
Company issued under the Indenture and identical in all material respects
(including the existence of restrictions on transfer under the Securities Act
and the securities laws of the several states of the United States) to the Notes
(the "Private Exchange Notes"). The Notes, the Exchange Notes and the Private
Exchange Notes are herein collectively called the "Securities".
<PAGE>
5
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all applicable
laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Notes validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(ii) deliver, or cause to be delivered, to the Trustee for cancellation
all the Notes so accepted for exchange; and
(iii) issue, and cause the Trustee to authenticate and deliver promptly
to each Holder of the Notes, Exchange Notes or Private Exchange Notes, as
the case may be, equal in principal amount to the Notes of such Holder so
accepted for exchange.
The Indenture will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and
<PAGE>
6
consent together on all matters as one class and that none of the Securities
will have the right to vote or consent as a class separate from one another on
any matter.
Interest on each Exchange Note and Private Exchange Note issued
pursuant to the Registered Exchange Offer and in the Private Exchange 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 Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes within the meaning of the Securities Act,
(iii) such Holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable, (iv) 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 Notes and (v) if such Holder is a broker-dealer, that it will receive
Exchange Notes for its own account in exchange for Notes that were acquired as a
result of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, 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 and (iii) any prospectus forming part of
any Exchange Offer Registration Statement, and any
<PAGE>
7
supplement to such prospectus, at the time of issuance does not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 2. SHELF REGISTRATION. If (i) the Company determines that a
Registered Exchange Offer, as contemplated by Section 1 hereof, is not available
or may not be consummated as soon as practicable after the last date the
Registered Exchange Offer is open because it would violate applicable law or the
applicable interpretations of the staff of the Commission, (ii) the Registered
Exchange Offer is not consummated within 180 days of the date of original issue
of the Notes, (iii) the Purchasers so request with respect to the Notes (or the
Private Exchange Notes) not eligible to be exchanged for Exchange Notes in the
Registered Exchange Offer and held by them following consummation of the
Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer)
is not eligible to participate in the Registered Exchange Offer or, in the case
of any Holder (other than an Exchanging Dealer) that participates in the
Registered Exchange Offer, such Holder does not receive freely tradeable
Exchange Notes on the date of the exchange for validly tendered (and not
withdrawn) Notes, the Company shall take the following actions:
(a) The Company shall use all reasonable efforts to prepare and file,
as promptly as practicable, with the Commission and thereafter to cause to
be declared effective a registration statement (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statement, a
"Registration Statement") on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Notes (as defined
below), by the Holders thereof from time to time in accordance with the
methods of distribution set forth in the Shelf Registration Statement and
Rule 415 under the Securities Act (hereinafter, the "Shelf Registration");
PROVIDED, HOWEVER, that no Holder (other than the Purchasers) shall be
entitled to have any Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder.
<PAGE>
8
(b) The Company shall use all reasonable efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, until the period referred to in Rule 144(k) under the
Securities Act after the original issue date of the Notes expires (or for
such longer period if extended pursuant to Section 3(j) below) or such
shorter period that will terminate when all the Securities covered by the
Shelf Registration Statement have been sold pursuant thereto.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 3. REGISTRATION PROCEDURES. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall (i) furnish to the Purchasers, prior to the
filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and shall not file any such Registration Statement or
amendment thereto or any prospectus or any supplement thereto (including
such documents which, upon filing, would be incorporated or deemed to be
incorporated by reference therein and amendments to such documents other
than documents required to be filed pursuant to the Exchange Act) to which
the Purchasers shall reasonably object, except for any Registration
Statement or amendment thereto or prospectus or supplement thereto (a copy
of which has
<PAGE>
9
been previously furnished to the Purchasers and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel))
which counsel to the Company has advised the Company in writing is required
to be filed in order to comply with applicable law; (ii) include
information substantially to the effect set forth (A) in Annex A hereto on
the cover, (B) in Annex B hereto in the "Exchange Offer Procedures" section
and the "Purpose of the Exchange Offer" section, (C) in Annex C hereto in
the "Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement and (D) include the information set
forth in Annex D hereto in the Letter of Transmittal delivered pursuant to
the Registered Exchange Offer; (iii) to the extent required by law or
interpretation of the staff of the Commission, if requested by the
Purchasers, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement; and (iv) to
the extent required by law or interpretation of the staff of the
Commission, in the case of a Shelf Registration Statement, include the
names of the Holders who propose to sell Securities pursuant to the Shelf
Registration Statement as selling securityholders.
(b) The Company shall notify the Purchasers, the Holders and any
Participating Broker-Dealer from whom the Company has received prior
written notice stating that it will be a Participating Broker-Dealer in the
Registered Exchange Offer (which notice pursuant to clauses (ii) through
(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made) promptly, and, if
requested by the Purchasers, the Holders or any such Participating
Broker-Dealer, confirm such notice in writing:
(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration
<PAGE>
10
Statement or the prospectus included therein or for additional
information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in order
that the Registration Statement or the prospectus do not contain an
untrue statement of a material fact nor 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; and
(vi) of any determination by the Company that a post-effective
amendment to a Registration Statement would be appropriate.
(c) The Company shall make every reasonable effort to prevent the
issuance, and if issued to obtain the withdrawal at the earliest possible
time, of any order suspending the effectiveness of the Registration
Statement and shall provide prompt written notice to the Purchasers and
each Holder of the withdrawal of any such order.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one
conformed copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules (without
documents incorporated therein by reference or exhibits thereto, unless a
Holder so requests in writing).
<PAGE>
11
(e) The Company shall deliver to the Purchasers, and to any other
Holder that so requests, without charge, at least one conformed copy of the
Exchange Offer Registration Statement and any post-effective amendment
thereto, including financial statements and schedules (without documents
incorporated therein by reference or exhibits thereto, unless the
Purchasers or any such Holder so request in writing).
(f) The Company shall deliver to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in the Shelf Registration Statement and any amendment or supplement thereto
as such person may reasonably request. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by each of the selling Holders of the
Securities in connection with the offering and sale of the Securities
covered by, and as contemplated by, the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
(g) The Company shall deliver to the Purchasers, any Participating
Broker-Dealer or any Exchanging Dealer, without charge, as many copies of
the final prospectus included in the Exchange Offer Registration Statement
and any amendment or supplement thereto as such person may reasonably
request, during the period not exceeding 120 days following the
consummation of the Registered Exchange Offer. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by the Purchasers, if necessary, any
Participating Broker-Dealer or Exchanging Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Notes covered by the
prospectus, or any amendment or supplement thereto, included in such
Exchange Offer Registration Statement; PROVIDED, HOWEVER, that such persons
shall not be authorized by the Company to deliver and shall not deliver any
such prospectus after the expiration of the period referred to in the
immediately preceding sentence, in connection with the resales contemplated
by this paragraph.
<PAGE>
12
(h) Prior to any public offering of the Securities pursuant to any
Registration Statement, the Company shall use its best efforts to register
or qualify or cooperate with the Holders of the Securities included therein
and their respective counsel in connection with the registration or
qualification of the Securities for offer and sale under the securities or
Blue Sky laws of such states of the United States as any Holder of the
Securities reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable such Holder to offer and sell in
such jurisdictions the Securities covered by such Registration Statement
owned by such Holder; PROVIDED, HOWEVER, that the Company shall not be
required to (i) qualify generally or as a foreign corporation to do
business in any jurisdiction where it is not then so qualified or (ii) take
any action which would subject it to general service of process or to
taxation in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Shelf Registration Statement free
of any restrictive legends and in such denominations (consistent with the
provisions of the Indenture) and registered in such names as the Holders
may request at least two business days prior to closing of any sale of the
Securities pursuant to such Shelf Registration Statement.
(j) If any event contemplated by paragraphs (ii) through (vi) of
Section 3(b) above occurs during the period for which the Company is
required to maintain an effective Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to the Registration
Statement or a supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Notes or
purchasers of Securities, the prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the
Company notifies the Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer in accordance with
<PAGE>
13
paragraphs (ii) through (vi) of Section 3(b) above to suspend the use of
the prospectus until the requisite changes to the prospectus have been
made, then the Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus until the
Company has amended or supplemented the prospectus to correct such
misstatement or omission, and the period of effectiveness of the Shelf
Registration Statement provided for in Section 2(b) above and the Exchange
Offer Registration Statement provided for in Section 1 above shall each be
extended by the number of days from and including the date of the giving of
such notice to and including the date when the Purchasers, the Holders of
the Securities and any known Participating Broker-Dealer shall have
received such amended or supplemented prospectus pursuant to this
Section 3(j); PROVIDED, HOWEVER, that the minimum time period before the
Company shall be entitled to close the Registered Exchange Offer shall be
extended only to the extent required by the Commission. The Purchasers,
each Holder and any Participating Broker-Dealers agree that upon receipt of
any such notice from the Company it will not distribute copies of the
prospectus that are the subject of such notice and will retain such copies
in its files.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will obtain a CUSIP number for the Transfer
Restricted Notes, the Exchange Notes or the Private Exchange Notes, as the
case may be, and provide the Trustee with printed certificates for the
Notes, the Exchange Notes or the Private Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to its securities holders (or otherwise provide in accordance
with Section 11(a) of the Securities Act) an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act, no later than 45
days after the end of a 12-month period (or 90 days, if such period is a
fiscal year) beginning
<PAGE>
14
with the first month of the Company's first fiscal quarter commencing after
the effective date of the Registration Statement, which statement shall
cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as
the Company may from time to time reasonably request for inclusion in the
Shelf Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(o) In the case of any Shelf Registration, the Company shall enter
into such customary agreements (including if requested an underwriting
agreement in customary form) and take all such other action, if any, as the
Holders of a majority of the Securities being sold shall reasonably request
in order to facilitate the disposition of the Securities pursuant to such
Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall make
available for inspection by a representative of the Holders of Securities
being sold, its counsel and an accountant retained by such Holders, in a
manner designed to permit underwriters to satisfy their due diligence
investigation under the Securities Act, all financial and other records,
pertinent corporate documents and properties of the Company customarily
inspected by underwriters in primary underwritten offerings and cause the
officers, directors and employees of the Company and its subsidiaries to
supply all information reasonably
<PAGE>
15
requested by, and customarily supplied in connection with primary
underwritten offerings to, any such representative, attorney or accountant
in connection with such registration; PROVIDED, HOWEVER, that any records,
information or documents that are designated by the Company as confidential
at the time of delivery of such records, information or documents shall be
kept confidential by such persons, unless (i) such records, information or
documents are in the public domain or otherwise publicly available, (ii)
disclosure of such records, information or documents is required by court
or administrative order or (iii) disclosure of such records, information or
documents, in the written opinion of counsel to such person, is otherwise
required by law (including, without limitation, pursuant to the
requirements of the Securities Act).
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall (i) cause its counsel to
deliver an opinion and updates thereof relating to the Securities in
customary form addressed to such Holders and the managing underwriters, if
any, and dated, in the case of the initial opinion, the effective date of
such Shelf Registration Statement covering matters customarily covered in
opinions requested in underwritten offerings, (ii) cause its officers to
execute and deliver such documents and certificates and updates thereof as
may be reasonably requested by any underwriters of the applicable
Securities, and which are customarily delivered in underwritten offerings,
to evidence the continued validity of the representations and warranties of
the Company made pursuant to, and to evidence compliance with any customary
conditions contained in, an underwriting agreement and (iii) cause its
independent public accountants to provide to the selling Holders of the
applicable Securities and any underwriter therefor a comfort letter in
customary form and covering matters of the type customarily covered in
comfort letters in connection with primary underwritten offerings, subject
to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
(r) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Company (or to
such other
<PAGE>
16
Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or
caused to be marked, on the Notes so exchanged that such Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes,
as the case may be, and in no event shall the Notes be marked as paid or
otherwise satisfied.
(s) The Company will use its best efforts to cause the Securities
covered by a Registration Statement to be rated by two nationally
recognized statistical rating organizations (as such term is defined in
Rule 436(g)(2) under the Securities Act) if so requested by Holders of a
majority in aggregate principal amount of Securities covered by such
Registration Statement, or by the managing underwriters, if any.
(t) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such
Securities or as an underwriter, a placement or sales agent or a broker or
dealer in respect thereof, or otherwise, the Company shall assist such
broker-dealer in complying with the requirements of such Rules and By-Laws,
including by (i) if such Rules, including Rule 2720, shall so require,
engaging a "qualified independent underwriter" (as defined in such Rule) to
participate in the preparation of the Registration Statement relating to
such Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Securities,
(ii) indemnifying any such qualified independent underwriter to the extent
of the indemnification of underwriters provided in Section 5 hereof and
(iii) providing such information to such broker-dealer as may be required
in order for such broker-dealer to comply with the requirements of the
Conduct Rules of the NASD.
<PAGE>
17
SECTION 4. REGISTRATION EXPENSES. The Company shall pay all fees and
expenses incident to the performance of or compliance with this Agreement by the
Company including, without limitation, (i) all Commission, stock exchange or
NASD registration and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state securities or Blue Sky laws (including
reasonable fees and disbursements of counsel for any underwriters or holders in
connection with Blue Sky qualification of any of the Securities), (iii) all
expenses of any persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any prospectus, any
amendments or supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and compliance
with this Agreement, (iv) all rating agency fees, and (v) the fees and
disbursements of counsel for the Company and in the event of a Shelf
Registration, the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Securities
covered thereby and of the independent public accountants of the Company,
including the expense of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, but excluding fees and
expenses of counsel to the underwriters and underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Securities by a Holder.
SECTION 5. INDEMNIFICATION. (a) The Company agrees to indemnify and
hold harmless each Holder of the Securities, any Participating Broker-Dealer,
and each person, if any, who controls such Holder or such Participating
Broker-Dealer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, or is under common control with, or is
controlled by, such Holder or such Participating Broker-Dealer, from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements 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
<PAGE>
18
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to such Holder or Participating Broker-Dealer furnished to the Company
in writing by such Holder or Participating Broker-Dealer expressly for use
therein; PROVIDED that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Holder or Participating
Broker-Dealer from whom the person asserting any such losses, claims, damages or
liabilities purchased Securities, or any person controlling or affiliated with
such Holder or Participating Broker-Dealer, if a copy of the final prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Holder or Participating Broker-Dealer to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of the
Securities to such person, and if the final prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability.
(b) Each Holder of the Securities, severally and not jointly, agrees
to indemnify and hold harmless the Company, other selling Holders, directors of
the Company, the officers of the Company who sign a Registration Statement and
each person, if any, who controls the Company or any selling Holders, within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from the Company to such
Holder, but only with reference to information relating to such Holder furnished
to the Company in writing by such Holder expressly for use in a Registration
Statement, any preliminary prospectus, prospectus or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the
<PAGE>
19
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. If an indemnified party includes (x) the Purchasers or such
controlling persons of the Purchasers, such firm shall be designated in writing
by Morgan Stanley & Co. Incorporated or (y) Holders of Securities (other than
the Purchasers) or controlling persons of such Holders, such firm shall be
designated in writing by Holders of a majority in aggregate principal amount of
such Securities. In all other cases, such firm shall be designated by the
Company. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 90 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any
<PAGE>
20
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 5 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party or parties on the other hand
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and any such Holder, Participating Broker-Dealer or other party on the other
hand shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Notes (before deducting expenses) received by
the Company and the total discounts and commissions received or realized by such
Holder, Participating Broker-Dealer or other party in respect thereof, in each
case as set forth in the Final Memorandum, bear to the aggregate offering price
of such Securities. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by such Holder, Participating
Broker-Dealer or other party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Holders' respective obligations to contribute
<PAGE>
21
pursuant to this Section 5 are several in proportion to the respective amount of
Notes they have purchased, not joint.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 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 paragraph (d) of this Section 5.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder of Securities shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities were sold by such Holder pursuant to a Registration Statement
exceeds the amount of any damages that such Holders have 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.
(f) The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Holder or Participating Broker-Dealer or any person controlling
such Holder or Participating Broker-Dealer or by or on behalf of the Company,
its officers or directors or any person controlling the Company and (iii) the
sale of the Securities. The remedies provided for in this Section 5 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
SECTION 6. ADDITIONAL INTEREST UNDER CERTAIN CIRCUMSTANCES. (a)
Additional interest (the "Additional Interest") with respect to the Securities
shall be assessed as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Failure to Register"):
<PAGE>
22
(i) If by December 28, 1996, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement has been filed with the
Commission;
(ii) If by May 12, 1997, neither the Registered Exchange Offer is
consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
(iii) If, after May 12, 1997, and after either the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared
effective, (A) such Registration Statement thereafter ceases to be
effective prior to completion of the Exchange Offer or the sale of all the
Transferred Restricted Notes registered pursuant to the Shelf Registration
Statement, as the case may be; or (B) such Registration Statement or the
related prospectus ceases to be usable in connection with resales of
Transfer Restricted Notes during the periods specified in this Agreement
(except as permitted in paragraph (b) of this Section 6) because either
(1) any event occurs as a result of which the related prospectus forming
part of such Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading or (2) it shall be necessary to amend such Registration
Statement, or supplement the related prospectus, to comply with the
Securities Act or the Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Notes over and above the
interest set forth in the title of the Notes from and including the date on
which any such Failure to Register shall occur to but excluding the date on
which all such Failures to Register have been cured, at a rate of 0.50% per
annum.
(b) A Failure to Register referred to in Section 6(a)(iii) shall be
deemed not to have occurred and be continuing in relation to a Registration
Statement or the related prospectus if (i) such Failure to Register has occurred
solely as a result of (x) the filing of a post-effective amendment to such
Registration Statement to incorporate annual audited financial information with
respect to the Company where such post-effective amendment
<PAGE>
23
is not yet effective and needs to be declared effective to permit Holders to
use the related prospectus or (y) the occurrence of other material events or
developments with respect to the Company that would need to be described in
such Registration Statement or the related prospectus and (ii) in the case of
clause (y), the Company is proceeding promptly and in good faith to amend or
supplement such Registration Statement and related prospectus to describe
such events or, in the case of material developments that the Company
determines in good faith must remain confidential for business reasons, the
Company is proceeding promptly and in good faith to take such steps as are
necessary so that such developments need no longer remain confidential;
PROVIDED, HOWEVER, that in any case, if such Failure to Register occurs for a
continuous period in excess of 45 days, Additional Interest shall be payable
in accordance with the above paragraph from the day following such 45 day
period until the date on which such Failure to Register is cured.
(c) Any amounts of Additional Interest due pursuant to clause (a)(i),
(a)(ii) or (a)(iii) of Section 6 above will be payable in cash on the regular
interest payment dates with respect to the Notes. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Notes" means each Security until (i) the date
on which such Transfer Restricted Note has been exchanged by a person other than
a broker-dealer for a freely transferrable Exchange Note in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Transfer Restricted Note for an Exchange Note, the date on
which such Exchange Note 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 Exchange Offer Registration Statement, (iii) the date on which
such Transfer Restricted Note 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 Transfer Restricted Note is distributed
to the public
<PAGE>
24
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act.
SECTION 7. RULES 144 AND 144A. The Company shall use its best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Transfer Restricted Notes, make publicly available other information so long as
necessary to permit sales of Securities pursuant to Rules 144 and 144A. The
Company covenants that it will take such further action as any Holder of
Transfer Restricted Notes may reasonably request, all to the extent required
from time to time to enable such Holder to sell Transfer Restricted Notes
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Notes identified to the Company by the Purchasers upon
request. Upon the request of any Holder of Transfer Restricted Notes, the
Company shall deliver to such Holder a written statement as to whether it has
complied with such requirements. Notwithstanding the foregoing, nothing in this
Section 7 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
SECTION 8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer
Restricted Notes covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering ("Managing Underwriters") will be
selected by the Holders of a majority in aggregate principal amount of such
Transfer Restricted Notes included in such offering; PROVIDED, HOWEVER, that the
Managing Underwriters shall be reasonably satisfactory to the Company.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
<PAGE>
25
SECTION 9. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
except by the Company and the written consent of the Holders of a majority in
principal amount of the Securities affected by such amendment, modification,
supplement, waiver or consent.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company in accordance with the provisions of
this Section 9(b), which address initially is, with respect to each Holder,
the address of such Holder to which confirmation of the sale of the Notes
to such Holder was first sent by the Purchasers, with a copy in like manner
to you as follows:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Facsimile: (212) 761-0359
Attention: Managing Director, Syndicate
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Facsimile: (212) 474-3700
Attention: Kris F. Heinzelman
(2) if to the Company, at the following address:
c/o The Cypress Group L.L.C.
65 East 55th Street (19th Floor)
New York, NY 10022
Facsimile: (212) 705-0199
Attention: David P. Spalding
<PAGE>
26
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Facsimile: (212) 455-2502
Attention: Vincent Pagano, Jr.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) NO INCONSISTENT AGREEMENTS. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its Securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns.
(e) 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.
(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(h) SEVERABILITY. If 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
<PAGE>
27
provisions contained herein shall not be affected or impaired thereby.
(i) SECURITIES HELD BY THE COMPANY. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
<PAGE>
28
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Purchasers and the Company in accordance with its terms.
Very truly yours,
AMTROL ACQUISITION, INC.,
By:/s/ Anthony D. Tutrone
-------------------------------
Name: Anthony D. Tutrone
Title: Secretary
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
BT Securities Corporation
Acting severally on behalf of
themselves and the several
Purchasers
By MORGAN STANLEY & CO. INCORPORATED,
By:/s/Charles J. Ditkoff
----------------------------------
Name: Charles J. Ditkoff
Title: Vice President
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a brokerdealer in connection with
resales of Exchange Notes received in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer as a result of marketmaking
activities or other trading activities. The Company has agreed that, for a
period of 120 days after the Expiration Date (as defined herein), it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of marketmaking activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes 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 this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 1997, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.(*)
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, 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 Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that
- -----------------------
(*) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
2
it is an "underwriter" within the meaning of the Securities Act.
For a period of 120 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
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 Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
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
the Securities Act.
<PAGE>
Exhibit 5.1
December 17, 1996
AMTROL Inc.
1400 Division Road
West Warwick, Rhode Island 02893
Ladies and Gentlemen:
We have acted as special counsel for AMTROL Inc., a Rhode Island corporation
("AMTROL"), in connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by AMTROL with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended,
relating to the issuance by AMTROL of $115,000,000 aggregate principal amount of
its 10 5/8% Senior Subordinated Notes due 2006 (the "Exchange Notes"). The
Exchange Notes are to be offered by AMTROL in exchange for $115,000,000
aggregate principal amount of its outstanding 10 5/8% Senior Subordinated Notes
due 2006 (the "Notes").
We have examined the Registration Statement, the Indenture dated as of
November 1, 1996 between AMTROL Acquisition, Inc. and The Bank of New York, as
trustee (the "Trustee"), as supplemented by the First Supplemental Indenture
dated as of November 13, 1996 between AMTROL and the Trustee (the "Indenture"),
which have been filed with the Commission as Exhibits to the Registration
Statement. In addition, we have examined, and have relied as to matters of fact
upon, the originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments and such certificates or comparable documents of public officials
and of officers and representatives of AMTROL, and have made such other and
further investigations, as we have deemed relevant and necessary as a basis for
the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that, assuming due authorization of the
Exchange Notes in accordance with Rhode Island law, the Exchange Notes, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered in exchange for the Notes as contemplated in the Registration
Statement and the Indenture, will constitute valid and legally binding
obligations of AMTROL.
Our opinion set forth above is subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York and we do not express any
opinion herein concerning any law other than the law of the State of New York
and the federal law of the United States.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ Simpson Thacher & Bartlett
--------------------------------------
SIMPSON THACHER & BARTLETT
<PAGE>
Exhibit 10.1
================================================================================
CREDIT AGREEMENT
among
AMTROL HOLDINGS, INC.,
AMTROL ACQUISITION, INC.,
VARIOUS LENDING INSTITUTIONS,
MORGAN STANLEY SENIOR FUNDING, INC.,
AS DOCUMENTATION AGENT,
and
BANKERS TRUST COMPANY,
AS ADMINISTRATIVE AGENT
-----------------------------
$75,000,000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . 1
1.01 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Borrowing Amounts, etc. . . . . . . . . . . . . . . . . 3
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . 4
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . 5
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . 7
1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . 8
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . 10
1.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.12 Change of Lending Office . . . . . . . . . . . . . . . . . . . . 12
1.13 Replacement of Banks . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 14
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 14
2.02 Minimum Initial Stated Amount . . . . . . . . . . . . . . . . . 15
2.03 Letter of Credit Requests; Notices of Issuance . . . . . . . . . 15
2.04 Agreement to Repay Letter of Credit Drawings . . . . . . . . . . 15
2.05 Letter of Credit Participations . . . . . . . . . . . . . . . . 16
2.06 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . . 19
3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.02 Voluntary Reduction of Commitments . . . . . . . . . . . . . . . 20
3.03 Mandatory Adjustments of Commitments, etc. . . . . . . . . . . . 21
SECTION 4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . 22
4.02 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . 22
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . 27
(i)
<PAGE>
Page
----
4.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 29
5.01 Conditions Precedent to Initial Borrowing Date . . . . . . . . . 29
5.02 Conditions Precedent to All Credit Events . . . . . . . . . . . 35
SECTION 6. Representations, Warranties and Agreements . . . . . . . . . . 36
6.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . 36
6.02 Corporate Power and Authority . . . . . . . . . . . . . . . . . 37
6.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . 37
6.06 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . 38
6.07 Investment Company Act . . . . . . . . . . . . . . . . . . . . . 38
6.08 Public Utility Holding Company Act . . . . . . . . . . . . . . . 38
6.09 True and Complete Disclosure . . . . . . . . . . . . . . . . . . 38
6.10 Financial Condition; Financial Statements . . . . . . . . . . . 39
6.11 Security Interests . . . . . . . . . . . . . . . . . . . . . . . 40
6.12 Consummation of Transaction . . . . . . . . . . . . . . . . . . 40
6.13 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . 40
6.14 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 41
6.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . . 42
6.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 42
6.18 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.19 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . 43
6.20 Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . 44
6.21 Existing Indebtedness . . . . . . . . . . . . . . . . . . . . . 44
6.22 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . 44
6.23 Special Purpose Corporations . . . . . . . . . . . . . . . . . . 44
SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 44
7.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . 45
7.02 Books, Records and Inspections . . . . . . . . . . . . . . . . . 47
7.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . 48
7.05 Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . 48
7.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . 48
7.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.08 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(ii)
<PAGE>
Page
----
7.09 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . 50
7.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 50
7.11 Additional Security; Further Assurances . . . . . . . . . . . . 50
7.12 Interest Rate Agreement . . . . . . . . . . . . . . . . . . . . 51
7.13 Compliance with Environmental Laws . . . . . . . . . . . . . . . 51
7.14 Consummation of the Merger . . . . . . . . . . . . . . . . . . . 52
7.15 Post-Closing Obligations . . . . . . . . . . . . . . . . . . . . 52
SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 53
8.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . . 53
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc. . . . . 53
8.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.04 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.05 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . 57
8.06 Advances, Investments and Loans . . . . . . . . . . . . . . . . 58
8.07 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.08 Prepayments of Indebtedness, etc . . . . . . . . . . . . . . . . 59
8.09 Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . . 60
8.10 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 61
8.11 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . 62
8.12 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.13 Minimum Consolidated EBITDA . . . . . . . . . . . . . . . . . . 64
8.14 Limitation On Issuance of Stock . . . . . . . . . . . . . . . . 65
8.15 Limitation on Creation of Subsidiaries . . . . . . . . . . . . . 65
SECTION 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 65
9.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . . 65
9.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . 66
9.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . 66
9.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . . 67
9.08 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.09 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 11. The Administrative Agent . . . . . . . . . . . . . . . . . . . 94
11.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 94
11.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . 95
(iii)
<PAGE>
Page
----
11.03 Lack of Reliance on the Agents . . . . . . . . . . . . . . . . 95
11.04 Certain Rights of the Agents . . . . . . . . . . . . . . . . . 95
11.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
11.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 96
11.07 The Agents in Their Individual Capacities . . . . . . . . . . . 96
11.08 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
11.09 Resignation by the Administrative Agent . . . . . . . . . . . . 97
SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 97
12.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . . 97
12.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . 98
12.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . 99
12.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . .101
12.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . .101
12.07 Calculations; Computations . . . . . . . . . . . . . . . . . .102
12.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of
Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . .102
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .103
12.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . .103
12.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . .103
12.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . .103
12.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . .104
12.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . .104
12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . .104
12.16 Bank Register . . . . . . . . . . . . . . . . . . . . . . . . .105
SECTION 13. Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . .105
13.01 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . .105
13.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . .106
13.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . . .106
13.04 Independent Obligation . . . . . . . . . . . . . . . . . . . .106
13.05 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .106
13.06 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . .107
13.07 Subordination . . . . . . . . . . . . . . . . . . . . . . . . .108
13.08 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . .108
13.09 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . .109
ANNEX I -- Commitments
ANNEX II -- Bank Addresses
(iv)
<PAGE>
ANNEX III -- Government Approvals
ANNEX IV -- Subsidiaries
ANNEX V -- Real Properties
ANNEX VI -- Existing Indebtedness
ANNEX VII -- Designated Assets
ANNEX VIII -- Existing Liens
ANNEX IX -- Consolidated EBITDA/Interest Expense Adjustment
ANNEX X -- Existing Letters of Credit
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B-1 -- Form of A Term Note
EXHIBIT B-2 -- Form of B Term Note
EXHIBIT B-3 -- Form of Revolving Note
EXHIBIT B-4 -- Form of Swingline Note
EXHIBIT C -- Form of Letter of Credit Request
EXHIBIT D -- Form of Section 4.04 Certificate
EXHIBIT E-1 -- Form of Opinion of Simpson, Thacher & Bartlett
EXHIBIT E-2 -- Form of Opinion of Hinckley, Allen & Snyder
EXHIBIT E-3 -- Form of Opinion of White & Case
EXHIBIT F -- Form of Officers' Certificate
EXHIBIT G -- Form of Subsidiary Guaranty
EXHIBIT H -- Form of Pledge Agreement
EXHIBIT I -- Form of Security Agreement
EXHIBIT J -- Form of Solvency Opinion
EXHIBIT K -- Form of Consent Letter
EXHIBIT L -- Form of Assignment Agreement
EXHIBIT M -- Form of Acknowledgment Agreement
(v)
<PAGE>
CREDIT AGREEMENT, dated as of November 13, 1996, among AMTROL HOLDINGS,
INC., a Delaware corporation, AMTROL ACQUISITION, INC., a Rhode Island
corporation, the lenders from time to time party hereto (each, a "Bank" and,
collectively, the "Banks"), MORGAN STANLEY SENIOR FUNDING, INC., as
Documentation Agent (the "Documentation Agent"), and BANKERS TRUST COMPANY, as
Administrative Agent (the "Administrative Agent" and together with the
Documentation Agent, collectively, the "Agents"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 11 are used
herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set forth,
the Banks are willing to make available to the Borrower the credit facilities
provided for herein; and
NOW, THEREFORE, IT IS AGREED:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENT. Subject to and upon the terms and conditions herein
set forth, each Bank severally agrees to make a loan or loans (each, a "Loan"
and, collectively, the "Loans") to the Borrower, which Loans shall be drawn, to
the extent such Bank has a commitment under such Facility, under the A Term
Facility, the B Term Facility and the Revolving Facility, as set forth below:
(a) Loans under the A Term Facility (each, an "A Term Loan" and,
collectively, the "A Term Loans") (i) shall be made pursuant to a single
drawing on the Initial Borrowing Date, (ii) shall be made and initially
maintained as a single Borrowing of Base Rate Loans (subject to the option
to convert such A Term Loans pursuant to Section 1.06) and (iii) shall not
exceed in aggregate principal amount for any Bank at the time of incurrence
thereof the A Term Commitment, if any, of such Bank as in effect on such
date. Once repaid, A Term Loans borrowed hereunder may not be reborrowed.
(b) Loans under the B Term Facility (each, a "B Term Loan" and,
collectively, the "B Term Loans") (i) shall be made pursuant to a single
drawing on the Initial Borrowing Date, (ii) shall be made and initially
maintained as a single Borrowing of Base Rate Loans (subject to the option
to convert such B Term Loans
<PAGE>
pursuant to Section 1.06) and (iii) shall not exceed in aggregate principal
amount for any Bank at the time of incurrence thereof the B Term Commitment,
if any, of such Bank as in effect on such date. Once repaid, B Term Loans
borrowed hereunder may not be reborrowed.
(c) Loans under the Revolving Facility (each, a "Revolving Loan" and,
collectively, the "Revolving Loans") (i) shall be made at any time and from
time to time on and after the Initial Borrowing Date and prior to the RF
Maturity Date, (ii) except as hereinafter provided, may, at the option of
the Borrower, be incurred and maintained as, and/or converted into, Base
Rate Loans or Eurodollar Loans, PROVIDED that (x) Revolving Loans may not be
incurred as Eurodollar Loans prior to the Syndication Date and (y) all
Revolving Loans made as part of the same Borrowing shall, unless otherwise
specifically provided herein, consist of Revolving Loans of the same Type,
(iii) may be repaid and reborrowed in accordance with the provisions hereof
and (iv) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when combined with the aggregate
outstanding principal amount of all other Revolving Loans of such Bank and
such Bank's Adjusted RF Percentage, if any, of the sum of (x) the Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time and (y) the outstanding
principal amount of Swingline Loans (exclusive of Swingline Loans which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) at such time, equals (1) if such
Bank is a Non-Defaulting Bank, the Adjusted Revolving Commitment, if any, of
such Bank at such time and (2) if such Bank is a Defaulting Bank, the
Revolving Commitment, if any, of such Bank at such time. In addition, the
aggregate outstanding principal amount of all Acquisition Loans for all
Banks at any time shall not exceed the Acquisition Sublimit at such time.
(d) Subject to and upon the terms and conditions herein set forth, BTCo
in its individual capacity agrees to make at any time and from time to time
after the Initial Borrowing Date and prior to the Swingline Expiry Date, a
loan or loans to the Borrower (each, a "Swingline Loan," and, collectively,
the "Swingline Loans"), which Swingline Loans (i) shall be made and
maintained as Base Rate Loans, (ii) may be repaid and reborrowed in
accordance with the provisions hereof, (iii) shall not exceed in aggregate
principal amount at any time outstanding, when combined with the aggregate
principal amount of all Revolving Loans made by Non-Defaulting Banks then
outstanding and the Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) at such time,
an amount equal to the Adjusted Total Revolving Commitment then in effect
(after giving effect to any reductions to the Adjusted Total Revolving
Commitment on such date) and
-2-
<PAGE>
(iv) shall not exceed in aggregate principal amount at any time outstanding
the Maximum Swingline Amount. BTCo will not make a Swingline Loan after it
has received written notice from the Required Banks that one or more of the
applicable conditions to Credit Events specified in Section 5.02 are not
then satisfied.
(e) On any Business Day, BTCo may, in its sole discretion, give notice
to the RF Banks that its outstanding Swingline Loans shall be funded with a
Borrowing of Revolving Loans (PROVIDED that each such notice shall be deemed
to have been automatically given upon the occurrence of an Event of Default
under Section 9.05 or upon the exercise of any of the remedies provided in
the last paragraph of Section 9), in which case a Borrowing of Revolving
Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all
RF Banks PRO RATA based on each RF Bank's Adjusted RF Percentage, and the
proceeds thereof shall be applied directly to repay BTCo for such
outstanding Swingline Loans. Each RF Bank hereby irrevocably agrees to make
Base Rate Loans upon one Business Day's notice pursuant to each Mandatory
Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified in writing by BTCo notwithstanding: (i)
that the amount of the Mandatory Borrowing may not comply with the Minimum
Borrowing Amount otherwise required hereunder, (ii) whether any conditions
specified in Section 5.02 are then satisfied, (iii) whether a Default or an
Event of Default has occurred and is continuing, (iv) the date of such
Mandatory Borrowing and (v) any reduction in the Total Revolving Commitment
or the Adjusted Total Revolving Commitment after any such Swingline Loans
were made. In the event that any Mandatory Borrowing cannot for any reason
be made on the date otherwise required above (including, without limitation,
as a result of the commencement of a proceeding under the Bankruptcy Code in
respect of the Borrower), each RF Bank (other than BTCo) hereby agrees that
it shall forthwith purchase from BTCo (without recourse or warranty) such
assignment of the outstanding Swingline Loans as shall be necessary to cause
the RF Banks to share in such Swingline Loans ratably based upon their
respective Adjusted RF Percentages, PROVIDED that all interest payable on
the Swingline Loans shall be for the account of BTCo until the date the
respective assignment is purchased and, to the extent attributable to the
purchased assignment, shall be payable to the RF Bank purchasing same from
and after such date of purchase.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal amount
of each Borrowing under a Facility shall not be less than the Minimum Borrowing
Amount for such Facility. The aggregate principal amount of each Borrowing of
Swingline Loans shall not be less than $50,000, and, if greater, shall be in an
integral multiple of $100,000. More than one Borrowing may be incurred on any
day, PROVIDED that at no time shall there be outstanding more than ten
Borrowings of Eurodollar Loans.
-3-
<PAGE>
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to incur
Loans under any Facility (excluding Borrowings of Swingline Loans and Mandatory
Borrowings), it shall give the Administrative Agent at its Notice Office, prior
to 10:00 A.M. (New York time), at least three Business Days' prior written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each, a "Notice of Borrowing")
shall be in the form of Exhibit A and shall be irrevocable and shall specify (i)
the Facility pursuant to which such Borrowing is being made, (ii) the aggregate
principal amount of the Loans to be made pursuant to such Borrowing, (iii) the
date of Borrowing (which shall be a Business Day) and (iv) whether the
respective Borrowing shall consist of Base Rate Loans or (to the extent
permitted) Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall promptly give each
Bank written notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of such Bank's proportionate share thereof and of the other
matters covered by the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give BTCo, prior to 10:00 A.M. (New York
time) on the day such Swingline Loan is to be made, written notice (or
telephonic notice promptly confirmed in writing) of each Swingline Loan to be
made hereunder. Each such notice shall be irrevocable and shall specify in each
case (x) the date of such Borrowing (which shall be a Business Day) and (y) the
aggregate principal amount of the Swingline Loan to be made pursuant to such
Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(e), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section 1.01(e).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent, BTCo (in the case of a Borrowing of Swingline Loans) or
the Letter of Credit Issuer (in the case of the issuance of Letters of Credit),
as the case may be, may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the
Administrative Agent, BTCo or the Letter of Credit Issuer in good faith to be
from an Authorized Officer of the Borrower. In each such case, the Borrower
hereby waives the right to dispute the Administrative Agent's, BTCo's or the
Letter of Credit Issuer's record of the terms of such telephonic notice, unless
such record reflects gross negligence or willful misconduct on the part of the
Administrative Agent, BTCo or the Letter of Credit Issuer, as the case may be.
-4-
<PAGE>
1.04 DISBURSEMENT OF FUNDS. (a) No later than 1:00 P.M. (New York
time) on the date specified in each Notice of Borrowing or each notice described
in Section 1.03(b)(i) or (ii), each Bank with a Commitment under the respective
Facility will make available its PRO RATA share of each Borrowing requested to
be made on such date (or in the case of Swingline Loans, BTCo shall make
available the full amount thereof) in the manner provided below. All such
amounts shall be made available to the Administrative Agent in U.S. dollars and
immediately available funds at the Payment Office and the Administrative Agent
promptly will make available to the Borrower by depositing to its account at the
Payment Office the aggregate of the amounts so made available in the type of
funds received. Unless the Administrative Agent shall have been notified by any
Bank prior to the date of Borrowing that such Bank does not intend to make
available to the Administrative Agent its portion of the Borrowing or Borrowings
to be made on such date, the Administrative Agent may assume that such Bank has
made such amount available to the Administrative Agent on such date of
Borrowing, and the Administrative Agent, in reliance upon such assumption, may
(in its sole discretion and without any obligation to do so) make available to
the Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Agent by such Bank and the
Administrative Agent has made available same to the Borrower, the Administrative
Agent shall be entitled to recover such corresponding amount from such Bank. If
such Bank does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent shall promptly
notify the Borrower, and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also be
entitled to recover on demand from such Bank or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (x) if paid by such Bank, the
overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the then
applicable rate of interest, calculated in accordance with Section 1.08, for the
respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the Borrower may have against any Bank as a result of any default by such Bank
hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the principal of,
and interest on, the Loans made to it by each Bank shall be evidenced (i) if
A Term Loans, by a promissory note substantially in the form of Exhibit B-1
with blanks appropriately completed in conformity herewith (each, an "A Term
Note" and, collectively, the "A Term Notes"), (ii) if B Term Loans, by a
promissory note substantially in the form of Exhibit B-2 with blanks
appropriately completed in conformity herewith (each, a "B Term Note" and,
collectively, the "B Term Notes"), (iii) if Revolving Loans, by a promissory
note substantially in the form of Exhibit B-3 with blanks appropriately
completed in conformity
-5-
<PAGE>
herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes")
and (iv) if Swingline Loans, by a promissory note substantially in the form
of Exhibit B-4, with blanks appropriately completed in conformity herewith
(the "Swingline Note").
(b) The A Term Note issued to each Bank that makes any A Term Loan
shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank
and be dated the Initial Borrowing Date, (iii) be in a stated principal amount
equal to the A Term Loans made by such Bank on the Initial Borrowing Date (or in
the case of a new A Term Note issued pursuant to Section 1.13 or 12.04, the
respective A Term Loans evidenced thereby at the time of issuance) and be
payable in the principal amount of A Term Loans evidenced thereby, (iv) mature
on the A TF Maturity Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
(c) The B Term Note issued to each Bank that makes any B Term Loan
shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank
and be dated the Initial Borrowing Date, (iii) be in a stated principal amount
equal to the B Term Loans made by such Bank on the Initial Borrowing Date (or in
the case of a new B Term Note issued pursuant to Section 1.13 or 12.04, the
respective B Term Loans evidenced thereby at the time of issuance) and be
payable in the principal amount of B Term Loans evidenced thereby, (iv) mature
on the B TF Maturity Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
(d) The Revolving Note issued to each RF Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Revolving
Commitment of such Bank and be payable in the principal amount of the Revolving
Loans evidenced thereby, (iv) mature on the RF Maturity Date, (v) bear interest
as provided in the appropriate clause of Section 1.08 in respect of the Base
Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to mandatory repayment as provided in Section 4.02 and (vii) be entitled
to the benefits of this Agreement and the other Credit Documents.
(e) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to the order of BTCo and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Maximum
Swingline Amount and be payable in the principal amount of Swingline Loans
evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear interest
as provided in Section 1.08 in respect of the Base Rate Loans
-6-
<PAGE>
evidenced thereby, (vi) be subject to mandatory prepayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(f) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will, prior to any
transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in respect of such
Loans.
1.06 CONVERSIONS. The Borrower shall have the option to convert on
any Business Day on and after the Syndication Date all or a portion at least
equal to the applicable Minimum Borrowing Amount of the outstanding principal
amount of the Loans owing (other than Swingline Loans, which at all times shall
be maintained as Base Rate Loans) pursuant to a single Facility into a Borrowing
or Borrowings pursuant to such Facility of another Type of Loan, PROVIDED that
(i) no partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii)
Base Rate Loans may not be converted into Eurodollar Loans when a Default under
Section 9.01 or an Event of Default is in existence on the date of the proposed
conversion if either Agent or the Required Banks shall have determined in its or
their sole discretion not to permit such conversion and (iii) Borrowings of
Eurodollar Loans resulting from this Section 1.06 shall be limited in number as
provided in Section 1.02. Each such conversion shall be effected by the
Borrower giving the Administrative Agent at its Notice Office, prior to 10:00
A.M. (New York time), at least three Business Days' (or two Business Days', in
the case of a conversion into Base Rate Loans) prior written notice (or
telephonic notice promptly confirmed in writing) (each, a "Notice of
Conversion") specifying the Loans to be so converted, the Type of Loans to be
converted into and, if to be converted into a Borrowing of Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Administrative Agent
shall give each Bank prompt notice of any such proposed conversion affecting any
of its Loans.
1.07 PRO RATA BORROWINGS. All Loans under this Agreement (other than
Swingline Loans) shall be made by the Banks PRO RATA on the basis of their A
Term Commitments, B Term Commitments or Revolving Commitments, as the case may
be. It is understood that no Bank shall be responsible for any default by any
other Bank in its obligation to make Loans hereunder and that each Bank shall be
obligated to make the Loans provided to be made by it hereunder, regardless of
the failure of any other Bank to fulfill its commitments hereunder.
1.08 INTEREST. (a) The unpaid principal amount of each Base Rate
Loan shall bear interest from the date of the Borrowing thereof until maturity
(whether by
-7-
<PAGE>
acceleration or otherwise) at a rate per annum which shall at all times be the
Applicable Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall bear interest at a rate per annum equal to the Base Rate in effect from
time to time plus the sum of (i) 2% and (ii) the Applicable Base Rate Margin,
PROVIDED that no Loan shall bear interest after maturity (whether by
acceleration or otherwise) at a rate per annum less than 2% plus the rate of
interest applicable thereto at maturity.
(d) Interest shall accrue from and including the date of any Borrowing
to but excluding the date of any repayment thereof and shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on the last Business Day of
each March, June, September and December, commencing March 31, 1997, (ii) in
respect of each Eurodollar Loan, on the last day of each Interest Period
applicable thereto and, in the case of an Interest Period in excess of three
months, on each date occurring at three month intervals after the first day of
such Interest Period and (iii) in respect of each Loan, on any prepayment or
conversion (other than the prepayment or conversion of any Base Rate Loan) (on
the amount prepaid or converted), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in accordance
with Section 12.07(b).
(f) The Administrative Agent, upon determining the interest rate for
any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify
the Borrower and the Banks thereof.
1.09 INTEREST PERIODS. (a) At the time the Borrower gives a Notice
of Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 10:00 A.M. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of the Interest Period applicable to such Borrowing, which Interest
Period shall, at the option of the Borrower, be a one, two, three, six or, to
the extent
-8-
<PAGE>
available to all Banks with a Commitment under the respective Facility, nine or
twelve month period. Notwithstanding anything to the contrary contained above:
(i) the initial Interest Period for any Borrowing of Eurodollar Loans
shall commence on the date of such Borrowing (including the date of any
conversion from a Borrowing of Base Rate Loans) and each Interest Period
occurring thereafter in respect of such Borrowing shall commence on the day
on which the next preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, PROVIDED that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) no Interest Period with respect to a Borrowing of Revolving Loans
shall extend beyond the RF Maturity Date;
(v) no Interest Period with respect to any Borrowing of Revolving
Loans may be elected that would extend beyond any date upon which a
Scheduled Reduction is required to be made if, after giving effect to the
selection of such Interest Period, the aggregate principal amount of
Revolving Loans maintained as Eurodollar Loans with Interest Periods ending
after such date would exceed the Total Revolving Commitment after giving
effect to such Scheduled Reduction;
(vi) no Interest Period with respect to any Borrowing of Term
Loans may be elected that would extend beyond any date upon which a
Scheduled Repayment is required to be made in respect of such Term Loans if,
after giving effect to the selection of such Interest Period, the aggregate
principal amount of Term Loans maintained under the respective Facility as
Eurodollar Loans with Interest Periods ending after such date would exceed
the aggregate principal amount of Term Loans under such Facility permitted
to be outstanding after such Scheduled Repayment; and
(vii) no Interest Period may be elected at any time when a Default
under Section 9.01 or an Event of Default is then in existence if either
Agent or the
-9-
<PAGE>
Required Banks shall have determined in its or their sole discretion not to
permit such election.
(b) If upon the expiration of any Interest Period, the Borrower has
failed to (or may not) elect a new Interest Period to be applicable to the
respective Borrowing of Eurodollar Loans as provided above, the Borrower shall
be deemed to have elected to convert such Borrowing into a Borrowing of Base
Rate Loans effective as of the expiration date of such current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Bank shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any Interest
Period that, by reason of any changes arising after the date of this
Agreement affecting the interbank Eurodollar market, adequate and fair means
do not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than taxes covered by Section 4.04 and any
increased cost or reduction in the amount received or receivable resulting
from the imposition of or a change in the rate of taxes or similar charges)
because of (x) any change since the Effective Date in any applicable law,
governmental rule, regulation, guideline or order (or in the interpretation
or administration thereof and including the introduction of any new law or
governmental rule, regulation, guideline or order) (such as, for example,
but not limited to, a change in official reserve requirements, but, in all
events, excluding reserves required under Regulation D to the extent
included in the computation of the Eurodollar Rate) and/or (y) other
circumstances affecting such Bank, the interbank Eurodollar market or the
position of such Bank in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has become unlawful by compliance by such Bank in good faith with any
law, governmental rule, regulation, guideline introduced or changed after
the Effective Date;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall (x) on such date and (y) within ten Business Days of
the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Banks). Thereafter (x) in the case of clause (i)
-10-
<PAGE>
above, Eurodollar Loans shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Banks that the circumstances
giving rise to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred shall be deemed rescinded
by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to
such Bank, upon written demand therefor, such additional amounts (in the form of
an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its reasonable discretion shall determine after
consultation with the Borrower) as shall be required to compensate such Bank for
such increased costs or reductions in amounts receivable hereunder (a written
notice as to the additional amounts owed to such Bank, describing the basis for
such increased costs and showing the calculation thereof, submitted to the
Borrower by such Bank shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section 1.10(b) as promptly
as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii), the Borrower may (and in the
case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Administrative
Agent telephonic notice (confirmed promptly in writing) thereof on the same date
that the Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or
(iii), or (ii) if the affected Eurodollar Loan is then outstanding, upon at
least three Business Days' notice to the Administrative Agent, require the
affected Bank to convert each such Eurodollar Loan into a Base Rate Loan,
PROVIDED that if more than one Bank is affected at any time, then all affected
Banks must be treated the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the Effective Date,
the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by such Bank or any corporation controlling such Bank
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Bank's or such
other corporation's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Bank or such other
corporation could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Bank's or such other corporation's
policies with respect to capital adequacy), then from time to time, within 15
days after demand by such Bank (with a copy to the Administrative Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
-11-
<PAGE>
compensate such Bank or such other corporation for such reduction. Each Bank,
upon determining in good faith that any additional amounts will be payable
pursuant to this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall describe the basis for such claim and set forth the
calculation of such additional amounts, although the failure to give any such
notice shall not release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt
of such notice.
1.11 COMPENSATION. (a) The Borrower shall compensate each Bank, upon
its written request (which request shall set forth the basis for requesting such
compensation), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by such Bank to
fund its Eurodollar Loans but excluding in any event the loss of anticipated
profits) which such Bank may sustain: (i) if for any reason (other than a
default by such Bank or the Administrative Agent) a Borrowing of Eurodollar
Loans does not occur on a date specified therefor in a Notice of Borrowing or
Notice of Conversion (whether or not withdrawn by the Borrower or deemed
withdrawn pursuant to Section 1.10(a)); (ii) if any prepayment, repayment or
conversion of any of its Eurodollar Loans occurs on a date which is not the last
day of an Interest Period applicable thereto; (iii) if any prepayment of any of
its Eurodollar Loans is not made on any date specified in a notice of prepayment
given by the Borrower; or (iv) as a consequence of (x) any other default by the
Borrower to repay its Eurodollar Loans when required by the terms of this
Agreement or (y) an election made pursuant to Section 1.10(b).
(b) Notwithstanding anything in this Agreement to the contrary, to the
extent any notice required by Section 1.10, 1.11, 2.06 or 4.04 is given by any
Bank more than 90 days after such Bank obtained, or reasonably should have
obtained, knowledge of the occurrence of the event giving rise to the additional
costs of the type described in such Section, such Bank shall not be entitled to
compensation under Section 1.10, 2.06 or 4.04 for any amounts incurred or
accruing prior to the giving of such notice to the Borrower.
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.06 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans affected by such
event, PROVIDED that such designation is made on such terms that such Bank and
its lending office suffer no material economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such Section. Nothing in this Section 1.12 shall
affect or postpone any of the obligations of the Borrower or the right of any
Bank provided in Section 1.10, 2.06 or 4.04.
-12-
<PAGE>
1.13 REPLACEMENT OF BANKS. (x) Upon the occurrence of any event
giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c),
Section 2.06 or Section 4.04 with respect to any Bank which results in such Bank
charging to the Borrower increased costs, (y) if a Bank becomes a Defaulting
Bank and/or (z) in the case of a refusal by a Bank to consent to a proposed
change, waiver, discharge or termination with respect to this Agreement which
has been approved by the Required Banks as provided in Section 12.12(b), the
Borrower shall have the right, if no Default or Event of Default then exists, to
replace such Bank (the "Replaced Bank") with one or more other Eligible
Transferee or Transferees, none of whom shall constitute a Defaulting Bank at
the time of such replacement (collectively, the "Replacement Bank") reasonably
acceptable to the Administrative Agent, PROVIDED that (i) at the time of any
replacement pursuant to this Section 1.13, the Replacement Bank shall enter into
one or more Assignment Agreements pursuant to Section 12.04(b) (and with all
fees payable pursuant to said Section 12.04(b) to be paid by the Replacement
Bank) pursuant to which the Replacement Bank shall acquire all of the
Commitments and outstanding Loans of, and in each case participations in Letters
of Credit by, the Replaced Bank and, in connection therewith, shall pay to (x)
the Replaced Bank in respect thereof an amount equal to the sum of (A) an amount
equal to the principal of, and all accrued interest on, all outstanding Loans of
the Replaced Bank, (B) an amount equal to all Unpaid Drawings that have been
funded by (and not reimbursed to) such Replaced Bank, together with all then
unpaid interest with respect thereto at such time and (C) an amount equal to all
accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to
Section 3.01, (y) the Letter of Credit Issuer an amount equal to such Replaced
Bank's RF Percentage of any Unpaid Drawing (which at such time remains an Unpaid
Drawing) to the extent such amount was not theretofore funded by such Replaced
Bank and (z) BTCo, any portion of a Mandatory Borrowing as to which the Replaced
Bank is then in default, and (ii) all obligations of the Borrower owing to the
Replaced Bank (other than those specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Bank concurrently with such
replacement. Upon the execution of the respective Assignment Agreements, the
payment of amounts referred to in clauses (i) and (ii) above and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Note or Notes executed by the Borrower, the Replacement Bank shall
become a Bank hereunder and the Replaced Bank shall cease to constitute a Bank
hereunder, except with respect to indemnification provisions applicable to the
Replaced Bank under this Agreement, which shall survive as to such Replaced
Bank.
SECTION 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that the Letter of Credit
Issuer at any time and from time to time on or after the Initial Borrowing Date
and prior to the RF Maturity Date issue, for the account of the Borrower and in
support of (x) trade obligations of the
-13-
<PAGE>
Borrower and/or its Subsidiaries incurred in the ordinary course of business
and/or (y) such other obligations of the Borrower and/or its Subsidiaries
incurred in the ordinary course of business or otherwise acceptable to the
Administrative Agent and, subject to and upon the terms and conditions herein
set forth, the Letter of Credit Issuer agrees to issue from time to time,
irrevocable letters of credit (payable on a sight basis, in the case of Trade
Letters of Credit) in such form as may be approved by the Letter of Credit
Issuer (each such letter of credit, a "Letter of Credit" and, collectively, the
"Letters of Credit"). All Letters of Credit shall be denominated in Dollars.
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued, the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $5,000,000 or (y) when added to the aggregate principal amount
of all Revolving Loans made by Non-Defaulting Banks and all Swingline Loans then
outstanding, the Adjusted Total Revolving Commitment at such time and (ii) (x)
each Standby Letter of Credit shall have an expiry date occurring not later than
one year after such Letter of Credit's date of issuance, provided that any such
Standby Letter of Credit may be extendable for successive periods of up to 12
months on terms acceptable to the Letter of Credit Issuer and in no event shall
any Standby Letter of Credit have an expiry date occurring later than the
Business Day next preceding the RF Maturity Date and (y) each Trade Letter of
Credit shall have an expiry date occurring no later than the earlier of (a) 365
days after the issuance thereof or (b) 15 days prior to the RF Maturity Date.
(c) Notwithstanding the foregoing, in the event a Bank Default exists,
the Letter of Credit Issuer shall not be required to issue any Letter of Credit
unless the Letter of Credit Issuer has entered into arrangements satisfactory to
it and the Borrower to eliminate the Letter of Credit Issuer's risk with respect
to the participation in Letters of Credit of the Defaulting Bank or Banks,
including by cash collateralizing such Defaulting Bank's or Banks' Revolving
Percentage of the Letter of Credit Outstandings.
(d) Annex XI hereto contains a description of all letters of credit
issued pursuant to the Existing Credit Agreement and outstanding on the
Effective Date. Each such letter of credit, including any extension or renewal
thereof (each, as amended from time to time in accordance with the terms thereof
and hereof, an "Existing Letter of Credit") shall constitute a "Letter of
Credit" for all purposes of this Agreement, issued, for purposes of Section
2.05(a), on the Initial Borrowing Date. Any Bank hereunder to the extent it has
issued an Existing Letter of Credit that is to remain outstanding on the
Effective Date shall constitute the "Letter of Credit Issuer" with respect to
such Letter of Credit for all purposes of this Agreement.
-14-
<PAGE>
2.02 MINIMUM INITIAL STATED AMOUNT. The initial Stated Amount of each
Letter of Credit shall be not less than $50,000 or such lesser amount acceptable
to the Letter of Credit Issuer.
2.03 LETTER OF CREDIT REQUESTS; NOTICES OF ISSUANCE. (a) Whenever it
desires that a Letter of Credit be issued, the Borrower shall give the
Administrative Agent and the Letter of Credit Issuer written notice (including
by way of facsimile transmission) in the form of Exhibit C thereof prior to 1:00
P.M. (New York time) at least three Business Days (or such shorter period as may
be acceptable to the Letter of Credit Issuer) prior to the proposed date of
issuance (which shall be a Business Day) (each, a "Letter of Credit Request"),
which Letter of Credit Request shall include any other documents that the Letter
of Credit Issuer customarily requires in connection therewith.
(b) The Letter of Credit Issuer shall, promptly after each issuance of
or amendment to a Standby Letter of Credit by it, give the Administrative Agent,
each RF Bank and the Borrower written notice of such issuance or amendment,
accompanied by a copy to the Administrative Agent of such Standby Letter of
Credit or amendment.
(c) Each Letter of Credit Issuer (other than BTCo) shall deliver to
the Administrative Agent, promptly on the first Business Day of each week, by
facsimile transmission, the aggregate daily Stated Amount available to be drawn
under the outstanding Trade Letters of Credit issued by such Letter of Credit
Issuer for the previous week. The Administrative Agent shall, within 10 days
after the last Business Day of each calendar month, deliver to each Participant
a report setting forth for such period the aggregate daily Stated Amount
available to be drawn under all outstanding Trade Letters of Credit during the
preceding calendar month.
2.04 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the
Administrative Agent at the Payment Office, for any payment or disbursement made
by the Letter of Credit Issuer under any Letter of Credit (each such amount so
paid or disbursed until reimbursed, an "Unpaid Drawing") immediately after, and
in any event on the date on which the Borrower is notified by the Letter of
Credit Issuer of such payment or disbursement with interest on the amount so
paid or disbursed by the Letter of Credit Issuer, to the extent not reimbursed
prior to 3:00 P.M. (New York time) on the date of such payment or disbursement,
from and including the date paid or disbursed to but not including the date the
Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall
be the Base Rate plus the Applicable Base Rate Margin as in effect from time to
time (plus an additional 2% per annum if not reimbursed by the third Business
Day after the date of such notice of payment or disbursement), such interest
also to be payable on demand.
-15-
<PAGE>
(b) The Borrower's obligation under this Section 2.04 to reimburse the
Letter of Credit Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Letter of Credit Issuer, the
Administrative Agent or any Bank, including, without limitation, any defense
based upon the failure of any drawing under a Letter of Credit to conform
substantially to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such drawing; PROVIDED,
HOWEVER, that the Borrower shall not be obligated to reimburse the Letter of
Credit Issuer for any wrongful payment made by the Letter of Credit Issuer under
a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer as
determined by a court of competent jurisdiction.
2.05 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other RF
Bank, and each such RF Bank (each, a "Participant") shall be deemed irrevocably
and unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Participant's Adjusted RF Percentage, in such Letter of
Credit, each substitute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto (although
the Letter of Credit Fee shall be payable directly to the Administrative Agent
for the account of the RF Banks as provided in Section 3.01(b) and the
Participants shall have no right to receive any portion of any Facing Fees) and
any security therefor or guaranty pertaining thereto. Upon any change in the
Revolving Commitments or Adjusted RF Percentages of the RF Banks pursuant to
Section 1.13 and/or 12.04(b) or upon a Bank Default, it is hereby agreed that,
with respect to all outstanding Letters of Credit and Unpaid Drawings, there
shall be an automatic adjustment to the participations pursuant to this Section
2.05 to reflect the new Adjusted RF Percentages of the assigning and assignee RF
Bank or of all RF Banks, as the case may be.
(b) In determining whether to pay under any Letter of Credit, the
Letter of Credit Issuer shall not have any obligation relative to the
Participants other than to determine that any documents required to be delivered
under such Letter of Credit have been delivered and that they substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by the Letter of Credit Issuer under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for the Letter of Credit
Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any payment
under any Letter of Credit and the Borrower shall not have reimbursed such
amount in full to the
-16-
<PAGE>
Letter of Credit Issuer pursuant to Section 2.04(a), the Letter of Credit Issuer
shall promptly notify the Administrative Agent, and the Administrative Agent
shall promptly notify each Participant of such failure, and each Participant
shall promptly and unconditionally pay to the Administrative Agent for the
account of the Letter of Credit Issuer, the amount of such Participant's
Adjusted RF Percentage of such payment in U.S. dollars and in same day funds;
PROVIDED, HOWEVER, that no Participant shall be obligated to pay to the
Administrative Agent its Adjusted RF Percentage of such unreimbursed amount for
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer. If the Administrative
Agent so notifies any Participant required to fund an Unpaid Drawing under a
Letter of Credit prior to 11:00 A.M. (New York time) on any Business Day, such
Participant shall make available to the Administrative Agent for the account of
the Letter of Credit Issuer such Participant's Adjusted RF Percentage of the
amount of such payment on such Business Day in same day funds. If and to the
extent such Participant shall not have so made its Adjusted RF Percentage of the
amount of such Unpaid Drawing available to the Administrative Agent for the
account of the Letter of Credit Issuer, such Participant agrees to pay to the
Administrative Agent for the account of the Letter of Credit Issuer, forthwith
on demand such amount, together with interest thereon, for each day from such
date until the date such amount is paid to the Administrative Agent for the
account of the Letter of Credit Issuer at the overnight Federal Funds Effective
Rate. The failure of any Participant to make available to the Administrative
Agent for the account of the Letter of Credit Issuer its Adjusted RF Percentage
of any Unpaid Drawing under any Letter of Credit shall not relieve any other
Participant of its obligation hereunder to make available to the Administrative
Agent for the account of the Letter of Credit Issuer its Adjusted RF Percentage
of any payment under any Letter of Credit on the date required, as specified
above, but no Participant shall be responsible for the failure of any other
Participant to make available to the Administrative Agent for the account of the
Letter of Credit Issuer such other Participant's Adjusted RF Percentage of any
such payment.
(d) Whenever the Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of the Letter of Credit Issuer any payments from the Participants
pursuant to clause (c) above, the Letter of Credit Issuer shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Participant which has paid its Adjusted RF Percentage thereof, in U.S. dollars
and in same day funds, an amount equal to such Participant's Adjusted RF
Percentage of the principal amount thereof and interest thereon accruing at the
overnight Federal Funds Effective Rate after the purchase of the respective
participations.
(e) The obligations of the Participants to make payments to the
Administrative Agent for the account of the Letter of Credit Issuer with respect
to Letters of Credit shall be irrevocable and not subject to counterclaim,
set-off or other defense or any other qualification or exception whatsoever
(PROVIDED that no Participant shall be required
-17-
<PAGE>
to make payments resulting from the Administrative Agent's gross negligence or
willful misconduct) and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any of
the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right which
the Borrower or any of its Subsidiaries may have at any time against a
beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, the Letter of Credit Issuer, any Bank or other Person,
whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including
any underlying transaction between the Borrower and the beneficiary named in
any such Letter of Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
(f) To the extent the Letter of Credit Issuer is not indemnified by
the Borrower, the Participants will reimburse and indemnify the Letter of Credit
Issuer, in proportion to their respective Adjusted RF Percentages, for and
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements of whatsoever kind
or nature which may be imposed on, asserted against or incurred by the Letter of
Credit Issuer in performing its respective duties in any way relating to or
arising out of its issuance of Letters of Credit; PROVIDED that no Participants
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Letter of Credit Issuer's gross negligence or willful
misconduct.
2.06 INCREASED COSTS. If at any time after the Effective Date, the
adoption or effectiveness of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Letter of Credit
Issuer or any Participant with any request or directive
-18-
<PAGE>
(whether or not having the force of law) by any such authority, central bank or
comparable agency shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against Letters of
Credit issued by the Letter of Credit Issuer or such Participant's participation
therein, or (ii) shall impose on the Letter of Credit Issuer or any Participant
any other conditions affecting this Agreement, any Letter of Credit or such
Participant's participation therein; and the result of any of the foregoing is
to increase the cost to the Letter of Credit Issuer or such Participant of
issuing, maintaining or participating in any Letter of Credit, or to reduce the
amount of any sum received or receivable by the Letter of Credit Issuer or such
Participant hereunder (other than any increased cost or reduction in the amount
received or receivable resulting from the imposition of or a change in the rate
of taxes or similar charges), then, upon demand to the Borrower by the Letter of
Credit Issuer or such Participant (a copy of which notice shall be sent by the
Letter of Credit Issuer or such Participant to the Administrative Agent), the
Borrower shall pay to the Letter of Credit Issuer or such Participant such
additional amount or amounts as will compensate the Letter of Credit Issuer or
such Participant for such increased cost or reduction. A certificate submitted
to the Borrower by the Letter of Credit Issuer or such Participant, as the case
may be (a copy of which certificate shall be sent by the Letter of Credit Issuer
or such Participant to the Administrative Agent), setting forth the basis for
the determination of such additional amount or amounts necessary to compensate
the Letter of Credit Issuer or such Participant as aforesaid shall be conclusive
and binding on the Borrower absent manifest error, although the failure to
deliver any such certificate shall not release or diminish any of the Borrower's
obligations to pay additional amounts pursuant to this Section 2.06 upon the
subsequent receipt thereof.
SECTION 3. FEES; COMMITMENTS.
3.01 FEES. (a) The Borrower agrees to pay to the Agent a commitment
commission ("Commitment Commission") for the account of each Non-Defaulting Bank
with a Revolving Commitment for the period from and including the Initial
Borrowing Date to but not including the date upon which the Total Revolving
Commitment has been terminated, computed at a rate for each day equal to 1/2 of
1% per annum on such Bank's Unutilized Revolving Commitment on such day. Such
Commitment Commission shall be due and payable in arrears on the last Business
Day of each March, June, September and December (commencing March 31, 1997) and
on the date upon which the Total Revolving Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent, for the
account of each Non-Defaulting Bank, PRO RATA on the basis of their respective
Adjusted RF Percentages, a fee in respect of each Letter of Credit (the "Letter
of Credit Fee") computed for each day at a per annum rate equal to (x) in the
case of a Standby Letter of Credit, the Applicable Eurodollar Margin for such
day multiplied by the then daily Stated Amount of such Standby Letter of Credit
and (y) in the case of a Trade Letter of Credit, 1.25% on the
-19-
<PAGE>
then daily Stated Amount of such Trade Letter of Credit. Accrued Letter of
Credit Fees shall be due and payable quarterly in arrears on the last Business
Day of each March, June, September and December of each year (commencing March
31, 1997) and on the date upon which the Total Revolving Commitment is
terminated.
(c) The Borrower agrees to pay to the Letter of Credit Issuer a fee in
respect of each Letter of Credit (the "Facing Fee") computed for each day at the
rate of 1/4 of 1% per annum on the then Stated Amount of such Letter of Credit,
PROVIDED that in no event shall the annual Facing Fee be less than $500.
Accrued Facing Fees shall be due and payable quarterly in arrears on the last
Business Day of each March, June, September and December of each year
(commencing March 31, 1997) and on the date upon which the Total Revolving
Commitment is terminated.
(d) The Borrower agrees to pay directly to the Letter of Credit Issuer
upon each issuance of, payment under, and/or amendment of, a Letter of Credit
such amount as shall at the time of such issuance, payment or amendment be the
administrative charge which the Letter of Credit Issuer is customarily charging
for issuances of, payments under or amendments of, letters of credit issued by
it.
(e) The Borrower shall pay to (x) each Agent on the Initial Borrowing
Date, for its own account and/or for distribution to the Banks, such fees as
heretofore agreed by the Borrower and the Agents and (y) the Administrative
Agent, for its own account, such other fees as agreed to between the Borrower
and the Administrative Agent, when and as due.
(f) All computations of Fees shall be made in accordance with Section
12.07(b).
AT 3.02 VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least one Business
Day's prior written notice (or telephonic notice confirmed in writing) to the
Administrative Agent at its Notice Office (which notice shall be deemed to be
given on a certain day only if given before 11:00 A.M. (New York time) on such
day and shall be promptly transmitted by the Administrative Agent to each of the
Banks), the Borrower shall have the right, without premium or penalty, to
terminate or partially reduce the Total Unutilized Revolving Commitment,
PROVIDED that (x) any such termination shall apply to proportionately and
permanently reduce the Revolving Commitment of each Bank, (y) no such reduction
shall reduce any Non-Defaulting Bank's Revolving Commitment to an amount that is
less than the outstanding Revolving Loans of such Bank and (z) any partial
reduction pursuant to this Section 3.02 shall be in the amount of at least
$1,000,000.
3.03 MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Total
Commitment (and the A Term Commitment, B Term Commitment and Revolving
Commitment of
-20-
<PAGE>
each Bank) shall terminate in its entirety on the Expiration Date unless the
Initial Borrowing Date has occurred on or before such date.
(b) Each of the Total A Term Commitment and Total B Term Commitment
shall terminate in its entirety on the Initial Borrowing Date (after giving
effect to the making of A Term Loans and B Term Loans on such date).
(c) The Total Revolving Commitment shall terminate in its entirety on
the earlier of (i) the RF Maturity Date and (ii) the date on which any Change of
Control occurs.
(d) The Total Revolving Commitment shall be reduced on each of the
dates set forth below in the aggregate amount specified opposite such date
(each, a "Scheduled Reduction").
Date Amount
----- -------
November 13, 2000 $ 5,000,000
November 13, 2001 $10,000,000
(e) On each date upon which a mandatory repayment of Term Loans
pursuant to Section 4.02(A)(c), (d), (e), (f), (g) or (h) is required (and
exceeds in amount the aggregate principal amount of Term Loans then outstanding)
or would be required if Term Loans were then outstanding, the Total Revolving
Commitment shall be permanently reduced by the amount, if any, by which the
amount required to be applied pursuant to said Section (determined as if an
unlimited amount of Term Loans were actually outstanding) exceeds the aggregate
principal amount of Term Loans then outstanding.
(f) Each partial reduction of the Total Revolving Commitment pursuant
to this Section 3.03 shall apply proportionately to the Revolving Commitment of
each Bank.
SECTION 4. PAYMENTS.
4.01 VOLUNTARY PREPAYMENTS. The Borrower shall have the right to
prepay Loans in whole or in part, without premium or penalty, from time to time
on the following terms and conditions: (i) the Borrower shall give the
Administrative Agent at the Payment Office written notice (or telephonic notice
promptly confirmed in writing) of its intent to prepay the Loans, whether such
Loans are A Term Loans, B Term Loans, Revolving Loans (and, if so, whether
Acquisition Loans or Working Capital Loans) or Swingline Loans, the amount of
such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s)
pursuant to which made, which notice shall be given by the Borrower at least one
Business Day prior to the date of such prepayment with respect to Base Rate
Loans (other than Swingline Loans, with respect to which notice shall be given
by the Borrower on the day
-21-
<PAGE>
of prepayment) and at least two Business Days prior to the date of such
prepayment with respect to Eurodollar Loans, which notice shall promptly be
transmitted by the Administrative Agent to each of the Banks; (ii) (x) each
partial prepayment of any Borrowing (other than a Borrowing of Swingline Loans)
shall be in an aggregate principal amount of at least $500,000 and (y) each
partial prepayment of any Borrowing of Swingline Loans shall be in an aggregate
principal amount of at least $50,000, PROVIDED that no partial prepayment of
Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate
principal amount of the Loans outstanding pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount applicable thereto; (iii) at the
time of any prepayment of Eurodollar Loans pursuant to this Section 4.01 on any
date other than the last day of the Interest Period applicable thereto, the
Borrower shall pay the amounts required pursuant to Section 1.11; (iv) each
prepayment in respect of any Loans made pursuant to a Borrowing shall be applied
PRO RATA among such Loans, PROVIDED, that at the Borrower's election in
connection with any prepayment of Revolving Loans pursuant to this Section 4.01,
such prepayment shall not be applied to any Revolving Loans of a Defaulting
Bank; and (v) each prepayment of Term Loans pursuant to this Section 4.01 shall
be applied to A Term Loans (in an amount equal to the A TF Percentage of such
prepayment) and B Term Loans (in an amount equal to the B TF Percentage of such
prepayment) and shall reduce the remaining Scheduled Repayments of each of the A
Term Loans and the B Term Loans in direct order of maturity.
4.02 MANDATORY PREPAYMENTS.
(A) REQUIREMENTS:
(a) (i) If on any date the sum of the aggregate outstanding principal
amount of Revolving Loans made by Non-Defaulting Banks, Swingline Loans and the
Letter of Credit Outstandings, exceeds the Adjusted Total Revolving Commitment
as then in effect, the Borrower shall repay on such date the principal of
Swingline Loans, and if no Swingline Loans are or remain outstanding, Revolving
Loans of Non-Defaulting Banks, in an aggregate amount equal to such excess. If,
after giving effect to the repayment of all outstanding Swingline Loans and
Revolving Loans of Non-Defaulting Banks, the aggregate amount of Letter of
Credit Outstandings exceeds the Adjusted Total Revolving Commitment then in
effect, the Borrower shall pay to the Administrative Agent an amount in cash
and/or Cash Equivalents equal to such excess (up to the aggregate amount of the
Letter of Credit Outstandings at such time) and the Administrative Agent shall
hold such payment as security for the obligations of the Borrower hereunder
pursuant to a cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Administrative Agent (which shall permit certain
investments in Cash Equivalents reasonably satisfactory to the Administrative
Agent, until the proceeds are applied to the secured obligations or until all
Letters of Credit so secured expire undrawn, at which time such amount shall be
returned
-22-
<PAGE>
to the Borrower). In addition, if on any date (after giving effect to any other
payments on such date) the aggregate outstanding principal amount of Acquisition
Loans exceeds the Acquisition Sublimit in effect, the Borrower shall repay on
such date that principal amount of Acquisition Loans in an aggregate amount
equal to such excess.
(ii) If on any date the aggregate outstanding principal amount of
the Revolving Loans made by a Defaulting Bank exceeds the Revolving Commitment
of such Defaulting Bank, the Borrower shall repay principal of Revolving Loans
of such Defaulting Bank in an amount equal to such excess.
(b) (i) On the last Business Day of each fiscal quarter of Holdings
ending closest to each date set forth below, the Borrower shall be required to
repay the principal amount of A Term Loans set forth opposite such date (each
such repayment, together with each repayment of B Term Loans required by clause
(b)(ii) below, as the same may be reduced as provided in Sections 4.01 and
4.02(B), a "Scheduled Repayment"):
Date Amount
---- ------
March 31, 1997 $86,250
June 30, 1997 $86,250
September 30, 1997 $230,000
December 31, 1997 $172,500
March 31, 1998 $262,500
June 30, 1998 $262,500
September 30, 1998 $700,000
December 31, 1998 $525,000
March 31, 1999 $525,000
June 30, 1999 $525,000
September 30, 1999 $1,400,000
December 31, 1999 $1,050,000
March 31, 2000 $825,000
June 30, 2000 $825,000
September 30, 2000 $2,200,000
December 31, 2000 $1,650,000
March 31, 2001 $866,250
June 30, 2001 $866,250
September 30, 2001 $2,310,000
December 31, 2001 $1,732,500
-23-
<PAGE>
Date Amount
---- ------
March 31, 2002 $1,450,000
A TF Maturity Date $1,450,000
(ii) On the last Business Day of each fiscal quarter of Holdings
ending closest to each date set forth below, the Borrower shall be required to
repay the principal amount of B Term Loans as set forth opposite such date:
Date Amount
---- ------
March 31, 1997 $62,500
June 30, 1997 $62,500
September 30, 1997 $62,500
December 31, 1997 $62,500
March 31, 1998 $62,500
June 30, 1998 $62,500
September 30, 1998 $62,500
December 31, 1998 $62,500
March 31, 1999 $62,500
June 30, 1999 $62,500
September 30, 1999 $62,500
December 31, 1999 $62,500
March 31, 2000 $62,500
June 30, 2000 $62,500
September 30, 2000 $62,500
December 31, 2000 $62,500
March 31, 2001 $62,500
June 30, 2001 $62,500
September 30, 2001 $62,500
December 31, 2001 $62,500
March 31, 2002 $62,500
June 30, 2002 $62,500
September 30, 2002 $3,000,000
December 31, 2002 $2,125,000
-24-
<PAGE>
Date Amount
---- ------
March 31, 2003 $1,725,000
June 30, 2003 $1,725,000
September 30, 2003 $4,600,000
December 31, 2003 $3,450,000
March 31, 2004 $3,500,000
B TF Maturity Date $3,500,000
(c) On the fifth Business Day following the date of receipt thereof by
Holdings and/or any of its Subsidiaries of the Cash Proceeds from any Asset
Sale, an amount equal to 100% of the Net Cash Proceeds from such Asset Sale
shall be applied as a mandatory repayment of principal of the then outstanding
Term Loans, PROVIDED that up to an aggregate of $3,000,000 of the Net Cash
Proceeds from Asset Sales shall not be required to be used to so repay Term
Loans to the extent the Borrower elects, as hereinafter provided, to cause such
Net Cash Proceeds to be reinvested in Reinvestment Assets (a "Reinvestment
Election"). The Borrower may exercise its Reinvestment Election (within the
parameters specified in the preceding sentence) with respect to an Asset Sale if
(x) no Default or Event of Default exists and (y) the Borrower delivers a
Reinvestment Notice to the Administrative Agent no later than five Business Days
following the date of the consummation of the respective Asset Sale, with such
Reinvestment Election being effective with respect to the Net Cash Proceeds of
such Asset Sale equal to the Anticipated Reinvestment Amount specified in such
Reinvestment Notice.
(d) On the date of the receipt thereof by Holdings and/or any of its
Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith) of
the incurrence of Indebtedness by Holdings or any of its Subsidiaries (other
than Indebtedness permitted by Section 8.04 as in effect on the Effective Date),
shall be applied as a mandatory repayment of principal of the then outstanding
Term Loans.
(e) On the date of the receipt thereof by Holdings and/or any of its
Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith) of
any sale or issuance of its equity or any equity contribution (other than equity
issued to management and other employees of Holdings and its Subsidiaries as
provided for in Section 8.09(a)(ii) and in connection with the Equity Financing)
and 100% of any amount of cash received by the Borrower in connection with any
capital contributions shall be applied as a mandatory repayment of principal of
the then outstanding Term Loans.
-25-
<PAGE>
(f) On each date which is 90 days after the last day of each fiscal
year of Holdings (commencing with the fiscal year ending on December 31, 1997),
75% of Excess Cash Flow for the fiscal year then last ended (or 50% if the
Leverage Ratio as of the last day of such fiscal year was 4.0:1 or less) (or in
the case of the first payment to be made hereunder, the period commencing on the
Initial Borrowing Date and ending December 31, 1997) shall be applied as a
mandatory repayment of principal of the then outstanding Term Loans.
(g) On the Reinvestment Prepayment Date with respect to a Reinvestment
Election, an amount equal to the Reinvestment Prepayment Amount, if any, for
such Reinvestment Election shall be applied as a repayment of the principal
amount of the then outstanding Term Loans.
(h) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, to the extent not theretofore repaid pursuant to the provisions
of this Agreement, (i) all then outstanding Swingline Loans shall be repaid in
full on the Swingline Expiry Date and (ii) all outstanding Revolving Loans shall
be repaid in full on the RF Maturity Date.
(i) On the date on which any Change of Control occurs, the outstanding
principal amount of the Term Loans, if any, shall become due and payable in
full.
(B) APPLICATION:
(a) Each mandatory repayment of Term Loans required to be made
pursuant to Section 4.02(A) (other than pursuant to clause (b) thereof) shall be
applied (x) to the A Term Loans in an amount equal to the A TF Percentage of
such prepayment and to the B Term Loans in an amount equal to the B TF
Percentage of such prepayment and (y) to reduce the then remaining Scheduled
Repayments of the respective Facility on a PRO RATA basis (based upon the then
remaining Scheduled Repayments of the respective Facility).
(b) With respect to each prepayment of Loans required by Section 4.02,
the Borrower may designate the Types of Loans which are to be prepaid and the
specific Borrowing(s) under the affected Facility pursuant to which made,
PROVIDED that (i) Eurodollar Loans may so be designated for prepayment pursuant
to this Section 4.02 only on the last day of an Interest Period applicable
thereto unless all Eurodollar Loans made pursuant to such Facility with Interest
Periods ending on such date of required prepayment and all Base Rate Loans made
pursuant to such Facility have been paid in full; (ii) if any prepayment of
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding Loans made pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount for such Borrowing, such Borrowing shall be immediately
converted into Base Rate Loans; (iii) each prepayment of any Revolving Loans
made by Non-Defaulting Banks pursuant to a Borrowing shall be applied PRO RATA
among such Revolving Loans; and (iv) each
-26-
<PAGE>
prepayment of any Revolving Loans made by Defaulting Banks pursuant to a
Borrowing shall be applied PRO RATA among such Revolving Loans. In the absence
of a designation by the Borrower as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such designation in its
sole discretion with a view, but no obligation, to minimize breakage costs owing
under Section 1.11.
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement shall be made to the
Administrative Agent for the ratable (based on its PRO RATA share) account of
the Banks entitled thereto, not later than 1:00 P.M. (New York time) on the date
when due and shall be made in immediately available funds and in lawful money of
the United States of America at the Payment Office, it being understood that
written notice by the Borrower to the Administrative Agent to make a payment
from the funds in the Borrower's account at the Payment Office shall constitute
the making of such payment to the extent of such funds held in such account.
Any payments under this Agreement which are made later than 1:00 P.M. (New York
time) shall be deemed to have been made on the next succeeding Business Day.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
4.04 NET PAYMENTS. (a) All payments made by the Borrower hereunder
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, with respect to the Administrative Agent or any Bank, except as
provided in the second succeeding sentence, any tax imposed on or measured by
the net income or net profits of the Administrative Agent or a Bank pursuant to
the laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office is located, or in the case of any Bank, the
applicable lending office of such Bank is located or any subdivision thereof or
therein) and all interest, penalties or similar liabilities with respect to such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
(all such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every payment of all amounts
due under this Agreement or under any Note, after withholding or deduction for
or on account of any Taxes, will not be less than the amount provided for herein
or in such Note. The Borrower will furnish to the Administrative Agent within
45 days after the date the payment of any Taxes is due pursuant to applicable
law certified copies of tax receipts evidencing such payment by the
-27-
<PAGE>
Borrower. The Borrower agrees to indemnify and hold harmless and reimburse the
Administrative Agent and each Bank upon its written request, for the amount of
any Taxes so levied or imposed and paid by the Administrative Agent or Bank, as
the case may be.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for Federal income tax purposes
agrees to deliver to the Borrower and the Administrative Agent on or prior to
the Effective Date, or in the case of a Bank that is an assignee or transferee
of an interest under this Agreement pursuant to Section 1.13 or 12.04 (unless
the respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or (ii)
if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit D (any such certificate, a "Section 4.04 Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
such Bank agrees that, from time to time after the Effective Date, when a lapse
in time or change in circumstances renders the previous certification obsolete
or inaccurate in any material respect, it will deliver to the Borrower and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section 4.04
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Bank to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement and any Note, or it shall immediately notify the
Borrower and the Administrative Agent of its inability to deliver any such Form
or Certificate in which case such Bank shall not be required to deliver any such
Form or Certificate pursuant to this Section 4.04(b). Notwithstanding anything
to the contrary contained in Section 4.04(a), but subject to Section 12.04(b)
and the immediately succeeding sentence, (x) the Borrower shall be entitled, to
the extent it is required to do so by law, to deduct or withhold income or
similar taxes imposed by the United States from interest, fees or other amounts
payable hereunder for the account of any Bank which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) for Federal
income tax purposes to the extent that such Bank has not provided to the
Borrower Internal Revenue Service Forms that establish a complete exemption from
such deduction or withholding and (y) the Borrower shall not be obligated
pursuant to Section 4.04(a) hereof to gross-up payments to be made to any such
Bank in respect of income or similar taxes imposed by the United States if (I)
such Bank has not provided to the Borrower the Internal Revenue Service Forms
required to be provided to the Borrower
-28-
<PAGE>
pursuant to this Section 4.04(b) or (II) in the case of a payment, other than
interest, to a Bank described in clause (ii) of the last sentence of this
Section 4.04(b) above, to the extent that such Forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section 4.04
and except as set forth in Section 12.04(b), the Borrower agrees to pay
additional amounts and to indemnify each Bank in the manner set forth in Section
4.04(a) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any Taxes deducted or withheld by it as
described in the immediately preceding sentence as a result of any changes after
the Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of such Taxes.
(c) If the Borrower pays any additional amount under this Section 4.04
to a Bank and such Bank determines in its sole discretion that it has actually
received or realized in connection therewith any refund or any reduction of, or
credit against, its Tax liabilities in or with respect to the taxable year in
which the additional amount is paid, such Bank shall pay to the Borrower an
amount that the Bank shall, in its sole discretion, determine is equal to the
net benefit, after tax, which was obtained by the Bank in such year as a
consequence of such refund, reduction or credit.
SECTION 5. CONDITIONS PRECEDENT.
5.01 CONDITIONS PRECEDENT TO INITIAL BORROWING DATE. The obligation
of the Banks to make Loans, and of the Letter of Credit Issuer to issue Letters
of Credit, on the Initial Borrowing Date is subject to the satisfaction of each
of the following conditions at such time:
(a) EFFECTIVENESS; NOTES. On or prior to the Initial Borrowing Date,
(i) the Effective Date shall have occurred and (ii) there shall have been
delivered to the Administrative Agent for the account of each Bank the
appropriate Note or Notes executed by the Borrower, in each case, in the amount,
maturity and as otherwise provided herein.
(b) OPINIONS OF COUNSEL. On the Initial Borrowing Date, the
Administrative Agent shall have received opinions, addressed to each Agent and
each of the Banks and dated the Initial Borrowing Date, from (i) Simpson,
Thacher and Bartlett, special New York counsel to the Credit Parties, which
opinion shall cover the matters contained in Exhibit E-1 hereto, (ii) Hinckley,
Allen & Snyder, special Rhode Island counsel to Acquisition Corp., AMTROL and
the Subsidiaries of AMTROL, which opinion shall cover the matters contained in
Exhibit E-2 hereto, (iii) White & Case, special counsel to the Agents, which
opinion shall cover the matters contained in Exhibit E-3 hereto and (iv) such
local counsel, if any, reasonably satisfactory to the Agents as the Agents may
request, which opinions shall cover the perfection of the security interests
granted pursuant to the Security Documents and
-29-
<PAGE>
such other matters incident to the transactions contemplated herein as the
Agents may reasonably request and shall be in form and substance satisfactory to
the Agents.
(c) CORPORATE PROCEEDINGS. (I) On the Initial Borrowing Date, the
Administrative Agent shall have received from each Credit Party a
certificate, dated the Initial Borrowing Date, signed by the President or any
Vice-President of each such Credit Party in the form of Exhibit F with
appropriate insertions and deletions, together with (x) copies of the
certificate of incorporation, by-laws or other organizational documents of
each such Credit Party, (y) the resolutions, or such other administrative
approval, of each such Credit Party referred to in such certificate and all
of the foregoing (including each such certificate of incorporation and
by-laws) shall be reasonably satisfactory to the Agents and (z) in the case
of the certificate from the Borrower, a statement that all of the applicable
conditions set forth in Sections 5.01(g), (h) and (i) and 5.02 exist as of
such date.
(II) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Documents shall be
reasonably satisfactory in form and substance to the Agents, and the
Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including good standing certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Agents may have reasonably requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
(d) PLANS; ETC. On or prior to the Initial Borrowing Date, there
shall have been made available to the Administrative Agent true and correct
copies of:
(i) any Plans of Holdings or any of its Subsidiaries, and for each
such Plan the most recently completed actuarial valuation prepared therefor
by such Plan's regular enrolled actuary and the Schedule B (Actuarial
Information) to the most recent annual report (Form 5500 Series) for each
Plan most recently filed with the Internal Revenue Service;
(ii) any collective bargaining agreements or any other similar
agreement or arrangements covering the employees of Holdings or any of its
Subsidiaries (collectively, the "Collective Bargaining Agreements");
(iii) all agreements evidencing or relating to the Existing
Indebtedness (the "Existing Indebtedness Agreements");
(iv) all agreements entered into by Holdings or the Borrower governing
the terms and relative rights of its capital stock (collectively, the
"Shareholders' Agreements");
-30-
<PAGE>
(v) any material agreement with respect to the management of Holdings
or any of its Subsidiaries (collectively, the "Management Agreements");
(vi) any material employment agreements entered into by Holdings or any
of its Subsidiaries (collectively, the "Employment Agreements"); and
(vii) any tax sharing, tax allocation and other similar agreements
entered into by Holdings and/or any of its Subsidiaries (collectively, the
"Tax Sharing Agreements");
all of which shall be in form and substance reasonably satisfactory to the
Agents and shall be in full force and effect on the Initial Borrowing Date.
(e) ADVERSE CHANGE, ETC. From December 31, 1995 to the Initial
Borrowing Date, nothing shall have occurred (and neither the Banks nor the
Agents shall have become aware of any facts or conditions not previously known)
which either Agent or the Required Banks shall determine (a) has, or is
reasonably likely to have, a material adverse effect on the rights or remedies
of the Banks or the Agents hereunder or under any other Credit Document, or on
the ability of the Credit Parties to perform their obligations to them, or (b)
has, or is reasonably likely to have, a Material Adverse Effect.
(f) LITIGATION. On the Initial Borrowing Date, there shall be no
actions, suits or proceedings pending or threatened (a) with respect to the
Transaction, this Agreement or any other Document or (b) which either Agent or
the Required Banks shall determine could reasonably be expected to (i) have a
Material Adverse Effect or (ii) have a material adverse effect on the rights or
remedies of the Banks or the Agents hereunder or under any other Credit Document
or on the ability of any Credit Party to perform its respective obligations to
the Banks or the Agents hereunder or under any other Credit Document.
(g) APPROVALS. On the Initial Borrowing Date, all material necessary
governmental and third party approvals in connection with the transactions
contemplated by the Credit Documents and the other Documents and otherwise
referred to herein or therein shall have been obtained and remain in effect, and
all applicable waiting periods shall have expired without any action being taken
by any competent authority which restrains or prevents such transactions or
imposes, in the reasonable judgment of the Required Banks or either Agent,
materially adverse conditions upon the consummation of such transactions.
(h) CAPITALIZATION. (I) On or prior to the Initial Borrowing Date,
(i) Cypress and its Affiliates and the Management Investors shall have
contributed at least $68.0 million in cash to Holdings as a common equity
contribution, (ii) Holdings shall have contributed the full amount received by
it pursuant to preceding clause (i) to the capital of the Borrower as a common
equity contribution, (iii) the Borrower shall have utilized the full amount of
-31-
<PAGE>
such cash contribution to make payments owing in connection with the Transaction
prior to, or concurrently with, the utilization of any proceeds of Loans for
such purpose and (iv) the amount of such cash contribution, when aggregated with
the cash proceeds of the issuance or incurrence of the Senior Subordinated
Notes, the Term Loans, cash on hand at AMTROL and up to $5,000,000 of Revolving
Loan, shall be sufficient to consummate the Merger, to pay all fees and expenses
arising in connection with the Transaction and to effect the Option
Cancellation.
(II) On or prior to the Initial Borrowing Date, (i) the Borrower shall
have received gross cash proceeds of at least $115,000,000 from the issuance by
the Borrower of the Senior Subordinated Notes and (ii) the Borrower shall have
utilized the full amount of such cash proceeds to make payments owing in
connection with the Transaction prior to, or concurrently with, the utilization
of any proceeds of Loans for such purpose.
(i) CONSUMMATION OF THE MERGER, ETC. (I) On or prior to the Initial
Borrowing Date, (i) the Merger, including all of the terms and conditions
thereof, shall have been duly approved by the board of directors and (if
required by applicable law) the shareholders of Holdings, Acquisition Corp. and
AMTROL and (ii) the Merger shall have been consummated in accordance with the
Merger Documents and all applicable laws.
(II) On or prior to the Initial Borrowing Date, the Agents and the
Banks shall have received true and correct copies of each of the Transaction
Documents certified as such by an Authorized Officer of Holdings, each of which
shall have been duly authorized, executed and delivered by the parties thereto
and shall be in full force and effect and in form and substance (including all
terms and conditions thereof) reasonably satisfactory to the Agents. On or
prior to the Initial Borrowing Date, all material conditions precedent set forth
in the Transaction Documents shall have been satisfied and not waived (unless
waived with the consent of the Agents) and the Transaction shall have been
consummated in accordance with the Transaction Documents and all applicable law.
(j) SUBSIDIARY GUARANTY. On the Initial Borrowing Date, each
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Subsidiary Guaranty in the form of Exhibit G hereto (as modified, amended or
supplemented from time to time in accordance with the terms hereof and thereof,
the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force
and effect.
(k) SECURITY DOCUMENTS. (I) On the Initial Borrowing Date, each
Credit Party shall have each duly authorized, executed and delivered a Pledge
Agreement in the form of Exhibit H (as modified, amended or supplemented from
time to time in accordance with the terms thereof and hereof, the "Pledge
Agreement") and shall have delivered to the Collateral Agent, as pledgee
thereunder, all of the certificates representing the Pledged Securities referred
to therein, endorsed in blank or accompanied by executed and undated stock
powers, and the Pledge Agreement shall be in full force and effect.
-32-
<PAGE>
(II) On the Initial Borrowing Date, each Credit Party shall have each
duly authorized, executed and delivered a Security Agreement substantially in
the form of Exhibit I (as modified, supplemented or amended from time to time,
the "Security Agreement") covering all of such Credit Party's present and future
Security Agreement Collateral, in each case together with:
(i) executed copies of Financing Statements (Form UCC-1) in
appropriate form for filing under the UCC of each jurisdiction as may be
necessary to perfect the security interests purported to be created by the
Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of recent date listing all effective
financing statements that name any Credit Party as debtor and that are filed
in the jurisdictions referred to in clause (i), together with copies of such
financing statements (none of which shall cover the Collateral except (x)
those with respect to which appropriate termination statements executed by
the secured lender thereunder have been filed or delivered to the
Administrative Agent and (y) to the extent evidencing Permitted Liens);
(iii) evidence of the completion of all other recordings and
filings of, or with respect to, the Security Agreement as may be necessary
or, in the reasonable opinion of the Collateral Agent, desirable to perfect
the security interests intended to be created by the Security Agreement; and
(iv) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Security Agreement have
been taken;
and the Security Agreement shall be in full force and effect.
(III) On the Initial Borrowing Date, the Collateral Agent shall have
received:
(i) fully executed counterparts of deeds of trust, mortgages and
similar documents, in each case in form and substance reasonably
satisfactory to the Collateral Agent (as amended, modified or supplemented
from time to time in accordance with the terms thereof and hereof, each a
"Mortgage" and, collectively, the "Mortgages") with respect to each of the
Mortgaged Properties, and arrangements reasonably satisfactory to the
Collateral Agent shall be in place to provide that counterparts of such
Mortgages shall be recorded on the Initial Borrowing Date in all places to
the extent necessary or desirable, in the reasonable judgment of the
Collateral Agent, effectively to create a valid and enforceable first
priority mortgage Lien, subject only to Permitted Encumbrances, on each such
Mortgaged Property in
-33-
<PAGE>
favor of the Collateral Agent (or such other trustee as may be required or
desired under local law) for the benefit of the Agents and the Banks;
(ii) mortgagee title insurance policies (or binding commitments to
issue such title insurance policies) issued by title insurers reasonably
satisfactory to the Collateral Agent (the "Mortgage Policies") in amounts
reasonably satisfactory to the Collateral Agent and assuring the Collateral
Agent that the Mortgages are valid and enforceable first priority mortgage
Liens on the respective Mortgaged Properties, free and clear of all defects
and encumbrances except Permitted Encumbrances, and such Mortgage Policies
shall be in form and substance reasonably satisfactory to the Collateral
Agent and (A) shall include (to the extent available in the respective
jurisdiction of each Mortgaged Property) an endorsement for future advances
under this Agreement, the Notes and the Mortgages, and for such other
matters that the Collateral Agent in its discretion may reasonably request,
(B) shall not include an exception for mechanics' liens, and (C) shall
provide for affirmative insurance and such reinsurance (including direct
access agreements) as the Collateral Agent in its discretion may reasonably
request; and
(iii) such estoppel letters, landlord waiver letters, non-disturbance
letters and similar assurances as may have been reasonably requested by the
Collateral Agent, which letters shall be in form and substance reasonably
satisfactory to the Collateral Agent.
(l) SOLVENCY. On the Initial Borrowing Date, the Borrower shall have
delivered to the Administrative Agent, a solvency letter in the form of Exhibit
J hereto from the Chief Financial Officer of the Borrower, expressing opinions
of value and other appropriate facts or information regarding the solvency of
the Borrower.
(m) INSURANCE POLICIES. On the Initial Borrowing Date, the Collateral
Agent shall have received evidence of insurance complying with the requirements
of Section 8.03 for the business and properties of Holdings and its
Subsidiaries, in form and substance reasonably satisfactory to the Agents and,
with respect to all casualty insurance, naming the Collateral Agent as an
additional insured and/or loss payee, and stating that such insurance shall not
be cancelled or revised without at least 30 days' prior written notice by the
insurer to the Collateral Agent.
(n) ENVIRONMENTAL ASSESSMENTS. On or prior to the Initial Borrowing
Date, the Administrative Agent shall have received environmental assessments
from GaiaTech and in form, scope and substance reasonably satisfactory to the
Agents and the Required Banks, together with reliance letters with respect
thereto.
-34-
<PAGE>
(o) EXISTING INDEBTEDNESS. On the Initial Borrowing Date and after
giving effect to the Transaction and the Loans then incurred, neither Holdings
nor any of its Subsidiaries shall have any preferred stock or Indebtedness
outstanding except for (i) the Loans, (ii) the Senior Subordinated Notes and
(iii) the Existing Indebtedness. On and as of the Initial Borrowing Date, all
of the Existing Indebtedness shall remain outstanding after giving effect to the
Transaction and the other transactions contemplated hereby without any default
or events of default existing thereunder or arising as a result of the
Transaction and the other transactions contemplated hereby, and there shall not
be any material amendments or modifications to the Existing Indebtedness
Agreements other than as requested or approved by the Agents. On and as of the
Initial Borrowing Date, the Agents shall be reasonably satisfied with the amount
of and the terms and conditions of all Existing Indebtedness.
(p) CONSENT LETTER. On the Initial Borrowing Date, the Administrative
Agent shall have received a letter from CT Corporation System, substantially in
the form of Exhibit K hereto, indicating its consent to its appointment by each
Credit Party as its agent to receive service of process.
(q) FEES. On the Initial Borrowing Date, the Borrower shall have paid
to the Agents and the Banks all Fees and expenses agreed upon by such parties to
be paid on or prior to such date.
5.02 CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligation of each
Bank to make Loans (including Loans made on the Initial Borrowing Date) and the
obligation of the Letter of Credit Issuer to issue any Letter of Credit is
subject, at the time of each such Credit Event, to the satisfaction of the
following conditions:
(a) NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. The Administrative
Agent shall have received a Notice of Borrowing meeting the requirements of
Section 1.02 with respect to the incurrence of Term Loans, Revolving Loans or
Swingline Loans, as the case may be, or a Letter of Credit Request meeting the
requirements of Section 2.03 with respect to the issuance of a Letter of Credit.
(b) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
Credit Event and also after giving effect thereto, (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties made by
any Credit Party contained herein or in the other Credit Documents shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, except to the extent that such representations and warranties
expressly relate to an earlier date.
-35-
<PAGE>
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to the Agents and each of the Banks
that all of the applicable conditions specified in Section 5.01 (in the case of
the Credit Events occurring on the Initial Borrowing Date) and/or 5.02, as the
case may be, exist as of that time. All of the certificates, legal opinions and
other documents and papers referred to in Section 5.01, unless otherwise
specified, shall be delivered to the Administrative Agent at its Notice Office
for the account of each of the Banks and, except for the Notes, in sufficient
counterparts for each of the Banks and shall be reasonably satisfactory in form
and substance to the Agents.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to
induce the Banks to enter into this Agreement and to make the Loans and issue
and/or participate in Letters of Credit provided for herein, each of Holdings
and the Borrower makes the following representations and warranties to, and
agreements with, the Banks, all of which shall survive the execution and
delivery of this Agreement and the making of the Loans, it being understood and
agreed that, notwithstanding any statement to the contrary contained in this
Section 6, each of Holdings and the Borrower makes the following representations
and warranties solely with respect to itself and its respective Subsidiaries:
6.01 CORPORATE STATUS. Each of Holdings and each of its Subsidiaries
(i) is a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its organization and has the corporate power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes to engage and (ii) has duly qualified and
is authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified would
have a Material Adverse Effect.
6.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Person enforceable
in accordance with its terms, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (regardless of whether
enforcement is sought in equity or at law) and an implied covenant of good faith
and fair dealing.
6.03 NO VIOLATION. Neither the execution, delivery and performance by
any Credit Party of the Documents to which it is a party nor compliance with the
terms and provisions thereof, nor the consummation of the transactions
contemplated therein (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ,
-36-
<PAGE>
injunction or decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or (other
than pursuant to the Security Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of Holdings or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, agreement or other instrument to which
Holdings or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which it may be subject or (iii) will violate
any provision of the certificate of incorporation or by-laws of Holdings or any
of its Subsidiaries.
6.04 LITIGATION. There are no actions, suits or proceedings pending
or, to the best of its knowledge, threatened with respect to Holdings or any of
its Subsidiaries (i) that could reasonably be expected to have a Material
Adverse Effect or (ii) that could reasonably be expected to have a material
adverse effect on (a) the rights or remedies of the Banks or on the ability of
any Credit Party to perform its respective obligations to them hereunder and
under the other Credit Documents to which it is a party or (b) the consummation
of the Transaction.
6.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of all
Term Loans shall be utilized on the Initial Borrowing Date (i) to finance the
Merger, (ii) to pay certain fees, premiums and expenses relating to the
Transaction and (iii) to effect the Option Cancellation.
(b) The proceeds of all Revolving Loans may be used (i) in an amount
not to exceed $5,000,000 for the purposes described in Section 6.05(a)(i) and
(ii) as provided in the following sentence. The proceeds of Acquisition Loans
may only be utilized to finance Permitted Acquisitions, while the proceeds of
Working Capital Loans may be utilized for general corporate and working capital
purposes, other than to finance Permitted Acquisitions.
(c) The proceeds of all Swingline Loans may be utilized for the
general corporate and working capital purposes of the Borrower and its
Subsidiaries (other than to finance Permitted Acquisitions).
(d) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
and no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock in violation of Regulation U or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
6.06 GOVERNMENTAL APPROVALS. Except for filings and recordings in
connection with the Security Documents, SEC filings and those items listed on
Annex III,
-37-
<PAGE>
no order, consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, any foreign or domestic
governmental or public body or authority, or any subdivision thereof, is
required to authorize or is required in connection with (i) the execution,
delivery and performance of any Document to which Holdings or any of its
Subsidiaries is a party or (ii) the legality, validity, binding effect or
enforceability of any such Document.
6.07 INVESTMENT COMPANY ACT. Neither Holdings nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Holdings nor any of
its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
6.09 TRUE AND COMPLETE DISCLOSURE. Except with respect to projections
and PRO FORMA financial information, all factual information (taken as a whole)
heretofore or contemporaneously furnished by or on behalf of Holdings or any of
its Subsidiaries in writing to the Agents or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated herein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of any such Person in writing to any Bank will be, true and accurate
in all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary to
make such information (taken as a whole) not misleading at such time in light of
the circumstances under which such information was provided. There is no fact
known to Holdings or the Borrower which would have a Material Adverse Effect,
which has not been disclosed herein or in such other documents, certificates and
statements furnished to the Banks for use in connection with the transactions
contemplated hereby.
6.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as of the
Initial Borrowing Date, on a PRO FORMA basis after giving effect to the
Transaction and all Indebtedness incurred, and to be incurred (including,
without limitation, the Loans and the Senior Subordinated Notes), and Liens
created, and to be created, by each Credit Party in connection therewith, (x)
the sum of the assets, at a fair valuation, of each of Holdings and its
Subsidiaries (on a consolidated basis) and the Borrower (on a stand-alone basis)
will exceed its debts, (y) the Borrower will not have incurred or intended to,
or believe that it will, incur debts beyond its ability to pay such debts as
such debts mature and (z) each of Holdings and the Borrower will not have
unreasonably small capital with which to conduct its business. For purposes of
this Section 6.10, "debt" means any liability on a claim, and "claim" means (i)
right to payment whether or not such a right is reduced to judgment,
-38-
<PAGE>
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured; or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b) The consolidated balance sheet of AMTROL at December 31, 1994,
December 31, 1995 and September 28, 1996 and the related consolidated statements
of operations and cash flows of AMTROL for the fiscal years or the nine-month
period, as the case may be, ended as of said dates, which, in the case of the
annual financial statements, have been examined by Arthur Andersen, L.L.P.,
independent certified public accountants, who delivered an unqualified opinion
in respect therewith, copies of which have heretofore been furnished to each
Bank, present fairly the financial position of such entities at the dates of
said statements and the results for the periods covered thereby in accordance
with GAAP, except to the extent provided in the notes to said financial
statements and, in the case of the September 28, 1996 financial statements,
subject to normal and recurring year-end audit adjustment. All such financial
statements have been prepared in accordance with GAAP and practices consistently
applied except to the extent provided in the notes to said financial statements.
The PRO FORMA consolidated balance sheet of the Borrower as of September 28,
1996, a copy of which has heretofore been furnished to each Bank, presents a
good faith estimate of the consolidated PRO FORMA financial condition of the
Borrower (after giving effect to the Transaction and the related financing
thereof) as at the date thereof). Nothing has occurred since September 28, 1996
that has had or could reasonably be expected to have a Material Adverse Effect.
(c) Except as reflected in the financial statements and the notes
thereto described in Section 6.10(b), there were as of the Initial Borrowing
Date no liabilities or obligations with respect to Holdings or any of its
Subsidiaries of a nature (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, would be
material to Holdings and its Subsidiaries taken as a whole, except as incurred
in the ordinary course of business consistent with past practices subsequent to
September 28, 1996.
6.11 SECURITY INTERESTS. On and after the Initial Borrowing Date,
each of the Security Documents creates, as security for the Obligations
purported to be secured thereby, a valid and enforceable perfected security
interest in and Lien on all of the Collateral subject thereto, superior to and
prior to the rights of all third Persons and subject to no other Liens (except
(x) that the Security Agreement Collateral may be subject to the security
interests evidenced by Permitted Liens relating thereto and (y) the Mortgaged
Properties may be subject to Permitted Encumbrances relating thereto), in favor
of the Collateral Agent for the benefit of the Banks. No filings or recordings
are required in order to perfect the security interests created under any
Security Document except for filings or recordings required in
-39-
<PAGE>
connection with any such Security Document (other than the Pledge Agreement)
which shall have been made upon or prior to (or are the subject of arrangements,
reasonably satisfactory to the Administrative Agent, for filing on or promptly
after the date of) the execution and delivery thereof.
6.12 CONSUMMATION OF TRANSACTION. As of the Initial Borrowing Date,
the Transaction shall have been consummated in accordance with the material
terms and conditions of the Transaction Documents and all applicable laws. All
applicable waiting periods with respect thereto have or, prior to the time when
required, will have, expired without, in all such cases, any action being taken
by any competent authority which restrains, prevents, or imposes material
adverse conditions upon the consummation of the Transaction. As of the Initial
Borrowing Date, there does not exist any judgment, order, or injunction
prohibiting the consummation of the Transaction, or the making of Loans or the
performance by any Credit Party of their respective obligations under the
Documents.
6.13 TAX RETURNS AND PAYMENTS. Each of Holdings and each of its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and adequately disclosed and fully provided for on
the financial statements of Holdings and its Subsidiaries in accordance with
generally accepted accounting principles. Each of Holdings and each of its
Subsidiaries has at all times paid, or has provided adequate reserves (in the
good faith judgment of the management of Holdings) for the payment of, all
federal, state and foreign income taxes applicable for all prior fiscal years
and for the current fiscal year to date. There is no material action, suit,
proceeding, investigation, audit, or claim now pending or, to the knowledge of
Holdings or any of its Subsidiaries, threatened by any authority regarding any
taxes relating to Holdings or any of its Subsidiaries. Neither Holdings nor any
of its Subsidiaries has entered into an agreement or waiver or been requested to
enter into an agreement or waiver extending any statute of limitations relating
to the payment or collection of taxes of Holdings or any of its Subsidiaries, or
is aware of any circumstances that would cause the taxable years or other
taxable periods of Holdings or any of its Subsidiaries not to be subject to the
normally applicable statute of limitations.
6.14 COMPLIANCE WITH ERISA. Except to the extent that all events and
obligations described in the following clauses of this Section 6.14 and at any
time hereafter in existence would not in the aggregate have a Material Adverse
Effect, each Plan (and each related trust, insurance contract or fund) is in
substantial compliance with its terms and with all applicable laws, including,
without limitation, ERISA and the Code; neither Holdings nor any ERISA
Affiliate has incurred or reasonably expects to incur, and to Holdings'
knowledge, no condition exists which presents a material risk to Holdings or any
ERISA Affiliate of incurring, any liability, nor has a lien been imposed against
the assets of Holdings or any ERISA Affiliate, on account of a Plan under the
Code or ERISA; each Plan
-40-
<PAGE>
(and each related trust, if any) which is intended to be qualified under Section
401(a) of the Code has received a determination letter from the Internal Revenue
Service to the effect that it meets the requirements of Sections 401(a) and
501(a) of the Code; no Reportable Event has occurred; no Plan which is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or
in reorganization; no Plan has an Unfunded Current Liability; no Plan which is
subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency, within the meaning of such sections of the Code or ERISA,
or has applied for or received a waiver of an accumulated funding deficiency or
an extension of any amortization period, within the meaning of Section 412 of
the Code or Section 303 or 304 of ERISA; no proceedings have been instituted to
terminate or appoint a trustee to administer any Plan which is subject to Title
IV of ERISA no action, suit, proceeding, hearing or audit or, to the knowledge
of Holdings, no investigation with respect to the administration, operation or
the investment of assets of any Plan (other than routine claims for benefits) is
pending, or to the knowledge of Holdings is, expected or threatened. In
addition, using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, to the knowledge of Holdings, the
aggregate liabilities which would be payable in any fiscal year of Holdings and
its Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer
plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Plan ended prior to the date of the most recent Credit Event, would not
result in any liability to Holdings, any Subsidiary or any ERISA Affiliate; and
Holdings and its Subsidiaries do not maintain or contribute to any (i) employee
welfare benefit plan (as defined in Section 3(1) of ERISA) which provides
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) the obligations with respect to which as a consequence
of any termination or other extraordinary event (other than benefits in the
ordinary course) could reasonably be expected to have an adverse effect on the
ability of Holdings or the Borrower to perform its obligations under this
Agreement or (ii) Plan, the obligations with respect to which could reasonably
be expected to have an adverse effect on the ability of Holdings or the Borrower
to perform its obligations under this Agreement.
6.15 SUBSIDIARIES. (a) Prior to the consummation of the Merger, (i)
Holdings has no Subsidiaries other than the Borrower and (ii) the Borrower has
no Subsidiaries.
(b) On and as of the Initial Borrowing Date and after giving effect to
the consummation of the Transaction, Holdings has no Subsidiaries other than the
Borrower and its Subsidiaries and the Borrower has no Subsidiaries other than
those Subsidiaries listed on Annex IV. Annex IV correctly sets forth, as of the
Initial Borrowing Date and after giving effect to the Merger, the percentage
ownership (direct and indirect) of the Borrower in each class of capital stock
of each of its Subsidiaries and also identifies the direct owner thereof.
-41-
<PAGE>
6.16 INTELLECTUAL PROPERTY. Holdings and each of its Subsidiaries
have obtained all material patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their businesses taken as a whole as
presently conducted and as proposed to be conducted.
6.17 ENVIRONMENTAL MATTERS. (a) Each of Holdings and each of its
Subsidiaries is in compliance with all applicable Environmental Laws governing
its business for which failure to comply is reasonably likely to have a Material
Adverse Effect, and neither Holdings nor any of its Subsidiaries is liable for
any material penalties, fines or forfeitures for failure to comply with any of
the foregoing in the manner set forth above. All licenses, permits,
registrations or approvals required for the business of Holdings and each of its
Subsidiaries, as conducted as of the Initial Borrowing Date, under any
Environmental Law have been secured and Holdings and each of its Subsidiaries is
in substantial compliance therewith, except such licenses, permits,
registrations or approvals the failure to secure or to comply therewith is not
reasonably likely to have a Material Adverse Effect. Neither Holdings nor any
of its Subsidiaries is in any respect in noncompliance with, breach of or
default under any applicable writ, order, judgment, injunction, or decree to
which Holdings or such Subsidiary is a party or which could affect the ability
of Holdings or such Subsidiary to operate any real property and no event has
occurred and is continuing which, with the passage of time or the giving of
notice or both, would reasonably be expected to constitute noncompliance, breach
of or default thereunder, except in each such case, such noncompliance, breaches
or defaults as are not reasonably likely to, in the aggregate, have a Material
Adverse Effect. There are as of the Initial Borrowing Date no Environmental
Claims pending or, to the best of its knowledge threatened, which (i) question
the validity, term or entitlement of Holdings or any Subsidiaries for any
permit, license, order or registration required for the operation of any
facility which Holdings or any of its Subsidiaries currently operates and (ii)
wherein an unfavorable decision, ruling or finding would be reasonably likely to
have a Material Adverse Effect. There are no facts, circumstances, conditions
or occurrences concerning the business or operations of Holdings or any of its
Subsidiaries, or any Real Property at any time owned or operated by Holdings or
any of its Subsidiaries or on any property adjacent to any such Real Property
that could reasonably be expected (i) to form the basis of an Environmental
Claim against Holdings, any of its Subsidiaries or any of their respective Real
Property or (ii) to cause any such currently owned or operated Real Property to
be subject to any restrictions on the ownership, occupancy, use or
transferability of such Real Property under any Environmental Law, except in
each such case, such Environmental Claims or restrictions that individually, or
in the aggregate, are not reasonably likely to have a Material Adverse Effect.
(b) Hazardous Materials have not at any time been (i) generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by Holdings or any of its Subsidiaries or (ii) released on or from any
such Real Property, in
-42-
<PAGE>
each case where such occurrence or event individually or in the aggregate is
reasonably likely to have a Material Adverse Effect.
6.18 PROPERTIES. Holdings and each of its Subsidiaries have good and
marketable title to, or a validly subsisting leasehold interest in, all material
properties owned by them, including all Real Property reflected in the
consolidated balance sheet of AMTROL as of September 28, 1996 referred to in
Section 6.10(b), free and clear of all Liens, other than (i) as referred to in
the consolidated balance sheet or in the notes thereto or (ii) otherwise
permitted by Section 8.03. Annex V contains a true and complete list of each
Real Property owned or leased by Holdings or any of its Subsidiaries as of the
Initial Borrowing Date and after giving effect to the Transaction, and the type
of interest therein held by Holdings or the respective Subsidiary.
6.19 LABOR RELATIONS. No Credit Party is engaged in any unfair labor
practice that could reasonably be expected to have a Material Adverse Effect.
There is (i) no unfair labor practice complaint pending against any Credit Party
or, to the best of its knowledge, threatened against any of them, before the
National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so pending
against any Credit Party or, to the best of its knowledge, threatened against
any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against
any Credit Party or, to the best of its knowledge, threatened against any Credit
Party and (iii) no union representation question existing with respect to the
employees of any Credit Party and no union organizing activities are taking
place, except with respect to any matter specified in clause (i), (ii) or (iii)
above, either individually or in the aggregate, such as is not reasonably likely
to have a Material Adverse Effect.
6.20 SENIOR SUBORDINATED NOTES. The subordination provisions
contained in the Senior Subordinated Notes are enforceable by the Banks against
the Borrower and the holders of such Senior Subordinated Notes, subject to the
effects of bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (regardless of whether enforcement is sought in equity or at law) and
an implied covenant of good faith and fair dealing and all Obligations of the
Borrower are or will be within the definition of "Senior Indebtedness" included
in such provisions of the Senior Subordinated Note Documents.
6.21 EXISTING INDEBTEDNESS. Annex VI sets forth a true and complete
list of all Indebtedness of Holdings and each of its Subsidiaries as of the
Initial Borrowing Effective Date and which is to remain outstanding after giving
effect to the Transaction (excluding the Loans, the Letters of Credit and the
Senior Subordinated Notes, the "Existing Indebtedness"), in each case showing
the aggregate principal amount thereof and the name of the respective borrower
(or issuer) and any other entity which directly or indirectly guaranteed such
debt.
-43-
<PAGE>
6.22 COMPLIANCE WITH STATUTES, ETC. Each of Holdings and each of its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property, except such non-compliance as is not reasonably likely to,
individually or in the aggregate, have a Material Adverse Effect.
6.23 SPECIAL PURPOSE CORPORATIONS. Holdings and Acquisition Corp.
were formed to effect the Transaction. Prior to the consummation of the
Transaction, (i) Holdings had no significant assets (other than the capital
stock of Acquisition Corp.) or liabilities (other than those liabilities under
the Merger Documents) and (ii) the Borrower had no significant assets or
liabilities (other than those liabilities under the Merger Documents).
SECTION 7. AFFIRMATIVE COVENANTS. Each of Holdings and the Borrower
hereby covenants and agrees with respect to itself and its Subsidiaries that on
the Effective Date and thereafter for so long as this Agreement is in effect and
until the Commitments have terminated, no Letters of Credit or Notes are
outstanding and the Loans and Unpaid Drawings, together with interest, Fees and
all other Obligations incurred hereunder, are paid in full:
7.01 INFORMATION COVENANTS. Holdings will furnish to each Bank:
(a) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of
each fiscal year of Holdings, the audited consolidated balance sheet of Holdings
and its Subsidiaries, as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash flows for
such fiscal year, in each case setting forth comparative consolidated figures
for the preceding fiscal year, and examined by independent certified public
accountants of recognized national standing whose opinion shall not be qualified
as to the scope of audit and as to the status of Holdings or any of its
Subsidiaries as a going concern, together with a certificate of such accounting
firm stating that in the course of its regular audit of the business of Holdings
and its Subsidiaries, which audit was conducted in accordance with generally
accepted auditing standards, such accounting firm has obtained no knowledge of
any Default or Event of Default which has occurred and is continuing or, if in
the opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within 45 days after the close of each of the first three quarterly
accounting periods in each fiscal year, the unaudited consolidated balance sheet
of Holdings and its Subsidiaries, as at the end of such quarterly period and the
related unaudited consolidated statements of income and retained earnings and of
cash flows for such quarterly period and for the elapsed portion of the fiscal
year ended with the last day of such quarterly period, and in each case setting
-44-
<PAGE>
forth comparative consolidated figures for the related periods in the prior
fiscal year, all of which shall be certified by the chief financial officer or
controller of Holdings, subject to changes resulting from audit and normal
year-end audit adjustments.
(c) MONTHLY REPORTS. As soon as practicable, and in any event within
30 days, after the end of each monthly accounting period of each fiscal year
(other than the last monthly accounting period in such fiscal year) the
unaudited consolidated balance sheet of Holdings and its Subsidiaries, as at the
end of such period, and the related unaudited consolidated statements of income
and retained earnings for such period, setting forth comparative figures for the
corresponding period of the previous year, all of which shall be certified by
the chief financial officer or controller of Holdings subject to changes
resulting from audit and normal year-end audit adjustments.
(d) BUDGETS; ETC. Not more than 60 days after the commencement of
each fiscal year of Holdings, a consolidated budget of Holdings and its
Subsidiaries in reasonable detail for each of the twelve months of such fiscal
year. Together with each delivery of consolidated financial statements pursuant
to Sections 7.01(a), (b) and (c), a comparison of the current year-to-date
financial results against the budgets required to be submitted pursuant to this
clause (d) shall be presented.
(e) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Sections 7.01(a), (b) and (c), a
certificate of the chief financial officer, controller or other Authorized
Officer of Holdings to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and extent
thereof, which certificate (x) in the case of the certificate delivered pursuant
to Sections 7.01(a) and (b), shall set forth the calculations required to
establish (I) the Leverage Ratio for the Test Period ending on the last day of
the fiscal year or period covered by such financial statements and (II) whether
Holdings and its Subsidiaries were in compliance with the provisions of Sections
8.05, 8.07, 8.09(a) (but only to the extent Holdings has made payments of the
type described in clause (ii) thereof in such period or year), 8.11, 8.12 and
8.13 as at the end of such fiscal period or year, as the case may be, and (y) in
the case of the certificate delivered pursuant to Section 7.01(a), shall set
forth the amount of the Excess Cash Flow for the fiscal year covered by such
financial statements.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within three Business Days after any officer of Holdings or the Borrower obtains
knowledge thereof, notice of (x) the occurrence of any event which constitutes a
Default or Event of Default which notice shall specify the nature thereof, the
period of existence thereof and what action Holdings or the Borrower proposes to
take with respect thereto and (y) the commencement of, or any significant
development in, any litigation or governmental proceeding pending against
Holdings or any of its Subsidiaries which is reasonably likely to have a
Material Adverse Effect or is reasonably likely to have a material adverse
effect on the ability of
-45-
<PAGE>
Holdings or any of its Subsidiaries to perform its obligations hereunder or
under any other Credit Document.
(g) ENVIRONMENTAL MATTERS. Promptly after obtaining knowledge of any
of the following (but only to the extent that any of the following could
reasonably be expected to (x) have a Material Adverse Effect, either
individually or in the aggregate, or (y) result in a remedial cost to Holdings
or any of its Subsidiaries in excess of $1,000,000), written notice of:
(i) any pending or threatened Environmental Claim against Holdings or
any of its Subsidiaries or any Real Property owned or operated by Holdings
or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or operated
by Holdings or any of its Subsidiaries that (x) results in noncompliance by
Holdings or any of its Subsidiaries with any applicable Environmental Law or
(y) would reasonably be anticipated to result in an Environmental Claim
against Holdings or any of its Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property owned or
operated by Holdings or any of its Subsidiaries that would reasonably be
anticipated to result in such Real Property being subject to any
restrictions on the ownership, occupancy, use or transferability by Holdings
or its Subsidiary, as the case may be, of its interest in such Real Property
under any Environmental Law; and
(iv) the taking of any removal or remedial action in response to the
actual or alleged presence of any Hazardous Material on any Real Property
owned or operated by Holdings or any of its Subsidiaries.
All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and Holdings'
or the relevant Subsidiary's response or proposed response thereto. In
addition, Holdings agrees to provide the Banks with copies of all material
communications by Holdings or any of its Subsidiaries with any Person,
government or governmental agency relating to any of the matters set forth in
clauses (i)-(iv) above, and such detailed reports relating to any of the matters
set forth in clauses (i)-(iv) above as may reasonably be requested by the
Administrative Agent or the Required Banks.
(h) OTHER INFORMATION. Promptly upon transmission thereof, (i)
copies of any filings and registrations with, and reports to, the Securities
and Exchange Commission or any successor thereto (the "SEC") by Holdings or
any of its Subsidiaries, (ii) copies of all financial statements, proxy
statements, notices and reports as Holdings or any of its
-46-
<PAGE>
Subsidiaries shall send generally to analysts and the holders of the Senior
Subordinated Notes in their capacity as such holders (to the extent not
theretofore delivered to the Banks pursuant to this Agreement) and with
reasonable promptness, such other information or documents (financial or
otherwise) as either Agent on its own behalf or on behalf of the Required
Banks may reasonably request from time to time.
7.02 BOOKS, RECORDS AND INSPECTIONS. Holdings will, and will cause
its Subsidiaries to, permit, upon reasonable notice to the chief financial
officer, controller or any other Authorized Officer of Holdings, officers and
designated representatives of the Agents or the Required Banks to visit and
inspect any of the properties or assets of Holdings and any of its Subsidiaries
in whomsoever's possession, and to examine the books of account of Holdings and
any of its Subsidiaries and discuss the affairs, finances and accounts of
Holdings and of any of its Subsidiaries with, and be advised as to the same by,
its and their officers and independent accountants, all at such reasonable times
and intervals and to such reasonable extent as the Agents or the Required Banks
may desire, it being understood that the Agents shall be permitted to conduct
such inspections, examinations and discussions at the request of any Bank and
the results of any such inspection, examination or discussion may be made
available by the Agents to such Bank.
7.03 INSURANCE. Holdings will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance in
such amounts, covering such risks and liabilities and with such deductibles or
self-insured retentions as are in accordance with normal industry practice.
Holdings will, and will cause each of its Subsidiaries to, furnish to the
Administrative Agent on the Initial Borrowing Date and thereafter, upon request
of the Administrative Agent, a summary of the insurance carried together with
certificates of insurance and other evidence of such insurance, if any, naming
the Collateral Agent as an additional insured and/or loss payee.
7.04 PAYMENT OF TAXES. Holdings will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien or charge
upon any properties of Holdings or any of its Subsidiaries, PROVIDED that
neither Holdings nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
proper proceedings if it has maintained adequate reserves (in the good faith
judgment of the management of Holdings) with respect thereto in accordance with
GAAP.
7.05 CORPORATE FRANCHISES. Holdings will do, and will cause each
Subsidiary to do, or cause to be done, all things reasonably necessary to
preserve and keep in full force and effect its existence and to preserve its
material rights and franchises, other than those the failure to preserve which
could not reasonably be expected to have a Material Adverse
-47-
<PAGE>
Effect, PROVIDED that any transaction permitted by Section 8.02 will not
constitute a breach of this Section 7.05.
7.06 COMPLIANCE WITH STATUTES, ETC. Holdings will, and will cause
each Subsidiary to, comply with all applicable statutes, regulations and orders
of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property other than those the non-compliance with which would not have a
Material Adverse Effect or would not have a material adverse effect on the
ability of any Credit Party to perform its obligations under any Credit Document
to which it is a party.
7.07 ERISA. As soon as possible and, in any event, within fifteen
days after the chief financial officer or chief executive officer of Holdings,
or within twenty days after the chief financial officer or chief executive
officer of any Subsidiary of Holdings or any ERISA Affiliate, knows or has
reason to know of the occurrence of any of the following events (but in each
case, only to the extent that it is reasonably likely that the liability of
Holdings and its Subsidiaries attributable to such event will be at least
$500,000), Holdings will deliver to each of the Banks a certificate of Holdings
setting forth in reasonable detail as to such occurrence and the action, if any,
that Holdings, Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be given to
or filed with or by Holdings, the Subsidiary, the ERISA Affiliate, the PBGC, a
Plan participant or the Plan administrator with respect thereto: that a
Reportable Event has occurred; that an accumulated funding deficiency, within
the meaning of Section 412 of the Code or Section 302 of ERISA, has been
incurred or an application may reasonably be expected to be or has been made for
a waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any
contribution required to be made with respect to a Plan that is subject to the
funding requirements of Section 412 of the Code or Section 302 of ERISA has not
been timely made; that a Plan has been or may reasonably be expected to be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; or that some action has been taken or proceedings have been instituted
which would be reasonably likely to cause any such termination, reorganization,
partition or declaration or result in the filing of any such application; that a
Plan has an Unfunded Current Liability; that proceedings may reasonably be
expected to be or have been instituted to appoint a trustee to administer a Plan
which is subject to Title IV of ERISA; that a proceeding has been instituted
pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan;
that Holdings, any Subsidiary of Holdings or any ERISA Affiliate will or may
reasonably be expected to incur any liability (including any indirect,
contingent, or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980
of the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a
group
-48-
<PAGE>
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the
Code) under Section 4980B of the Code; or that Holdings or any Subsidiary of
Holdings has incurred or is reasonably likely to incur any liability as a
consequence of any termination or other extraordinary event (other than benefits
in the ordinary course) in connection with any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA) or any
Plan. Upon the request of the Agent, Holdings will deliver to each of the Banks
a complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service. In addition to any certificates or notices delivered
to the Banks pursuant to the first sentence hereof, copies of any material
notices received by Holdings, any Subsidiary of Holdings or any ERISA Affiliate
with respect to any Plan shall be delivered to the Banks as soon as practicable,
but in no event later than 20 days, after such request is received.
7.08 GOOD REPAIR. Holdings will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment necessary in
the operation of its business are kept in good repair, working order and
condition, normal wear and tear excepted, and, subject to Section 8.05, that
from time to time there are made in such properties and equipment all needful
and proper repairs, renewals, replacements, extensions, additions, betterments
and improvements thereto, to the extent and in the manner useful or customary
for companies in similar businesses.
7.09 END OF FISCAL YEARS; FISCAL QUARTERS. Holdings will, and will
cause each of its Subsidiaries to, maintain for financial reporting purposes a
fiscal year and fiscal quarters on the same basis as are maintained on the
Initial Borrowing Date.
7.10 USE OF PROCEEDS. All proceeds of the Loans shall be used as
provided in Section 6.05.
7.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) The Borrower will,
and will cause its Subsidiaries to, grant to the Collateral Agent security
interests and mortgages in Real Property acquired after the Initial Borrowing
Date as may be reasonably requested from time to time by the Administrative
Agent and/or the Required Banks (collectively, the "Additional Mortgages"). All
such security interests and mortgages shall be granted pursuant to documentation
reasonably satisfactory in form and substance to the Administrative Agent and/or
the Required Banks and shall constitute valid and enforceable Liens superior to
and prior to the rights of all third Persons and subject to no other Liens
except as are permitted by Section 8.03. The Additional Mortgages or
instruments related thereto shall have been duly recorded or filed in such
manner and in such places as are required by law to establish, perfect, preserve
and protect the Liens in favor of the Collateral
-49-
<PAGE>
Agent required to be granted pursuant to the Additional Mortgages and all taxes,
fees and other charges payable in connection therewith shall have been paid in
full.
(b) The Borrower will, and will cause its Subsidiaries to, at the
expense of the Borrower make, execute, endorse, acknowledge, file and/or deliver
to the Collateral Agent from time to time such vouchers, invoices, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
collateral covered by any of the Security Documents as the Collateral Agent may
reasonably require. Furthermore, Holdings shall cause to be delivered to the
Collateral Agent such opinions of counsel, title insurance and other related
documents as may be reasonably requested by the Administrative Agent and/or the
Required Banks to assure itself that this Section 7.11 has been complied with.
(c) Each of the Credit Parties agrees that each action required above
by this Section 7.11 shall be completed as soon as possible, but in no event
later than 60 days after such action is requested to be taken by the
Administrative Agent, the Collateral Agent or the Required Banks, as the case
may be, PROVIDED that in no event shall the Borrower be required to take any
action, other than using its reasonable commercial efforts without any material
expenditure, to obtain consents from third parties with respect to its
compliance with this Section 7.11.
7.12 INTEREST RATE AGREEMENT. The Borrower (x) will, no later than
the date occurring 60 days after the Initial Borrowing Date, enter into Interest
Rate Agreements which cover for at least two years from the Initial Borrowing
Date at least $30,000,000 of the outstanding Term Loans on terms reasonably
satisfactory to the Agents and (y) may thereafter, enter into Interest Rate
Agreements which cover additional amounts of outstanding Term Loans on terms
(and in such amounts) reasonably satisfactory to the Agents.
7.13 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a)(i) The Borrower will
comply, and will cause each of its Subsidiaries to comply, with all
Environmental Laws applicable to the ownership, lease or use of all Real
Property now or hereafter owned, leased or operated by the Borrower or any of
its Subsidiaries, will promptly pay or cause to be paid all costs and expenses
incurred in connection with such compliance, and will keep or cause to be kept
all such Real Property free and clear of any Liens imposed pursuant to such
Environmental Laws and (ii) neither the Borrower nor any of its Subsidiaries
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, release or disposal of Hazardous Materials
on any Real Property now or hereafter owned, leased or operated by the Borrower
or any of its Subsidiaries, or transport or permit the transportation of
Hazardous Materials to or from any such Real Property, except to the extent that
the failure to comply with the requirements specified in clause (i) or (ii)
above,
-50-
<PAGE>
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. If required to do so under any applicable
directive or order of any governmental agency, the Borrower agrees to undertake,
and cause each of its Subsidiaries to undertake, any clean up, removal, remedial
or other action necessary to remove and clean up any Hazardous Materials from
any Real Property owned, leased or operated by the Borrower or any of its
Subsidiaries in accordance with, in all material respects, the requirements of
all applicable Environmental Laws and in accordance with, in all material
respects, such orders and directives of all governmental authorities, except to
the extent that the Borrower or such Subsidiary is contesting such order or
directive in good faith and by appropriate proceedings and for which adequate
reserves have been established to the extent required by GAAP; PROVIDED that it
will not constitute a breach of this Section 7.13 if a Person other than the
Borrower and its Subsidiaries takes such action on behalf of the Borrower and
its Subsidiaries.
(b) At the request of the Agent or the Required Banks at any time and
from time to time during the existence of this Agreement: (i) if an Event of
Default exists under this Agreement and (ii) upon the reasonable belief by the
Administrative Agent that Holdings or any of its Subsidiaries has breached in
any material respect any representation or covenant herein with respect to any
environmental matters affecting any Mortgaged Property and such breach is
continuing and/or a notice has been provided under Section 7.01(g), Holdings
will provide, at its sole cost and expense (or will cause the relevant
Subsidiary to provide at its sole cost and expense), an environmental site
assessment report reasonable in scope concerning any Mortgaged Property that is
the subject of the breach or notice of Holdings or its Subsidiaries, prepared by
GaiaTech or other environmental consulting firm reasonably acceptable to the
Agents, indicating the presence or Release of Hazardous Materials on or from any
such Mortgaged Property and the potential cost of any removal or remedial action
in connection with any Hazardous Materials on such Mortgaged Property. If
Holdings fails to provide the same after thirty days' notice, the Agent may
order the same, and Holdings shall grant and hereby grants to the Agent and the
Banks and their agents access to such Mortgaged Property and specifically grants
the Agent and the Banks an irrevocable non-exclusive license, subject to the
rights of tenants, to undertake such an assessment all at Holdings' reasonable
expense, which assessments, if obtained, will be provided to Holdings.
7.14 CONSUMMATION OF THE MERGER. Promptly following the making of
Term Loans to the Borrower, but in any event on the Initial Borrowing Date,
AMTROL, as the surviving corporation of the Merger, shall execute and deliver an
Acknowledgment Agreement in the form of Exhibit M and the Notes delivered
pursuant to Section 5.01. After giving effect to the Merger, AMTROL shall
succeed to all rights and obligations of Acquisition Corp. as were existing
immediately prior to the Merger (including, without limitation, all obligations
under this Agreement and the other Credit Documents to which Acquisition Corp.
is a party). Simultaneously with the Merger, all capital stock of
-51-
<PAGE>
AMTROL, as the surviving corporation of the Merger, shall be pledged pursuant to
the Pledge Agreement, and all stock certificates evidencing such shares of
capital stock of AMTROL after giving effect to the Merger shall be delivered to
the Collateral Agent.
7.15 POST-CLOSING OBLIGATIONS. Within 25 Business Days of the Initial
Borrowing Date, each of the Borrower and AMTROL International shall have (i)
duly authorized, executed and delivered a share mortgage in form and substance
satisfactory to the Collateral Agent (the "Hong Kong Mortgage"), granting a
security interest in favor of the Collateral Agent in the capital stock of
AMTROL Asia Pacific, (ii) accomplished all other recordings and filings of, or
with respect to, the Hong Kong Mortgage as may be necessary or, in the opinion
of the Collateral Agent, desirable to perfect the security interests intended to
be created by the Hong Kong Mortgage and (iii) delivered to the Collateral Agent
the capital stock referred to in the Hong Kong Mortgage then owned by the
Borrower and AMTROL International, together with executed and undated stock
powers or such other transfer instruments as may be required under Hong Kong
law.
SECTION 8. NEGATIVE COVENANTS. Each of Holdings and the Borrower
hereby covenants and agrees with respect to itself and its Subsidiaries that as
of the Effective Date and thereafter for so long as this Agreement is in effect
and until the Commitments have terminated, no Letters of Credit or Notes are
outstanding and the Loans and Unpaid Drawings, together with interest, Fees and
all other Obligations incurred hereunder, are paid in full:
8.01 CHANGES IN BUSINESS. (a) The Borrower will not, and will not
permit any of its Subsidiaries to, materially alter the character of the
business of the Borrower and its Subsidiaries from that conducted by AMTROL and
its Subsidiaries on the Initial Borrowing Date (immediately prior to the
Merger), provided that this Section 8.01 shall not restrict the making of any
investment expressly permitted by Section 8.06.
(b) Holdings will not engage in any business other than its ownership
of the capital stock of the Borrower (and no other assets), provided that
Holdings may engage in those activities that are incidental to (x) the
maintenance of its corporate existence in compliance with applicable law, (y)
legal, tax and accounting matters in connection with any of the foregoing
activities and (z) the entering into, and performing its obligations under, this
Agreement and the other Documents to which it is a party.
8.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. Holdings
will not, and will not permit any Subsidiary to, wind up, liquidate or dissolve
its affairs, or enter into any transaction of merger or consolidation, sell or
otherwise dispose of all or any part of its property or assets (other than
inventory or obsolete equipment or excess equipment no longer needed in the
conduct of the business in the ordinary course of business) or purchase, lease
or otherwise acquire all or any part of the property or assets of any Person
-52-
<PAGE>
(other than purchases or other acquisitions of inventory, leases, materials and
equipment in the ordinary course of business) or agree to do any of the
foregoing at any future time, except that the following shall be permitted:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into, or be liquidated into, the Borrower or a Subsidiary Guarantor (so
long as the Borrower or such Subsidiary Guarantor is the surviving
corporation), or all or any part of its business, properties and assets may
be conveyed, leased, sold or transferred to the Borrower or any Subsidiary
Guarantor (or any other Subsidiary), PROVIDED that neither the Borrower nor
any Subsidiary Guarantor may be a party to any merger, consolidation or
liquidation otherwise permitted by this clause (a) involving a Subsidiary
that is not a Wholly-Owned Subsidiary;
(b) capital expenditures to the extent within the limitations set
forth in Section 8.05 hereof;
(c) the investments, acquisitions and transfers or dispositions of
properties permitted pursuant to Section 8.06;
(d) each of the Borrower and the Subsidiary Guarantors may lease (as
lessee) real or personal property in the ordinary course of business (so
long as such lease does not create a Capitalized Lease Obligation not
otherwise permitted by Section 8.04(d) or would not violate Section 8.07);
(e) licenses or sublicenses by the Borrower and its Subsidiary
Guarantors of intellectual property in the ordinary course of business,
PROVIDED, that such licenses or sublicenses shall not interfere with the
business of the Borrower or any Subsidiary Guarantor;
(f) other sales or dispositions of (I) Designated Assets to the extent
consummated prior to December 31, 1997 and (II) any other assets to the
extent that the aggregate Net Cash Proceeds received from all such sales and
dispositions permitted by this clause (f)(II) shall not exceed $500,000 in
any fiscal year of the Borrower, provided that, in the case of both clauses
(f)(I) and (f)(II), (x) each such sale shall be in an amount at least equal
to the fair market value thereof and for proceeds consisting solely of cash
(except as set forth on Annex VII) and (y) the Net Cash Proceeds of any such
sale are applied to repay the Loans to the extent required by Section
4.02(A)(c), and, PROVIDED FURTHER, that the sale or disposition of the
capital stock of (i) the Borrower shall be prohibited and (ii) any
Subsidiary of the Borrower shall be prohibited unless it is for all of the
outstanding capital stock of such Subsidiary owned by the Borrower;
-53-
<PAGE>
(g) any Subsidiary may be liquidated into the Borrower or a Subsidiary
Guarantor;
(h) Permitted Acquisitions in accordance with Section 8.06(g); and
(i) the Merger.
8.03 LIENS. Holdings will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of Holdings or any such Subsidiary whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets
(including sales of accounts receivable or notes with recourse to Holdings or
any of its Subsidiaries) or assign any right to receive income, except:
(a) Liens for taxes not yet due or Liens for taxes being contested in
good faith and by appropriate proceedings for which adequate reserves (in
the good faith judgment of the management of Holdings) have been
established;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business, such as carriers', warehousemen's and mechanics' Liens,
statutory landlord's Liens, and other similar Liens arising in the ordinary
course of business, and (x) which do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries or (y) which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement or the other Credit
Documents;
(d) Liens on assets of the Borrower and each Subsidiary existing on
the Initial Borrowing Date and listed on Annex VIII hereto and any
subsequent renewals or extensions thereof, provided that (x) the aggregate
principal amount of the Indebtedness, if any, secured by such Liens does not
increase from that amount outstanding at the time of any such renewal or
extension and (y) any such renewal or extension does not encumber any
additional assets or properties of Holdings or any of its Subsidiaries;
-54-
<PAGE>
(e) Liens arising from judgments, decrees or attachments and Liens
securing appeal bonds arising from judgments, in each case in circumstances
not constituting an Event of Default under Section 9.09;
(f) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or
to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations incurred in the ordinary
course of business (exclusive of obligations in respect of the payment for
borrowed money), PROVIDED that the aggregate amount of deposits at any time
pursuant to this clause (f) shall not exceed $2,000,000;
(g) leases or subleases granted to others not interfering in any
material respect with the business of the Borrower or any of its
Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Holdings or any of its Subsidiaries;
(i) Liens arising from UCC financing statements regarding leases
permitted by this Agreement;
(j) purchase money Liens securing payables arising from the purchase
by the Borrower or any Subsidiary Guarantor of any equipment or goods in the
normal course of business, PROVIDED that such payables shall not constitute
Indebtedness;
(k) any interest or title of a lessor under any lease permitted by
this Agreement;
(l) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price of assets
acquired by the Borrower or any Subsidiary Guarantor after the Initial
Borrowing Date, PROVIDED that any such Liens attach only to the assets so
acquired and that all Indebtedness secured by Liens created pursuant to this
clause (l) shall not exceed $500,000 at any time outstanding;
(m) Liens created pursuant to Capital Leases permitted pursuant to
Section 8.04(d);
(n) Permitted Encumbrances;
-55-
<PAGE>
(o) Liens imposed pursuant to Environmental Laws to the extent
permitted by Section 7.13 of this Agreement;
(p) any Lien imposed by ERISA to the extent not in violation of any of
the representations, warranties or covenants in respect of ERISA made by
Holdings or the Borrower in this Agreement;
(q) Liens on assets of Foreign Subsidiaries securing Indebtedness
permitted to be incurred under Section 8.04; and
(r) additional Liens securing Indebtedness not in excess of $500,000
at any time outstanding.
8.04 INDEBTEDNESS. Holdings will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Indebtedness owing by (i) any Subsidiary Guarantor to another
Subsidiary Guarantor or the Borrower and/or (ii) the Borrower to any
Subsidiary Guarantor;
(c) Indebtedness of the Borrower evidenced by the Senior Subordinated
Notes, in an aggregate principal amount at any time outstanding not to
exceed $115,000,000;
(d) Capitalized Lease Obligations of the Borrower and its Subsidiary
Guarantors, PROVIDED that the aggregate Capitalized Lease Obligations under
all Capital Leases entered into after Initial Borrowing Date shall not
exceed $2,500,000;
(e) Existing Indebtedness and any subsequent extension, renewal or
refinancing thereof, provided that (x) the aggregate principal amount
thereof is not increased and (y) no additional obligees are added;
(f) Indebtedness under Interest Rate Agreements to the extent entered
into in compliance with Section 7.12;
(g) Indebtedness of Holdings represented by the obligations of
Holdings to make payments with respect to the cancellation or repurchase of
certain stock of officers, employees and directors (or their estates) of
Holdings and its Subsidiaries, to the extent permitted by Section 8.09;
-56-
<PAGE>
(h) Indebtedness incurred pursuant to purchase money mortgages
permitted by Section 8.03(l);
(i) Indebtedness constituting intercompany loans and advances to a
Foreign Subsidiary to the extent permitted by Section 8.06(j);
(j) additional Indebtedness of the Borrower, the Subsidiary Guarantors
and/or Foreign Subsidiaries not to exceed an aggregate outstanding principal
amount of $10,000,000 at any time.
8.05 CAPITAL EXPENDITURES. (a) Holdings will not, and will not
permit any of its Subsidiaries to, incur Consolidated Capital Expenditures,
PROVIDED that the Borrower and its Subsidiaries may make Consolidated Capital
Expenditures not to exceed in the aggregate (x) $1,750,000 during the period
from the Initial Borrowing Date to the end of its fiscal year ending closest to
December 31, 1996, (y) $7,000,000 during each of its next two subsequent fiscal
years and (z) $6,000,000 during each subsequent fiscal year thereafter.
(b) In the event that the maximum amount which is permitted to be
expended in respect of Consolidated Capital Expenditures during any fiscal year
pursuant to Section 8.05(a) (without giving effect to this clause (b)) is not
fully expended during such fiscal year, the maximum amount which may be expended
during the immediately succeeding fiscal year pursuant to Section 8.05(a) shall
be increased by such unutilized amount, PROVIDED that such increase shall not
exceed $3,000,000 in any fiscal year.
8.06 ADVANCES, INVESTMENTS AND LOANS. Holdings will not, and will not
permit any of its Subsidiaries to, lend money or credit or make advances to any
Person, or purchase or acquire any stock, obligations or securities of, or any
other interest in, or make any capital contribution to any Person, except:
(a) the Borrower or any Subsidiary may invest in cash and Cash
Equivalents;
(b) the Borrower and any Subsidiary may acquire and hold receivables
owing to them, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(c) the intercompany Indebtedness described in Section 8.04(b) shall
be permitted;
(d) loans and advances to officers, directors and employees in the
ordinary course of business in an aggregate principal amount not to exceed
$500,000 at any time outstanding shall be permitted;
-57-
<PAGE>
(e) the Borrower and each Subsidiary Guarantor may acquire and own
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business;
(f) Interest Rate Agreements permitted by Section 8.04(f) shall be
permitted;
(g) the Borrower or any Subsidiary Guarantor may make Permitted
Acquisitions not to exceed $25,000,000 (plus amounts returned to the
Borrower as a result of sales of such investment or pursuant to a dividend
payment thereunder) in the aggregate;
(h) Holdings may make contributions to an employee stock ownership
plan, PROVIDED such contributions are in Holdings Common Stock;
(i) Holdings may make equity contributions to the capital of the
Borrower, and the Borrower may make equity contributions to the capital of
any Subsidiary Guarantor;
(j) the Borrower and any Subsidiary Guarantor may make loans and
advances to, and/or equity contributions in, any Foreign Subsidiary,
PROVIDED that at no time shall the aggregate outstanding principal amount of
all loans and advances made pursuant to this clause (j), when added to the
aggregate amount of contributions made pursuant to this clause (j), exceed
$10,000,000.
8.07 LEASES. Holdings will not permit the aggregate payments
(including, without limitation, any property taxes paid by Holdings and its
Subsidiaries as additional rent or lease payments) by Holdings and its
Subsidiaries on a consolidated basis under all agreements to rent or lease any
real or personal property (exclusive of Capitalized Lease Obligations) to exceed
$2,500,000 in any fiscal year of Holdings.
8.08 PREPAYMENTS OF INDEBTEDNESS, ETC. Holdings will not, and will
not permit any of its Subsidiaries to:
(a) make (or give any notice in respect thereof) any voluntary or
optional payment or prepayment or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto money or securities before due for the purpose of paying
when due) or exchange (except through the issuance of Exchange Senior
Subordinated Notes) of the Senior Subordinated Notes;
-58-
<PAGE>
(b) amend or modify, or permit the amendment or modification of, any
material provisions of any Senior Subordinated Note Documents; and/or
(c) amend, modify or change in any manner adverse to the interests of
the Banks the certificate of incorporation (including, without limitation,
by the filing of any certificate of designation) or by-laws of any Credit
Party or any agreement entered into by Holdings or the Borrower with respect
to its capital stock (including any Equity Financing Document), or any
Merger Document or enter into any new agreement in any manner adverse to the
interests of the Banks with respect to the capital stock of Holdings or the
Borrower.
8.09 DIVIDENDS, ETC. (a) Holdings will not, and will not permit any
of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in capital stock of such Person) or return any capital to, its
stockholders or authorize or make any other distribution, payment or delivery of
property or cash to its stockholders as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for a consideration, any shares of
any class of its capital stock now or hereafter outstanding (or any warrants for
or options or stock appreciation rights in respect of any of such shares), or
set aside any funds for any of the foregoing purposes, or permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of Holdings or any other Subsidiary, as the case
may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends"), except that:
(i) any Subsidiary of the Borrower may pay dividends to the Borrower
or to a Subsidiary Guarantor;
(ii) Holdings may redeem or repurchase Holdings Common Stock (or
options to purchase such Holdings Common Stock) from (1) officers, employees
and directors (or their estates) upon the death, permanent disability,
retirement or termination of employment of any such Person or otherwise in
accordance with (x) the Stockholders' Agreement and (y) any stock option
plan or any employee stock ownership plan, or (2) other stockholders of
Holdings, so long as the purpose of such purchase is to acquire Holdings
Common Stock for reissuance to new officers, employees and directors (or
their estates) of Holdings to the extent so reissued within 12 months of any
such purchase, PROVIDED that in all such cases (x) no Default or Event of
Default is then in existence or would arise therefrom, (y) the aggregate
amount of all cash paid in respect of all such shares so redeemed or
repurchased in any calendar year does not exceed $500,000;
(iii) so long as no Default or Event of Default then exists or
would result therefrom, the Borrower may pay cash Dividends to Holdings so
long as the cash
-59-
<PAGE>
proceeds thereof are promptly used by Holdings for the purposes described in
clause (ii), (iv) or (v) of this Section 8.09;
(iv) the Borrower may pay cash Dividends to Holdings so long as the
cash proceeds thereof are promptly used by Holdings to pay operating
expenses in the ordinary course of business (including, without limitation,
professional fees and expenses) and other similar corporate overhead costs
and expenses, PROVIDED that the aggregate amount of cash Dividends paid
pursuant to this clause (iv) shall at no time during any fiscal year of
Holdings exceed $200,000;
(v) the Option Cancellation shall be permitted; and
(vi) the Borrower may pay cash Dividends to Holdings in amounts equal
to, and made in lieu of, payments otherwise payable at such time to Holdings
under the Tax Sharing Agreement.
(b) Holdings will not, and will not permit any of its Subsidiaries to,
create or otherwise cause or suffer to exist any encumbrance or restriction
which prohibits or otherwise restricts (A) the ability of any Subsidiary to (a)
pay dividends or make other distributions or pay any Indebtedness owed to
Holdings or any Subsidiary, (b) make loans or advances to Holdings or any
Subsidiary, (c) transfer any of its properties or assets to Holdings or any
Subsidiary or (B) the ability of Holdings or any other Subsidiary of Holdings to
create, incur, assume or suffer to exist any Lien upon its property or assets to
secure the Obligations, other than prohibitions or restrictions existing under
or by reason of:
(i) this Agreement, the other Credit Documents and the Senior
Subordinated Note Documents;
(ii) applicable law;
(iii) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices;
(iv) any restriction or encumbrance with respect to a Subsidiary
imposed pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the capital stock or assets of
such Subsidiary, so long as such sale or disposition is permitted under this
Agreement; and
(v) Liens permitted under Section 8.03 and any documents or
instruments governing the terms of any Indebtedness or other obligations
secured by any such Liens, PROVIDED that such prohibitions or restrictions
apply only to the assets subject to such Liens.
-60-
<PAGE>
8.10 TRANSACTIONS WITH AFFILIATES. Holdings will not, and will not
permit any Subsidiary to, enter into any transaction or series of transactions
after the Initial Borrowing Date whether or not in the ordinary course of
business, with any Affiliate other than on terms and conditions substantially as
favorable to Holdings or such Subsidiary as would be obtainable by Holdings or
such Subsidiary at the time in a comparable arm's-length transaction with a
Person other than an Affiliate, PROVIDED that the foregoing restrictions shall
not apply to (i) the payment by Holdings or the Borrower of fees, expenses and
other amounts to Cypress and its Affiliates in connection with the Merger and
payments by Holdings, the Borrower and any of its Subsidiaries to Cypress and
its Affiliates made pursuant to any financial advisory, financing, underwriting
or placement agreement, or in respect of other investment banking activities, in
each case as determined by the board of directors of such Person in good faith,
(ii) employment arrangements entered into in the ordinary course of business
with officers of Holdings and its Subsidiaries and (iii) customary fees paid to
members of the Board of Directors of Holdings and of its Subsidiaries.
8.11 INTEREST COVERAGE RATIO. Holdings will not permit the ratio of
(i) Consolidated EBITDA to (ii) Consolidated Cash Interest Expense for any Test
Period ending at the end of any fiscal quarter of Holdings set forth below, to
be less than the ratio set forth opposite such fiscal quarter:
Fiscal Quarter Ending Closest To: Ratio
--------------------------------- -----
December 31, 1996 1.60
March 31, 1997 1.60
June 30, 1997 1.60
September 30, 1997 1.60
December 31, 1997 1.60
March 31, 1998 1.60
June 30, 1998 1.65
September 30, 1998 1.70
December 31, 1998 1.75
March 31, 1999 1.75
June 30, 1999 1.80
September 30, 1999 1.85
December 31, 1999 1.90
March 31, 2000 1.95
June 30, 2000 2.00
September 30, 2000 2.05
December 31, 2000 2.10
March 31, 2001 2.10
June 30, 2001 2.15
-61-
<PAGE>
September 30, 2001 2.20
December 31, 2001 2.25
March 31, 2002 2.30
June 30, 2002 2.35
September 30, 2002 2.45
December 31, 2002 2.50
March 31, 2003 2.55
June 30, 2003 2.60
September 30, 2003 2.70
December 31, 2003 2.75
March 31, 2004 2.85
June 30,2004 3.00
8.12 LEVERAGE RATIO. Holdings will not permit the Leverage Ratio to
exceed, as of the end of any fiscal quarter of Holdings set forth below, the
ratio set forth opposite such fiscal quarter:
Fiscal Quarter Ending Closest To: Ratio
--------------------------------- -----
December 31, 1996 6.25
March 31, 1997 6.25
June 30, 1997 6.25
September 30, 1997 6.25
December 31, 1997 6.25
March 31, 1998 6.20
June 30, 1998 6.00
September 30, 1998 5.75
December 31, 1998 5.60
March 31, 1999 5.50
June 30, 1999 5.40
September 30, 1999 5.30
December 31, 1999 5.20
March 31, 2000 5.10
June 30, 2000 4.90
September 30, 2000 4.80
December 31, 2000 4.70
March 31, 2001 4.60
June 30, 2001 4.50
September 30, 2001 4.40
December 31, 2001 4.30
-62-
<PAGE>
March 31, 2002 4.20
June 30, 2002 4.05
September 30, 2002 3.90
December 31, 2002 3.80
March 31, 2003 3.70
June 30, 2003 3.60
September 30, 2003 3.45
December 31, 2003 3.30
March 31, 2004 3.15
June 30, 2004 3.00
8.13 MINIMUM CONSOLIDATED EBITDA. Holdings will not permit
Consolidated EBITDA, for any Test Period ending at the end of any fiscal quarter
of Holdings set forth below, to be less than the amount set forth opposite such
fiscal quarter:
Fiscal Quarter Ending Closest To: Amount
-------------------------------- ------
December 31, 1996 $ 27,800,000
March 31, 1997 $ 26,640,000
June 30, 1997 $ 26,640,000
September 30, 1997 $ 26,640,000
December 31, 1997 $ 26,640,000
March 31, 1998 $ 27,330,000
June 30, 1998 $ 28,650,000
September 30, 1998 $ 29,170,000
December 31, 1998 $ 29,830,000
March 31, 1999 $ 30,200,000
June 30, 1999 $ 30,710,000
September 30, 1999 $ 31,170,000
December 31, 1999 $ 31,560,000
March 31, 2000 $ 32,070,000
June 30, 2000 $ 32,750,000
September 30, 2000 $ 33,380,000
December 31, 2000 $ 33,900,000
March 31, 2001 $ 34,220,000
June 30, 2001 $ 34,650,000
September 30, 2001 $ 35,050,000
December 31, 2001 $ 35,370,000
March 31, 2002 $ 35,950,000
June 30, 2002 $ 36,710,000
-63-
<PAGE>
September 30, 2002 $ 37,420,000
December 31, 2002 $ 38,010,000
March 31, 2003 $ 38,380,000
June 30, 2003 $ 38,870,000
September 30, 2003 $ 39,330,000
December 31, 2003 $ 39,700,000
March 31, 2004 $ 40,090,000
June 30, 2004 $ 40,610,000
8.14 LIMITATION ON ISSUANCE OF STOCK. Holdings will not permit any of
its Subsidiaries, directly or indirectly, to issue any shares of its capital
stock or other securities (or warrants, rights or options to acquire shares or
other equity securities), except (i) for replacements of then outstanding shares
of capital stock, (ii) for stock splits, stock dividends and similar issuances
which do not decrease the percentage ownership of Holdings or any of its
Subsidiaries in any class of the capital stock of such Subsidiary, (iii) for
issuances to Holdings or any of its Subsidiaries in connection with the creation
of new Wholly-Owned Subsidiaries permitted under Section 8.15, (iv) to qualify
directors to the extent required by applicable law, and (v) for issuances by
wholly-owned Foreign Subsidiaries to third Persons to satisfy local law
requirements.
8.15 LIMITATION ON CREATION OF SUBSIDIARIES. Holdings will not, and
will not permit any Subsidiary to, establish, create or acquire any Subsidiary;
PROVIDED that, the Borrower and its Subsidiaries shall be permitted to
establish, create or acquire Wholly-Owned Subsidiaries so long as (i) 100% (or
65% in the case of a Foreign Subsidiary) of the capital stock of such new
Subsidiary owned by the Borrower or any Subsidiary Guarantor is pledged pursuant
to, and to the extent required by, the Pledge Agreement and the certificates
representing such stock, together with stock powers duly executed in blank, are
delivered to the Collateral Agent and (ii) such new Subsidiary (other than if a
Foreign Subsidiary) executes a counterpart of the Subsidiary Guaranty, the
Pledge Agreement and the Security Agreement, in each case on the same basis (and
to the same extent) as such Subsidiary would have executed such Credit Documents
if it were a Credit Party on the Initial Borrowing Date.
SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each, an "Event of Default"):
9.01 PAYMENTS. The Borrower shall (i) default in the payment when due
of any principal of the Loans or (ii) default, and such default shall continue
for five or more days, in the payment when due of any Unpaid Drawing, any
interest on the Loans or any Fees or any other amounts owing hereunder or under
any other Credit Document; or
-64-
<PAGE>
9.02 REPRESENTATIONS, ETC. Any representation, warranty or statement
made by any Credit Party herein or in any other Credit Document or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made; or
9.03 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 7.11 or 8, or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 9.01,
9.02 or clause (a) of this Section 9.03) contained in this Agreement and such
default shall continue unremedied for a period of at least 30 days after written
notice to the defaulting party by the Administrative Agent or the Required
Banks;
9.04 DEFAULT UNDER OTHER AGREEMENTS. (a) Holdings or any of its
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) beyond the period of grace, if any, applicable
thereto or (ii) default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause any such
Indebtedness to become due prior to its stated maturity; or (b) any such
Indebtedness of Holdings or any of its Subsidiaries shall be declared to be due
and payable prior to the stated maturity thereof, PROVIDED that it shall not
constitute an Event of Default pursuant to this Section 9.04 unless the
principal amount of any one issue of such Indebtedness exceeds $2,000,000 or the
aggregate amount of all Indebtedness referred to in clauses (a) and (b) above
exceeds $3,000,000 at any one time; or
9.05 BANKRUPTCY, ETC. Holdings or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy", as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against
Holdings or any of its Subsidiaries and the petition is not controverted within
10 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of Holdings or any of its
Subsidiaries; or Holdings or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to or any of its
Subsidiaries; or there is commenced against Holdings or any of its Subsidiaries
any such proceeding which remains undismissed for a period of 60 days; or
Holdings or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
Holdings or any of
-65-
<PAGE>
its Subsidiaries suffers any appointment of any custodian or the like for it or
any substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or Holdings or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by
Holdings or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof under Section 412 of the
Code or Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, any Plan
which is subject to Title IV of ERISA shall have had or is likely to have a
trustee appointed to administer such Plan, any Plan which is subject to Title IV
of ERISA is, shall have been or is likely to be terminated or to be the subject
of termination proceedings under ERISA, any Plan shall have an Unfunded Current
Liability, a contribution required to be made with respect to a Plan that is
subject to the funding requirements of Section 412 of the Code or Section 302 of
ERISA has not been timely made, Holdings or any Subsidiary of Holdings or any
ERISA Affiliate has incurred or is likely to incur any liability to or on
account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the
Code or on account of a group health plan (as defined in Section 607(1) of ERISA
or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or Holdings
or any Subsidiary of Holdings has incurred or is likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as defined in Section
3(1) of ERISA) that provide benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or Plans; (b) there
shall result from any such event or events the imposition of a lien, the
granting of a security interest, or a liability or a material risk of incurring
a liability; and (c) such lien, security interest or liability, individually,
and/or in the aggregate, in the reasonable opinion of the Required Banks, has
had, will have, a Material Adverse Effect; or
9.07 SECURITY DOCUMENTS. (a) Any Security Document shall cease to be
in full force and effect, or shall cease to give the Collateral Agent the Liens
or any of the material rights, powers and privileges purported to be created
thereby in favor of the Collateral Agent, or (b) any Credit Party shall default
in the due performance or observance of any term, covenant or agreement on its
part to be performed or observed pursuant to any such Security Document and such
default (other than a default arising from the failure to deliver collateral)
shall continue unremedied for a period of at least 30 days after written notice
to the defaulting party by the Collateral Agent; or
9.08 GUARANTIES. The Guaranties or any provision thereof shall cease
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under any Guaranty or any
-66-
<PAGE>
Guarantor shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to any
Guaranty and such default (other than a payment default) shall continue
unremedied for a period of at least 30 days after written notice to the
defaulting party by the Administrative Agent; or
9.09 JUDGMENTS. One or more judgments or decrees shall be entered
against Holdings or any of its Subsidiaries involving a liability of $2,000,000
or more in the case of any one such judgment or decree and $3,000,000 or more in
the aggregate for all such judgments and decrees for Holdings and its
Subsidiaries (not paid or to the extent not covered by insurance) and any such
judgments or decrees shall not have been vacated, discharged or stayed or bonded
pending appeal within 60 days from the entry thereof;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Banks, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the
Administrative Agent or any Bank to enforce its claims against any Guarantor or
the Borrower, except as otherwise specifically provided for in this Agreement
(PROVIDED that, if an Event of Default specified in Section 9.05 shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Administrative Agent as specified in clauses (i) and (ii)
below shall occur automatically without the giving of any such notice): (i)
declare the Total Commitment terminated, whereupon the Commitment of each Bank
shall forthwith terminate immediately and any Commitment Commission shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and any accrued interest in respect of all Loans and
all obligations owing hereunder (including Unpaid Drawings) and thereunder to
be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the
Collateral Agent to enforce), any or all of the Liens and security interests
created pursuant to the Security Documents; (iv) terminate any Letter of Credit
which may be terminated in accordance with its terms; and (v) direct the
Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or
upon the occurrence of any Event of Default specified in Section 9.05 in respect
of the Borrower, it will pay) to the Collateral Agent at the Payment Office such
additional amounts of cash, to be held as security for the Borrower's
reimbursement obligations in respect of Letters of Credit then outstanding equal
to the aggregate Stated Amount of all Letters of Credit then outstanding.
SECTION 10. DEFINITIONS. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
-67-
<PAGE>
"A Term Commitment" shall mean, with respect to each Bank, the amount,
if any, set forth opposite such Bank's name on Annex I hereto directly below the
column entitled "A Term Commitment" as the same may be terminated pursuant to
Section 3.03.
"A Term Facility" shall mean the Facility evidenced by the Total A Term
Commitment.
"A Term Loan" shall have the meaning provided in Section 1.01(a).
"A Term Note" shall have the meaning provided in Section 1.05(a).
"A TF Maturity Date" shall mean May 13, 2002.
"A TF Percentage" shall mean, at any time of determination thereof, a
fraction (expressed as a percentage) the numerator of which is equal to the
aggregate principal amount of A Term Loans outstanding at such time and the
denominator of which is equal to the aggregate principal amount of Term Loans
outstanding at such time.
"Acknowledgment Agreement" shall mean the Acknowledgment Agreement,
dated as of November 13, 1996, executed by AMTROL after the Merger, in the form
of Exhibit M.
"Acquisition Corp." shall mean AMTROL Acquisition, Inc., a Rhode Island
corporation.
"Acquisition Loans" shall mean Revolving Loans the proceeds of which
are utilized to make Permitted Acquisitions or to refinance loans or advances
the proceeds of which were utilized to make Permitted Acquisitions.
"Acquisition Sublimit" shall mean at any time the Total Revolving
Commitment at such time less $10,000,000.
"Additional Mortgages" shall have the meaning provided in Section 7.11.
"Adjusted Cash Flow" for any fiscal year shall mean Consolidated Net
Income for such fiscal year (after provision for taxes) PLUS the amount of all
net non-cash charges (including, without limitation, depreciation, deferred tax
expense, non-cash interest expense, amortization and other non-cash charges)
that were deducted in arriving at Consolidated Net Income for such fiscal year,
MINUS the amount of all non-cash gains and gains from sales of assets (other
than sales of inventory and equipment in the normal course of business) that
were added in arriving at Consolidated Net Income for such fiscal year.
-68-
<PAGE>
"Adjusted RF Percentage" shall mean (x) at a time when no Bank Default
exists, for each RF Bank such RF Bank's Revolving Percentage and (y) at a time
when a Bank Default exists (i) for each RF Bank that is a Defaulting Bank, zero
and (ii) for each RF Bank that is a Non-Defaulting Bank, the percentage
determined by dividing such RF Bank's Revolving Commitment at such time by the
Adjusted Total Revolving Commitment at such time, it being understood that all
references herein to Revolving Commitments and the Adjusted Total Revolving
Commitment at a time when the Total Revolving Commitment or Adjusted Total
Revolving Commitment, as the case may be, has been terminated shall be
references to the Total Revolving Commitment or Adjusted Total Revolving
Commitment, as the case may be, in effect immediately prior to such termination,
PROVIDED that (A) no RF Bank's Adjusted RF Percentage shall change upon the
occurrence of a Bank Default from that in effect immediately prior to such Bank
Default if, after giving effect to such Bank Default and any repayment of
Revolving Loans and Swingline Loans at such time pursuant to Section 4.02(A)(a)
or otherwise, the sum of (i) the aggregate outstanding principal amount of
Revolving Loans of all Non-Defaulting Banks plus (ii) the aggregate outstanding
principal amount of Swingline Loans plus (iii) the Letter of Credit
Outstandings, exceeds the Adjusted Total Revolving Loan Commitment; (B) the
changes to the Adjusted RF Percentage that would have become effective upon the
occurrence of a Bank Default but that did not become effective as a result of
the preceding clause (A) shall become effective on the first date after the
occurrence of the relevant Bank Default on which the sum of (i) the aggregate
outstanding principal amount of the Revolving Loans of all Non-Defaulting Banks
plus (ii) the aggregate outstanding principal amount of the Swingline Loans plus
(iii) the Letter of Credit Outstandings is equal to or less than the Adjusted
Total Revolving Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted RF
Percentage is changed pursuant to the preceding clause (B) and (ii) any
repayment of such Bank's Revolving Loans, or of Unpaid Drawings with respect to
Letters of Credit or of Swingline Loans, that were made during the period
commencing after the date of the relevant Bank Default and ending on the date of
such change to its Adjusted RF Percentage must be returned to any Borrower as a
preferential or similar payment in any bankruptcy or similar proceeding of such
Borrower, then the change to such Non-Defaulting Bank's Adjusted RF Percentage
effected pursuant to said clause (B) shall be reduced to that positive change,
if any, as would have been made to its Adjusted RF Percentage if (x) such
repayments had not been made and (y) the maximum change to its Adjusted RF
Percentage would have resulted in the sum of the outstanding principal of
Revolving Loans made by such Bank plus such Bank's new Adjusted RF Percentage of
the outstanding principal amount of Swingline Loans and of Letter of Credit
Outstandings equalling such Bank's Revolving Commitment at such time.
"Adjusted Revolving Commitment" for each Non-Defaulting Bank shall mean
at any time the product of such Bank's Adjusted RF Percentage and the Adjusted
Total Revolving Commitment.
-69-
<PAGE>
"Adjusted Total Revolving Commitment" shall mean at any time the Total
Revolving Commitment less the aggregate Revolving Commitments of all Defaulting
Banks.
"Administrative Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 11.09.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power (i) to vote 10% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agents" shall have the meaning provided in the first paragraph of this
Agreement.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time further modified, amended and/or supplemented.
"AMTROL" shall mean AMTROL, Inc., a Rhode Island corporation.
"AMTROL International" shall mean AMTROL International Inc., a Rhode
Island corporation and a Wholly-Owned Subsidiary of the Borrower.
"AMTROL Asia Pacific" shall mean AMTROL Asia Pacific Ltd., a Hong Kong
corporation.
"Anticipated Reinvestment Amount" shall mean, with respect to any
Reinvestment Election, the amount specified in the Reinvestment Notice delivered
by the Borrower in connection therewith as the amount of the Net Cash Proceeds
from the related Asset Sale that the Borrower intends to use to purchase,
construct or otherwise acquire Reinvestment Assets.
"Applicable Base Rate Margin" shall mean (i) in the case of A Term
Loans, Revolving Loans and Swingline Loans, 1.50% LESS the Margin Reduction
Discount, if any and (ii) in the case of B Term Loans, 2.00%.
-70-
<PAGE>
"Applicable Eurodollar Margin" shall mean (i) in the case of A Term
Loans, Revolving Loans and Swingline Loans, 2.50% LESS the Margin Reduction
Discount, if any and (ii) in the case of B Term Loans, 3.00%.
"Asset Sale" shall mean the sale, transfer or other disposition by
Holdings or any Subsidiary to any Person other than the Borrower or any
Subsidiary Guarantor of any asset of the Borrower or such Subsidiary (other than
sales, transfers or other dispositions in the ordinary course of business of
inventory and/or obsolete or excess equipment).
"Assignment Agreement" shall mean the Assignment Agreement in the form
of Exhibit L (appropriately completed).
"Authorized Officer" shall mean any senior officer of Holdings or the
Borrower designated as such in writing to the Administrative Agent by Holdings
or the Borrower, in each case to the extent acceptable to the Administrative
Agent.
"B Term Commitment" shall mean, with respect to each Bank, the amount,
if any, set forth opposite such Bank's name on Annex I hereto directly below the
column entitled "B Term Commitment" as the same may be terminated pursuant to
Section 3.03.
"B Term Facility" shall mean the Facility evidenced by the Total B Term
Commitment.
"B Term Loan" shall have the meaning provided in Section 1.01(b).
"B Term Note" shall have the meaning provided in Section 1.05(a).
"B TF Maturity Date" shall mean May 13, 2004.
"B TF Percentage" shall mean, at any time of determination thereof, a
percentage equal to 100% minus the A TF Percentage at such time.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any incurrence of Loans or
to fund its portion of any unreimbursed payment under Section 2.05(c) or (ii) a
Bank having notified the Administrative Agent and/or the Borrower that it does
not intend to comply with the obligations under Section 1.01 or under Section
2.05(c), in the case of either clause (i) or (ii) as a result of the appointment
of a receiver or conservator with respect to such Bank at the direction or
request of any regulatory agency or authority.
-71-
<PAGE>
"Bank Register" shall have the meaning provided in Section 12.16.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the higher of (i) the rate which is
1/2 of 1% in excess of the Federal Funds Effective Rate and (ii) the Prime
Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrower" shall mean (i) at any time prior to the consummation of the
Merger, Acquisition Corp. and (ii) thereafter, AMTROL, as the surviving
corporation of the Merger.
"Borrowing" shall mean the incurrence of (i) Swingline Loans by the
Borrower from BTCo on a given date or (ii) one Type of Loan pursuant to a single
Facility by the Borrower from all of the Banks having Commitments with respect
to such Facility on a PRO RATA basis on a given date (or resulting from
conversions on a given date), having in the case of Eurodollar Loans the same
Interest Period; PROVIDED that Base Rate Loans incurred pursuant to Section
1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company in its individual capacity.
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in the City of New York a legal holiday or a day on which banking institutions
are authorized by law or other governmental actions to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Lease" as applied to any Person shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality
-72-
<PAGE>
thereof (PROVIDED that the full faith and credit of the United States of America
is pledged in support thereof) having maturities of not more than six months
from the date of acquisition, (ii) U.S. dollar denominated time deposits,
certificates of deposit and bankers' acceptances of (x) any Bank, (y) any
domestic commercial bank of recognized standing having capital and surplus in
excess of $500,000,000 or (z) any bank (or the parent company of such bank)
whose short-term commercial paper rating from Standard & Poor's Ratings
Services, a division of McGraw-Hill, Inc. ("S&P") is at least A-1 or the
equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at
least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each
case with maturities of not more than six months from the date of acquisition,
(iii) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (ii) above, (iv)
commercial paper issued by any Bank or Approved Bank or by the parent company of
any Bank or Approved Bank and commercial paper issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper rating of at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's (any such company, an "Approved Company"), or guaranteed by
any industrial company with a long term unsecured debt rating of at least A or
A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be,
and in each case maturing within six months after the date of acquisition and
(v) investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (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, but only as and
when so received) received by the Borrower and/or any Subsidiary from such Asset
Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 ET
SEQ.
"Change of Control" shall mean, at any time and for any reason
whatsoever, (a) Holdings shall cease to own directly 100% on a fully diluted
basis of the economic and voting interest in the Borrower's capital stock or (b)
Cypress and/or its Affiliates and/or the Management Investors shall cease to own
on a fully diluted basis in the aggregate at least 51% of the economic and
voting interest in Holdings' capital stock or (c) any Person or "group" (within
the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
as in effect on the Effective Date, other than Cypress and its Affiliates, shall
have acquired beneficial ownership of 35% or more on a fully diluted basis of
the voting and/or economic interest in Holdings' capital stock or (d) the Board
of Directors of Holdings shall cease to consist of a majority of Continuing
Directors or (e) a "change of control" or similar event shall occur as provided
in the Senior Subordinated Note Indenture.
-73-
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the Effective
Date and any subsequent provisions of the Code, amendatory thereof, supplemental
thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of the
Security Documents.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Banks.
"Commitment" shall mean, with respect to each Bank, such Bank's Term
Commitment and Revolving Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Consolidated Capital Expenditures" shall mean, for any period, the
aggregate of all cash expenditures and including in all events all amounts
expended under Capital Leases but excluding any amount representing capitalized
interest) by Holdings and its Subsidiaries during that period that, in
conformity with GAAP, are or are required to be included in the property, plant
or equipment reflected in the consolidated balance sheet of Holdings and its
Subsidiaries, PROVIDED that Consolidated Capital Expenditures shall in any event
(x) include the purchase price paid in cash in connection with the acquisition
of any Person (including through the purchase of all of the capital stock or
other ownership interests of such Person or through merger or consolidation) to
the extent allocable to property, plant and equipment and (y) exclude amounts
expended to acquire Reinvestment Assets.
"Consolidated Cash Interest Expense" shall mean, for any period,
Consolidated Interest Expense for such period LESS (i) any portion of such
Consolidated Interest Expense not payable in cash and amortization of discount
and deferred issuance and financing costs and (ii) the consolidated interest
income (to the extent payable in cash) of Holdings and its Subsidiaries for such
period, PROVIDED that for the purposes of Sections 8.11, Consolidated Cash
Interest Expense for each Test Period ending on or prior to September 30, 1997
shall mean the sum of (x) Consolidated Cash Interest Expense for such Test
Period as determined without regard to this proviso plus (y) the amount set
forth in Annex X hereto as applicable to Consolidated Cash Interest Expense for
such Test Period.
"Consolidated Current Assets" shall mean, as to any Person at any time,
the current assets (other than cash and Cash Equivalents) of such Person and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
-74-
<PAGE>
"Consolidated Current Liabilities" shall mean, as to any Person at any
time, the current liabilities of such Person and its Subsidiaries determined on
a consolidated basis in accordance with GAAP, but excluding all short-term
Indebtedness for borrowed money and the current portion of any long-term
Indebtedness of such Person or its Subsidiaries, in each case to the extent
otherwise included therein.
"Consolidated Debt" shall mean, as of any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Holdings and its
Subsidiaries on a consolidated basis as determined in accordance with GAAP plus
any Indebtedness for borrowed money of any other Person as to which Holdings
and/or any of its Subsidiaries has created a guarantee or other Contingent
Obligation.
"Consolidated EBIT" shall mean, for any period, (A) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) provisions for
taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization or
write-off of deferred financing costs to the extent deducted in determining
Consolidated Net Income and (v) losses on sales of assets (excluding sales in
the ordinary course of business) and other extraordinary losses LESS (B) the
amount for such period of gains on sales of assets (excluding sales in the
ordinary course of business) and other extraordinary gains, all as determined on
a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum of the
amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense,
(iii) amortization expense and (iv) one-time severance expenses relating to
lay-offs in connection with, or resulting from the Transaction to the extent
deducted in the calculation of Consolidated Net Income for such period, all as
determined on a consolidated basis in accordance with GAAP; PROVIDED that
Consolidated EBITDA for each Test Period ending on or prior to September 30,
1997 shall mean the sum of (x) Consolidated EBITDA for such Test Period as
determined without regard to this proviso PLUS (y) the amount set forth in Annex
X hereto as applicable to Consolidated EBITDA for such Test Period.
"Consolidated Interest Expense" shall mean, for any period - total
interest expense (including the portion that is attributable to Capital Leases
in accordance with GAAP) of Holdings and its Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of Holdings and its
Subsidiaries (including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements).
"Consolidated Net Income" shall mean for any period, the net income (or
loss) of Holdings and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP, PROVIDED
that there shall be excluded from the calculation thereof (without duplication)
(i) the income (or loss) of any
-75-
<PAGE>
Person (other than Subsidiaries of Holdings) in which any other Person (other
than Holdings or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to
Holdings or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of Holdings or is merged into or consolidated with Holdings or any of its
Subsidiaries or that Person's assets are acquired by Holdings or any of its
Subsidiaries, (iii) the income of any Subsidiary of Holdings to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (iv) Transaction
Expenses, (v) compensation expense resulting from the issuance of capital stock,
stock options or stock appreciation rights issued to employees, including
officers, of Holdings or any Subsidiary, or the exercise of such options or
rights, in each case to the extent the obligation (if any) associated therewith
is not expected to be settled by the payment of cash by Holdings or any
Affiliate of Holdings and compensation expense resulting from the repurchase of
any such capital stock, options and rights, (vi) any one-time non-cash expenses
incurred or payments made in connection with the Transaction (including (x)
reversals of purchase accounting positions, (y) the amount of any expenses
included in the Cost of Goods Sold resulting from the write-up of finished goods
inventory and (z) the write-down of the 4-BA Production Line, a reusable
pressure-rated cylinder line), (vii) the one-time charge relating to reserve
adjustments for workman's compensation in connection with or resulting from the
Transaction and (viii) expenses relating to the Option Cancellation.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intending to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof, PROVIDED HOWEVER, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof
-76-
<PAGE>
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Continuing Directors" shall mean the directors of Holdings on the
Initial Borrowing Date and each other director if such director's nomination for
the election to the Board of Directors of Holdings is recommended by a majority
of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, the Security
Documents, the Subsidiary Guaranty and the Acknowledgment Agreement and any
documents executed in connection therewith.
"Credit Event" shall mean and include the making of a Loan or the
issuance of a Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and the Subsidiary
Guarantors.
"Cypress" shall mean The Cypress Group L.L.C., a Delaware limited
liability corporation.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Designated Assets" shall mean those assets listed on Annex VII.
"Dividends" shall have the meaning provided in Section 8.09.
"Documentation Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the Documentation
Agent.
"Documents" shall mean, collectively, the Credit Documents and the
Transaction Documents.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other institutional "accredited investor" as defined in
Regulation D of the Securities Act.
-77-
<PAGE>
"Employment Agreements" shall have the meaning provided in Section
5.01(d).
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by the Borrower or any of its Subsidiaries solely in the ordinary course of such
Person's business and not in response to any third party action or request of
any kind) or proceedings relating in any way to any Environmental Law or any
permit issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials arising from alleged injury
or threat of injury to health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code and rule of common law now
or hereafter in effect and in each case as amended, and any binding judicial or
administrative interpretation thereof, including any binding judicial or
administrative order, consent decree or judgment, relating to the environment or
Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; the
Toxic Substances Control Act, 15 U.S.C. Section 7401 ET SEQ.; the Clean Air
Act, 42 U.S.C. Section 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C.
Section 3808 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET
SEQ. and any applicable state and local or foreign counterparts or equivalents.
"Equity Financing" shall mean the issuance by Holdings of Holdings
Common Stock on the Initial Borrowing Date in accordance with the provisions of
Section 5.01(h)(I).
"Equity Financing Documents" shall mean all of the agreements
governing, or relating to, the Equity Financing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect as of the
Effective Date and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
-78-
<PAGE>
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with Holdings, a Subsidiary or a Credit Party would be
deemed to be a "single employer" within the meaning of Sections 414(b), (c), (m)
and (o) of the Code.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period for a
Eurodollar Loan, (i) the offered quotation to first-class banks in the interbank
Eurodollar market by the Administrative Agent for dollar deposits of amounts in
same day funds comparable to the outstanding principal amount of the Eurodollar
Loan of the Administrative Agent for which an interest rate is then being
determined with maturities comparable to the Interest Period to be applicable to
such Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date
which is two Business Days prior to the commencement of such Interest Period
divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including without limitation any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any fiscal year, the remainder of
(i) the sum of (x) Adjusted Cash Flow for such fiscal year and (y)(I) the
decrease, if any, in Working Capital less (II) the decrease, if any, in the
principal amount of Revolving Loans, in each case from the first day to the last
day of such fiscal year, plus (ii) to the extent not included in (i) above, any
amounts received by Holdings and its Subsidiaries in settlement of, or in
payment of any judgments resulting from, actions, suits or proceedings with
respect to Holdings and/or its Subsidiaries from the first day to the last day
of such fiscal year, minus (iii) the sum of (x) the amount of Consolidated
Capital Expenditures (except to the extent financed through the incurrence of
Indebtedness) made during such fiscal year and (y)(I) the increase, if any, in
Working Capital less (II) the increase, if any, in the principal amount of
Revolving Loans, in each case from the first day to the last day of such fiscal
year and (z) any repayments or prepayments of the principal amount of Term
Loans, except prepayments of the principal amount of Term Loans made pursuant to
Sections 4.02(A)(c), (d), (e), (f), (g) and/or (i) and any repayments of
Revolving Loans as a result of a Scheduled Reduction.
"Exchange Senior Subordinated Notes" shall mean senior subordinated
notes which are substantially identical securities to the Senior Subordinated
Notes issued on or prior to the Initial Borrowing Date, which Exchange Senior
Subordinated Notes shall be
-79-
<PAGE>
issued pursuant to a registered exchange offer or private exchange offer for the
Senior Subordinated Notes and pursuant to the Senior Subordinated Note
Indenture. In no event will the issuance of any Exchange Senior Subordinated
Notes increase the aggregate principal amount of Senior Subordinated Notes then
outstanding or otherwise result in an increase in an interest rate applicable to
the Senior Subordinated Notes.
"Existing Credit Agreement" shall mean the Amended and Restated Credit
Agreement, dated as of March 29, 1996, among AMTROL, the institutions from time
to time party thereto, and Fleet National Bank, N.A., as Agent, as in effect on
the Effective Date.
"Existing Indebtedness" shall have the meaning provided in Section
6.21.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.01(d).
"Existing Letter of Credit" shall have the meaning provided in Section
2.01(d).
"Expiration Date" shall mean January 31, 1997.
"Facility" shall mean any of the credit facilities established under
this Agreement, I.E., the A Term Facility, the B Term Facility or the Revolving
Facility.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Effective Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that is
incorporated under the laws of any jurisdiction other than the United States of
America, any State thereof, or any territory thereof.
-80-
<PAGE>
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 8, including defined terms as used therein, are subject (to the
extent provided therein) to Section 12.07(a).
"Guaranteed Creditors" shall mean and include each of the Agents, the
Collateral Agent, the Banks and each party (other than any Credit Party) party
to an Interest Rate Agreement to the extent that such party constitutes a
Secured Creditor.
"Guaranteed Obligations" shall mean (i) the principal and interest on
each Note issued by the Borrower, and Loans made, under this Agreement and all
reimbursement obligations and Unpaid Drawings with respect to Letters of Credit,
together with all the other obligations (including obligations which, but for
the automatic stay under Section 362(a) of the Bankruptcy Code, would become
due) and liabilities (including, without limitation, indemnities, fees and
interest thereon) of the Borrower to any Bank or the Agents and/or the
Collateral Agent now existing or hereafter incurred under, arising out of or in
connection with this Agreement or any other Credit Document and the due
performance and compliance with all the terms, conditions and agreements
contained in the Credit Documents by the Borrower and (ii) all obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities of the Borrower owing
under any Interest Rate Agreement entered into by the Borrower with a Secured
Creditor, whether now in existence or hereafter arising, and the due performance
and compliance with all terms, conditions and agreements contained therein.
"Guarantor" shall mean Holdings and each Subsidiary Guarantor.
"Guaranty" shall mean and include each of the Holdings Guaranty and the
Subsidiary Guaranty.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that
contains, electric fluid containing levels of polychlorinated biphenyls, and
radon gas and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law.
"Holdings" shall mean AMTROL Holdings, Inc., a Delaware corporation.
"Holdings Common Stock" shall mean the common stock of Holdings.
-81-
<PAGE>
"Holdings Guaranty" shall mean the guaranty of Holdings pursuant to
Section 13.
"Hong Kong Mortgage" shall have the meaning provided in Section 7.15.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations
of such Person, (vi) all obligations of such Person to pay a specified purchase
price for goods or services whether or not delivered or accepted, I.E.,
take-or-pay and similar obligations, (vii) all net obligations of such Person
under Interest Rate Agreements and (viii) all Contingent Obligations of such
Person, (other than Contingent Obligations arising from the guaranty by such
Person of the obligations of the Borrower and/or its Subsidiaries to the extent
such guaranteed obligations do not constitute Indebtedness and are otherwise
permitted hereunder), PROVIDED that Indebtedness shall not include trade
payables and accrued expenses, in each case arising in the ordinary course of
business.
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Interest Period" with respect to any Loan shall mean the interest
period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap agreement,
any interest rate cap agreement, any interest rate collar agreement or other
similar agreement or arrangement designed to protect the Borrower or any
Subsidiary against fluctuations in interest rates.
"Leasehold" of any Person means all of the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean BTCo or any Bank which at the
request of the Borrower and with the consent of the Administrative Agent agrees,
in such Bank's
-82-
<PAGE>
sole discretion, to become a Letter of Credit Issuer for purposes of issuing
Letters of Credit pursuant to Section 2.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.04(a).
"Leverage Ratio" shall mean, at any date of determination, the ratio of
Consolidated Debt on such date to Consolidated EBITDA for the Test Period ending
on such date (or most recently ended).
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01.
"Management Agreement" shall have the meaning provided in Section
5.01(d).
"Management Investors" shall mean the executive officers of the
Borrower (i) immediately following the Transaction and any persons who become
executive officers of the Borrower at a time when Cypress and its Affiliates
beneficially own, directly or indirectly, more than a majority of the capital
stock of the Borrower and (ii) who own capital stock of the Borrower.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(e).
"Margin Reduction Discount" shall mean zero, PROVIDED that the Margin
Reduction Discount shall be increased to 1/4 of 1%, 1/2 of 1% or 3/4 of 1%, as
the case may be, as specified in clauses (i), (ii) or (iii) below, at any time
after the Initial Borrowing Date, when, and for so long as, the ratio set forth
in such clause has been satisfied as at the end of the then Relevant Test
Periods:
(i) the Margin Reduction Discount shall be 1/4 of 1% in the event that
as at the end of the Relevant Test Period the Leverage Ratio is greater than
4.0 to 1 but less than or equal to 4.5 to 1; or
-83-
<PAGE>
(ii) the Margin Reduction Discount shall be 1/2 of 1% in the event that
as at the end of the Relevant Test Period the Leverage Ratio is greater than
3.0 to 1 but less than or equal to 4.0 to 1; or
(iii) the Margin Reduction Discount shall be 3/4 of 1% in the event
that as at the end of the Relevant Test Period the Leverage Ratio is less
than or equal to 3.0 to 1;
The Leverage Ratio shall be determined for the Relevant Test Period, by delivery
of an officer's certificate of the Borrower to the Banks pursuant to Section
7.01(e), which certificate shall set forth the calculation of the Leverage
Ratio. The Margin Reduction Discount so determined shall apply, except as set
forth below, from the date on which such officer's certificate is delivered to
the Administrative Agent to the earlier of (x) the date on which the next
certificate is delivered to the Administrative Agent pursuant to Section 7.01(e)
and (y) the 50th day following the end of the fiscal quarter in which such first
certificate was delivered to the Administrative Agent (or 100 days if such
fiscal quarter was the last fiscal quarter of a fiscal year). Notwithstanding
anything to the contrary contained above, the Margin Reduction Discount shall be
zero (x) prior to the first anniversary of the Initial Borrowing Date, (y) if no
officer's certificate has been delivered to the Banks pursuant to Section
7.01(e) which sets forth the Leverage Ratio for the Relevant Test Period or the
financial statements upon which any such calculations are based have not been
delivered, until such a certificate and/or financial statements are delivered
and (z) at all times when there shall exist a violation of Section 9.01 or an
Event of Default. It is understood and agreed that the Margin Reduction
Discount as provided above shall in no event be cumulative and only the Margin
Reduction Discount available pursuant to either clause (i), (ii) or (iii), if
any, contained in this definition shall be applicable.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, property, assets, liabilities, operations or financial condition of
(x) Holdings and its Subsidiaries taken as a whole after giving effect to the
Transaction and (y) for purposes of Section 5.01, AMTROL and its Subsidiaries
taken as a whole.
"Maximum Swingline Amount" shall mean $2,000,000.
"Merger" shall mean the merger of Acquisition Corp. with and into
AMTROL pursuant to the Merger Documents, with AMTROL as the surviving
corporation of such merger.
"Merger Agreement" shall mean the Merger Agreement, dated as of August
28, 1996, between Holdings, Acquisition Corp. and AMTROL.
-84-
<PAGE>
"Merger Documents" shall mean the Merger Agreement and all other
material agreements and documents relating to the Merger, as same may be
amended, modified or supplemented from time to time pursuant to the terms hereof
and thereof.
"Minimum Borrowing Amount" shall mean (i) for Term Loans and Revolving
Loans maintained as Base Rate Loans, $1,000,000, (ii) for Term Loans and
Revolving Loans maintained as Eurodollar Loans, $5,000,000 and (iii) for
Swingline Loans, $50,000.
"Mortgage" shall have the meaning provided in Section 5.01(k)(III).
"Mortgage Policies" shall have the meaning provided in Section
5.01(k)(III).
"Mortgaged Properties" shall mean all Real Property of Holdings and its
Subsidiaries listed on Annex V and designated as "Mortgaged Properties" therein.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting therefrom net of expenses of sale (including payment of
principal, premium and interest of Indebtedness secured by the assets the
subject of the Asset Sale and required to be, and which is, repaid under the
terms thereof as a result of such Asset Sale), and incremental taxes paid or
payable as a result thereof.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean and include each A Term Note, each B Term Note, each
Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section 1.03.
"Notice of Conversion" shall have the meaning provided in Section 1.06.
"Notice Office" shall mean the office of the Administrative Agent at
130 Liberty Street, New York, New York or such other office as the
Administrative Agent may designate to the Borrower in writing from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Administrative Agent, the Documentation Agent, the Collateral Agent or any Bank
pursuant to the terms of this Agreement or any other Credit Document.
-85-
<PAGE>
"Option Cancellation" shall mean the payment by the Borrower of the
cancellation price (which shall be acceptable to the Agents) of certain
management options issued by AMTROL that are cancelled in connection with the
Merger.
"Offering Memorandum" shall mean the Offering Memorandum, dated
November __, 1996, in connection with the private placement of the Senior
Subordinated Notes.
"Participant" shall have the meaning provided in Section 2.05(a).
"Payment Office" shall mean the office of the Administrative Agent at
130 Liberty Street, New York, New York or such other office as the
Administrative Agent may designate to the Borrower in writing from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall mean any acquisition (including by merger
or consolidation) of property or assets of a nature or type or which will be
used in a business similar, complementary or related to the nature or type of
the property and assets of, or the business of, the Borrower and its
Subsidiaries existing on the date of such investment (as determined in good
faith by the Board of Directors of the Borrower), and shall include the creation
and/or acquisition of a Subsidiary all of whose property, assets and
Subsidiaries come within the foregoing description.
"Permitted Encumbrances" shall mean, with respect to the Mortgaged
Properties, such exceptions to title as are set forth in the title insurance
policy or title commitment delivered with respect thereto, all of which
exceptions must be reasonably acceptable to the Administrative Agent.
"Permitted Liens" shall mean Liens described in Section 8.03.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of ERISA,
which (i) is maintained or contributed to by (or to which there is an obligation
to contribute of) Holdings, a Subsidiary or an ERISA Affiliate or (ii) was so
maintained or contributed to by Holdings, a Subsidiary or an ERISA Affiliate in
respect of which Holdings or a Subsidiary or an ERISA Affiliate could have
liability under Section 4069 or Section 4212 of ERISA.
-86-
<PAGE>
"Pledge Agreement" shall have the meaning provided in Section
5.01(k)(I).
"Pledged Securities" shall mean all the Pledged Securities as defined
in the relevant Pledge Agreement.
"Prime Lending Rate" shall mean the rate which Bankers Trust Company
announces from time to time as its prime lending rate, the Prime Lending Rate to
change when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company may make commercial
loans or other loans at rates of interest at, above or below the Prime Lending
Rate.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 ET SEQ.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Reinvestment Assets" shall mean any assets to be employed in the
business of the Borrower and its Subsidiaries as described in Section 8.01.
"Reinvestment Election" shall have the meaning provided in Section
4.02(A)(c).
"Reinvestment Notice" shall mean a written notice signed by an
Authorized Officer of the Borrower stating that the Borrower, in good faith,
intends and expects to use all or a specified portion of the Net Cash Proceeds
of an Asset Sale to purchase, construct or otherwise acquire Reinvestment
Assets.
"Reinvestment Prepayment Amount" shall mean, with respect to any
Reinvestment Election, the amount, if any, on the Reinvestment Prepayment Date
relating thereto by which (a) the Anticipated Reinvestment Amount in respect of
such Reinvestment Election exceeds (b) the aggregate amount thereof expended by
Holdings and its Subsidiaries to acquire Reinvestment Assets.
-87-
<PAGE>
"Reinvestment Prepayment Date" shall mean, with respect to any
Reinvestment Election, the earliest of (i) the date, if any, upon which the
Administrative Agent, on behalf of the Required Banks, shall have delivered a
written termination notice to the Borrower, provided that such notice may only
be given while an Event of Default exists, (ii) the date occurring 355 days
after such Reinvestment Election and (iii) the date on which the Borrower shall
have determined not to, or shall have otherwise ceased to, proceed with the
purchase, construction or other acquisition of Reinvestment Assets with the
related Anticipated Reinvestment Amount.
"Relevant Test Period" shall mean, at any time, the Test Period ending
on the last day of the then most recently ended fiscal quarter of the Borrower
with respect to which an officer's certificate has been delivered to the Banks
pursuant to Section 7.01(e).
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan that is subject to Title IV or ERISA other than
those events as to which the 30-day notice period is waived under PBGC
regulations.
"Required RF Banks" shall mean Non-Defaulting Banks the sum of whose
Revolving Commitments (or, if after the Total Revolving Commitment has been
terminated, Adjusted RF Percentages) represents an amount greater than 50% of
the Adjusted Total Revolving Commitment (or, if the Total Revolving Commitment
has been terminated, the aggregate Adjusted RF Percentages).
"Required TF Banks" with respect to the A Term Facility and the B Term
Facility, respectively, shall mean Non-Defaulting Banks the sum of whose
outstanding Term Loans under such Facility represents an amount greater than 50%
of the sum of all outstanding Term Loans under such Facility made by
Non-Defaulting Banks.
"Required Banks" shall mean Non-Defaulting Banks whose outstanding Term
Loans and Revolving Commitments (or, if after the Total Revolving Commitment has
been terminated, Adjusted RF Percentages) constitute greater than 50% of the sum
of (i) the total outstanding Term Loans of Non-Defaulting Banks and (ii) the
Adjusted Total Revolving Commitment (or, if after the Total Revolving Commitment
has been terminated, the aggregate Adjusted RF Percentages).
"Revolving Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I hereto directly below the
column entitled "Revolving Commitment," as the same may be reduced or terminated
from time to time pursuant to Section 3.02, 3.03 and/or 9 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to Section
12.04.
-88-
<PAGE>
"Revolving Facility" shall mean the Facility evidenced by the Total
Revolving Commitment.
"Revolving Loan" shall have the meaning provided in Section 1.01(c).
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Revolving Percentage" shall mean at any time for each Bank with a
Revolving Commitment, the percentage obtained by dividing such Bank's Revolving
Commitment by the Total Revolving Commitment, PROVIDED that if the Total
Revolving Commitment has been terminated, the Revolving Percentage of each Bank
shall be determined by dividing such Bank's Revolving Commitment immediately
prior to such termination by the Total Revolving Commitment immediately prior to
such termination.
"RF Bank" shall mean at any time each Bank with a Revolving Commitment
or with outstanding Revolving Loans.
"RF Maturity Date" shall mean May 13, 2002.
"Scheduled Reduction" shall have the meaning provided in Section
3.03(d).
"Scheduled Repayment" shall have the meaning provided in Section
4.02(A)(b).
"SEC" shall have the meaning provided in Section 7.01(h).
"SEC Regulation D" shall mean Regulation D as promulgated under the
Securities Act of 1933, as amended, as the same may be in effect from time to
time.
"Section 4.04 Certificate" shall have the meaning provided in Section
4.04(b)(ii).
"Secured Creditor" shall mean and include any Secured Creditor as
defined in any Security Document.
"Security Agreement Collateral" shall mean all "Collateral" as defined
in the relevant Security Agreement.
"Security Agreement" shall have the meaning provided in Section
5.01(k)(II).
"Security Documents" shall mean the Pledge Agreement, the Security
Agreement, each Mortgage and each Additional Mortgage, if any.
-89-
<PAGE>
"Senior Subordinated Note Documents" shall mean the Senior Subordinated
Notes and the Senior Subordinated Note Indenture.
"Senior Subordinated Note Indenture" shall mean the Indenture entered
into by and between the Borrower and The Bank of New York, as trustee
thereunder, with respect to the Senior Subordinated Notes as in effect on the
Initial Borrowing Date and as the same may be modified, amended or supplemented
from time to time in accordance with the terms hereof and thereof.
"Senior Subordinated Notes" shall mean the Senior Subordinated Notes
due 2006 issued by the Borrower under the Senior Subordinated Note Indenture, as
in effect on the Initial Borrowing Date and as the same may be supplemented,
amended or modified from time to time in accordance with the terms thereof and
hereof. As used herein, the term "Senior Subordinated Notes" shall include any
Exchange Senior Subordinated Notes issued pursuant to the Senior Subordinated
Note Indenture in exchange for outstanding Senior Subordinated Notes, as
contemplated by the Offering Memorandum and the definition of Exchange Senior
Subordinated Notes.
"Shareholders' Agreements" shall have the meaning provided in Section
5.01(d).
"Standby Letter of Credit" shall mean and include each Letter of Credit
issued in support of the obligations described in clause (x) of Section 2.01(a).
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of Holdings.
"Subsidiary Guarantors" shall mean each Subsidiary of the Borrower
other than a Foreign Subsidiary.
"Subsidiary Guaranty" shall have the meaning provided in Section
5.01(j).
-90-
<PAGE>
"Swingline Expiry Date" shall mean the date which is five Business Days
prior to the RF Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(d).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Date" shall mean the earlier of (x) the date which is 30
days after the Initial Borrowing Date and (y) the date upon which the
Administrative Agent determines in its sole discretion (and notifies the
Borrower) that the primary syndication (and the resulting addition of Banks
pursuant to Section 12.04) has been completed.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Tax Sharing Agreement" shall have the meaning provided in
Section 5.01(d).
"Term Commitment" shall mean for any Bank the sum of its A Term
Commitment and its B Term Commitment.
"Term Loans" shall mean, collectively, the A Term Loans and the B Term
Loans.
"Test Period" shall mean at any time (i) for any determination made on
or prior to September 30, 1997, the period (taken as one accounting period) from
the Initial Borrowing Date to the last day of the fiscal quarter of the Borrower
then ending or then last ended and (ii) for any determination made thereafter,
the four consecutive fiscal quarters of the Borrower (taken as one accounting
period) then ending or then last ended.
"Total A Term Commitment" shall mean the sum of the A Term Commitments
of each of the Banks.
"Total B Term Commitment" shall mean the sum of the B Term Commitments
of each of the Banks.
"Total Commitment" shall mean the sum of the Total A Term Commitment,
the Total B Term Commitment and the Total Revolving Commitment.
"Total Revolving Commitment" shall mean the sum of the Revolving
Commitments of each of the Banks.
-91-
<PAGE>
"Total Unutilized Revolving Commitment" shall mean, at any time, (i)
the Total Revolving Commitment at such time less (ii) the sum of the aggregate
principal amount of all Revolving Loans and Swingline Loans at such time plus
the Letter of Credit Outstandings at such time.
"Trade Letter of Credit" shall mean and include each Letter of Credit
issued in support of the obligations described in clause (y) of Section 2.01(a).
"Transaction" shall mean (i) the consummation of the Merger, (ii) the
Equity Financing, (iii) the issuances of the Senior Subordinated Notes and (iv)
the incurrence of Loans and issuance of Letters of Credit, if any, on the
Initial Borrowing Date.
"Transaction Documents" shall mean the Merger Documents, the Equity
Financing Documents and the Senior Subordinated Note Documents.
"Transaction Expenses" shall mean all fees and expenses incurred in
connection with, and payable prior to or substantially concurrently with the
closing of, the Transaction and the transactions contemplated in connection with
the Documents, and including all fees paid to any of the Banks and the Agents
hereunder, fees paid to Cypress or its Affiliates permitted hereunder,
attorney's fees, accountants' fees, placement agents' fees, discounts and
commissions and brokerage, and consultant fees. Transaction Expenses shall
include the amortization of any such fees and expenses that are capitalized and
not classified as an expense on the date incurred.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, I.E., a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan shall mean the amount, if any,
by which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year exceeds the fair market value
of the assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.05(a).
"Unutilized Revolving Commitment" for any Bank with a Revolving
Commitment at any time shall mean the excess of (i) the Revolving Commitment of
such Bank over (ii) the sum of (x) the aggregate outstanding principal amount of
Revolving
-92-
<PAGE>
Loans made by such Bank plus (y) an amount equal to such Bank's Revolving
Percentage of the Letter of Credit Outstandings at such time.
"Voting Stock" shall mean, with respect to any corporation, the
outstanding stock of all classes (or equivalent interests) which ordinarily, in
the absence of contingencies, entitles holders thereof to vote for the election
of directors (or Persons performing similar functions) of such corporation, even
though the right so to vote has been suspended by the happening of such a
contingency.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' qualifying shares, is owned directly
or indirectly by such Person.
"Working Capital" shall mean the excess of Consolidated Current Assets
over Consolidated Current Liabilities.
"Working Capital Loans" shall mean all Revolving Loans that are not
Acquisition Loans.
"Written" or "in writing" shall mean any form of written communication
or a communication by means of telex, facsimile transmission, telegraph or
cable.
SECTION 11. THE ADMINISTRATIVE AGENT.
11.01 APPOINTMENT. The Banks hereby designate Bankers Trust Company
as Administrative Agent (for purposes of this Section 11, the terms
"Administrative Agent" and "Agent" shall include BTCo in its capacity as
Collateral Agent pursuant to the Security Documents) and Morgan Stanley & Co.,
Incorporated as Documentation Agent to act as specified herein and in the other
Credit Documents. Each Bank hereby irrevocably authorizes, and each holder of
any Note by the acceptance of such Note shall be deemed irrevocably to
authorize, the Agents to take such action on its behalf under the provisions of
this Agreement, the other Credit Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the Agents by the terms hereof and thereof and such other powers as
are reasonably incidental thereto. The Agents may perform any of their duties
hereunder by or through their respective officers, directors, agents, employees
or affiliates.
11.02 NATURE OF DUTIES. The Agents shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. No Agent or any of its respective officers, directors,
agents, employees or affiliates shall be liable for any action taken or omitted
by them hereunder or under any
-93-
<PAGE>
other Credit Document or in connection herewith or therewith, unless caused by
their gross negligence or willful misconduct. The duties of the Agents shall be
mechanical and administrative in nature; the Agents shall not have by reason of
this Agreement or any other Credit Document a fiduciary relationship in respect
of any Bank or the holder of any Note; and nothing in this Agreement or any
other Credit Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agents any obligations in respect of this
Agreement or any other Credit Document except as expressly set forth herein or
therein.
11.03 LACK OF RELIANCE ON THE AGENTS. Independently and without
reliance upon the Agents, each Bank and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of Holdings and
its Subsidiaries in connection with the making and the continuance of the Loans
and the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of Holdings and its Subsidiaries and,
except as expressly provided in this Agreement, the Agents shall not have any
duty or responsibility, either initially or on a continuing basis, to provide
any Bank or the holder of any Note with any credit or other information with
respect thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter. The Agents shall not be responsible
to any Bank or the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of this Agreement or any other Credit Document or the financial
condition of Holdings and its Subsidiaries or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any other Credit Document, or the financial
condition of Holdings and its Subsidiaries or the existence or possible
existence of any Default or Event of Default.
11.04 CERTAIN RIGHTS OF THE AGENTS. If the Agents shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, the Agents shall be entitled to refrain from such act or taking such
action unless and until the Agents shall have received instructions from the
Required Banks; and the Agents shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, neither any Bank nor the
holder of any Note shall have any right of action whatsoever against the Agents
as a result of the Agents acting or refraining from acting hereunder or under
any other Credit Document in accordance with the instructions of the Required
Banks.
11.05 RELIANCE. Each of the Agents shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype, facsimile or telecopier message,
cablegram, radiogram, order or other
-94-
<PAGE>
document or telephone message signed, sent or made by any Person that such Agent
believed to be the proper Person, and, with respect to all legal matters
pertaining to this Agreement and any other Credit Document and its duties
hereunder and thereunder, upon advice of counsel selected by such Agent.
11.06 INDEMNIFICATION. To the extent the Agents are not reimbursed
and indemnified by the Borrower, each Defaulting Bank (to the extent so able)
and the Non-Defaulting Banks will reimburse and indemnify the Agents, in
proportion to their respective Loans and Commitments, for and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature which
may be imposed on, asserted against or incurred by the Agents in performing
their respective duties hereunder or under any other Credit Document, in any way
relating to or arising out of this Agreement or any other Credit Document;
PROVIDED that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of either Agent.
11.07 THE AGENTS IN THEIR INDIVIDUAL CAPACITIES. With respect to its
obligation to make Loans under this Agreement, the Agents shall have the rights
and powers specified herein for a "Bank" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Banks," "Required Banks," "holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include the Agents in their
individual capacities. The Agents may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any Credit
Party or any Affiliate of any Credit Party as if they were not performing the
duties specified herein, and may accept fees and other consideration from
Holdings, the Borrower or any other Credit Party for services in connection with
this Agreement and otherwise without having to account for the same to the
Banks.
11.08 HOLDERS. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
11.09 RESIGNATION BY THE ADMINISTRATIVE AGENT. (a) The Administrative
Agent may resign from the performance of all its functions and duties hereunder
and/or under the other Credit Documents at any time by giving 15 Business Days'
prior written notice to the Borrower and the Banks. Such resignation shall take
effect upon the
-95-
<PAGE>
appointment of a successor Administrative Agent pursuant to clauses (b) and (c)
below or as otherwise provided below.
(b) Upon any such notice of resignation, the Banks shall appoint a
successor Administrative Agent hereunder or thereunder who shall be a commercial
bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Borrower, shall then appoint a successor Administrative Agent who
shall serve as Administrative Agent hereunder or thereunder until such time, if
any, as the Banks appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed pursuant
to clause (b) or (c) above by the 20th Business Day after the date such notice
of resignation was given by the Administrative Agent, the Administrative Agent's
resignation shall become effective and the Required Banks shall thereafter
perform all the duties of the Administrative Agent hereunder and/or under any
other Credit Document until such time, if any, as the Banks appoint a successor
Administrative Agent as provided above.
(e) The Documentation Agent may resign from the performance of all of
its functions and duties hereunder and/or under the other Credit Documents at
any time by giving 5 Business Days' prior written notice to the Banks. Such
resignation shall take effect at the end of such 5 Business Days.
SECTION 12. MISCELLANEOUS.
12.01 PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (i) whether
or not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agents in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of White & Case) and of the Agents and each of the Banks in
connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Agents and for each of the Banks,
provided that, except in the case of a bankruptcy of any Credit Party, no more
than one counsel may be used in any jurisdiction); (ii) pay and hold each of the
Banks harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save each of the Banks
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such Bank)
to pay such taxes; and (iii) indemnify each Bank (including in its capacity as
Agent or Letter
-96-
<PAGE>
of Credit Issuer), its officers, directors, employees, representatives and
agents from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them as a result of,
or arising out of, or in any way related to, or by reason of, (a) any
investigation, litigation or other proceeding (whether or not the Agents or any
Bank is a party thereto and whether or not any such investigation, litigation or
other proceeding is between or among the Agents, any Bank, any Credit Party or
any third Person or otherwise) related to the entering into and/or performance
of any Document or the use of the proceeds of any Loans hereunder or the
Transaction or the consummation of any transactions contemplated in any Credit
Document, including, without limitation, any such investigation, litigation or
other proceeding relating to the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of the Borrower, any
of its Subsidiaries or any Real Property owned or operated by them, and in each
case including, without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified).
12.02 RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, if an Event of Default then exists, each Bank is hereby authorized
at any time or from time to time, without presentment, demand, protest or other
notice of any kind to any Credit Party or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other Indebtedness at any time held or
owing by such Bank (including, without limitation, by branches and agencies of
such Bank wherever located) to or for the credit or the account of any Credit
Party against and on account of the Obligations and liabilities of such Credit
Party to such Bank under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in Obligations of such
Credit Party purchased by such Bank pursuant to Section 12.06(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such Bank
shall have made any demand hereunder and although said Obligations, liabilities
or claims, or any of them, shall be contingent or unmatured.
12.03 NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered, if to a
Credit Party, at the address specified opposite its signature below or in the
other relevant Credit Documents, as the case may be; if to any Bank, at its
address specified for such Bank on Annex II hereto; or, at such other address as
shall be designated by any party in a written notice to the other parties
hereto. All such notices and communications shall be mailed, telegraphed,
telexed, telecopied, or cabled or sent by overnight courier, and shall be
effective when received.
-97-
<PAGE>
12.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, PROVIDED that Holdings and the Borrower may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Banks. Each Bank may at any time grant participations in
any of its rights hereunder or under any of the Notes to another financial
institution, PROVIDED that in the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation, except that the participant shall be entitled to the benefits of
Sections 1.10, 2.06 and 4.04 of this Agreement to the extent that such Bank
would be entitled to such benefits if the participation had not been entered
into or sold, and, PROVIDED FURTHER that no Bank shall transfer, grant or assign
any participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except to
the extent such amendment or waiver would (i) extend the final scheduled
maturity of any Loan or Note in which such participant is participating (it
being understood that any waiver of the application of any prepayment or the
method of any application of any prepayment to, the amortization of the Term
Loans shall not constitute an extension of the final maturity date), or reduce
the rate or extend the time of payment of interest or Fees thereon (except in
connection with a waiver of the applicability of any post-default increase in
interest rates), or reduce the principal amount thereof, or increase such
participant's participating interest in any Commitment over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default or of a mandatory reduction in the Total Commitment, or a mandatory
prepayment, shall not constitute a change in the terms of any Commitment), (ii)
release all or substantially all of the Collateral or (iii) consent to the
assignment or transfer by any Credit Party of any of its rights and obligations
under this Agreement or any other Credit Document.
(b) Notwithstanding the foregoing, (x) any Bank may assign all or a
portion of its outstanding A Term Loans and/or B Term Loans and/or Revolving
Commitment (or, if prior to the Initial Borrowing Date, its A Term Commitment
and/or B Term Commitment) and its rights and obligations hereunder to one or
more Banks, and (y) with the consent of the Administrative Agent and the
Borrower (which consent, in either case, shall not be unreasonably withheld),
any Bank may assign all or a portion of its outstanding A Term Loans and/or B
Term Loans and/or Revolving Commitment and its rights and obligations hereunder
to one or more Eligible Transferees. No assignment pursuant to the immediately
preceding sentence shall to the extent such assignment represents an assignment
to an institution other than one or more Banks hereunder, be in an aggregate
amount less than $5,000,000 unless the entire Commitment of the assigning Bank
is so assigned; PROVIDED that for purposes of this sentence, Chancellor Senior
Management, Inc. and its Affiliates
-98-
<PAGE>
shall be deemed to collectively constitute one Bank. If any Bank so sells or
assigns all or a part of its rights hereunder or under the Notes, any reference
in this Agreement or the Notes to such assigning Bank shall thereafter refer to
such Bank and to the respective assignee to the extent of their respective
interests and the respective assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and benefits as
it would if it were such assigning Bank. Each assignment pursuant to this
Section 12.04(b) shall be effected by the assigning Bank and the assignee Bank
executing an Assignment Agreement. At the time of any such assignment, (i)
either the assigning or the assignee Bank shall pay to the Administrative Agent
a nonrefundable assignment fee of $3,500, (ii) Annex I shall be deemed to be
amended to reflect the Commitment of the respective assignee (which shall result
in a direct reduction to the Commitment of the assigning Bank) and of the other
Banks, and (iii) the Borrower will issue new Notes to the respective assignee
and to the assigning Bank in conformity with the requirements of Section 1.05.
To the extent of any assignment pursuant to this Section 12.04(b) to a Person
which is not already a Bank hereunder and which is not a United States Person
(as such term is defined in Section 7701(a)(30) of the Code) for Federal income
tax purposes, the respective assignee Bank shall provide to the Borrower and the
Administrative Agent the appropriate Internal Revenue Service Forms (and, if
applicable, a Section 4.04 Certificate) described in Section 4.04(b). To the
extent that an assignment of all or any portion of a Bank's Commitments and
related outstanding Obligations pursuant to this Section 12.04(b) would, at the
time of such assignment, result in increased costs under Section 1.10, 2.06 or
4.04 from those being charged by the respective assigning bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from the changes specified in said Section
1.10, 2.06 or 4.04 after the date of the respective assignment). Each Bank and
the Borrower agree to execute such documents (including without limitation
amendments to this Agreement and the other Credit Documents) as shall be
necessary to effect the foregoing. Nothing in this clause (b) shall prevent or
prohibit any Bank from pledging its Notes or Loans to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank.
(c) Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or obligations of any Bank hereunder or
any grant of participation therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any State.
(d) Each Bank initially party to this Agreement hereby represents, and
each Person that became a Bank pursuant to an assignment permitted by this
Section 12 will, upon its becoming party to this Agreement, represent that it is
an Eligible Transferee which makes loans in the ordinary course of its business
and that it will make or acquire Loans for its own account in the ordinary
course of such business, PROVIDED that subject to the
-99-
<PAGE>
preceding clauses (a) and (b), the disposition of any promissory notes or other
evidences of or interests in Indebtedness held by such Bank shall at all times
be within its exclusive control.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part
of any Agent or any Bank in exercising any right, power or privilege hereunder
or under any other Credit Document and no course of dealing between any Credit
Party and either Agent or any Bank shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder or
under any other Credit Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which either Agent or any Bank would
otherwise have. No notice to or demand on any Credit Party in any case shall
entitle any Credit Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agents or the
Banks to any other or further action in any circumstances without notice or
demand.
12.06 PAYMENTS PRO RATA. (a) The Administrative Agent agrees that
promptly after its receipt of each payment from or on behalf of any Credit Party
in respect of any Obligations of such Credit Party hereunder, it shall
distribute such payment to the Banks (other than any Bank that has expressly
waived its right to receive its pro rata share thereof) PRO RATA based upon
their respective shares, if any, of the Obligations with respect to which such
payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Banks is in a greater proportion than the total of such
Obligation then owed and due to such Bank bears to the total of such Obligation
then owed and due to all of the Banks immediately prior to such receipt, then
such Bank receiving such excess payment shall purchase for cash without recourse
or warranty from the other Banks an interest in the Obligations of the
respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount, PROVIDED that if
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 12.06(a) and (b) shall be subject to the
express provisions of this
-100-
<PAGE>
Agreement which require, or permit, differing payments to be made to
Non-Defaulting Banks as opposed to Defaulting Banks.
12.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by the Borrower
to the Banks), PROVIDED that (x) except as otherwise specifically provided
herein, all computations of Excess Cash Flow and all computations determining
compliance with Sections 8.11 through 8.13, inclusive, including definitions
used therein, shall utilize accounting principles and policies in effect at the
time of the preparation of, and in conformity with those used to prepare, the
December 31, 1995 historical financial statements of AMTROL delivered to the
Banks pursuant to Section 6.10(b) and (y) that if at any time such computations
utilize accounting principles different from those utilized in the financial
statements furnished to the Banks, such financial statements shall be
accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) This Agreement and the other Credit Documents and the rights and
obligations of the parties hereunder and thereunder shall be construed in
accordance with and be governed by the law of the state of New York. Any legal
action or proceeding with respect to this Agreement or any other Credit Document
may be brought in the courts of the State of New York sitting in the Borough of
Manhattan or of the United States for the Southern District of New York, and, by
execution and delivery of this Agreement, each Credit Party hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Credit Party
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to each Credit Party
located outside New York City and by hand delivery to each Credit Party located
within New York City, at its address for notices pursuant to Section 12.03, such
service to become effective 30 days after such mailing. Each Credit Party
hereby irrevocably designates appoints and empowers CT Corporation System, with
offices on the date hereof located at 1633 Broadway, New York, New York 10019,
as its agent for service of process in respect of any such action or proceeding.
Nothing herein shall affect the right of the Administrative Agent, any Bank to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Credit Party in any other
jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings
-101-
<PAGE>
arising out of or in connection with this Agreement or any other Credit Document
brought in the courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
(c) Each of the parties to this Agreement hereby irrevocably waives
all right to a trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement, the other Credit Documents or the
transactions contemplated hereby or thereby.
12.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
12.10 EFFECTIVENESS. This Agreement shall become effective on the
date (the "Effective Date") on which Holdings, the Borrower and each of the
Banks shall have signed a copy hereof (whether the same or different copies) and
shall have delivered the same to the Administrative Agent at the Payment Office
of the Administrative Agent or, in the case of the Banks, shall have given to
the Administrative Agent telephonic (confirmed in writing), written telex or
facsimile transmission notice (actually received) at such office that the same
has been signed and mailed to it.
12.11 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 AMENDMENT OR WAIVER. (a) Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, PROVIDED that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) directly
affected thereby, (i) extend the A TF Maturity Date, the B TF Maturity Date or
the RF Maturity Date (it being understood that any waiver of any prepayment of,
or the method of application of any prepayment to the amortization of, the Loans
shall not constitute any such extension), or extend the stated maturity of any
Letter of Credit beyond the RF Maturity Date, or reduce the rate or extend the
time of payment of interest (other than as a result of waiving the applicability
of any post-default increase in interest rates) or Fees thereon, or reduce the
principal amount thereof, or increase the Commitment of any Bank over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment shall not
constitute a change in the terms of any Commitment of any Bank),
-102-
<PAGE>
(ii) amend, modify or waive any provision of this Section 12.12, (iii) reduce
the percentage specified in, or (except to give effect to any additional
facilities hereunder) otherwise modify, the definition of Required Banks, (iv)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or (v) release all or substantially all of the
Collateral; PROVIDED FURTHER that no such change, waiver, discharge or
termination shall, (x) without the consent of the Required TF Banks under a
Facility, amend the definition of Required TF Banks or amend, waive or reduce
any Scheduled Repayment applicable to such Facility, (y) without the consent of
the Letter of Credit Issuer or the Agents, as the case may be, amend any
provision of Section 2 or 11, as the case may be, or (z) without the consent of
the Required RF Banks, amend the definition of Required RF Banks or amend, waive
or reduce any Scheduled Reduction.
(b) If, in connection with any proposed change, waiver, discharge or
termination with respect to any of the provisions of this Agreement as
contemplated by clauses (i) through (v), inclusive, of the first proviso to
Section 12.12(a), the consent of the Required Banks is obtained but the consent
of one or more of such other Banks whose consent is required is not obtained,
then the Borrower shall have the right, to replace each such non-consenting Bank
or Banks (so long as all non-consenting Banks are so replaced) with one or more
Replacement Banks pursuant to Section 1.13 so long as at the time of such
replacement, each such Replacement Bank consents to the proposed change, waiver,
discharge or termination, provided that the Borrower shall not have the right to
replace a Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to the second proviso
to Section 12.12(a).
12.13 SURVIVAL. All indemnities set forth herein including, without
limitation, in Section 1.10, 1.11, 2.06, 4.04, 11.06 or 12.01 shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans provided that no claim may be made for any indemnity under Section 12.01
more than 90 days after the later of (i) the payment in full of the Loans and
(ii) the date on which such claim has been fully determined (and not subject to
appeal or reversal).
12.14 DOMICILE OF LOANS. Each Bank may transfer and carry its Loans
at, to or for the account of any branch office, subsidiary or affiliate of such
Bank, PROVIDED that the Borrower shall not be responsible for costs arising
under Section 1.10, 2.06 or 4.04 resulting from any such transfer (other than a
transfer pursuant to Section 1.12) to the extent not otherwise applicable to
such Bank prior to such transfer.
12.15 CONFIDENTIALITY. Subject to Section 12.04, the Banks shall hold
all non-public information obtained pursuant to the requirements of this
Agreement which has been identified as such by Holdings or the Borrower in
accordance with its customary procedure for handling confidential information of
this nature and in accordance with safe and sound banking practices and in any
event may make disclosure to its Affiliates,
-103-
<PAGE>
employees, auditors, advisors, or counsel or as reasonably required by any BONA
FIDE transferee or participant in connection with the contemplated transfer of
any Loans or participation therein (so long as such transferee or participant
agrees to be bound by the provisions of this Section 12.15) or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process, PROVIDED that, unless specifically prohibited by applicable law
or court order, each Bank shall notify Holdings or the Borrower of any request
by any governmental agency or representative thereof (other than any such
request in connection with an examination of the financial condition of such
Bank by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information, and provided further that
in no event shall any Bank be obligated or required to return any materials
furnished by Holdings or any Subsidiary.
12.16 BANK REGISTER. The Borrower hereby designates the Administrative
Agent to serve as its agent, solely for purposes of this Section 12.16, to
maintain a register (the "Bank Register") on which it will record the
Commitments from time to time of each of the Banks, the Loans made by each of
the Banks and each repayment in respect of the principal amount of the Loans of
each Bank. Failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Bank, the transfer of the Commitments of such Bank
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitments shall not be effective until such transfer is recorded on the
Bank Register maintained by the Administrative Agent with respect to ownership
of such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of
any Commitments and Loans shall be recorded by the Administrative Agent on the
Bank Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered Assignment Agreement pursuant to Section 12.04(b). The
Borrower agrees to indemnify the Administrative Agent from and against any and
all losses, claims, damages and liabilities of whatsoever nature which may be
imposed on, asserted against or incurred by the Administrative Agent in
performing its duties under this Section 12.16 other than those resulting from
the Administrative Agent's willful misconduct or gross negligence.
SECTION 13. HOLDINGS GUARANTY.
13.01 THE GUARANTY. In order to induce the Banks to enter into this
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the proceeds of the Loans and the
issuance of the Letters of Credit, Holdings hereby unconditionally and
irrevocably guarantees, as primary obligor and not merely as surety, the full
and prompt payment when due, whether upon maturity, acceleration or otherwise,
of any and all of the Guaranteed Obligations. If any of the Guaranteed
Obligations becomes due and payable hereunder, Holdings unconditionally promises
to pay such indebtedness to the Guaranteed Creditors, or order, on demand,
-104-
<PAGE>
together with any and all expenses which may be incurred by the Guaranteed
Creditors in collecting any of the Guaranteed Obligations. If claim is ever
made upon any Guaranteed Creditor for repayment or recovery of any amount or
amounts received in payment or on account of any of the Guaranteed Obligations
and any of the aforesaid payees repays all or part of said amount by reason of
(i) any judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower), then and in such event Holdings agrees that any such
judgment, decree, order, settlement or compromise shall be binding upon
Holdings, notwithstanding any revocation of this Guaranty or any other
instrument evidencing any liability of the Borrower, and Holdings shall be and
remain liable to the aforesaid payees hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such payee.
13.02 BANKRUPTCY. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
to the Guaranteed Creditors whether or not due or payable by the Borrower upon
the occurrence in respect of the Borrower of any of the events specified in
Section 9.05, and unconditionally promises to pay such indebtedness on demand,
in lawful money to the United States.
13.03 NATURE OF LIABILITY. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations whether executed by Holdings, any other guarantor or by
any other party, and the liability of Holdings hereunder is not affected or
impaired by (a) any direction as to application of payment by the Borrower or by
any other party, or (b) any other continuing or other guaranty, undertaking or
maximum liability or a guarantor or of any other party as to the Guaranteed
Obligations, or (c) any payment on or in reduction of any such other guaranty or
undertaking, or (d) any dissolution, termination or increase, decrease or change
in personnel by the Borrower, or (e) any payment made to the Guaranteed
Creditors on the Guaranteed Obligations which any such Guaranteed Creditor
repays to the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
Holdings waives any right to the deferral or modification of its obligations
hereunder by reason of any such proceeding.
13.04 INDEPENDENT OBLIGATION. The obligations of Holdings hereunder
are independent of the obligations of any other guarantor, any other party or
the Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor,
any other party or the Borrower and whether or not any other guarantor, any
other party or the Borrower be joined in any such action or actions. Holdings
waives, to the full extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement hereof. Any
payment by the
-105-
<PAGE>
Borrower or other circumstance which operates to toll any statute of limitations
as to the Borrower shall operate to toll the statute of limitations as to
Holdings.
13.05 AUTHORIZATION. Holdings authorizes the Guaranteed Creditors
without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder,
from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of
the Guaranteed Obligations (including any increase or decrease in the rate
of interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the Guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended, renewed
or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the Borrower
or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
substitute the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its creditors other than
the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Guaranteed Creditors
regardless of what liability or liabilities of the Borrower remain unpaid;
(g) consent to or waive any breach of, or any act, omission or default
under, this Agreement, any other Credit Document or any of the instruments
or agreements referred to herein or therein, or otherwise amend, modify or
supplement this Agreement, any other Credit Document or any of such other
instruments or agreements; and/or
-106-
<PAGE>
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Guaranty.
13.06 RELIANCE. It is not necessary for the Guaranteed Creditors to
inquire into the capacity or powers of the Borrower or the officers, directors,
partners or agents acting or purporting to act on their behalf, and any
Guaranteed Obligations made or created in reliance upon the professed exercise
of such powers shall be guaranteed hereunder.
13.07 SUBORDINATION. Any of the indebtedness of the Borrower now or
hereafter owing to Holdings is hereby subordinated to the Guaranteed Obligations
of the Borrower; and if the Administrative Agent so requests at a time when an
Event of Default exists, all such indebtedness of the Borrower to Holdings shall
be collected, enforced and received by Holdings for the benefit of the
Guaranteed Creditors and be paid over to the Administrative Agent on behalf of
the Guaranteed Creditors on account of the Guaranteed Obligations, but without
affecting or impairing in any manner the liability of Holdings under the other
provisions of this Guaranty. Prior to the transfer by Holdings of any note or
negotiable instrument evidencing any of the indebtedness of the Borrower to
Holdings, Holdings shall mark such note or negotiable instrument with a legend
that the same is subject to this subordination. Without limiting the generality
of the foregoing, Holdings hereby agrees with the Guaranteed Creditors that it
will not exercise any right of subrogation which it may at any time otherwise
have as a result of this Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
13.08 WAIVER. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party or (iii) pursue any other remedy in any
Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based on or
arising out the disability of the Borrower, any other guarantor or any other
party, or the unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
other than payment in full of the Guaranteed Obligations. The Guaranteed
Creditors may, at their election, foreclose on any security held by the
Collateral Agent or any other Guaranteed Creditor by one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable (to the extent such sale is permitted by applicable law), or exercise
any other right or remedy the Guaranteed Creditors may have against the Borrower
or any other party, or any security, without affecting or impairing in any way
the liability of Holdings hereunder except to the extent the Guaranteed
Obligations have been paid.
-107-
<PAGE>
(b) Holdings waives all presentments, demands for performance, protests
and notices, including, without limitation, notices of nonperformance, notices
of protest, notices of dishonor, notices of acceptance of this Guaranty, and
notices of the existence, creation or incurring of new or additional Guaranteed
Obligations. Holdings assumes all responsibility for being and keeping itself
informed of the Borrower's financial condition and assets, and of all other
circumstances, bearing upon the risk of nonpayment of the Guaranteed Obligations
and the nature, scope and extent of the risks which Holdings assumes and incurs
hereunder, and agrees that the Guaranteed Creditors shall have no duty to advise
Holdings of information known to them regarding such circumstances or risks.
13.09 ENFORCEMENT. The Guaranteed Creditors agree that this Guaranty
may be enforced only by the action of the Administrative Agent or the Collateral
Agent, in each case acting upon the instructions of the Required Banks and no
Guaranteed Creditor shall have any right individually to seek to enforce or to
enforce this Guaranty or to realize upon the security to be granted by the
Security Documents, it being understood and agreed that such rights and remedies
may be exercised by the Administrative Agent or the Collateral Agent for the
benefit of the Creditors upon the terms of this Guaranty and the Security
Documents.
* * *
-108-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed and delivered as of the date first above
written.
AMTROL HOLDINGS, INC.
By /s/ David P. Spalding
---------------------------------
Name: David P. Spalding
Title: President
AMTROL ACQUISITION, INC.,
as Borrower
By /s/ Edward J. Cooney
---------------------------------
Name: Edward J. Cooney
Title: Chief Financial Officer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By /s/ Dana Klein
---------------------------------
Name: Dana Klein
Title:
MORGAN STANLEY SENIOR FUNDING, INC.,
Individually and as Documentation Agent
By /s/ Michael T. McLaughlin
---------------------------------
Name: Michael T. McLaughlin
Title: Vice President
-109-
<PAGE>
THE BANK OF NEW YORK
By /s/ Daniel L. Black
---------------------------------
Name: Daniel L. Black
Title: Senior Vice President
THE BANK OF NOVA SCOTIA
By /s/ Terry M. Pitcher
---------------------------------
Name: Terry M. Pitcher
Title: Authorized Signatory
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Gregory R.D. Clark
---------------------------------
Name: Gregory R.D. Clark
Title: Director
CITIZENS FINANCIAL GROUP INC
By /s/ Louis M. Amoriggi
---------------------------------
Name: Louis M. Amoriggi
Title: Vice President
FIRST SOURCE FINANCIAL LLP
By First Source Financial Inc.,
Its manager
By /s/ Robert M. Coseo
---------------------------------
Name: Robert M. Coseo
Title: Senior Vice President
-1-
<PAGE>
FLEET NATIONAL BANK
By /s/ Stephen J. Craven
---------------------------------
Name: Stephen J. Craven
Title: Vice President
SOCIETE GENERALE
By /s/ Steve Pischel
---------------------------------
Name: Steve Pischel
Title Assistant Treasurer
<PAGE>
Exhibit 12
<TABLE>
<CAPTION>
AMTROL INC. AND SUBSIDIARIES
CALCUALTION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
(UNAUDITED)
-------------------------YEAR ENDED DECEMBER 31,-------------------------
PRO FORMA
1991 1992 1993 1994 1995 1995
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income before provision for income taxes and
extraordinary item $ 9,436 $ 13,282 $ 18,324 $ 19,954 $ 14,766 $ (1,556)
Plant closing changes - - - - 3,825 3,825
Fixed charges (see below) 4,980 3,102 1,200 540 459 17,360
-------- -------- -------- -------- -------- --------
Earnings as defined $ 14,416 $ 16,384 $ 19,524 $ 20,494 $ 19,050 $ 19,629
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
FIXED CHARGES:
Interest expanse $ 4,353 $ 2,838 $ 936 $ 276 $ 195 $ 17,096
Interest component of operating leases 627 264 264 264 264 264
-------- -------- -------- -------- -------- --------
Fixed charges as defined $ 4,980 $ 3,102 $ 1,200 $ 540 $ 459 $ 17,360
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIO OF EARNINGS TO FIXED CHARGES 2.9 5.3 16.3 38.0 41.5 1.1
---- ---- ---- ---- ---- ----
---- ---- ---- ---- ---- ----
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
PRO FORMA
1995 1996 1996
EARNINGS:
Income before provision for income taxes and
extraordinary item $ 14,016 $ 14,276 $ 1,228
Plant closing changes 1,875 - -
Fixed charges (see below) 315 347 13,023
-------- -------- --------
Earnings as defined $ 16,206 $ 14,623 $ 14,251
-------- -------- --------
-------- -------- --------
FIXED CHARGES:
Interest expanse $ 117 $ 149 $ 12,825
Interest component of operating leases 198 198 198
-------- -------- --------
Fixed charges as defined $ 315 $ 347 $ 13,023
-------- -------- --------
-------- -------- --------
RATIO OF EARNINGS TO FIXED CHARGES 51.5 42.1 1.1
---- ---- ----
---- ---- ----
</TABLE>
NOTE: FOR PURPOSES OF THIS COMPUTATION, EARNINGS REPRESENT NET INCOME BEFORE
EXTRAORDINARY ITEM, INCOME TAXES, PLANT CLOSING CHARGES AND FIXED
CHARGES. FIXED CHARGES CONSIST OF INTEREST EXPENSE, CAPITALIZED
INTEREST, THE INTEREST COMPONENT OF OPERATING LEASES AND AMORTIZATION
OF DEFERRED FINANCING COSTS.
<PAGE>
Exhibit 21
Subsidiaries of
AMTROL Inc.
NAME OF SUBSIDIARY PLACE OF INCORPORATION
- ------------------------- ----------------------
American Granby Inc. Rhode Island
AMTROL Asia Pacific Ltd. Hong Kong
AMTROL Canada Ltd. Ontario, Canada
AMTROL Export Sales Inc. Barbados
AMTROL International Inc. Rhode Island
AMTROL Ltd. Delaware
Water Soft Inc. Rhode Island
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 29, 1996
included in AMTROL Inc.'s Form 10-K for the year ended December 31, 1995 and to
all references to our firm included in this registation statement.
Arthur Andersen LLP
Boston Massachusetts
December 9, 1996
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
--------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
AMTROL Inc.
(Exact name of obligor as specified in its charter)
Rhode Island 05-0246955
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1400 Division Road
West Warwick, Rhode Island 02839
(Address of principal executive offices) (Zip code)
--------------------------
10 5/8% Senior Subordinated Notes due 2006
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF
THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 3rd day of December, 1996.
THE BANK OF NEW YORK
By: /S/ MARY LAGUMINA
--------------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 3,650,068
Interest-bearing balances .......... 738,260
Securities:
Held-to-maturity securities ........ 784,969
Available-for-sale securities ...... 2,033,407
Federal funds sold and securities
purchased under agreements to
resell in domestic offices of the bank:
Federal funds sold ................. 3,699,232
Securities purchased under
agreements to resell ............... 20,000
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................28,109,045
LESS: Allowance for loan and
lease losses ..............586,658
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve.... 27,521,958
Assets held in trading accounts ...... 678,844
Premises and fixed assets (including
capitalized leases) ................ 608,217
Other real estate owned .............. 50,599
Investments in unconsolidated
subsidiaries and associated
companies .......................... 235,670
Customers' liability to this bank on
acceptances outstanding ............ 904,948
Intangible assets .................... 450,230
Other assets ......................... 1,299,464
----------
Total assets ......................... $42,675,866
-----------
-----------
LIABILITIES
Deposits:
In domestic offices ................ $19,223,050
Noninterest-bearing .......7,675,758
Interest-bearing .........11,547,292
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 11,527,685
Noninterest-bearing ..........48,502
Interest-bearing .........11,479,183
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 1,498,351
Securities sold under agreements
to repurchase .................... 126,974
Demand notes issued to the U.S.
Treasury ........................... 231,865
Trading liabilities .................. 479,390
Other borrowed money:
With original maturity of one year
or less .......................... 2,521,578
With original maturity of more than
one year ......................... 20,780
Bank's liability on acceptances exe-
cuted and outstanding .............. 905,850
Subordinated notes and debentures .... 1,020,400
Other liabilities .................... 1,543,657
----------
Total liabilities .................... 39,099,580
----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 2,124,231
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ ( 8,063)
Cumulative foreign currency transla-
tion adjustments .................. ( 7,832)
----------
Total equity capital ................ 3,576,286
---------
Total liabilities and equity
capital ........................... $42,675,866
-----------
-----------
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot ]
Alan R. Griffith ] Directors
Thomas A. Renyi ]
- --------------------------------------------------------------------------------
<PAGE>
LETTER OF TRANSMITTAL
FOR
10 5/8% SENIOR SUBORDINATED NOTES DUE 2006
OF
AMTROL INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997
(THE "EXPIRATION DATE") UNLESS EXTENDED BY AMTROL INC.
EXCHANGE AGENT:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
BY HAND: BY MAIL:
The Bank Of New York (INSURED OR REGISTERED RECOMMENDED)
Reorganization Section The Bank Of New York
101 Barclay Street Reorganization Section
Floor 7 East 101 Barclay Street
New York, New York 10286 Floor 7 East
Attention: Enrique Lopez New York, New York 10286
Attention: Enrique Lopez
BY OVERNIGHT EXPRESS: BY FACSIMILE:
The Bank Of New York (212) 571-3080
Reorganization Section (for Eligible Institutions Only)
101 Barclay Street BY TELEPHONE:
Floor 7 East (212) 815-2742
New York, New York 10286
Attention: Enrique Lopez
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated ,
1997 (the "Prospectus") of AMTROL Inc. ("AMTROL"), and this Letter of
Transmittal (the "Letter of Transmittal"), which together describe AMTROL's
offer (the "Exchange Offer") to exchange $1,000 in principal amount of its new
10 5/8% Senior Subordinated Notes due 2006 (the "New Notes") to exchange $1,000
in principal amount of outstanding 10 5/8% Senior Subordinated Notes due 2006
(the "Notes"). The terms of the New Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the New Notes are freely transferable by holders thereof (except as
provided herein or in the Prospectus) and are not subject to any covenant
regarding registration under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF NOTES TENDERED HEREWITH
<CAPTION>
AGGREGATE
PRINCIPAL
AMOUNT PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY AMOUNT
(PLEASE FILL IN) NUMBERS(S)* NOTES* TENDERED**
<S> <C> <C> <C>
TOTAL
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Notes. See instruction
2.
This Letter of Transmittal is to be used either if certificates of Notes are
to be forwarded herewith or if delivery of Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company, pursuant to the procedures set forth in "The Exchange Offer--Procedures
for Tendering" in the Prospectus. Delivery of documents to the book-entry
transfer facility does not constitute delivery to the Exchange Agent.
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering."
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------------------------------------------------
/ / The Depository Trust Company
- ---------------------------------------------------------------------
Account Number
------------------------------------------------------------------------------
Transaction Code Number
----------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
-----------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
---------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------------------------------
If Delivered by Book-Entry Transfer:
Account Number
------------------------------------------------------------------------------
<PAGE>
/ / CHECK HERE IF NEW NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON
SIGNING THE LETTER OF TRANSMITTAL:
Name
------------------------------------------------------------------------------
(Please Print)
Address
------------------------------------------------------------------------------
(Including Zip Code)
/ / CHECK HERE IF NEW NOTES ARE TO BE DELIVERED TO AN ADDRESS DIFFERENT FROM
THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address
------------------------------------------------------------------------------
(Including Zip Code)
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
------------------------------------------------------------------------------
Address:
------------------------------------------------------------------------------
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
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Notes that were acquired as result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus in connection with any resale of such New Notes; 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 the Securities Act.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to AMTROL the above-described principal amount of the
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Notes tendered herewith, the undersigned hereby exchanges,
assigns and transfers to, or upon the order of, AMTROL all right, title and
interest in and to such Notes. The undersigned hereby irrevocably constitutes
and appoints the Exchange Agent the true and lawful agent and attorney-in-fact
of the undersigned (with full knowledge that said Exchange Agent acts as the
agent of AMTROL in connection with the Exchange Offer) to cause the Notes to be
assigned, transferred and exchanged. The undersigned represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Notes and to acquire New Notes issuable upon the exchange of such tendered
Notes, and that, when the same are accepted for exchange, AMTROL will acquire
good and unencumbered title to the tendered Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
undersigned also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or AMTROL to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Notes or
transfer ownership of such Notes on the account books maintained by the
book-entry transfer facility. The undersigned further agrees that acceptance of
any and all validly tendered Notes by AMTROL and the issuance of New Notes in
exchange therefor shall constitute performance in full by AMTROL of its
obligations under the Registration Agreement (as defined in the Prospectus) and
that AMTROL shall have no further obligations or liabilities thereunder except
as provided in the first paragraph of Section 3 of said agreement.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--General." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by AMTROL), as more particularly set forth in the Prospectus, AMTROL
may not be required to exchange any of the Notes tendered hereby and, in such
event, the Notes not exchanged will be returned to the undersigned at the
address shown above.
By tendering, each holder of Notes represents that New Notes acquired in the
exchange will be obtained in the ordinary course of such holder's business, that
such holder has no arrangement with any person to participate in the
distribution of such New Notes, that such holder is not an "affiliate" of AMTROL
within the meaning of Rule 405 under the Securities Act and that such holder is
not engaged in, and does not intend to engage in, a distribution of the New
Notes. Any holder of Notes using the Exchange Offer to participate in a
distribution of the New Notes (i) cannot rely on the position of the staff of
the Securities and Exchange Commission (the "Commission") enunciated in its
interpretive letter with respect to Exxon Capital Holdings Corporation
(available April 13, 1989) or similar letters and (ii) must comply with the
registration and prospectus requirements of the Securities Act in connection
with a secondary resale transaction.
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
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Notes that were acquired as a result of
market-making activities or other trading as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus in connection with any resale of such New Notes; 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 the Securities Act.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Notes may be withdrawn at any time
prior to the Expiration Date in accordance with the terms of the Letter of
Transmittal.
Certificates for all New Notes delivered in exchange for tendered Notes and
any Notes delivered herewith but not exchanged, and registered in the name of
the undersigned, shall be delivered to the undersigned at the address shown
below the signature of the undersigned.
<PAGE>
TENDERING HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated ___________________ Area Code and Telephone Number: ___________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Notes. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth the full title of such
person.) See Instruction 3.
Name(s) ________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No. ____________________________________________________
Taxpayer Identification No. ____________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
Title __________________________________________________________________________
Address ________________________________________________________________________
Name of Firm ___________________________________________________________________
Area Code and Telephone No. ____________________________________________________
Dated __________________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Notes or confirmation of any
book-entry transfer to the Exchange Agent's or its agent's account at a
book-entry transfer facility of Notes tendered by book-entry transfer, as well
as a properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Prospectus).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY
DELIVERY.
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other required documents to the Exchange Agent on or prior
to the Expiration Date or comply with book-entry transfer procedures on a timely
basis must tender their Notes pursuant to the guaranteed delivery procedure set
forth in that Prospectus under "The Exchange Offer--Guaranteed Delivery
Procedures." Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution (as defined in the Prospectus); (ii) prior to
the Expiration Date the Exchange Agent must have received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder of the Notes, the certificate number or numbers of such
Notes and the prinicpal amount of Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within five business days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof), together with
the certificate(s) representing the Notes to be tendered in proper form for
transfer and any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) all
tendered Notes (or a confirmation of any book-entry transfer of such Notes into
the Exchange Agent's account at a book-entry transfer facility) as well as this
Letter of Transmittal and all other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within five business days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Notes evidenced by a submitted
certificate is tendered, the tendering holder should fill in the principal
amount tendered in the box entitled "Principal Amount Tendered." A newly issued
certificate for the principal amount of Notes submitted but not tendered will be
sent to such holder as soon as practicable after the Expiration Date. All Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise clearly indicated.
Tenders of Notes pursuant to the Exchange Offer are irrevocable, except that
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior
to 5:00 P.M. New York City time, on the Expiration Date. To be effective, a
letter notice or facsimile transmission notice of withdrawal must be received by
the Exchange Agent by 5:00 P.M., New York City time, on the Expiration Date
unless extended by AMTROL. Any such notice of withdrawal must specify the person
named in the Letter of Transmittal as having tendered Notes to be withdrawn, the
certificate numbers of the Notes to be withdrawn, the principal amount of Notes
delivered for exchange and a statement that such holder is withdrawing his or
her election to have such Notes exchanged, and must be signed by the holder in
the same manner as the originial signature on the Letter of Transmittal by which
such Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to permit the Trustee with
respect to the Notes to register the transfer of such Notes into the name of the
Depositor withdrawing the tender and must specify the name in which any such
Notes are to be registered, if different from that of the holder. The Exchange
Agent will return the properly withdrawn Notes promptly following receipt of
notice of withdrawal. If Notes have been tendered pursuant to the procedure for
book-entry transfer, 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 Notes or otherwise comply with the book-entry transfer facility's
procedures. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by AMTROL, and such determination
will be final and binding on all parties.
<PAGE>
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Notes tendered hereby, the signature must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Notes tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Notes) of Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Notes listed, such Notes must be endorsed or
accompanied by separate written instruments of transfer or exchange in form
satisfactory to AMTROL and duly executed by the registered holder, in either
case signed exactly as the name or names of the registered holder or holders
appear(s) on the Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by AMTROL, proper evidence
satisfactory to AMTROL of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Notes are tendered (i) by a registered holder
of such Notes, for the holder of such Notes; or (ii) for the account of an
Eligible Institution.
4. TRANSFER TAXES.
AMTROL shall pay all transfer taxes, if any, applicable to the transfer and
exchange of Notes to it or its order pursuant to the Exchange Offer. If a
transfer tax is imposed for any reason other than the transfer and exchange of
Notes to AMTROL or its order pursuant to the Exchange Offer, the amount of any
such transfer taxes (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exception therefrom is not submitted herewith the
amount of such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS.
AMTROL reserves the right to waive in its reasonable judgment, in whole or
in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any holder whose Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated below for further
instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to AMTROL Inc. at 1400 Division Road, West
Warwick, Rhode Island 02893. Attention: Edward J. Cooney, (Telephone): (401)
884-6300.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES OF NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
10 5/8% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
NEW 10 5/8% SENIOR SUBORDINATED NOTES DUE 2006
OF
AMTROL INC.
Registered holders of outstanding 10 5/8% Senior Subordinated Notes due 2006
(the "Notes") who wish to tender their Notes in exchange for a like principal
amount of new 10 5/8% Senior Subordinated Notes due 2006 (the "New Notes") and
whose Notes are not immediately available or who cannot deliver their Notes and
Letter of Transmittal (and any other documents required by the Letter of
Transmittal) to The Bank of New York (the "Exchange Agent") prior to the
Expiration Date, may use this Notice of Guaranteed Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand
or sent by facsimile transmission or mail to the Exchange Agent. See "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
BY HAND: BY MAIL:
The Bank of New York (INSURED OR REGISTERED RECOMMENDED)
Reorganization Section The Bank of New York
101 Barclay Street Reorganization Section
Floor 7 East 101 Barclay Street
New York, New York 10286 Floor 7 East
Attention: Enrique Lopez New York, New York 10286
Attention: Enrique Lopez
BY OVERNIGHT EXPRESS: BY FACSIMILE:
The Bank of New York (212) 571-3080
Reorganization Section (For Eligible Institutions Only)
101 Barclay Street BY TELEPHONE:
Floor 7 East (212) 815-2742
New York, New York 10286
Attention: Enrique Lopez
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated , 1997 of AMTROL Inc. (the "Prospectus"), receipt of which is
hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<S> <C> <C>
Name and address of
registered holder as it
appears on the 10 5/8% Senior
Subordinated Notes due 2006 Certificate Number(s) Principal Amount
("Notes") of Notes of Notes
(Please Print) Tendered Tendered
- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ----------------------------
</TABLE>
2
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office, branch, agency or
correspondent in the United States, hereby guarantees to deliver to the Exchange
Agent at one of its addresses set forth above, the certificates representing the
Notes, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, and
any other documents required by the Letter of Transmittal within five New York
Stock Exchange, Inc. trading days after the date of execution of this Notice of
Guaranteed Delivery.
<TABLE>
<S> <C>
Name of Firm: --------------------------------------- ------------------------------------
(Authorized Signature)
Address: -------------------------------------------- Title:
-------------------------------
- ---------------------------------------------------- Name: ------------------------------
(Zip Code) (Please type or print)
Area Code and Telephone Number: Date: ------------------------------
- ----------------------------------------------------
</TABLE>
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
EXHIBIT 99.3
___________, 199__
FORM OF EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
AMTROL Inc. (the "Company") proposes to make an offer (the "Exchange
Offer") to exchange its new
10 5/8% Senior Subordinated Notes due 2006 (the "Old Securities") for its
outstanding 10 5/8% Senior Subordinated Notes due 2006 (the "New Securities").
The terms and conditions of the Exchange Offer as currently contemplated are set
forth in a prospectus, dated ___________, 199__ (the "Prospectus"), proposed to
be distributed to all record holders of the Old Securities. The Old Securities
and the New Securities are collectively referred to herein as the "Securities".
The Company hereby appoints The Bank of New York to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Company on or
about _____________, 199_. The Letter of Transmittal accompanying the
Prospectus (or in the case of book entry securities, the ATOP system) is to be
used by the holders of the Old Securities to accept the Exchange Offer and
contains instructions with respect to the delivery of certificates for Old
Securities tendered in connection therewith.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
_____________, 199__ or on such later date or time to which the Company may
extend the Exchange Offer (the "Expiration Date"). Subject to the terms and
conditions set forth in the Prospectus, the Company expressly reserves the right
to extend the Exchange Offer from time to time and may extend the Exchange Offer
by giving oral (confirmed in writing) or written notice to you before 9:00 A.M.,
New York City time, on the business day following the previously scheduled
Expiration Date.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange
<PAGE>
any Old Securities not theretofore accepted for exchange, upon the occurrence of
any of the conditions of the Exchange Offer specified in the Prospectus under
the caption "The Exchange Offer". The Company will give oral (confirmed in
writing) or written notice of any amendment, termination or nonacceptance to
you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" or as specifically set forth herein; PROVIDED, HOWEVER, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old Securities
at The Depository Trust Company (the "Book-Entry Transfer Facility") for
purposes of the Exchange Offer within two business days after the date of the
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the Old
Securities by causing the Book-Entry Transfer Facility to transfer such Old
Securities into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Securities (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Old Securities to ascertain
whether: (i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set forth
therein and (ii) the Old Securities have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed or any of the certificates for Old Securities
are not in proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will endeavor to inform
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
4. With the approval of the President, Senior Vice President,
Executive Vice President, or any Vice President of the Company (such approval,
if given orally, to be confirmed in writing) or any other party designated by
such an officer in writing, you are authorized to waive any irregularities in
connection with any tender of Old Securities pursuant to the Exchange Offer.
5. Tenders of Old Securities may be made only as
<PAGE>
set forth in the Letter of Transmittal and in the section of the Prospectus
captioned "The Exchange Offer", and Old Securities shall be considered properly
tendered to you only when tendered in accordance with the procedures set forth
therein.
Notwithstanding the provisions of this paragraph 5, Old Securities
which the President, Senior Vice President, Executive Vice President, or any
Vice President of the Company shall approve as having been properly tendered
shall be considered to be properly tendered (such approval, if given orally,
shall be confirmed in writing).
6. You shall advise the Company with respect to any Old Securities
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Old Securities.
7. You shall accept tenders:
(a) in cases where the Old Securities are registered in two or more
names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old Securities
provided that customary transfer requirements, including any applicable transfer
taxes, are fulfilled.
You shall accept partial tenders of Old Securities where so indicated
and as permitted in the Letter of Transmittal and deliver certificates for Old
Securities to the transfer agent for split-up and return any untendered Old
Securities to the holder (or such other person as may be designated in the
Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will notify you (such notice if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date, of
all Old Securities properly tendered and you, on behalf of the Company, will
exchange such Old Securities for New Securities and cause such Old Securities to
be cancelled. Delivery of New Securities will be made on behalf of the Company
by you at the rate of $1,000 principal amount of New Securities for each $1,000
principal amount of the corresponding series of Old Securities tendered promptly
after notice (such notice if given orally, to be confirmed in writing) of
acceptance of said Old Securities by the Company; provided, however, that in all
<PAGE>
cases, Old Securities tendered pursuant to the Exchange Offer will be exchanged
only after timely receipt by you of certificates for such Old Securities (or
confirmation of book-entry transfer into your account at the Book-Entry
Transfer Facility), a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees and any other
required documents. You shall issue New Securities only in denominations of
$1,000 or any integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and upon the conditions set forth in the Prospectus
and the Letter of Transmittal, Old Securities tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Old Securities
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Old Securities
tendered shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept
for exchange all or part of the Old Securities tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer -- Termination" or otherwise, you shall as soon
as practicable after the expiration or termination of the Exchange Offer return
those certificates for unaccepted Old Securities (or effect appropriate
book-entry transfer), together with any related required documents and the
Letters of Transmittal relating thereto that are in your possession, to the
persons who deposited them.
12. All certificates for reissued Old Securities, unaccepted Old
Securities or for New Securities shall be forwarded by (a) first-class certified
mail, return receipt requested under a blanket surety bond protecting you and
the Company from loss or liability arising out of the non-receipt or
non-delivery of such certificates or (b) by registered mail insured separately
for the replacement value of each of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or as may be subsequently agreed to in writing by
you and the Company;
<PAGE>
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any of
the certificates or the Old Securities represented thereby deposited with you
pursuant to the Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter, telegram or
other document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also as to the
truth and accuracy of any information contained therein, which you shall in good
faith believe to be genuine or to have been signed or represented by a proper
person or persons;
(f) may rely on and shall be protected in acting upon written or
oral instructions from any officer of the Company;
(g) may consult with your counsel with respect to any questions
relating to your duties and responsibilities and the advice or opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by you hereunder in good faith
and in accordance with the advice or opinion of such counsel; and
(h) shall not advise any person tendering Old Securities
pursuant to the Exchange Offer as to the wisdom of making such tender or as to
the market value or decline or appreciation in market value of any Old
Securities.
15. You shall take such action as may from time to time be requested
by the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms
as may be approved from time to time by the Company, to all persons requesting
such documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall
<PAGE>
relate only to the procedures for accepting (or withdrawing from) the Exchange
Offer. The Company will furnish you with copies of such documents at your
request. All other requests for information relating to the Exchange Offer
shall be directed to the Company, Attention: Chief Financial Officer.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Chief Financial Officer of the Company
and such other person or persons as it may request, daily (and more frequently
during the week immediately preceding the Expiration Date and if otherwise
requested) up to and including the Expiration Date, as to the number of Old
Securities which have been tendered pursuant to the Exchange Offer and the items
received by you pursuant to this Agreement, separately reporting and giving
cumulative totals as to items properly received and items improperly received.
In addition, you will also inform, and cooperate in making available to, the
Company or any such other person or persons upon oral request made from time to
time prior to the Expiration Date of such other information as it or he or she
reasonably requests. Such cooperation shall include, without limitation, the
granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the Company
shall have received information in sufficient detail to enable it to decide
whether to extend the Exchange Offer. You shall prepare a final list of all
persons whose tenders were accepted, the aggregate principal amount of Old
Securities tendered, the aggregate principal amount of Old Securities accepted
and deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall
be stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter
of Transmittal and further acknowledge that you
<PAGE>
have examined each of them. Any inconsistency between this Agreement, on the
one hand, and the Prospectus and the Letter of Transmittal (as they may be
amended from time to time), on the other hand, shall be resolved in favor of the
latter two documents, except with respect to the duties, liabilities and
indemnification of you as Exchange Agent, which shall be controlled by this
Agreement.
21. The Company covenants and agrees to indemnify and hold you
harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including attorneys' fees and expenses, arising out
of or in connection with any act, omission, delay or refusal made by you in
reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Old Securities reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Old Securities; provided, however, that the
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of your gross negligence or
willful misconduct. In no case shall the Company be liable under this indemnity
with respect to any claim against you unless the Company shall be notified by
you, by letter or cable or by facsimile confirmed by letter, of the written
assertion of a claim against you or of any other action commenced against you,
promptly after you shall have received any such written assertion or notice of
commencement of action. The Company shall be entitled to participate at its own
expense in the defense of any such claim or other action, and, if the Company so
elects, the Company shall assume the defense of any suit brought to enforce any
such claim. In the event that the Company shall assume the defense of any such
suit, the Company shall not be liable for the fees and expenses of any
additional counsel thereafter retained by you so long as the Company shall
retain counsel satisfactory to you to defend such suit.
22. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the
Internal Revenue Service in accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely manner to
each governmental authority to which any transfer taxes are payable in respect
of the exchange of Old Securities, your check in the amount of all transfer
taxes so
<PAGE>
payable, and the Company shall reimburse you for the amount of any and all
transfer taxes payable in respect of the exchange of Old Securities; provided,
however, that you shall reimburse the Company for amounts refunded to you in
respect of your payment of any such transfer taxes, at such time as such refund
is received by you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
26. In case any provision of this Agreement 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.
27. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
<PAGE>
If to the Company:
AMTROL Inc.
1400 Division Road
West Warwick, Rhode Island 02893
Facsimile: (401) 884-7816
Attention: Chief Financial Officer
If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
29. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver
to the Company any certificates for Securities, funds or property then held by
you as Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof.
<PAGE>
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
AMTROL Inc.
By:______________________
Name:
Title:
Accepted as the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:_____________________
Name:
Title:
