<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GLASSTECH, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3567 13-3440225
(State or Other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Code Identification No.)
Number)
</TABLE>
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AMPOINT INDUSTRIAL PARK
995 FOURTH STREET
PERRYSBURG, OHIO 43551
(419) 661-9500
(Address, including ZIP code, and telephone number, including area code,
of Registrant's principal executive offices)
KENNETH H. WETMORE, ESQ.
GENERAL COUNSEL
GLASSTECH, INC.
AMPOINT INDUSTRIAL PARK
995 FOURTH STREET
PERRYSBURG, OHIO 43551
(419) 661-9500
(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
With a copy to
R. STEVEN KESTNER, ESQ.
BAKER & HOSTETLER LLP
3200 NATIONAL CITY CENTER
1900 EAST NINTH STREET
CLEVELAND, OHIO 44114
(216) 621-0200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series B 12 3/4% Senior Notes Due 2004..... $70,000,000 100% $70,000,000 $21,213
- --------------------------------------------------------------------------------------------------------------
TOTAL $70,000,000 100% $70,000,000 $21,213
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</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE> 2
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 THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 26, 1997
PROSPECTUS
(GLASSTECH LOGO) GLASSTECH, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS
SERIES B 12 3/4% SENIOR NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING
12 3/4% SENIOR NOTES DUE 2004, OF WHICH
$70,000,000 PRINCIPAL AMOUNT IS OUTSTANDING
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
------------------------
Glasstech, Inc., a Delaware corporation (the "Company"), hereby offers (the
"Exchange Offer"), upon the terms and conditions set forth in this Prospectus
(the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its Series B 12 3/4%
Senior Notes due 2004 (the "New Notes"), registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which this Prospectus is a part, for each $1,000 principal amount of its
outstanding 12 3/4% Senior Notes due 2004 (the "Old Notes"), of which
$70,000,000 principal amount is outstanding. The form and terms of the New Notes
are the same as the form and terms of the Old Notes (which they replace), except
that the New Notes will bear a Series B designation and will have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer and will not contain certain provisions relating to
an increase in the interest rate which were included in the terms of the Old
Notes in certain circumstances relating to the timing of the Exchange Offer. The
New Notes will evidence the same debt as the Old Notes (which they replace) and
will be issued under and be entitled to the benefits of the Indenture, dated as
of July 2, 1997 between Glasstech Sub Co., a Delaware corporation ("Sub Co."),
and United States Trust Company of New York, as trustee (the "Trustee"), as
supplemented by the Supplemental Indenture, dated July 2, 1997 between the
Company and the Trustee (collectively, the "Indenture"). The Old Notes and the
New Notes are sometimes referred to herein collectively as the "Notes." See "The
Exchange Offer" and "Description of the Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on , 1997,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
(Continued on next page)
------------------------
SEE "RISK FACTORS" ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PURCHASERS OF THE NEW NOTES.
------------------------
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> 3
(Continued from cover)
Interest on the New Notes will be payable in cash semi-annually on each
January 1 and July 1, commencing January 1, 1998. The Notes are redeemable at
the option of the Company, in whole or in part, at any time on or after July 1,
2002, at the redemption prices set forth herein, plus accrued and unpaid
interest to the date of redemption. In addition, the Company, at its option, may
redeem in the aggregate up to $17.5 million, or 25%, of the original principal
amount of the Notes at any time and from time to time prior to July 1, 2000 at
112.75% of the aggregate principal amount so redeemed, plus accrued and unpaid
interest to the redemption date, with the Net Proceeds (as defined herein) of
one or more Qualified Equity Offerings (as defined herein) of the Company or
Glasstech Holding Co., a Delaware corporation and sole stockholder of the
Company ("Holding") to the extent such proceeds were contributed to the Company
as common equity, provided that at least $52.5 million of the principal amount
of the Notes originally issued remain outstanding immediately after the
occurrence of any such redemption and that any such redemption occurs within 90
days following the closing of any such Qualified Equity Offering. See
"Description of the Notes -- Optional Redemption."
Upon a Change of Control (as defined herein), each holder of the Notes will
be entitled to require the Company to repurchase such holder's Notes at 101% of
the principal amount thereof plus accrued and unpaid interest to the repurchase
date. See "Description of the Notes -- Change of Control Offer." In addition,
the Company is obligated in certain instances to make an offer to repurchase the
Notes at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest to the date of repurchase with the net cash
proceeds of certain asset sales. See "Description of the Notes -- Certain
Covenants -- Limitation on Certain Asset Sales."
The New Notes will be general senior unsecured obligations of the Company,
ranking pari passu in right of payment with all other existing and future senior
indebtedness of the Company and senior in right of payment to any subordinated
indebtedness of the Company. The New Notes will be effectively subordinated in
right of payment to all secured indebtedness of the Company, including
indebtedness under the Revolving Credit Facility (as defined herein). Upon
completion of the Initial Offering (as defined herein), the Company had $10.0
million available under the Revolving Credit Facility and no senior indebtedness
outstanding, including indebtedness under the Revolving Credit Facility, other
than the Old Notes. See "Risk Factors -- High Level of Indebtedness and
Leverage," "Use of Proceeds" and "Capitalization."
The Old Notes were sold on July 2, 1997 (the "Issue Date") to CIBC Wood
Gundy Securities Corp. (the "Initial Purchaser") in a transaction not registered
under the Securities Act in reliance upon an exemption under the Securities Act
as part of a sale of 70,000 units (the "Units"), consisting of the sale of the
Old Notes by Sub Co., an acquisition vehicle used by Holding to acquire the
Company pursuant to a merger, in an aggregate principal amount of $70.0 million
and the sale of 70,000 warrants (the "Warrants") by Holding, then the sole
stockholder of Sub Co., to purchase 877.21 shares of Class A Common Stock (as
defined herein) of Holding. These transactions are collectively hereinafter
referred to as the "Initial Offering." The Initial Purchaser subsequently placed
the Units with qualified institutional buyers in reliance upon Rule 144A under
the Securities Act. The Warrants were immediately detachable from the Old Notes.
Accordingly, the Units, Warrants and Old Notes may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The New Notes are being offered
hereunder solely in exchange for the Old Notes in order to satisfy the
obligations of the Company under the Registration Rights Agreement (as defined
herein) entered into by the Company in connection with the Initial Offering.
Neither the Company nor Holding has any obligation under to Registration Rights
Agreement or any other agreement to exchange the Warrants or register the
Warrants under the Securities Act. See "The Exchange Offer."
Based upon 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 may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder 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 such
ii
<PAGE> 4
New Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes. See "The Exchange Offer -- Resale of the New
Notes." Each broker-dealer (a "Participating 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.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating 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
Participating Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
There has not previously been any public market for the Old Notes or the
New Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the New Notes will
develop. See "Risk Factors -- Absence of a Public Market." Moreover, to the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected.
The New Notes will be available initially only in book-entry form and the
Company expects that the New Notes issued pursuant to the Exchange Offer will be
issued in the form of a Global Note (as defined herein), which will be deposited
with, or on behalf of, The Depository Trust Company ("DTC") and registered in
its name or in the name of Cede & Co., its nominee. Beneficial interests in the
Global Note representing the New Notes will be shown on, and transfers thereof
will be effected through, records maintained by DTC and its participants. After
the initial issuance of the Global Note, New Notes in certificated form will be
issued in exchange for the Global Note only under the limited circumstances set
forth in the Indenture. See "Description of the Notes -- Book-Entry, Delivery
and Form."
There will be no cash proceeds payable to the Company from the issuance of
the New Notes pursuant to the Exchange Offer and no underwriter is being used in
connection with the Exchange Offer. Initially, the Old Notes were issued by Sub
Co., a corporation formed for the sole purpose of effecting the acquisition of
the Company by the Key Equity Group (as defined herein). The net proceeds from
the Initial Offering, together with an equity contribution of $15.0 million to
Sub Co. by Holding, a corporation wholly-owned by the Key Equity Group, were
used by Sub Co. to acquire all the outstanding capital stock of the Company. The
acquisition was effected pursuant to the terms of a merger agreement among
Holding, Sub Co. and the Company, as amended (the "Merger Agreement"). On July
2, 1997 the Initial Offering was consummated and Sub Co. was merged with and
into the Company, with the Company becoming the surviving corporation and
obligor on the Old Notes.
iii
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which definition shall
encompass all amendments, exhibits, annexes and schedules thereto) pursuant to
the Securities Act, and the rules and regulations promulgated thereunder,
covering the New Notes being offered hereby. This Prospectus does not contain
all the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Exchange Offer
Registration Statement, including the exhibits thereto, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Regional Offices of
the Commission at 7 World Trade Center, 13th Floor, New York, New York 10048 and
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Company will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will be required to file periodic reports and
other information with the Commission. The obligation of the Company to file
periodic reports and other information with the Commission will be suspended if
the Notes are held of record by fewer than 300 holders as of the beginning of
any fiscal year of the Company other than the fiscal year in which the Exchange
Offer Registration Statement is declared effective. The Company has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the Notes remain outstanding, it will furnish
to the holders of the Notes and file with the Commission (unless the Commission
will not accept such a filing) (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including for each a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
only, a report thereon by the Company's independent auditors and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports.
FORWARD-LOOKING STATEMENTS
This Prospectus contains and incorporates by reference certain statements
that are "forward-looking statements" within the meaning of Section 27A of the
Securities Act. Those statements include, among other things, the discussions of
the Company's business strategy and expectations concerning the Company's market
position, future operations, margins, profitability, liquidity and capital
resources. Investors are cautioned that reliance on any forward-looking
statement involves risks and uncertainties, and that although the Company
believes that the assumptions on which the forward-looking statements contained
herein are reasonable, any of those assumptions could prove to be inaccurate,
and as a result, the forward-looking statements based on those assumptions also
could be incorrect. The uncertainties in this regard include, but are not
limited to, those identified in the risk factors discussed herein. See "Risk
Factors." In light of these and other uncertainties, the inclusion of a
forward-looking statement herein should not be regarded as a representation by
the Company that the Company's plans and objectives will be achieved.
iv
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<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. As used in this Prospectus, the
"Company" or "Glasstech" refers to Glasstech, Inc. and its subsidiaries,
"Holding" refers to Glasstech Holding Co. and "Sub Co." refers to Glasstech Sub
Co., unless the context otherwise requires.
THE COMPANY
The Company is a market and technological leader in the design and assembly
of state-of-the-art glass bending and tempering (i.e., strengthening) systems
used by glass manufacturers and processors in the conversion of flat glass into
safety glass. The Company sells its systems worldwide, primarily to automotive
glass manufacturers and processors (the "Automotive Market"), and also to
architectural glass manufacturers and processors (the "Architectural Market").
The Company's systems are designed to meet customers' safety glass production
requirements for complexity, accuracy and optical quality while simultaneously
enhancing system productivity, flexibility and cost efficiency. For the
Automotive Market, the Company has developed bending and tempering systems that
meet automobile manufacturers' safety glass specifications for current and
future production models. Management believes that the Company has a leading
share of and is the only significant independent supplier in the market for
technologically advanced systems used to bend and temper automotive glass into
complex shapes. For the Architectural Market, the Company's energy-efficient
processing systems are capable of producing high-quality bent or flat glass at
output rates tailored to meet customer-specific production requirements. As a
result of the long useful life and growing worldwide installed base of its
systems, the Company is able to complement its sale of complete systems
("Original Equipment") with the sale of aftermarket products and services
consisting of retrofits, tooling (i.e., molds used to shape automotive glass)
and replacement parts. The Company's products feature proprietary technologies
that have been developed over the last 25 years and are protected by more than
700 patents and patent application filings worldwide.
For the fiscal year ended June 30, 1997, the Company generated revenue and
Adjusted EBITDA (as defined in Note (e) to the Summary Historical and Pro Forma
Consolidated Financial and Other Data) of $76.4 million and $16.8 million,
respectively. Original Equipment revenue totaled $50.2 million, or 65.7%, of the
Company's total revenue for the same period. The balance of the Company's
revenue was generated through aftermarket sales including retrofits, tooling and
replacement part sales intended to maintain or enhance the Company's installed
base of systems.
A Glasstech system performs a series of processes that bend and strengthen
flat glass in the production of safety glass products such as car windows. In
each system, flat glass supplied by glass manufacturers is conveyed horizontally
on ceramic rollers through a high temperature furnace, a bending module and a
quench module (which completes the tempering process by rapidly cooling the
heated glass). Microprocessor-based controls regulate temperature, speed and
glass location throughout the entire process. In addition, the Company develops
its own proprietary software to control the integrated system. The modular
design of a Glasstech system readily enables the Company to offer customized
systems that meet specific technical requirements of its customers. Such a
design also creates equipment retrofit and upgrade opportunities for the
Company. The Company works closely with its customers as they identify capacity
and functionality requirements for a new system and then throughout the usual
ten to twelve month order, installation and acceptance cycle to ensure
satisfaction with their completed system. Systems designed for the Automotive
Market, which are used to form and temper glass for automotive back, side and
roof windows, as well as to form and anneal glass used for windshields, range in
price from approximately $2.5 million to $7.0 million. Systems designed for the
Architectural Market process curved and flat tempered glass which are used for
skylights, insulating glass, patio doors, furniture and appliances. These
systems range in price from approximately $0.5 million to $3.0 million.
The Company has an installed base of more than 375 systems located in over
40 countries on six continents. Sales in the United States, Europe and
Asia-Pacific represented 29.1%, 6.6% and 51.5%, respectively, of the Company's
total sales in fiscal 1997. The Company's customers include virtually all major
glass manufacturers and processors including: Chrysler Corporation, Ford Motor
Company, Guardian
1
<PAGE> 8
Industries Corp. and PPG Industries, Inc. in the United States; Compagnie de
Saint-Gobain and Pilkington plc in Europe; Asahi Glass Company, Central Glass
Company and Nippon Sheet Glass Company in Japan; Hankuk Glass Industry Company
and Keumkang Ltd. in Korea; and Shatterprufe (Pty) Limited in South Africa.
Management believes that the Company's future growth in the Automotive Market
will be driven by customer demand for more advanced safety glass bending
capabilities, the sale of systems that will supply new automobile factories
under construction worldwide and the opportunity to sell systems to glass
manufacturers and processors who desire to "outsource" (i.e., purchase glass
processing systems rather than develop them internally). Management further
believes that future sales in the Architectural Market will be derived, in part,
from the adoption of stringent building codes worldwide that mandate the use of
tempered glass and the increased use of coated glass for products such as
energy-efficient windows.
The Company was founded in 1971 to manufacture flat glass tempering systems
for the Architectural Market. Building on its success in that market, in 1977
the Company delivered its first bending and tempering system used to produce
simple glass shapes for the Automotive Market. Through continued product
development programs and technological enhancements, the Company manufactured
its first bending and tempering system for complex glass shapes for the
Automotive Market in 1985. This system enables the Company's customers to bend
and form glass while it is still inside the furnace, which results in enhanced
quality, higher yields (i.e., reduced breakage and fewer defects) and more
precision in the final shape of the safety glass product. The introduction of a
new system by the Company expands its total product offering because new
products typically complement, rather than replace, existing products. Recent
new product introductions by the Company include a bending system used to form
curved architectural glass (fiscal 1990), a tight radius cylindrical bending
system for furniture and display case applications (fiscal 1992), a constant
radius bending system for automotive side and roof windows (fiscal 1994), a
windshield bending and annealing system (fiscal 1995) and a forced convection
heating system intended for more energy-efficient glass production (fiscal
1996). See "Business -- Products."
Management believes that the Company's competitive advantage in the
production of high-quality glass bending and tempering systems, as well as its
market leadership, is the result of its: (i) development of patented,
state-of-the-art, cost-efficient technology; (ii) installed base of more than
375 systems in over 40 countries; (iii) experienced technical staff, which works
closely with customers in the development and design of new systems; (iv)
longstanding relationships (often of 20 years or more) with its major automotive
and architectural customers; (v) knowledgeable sales force, many of whom have
technical degrees; and (vi) ability to develop new products within reasonably
short lead times. In addition, the Company believes that its management team,
which has an average of more than 20 years of experience in the glass industry,
continues to be instrumental in further strengthening the Company's leading
market and technological position.
BUSINESS AND OPERATING STRATEGY
The Company's strategy is to strengthen its leadership position as a
provider of technologically advanced and cost-efficient glass bending and
tempering systems by: (i) capitalizing on current trends in the Automotive
Market; (ii) leveraging its long-term relationships with major customers; (iii)
offering customers a market-driven product development effort; (iv) maintaining
its position as a high-quality, low-cost manufacturer; (v) providing extensive
aftermarket products and services; and (vi) continuing to capitalize on
international growth opportunities.
- Capitalizing on Current Trends in the Automotive Market. Management
believes that the Company is well positioned to capitalize on current
trends in the Automotive Market including: (i) customer demand for
improved productivity from its safety glass processing equipment; (ii)
the emergence of advanced automotive designs which feature complex-shaped
glass in vehicle windows and an increase in the average glass content per
vehicle; (iii) customer demand for greater optical quality in safety
glass products; (iv) shorter lead times for each car design modification
or new model introduction; and (v) the replacement of older bending
systems initially installed by the Company's competitors or developed
in-house by its customers.
2
<PAGE> 9
- Leveraging Long-Term Relationships with Major Customers. Management
believes that the Company's strong relationships with major glass
manufacturers and processors have developed in large part due to the
following factors: (i) the continuity of the Company's customer
relationships, many of which have existed since the Company's inception;
(ii) the Company's awareness of and involvement in its customers' capital
budgeting and planning processes; and (iii) the Company's commitment to
provide the ongoing technical service required to properly maintain a
Glasstech system. Based upon its strong relationships, the Company is
better able to predict future demand for its systems and aftermarket
products, as well as to proactively design and implement creative
solutions to meet its customers' evolving safety glass requirements.
- Offering Customers a Market-Driven Product Development Effort. The
Company's technological leadership is a result of its commitment to
research and development ("R&D"). The objective of the Company's R&D
effort is to develop new products and to improve existing products to
meet present and future market demands. The Company has spent an average
of $4.5 million annually on R&D in fiscal years 1995 through 1997 and has
47 employees (17% of total employees) in its R&D department. Recent
product introductions and improvements include bending and tempering
systems that provide tighter part tolerances, higher output capability,
shorter tooling changeover periods, faster cycle times, improved optical
quality, greater depth of bend and an ability to produce shapes with
greater complexity. In addition, the Company is developing modeling
software which is intended to enable both automotive designers and glass
processors to analyze the shape and optical quality of various safety
glass configurations without actually constructing costly prototypes.
- Maintaining Position as a High-Quality, Low-Cost Manufacturer. The
Company is dedicated to producing high-quality, cost-efficient systems
that minimize its customers' safety glass production costs. As an example
of its commitment to quality, the Company recently received its ISO-9001
certification, which is an internationally recognized quality standards
certification. By continually striving to reduce its customers' cost of
producing safety glass, the Company increases its opportunities to sell
its systems to those glass manufacturers and processors who might
otherwise develop such systems in-house. To improve its own operating
results, the Company has significantly reduced its operating costs by:
(i) improving its production process by modularizing and standardizing
product engineering; (ii) using advanced computer-aided design systems;
and (iii) improving employee training programs. The Company's success in
developing new high-quality, cost-efficient systems and in implementing
cost reductions internally has contributed to an increase in Adjusted
EBITDA from approximately $8.7 million in fiscal 1995 to $16.8 million in
fiscal 1997. During the same period, Adjusted EBITDA margins have
improved from 16.2% to 22.0%.
- Providing Extensive Aftermarket Products and Services. The Company's
aftermarket products and services, which include retrofits, automotive
tooling, replacement parts and customer service programs, provide an
ongoing source of revenue and cash flow that complement the Company's
sale of Original Equipment. Retrofits consist of extensions, upgrades and
improvements to existing systems, while replacement parts consist of both
proprietary and nonproprietary components. Aftermarket revenue was $26.2
million for fiscal 1997, or approximately 34.3% of the Company's total
revenue. Management believes that aftermarket sales will remain a
significant component of the Company's revenue as the Company's installed
base of systems continues to expand.
- Continuing to Capitalize on International Growth Opportunities. The
Company's service organization continuously interacts with customers in
more than 40 countries. Sales to the United States, Europe and
Asia-Pacific represented 29.1%, 6.6% and 51.5%, respectively, of the
Company's total fiscal 1997 sales. The Company's geographically diverse
customer base positions it to capitalize on the increasing globalization
and development of markets in areas such as Asia-Pacific (including
China), Eastern Europe and Russia. Such diversification also mitigates
the impact of regional economic downturns and a reliance on any one
market. Management believes that the Company will continue to sell new
systems to its existing customers in both established and developing
markets.
3
<PAGE> 10
THE TRANSACTIONS
Holding and Sub Co. were newly organized Delaware corporations formed to
effect the acquisition of the Company by Key Equity Capital Corporation
("KECC"), certain of KECC's affiliates and certain members of management of the
Company (collectively, the "Key Equity Group"). The acquisition was consummated
on July 2, 1997 pursuant to an Agreement and Plan of Merger, dated as of June 5,
1997, among Holding, Sub Co. and the Company, as amended (the "Merger
Agreement"). Under the terms of the Merger Agreement, Sub Co. was merged into
the Company, and the Company continued as the surviving corporation (the
"Merger"). The aggregate consideration for the Merger was $76.2 million (the
"Purchase Price"), subject to certain adjustments. To finance and complete the
Merger (including the payment of related fees and expenses): (i) the Key Equity
Group purchased, for $15.0 million, all of the outstanding shares of capital
stock of Holding; (ii) Holding purchased, for $15.0 million, all of the
outstanding shares of capital stock of Sub Co. (the "Equity Contribution");
(iii) Sub Co. consummated the Initial Offering; and (iv) upon completion of the
Merger, the Company, as the surviving entity, became the obligor on the Old
Notes. The foregoing transactions, together with the Initial Offering, the
establishment of the Revolving Credit Facility (as defined herein), the
application of the proceeds from the Initial Offering and the Equity
Contribution and the payment of related transaction fees and expenses are
collectively referred to herein as the "Transactions."
Prior to the consummation of the Merger, the Company redeemed its existing
indebtedness at a premium, paid certain Transaction-related expenses and
remitted any remaining unrestricted cash in excess of $2.0 million to its
stockholders.
In connection with the Merger, the Company entered into a new $10.0 million
revolving credit facility (the "Revolving Credit Facility"), which is secured by
substantially all of the assets of the Company. The Company has not drawn on the
Revolving Credit Facility in connection with the Transactions.
4
<PAGE> 11
THE INITIAL OFFERING
OLD NOTES
Pursuant to a Securities Purchase Agreement dated as of July 2, 1997 (the
"Purchase Agreement"), Sub Co. sold the Old Notes in an aggregate principal
amount of $70.0 million to the Initial Purchaser on July 2, 1997 as part of the
sale of 70,000 Units, which included the sale of the Old Notes by Sub Co. and
the sale of 70,000 Warrants by Holding to purchase an aggregate of 877.21 shares
of Class A Common Stock of Holding. The Initial Purchaser subsequently resold
the Old Notes purchased from the Company to qualified institutional buyers
pursuant to Rule 144A under the Securities Act. Pursuant to the Merger, the
Company became the obligor on the Old Notes.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the Purchase Agreement, Sub Co. and the Initial Purchaser
entered into a Registration Rights Agreement, dated as of July 2, 1997 (the
"Registration Rights Agreement"), which granted holders of the Old Notes certain
exchange and registration rights. The Exchange Offer is intended to satisfy such
exchange and registration rights which terminate after consummation of the
Exchange Offer. No offer to exchange the Warrants is being made in this
Prospectus and neither the Company (as the successor to Sub Co. pursuant to the
Merger) nor Holding is obligated to register or exchange the Warrants pursuant
to the Registration Rights Agreement or any other agreement.
THE EXCHANGE OFFER
Securities Offered............ $70,000,000 aggregate principal amount of
Series B 12 3/4% Senior Notes due 2004 of the
Company.
The Exchange Offer............ $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of
Old Notes. As of the date hereof, $70,000,000
aggregate principal amount of Old Notes are
outstanding. The Company will issue the New
Notes to holders on or promptly after the
Expiration Date.
Based upon 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 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
holder's business and that such holder does not
intend to participate and has no arrangement or
understanding with any person to participate in
the distribution of such New Notes. Each holder
accepting the Exchange Offer is required to
represent to the Company in the Letter of
Transmittal that, among other things, the New
Notes will be acquired by the holder in the
ordinary course of business and the holder does
not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such New
Notes.
Any Participating Broker-Dealer that acquired
Old Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating 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. The Letter of
5
<PAGE> 12
Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating
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 Participating Broker-Dealer in
connection with resale of New Notes received in
exchange for Old Notes where such Old Notes
were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The
Company has agreed that, for a period of 180
days after the Expiration Date, it will make
this Prospectus available to any Participating
Broker-Dealer for use in connection with any
such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the New Notes will not be able to rely on the
position of the staff of the Commission set
forth in no-action letters and, in the absence
of an exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements may result in
such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Minimum Condition............. The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered or accepted for exchange.
Expiration Date............... 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.
Accrued Interest on the New
Notes and the Old Notes....... Each New Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including,
the issuance date of the New Notes. Such
interest will be paid with the first interest
payment on the New Notes. Interest on the Old
Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange Offer --
Conditions." The Company reserves the right to
terminate or amend the Exchange Offer at any
time prior to the Expiration Date upon the
occurrence of any such condition.
Procedures for Tendering Old
Notes......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, or an Agent's
Message (as defined herein) in connection with
a book-entry transfer, together with the Old
Notes and other required documentation to the
Exchange Agent (as defined herein) at the
address set forth herein. By executing the
Letter of Transmittal, each holder will
represent to the Company that, among other
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 such
6
<PAGE> 13
other person (i) has any arrangement or
understanding with any person to participate in
the distribution of such New Notes, (ii) is
engaging or intends to engage in the
distribution of such New Notes, or (iii) is an
affiliate as defined under Rule 405 of the
Securities Act, of the Company. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "The Exchange
Offer -- Procedures for Tendering."
Untendered Old Notes.......... Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate but who do not tender their Old
Notes will not have any further exchange rights
and such Old Notes will continue to be subject
to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Old Notes could be adversely affected.
Consequences of Failure to
Exchange...................... The Old Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant
to Rule 144A or Rule 144 under the Securities
Act or pursuant to some other exemption under
the Securities Act, (iii) outside the United
States to a non-U.S. person pursuant to the
requirements of Rule 904 under the Securities
Act, or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Exchange Offer -- Consequences of
Failure to Exchange."
Shelf Registration
Statement..................... In the event that changes in the law or the
applicable interpretations of the staff of the
Commission do not permit the Company to effect
the Exchange Offer, or if for any other reason
the Exchange Offer is not consummated within
210 days of the date of the original issuance
of the Old Notes, the Company will (i) as
promptly as possible, file a shelf registration
statement (the "Shelf Registration Statement")
covering resales of the Old Notes, (ii) use its
respective best efforts to cause the Shelf
Registration Statement to be declared effective
under the Securities Act and (iii) use its best
efforts to keep the Shelf Registration
Statement effective until three years after its
effective date. A holder of the Old Notes that
sells such Old 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 Rights Agreement which are
applicable to such holder (including certain
indemnification obligations).
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal and delivering its
Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time. The Company will keep the
7
<PAGE> 14
Exchange Offer open for not less than thirty
days in order to provide for the transfer of
registered ownership.
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, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Old Notes and
Delivery of New Notes....... The Company will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Federal Income Tax
Consequences................ The exchange of Old Notes for New Notes by
tendering holders will not be a taxable
exchange for federal income tax purposes, and
such holders should not recognize any taxable
gain or loss or any interest income as a result
of such exchange.
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Exchange Agent................ United States Trust Company of New York.
THE NEW NOTES
General....................... The form and terms of the New Notes are the
same as the form and terms of the Old Notes
(which they replace) except that (i) the New
Notes bear a Series B designation, (ii) the New
Notes have been registered under the Securities
Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii) the
holders of New Notes will not be entitled to
certain rights under the Registration Rights
Agreement, including the provisions providing
for an increase in the interest rate on the Old
Notes in certain circumstances relating to the
timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is
consummated. See "The Exchange Offer -- Purpose
and Effect of the Exchange Offer." The New
Notes will evidence the same debt as the Old
Notes and will be entitled to the benefits of
the Indenture. See "Description of the Notes."
The Old Notes and the New Notes are referred to
collectively herein as the "Notes."
Issuer........................ Glasstech, Inc.
Notes Offered................. $70,000,000 principal amount of Series B
12 3/4% Senior Notes due 2004.
Maturity Date................. July 1, 2004.
8
<PAGE> 15
Interest Payment Dates........ Interest will accrue on the New Notes from the
date of issuance and will be payable
semi-annually on each January 1 and July 1,
commencing January 1, 1998.
Ranking....................... The New Notes will be general senior unsecured
obligations of the Company, ranking pari passu
in right of payment with all other existing and
future senior indebtedness of the Company and
senior in right of payment to any subordinated
indebtedness of the Company. The New Notes will
be effectively subordinated in right of payment
to all senior secured indebtedness of the
Company, including indebtedness under the
Revolving Credit Facility. The Revolving Credit
Facility provides for a total revolving credit
commitment of $10.0 million, subject to certain
conditions, and initial borrowing availability
of up to $8.0 million. The Company has no
senior indebtedness outstanding, including
indebtedness under the Revolving Credit
Facility, other than the Notes.
Guarantees by Future
Subsidiaries................ The New Notes will be unconditionally
guaranteed, on a senior unsecured basis, as to
the payment of principal, premium, if any, and
interest, jointly and severally (the
"Guarantees"), by all future direct and
indirect domestic Restricted Subsidiaries (as
defined herein) of the Company having either
assets or stockholders' equity in excess of
$10,000 (the "Guarantors"). As of the date of
this Prospectus, no Guarantees were in effect.
Each Guarantee will be effectively subordinated
to all secured indebtedness of such Guarantor.
See "Description of the Notes -- Certain
Covenants -- Limitation on Creation of
Subsidiaries" and "Description of the Notes --
Future Guarantees."
Optional Redemption........... The Notes will be redeemable at the option of
the Company, in whole or in part, at any time
on or after July 1, 2002, at the redemption
prices set forth herein plus accrued interest
to the date of redemption. In addition, the
Company, at its option, may redeem in the
aggregate up to $17.5 million, or 25%, of the
original principal amount of the Notes at any
time and from time to time prior to July 1,
2000 at a redemption price equal to 112.75% of
the principal amount thereof plus accrued and
unpaid interest to the redemption date with the
Net Proceeds of one or more Qualified Equity
Offerings of the Company or Holding to the
extent such proceeds were contributed to the
Company as common equity; provided, that at
least $52.5 million aggregate principal amount
of Notes originally issued remain outstanding
immediately after the occurrence of any such
redemption and that any such redemption occurs
within 90 days following the closing of any
such Qualified Equity Offering.
Change of Control............. In the event of a Change of Control, holders of
the Notes will have the right to require the
Company to repurchase their Notes at 101% of
the aggregate principal amount thereof plus
accrued and unpaid interest to the repurchase
date. See "Description of the Notes -- Change
of Control Offer."
Asset Sale Proceeds........... The Company will be obligated in certain
instances to make offers to repurchase the
Notes at a purchase price in cash equal to 100%
of the principal amount thereof plus accrued
and unpaid interest to the date of repurchase
with the net cash proceeds of certain asset
sales. See "Description of the Notes -- Certain
Covenants -- Limitation on Certain Asset
Sales."
9
<PAGE> 16
Certain Covenants............. The indenture contains covenants for the
benefit of the holders of the Notes that, among
other things, restrict the ability of the
Company and any Restricted Subsidiaries to: (i)
incur additional indebtedness; (ii) pay
dividends and make distributions; (iii) issue
stock of subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create
liens; (vii) enter into transactions with
affiliates; (viii) enter into sale and
leaseback transactions; (ix) create dividend or
other payment restrictions affecting Restricted
Subsidiaries; (x) merge or consolidate the
Company; and (xi) transfer and sell assets.
These covenants are subject to a number of
important exceptions. See "Description of the
Notes -- Certain Covenants."
Registration Rights........... Pursuant to the Registration Rights Agreement,
the Company agreed to use its best efforts to
file within 60 days, and cause to become
effective within 150 days of the closing date
of the Initial Offering, an Exchange Offer
Registration Statement with respect to an offer
to exchange the Old Notes for the New Notes of
the Company with terms substantially identical
to the Old Notes (except the New Notes will not
be subject to transfer restrictions). In
addition, under certain circumstances, the
Company may be required to file a Shelf
Registration Statement. Among other provisions,
in the event that (i) the Registration
Statement or Shelf Registration Statement has
not been filed with the Commission within 60
days after the Issue Date; (ii) the
Registration Statement or Shelf Registration
Statement is not declared effective within 150
days after the Issue Date; or (iii) the
Exchange Offer is not consummated within 60
days after the Registration Statement is
declared effective (each such event referred to
in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy
available to holders of the Old Notes will be
the immediate assessment of additional interest
("Additional Interest") as follows: the per
annum interest rate on the Old Notes will
increase by 0.50%, and the per annum interest
rate will increase by an additional 0.25% for
each subsequent 90-day period during which the
Registration Default remains uncured, up to a
maximum additional interest rate of 2.0% per
year in excess of the interest rate set forth
on the cover page hereof. All Additional
Interest will be payable to holders of the Old
Notes in cash on each January 1 and July 1,
commencing with the first such date occurring
after any such Additional Interest commences to
accrue, and continuing until such Registration
Default is cured. After the date on which such
Registration Default is cured, the interest
rate on the Old Notes will revert to the
interest rate originally borne by the Old
Notes. See "Exchange Offer."
RISK FACTORS
Before tendering their Old Notes for New Notes offered hereby, holders of
the Old Notes should consider carefully the information set forth under the
caption "Risk Factors," and all other information set forth in this Prospectus.
10
<PAGE> 17
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth summary historical consolidated financial
and other data of the Company for the three years ended June 30, 1997 which have
been derived from the Company's audited consolidated financial statements. The
summary pro forma consolidated data give effect to the consummation of the
Transactions, including the Initial Offering and the application of the net
proceeds therefrom, as if they had occurred at the beginning of the pro forma
period. The summary pro forma and adjusted consolidated balance sheet data as of
June 30, 1997 have been prepared as if the Transactions had occurred as of June
30, 1997. In May 1993, the Company filed for protection under Chapter 11
("Chapter 11") of the United States Bankruptcy Code, as amended (the "Bankruptcy
Code"). Upon emergence from Chapter 11 on January 4, 1995, the Company adopted
"fresh start" financial reporting, thereby reflecting the Company's assets and
liabilities at their fair market value and eliminating the accumulated deficit
as of January 3, 1995. The information presented on the following pages should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and notes thereto included elsewhere herein.
11
<PAGE> 18
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
----------- REORGANIZED COMPANY
PERIOD FROM -------------------------------------------
JULY 1, PERIOD FROM
1994 JANUARY 4, 1995
THROUGH THROUGH YEAR ENDED YEAR ENDED
JANUARY 3, JUNE 30, JUNE 30, JUNE 30,
1995 1995 1996 1997
----------- --------------- ---------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................................ $ 25,948 $27,854 $ 62,771 $ 76,433
Cost of goods sold......................................... 16,576 17,036 39,024 45,603
------- -------- ------- -------
Gross profit........................................... 9,372 10,818 23,747 30,830
Selling, general and administrative expenses............... 3,430 5,105 10,723 12,866
Research and development expenses.......................... 2,082 2,302 4,557 4,594
Amortization expense....................................... 2,512 1,203 2,407 2,306
------- -------- ------- -------
Operating profit....................................... 1,348 2,208 6,060 11,064
Interest expense........................................... -- (2,077) (4,200) (4,200)
Other income (expense) -- net.............................. 35 784 1,540 2,263
------- -------- ------- -------
Income before items below.............................. 1,383 915 3,400 9,127
Reorganization items(a).................................... (1,164) -- -- --
Income taxes not payable in cash(b)........................ -- (445) (1,418) (2,551)
Federal income taxes, current.............................. -- -- (105) (78)
Extraordinary gain(c)...................................... 214,773 -- -- --
Cumulative effect on prior years of change in method of
accounting for non-pension post-retirement benefits...... (1,906) -- -- --
------- -------- ------- -------
Net income............................................. $ 213,086 $ 470 $ 1,877 $ 6,498
======= ======== ======= =======
OTHER DATA:
EBITDA(d).................................................. $ 4,625 $ 4,109 $ 9,781 $ 14,829
Depreciation and amortization.............................. 3,277 1,901 3,721 3,765
Capital expenditures....................................... 480 680 2,152 990
Backlog.................................................... 31,941 25,931 38,910 30,307
PRO FORMA AND ADJUSTED DATA:
Adjusted EBITDA(e)......................................... $ 16,808
Pro forma cash interest expense............................ 8,925
Ratio of Adjusted EBITDA to pro forma cash interest
expense.................................................. 1.88x
Ratio of total debt to Adjusted EBITDA..................... 4.16x
Ratio of net debt to Adjusted EBITDA....................... 3.76x
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
--------------------------
ACTUAL PRO FORMA
---------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Working capital (deficiency)(f)..... $ 39,518 $ (2,011)
Total assets........................ 99,364 105,733
Total debt(g)....................... 42,000 70,000
Net debt(g)(h)...................... (9,805) 63,273
Shareholders' equity(i)............. 29,232 15,750
</TABLE>
(See footnotes on following page)
12
<PAGE> 19
NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
(a) Reorganization (as defined herein) items relate to the period in which the
Company was operating under the protection of Chapter 11 of the Bankruptcy
Code.
(b) Income taxes not payable in cash represent the tax effect of certain tax
attributes existing prior to the Reorganization and are recorded as a
reduction to reorganization value in excess of amounts allocable to
identifiable assets as required by SOP 90-7.
(c) An extraordinary gain of $214,773 was recognized on January 3, 1995 because
the consideration for the discharge of pre-petition liabilities was less
than the carrying value of the recorded liabilities discharged.
(d) "EBITDA" for any period means operating profit plus depreciation and
amortization. EBITDA is determined after the deduction of directors' fees,
consulting fees and related expenses (the "Directors' Fees") of $0, $203,
$995 and $1,289 for the periods ended January 3, 1995, June 30, 1995, June
30, 1996 and June 30, 1997, respectively. Upon completion of the
Transactions, these fees were replaced by a post-Merger KECC advisory fee of
$200 per year. Management understands that EBITDA is an indicator
customarily used by investors to gauge a company's ability to service its
interest and principal obligations. EBITDA should not be considered in
isolation from, as a substitute for or as being more meaningful than net
income, cash flows from operating, investing and financing activities, or
other income or cash flow statement data prepared in accordance with
generally accepted accounting principles, and it should not be construed as
an indication of the Company's operating performance or as a measure of
liquidity. EBITDA, as presented herein, may be calculated differently by
other companies and, as such, EBITDA amounts presented herein may not be
comparable to other similarly titled measures of other companies.
(e) "Adjusted EBITDA" for any period means EBITDA adjusted to reflect: (i) the
add-back of Directors' Fees paid during such period, offset by a
post-Merger KECC advisory fee of $200 per year; and (ii) for the reporting
periods ended June 30, 1997, the add-back of an $890 one-time accrual
relating to the replacement of certain components in forced convection
heaters due to an error in material specifications. For the year ended June
30, 1997, Adjusted EBITDA reflects a net reduction in Directors' Fees of
$1,089 and the add-back of the $890 one-time expense accrual.
(f) Working capital is defined as total current assets less total current
liabilities, which includes a current liability of $10.7 million of
billings in excess of costs and estimated earnings on uncompleted contracts
("Unearned Revenue"). Unearned Revenue represents progress payments
received or due on contracts in advance of the recognition of the revenue
on such contracts.
(g) Total debt and net debt reflect the principal amount of indebtedness due
under the Notes.
(h) Net debt is equal to total debt less cash and cash equivalents, which, on a
pro forma basis, includes restricted cash that was reclassified as
unrestricted cash upon the establishment of the Revolving Credit Facility.
(i) Shareholders' equity includes $750 attributable to the value of the
Warrants.
13
<PAGE> 20
RISK FACTORS
Holders of the Old Notes should carefully consider the following factors,
in addition to the other information set forth in this Prospectus, before making
an investment in the New Notes offered hereby. Certain of the statements in this
Prospectus are forward-looking in nature and, accordingly, are subject to many
risks and uncertainties. The actual results that the Company achieves may differ
materially from any forward-looking statements in this Prospectus. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and those contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as those discussed elsewhere in this Prospectus.
HIGH LEVEL OF INDEBTEDNESS AND LEVERAGE
Upon consummation of the Transactions, the Company became highly leveraged.
At July 2, 1997, after consummation of the Transactions, the Company's total
indebtedness (including current maturities) and shareholders' equity was $69.2
million and $15.8 million, respectively. The Company, subject to certain
conditions, also has the ability to borrow up to $10.0 million pursuant to the
Revolving Credit Facility. Management believes that the Company's cash flow from
operations, together with borrowings available under the Revolving Credit
Facility, will be adequate to meet its anticipated requirements for working
capital, capital expenditures, interest payments and scheduled principal
payments over the next twelve months. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources." The Company's ability to make scheduled payments of the principal
of, or interest on, or to refinance its indebtedness (including the Notes)
depends, however, on its future performance, which to a certain extent is
subject to economic, financial, competitive and other factors beyond its
control.
The Company's high level of indebtedness will have several important
effects on its future operations, including the following: (i) the financial
covenants and other restrictions contained in the Revolving Credit Facility and
the Indenture require the Company to meet certain financial tests and restrict
its ability to, among other things, borrow additional funds, make certain
investments and acquire or dispose of assets; and (ii) because of the Company's
debt service requirements, funds available for working capital, R&D, capital
expenditures, acquisitions and general corporate purposes may be limited. The
Company's leveraged position may increase its vulnerability to competitive
pressures, the cyclical nature of the automobile and architectural industries
and general economic conditions, all of which may influence the market demand
for the Company's products. In addition, although management believes that
capital expenditures above maintenance levels can be deferred to address cash
flow or other constraints, such initiatives cannot be deferred for extended
periods without an adverse effect on revenue, cash flow and operating results,
which may be material. The Company's continued growth depends, in part, on its
ability to adequately invest in the development of new technologies, and,
therefore, to the extent it is unable to do so with internally generated cash,
the Company's inability to finance such projects with borrowed funds could have
a material adverse effect on its future operations.
RESTRICTIONS UNDER DEBT AGREEMENTS
The Indenture contains covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries to incur additional
indebtedness, incur liens, pay dividends and make certain other restricted
payments, make certain investments, consummate certain asset sales, enter into
certain transactions with affiliates, issue subsidiary stock, create dividend or
other payment restrictions affecting Restricted Subsidiaries, consolidate or
merge with any other person or transfer all or substantially all of the assets
of the Company. See "Description of the Notes -- Certain Covenants."
In addition, the Revolving Credit Facility contains restrictive covenants
which, generally, are more restrictive than those contained in the Indenture and
limit the ability of the Company and its subsidiaries to prepay their
indebtedness (including the Notes). The Revolving Credit Facility requires the
Company to maintain specified consolidated financial ratios and satisfy certain
consolidated financial tests. The Company's ability to meet those ratios and
tests can be affected by events beyond its control, and there can be no
assurance that the Company will meet those ratios and tests. A breach of any of
the covenants under the
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<PAGE> 21
Revolving Credit Facility or the Indenture could result in a default under other
outstanding indebtedness, including the Revolving Credit Facility and the
Indenture. If an event of default occurs under the Revolving Credit Facility,
the lender could elect to declare all amounts outstanding thereunder, together
with accrued interest, to be immediately due and payable. If the Company is
unable to repay those amounts, the lender could proceed against the collateral
granted to it to secure such indebtedness. Any such action taken by the lender
under the Revolving Credit Facility would likely result in an acceleration of
the indebtedness represented by the Notes. The Revolving Credit Facility is
secured by substantially all of the assets of the Company. See "Description of
the Notes" and "Description of the Revolving Credit Facility."
FLUCTUATIONS IN CASH FLOW
The Company's cash flow is subject to fluctuation from quarter to quarter
or year to year due to a number of factors, including the number and timing of
new system orders from customers and the timing of customer progress payments
during the build-and-install cycle for a new system. Such progress payments are
generally due upon contract signing, system shipment and final system acceptance
by the customer. See "Business -- Marketing and Sales." Variations in the number
and timing of system orders, changes to installation schedules that lead to the
deferral of progress payments or unanticipated increases in production costs or
other costs could have a material adverse effect on the Company's ability to
meet its debt obligations as they become due. In addition, the period during
which the Company recognizes revenue for a new system may not be the period
during which payment is actually received from the customer, and thus EBITDA and
other financial indicators generally relied on by investors to evaluate a
company's ability to service its debt may not, in the case of the Company,
reflect actual cash received during a given period. See "Management's Discussion
and Analysis of Financial Conditions and Operating Results."
CYCLICALITY OF AUTOMOBILE INDUSTRY; SUSCEPTIBILITY TO ECONOMIC CONDITIONS
The Company's business depends primarily on capital expenditures by
manufacturers of automotive safety glass products, which, in turn, rely on
purchases of their glass products by automobile manufacturers. The automobile
industry is and historically has been a cyclical industry. Currently, the
automobile industry is relatively strong as is the demand for high-quality,
complex glass shapes. Although the Company is currently experiencing demand for
its Original Equipment systems and aftermarket products and services, there can
be no assurance that such demand will continue in the future. The cyclicality of
the automobile industry, among other factors, including fluctuations in market
demand based on general economic conditions in the United States or
internationally, may cause prospective customers to postpone decisions regarding
major capital expenditures, including purchases of the Company's systems or
aftermarket products and services. Most of the factors that might influence
customers and prospective customers to reduce their capital budgets under these
circumstances are beyond the Company's control. During prior recessionary
periods, the Company's operating performance has been materially adversely
affected, and there can be no assurance that any future economic downturn would
not materially and adversely affect the Company's business, financial condition
and operating results. In addition, there can be no assurance that the Company's
customers will continue to require new glass bending capabilities or increased
capacity, thereby reducing demand for the Company's products.
PATENT AND PROPRIETARY RIGHTS; RISK OF LITIGATION
The Company relies on patent, trademark, copyright and trade secret laws,
employee and third-party non-disclosure agreements and other methods to protect
its proprietary rights. The Company holds more than 100 patents in the United
States and more than 350 patents outside the United States (which primarily
extend the patent protection acquired in the United States to its foreign
markets) and has more than 250 patent application filings worldwide that cover
certain aspects of its technology. Typically, several patents cover various
controls, bending processes or general aspects of the equipment. While
management does not believe that the loss of any one patent would have a
material adverse effect on the Company's business, it believes the Company's
aggregate patent position provides it with an important competitive advantage.
There can be no assurance that any pending or future patent applications will be
granted, that any current or future patents will not be challenged, invalidated
or circumvented or that the rights granted thereunder will provide competitive
15
<PAGE> 22
advantages to the Company. There can also be no assurance that the Company's
trade secrets or nondisclosure agreements will provide meaningful protection of
the Company's proprietary information. Furthermore, there can be no assurance
that others will not independently develop similar technologies or duplicate any
technology developed by the Company or that the Company's technology will not
infringe upon patents or other rights owned by others. The Company does not own
all the patent rights with respect to certain technology relating to the forced
convection heater which it recently developed in conjunction with the Gas
Research Institute, a nonprofit trade association of gas companies ("GRI"). See
"Business -- Patents and Proprietary Rights." The Company's inability to
maintain a competitive advantage based on proprietary rights would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Although the Company is not currently the subject of any patent or
proprietary rights infringement litigation, there can be no assurance that third
parties will not assert infringement claims against the Company in the future
with respect to current or future products. In addition, one of the Company's
European architectural patents has been opposed by two of the Company's
competitors, and management believes that one of its customers may be infringing
on certain U.S. and foreign counterpart patents. There can be no assurance that
the outcome of either of these matters, or any other opposition of or
infringement upon the Company's proprietary rights, will support the Company's
patent position. In addition, the Company may be subject to additional risks as
it enters into transactions in countries where intellectual property laws are
not well developed or are poorly enforced. Legal protection of the Company's
rights may be ineffective in such countries. Any claims or litigation, with or
without merit, could be costly and could result in a diversion of management's
attention. Adverse determinations of such claims or litigation could also have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Patents and Proprietary Rights."
CONTINUANCE OF TECHNOLOGICAL ADVANTAGE
The Company's success will depend in part upon its ability to improve
existing products and services, and to develop and introduce new products and
services to meet changing customer requirements. Such product enhancements
require the incorporation of sophisticated technology and computer software. The
application of such technologies and software to the Company's products has
grown increasingly complex. There can be no assurance that the Company will
successfully complete the development of new products in a timely fashion or
that the Company's current or future products will satisfy the needs of the
worldwide safety glass market. In addition, certain of the Company's customers
require that products be customized to address the unique characteristics of
their businesses. The Company's commitment to customization could burden its
resources or delay the delivery or installation of products. Such results could
adversely affect the Company's relationship with its customers, which could
adversely affect its business, financial condition or results of operations.
1993 BANKRUPTCY FILING
In May 1993, the Company filed for protection under Chapter 11 of the
Bankruptcy Code, largely as a result of the Company's inability to meet its
obligations with respect to $269.5 million of indebtedness outstanding as of May
1993, $193.0 million of which was incurred in connection with a leveraged buyout
in 1989. The Company emerged from Chapter 11 in January of 1995. See
"Business -- History."
RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS
Sales to customers in countries other than the United States accounted for
63.7%, 70.1% and 70.9% of net revenue in fiscal 1995, 1996 and 1997,
respectively. Management anticipates that international sales will continue to
account for a substantial portion of the Company's revenue in the future. Sales
and operating activities outside of the United States are subject to certain
inherent risks, including fluctuations in the value of the United States dollar
relative to foreign currencies, tariffs, quotas, taxes and other market
barriers, political and economic instability, restrictions on the export or
import of technology, potentially limited intellectual property protection,
difficulties in staffing and managing international operations and potentially
adverse tax consequences. There can be no assurance that any of these factors
will not have a material adverse
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<PAGE> 23
effect on the Company's business, financial condition or results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RELIANCE ON LIMITED CUSTOMER BASE
The Company's customer base in the Automotive Market and the Architectural
Market is comprised of a limited number of firms that produce or use safety
glass. For example, in fiscal years 1995, 1996, and 1997 Asahi Glass Company,
Chrysler Corporation, Nippon Sheet Glass Company and Pilkington plc collectively
accounted for 40.5%, 40.8% and 50.6% of the Company's revenue, respectively. In
addition, (i) in fiscal 1995, Asahi Glass Company and Pilkington plc each
accounted for more than 10.0% of the Company's revenue, (ii) in fiscal 1996,
Pilkington plc accounted for more than 10.0% of the Company's revenue and (iii)
in fiscal 1997 Asahi Glass Company, Chrysler Corporation, Nippon Sheet Glass
Company and Pilkington plc each accounted for more than 10% of the Company's
revenue. Accordingly, a significant portion of the Company's revenue in any
particular period is attributable to sales to a limited number of customers. The
Company's largest customers change from period to period as projects are
completed and new projects are initiated. Management expects that sales of the
Company's products to relatively few customers will continue to account for a
high percentage of its revenue in the foreseeable future. If completed contracts
are not replaced on a timely basis by new orders from the same or other
customers, the Company's revenue and related cash flow could be materially
adversely affected. The loss of a significant customer, a reduction in orders
from any significant customer or the cancellation of a significant order from a
customer, including reductions or cancellations due to customer departures from
recent buying patterns, financial difficulties of a customer or market, or
economic or competitive conditions in the glass manufacturing industry could
materially adversely affect the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Marketing and Sales."
COMPETITION
The Company faces competition primarily from the in-house engineering
departments of its customers in the Automotive Market and from one major
independent producer in the Architectural Market. There can be no assurance
that: (i) the Company's Automotive Market customers will not increase their
in-house design and assembly of glass bending and tempering systems or will not
try to market systems developed in-house to other customers of the Company; (ii)
the Company's existing competitors in the Architectural Market will not develop
superior technology; or (iii) new competitors will not enter the Company's
markets. Any of these factors, alone or in the aggregate, could have a material
adverse effect on the Company's business, financial condition or results of
operations. See "Business -- Competition."
EMERGENCE OF A SUBSTITUTE FOR AUTOMOTIVE SAFETY GLASS
Automobile manufacturers and certain automobile component suppliers such as
plastic manufacturers are constantly evaluating methods to reduce the weight and
cost of automobiles, including the substitution of automotive safety glass with
some form of plastic. While to date there has been no cost-effective substitute
developed which would have the required durability, optical quality and fracture
patterns found in safety glass, there can be no assurance that such a product,
if developed and introduced in the automotive safety glass market, would not
have a material adverse effect on the Company's business, financial condition or
operating results.
DEPENDENCE ON THIRD-PARTY SUPPLIERS AND MANUFACTURERS
The Company purchases substantially all of its materials and component
parts incorporated into its products from third-party suppliers and
manufacturers. Management believes that there are numerous available sources of
supply for such required materials. While the Company attempts to maintain
alternative sources for materials, the Company's businesses are subject to the
risk of price fluctuations and periodic delays in the delivery of materials.
Failure by certain suppliers to continue to supply the Company with materials on
commercially reasonable terms, or at all, could have a material adverse effect
on the Company's business, financial condition and operating results. In
addition, the Company is, to some degree, dependent upon the
17
<PAGE> 24
ability of such manufacturers, among other things, to meet stringent performance
and quality specifications and to conform to delivery schedules. Failure by such
third-party manufacturers to comply with these and other requirements could have
a material adverse effect on the Company's ability to deliver its products on a
timely basis.
ENVIRONMENTAL REGULATION
The operations and properties of the Company are subject to a wide variety
of federal, state and local laws and regulations, including those governing the
use, storage, handling, generation, treatment, emission, release, discharge and
disposal of certain materials, substances and wastes, the remediation of
contaminated soil and groundwater, and the health and safety of employees
(collectively, the "Environmental Laws"). Since Environmental Laws frequently
are revised and supplemented, with a trend toward greater stringency,
expenditures for compliance and liabilities under Environmental Laws are
difficult to estimate and may exceed anticipated costs. Based upon its
experience to date, management believes that compliance with existing
Environmental Laws will not have a material adverse effect on the Company's
business, financial condition or results of operations. However, future events,
such as the discovery of new information, changes in existing Environmental Laws
or their interpretation and more vigorous enforcement policies of regulatory
agencies, may give rise to additional expenditures or liabilities that could be
material. See "Business -- Environmental Matters."
OWNERSHIP OF HOLDING AND THE COMPANY
Upon consummation of the Transactions, the Key Equity Group became the
owner of all of the outstanding capital stock of Holding, which owns all of the
voting stock of the Company. By virtue of such stock ownership, such persons
have the power to direct the affairs of Holding and the Company and to determine
the outcome of all matters required to be submitted to stockholders of Holding
and the Company for approval, including the election of Holding's and the
Company's directors and any amendment to the certificate of incorporation of
Holding and the Company. The interests of the members of the Key Equity Group as
equity holders may differ from the interests of holders of the Notes. See
"Certain Transactions" and "Ownership and Control."
CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all of the outstanding Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest to the date of repurchase. There can be no
assurance that the Company will have sufficient funds available to finance a
Change of Control Offer. In addition, upon a Change of Control, the Indenture
would require the Company, before repurchase of the Notes, to (i) repay in full
all obligations under or in respect of the Revolving Credit Facility or offer to
repay in full all obligations under or in respect of the Revolving Credit
Facility or (ii) obtain the requisite consent under the Revolving Credit
Facility to permit the repurchase of the Notes as described above. See
"Description of the Notes -- Change of Control Offer." The Company's inability
to repay its obligations or to obtain the requisite consent under the Revolving
Credit Facility, and to repurchase all of the tendered Notes, would constitute
an event of default under the Indenture.
FRAUDULENT CONVEYANCE
The incurrence by the Company of indebtedness such as the Notes may be
subject to review under relevant state and federal fraudulent conveyance laws if
a bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of
the Company. Under these laws, if a court were to find that, after giving effect
to the sale of the Notes and the application of the net proceeds therefrom,
either (i) the Company incurred such indebtedness with the intent of hindering,
delaying or defrauding creditors or contemplated insolvency with a design to
prefer one or more creditors to the exclusion in whole or in part of others; or
(ii) the Company received less than reasonably equivalent value or consideration
for incurring such indebtedness and (a) was insolvent or rendered insolvent by
reason of such transaction, (b) was engaged in a business or transaction for
which the assets remaining with the Company constituted unreasonably small
capital or (c) intended to incur,
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<PAGE> 25
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, such court may subordinate such indebtedness to presently existing
and future indebtedness of the Company, avoid the issuance of such indebtedness
and direct the repayment of any amounts paid thereunder to the Company's
creditors or take other action detrimental to the holders of such indebtedness.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the value of all its property at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its debts,
including contingent liabilities, as they become absolute and matured.
It was a condition to consummation of the Initial Offering that the Company
receive a solvency opinion, delivered by Houlihan Lokey Howard & Zukin, Inc.,
mutually acceptable to the Company and the Initial Purchaser. The Company
believes that the indebtedness represented by the Old Notes was incurred for
proper purposes and in good faith and, at the time the Old Notes were issued and
the New Notes are issued, the Company was and will be, as the case may be: (i)
neither insolvent nor rendered insolvent thereby; (ii) in possession of
sufficient capital to operate its business effectively; and (iii) incurring
debts within its ability to pay as the same mature or become due. See
"Management's Discussions and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." There can be no assurance,
however, that a court passing on these issues would make the same determination.
DEPENDENCE ON SENIOR MANAGEMENT
The Company's business depends upon the efforts, abilities and expertise of
its executive officers and other key employees. The Company has entered into
five-year employment contracts with several senior members of management in an
effort to ensure the continuance of the existing management team. The agreements
generally contain certain noncompete provisions. If the Company were to lose the
services of certain of these executive officers or key employees, the Company's
operating results could be adversely affected, perhaps materially. See
"Management -- Employment Agreements and Arrangements."
EFFECTIVE SUBORDINATION OF THE NOTES
The Notes are general senior unsecured obligations of the Company and are
effectively subordinated in right of payment to all secured indebtedness of the
Company, including indebtedness under the Revolving Credit Facility, which
provides for a total revolving credit commitment of $10.0 million, subject to
certain conditions. The Company has no borrowings outstanding under the
Revolving Credit Facility. The Indenture will limit, but not prohibit, the
ability of the Company and its Restricted Subsidiaries to incur additional
secured indebtedness.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The Old Notes were issued to, and the Company believes the Old Notes are
currently owned by, a relatively small number of beneficial owners. Prior to the
Exchange Offer, there has not been any public market for the Old Notes. The Old
Notes have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
New Notes by holders who are entitled to participate in the Exchange Offer. The
holders of Old Notes (other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who are not
eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Company is required to file a Shelf Registration
Statement with respect to such Old Notes. The New Notes will constitute a new
issue of securities with no established trading market. The Company does not
intend to list the New Notes on any national securities exchange or seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. The Initial Purchaser has advised the Company that
it currently intends to make a market in the New Notes, but it is not obligated
to do so and may discontinue such market making at any time. In addition, such
market making activity will be subject to the limits
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<PAGE> 26
imposed by the Securities Act and the Exchange Act and may be limited during the
Exchange Offer and the pendency of the Shelf Registration Statement.
Accordingly, no assurance can be given that an active public or other market
will develop for the New Notes or as to the liquidity of the trading market for
the New Notes. If a trading market does not develop or is not maintained,
holders of the New Notes may experience difficulty in reselling the New Notes or
may be unable to sell them at all. If a market for the New Notes develops, any
such market may be discontinued at any time.
If a public trading market develops for the New Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Notes may trade at a discount from their
principal amount.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of the 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 issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws, or pursuant to an exemption therefrom. The Company does not
intend to register the Old Notes under the Securities Act. In addition, any
holder of Old Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes may be deemed to have received
restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if any, for the Old Notes
not so tendered could be adversely affected. See "The Exchange Offer."
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<PAGE> 27
THE TRANSACTIONS
The Company, Holding and Sub Co. each entered into certain transactions
(defined herein as the "Transactions"), including ones with each other, that,
upon their consummation, resulted in the ownership by Holding, which is in turn
wholly-owned by the Key Equity Group, of all of the capital stock of the
Company. The Transactions relating to such sale include: (i) the Merger; (ii)
the Initial Offering; (iii) the Equity Contribution; and (iv) the establishment
of the Revolving Credit Facility. The Transactions were consummated on July 2,
1997.
THE MERGER
On June 5, 1997, the Company, Holding and Sub Co. entered into the Merger
Agreement, pursuant to which, on July 2, 1997, Sub Co. was merged into the
Company (defined herein as the "Merger") and the Company continued as the
surviving entity and became a wholly-owned subsidiary of Holding. Upon
consummation of the Merger: (i) each outstanding share of capital stock of the
Company was converted into the right to receive its proportionate share of $76.2
million in cash to be paid to the existing stockholders of the Company by Sub
Co., subject to certain adjustments; (ii) each share of capital stock of Sub Co.
was converted into one share of capital stock of the Company; and (iii) each
share of capital stock of the Company outstanding immediately prior to the
Merger was cancelled. The Company agreed that, prior to the consummation of the
Merger, it would use its unrestricted cash to repay $42.0 million aggregate
principal amount of Senior Notes due 2001 and pay accrued interest and a
prepayment penalty on such notes of $6.3 million, as well as certain
Transaction-related expenses. The Purchase Price of $76.2 million was adjusted
to reflect changes in the net working capital of the Company. At the closing of
the Merger, approximately $3.5 million of the Purchase Price was deposited into
certain escrow accounts (the "Escrow Accounts") to secure any payment for losses
incurred as a result of any breach of certain representations and warranties
made in the Merger Agreement and to adjust the final Purchase Price in
accordance with the Merger Agreement. The Purchase Price was financed through
the Initial Offering and the Equity Contribution. See "Use of Proceeds."
THE INITIAL OFFERING
The proceeds from the Initial Offering, together with the proceeds from the
Equity Contribution, were used to acquire all of the outstanding shares of
capital stock of the Company from its existing stockholders pursuant to the
terms of the Merger Agreement and to pay fees and expenses relating to the
Transactions. Warrants were issued by Holding and became immediately detachable.
Upon consummation of the Merger, the Company, as the surviving corporation,
became the obligor on the Old Notes to the same extent that Sub Co. was liable
under the Old Notes prior to the Merger.
THE EQUITY CONTRIBUTION
As part of or prior to the consummation of the Merger and the Initial
Offering, the Key Equity Group purchased, for $15.0 million, all of the
outstanding shares of capital stock of Holding, a Delaware corporation formed
for the sole purpose of effecting the Merger and holding its investment in the
Company. Holding then purchased for $15.0 million all of the outstanding shares
of common stock of Sub Co., a Delaware corporation formed for the sole purpose
of effecting the Merger. The proceeds of the Equity Contribution, together with
the proceeds of the Initial Offering, were used to acquire all of the
outstanding shares of capital stock of the Company from its existing
stockholders pursuant to the terms of the Merger Agreement and to pay fees and
expenses relating to the Transactions.
REVOLVING CREDIT FACILITY
To assist the Company in meeting its ongoing working capital requirements
upon the consummation of the Merger and the Initial Offering, the Company
arranged for a Revolving Credit Facility with an aggregate borrowing capacity of
$10.0 million. No borrowings have been drawn under the Revolving Credit
Facility. Advances on the Revolving Credit Facility are secured by substantially
all of the assets of the Company. See "Description of the Revolving Credit
Facility."
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USE OF PROCEEDS
The proceeds from the Initial Offering, together with the proceeds from the
Equity Contributions, were used to (i) pay the Purchase Price pursuant to the
Merger Agreement ($76.2 million), (ii) pay certain fees and expenses ($4.5
million) and (iii) fund working capital of the Company ($4.3 million).
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of June 30, 1997 and pro forma as adjusted to give effect to the Transactions as
if each had occurred on June 30, 1997 (dollars in thousands). The table should
be read in conjunction with the consolidated financial statements and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------
ACTUAL PRO FORMA
------- ---------
<S> <C> <C>
Cash and cash equivalents(a).............................................. $51,805 $ 6,727
======= =======
Total long-term debt, including current portion(b):
Notes offered pursuant to the Initial Offering and the Exchange
Offer(c)............................................................. -- 69,250
10% Senior Notes due 2001(d)............................................ 42,000 --
------- -------
Total long-term debt................................................. 42,000 69,250
Shareholders' equity(e):
Common stock............................................................ 10 10
Additional paid-in capital(f)........................................... 20,377 15,740
Retained earnings....................................................... 8,845 --
------- -------
Shareholders' equity................................................. 29,232 15,750
------- -------
Total capitalization................................................. $71,232 $85,000
======= =======
</TABLE>
- ---------------
(a) Prior to the consummation of the Merger, the Company redeemed its existing
indebtedness at a premium and paid certain Transaction-related expenses.
(b) The Company established a Revolving Credit Facility that permits the Company
to draw amounts of up to $10.0 million. No funds were drawn on the Revolving
Credit Facility upon consummation of the Merger. The Revolving Credit
Facility is secured by substantially all of the assets of the Company. See
"Description of the Revolving Credit Facility."
(c) Reflects the issuance of $70.0 million aggregate principal amount of Notes,
net of $750,000 relating to the value attributable to the Warrants.
(d) Reflects $42.0 million aggregate principal amount of 10% Senior Notes due
2001 issued in connection with the Reorganization and retired pursuant to
the consummation of the Transactions.
(e) Reflects the recording of the Equity Contribution of $15.0 million, $750,000
attributable to the value of the Warrants and the elimination of historical
shareholders' equity as a result of the Transactions.
(f) Includes $750,000 relating to the value attributable to the Warrants.
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UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated balance sheet of the Company
gives effect to the Transactions and the pro forma adjustments described in the
notes thereto as if the Transactions had occurred on June 30, 1997. The
unaudited pro forma consolidated statements of earnings of the Company for the
year ended June 30, 1997 give effect to the Transactions and the pro forma
adjustments described in the notes thereto as if the Transactions had occurred
on July 1, 1996.
The pro forma financial data is for informational purposes only and may not
necessarily be indicative of the results of operations and financial position of
the Company in the future or what the results of operations or financial
position of the Company would have been had the Transactions occurred on the
dates indicated. The pro forma data is based on a Purchase Price of $76.2
million, as adjusted in accordance with the terms of the Merger Agreement. The
adjustments primarily affect the amount of pro forma cash and the pro forma
goodwill and goodwill amortization.
The unaudited pro forma consolidated statements and accompanying notes
thereto should be read in conjunction with the consolidated financial statements
and the notes thereto included elsewhere in this Prospectus.
23
<PAGE> 30
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................ $ 51,805 $ (45,078)(a) $ 6,727
Restricted cash.......................................... 1,529 (1,529)(a) --
Accounts receivable:
Contracts:
Uncompleted, including unbilled amounts of $2,188... 3,652 -- 3,652
Completed, less allowance of $101 for doubtful
accounts.......................................... 1,676 -- 1,676
Trade, less allowance of $40 for doubtful accounts..... 1,530 -- 1,530
------- -------- --------
Total accounts receivable...................... 6,858 -- 6,858
Inventory................................................ 4,265 -- 4,265
Prepaid expenses......................................... 481 -- 481
------- -------- --------
Total current assets........................... 64,938 (46,607) 18,331
Property, plant and equipment, net....................... 8,390 -- 8,390
Other assets:
Goodwill............................................... -- 56,339 (b) 56,339
Patents, less accumulated amortization of $4,317....... 18,283 -- 18,283
Reorganization value in excess of amounts allocable to
identifiable assets, less accumulated amortization
of $1,599........................................... 7,583 (7,583)(c) --
Deferred financing costs............................... 170 4,220 (d) 4,390
------- -------- --------
Total other assets............................. 26,036 52,976 79,012
------- -------- --------
Total assets................................... $ 99,364 $ 6,369 $ 105,733
======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable......................................... $ 3,413 $ -- $ 3,413
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 10,720 -- 10,720
Accrued liabilities...................................... 11,287 (5,078)(e) 6,209
------- -------- --------
Total current liabilities...................... 25,420 (5,078) 20,342
Long-term debt........................................... 42,000 27,250 (f) 69,250
Non-pension post-retirement benefit obligation........... 2,712 (2,321)(g) 391
Shareholders' equity:
Common stock........................................... 10 -- 10
Additional paid-in capital............................. 20,377 (4,637)(h) 15,740
Retained earnings...................................... 8,845 (8,845)(i) --
------- -------- --------
Shareholders' equity........................... 29,232 (13,482) 15,750
------- -------- --------
Total liabilities and shareholders' equity..... $ 99,364 $ 6,369 $ 105,733
======= ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet
24
<PAGE> 31
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Prior to the consummation of the Merger, the Company reduced its existing
cash balance by redeeming its existing indebtedness at a premium, paying
certain Transaction-related expenses and remitting any remaining
unrestricted cash in excess of $2,000 to existing stockholders. The
following reflects the net decrease in cash and cash equivalents as a result
of the pre-closing payments and the Transactions:
<TABLE>
<S> <C>
Pre-closing adjustments:
Repayment of existing long-term debt......................................... $(42,000)
Payment of interest and prepayment penalty on existing long-term debt(1)..... (6,312)
Payment of employee bonuses and certain Transaction-related expenses......... (6,627)
Payment to existing stockholders(2).......................................... (989)
Proceeds from the exercise of stock options and stock warrants............... 6,236
--------
Total pre-closing adjustments.............................................. (49,692)
Transaction adjustments:
Excess proceeds from the Initial Offering and the Equity Contribution........ 3,085
Reclassification of restricted cash to cash.................................. 1,529
--------
Total Transaction adjustments.............................................. 4,614
--------
Total...................................................................... $(45,078)
========
</TABLE>
- ---------------
(1) Includes a 10% prepayment penalty of $4,200 and accrued interest of
$2,112.
(2) Existing stockholders were required to leave $2,000 in unrestricted
cash in the Company at closing.
(b) Reflects goodwill of $56,339 representing the excess of the Purchase Price
over the net assets acquired.
(c) Reflects the elimination of reorganization value in excess of amounts
allocable to identifiable assets of $7,583.
(d) Reflects an increase in deferred financing costs as a result of the Initial
Offering of $4,220.
(e) Reflects the payment of certain incentive compensation, interest costs and
Transaction-related expenses that were accrued prior to June 30, 1997. See
Note (a) above.
(f) Reflects the net increase in long-term debt resulting from the Transactions
as follows:
<TABLE>
<S> <C>
Notes........................................................................ $ 70,000
Value attributable to the Warrants........................................... (750)
Repayment of existing long-term debt......................................... (42,000)
--------
Total...................................................................... $ 27,250
========
See Note (a) above.
</TABLE>
(g) Reflects purchase price accounting adjustment to state non-pension
post-retirement benefit obligation at fair value.
(h) Reflects the net decrease in additional paid-in capital as follows:
<TABLE>
<S> <C>
Exercise of stock options and stock warrants................................. $ 6,236
Payment to existing stockholders............................................. (989)
Elimination of historical additional paid-in capital......................... (20,377)
Elimination of additional paid-in capital relating to issuance of stock
options and warrants........................................................ (6,236)
Elimination of additional paid-in capital relating to the payment to existing
stockholders................................................................ 989
Recording of additional paid-in capital from the Equity Contribution......... 14,990
Recording of value attributable to the Warrants.............................. 750
--------
Total...................................................................... $ (4,637)
========
</TABLE>
(i) Reflects the elimination of historical retained earnings as a result of the
Transactions.
25
<PAGE> 32
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997
--------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net revenue.................................................. $ 76,433 $ -- $76,433
Cost of goods sold........................................... 45,603 -- 45,603
------- ------- -------
Gross profit............................................... 30,830 -- 30,830
Selling, general and administrative expenses................. 12,866 (1,433)(a) 11,433
Research and development expenses............................ 4,594 -- 4,594
Amortization expense......................................... 2,306 2,238 (b) 4,544
------- ------- -------
Operating profit........................................... 11,064 (805) 10,259
Interest expense............................................. (4,200) (4,832)(c) (9,032)
Amortization of deferred financing costs..................... -- (627)(d) (627)
Other income (expense) -- net................................ 2,263 (1967)(e) 296
------- ------- -------
Income (loss) before income taxes.......................... 9,127 (8,231) 896
Income taxes not payable in cash............................. (2,551) 1,492 (f) (1,059)
Federal income taxes, current................................ (78)(g) 113 35
------- ------- -------
Net income (loss).......................................... $ 6,498 $(6,626) $ (128)
======= ======= =======
OTHER DATA:
Ratio of earnings to fixed charges(h)........................ 3.12x -- 1.09x
Depreciation and amortization................................ $ 3,765 $ 2,238 $ 6,003
EBITDA(i).................................................... 14,829 1,433 16,262
Adjusted EBITDA(j)........................................... $ 16,808 $ 344 $17,152
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Earnings
26
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
<S> <C> <C>
(a) Reflects the elimination of certain Transaction-related professional fees and other costs
and historical Directors' Fees, offset by a new annual advisory fee payable to KECC:
Elimination of certain Transaction-related professional fees................ $ (460)
Elimination of historical Directors' Fees................................... (1,289)
Addition of a new annual KECC advisory fee.................................. 200
Reduction in net periodic post-retirement benefit cost resulting from a
purchase price accounting adjustment........................................ $ 116
--------
Total................................................................ $ (1,433)
========
(b) Reflects the elimination of historical amortization of the reorganization
value in excess of identifiable costs and the addition of amortization of
goodwill resulting from the Merger as follows:
Elimination of historical amortization of reorganization value in excess of
identifiable costs.......................................................... $ (579)
Addition of goodwill amortization (20 years straight line).................. 2,817
--------
Total................................................................ $ 2,238
========
(c) Reflects the adjustment to interest expense as follows:
Elimination of historical interest expense.................................. $ 4,200
Interest expense on the Notes(1)............................................ (9,032)
--------
Total................................................................ $ (4,832)
========
---------------
(1) Reflecting cash interest expense on $70,000 at an interest rate of 12.75% and
amortization of original issue discount relating to the value attributable to the Warrants.
(d) Reflects the amortization of capitalized costs arising from the Transactions (7 years
straight line).
(e) Reflects the adjustment to interest income as follows:
$(2,303)
Elimination of historical interest income...................................
336
Interest income on pro forma cash balance(1)................................
--------
$(1,967)
Total................................................................
========
</TABLE>
<TABLE>
<S> <C>
---------------
(1) Assuming an interest income rate of 5.0%.
(f) Reflects adjustments to the Company's income taxes not payable in cash based upon the
Company's effective income tax rate for the period presented.
(g) Reflects estimated alternative minimum taxes ("AMT") payable for the period.
(h) For purposes of this computation, earnings are defined as earnings or losses before
extraordinary items and fixed charges. Fixed charges are the sum of: (i) interest expense,
including the amortization of original issue discount relating to the value attributable to
the Warrants; (ii) amortization of deferred financing costs; and (iii) that portion of
rental expense that is the functional equivalent to interest expense.
</TABLE>
27
<PAGE> 34
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
(i) "EBITDA" means operating profit plus depreciation and amortization. EBITDA is determined
after the deduction of Directors' Fees of $1,289 for the year ended June 30, 1997. Upon the
completion of the Transactions, these fees were replaced by a post-Merger KECC advisory fee
of $200 per year. Management understands that EBITDA is an indicator customarily used by
investors to gauge a company's ability to service its interest and principal obligations.
EBITDA should not be considered in isolation from, as a substitute for or as being more
meaningful than net income, cash flows from operating, investing and financing activities,
or other income or cash flow statement data prepared in accordance with generally accepted
accounting principles, and it should not be construed as an indication of the Company's
operating performance or as a measure of liquidity. EBITDA, as presented herein, may be
calculated differently by other companies and, as such, EBITDA amounts presented herein may
not be comparable to other similarly titled measures of other companies.
(j) "Adjusted EBITDA" means EBITDA adjusted to reflect: (i) an add-back of Directors' Fees paid
during fiscal 1997, offset by a post-Merger KECC advisory fee of $200 per year; and (ii)
the add-back of an $890 one-time accrual relating to the replacement of certain components
in forced convection heaters due to an error in material specifications.
</TABLE>
28
<PAGE> 35
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following table sets forth selected historical consolidated financial
and other data of the Company for the five years ended June 30, 1997 which have
been derived from the Company's audited consolidated financial statements. The
information presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY REORGANIZED COMPANY
----------------------------------------- -------------------------------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED JUNE 30, JULY 1, 1994 JAN. 4, 1995
----------------------- THROUGH THROUGH YEAR ENDED YEAR ENDED
1993 1994 JAN. 3, 1995 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1997
--------- --------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue..................... $ 55,194 $ 51,975 $ 25,948 $27,854 $62,771 $76,433
Cost of goods sold.............. 41,879 33,329 16,576 17,036 39,024 45,603
--------- --------- --------- -------- -------- --------
Gross profit.................. 13,315 18,646 9,372 10,818 23,747 30,830
Selling, general and
administrative expenses....... 8,093 7,001 3,430 5,105 10,723 12,866
Research and development
expenses...................... 4,933 4,520 2,082 2,302 4,557 4,594
Amortization expense............ 9,276 5,434 2,512 1,203 2,407 2,306
--------- --------- --------- -------- -------- --------
Operating profit (loss)....... (8,987) 1,691 1,348 2,208 6,060 11,064
Interest expense................ (26,556) -- -- (2,077) (4,200) (4,200)
Other income (expense) -- net... (53,192) (16) 35 784 1,540 2,263
--------- --------- --------- -------- -------- --------
Income before items below..... (88,735) 1,675 1,383 915 3,400 9,127
Reorganization items(a)......... (275) (271) (1,164) -- -- (2,551)
Income taxes not payable in
cash(b)....................... 386 -- -- (445) (1,418)
Federal income taxes, current... -- -- -- -- (105) (78)
Extraordinary gain(c)........... -- -- 214,773 -- -- --
Cumulative effect on prior years
of change in method of
accounting for non-pension
post-retirement benefits...... -- -- (1,906) -- -- --
--------- --------- --------- -------- -------- --------
Net income (loss)............. $ (88,624) $ 1,404 $ 213,086 $ 470 $ 1,877 $ 6,498
========= ========= ========= ======== ======== ========
OTHER DATA:
EBITDA(d)....................... $ 2,177 $ 8,736 $ 4,625 $ 4,109 $ 9,781 $14,829
Depreciation and amortization... 11,164 7,045 3,277 1,901 3,721 3,765
Capital expenditures............ 141 484 480 680 2,152 990
Backlog......................... 18,890 21,249 31,941 25,931 38,910 30,307
Ratio of earnings to fixed
charges(e).................... -- 15.00x 5.40x 1.40x 1.80x 3.12x
Deficiency of earnings to cover
fixed charges................. $ 89,010 -- -- -- -- --
CASH FLOW PROVIDED BY (USED IN):
Operating activities............ $ 4,426 $ 8,319 $ 13,803 $(1,389) $22,521 $ 8,973
Investing activities............ (72) (468) (479) 90 (1,663) (978)
Financing activities............ -- -- (6,200) (3,797) 125 (5)
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital................. $ 21,174 $ 29,062 $ 18,649 $21,725 $27,599 $39,518
Total assets.................... 81,574 85,983 87,952 83,808 95,977 99,364
Total debt...................... 269,504 269,411 42,000 42,000 42,000 42,000
Shareholders' equity (capital
deficiency)................... (194,316) (192,912) 20,174 20,644 22,652 29,232
</TABLE>
(See footnotes on following page)
29
<PAGE> 36
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
(a) Reorganization items relate to the period in which the Company was operating
under the protection of Chapter 11 of the Bankruptcy Code.
(b) Income taxes not payable in cash represent the tax effect of certain tax
attributes existing prior to the Reorganization and are recorded as a
reduction to reorganization value in excess of amounts allocable to
identifiable assets as required by SOP 90-7.
(c) An extraordinary gain of $214,773 was recognized on January 3, 1995 because
the consideration for the discharge of pre-petition liabilities was less
than the carrying value of the recorded liabilities discharged.
(d) EBITDA for any period means operating profit plus depreciation and
amortization. EBITDA is determined after deduction of Directors' Fees of $0,
$0, $0, $203, $995 and $1,289 for the periods ended June 30, 1993, June 30,
1994, January 3, 1995, June 30, 1995, June 30, 1996 and June 30, 1997,
respectively. Upon completion of the Transactions, these fees were replaced
by a post-Merger KECC advisory fee of $200 per year. Management understands
that EBITDA is an indicator customarily used by investors to gauge a
company's ability to service its interest and principal obligations. EBITDA
should not be considered in isolation from, as a substitute for or as being
more meaningful than net income, cash flows from operating, investing and
financing activities, or other income or cash flow statement data prepared
in accordance with generally accepted accounting principles, and should not
be construed as an indication of the Company's operating performance or as a
measure of liquidity. EBITDA, as presented herein, may be calculated
differently by other companies and, as such, EBITDA amounts presented herein
may not be comparable to other similarly titled measures of other companies.
(e) For purposes of this computation, earnings are defined as earnings or loss
before extraordinary items and fixed charges. Fixed charges are the sum of
(i) interest expense; (ii) amortization of deferred financing costs; and
(iii) that portion of rental expense that is the functional equivalent to
interest expense.
30
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a market and technological leader in the design and assembly
of state-of-the-art glass bending and tempering (or strengthening) systems used
in the production of safety glass. The Company sells its systems worldwide
primarily to the Automotive Market and the Architectural Market. The Company
complements its sale of complete systems (Original Equipment) with the sale of
aftermarket products and services consisting of retrofits, tooling and
replacement parts. The Company has generated a continuing stream of aftermarket
revenue due to the long life and growing installed base of more than 375 systems
worldwide.
For fiscal year 1997, the Company generated revenue and EBITDA of $76.4
million and $14.8 million, respectively. Original Equipment revenue totaled
$50.2 million or 65.7% of the Company's total revenue, with $26.2 million or
34.3% of total revenue generated by aftermarket sales in connection with the
maintenance and enhancement of the Company's installed base of systems.
In May of 1993, the Company filed for protection under Chapter 11 largely
as a result of its inability to meet its obligations with respect to
approximately $269.5 million of indebtedness outstanding as of May 1993, $193.0
million of which was incurred in connection with a leveraged buyout in 1989. See
"Business -- History." Upon emergence from bankruptcy on January 4, 1995 with
new shareholders, a reorganized senior management team, a business strategy
focused on a more profitable product mix and cost containment and significantly
reduced debt service obligations, the Company adopted "fresh start" financial
reporting that reflected the financial impact of the Reorganization. The
Company's assets and liabilities were adjusted to reflect their estimated fair
value and the accumulated deficit as of January 3, 1995 was eliminated.
As a result of the Reorganization, the results of operations, financial
condition and cash flow of the Company for dates and periods subsequent to
January 3, 1995 are not necessarily comparable to those prior to January 4,
1995. The following table sets forth the amounts and the percentage of revenue
of certain revenue and expense items for the periods indicated. The
pre-Reorganization six-month period ended January 3, 1995 and the
post-Reorganization six-month period ended June 30, 1995 have been combined for
purposes of this discussion (dollars in millions).
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue(a):
Original Equipment................................... $33.0 61.3% $34.2 54.5% $50.2 65.7%
Aftermarket.......................................... 20.8 38.7 28.6 45.5 26.2 34.3
----- ----- ----- ----- ----- -----
Total net revenue.................................. 53.8 100.0 62.8 100.0 76.4 100.0
Cost of goods sold(a).................................. 33.6 62.5 39.0 62.1 45.6 59.7
----- ----- ----- ----- ----- -----
Gross profit........................................... 20.2 37.5 23.8 37.9 30.8 40.3
SG&A expense........................................... 8.5 15.8 10.7 17.1 12.9 16.8
R&D expense............................................ 4.4 8.2 4.6 7.3 4.6 6.0
Amortization expense................................... 3.7 6.8 2.4 3.8 2.3 3.0
----- ----- ----- ----- ----- -----
Operating profit..................................... $ 3.6 6.7% $ 6.1 9.7% $11.0 14.5%
===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
(a) Contract revenue and cost of goods sold are recognized on a percentage of
completion basis measured by the percentage of costs incurred to the
estimated total costs of each contract.
RESULTS OF OPERATIONS
Fiscal Year 1997 Compared with Fiscal Year 1996
Net revenue for fiscal 1997 increased $13.6 million, or 21.7%, to $76.4
million from $62.8 million for fiscal 1996. Original Equipment revenue increased
$16.0 million, or 46.8%, to $50.2 million for fiscal 1997 compared to $34.2
million for fiscal 1996. The increase in Original Equipment revenue was
primarily the result of increased contract signings and demand for the Company's
products, particularly automotive systems. Aftermarket revenue decreased $2.4
million, or 8.4%, to $26.2 million for fiscal 1997 from $28.6 million for
31
<PAGE> 38
fiscal 1996. The decrease in aftermarket revenue was due to a decline in
automotive retrofit tooling revenue partially offset by an increase in
replacement parts revenue.
A significant portion of the Company's revenue is generated from customers
outside of the United States. For fiscal 1997, Original Equipment revenue from
foreign customers was $37.1 million (73.9% of total Original Equipment revenue)
as compared to $24.9 million (72.8% of total Original Equipment revenue) for
fiscal 1996. The percentage of aftermarket revenue from foreign customers
decreased to 65.1% of total aftermarket revenue for fiscal 1997 compared to
66.9% for fiscal 1996.
Gross profit increased $7.0 million, after the effect of a one-time expense
of $0.9 million to replace certain components in forced convection heaters, to
$30.8 million, or a gross margin percentage of 40.3%, for fiscal 1997 compared
to $23.8 million, or a gross margin of 37.9%, for fiscal 1996. The increase in
gross profit was due to increased revenue for 1997. The increase in the gross
margin is the result of a more profitable product mix (reflecting a shift toward
increased sales to the Automotive Market) for fiscal 1997 as compared to fiscal
1996.
Selling, general and administrative expenses increased $2.2 million, or
20.6%, to $12.9 million for fiscal 1997 from $10.7 million for fiscal 1996. This
increase was primarily the result of increases in incentive compensation costs
due to increased earnings and Directors' Fees.
Research and development expenses were $4.6 million for fiscal 1997 and
fiscal 1996.
Amortization expense for fiscal 1997 was $2.3 million compared to $2.4
million for fiscal 1996.
Operating profit increased $4.9 million, or 80.3%, to $11.0 million for
fiscal 1997 from $6.1 million for fiscal 1996. Operating profit as a percentage
of revenue was 14.5% for fiscal 1997 as compared to 9.7% for fiscal 1996 due to
increased revenue and a more profitable product mix.
Interest expense for fiscal 1997 and fiscal 1996 was $4.2 million. Other
income, net, which is comprised primarily of interest income, increased $0.7
million, or 46.9%, to $2.3 million for fiscal 1997 from $1.6 million for fiscal
1996. This increase was the result of an $8.0 million, or 18.2%, increase in the
average cash balance for fiscal 1997 as compared to fiscal 1996.
Since the Reorganization, the Company's effective tax rate has been greater
than the statutory tax rate as a result of the amortization expense relating to
the Reorganization that is not deductible for income tax purposes. The Company's
effective tax rate decreased to 28.8% for fiscal 1997 compared to 44.8% for
fiscal 1996 as a result of the reduction in the valuation allowance of deferred
taxes and significantly higher pretax income, without an increase in the
nondeductible amortization expenses. Income taxes not payable in cash relate to
pre-Reorganization temporary differences, primarily related to patent
amortization, and utilization of pre-Reorganization net operating loss
carryforwards. Income taxes not payable in cash increased $1.1 million to $2.5
million for fiscal 1997 from $1.4 million for fiscal 1996 due primarily to
increased earnings in fiscal 1997. See the notes to the consolidated financial
statements included herein for a further discussion of income taxes.
Net income increased $4.6 million, after the effect of a one-time expense
of $0.9 million to replace certain components in forced convection heaters, to
$6.5 million for fiscal 1997 compared to $1.9 million for fiscal 1996. This
increase in net income was due primarily to increased operating profit.
Fiscal Year 1996 Compared with Fiscal Year 1995
Net revenue for fiscal 1996 increased $9.0 million, or 16.7%, to $62.8
million from $53.8 million for fiscal 1995. Original Equipment revenue increased
$1.2 million, or 3.7%, to $34.2 million for fiscal 1996 compared to $33.0
million for the same period in fiscal 1995. The increase in Original Equipment
revenue was primarily the result of increased contract signings and demand for
the Company's products, particularly architectural systems. Aftermarket revenue
increased $7.8 million, or 37.3%, to $28.6 million for fiscal 1996 from $20.8
million for fiscal 1995 due in part to automotive retrofits for Glasstech
systems and a strong demand for automotive aftermarket products.
32
<PAGE> 39
Original Equipment revenue from foreign customers for fiscal 1996 was $24.9
million (72.8% of total Original Equipment revenue) as compared to $23.6 million
(71.5% of total Original Equipment revenue) for fiscal 1995. The percentage of
aftermarket revenue from foreign customers increased to 66.9% of total
aftermarket revenue for fiscal 1996 compared to 51.5% for fiscal 1995.
Gross profit increased $3.6 million to $23.8 million, or a gross margin of
37.9%, for fiscal 1996 compared to $20.2 million, or a gross margin of 37.5%,
for fiscal 1995. The increase in gross profit was due to increased Original
Equipment and aftermarket revenue.
Selling, general and administrative expenses increased $2.2 million, or
25.6%, to $10.7 million for fiscal 1996 from $8.5 million in fiscal 1995. This
increase was primarily the result of increases in incentive compensation costs
and Directors' Fees, neither of which were incurred in the period from July 1,
1994 through January 3, 1995, and professional fees.
Research and development expenses increased $0.2 million, or 3.9%, to $4.6
million for fiscal 1996 from $4.4 million for fiscal 1995. This increase was
primarily the result of an increase in general development project activities.
Amortization expense decreased $1.3 million, or 35.2%, to $2.4 million for
fiscal 1996 compared to $3.7 million for fiscal 1995. The decrease in
amortization expense resulted from the fair value adjustments made to patents
and other intangibles at January 3, 1995 in conjunction with fresh start
reporting.
Operating profit increased $2.5 million, or 69.4%, to $6.1 million for
fiscal 1996 compared to $3.6 million for fiscal 1995. This increase resulted
from higher Original Equipment and aftermarket revenue and lower amortization
expenses as previously discussed.
Interest expense increased $2.1 million to $4.2 million for fiscal 1996
from $2.1 million for fiscal 1995 as a result of debt service obligations
beginning on January 3, 1995. Other income, net, which is comprised primarily of
interest income, increased $0.8 million to $1.6 million for fiscal 1996 compared
to $0.8 million for fiscal 1995. Prior to January 4, 1995, interest income of
$0.7 million was netted against certain Reorganization items.
The Company's effective tax rate increased to 44.8% for fiscal 1996
compared to 39.3% for combined fiscal 1995. Since the Reorganization, the
Company's effective tax rate has been greater than the statutory tax rate as a
result of amortization expense relating to the Reorganization that is not
deductible for income tax purposes. The lower effective tax rate in fiscal 1995
was a result of the use of net operating loss carryovers in the Reorganization
period. See the notes to the consolidated financial statements included herein
for a further discussion of income taxes.
An extraordinary gain of $214.8 million was recognized at January 3, 1995
because the consideration for the discharge of pre-petition liabilities was less
than the carrying value of the recorded liabilities discharged. Upon emerging
from bankruptcy, liabilities subject to compromise totaling $269.5 million were
discharged for 100% of the Company's common stock, $12.6 million in cash and
$42.0 million of new senior debt.
Net income for fiscal 1996 was $1.9 million compared to $213.6 million for
fiscal 1995. Net income for fiscal 1995 included an extraordinary gain of $214.8
million related to the discharge of pre-petition liabilities, an expense of $1.9
million related to the cumulative effect on prior years of a change in the
Company's method of accounting for non-pension post-retirement benefits and
expenses related to the Reorganization of $1.2 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is from funds provided by
operations. Upon consummation of the Transactions, the Company had long-term
principal amount of indebtedness of $70.0 million in the form of the Notes and
cash of $6.7 million. The Notes do not require any principal payments prior to
maturity. Also, in connection with the Transactions, the Company established a
$10.0 million Revolving Credit Facility which will be used primarily to fund
working capital requirements and secure the issuance of standby letters of
credit, which were $1.5 million at June 30, 1997.
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The Company's working capital balance was $27.6 million at June 30, 1996
and $39.5 million at June 30, 1997. The $11.9 million increase in working
capital from June 30, 1996 to June 30, 1997 resulted from an increase in cash
generated by new system orders. In most instances, progress payments on new
system orders are received or invoiced in advance of revenue recognition. When
progress payments are received or invoiced in advance of such revenue
recognition, the Company increases current liabilities represented by its
billings in excess of costs and estimated earnings on uncompleted contracts.
When the revenue is earned, the Company recognizes the revenue and reduces the
billings in excess of costs and estimated earnings on uncompleted contracts
balance. The Company's working capital, primarily cash, was significantly
reduced upon consummation of the Transactions. On a pro forma basis at June 30,
1997, the Company would have had working capital deficiency of $2.0 million,
which includes $10.7 million of billings in excess of costs and estimated
earnings on uncompleted contracts.
Net cash provided by operating activities can vary significantly from
quarter to quarter or year to year due to the number of new system signings and
the amount and timing of new system payments. In particular, due to the timing
of receipt of cash progress payments, net cash provided by operating activities
for fiscal 1997 was $9.0 million, whereas for fiscal 1996, net cash provided by
operating activities was $22.5 million. The increased level of net cash provided
by operating activities for fiscal 1996 was principally the result of a
significant number of new system orders in the fourth quarter of fiscal 1996.
Net cash provided by operating activities in the fourth quarter of fiscal 1996
was $11.5 million.
Capital expenditures, including investment in prototype fixed assets, were
$1.0 million for fiscal 1997 and $2.2 million for fiscal 1996. Future capital
expenditures, excluding prototype assets, will be used to fund the replacement
or improvement of operating equipment and facilities at levels approximating
$1.5 million per year. In addition, the Company may need to make periodic
investments in prototype fixed assets to be used for customer demonstrations and
research and development purposes. Existing prototype fixed assets which outlive
their usefulness for customer demonstrations or research and development
purposes, or both, may be refurbished and sold.
As of June 30, 1997, the Company had net operating loss ("NOL")
carryforwards for regular and alternative minimum tax purposes of approximately
$21.0 million and $17.0 million, respectively, which expire in the years 2009
through 2011. As a result of the change of control effected pursuant to the
Merger, future years will be subject to an annual usage limitation.
Management believes that internally generated funds, together with amounts
available under the Revolving Credit Facility, will be sufficient to satisfy the
Company's operating cash requirements and make scheduled interest and principal
payments under the Revolving Credit Facility and scheduled interest payments on
the Notes. However, the ability of the Company to satisfy its obligations will
be primarily dependent upon its future financial and operating performance and
upon its ability to renew or refinance borrowings or to raise additional equity
capital if necessary. The Company's business is subject to fluctuations due to
changes in the world markets for the end products produced by its equipment
(largely in the cyclical markets of automobiles and construction), currency
fluctuations, geopolitical events and other macroeconomic forces largely beyond
the ability of the Company to predict or control. Management is not currently
aware of any trends, demands, commitments or uncertainties which will or are
reasonably likely to result in a material change in the Company's liquidity.
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BUSINESS
OVERVIEW
The Company is a market and technological leader in the design and assembly
of state-of-the-art glass bending and tempering (i.e., strengthening) systems
used by glass manufacturers and processors in the conversion of flat glass into
safety glass. The Company sells its systems worldwide, primarily to the
Automotive Market and the Architectural Market. The Company's systems are
designed to meet customers' safety glass production requirements for complexity,
accuracy and optical quality while simultaneously enhancing system productivity,
flexibility and cost efficiency. For the Automotive Market, the Company has
developed bending and tempering systems that meet automobile manufacturers'
safety glass specifications for current and future production models. Management
believes that the Company has a leading share of and is the only significant
independent supplier in the market for technologically advanced systems used to
bend and temper automotive glass into complex shapes. For the Architectural
Market, the Company's energy-efficient processing systems are capable of
producing high-quality bent or flat glass at output rates tailored to meet
customer-specific production requirements. As a result of the long useful life
and growing worldwide installed base of its systems, the Company is able to
complement its sale of Original Equipment with the sale of aftermarket products
and services consisting of retrofits, tooling (i.e., molds used to shape
automotive glass) and replacement parts. The Company's products feature
proprietary technologies that have been developed over the last 25 years and are
protected by more than 700 patents and patent application filings worldwide.
For the fiscal year ended June 30, 1997, the Company generated revenue and
Adjusted EBITDA of $76.4 million and $16.8 million, respectively. Original
Equipment revenue totaled $50.2 million, or 65.7%, of the Company's total
revenue for the same period. The balance of the Company's revenue was generated
through aftermarket sales including retrofits, tooling and replacement part
sales intended to maintain or enhance the Company's installed base of systems.
A Glasstech system performs a series of processes that bend and strengthen
flat glass in the production of safety glass products such as car windows. In
each system, flat glass supplied by glass manufacturers is conveyed horizontally
on ceramic rollers through a high temperature furnace, a bending module and a
quench module (which completes the tempering process by rapidly cooling the
heated glass). Microprocessor-based controls regulate temperature, speed and
glass location throughout the entire process. In addition, the Company develops
its own proprietary software to control the integrated system. The modular
design of a Glasstech system readily enables the Company to offer customized
systems that meet specific technical requirements of its customers. Such a
design also creates equipment retrofit and upgrade opportunities for the
Company. The Company works closely with its customers as they identify capacity
and functionality requirements for a new system and then throughout the usual
ten to twelve month order, installation and acceptance cycle to ensure
satisfaction with their completed system. Systems designed for the Automotive
Market, which are used to form and temper glass for automotive back, side and
roof windows, as well as to form and anneal glass used for windshields, range in
price from approximately $2.5 million to $7.0 million. Systems designed for the
Architectural Market process curved and flat tempered glass which are used for
skylights, insulating glass, patio doors, furniture and appliances. These
systems range in price from approximately $0.5 million to $3.0 million.
The Company has an installed base of more than 375 systems located in over
40 countries on six continents. Sales in the United States, Europe and
Asia-Pacific represented 29.1%, 6.6% and 51.5%, respectively, of the Company's
total sales in fiscal 1997. The Company's customers include virtually all major
glass manufacturers and processors including: Chrysler Corporation, Ford Motor
Company, Guardian Industries Corp. and PPG Industries, Inc. in the United
States; Compagnie de Saint-Gobain and Pilkington plc in Europe; Asahi Glass
Company, Central Glass Company and Nippon Sheet Glass Company in Japan; Hankuk
Glass Industry Company and Keumkang Ltd. in Korea; and Shatterprufe (Pty)
Limited in South Africa. Management believes that the Company's future growth in
the Automotive Market will be driven by customer demand for more advanced safety
glass bending capabilities, the sale of systems that will supply new automobile
factories under construction worldwide and the opportunity to sell systems to
glass manufacturers and processors who desire to "outsource" (i.e., purchase
glass processing systems rather than develop them
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internally). Management further believes that future sales in the Architectural
Market will be derived, in part, from the adoption of stringent building codes
worldwide that mandate the use of tempered glass and the increased use of coated
glass for products such as energy-efficient windows.
HISTORY
The Company was founded in 1971 to manufacture flat glass tempering systems
for the Architectural Market. Building on its success in that market, in 1977
the Company delivered its first bending and tempering system used to produce
simple glass shapes for the Automotive Market. Through continued product
development programs and technological enhancements, the Company manufactured
its first bending and tempering system for complex glass shapes for the
Automotive Market in 1985. This system enables the Company's customers to bend
and form glass while it is still inside the furnace, which results in enhanced
quality, higher yields (i.e., reduced breakage and fewer defects) and more
precision in the final shape of the safety glass product.
In 1988, the Company was purchased in a leveraged buyout for $89.1 million.
The change in automotive styling to more aerodynamic designs (which require more
complex glass shapes), led by the introduction of the Ford Taurus, provided the
impetus for the Company's growth in the late 1980s, which culminated with the
Company generating revenue and EBITDA of $93.5 million and $30.9 million,
respectively, in fiscal 1989. Based upon these historically high operating
results, the Company was purchased for $242.6 million in a leveraged buyout in
1989.
In fiscal 1990, the Company achieved comparable results to 1989. However,
beginning in fiscal 1991, the Company's operating results declined significantly
due to several factors including: (i) the completion of the significant increase
in system orders driven by the introduction of the Taurus by Ford Motor Company
(i.e., automotive glass processors required more complex shapes used in the
ensuing aerodynamic styling trend led by the Ford Taurus); and (ii) other
external factors such as (a) a worldwide economic recession, (b) market
interruptions due to geopolitical events such as the fall of communist
governments in Russia and Eastern Europe, and (c) the war in the Persian Gulf.
As a result of the confluence of these industry and external factors, the
Company's EBITDA declined to $5.5 million in fiscal 1991, leading to the
Company's inability to meet its significant debt service obligations on the
$269.5 million of indebtedness outstanding as of May 1993, $193.0 million of
which was incurred in connection with the 1989 leveraged buyout. In fiscal 1992,
the Company's EBITDA further declined to $1.7 million as the continuing effects
of these industry and external factors required management to focus on the
restructuring of its debt obligations rather than on the daily operation of its
business.
In December 1992, the Company reorganized its senior management, with Mark
Christman assuming the position of President. In May 1993, the Company filed for
protection under Chapter 11 of the Federal Bankruptcy Code. While under the
protection of Chapter 11, the new management team refocused its business
strategy by, among other things, focusing on the sale of a more profitable
product mix and on the containment of costs. As a result of these efforts, a
reorganization of its senior management and a reorganization of the Company's
debt under a bankruptcy plan of reorganization, the Company emerged from Chapter
11 in January 1995 (the "Reorganization"). Upon consummation of the
Reorganization, the Company's debt holders converted their debt obligations into
100% of the Company's equity, $42.0 million of 10% Senior Notes and the right to
receive certain cash payments. The Company's stockholders have agreed to sell
their interests in the Company to Holding pursuant to the terms of the Merger
Agreement. See "The Transactions."
Throughout the early 1990s, the Company continued to introduce new Original
Equipment systems, enabling it to maintain its strong market positions in the
Automotive Market and the Architectural Market. The Company's significant
product introductions include a bending system used to form curved architectural
glass (fiscal 1990), a tight radius cylindrical bending system for furniture and
display case applications (fiscal 1992), a constant radius bending system for
automotive side and roof windows (fiscal 1994), an automotive windshield bending
and annealing system (fiscal 1995) and a forced convection heating system
intended for more energy-efficient glass production (fiscal 1996). See
"Business -- Products."
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Management believes that the Company's competitive advantage in the
production of high-quality glass bending and tempering systems, as well as its
market leadership, is the result of its: (i) development of patented,
state-of-the-art, cost-efficient technology; (ii) installed base of more than
375 systems in over 40 countries; (iii) experienced technical staff, which works
closely with customers in the development and design of new systems; (iv)
longstanding relationships (often of 20 years or more) with its major automotive
and architectural customers; (v) knowledgeable sales force, many of whom have
technical degrees; and (vi) ability to develop new products within reasonably
short lead times. In addition, the Company believes that its management team,
which has an average of more than 20 years of experience in the glass industry,
continues to be instrumental in further strengthening the Company's leading
market and technological position.
The Company's executive offices are located at Ampoint Industrial Park, 995
Fourth Street, Perrysburg, Ohio 43551. Its telephone number is (419) 661-9500.
BUSINESS AND OPERATING STRATEGY
The Company's strategy is to strengthen its leadership position as a
provider of technologically advanced and cost-efficient glass bending and
tempering systems by: (i) capitalizing on current trends in the Automotive
Market; (ii) leveraging its long-term relationships with major customers; (iii)
offering customers a market-driven product development effort; (iv) maintaining
its position as a high-quality, low-cost manufacturer; (v) providing extensive
aftermarket products and services; and (vi) continuing to capitalize on
international growth opportunities.
- Capitalizing on Current Trends in the Automotive Market. Management
believes that the Company is well positioned to capitalize on current
trends in the Automotive Market including: (i) customer demand for
improved productivity from its safety glass processing equipment; (ii)
the emergence of advanced automotive designs which feature complex-shaped
glass in vehicle windows and an increase in the average glass content per
vehicle; (iii) customer demand for greater optical quality in safety
glass products; (iv) shorter lead times for each car design modification
or new model introduction; and (v) the replacement of older bending
systems initially installed by the Company's competitors or developed
in-house by its customers.
- Leveraging Long-Term Relationships with Major Customers. Management
believes that the Company's strong relationships with major glass
manufacturers and processors have developed in large part due to the
following factors: (i) the continuity of the Company's customer
relationships, many of which have existed since the Company's inception;
(ii) the Company's awareness of and involvement in its customers' capital
budgeting and planning processes; and (iii) the Company's commitment to
provide the ongoing technical service required to properly maintain a
Glasstech system. Based upon its strong relationships, the Company is
better able to predict future demand for its systems and aftermarket
products, as well as to proactively design and implement creative
solutions to meet its customers' evolving safety glass requirements.
- Offering Customers a Market-Driven Product Development Effort. The
Company's technological leadership is a result of its commitment to R&D.
The objective of the Company's R&D effort is to develop new products and
to improve existing products to meet present and future market demands.
The Company has spent an average of $4.5 million annually on R&D in
fiscal years 1995 through 1997 and has 47 employees (17% of total
employees) in its R&D department. Recent product introductions and
improvements include bending and tempering systems that provide tighter
part tolerances, higher output capability, shorter tooling changeover
periods, faster cycle times, improved optical quality, greater depth of
bend and an ability to produce shapes with greater complexity. In
addition, the Company is developing modeling software which is intended
to enable both automotive designers and glass processors to analyze the
shape and optical quality of various safety glass configurations without
actually constructing costly prototypes.
- Maintaining Position as a High-Quality, Low-Cost Manufacturer. The
Company is dedicated to producing high-quality, cost-efficient systems
that minimize its customers' safety glass production costs. As an example
of its commitment to quality, the Company recently received its ISO-9001
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certification, which is an internationally recognized quality standards
certification. By continually striving to reduce its customers' cost of
producing safety glass, the Company increases its opportunities to sell
its systems to those glass manufacturers and processors that might
otherwise develop such systems in-house. To improve its own operating
results, the Company has significantly reduced its operating costs by:
(i) improving its production process by modularizing and standardizing
product engineering; (ii) using advanced computer-aided design systems;
and (iii) improving employee training programs. The Company's success in
developing new high-quality, cost-efficient systems and in implementing
cost reductions internally has contributed to an increase in Adjusted
EBITDA from approximately $8.7 million in fiscal 1995 to $16.8 million in
fiscal 1997. During the same period, Adjusted EBITDA margins have
improved from 16.2% to 22.0%.
- Providing Extensive Aftermarket Products and Services. The Company's
aftermarket products and services, which include retrofits, automotive
tooling, replacement parts and customer service programs, provide an
ongoing source of revenue and cash flow that complement the Company's
sale of Original Equipment. Retrofits consist of extensions, upgrades and
improvements to existing systems, while replacement parts consist of both
proprietary and nonproprietary components. Aftermarket revenue was $26.2
million for fiscal 1997, or approximately 34.3% of the Company's total
revenue. Management believes that aftermarket sales will remain a
significant component of the Company's revenue as the Company's installed
base of systems continues to expand.
- Continuing to Capitalize on International Growth Opportunities. The
Company's service organization continuously interacts with customers in
more than 40 countries. Sales to the United States, Europe and
Asia-Pacific represented 29.1%, 6.6% and 51.5%, respectively, of the
Company's total fiscal 1997 sales. The Company's geographically diverse
customer base positions it to capitalize on the increasing globalization
and development of markets in areas such as Asia-Pacific (including
China), Eastern Europe and Russia. Such diversification also mitigates
the impact of regional economic downturns and a reliance on any one
market. Management believes that the Company will continue to sell new
systems to its existing customers in both established and developing
markets.
THE MARKET FOR SAFETY GLASS PRODUCTS
In the United States, automobile manufacturers purchase most of their
safety glass products from independent glass manufacturers and processors,
except for Ford Motor Company and Chrysler Corporation, each of which produces a
portion of its safety glass requirements in-house. In Europe and Asia-Pacific,
the majority of automobile glass manufacturers purchase safety glass products
from independent manufacturers and processors. Most of the major glass
manufacturers and processors are customers of the Company.
Automotive safety glass products are formed into either simple or complex
shapes. Simple glass, which is relatively flat and has little curvature, is
required to conform to exacting physical dimensions and fracture requirements.
Significant bending technology is not required to process this type of glass.
Unlike simple glass, complex glass has a high degree of curvature, or "bulge."
The more curvature that a piece of glass has, the more likely it is to develop
optical distortions unless it is produced to precise specifications. For this
reason, it is important that the bending of complex glass be done in a manner
that produces consistent, repeatable results subject to minimal process
variation.
In the Automotive Market, the majority of side, back and roof windows
consist of a single piece of tempered glass. The majority of windshields are of
laminated construction, which requires the insertion of a plastic layer between
two pieces of safety glass. The most common architectural glazing product
worldwide is flat tempered glass which is made either with single-glazed or
double-glazed (sealed unit) construction. Such glass is used for commercial or
domestic building windows, patio doors, shower enclosures, display cases,
furniture glass and appliance glass. Flat laminated glass is less frequently
used for such products.
THE SAFETY GLASS PRODUCTION PROCESS
The Company's systems process flat glass produced by glass manufacturers
into safety glass. The Company designs and assembles Original Equipment systems
that bend and temper automotive glass
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primarily for side, back and roof windows and for commercial and domestic
architectural applications. The Company also designs and assembles systems that
anneal (rather than temper) glass for use in the production of laminated glass
for products such as automotive windshields. The basic fabrication process
involves placing a piece of glass horizontally on a conveyor of ceramic rollers
which transfers the glass through a furnace where it is heated to the desired
temperature. If the glass then requires bending, it generally will be bent into
either a simple or complex shape. The glass is then moved into the quench where,
depending upon the desired end-product, it is either tempered or annealed.
Heating Process. Traditionally, all Glasstech systems heated glass with
electric radiant heat ("ERH"). Recently, the Company has introduced gas-fired
forced convection heat ("FCH") as an alternative. FCH was developed in
conjunction with the Gas Research Institute. FCH is currently available in a
flat glass tempering system for sale to the Architectural Market and is expected
to be available in a system for sale to the Automotive Market by the end of
1997. FCH offers customers significant advantages over ERH technology. For
example, FCH can be more cost-effective than ERH, because gas often is less
expensive than electricity. In addition, FCH can heat glass with special
coatings faster and more uniformly than ERH, resulting in lower production
costs, faster outputs and higher quality glass. In spite of FCH's significant
advantages, not all product applications justify the additional capital expense
of an FCH furnace. Accordingly, the Company expects to continue to offer systems
with ERH. See "-- Patents and Proprietary Rights" and "-- Product Development."
Bending Process. Glasstech systems generally bend glass into simple and
complex shapes through one of three techniques. The gravity-sag technique
creates simple shapes by placing a piece of glass on a ring mold, heating it to
its softening point and allowing the shape to form via gravity. The deep bending
technique creates complex shapes by placing the glass on a ring mold, heating it
and pressing the heated glass against a full surface area mold. The cylindrical
bending technique creates simple shapes with a single curve by placing the glass
on rollers, heating it and using a set of flexible rollers to curve the glass.
Tempering Process. Tempering is the process of strengthening heated glass
by cooling it rapidly. Tempered glass is up to five times stronger than
untempered glass and, if broken, fractures into small pieces, reducing the risk
of injury. Conversely, untempered glass will splinter and produce sharp edges.
The process the Company uses to temper safety glass is called "quenching" which
involves moving the heated glass into the quench where, through a
computer-controlled process, it is cooled with air directed on the surfaces of
the glass by an array of nozzles that diffuse air from a large blower or fan.
Glass tempered by a Glasstech system meets international fracture standards.
Annealing Process. The annealing process is a preparatory step in the
process of producing laminated glass, which is used to form most vehicle
windshields. The annealing process is similar to the tempering process, except
that instead of cooling the glass rapidly, it is cooled slowly to produce a
relatively weaker safety glass product. Annealed glass breaks more easily upon
impact and, unlike tempered glass, splinters when broken. To complete the
lamination process, glass processors and fabricators layer two pieces of
annealed glass, which can be produced by one of the Company's Original Equipment
systems, around a piece of plastic such that the annealed glass adheres to the
plastic when broken. A laminated glass product breaks relatively easily into a
spiderweb-like pattern without permitting the object creating the impact to
break through the glass, and any glass particles remain adhered to the plastic
layer, thereby reducing the risk of injury to the vehicle's occupants.
PRODUCTS
Original Equipment -- Automotive. Systems designed and assembled for the
Automotive Market process flat glass by bending and tempering it to produce
automotive side, back and roof windows and by bending and annealing flat glass
in the production of laminated glass for windshields. These systems range in
price from $2.5 million to $7.0 million. The Company sells four basic systems,
which are primarily differentiated by their bending techniques, to automotive
glass manufacturers and processors.
- Quick-Sag System. Introduced in the late 1970s, the Company's quick-sag
system (the "Quick-Sag System") bends and tempers glass for side, back
and roof automotive windows. Using the gravity-sag
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technique, the Quick-Sag System produces high-optical-quality glass in
simple shapes. Although this is the Company's oldest system, demand for
it continues in markets such as China, South America and other developing
markets. Such a system may be retrofitted to provide higher output deep
bending or cylindrical bending capabilities if required by the Company's
customers.
- Deep Bending System. The Company's deep bending system (the "Deep Bending
System") was first introduced in 1985 in response to customers' demands
for more complex safety glass shapes that could not be produced by the
gravity-sag technique used in the Quick-Sag System. By using the deep-
bending technique, such systems shape glass with enhanced optical quality
to precise tolerances with deep and complex bends for automotive side and
back windows. Deep Bending Systems are currently available with ERH and
will soon be available with FCH heating technology. To form different
shapes of complex safety glass, the Deep Bending System requires
different sets of tooling, which the Company offers as part of its
aftermarket business.
- Cylindrical Bending System. Introduced in fiscal 1994 to produce
accurate, simple cylindrical bends using flexible rollers (rather than
tooling), the cylindrical bending system (the "Cylindrical Bending
System") produces side and roof vehicle windows that require a simple
cylindrical bend. Prior to the introduction of this system, it generally
was not cost-effective for the Company to offer a system that produced
glass with a simple cylindrical bend because the Company was unable to
compete favorably against equipment designed in-house by the Company's
customers. With the introduction of the Cylindrical Bending System,
however, the Company now offers customers the ability to make faster
changeovers by eliminating the tooling requirements typical of its other
bending systems. This feature reduces the customers' production costs and
maximizes their system performance.
- In-line System. Unlike the movement of glass in a Quick-Sag System or a
Deep Bending System, in which glass exits from the side of the bending
module, the glass in an in-line system (the "In-line System") travels in
a straight line throughout the entire process. An In-line System is
capable of producing higher quality glass at faster output rates and at
lower costs per piece of glass than a side-exit system. The first
generation of the In-line System was introduced in 1985. The most recent
generation of the In-line System was introduced in fiscal 1995 to produce
simple and complex bends for automotive side, rear and roof windows,
generally by using a more advanced deep bending technique. The Company
recently introduced a new version of the In-line System that has been
designed to produce complex-shaped glass for automotive windshields and
back windows.
Original Equipment -- Architectural. Systems designed and assembled for the
Architectural Market process flat glass by tempering or by bending and tempering
it for applications including residential and commercial construction,
furniture, display cases, shower enclosures and appliances. Such systems range
in price from $0.5 million to $3.0 million.
- Flat Glass Tempering Systems. The Company's initial generation of flat
glass tempering for architectural applications was introduced in 1971.
Current systems can be equipped with either ERH or FCH heating
technology. A system with FCH is more expensive initially than one with
ERH, but offers significant energy cost savings and output advantages,
particularly for reflective or low-emissivity glass.
- Bending and Tempering Systems. Initially introduced in 1990 in response
to the demand for curved glass from the Architectural Market, these
systems are designed to shape glass of varying thicknesses into
custom-specified curves. Shape is controlled by computer, eliminating the
need for extensive tooling.
Original Equipment -- Other. In 1992, the Company formed Stir-Melter, Inc.
("Stir-Melter"), a wholly-owned subsidiary that designs and assembles a
glass-melting system that vitrifies (i.e., changes into a glass-like substance
by fusion due to heat) hazardous waste for safe disposal. Stir-Melter's systems
are rapid glass melters that employ aggressive mechanical stirring action in
combination with direct electrical heating. Since its inception, Stir-Melter has
incurred certain expenses in connection with, among other things, the Company's
effort to procure patents covering certain Stir-Melter technology.
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Aftermarket Business. Aftermarket products and services complement the
Company's Original Equipment business. Sales in this area consist of the
following items: (i) retrofits (extensions or improvements of current systems);
(ii) tooling (complete sets of bending and tempering equipment designed to
produce specific complex-shaped glass products); (iii) ceramic rollers (used to
convey glass through the furnace); (iv) replacement parts for all the individual
system components; and (v) technical services.
- Retrofits. Retrofits are purchased by customers who want to increase
production capacity, extend bending capability, increase system
efficiency or take advantage of the latest computer and control system
developments. Typical retrofits and improvements include: (i) extensions
of heater length to increase capacity; (ii) conversions from automotive
simple bending systems to complex bending systems, such as from a
Quick-Sag System to a Deep Bending System; (iii) quench upgrades; (iv)
conversion of a single-function system to a dual-function system, such as
adding a Cylindrical Bending System to a Quick-Sag System; and (v)
computer or control upgrades.
- Tooling. The Company's customers in the Automotive Market operate complex
bending and tempering systems that require part-dedicated tooling
equipment to produce individual vehicle window parts that meet precise
design and shape specifications. The Company's tooling products generally
include: (i) bending molds; (ii) bending rings (to press the glass to the
mold); (iii) lift jets (to raise the glass from the conveyor to the
mold); (iv) quench rings (to transport the glass from the mold to the
quench); and (v) quenching heads (which incorporate nozzles and direct
air against the glass surface).
- Ceramic Rollers. The Company's roller hearth technology was introduced to
eliminate the marks left on glass by older vertical systems that tempered
flat glass by hanging it from tongs. The ceramic rollers are used to
convey the glass horizontally into and through the furnace and are
manufactured to strict specifications in order to reduce distortion or
markings on the glass surface.
- Replacement Parts. Both proprietary and nonproprietary parts are offered
to replace components used in Glasstech systems. Customers are encouraged
to purchase an initial consignment of replacement parts when purchasing a
new system and to maintain critical parts in inventory throughout the
life of their system.
- Technical Services. The Company's technical services department provides
it with an important competitive advantage. The customer service staff,
which consists of 28 full-time employees, provides aftermarket technical
support and gathers feedback from customers regarding specific product
improvement recommendations for Glasstech systems. The Company expects to
launch a pilot program in 1997 to offer additional customer service
through longer-term customer service contracts.
PRODUCT DEVELOPMENT
The Company's R&D effort is a significant factor in maintaining its market
and technological leadership. The objective of the Company's R&D effort is to
develop new products and to improve existing products to meet present and future
market demands. The Company works closely with its customers to identify their
current and future needs, enabling it to proactively design creative solutions
to meet future industry requirements. Development proposals are submitted to the
Company's Executive Technical Committee to be analyzed and assessed. Proposals
are authorized only when the committee is satisfied that the proposal meets
customer or market needs and the proposed program can be conducted
cost-effectively with a reasonable probability of achieving the desired level of
profitability.
The Company has spent approximately $4.4 million, $4.6 million and $4.6
million (exclusive of expenditures relating to prototypes) in fiscal years 1995,
1996 and 1997, respectively, on the development of new systems or on the
improvement of existing systems. 47 employees (or 17% of total employees) work
in the R&D department.
As a result of its recent R&D efforts, the Company expects to introduce two
improvements to its Deep Bending System in 1997. Both improvements are currently
in prototype production. The first improvement is expected to provide a
four-fold reduction in the tooling changeover time for a Deep Bending System.
The second improvement is the introduction of FCH heating technology to a Deep
Bending System for sale to the
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<PAGE> 48
Automotive Market. In addition, the Company is developing modeling software that
is intended to enable both automotive designers and glass manufacturers and
processors to analyze the shape and optical precision of various glass
configurations without the need to develop costly prototypes.
MARKETING AND SALES
The Company's sales efforts are conducted by well-qualified and experienced
personnel operating in the Americas, Europe (including Africa and the Middle
East) and Asia-Pacific. The Company's international sales efforts are
supplemented by nonexclusive sales agents retained on a commission basis.
Commission is paid only when sales are confirmed and payments have been received
from the customer. The Company's sales efforts in Europe are supported by
Glasstech Ltd., a wholly-owned subsidiary of the Company.
The Company has installed more than 375 systems in 40 countries on six
continents. The Company's customers include virtually all major glass
manufacturers and processors, such as Chrysler Corporation, Ford Motor Company,
Guardian Industries Corp. and PPG Industries, Inc. in the United States;
Compagnie de Saint-Gobain and Pilkington plc in Europe; Asahi Glass Company,
Central Glass Company and Nippon Sheet Glass Company in Japan; Hankuk Glass
Industry Company and Keumkang Ltd. in Korea; and Shatterprufe (Pty) Limited in
South Africa.
As part of its marketing process, the Company maintains close customer
relationships that enable management to understand its customers' needs for
existing and new product capabilities. Due to the size of a Glasstech system,
from both a physical and economic perspective, a significant commitment with
respect to planning is required on the part of the Company's customers before
they order new equipment and subsequently place it into operation. As part of
this planning process, the customer involves the Company in discussions that can
last up to one or two years before an order is actually placed. At any point in
time, the Company and its customers are involved in numerous discussions that
occur between their respective management teams, technical staffs and
sales/purchasing staffs.
The customer service staff, which consists of 28 full-time employees,
provides aftermarket technical support and gathers information from customers
regarding specific product improvement recommendations for Glasstech systems.
Customer service representatives are also available to the Company's customers
as consultants on a per diem basis. The Company's technical representatives
train the customer's workforce to properly operate its Glasstech system and
consult on specific technical issues or production goals. The Company's customer
service department has a program which provides customers with 24-hour
troubleshooting services via telephone. In-house computers enable the Company to
simulate system problems that a customer might experience and provide the
customer with prompt solutions.
An installation of a Glasstech system typically requires ten to twelve
months from the time the customer executes a contract to final acceptance of the
system. Following the execution of a contract, a project manager coordinates all
technical details with customer personnel before any parts are ordered from the
Company's suppliers. Design, delivery of parts and assembly generally takes the
Company four to six months, with shipment normally occurring five to seven
months after the initial signing of the contract. Shipment to the customer can
take up to one month, depending upon the destination. Installation time at the
customer's location varies according to system type, but generally requires
between one and two months from the simplest to the most complex systems.
Following installation, the system must meet certain predetermined performance
tests before the customer accepts the system. Depending on the system's
complexity and customer cooperation, these tests typically take two to eight
weeks.
Completion of aftermarket sales vary with each product. A typical retrofit
order, for example, takes between six and ten months to complete. A typical
tooling order requires three to four months to complete, while orders for
replacement parts and ceramic rollers typically range from six to ten weeks to
complete. Customer service calls, on the other hand, are typically completed in
24 to 48 hours.
A substantial portion of the Company's revenue historically has been
comprised of sales to a limited number of customers. For example, in fiscal
years 1995, 1996 and 1997, Asahi Glass Company, Chrysler Corporation, Nippon
Sheet Glass Company and Pilkington plc collectively accounted for 40.5%, 40.8%
and
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<PAGE> 49
50.6 % of total revenue, respectively. In addition, (i) in fiscal 1995, Asahi
Glass Company and Pilkington plc each accounted for more than 10.0% of revenue;
(ii) in fiscal 1996, Pilkington plc accounted for more than 10.0% of revenue;
and (iii) in fiscal 1997, Asahi Glass Company, Chrysler Corporation, Nippon
Sheet Glass Company and Pilkington plc accounted for more than 10.0% of revenue.
The Company also generates a substantial portion of its revenue outside of the
United States. See Note 9 to the Company's consolidated financial statements
included herein.
COMPETITION
The Company's primary competition in the Automotive Market comes from
either (i) the engineering departments of certain of its customers, such as
Pilkington plc and Compagnie de Saint-Gobain, which design and build glass
processing systems in-house or (ii) glass manufacturers which process safety
glass and sell it to automobile manufacturers, such as Chrysler Corporation and
Ford Motor Company, which elect to purchase processed safety glass rather than
install their own Glasstech system. In either case, the Company primarily
competes against its customers by developing systems with greater capabilities
than those currently produced in-house. Current trends in the automobile
industry are expected to provide the Company with the opportunity to further
differentiate the capabilities of its new systems from those developed by
in-house engineering departments.
In the Architectural Market, there is significant competition among
manufacturers of flat glass tempering systems, but less significant competition
for bending and tempering systems. The Company's principal competitor in the
Architectural Market is Tamglass Oy of Finland, which mainly competes against
the Company in the market for flat glass tempering systems. Although management
believes that the Company is well positioned in the flat glass tempering market,
it focuses most of its marketing effort on the bent glass tempering market,
which is generally comprised of customers that place a premium on the
capabilities, quality and service provided by the Company rather than the price
of the system.
PATENTS AND PROPRIETARY RIGHTS
The Company protects its technology by filing patents and patent
applications in the U.S. and in major markets worldwide. It is the Company's
policy to aggressively pursue patent coverage for any significant product
developments and, where appropriate, multiple patent coverage both in the U.S.
and other countries (which primarily extends the patent protection acquired in
the U.S. to critical foreign markets). The Company holds over 100 patents in the
U.S. and more than 350 patents outside the United States. In addition, the
Company has more than 250 patent application filings worldwide. Typically,
within each Glasstech system, numerous patents cover various controls, bending
processes or general aspects of the equipment. While management does not believe
that the loss of any one patent would have a material adverse effect on the
Company's business, it believes the Company's aggregate patent position provides
it with an important competitive advantage.
The Company's patents cover a range of products and product features,
including: (i) the Quick-Sag System; (ii) the Company's complex in-furnace
bending process (used in both Deep Bending and In-line Systems); (iii) the
Cylindrical Bending System; (iv) quenching systems; (v) process controls for
systems; and (vi) general aspects of its technologies and equipment. As patents
on some of the Company's older technologies, such as the Quick-Sag System, begin
to expire, the Company continually applies for and is generally issued patents
relating to its newer, leading edge technologies. These newer patents will
generally remain in effect for more than 15 years.
The Company received funding from GRI for the development of the FCH
technology. Under an agreement with GRI, GRI retained rights to the resulting
U.S. patents. Under the GRI agreement, the Company received two exclusive patent
licenses in the U.S. One license permits the Company to use FCH technology in
systems that produce flat tempered glass (the "Flat License") and the other
license permits the Company to use FCH technology in systems that produce bent
glass (the "Bent License"). The exclusivity with respect to the Flat License and
Bent License expires in 2000 and 2002, respectively. Subject to certain
obligations to exploit FCH technology with respect to the Bent License, the
Company will continue to hold
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<PAGE> 50
nonexclusive licenses for FCH technology for the duration of the underlying
patents. Under the terms of the GRI agreement, the Company holds the exclusive
rights to the FCH patents outside of the U.S.
Although the Company is not currently subject to any patent or proprietary
rights infringement litigation, management believes that one of its customers
may be infringing on certain U.S. and foreign counterpart patents relating to
its Quick-Sag System and Deep Bending System technologies. In addition, one of
the Company's European architectural patents relating to quenching apparatus for
roller conveyed glass sheets has been opposed by two of the Company's
competitors. This opposition is proceeding in the European Patent Office and may
result in a change of scope, or loss, or the claims granted under this patent in
Europe.
Substantially all Company employees execute technology agreements that have
a confidentiality provision and assign patent rights to the Company. Upon
consummation of the Transactions, members of senior management will enter into
employment agreements that contain noncompete provisions. See
"Management -- Employment Agreements and Arrangements."
MATERIALS AND SUPPLY ARRANGEMENTS
The Company has reached agreement with many of its suppliers, including its
ten largest suppliers, which guarantee firm pricing, generally for one year, but
do not have purchase volume requirements obligating the Company to purchase
certain quantities. Management believes that the Company has made adequate
arrangements with backup suppliers to avoid any material adverse effect that
would occur if one of its primary suppliers were unable to fill Company orders.
In fiscal 1997, the Company did not purchase more than 10% of its materials and
supplies from any one supplier.
PROPERTIES
The Company's facilities are located in Perrysburg, Ohio. The Company
leases a 96,800-square-foot facility that houses both its offices and plant, as
well as an adjacent 43,200-square-foot facility for production and storage. The
96,800-square-foot facility is subject to a five-year lease that will expire on
December 31, 1999, after which the Company has an option to extend the lease for
two additional five-year periods. The 43,200-square-foot building is subject to
a three-year lease that will expire on January 31, 1998. The Company also owns
an adjacent 108,000-square-foot building that houses R&D, tooling design,
tooling production and prototype production equipment. The Company believes that
its current facilities are adequate for its foreseeable needs.
EMPLOYEES
As of June 30, 1997, the Company employed 272 people, 160 of whom work in
the operations department. The Company has experienced low personnel turnover
throughout its history. The Company has no union employees, and no attempt has
ever been made to organize its workforce. Management believes that its relations
with its employees are good.
BACKLOG
The Company had a backlog (on a percentage of completion basis) as of June
30, 1997 of approximately $30.3 million as compared to $38.9 million on June 30,
1996. The Company expects to complete this backlog by the end of fiscal 1998.
LEGAL PROCEEDINGS
On January 15, 1997, James E. Heider ("Heider"), a former executive officer
of the Company, commenced an action against the Company and Mark Christman, the
President of the Company, in the Common Pleas Court of Wood County, Ohio,
relating to the nonrenewal of his employment agreement. In the amended
complaint, Heider alleges that the Company breached his written employment
agreement and breached implied and express employment agreements that, according
to the complaint, were created pursuant to certain alleged oral statements. The
complaint also alleges that Heider was terminated in
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<PAGE> 51
retaliation for reporting on the conduct of certain employees and that Heider
was wrongfully denied the ability to exercise certain stock options. Heider
seeks compensation of approximately $9.5 million for lost wages, bonuses, back
pay, vacation pay and the value of other fringe benefits he would have received
through continued employment with the Company. The Company believes that this
action is without merit and is barred by the provisions of Heider's written
employment agreement with the Company. The Company intends to contest this
action vigorously, and management does not believe that this action will have a
material adverse effect on the Company's financial condition or operating
results.
From time to time, the Company is a party to various other legal actions
and proceedings. Management does not believe that an unfavorable determination
in any such other action or proceeding would have a material adverse effect upon
the Company's operations.
ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to a wide variety of
increasingly complex and stringent Environmental Laws. As such, the nature of
the Company's operations exposes it to the risk of claims with respect to such
matters and there can be no assurance that material costs or liabilities will
not be incurred in connection with such claims. Management believes its
operations and properties are in compliance in all material respects with
Environmental Laws. Based upon its experience to date, management believes that
the future cost of compliance with and liability under existing Environmental
Laws will not have a material adverse effect on the Company's business,
financial condition or operating results. However, future events, such as the
discovery of new information, changes in existing Environmental Laws or their
interpretations and more vigorous enforcement policies of regulatory agencies,
may give rise to additional expenditures or liabilities that could be material.
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<PAGE> 52
MANAGEMENT
The following table sets forth the names and ages of the Company's
executive officers (the "Executive Management") and the directors of the Company
and Holding (the "Directors"). Within 12 months of the consummation of the
Transactions, the Company and Holding anticipate increasing the number of
Directors to five and appointing at least one independent director to the board
of directors of the Company and Holding (the "Board of Directors").
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- -----------------------------------------------
<S> <C> <C>
Mark D. Christman 45 Director, President and Chief Executive Officer
John S. Baxter 57 Director and Senior Vice President, Marketing
and Sales
Kenneth H. Wetmore 50 Vice President, General Counsel and Secretary
Ronald A. McMaster, Ph.D. 57 Vice President, Corporate Development
Diane S. Tymiak 40 Vice President, Treasurer and Chief Financial
Officer
Larry E. Elliott 47 Vice President, Manufacturing and Engineering
James P. Schnabel 36 Vice President, Development
David P. Given 42 Director
</TABLE>
Mark D. Christman has been President and Chief Operating Officer of the
Company since December 31, 1992. Mr. Christman joined the Company in 1976, and
since that time has served in various capacities, including Vice President,
Treasurer, Chief Financial Officer and Executive Vice President. Upon the
consummation of the Transactions, Mr. Christman began to serve as President and
Chief Executive Officer.
John S. Baxter has been Senior Vice President, Marketing and Sales, since
1992. Mr. Baxter joined the Company in 1981 and was Managing Director of
Glasstech Ltd. from 1981 to 1992. Prior to joining the Company, Mr. Baxter was
employed by Triplex Safety Glass, a subsidiary of Pilkington plc, for five
years.
Kenneth H. Wetmore joined the Company in 1988 as General Counsel and was
elected Secretary in 1989 and Vice President in 1991. Mr. Wetmore is also
President of Stir-Melter, Inc. Prior to joining the Company, Mr. Wetmore was
employed by Owens Corning Fiberglass Corp. for 19 years.
Ronald A. McMaster, Ph.D. has been Vice President, Corporate Development
since 1988. Dr. McMaster joined the Company in 1977 and has served in various
capacities, including Vice President, Research and Development and Vice
President, Advanced Engineering. Mr. McMaster and Mr. Christman are first
cousins.
Diane S. Tymiak has been Vice President, Treasurer and Chief Financial
Officer since 1993. Ms. Tymiak joined the Company in 1980 and has served in
various capacities since that time, most recently as Treasurer.
Larry E. Elliott joined the Company in July 1996 as Vice President,
Development. In December 1996, he was elected as Vice President, Manufacturing
and Engineering. Prior to joining the Company, Mr. Elliott was employed by the
glass division of Ford Motor Company for 25 years, most recently as Supervisor,
Fabrication Facilities Engineering.
James P. Schnabel was elected Vice President, Development in 1997. He has
served in various engineering capacities with the Company since 1984, most
recently as Director, Product Development.
David P. Given has been President of KECC, a venture capital firm, since
1995. Mr. Given joined KECC as a Vice President in 1990. Mr. Given serves as a
director of several privately-held companies.
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<PAGE> 53
EXECUTIVE COMPENSATION
The following table sets forth the compensation received by the Company's
Chief Operating Officer and the four other highest paid executive officers
(together with the Chief Operating Officer, the "Named Executive Officers") for
services to the Company in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
NAME AND ---------------------- ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION(A)
- ------------------------------------------------------- --------- -------- ---------------
<S> <C> <C> <C>
Mark D. Christman...................................... $ 291,110 $700,000 $12,520
President and Chief Operating Officer
John S. Baxter......................................... 219,516 215,000 12,590
Senior Vice President, Marketing and Sales
Kenneth H. Wetmore..................................... 190,448 115,000 12,590
Vice President, General Counsel and Secretary
Dianne S. Tymiak....................................... 142,493 95,000 12,713
Vice President, Chief Financial Officer
Norman J. Klatt........................................ 175,827 55,000 7,696
Vice President Sales - Asia
</TABLE>
- ---------------
(a) Represents (i) a pension plan contribution equal to 5% of each Named
Executive Officer's first $150,000 of salary and bonus under the Company's
pension plan and (ii) imputed income on life insurance provided by the
Company on all such persons except Mr. Klatt.
PRE-MERGER STOCK OPTION HOLDINGS
No options were issued or exercised in fiscal 1997. The following table
sets forth the value of options held by each of the Named Executive Officers at
June 30, 1997.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
---------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
JUNE 30, 1997(a) JUNE 30, 1997(b)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark D. Christman.......................... 26,424 32,283 $ 995,855 $ 1,216,666
John S. Baxter............................. 6,176 4,118 232,758 155,197
Kenneth H. Wetmore......................... 3,529 2,353 132,999 88,679
Diane S. Tymiak............................ 3,529 2,353 132,999 88,679
Norman J. Klatt............................ -- -- $ -- $ --
</TABLE>
- ---------------
(a) All outstanding options vested and were exercised upon consummation of the
Merger.
(b) The values are based on the value received by the Named Executive Officers
upon the deemed exercise of their options in connection with the Merger.
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS
Mr. Christman has entered into a five-year employment agreement with
Holding and the Company pursuant to which Mr. Christman serves as the President
and Chief Executive Officer of Holding and the Company (the "President"). Mr.
Christman is paid a base salary of $272,760 per year, subject to certain cost-
of-living adjustments, and receives customary executive benefits. Additionally,
pursuant to his agreement and the Stockholders Agreement (as defined herein), he
is entitled to receive no less than 40% of all distributions from the
Performance Bonus Pool (as defined herein), participate in the Restricted Stock
Program (as
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<PAGE> 54
defined herein), and participate in the Performance Share Program (as defined
herein). See "-- Management Incentive Plans." The employment agreement also
contains a noncompetition provision that prohibits Mr. Christman from competing
or holding certain ownership interests in other businesses that compete against
the Company for the later of five years after the initial date of the agreement
or two years following the termination of Mr. Christman's employment (unless Mr.
Christman is terminated without cause, in which case no restriction shall
apply). The employment agreement is renewable by the Company for one-year
successive terms upon completion of the initial five-year term.
Each of the other members of Executive Management also entered into an
employment agreement (each, an "Employment Agreement" and, collectively with the
President's employment agreement, the "Employment Agreements") that is
substantially similar to Mr. Christman's agreement, but is paid a base salary
per year, subject to certain cost-of-living adjustments, as follows:
<TABLE>
<CAPTION>
ANNUAL
NAME SALARY
----------------------------------------------------- --------
<S> <C>
John S. Baxter....................................... $213,438
Kenneth H. Wetmore................................... 182,210
Ronald A. McMaster, Ph.D............................. 175,844
Diane S. Tymiak...................................... 138,452
Larry E. Elliott..................................... 153,914
James P. Schnabel.................................... 132,843
</TABLE>
MANAGEMENT INCENTIVE PLANS
In connection with the Transactions, the Company established: (i) a
performance bonus pool (the "Performance Bonus Pool"); (ii) a restricted stock
plan (the "Restricted Stock Program"); and (iii) a performance share program
(the "Performance Share Program"), all of which were designed to retain and
reward members of Executive Management.
Performance Bonus Pool. Commencing fiscal 1998, each member of Executive
Management will be eligible to receive a distribution from the Performance Bonus
Pool. Amounts made available by the Company pursuant to the Performance Bonus
Pool at the end of each fiscal year shall be based on the operating results of
the Company for such fiscal year. If EBITDA (which for such purpose will be
computed before deducting any fees payable to KECC) is between $14.0 million and
$15.0 million for such fiscal year, then amounts available for distribution
pursuant to the Performance Bonus Pool will generally be 5.0% of such EBITDA. If
EBITDA is more than $15.0 million but not over $16.0 million, then amounts
available for distribution pursuant to the Performance Bonus Pool will generally
be 7.5% of EBITDA. If EBITDA is more than $16.0 million, then amounts available
for distribution pursuant to the Performance Bonus Pool will generally be 10.0%
of EBITDA. The Board of Directors, in consultation with the President, will
distribute the Performance Bonus Pool among the members of Executive Management
using its discretion; provided, however, Mr. Christman, pursuant to the terms of
his employment agreement, shall be entitled to receive at least 40% of the
Performance Bonus Pool. The Board of Directors will be required to distribute
the entire amount of the Performance Bonus Pool among some or all members of
Executive Management.
Restricted Stock Program. Simultaneous with the consummation of the
Transactions, Holding and the members of the Key Equity Group entered into a
stockholders agreement (the "Stockholders Agreement"), pursuant to which Holding
established the Restricted Stock Program. Under the terms of the Restricted
Stock Program, members of Executive Management were granted, pursuant to their
employment agreements, in the aggregate, 1,667 shares of restricted Class C
Common Stock (as defined herein) of Holding. The restricted Class C Common Stock
may not be sold or otherwise transferred while the restrictions are in effect
and may be forfeited to the Company if the recipient leaves the Company before
the restrictions lapse. The shares of Class C Common Stock are non-voting and
the restrictions will generally lapse in equal amounts over a four-year period.
However, all such restrictions will lapse upon a Change of Control (as defined
in the Employment Agreements).
Performance Share Program. The Performance Share Program was established
pursuant to the Stockholders Agreement. See "Certain Transactions -- Post Merger
Transactions -- Stockholders Agreement."
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<PAGE> 55
Under the terms of the Performance Share Program, members of Executive
Management purchased shares of Class D Common Stock of Holding (the "Class D
Holders") by paying $0.01 in cash and paying for the balance by issuing to
Holding promissory notes in consideration therefor and pledging such shares to
Holding to secure such debt. Upon the occurrence of a Liquidity Event (as
defined herein), a final determination of the number of shares of Class D Common
Stock that will be retained by members of Executive Management will be made
based upon the achievement by the Key Equity Group of certain goals relating to
its return on the Equity Contribution as adjusted to account for the value
attributable to the Warrants. "Liquidity Event" is defined in the Stockholders
Agreement as the first to occur of: (i) the sale of Holding and (ii) a public
offering of any of Holding's securities (each, a "Liquidity Event"). The Company
will have the right to repurchase shares of Class D Common Stock under certain
circumstances upon a termination of employment.
EMPLOYEES' PENSION PLAN AND EMPLOYEES' SAVINGS PLAN
The Company's Employees' Pension Plan and Employees' Savings Plan cover
substantially all of its employees. Under the Employees' Pension Plan, the
Company may make annual contributions to the participants equal to 5% of each
participant's compensation up to $150,000. For the fiscal years ended June 30,
1995, 1996 and 1997, the Company made contributions under the Employees' Pension
Plan of approximately $459,000 $541,000 and $604,000 respectively. The Company
does not match contributions made by employees under the Employees' Savings
Plan, a 401(k) plan.
DIRECTOR COMPENSATION
No Director currently receives compensation solely in connection with his
or her duties as a Director. The Company will institute a compensation program
for independent Directors at the time the independent Director joins the Board
of Directors. The Company will pay the reasonable out-of-pocket expenses
incurred by each Director in connection with their attendance at meetings of the
Board of Directors (and any committee hereof) of the Company or any of its
subsidiaries.
Members of the Board of Directors prior to the consummation of the
Transactions have received certain fees and options and warrants to purchase
shares of common stock of the Company since the Reorganization. See "Certain
Transactions -- Pre-Merger Transactions."
49
<PAGE> 56
CERTAIN TRANSACTIONS
POST-MERGER TRANSACTIONS
Advisory Agreement
Upon consummation of the Transactions, the Company entered into an advisory
agreement with KECC, pursuant to which KECC consults with the Directors and
members of Executive Management on such general business and financial matters
as may be requested by the Board of Directors, including: (i) corporate
strategy; (ii) budgeting of future corporate investment; and (iii) acquisition
and divestiture strategies. In exchange for such services, KECC receives an
annual fee of $200,000, payable quarterly in arrears.
Stockholders Agreement
Simultaneously with the consummation of the Transactions, members of the
Key Equity Group and Holding entered into the Stockholders Agreement which,
together with the Amended and Restated Certificate of Incorporation of Holding
(the "Certificate of Incorporation"), governs the terms of the capital stock of
Holding.
Classes of Common Stock. The authorized shares of capital stock of Holding
(the "Common Stock") consists of: (i) 18,072 authorized shares of Class A Voting
Common Stock, $0.01 par value (the "Class A Common Stock"); (ii) 13,070
authorized shares of Class B Non-Voting Common Stock, $0.01 par value (the
"Class B Common Stock"); (iii) 5,002 shares of Class C Stock Non-Voting Common
Stock, $0.01 par value (the "Class C Common Stock"); and (iv) 10,000 shares of
Class D Non-Voting Common Stock, $0.01 par value (the "Class D Common Stock").
The holders of Class A Common Stock have the right to vote on all matters to be
voted on by the stockholders of Holding. At every meeting of stockholders of
Holding, each holder of Class A Common Stock is entitled to one vote per share.
Except as otherwise required by law, a holder of Class B Common Stock, Class C
Common Stock or Class D Common Stock has no voting rights with respect to such
Common Stock.
Control. The Certificate of Incorporation requires Holding to obtain the
approval by vote or written consent of 55% of the then-outstanding shares of
Class A Common Stock, in addition to any other vote required by law, in order to
do any of the following: (i) redeem, purchase or otherwise acquire for value any
shares of Common Stock or any other shares of its capital stock, except as
specifically permitted in the Stockholders Agreement; (ii) authorize or issue,
or obligate itself to authorize or issue, additional shares of Common Stock or
any other shares of its capital stock except as contemplated in the Certificate
of Incorporation or in the Stockholders Agreement; (iii) amend, alter or repeal
the Certificate of Incorporation or the By-Laws of Holding (the "By-Laws"); (iv)
declare or pay any dividends or make any distributions with respect to any of
its capital stock; or (v) except as specifically permitted by the Stockholders
Agreement, effect, or obligate itself to effect, any sale, lease, assignment,
transfer or other conveyance of all or substantially all of the assets of
Holding or any subsidiary thereof, or any consolidation or merger involving
Holding or any subsidiary thereof, or any reclassification or other change of
capital stock, or any recapitalization or reorganization or any dissolution,
liquidation or winding up of Holding or any subsidiary thereof, except for the
merger into Holding of, or the transfer of assets to Holding from, any
wholly-owned subsidiary.
In addition, the Stockholders Agreement provides that Holding will not, and
will not permit any of its subsidiaries (including the Company), to take any of
the following actions without the written consent of KECC or Key Equity Partners
97, a general partnership comprised of certain affiliates of KECC ("KEP 97"):
(i) acquire any assets (other than in the ordinary course of business), capital
stock, or any other interest in another business or entity; (ii) sell, lease,
transfer, mortgage, pledge, or encumber all or substantially all of its assets;
(iii) dispose of any business entity or product line or any division or
subsidiary; (iv) enter into any merger, consolidation, reorganization or
recapitalization, or any agreement to do any of the foregoing or reclassify any
of its equity securities; (v) issue any equity security, or issue any options,
warrants, convertible securities, or other rights (contingent or otherwise) to
acquire any equity securities, except for shares of Class A Common Stock issued
pursuant to the Warrants and the issuance of stock to an employee of Holding
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<PAGE> 57
or any of its subsidiaries in accordance with a stock purchase or award program
plan or the conversion of stock as described in the Certificate of
Incorporation; (vi) form or acquire any subsidiary except those now existing;
(vii) except as otherwise contemplated by the Stockholders Agreement, declare or
pay any dividends or distributions on the Common Stock or other equity
securities or redeem or repurchase any Common Stock; (viii) grant its consent to
a transfer of stock otherwise prohibited by the Stockholders Agreement; (ix)
incur, assume or guaranty any indebtedness for borrowed money in excess of
certain amounts in any fiscal year; (x) make any loans or advances to any
stockholders or any employees of Holding or any of its subsidiaries other than
advances to employees in the ordinary course of business which do not exceed
certain amounts per year; (xi) make capital expenditures in excess of certain
amounts in any fiscal year; (xii) except as otherwise contemplated by the
Stockholders Agreement, enter into any transaction with any stockholder or any
affiliate of Holding or its subsidiaries or any stockholder that is on terms
less favorable to Holding and its subsidiaries than could be obtained from
unaffiliated third parties on an arm's-length basis; (xiii) amend its
Certificate of Incorporation or By-Laws; or (xiv) enter into any agreement to do
any of the foregoing.
Conversion. Each holder of Class B Common Stock is entitled at any time and
from time to time to convert any or all of the shares of that holder's Class B
Common Stock into the same number of shares of Class A Common Stock as provided
in the Certificate of Incorporation; each holder of Class A Common Stock is
entitled at any time and from time to time to convert any or all of the shares
of that holder's Class A Common Stock into the same number of shares of Class B
Common Stock as provided in the Certificate of Incorporation; provided that in
the case of a conversion from Class B Common Stock, which is non-voting, into
Class A Common Stock, which is voting, the holder of shares to be converted
would be permitted under applicable law to hold the total number of shares of
Class A Common Stock which would be held after giving effect to the conversion.
Each holder of Class C Common Stock is entitled to convert any or all of
the shares of that holder's Class C Common Stock into the same number of shares
of Class A Common Stock only upon the occurrence of any public offering or
public sale of securities of the Corporation (including a public offering
registered under the Securities Act and a sale pursuant to Rule 144 of the
Securities Act or any similar rule then in effect) (any such offering, a
"Conversion Event"). In addition, each holder of Class C Common Stock is
entitled to convert shares of Class C Common Stock if such holder reasonably
believes that a Conversion Event will be consummated. The Company is obligated,
upon written request of the holder of Class C Common Stock, to effect such
conversion in a timely manner so as to enable each such holder to participate in
such Conversion Event. If any shares of Class C Common Stock are converted into
shares of Class A Common Stock in connection with a Conversion Event and such
shares of Class A Common Stock are not actually distributed, disposed of or sold
pursuant to such Conversion Event, such shares of Class A Common Stock will
promptly be converted back into the same number of shares of Class C Common
Stock that had been the subject of the request for conversion.
Restrictions on Transfer. Generally, the shares of Common Stock are subject
to certain restrictions on transfer contained in the Stockholders Agreement. The
shares of Common Stock may be transferred among affiliates and immediate family
members without restrictions as long as the recipient complies with the
provisions of the Stockholders Agreement and the applicable rules and
regulations of the Commission. In addition, Holding may repurchase shares of
Common Stock from departing members of Executive Management.
Preemptive Rights. The holders of Common Stock have a pro rata right to
participate in all future offerings of shares of equity securities of Holding or
any securities convertible into or exchangeable for or carrying rights or
options to purchase any shares or any other equity securities of the Company.
Certain Rights of KECC and KEP 97. KECC and KEP 97 have the right, in the
future to exercise a right to require Holding to repurchase their shares of
Common Stock any time after June 2004. In addition, KECC and KEP 97 also have
certain demand registration rights pursuant to which members of Executive
Management also be able to participate.
Election of Directors of Holding. The Board of Directors of Holding
initially consists of three members as follows: (i) a representative selected by
KECC (initially, Mr. Given); (ii) the Chief Executive Officer of the Company
(initially, Mr. Christman); and (iii) an individual to be jointly designated by
Mr. Given and
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<PAGE> 58
Mr. Christman (initially, Mr. Baxter). The board of directors of each subsidiary
of Holding (including the Company) will be the same as the Board of Directors of
Holding. Holding and the Company anticipate increasing the size of the Board of
Directors to five within 12 months of the consummation of the Transactions and
electing at least one independent Director.
Advances to Holding
Through August 1, 1997, the Company has advanced to Holding the sum of
$656,399. The advances have been made to Holding to permit Holding to satisfy
certain obligations it entered into in connection with the Transactions,
including, without limitation, obligations to loan funds to members of Executive
Management to allow them to satisfy certain tax liabilities. The tax liabilities
resulted from the members of Executive Management making certain elections under
Section 83(b) of the Code with respect to the shares of Class C Common Stock.
See "Ownership and Control." The advances are payable from Holding to the
Company on demand and bear interest at a rate of 4.96% per annum.
PRE-MERGER TRANSACTIONS
In connection with the Reorganization, the Company entered into a long-term
agreement to lease its manufacturing and office building from H.N.F. Realty Co.,
a partnership comprised of certain parties who were stockholders prior to the
consummation of the Reorganization. The minimum annual rental associated with
this lease for each of the next two years is approximately $300,000, after which
the Company has an option to extend the lease for two additional five-year
periods. Total rental expense amounted to approximately $300,000 for each of the
years ended June 30, 1997, 1996 and 1995. Management believes the terms of the
lease are no less favorable than the Company could have received from an
unaffiliated third party.
In connection with the Reorganization, the Company entered into a
stockholders agreement dated January 3, 1995 (the "1995 Stockholders Agreement")
with the institutional and independent holders of all of the outstanding shares
of the Company's capital stock issued upon its emergence from Chapter 11.
Pursuant to the 1995 Stockholders Agreement, a new Board of Directors of the
Company was appointed that was comprised of Jay P. Goldsmith, Chairman of the
Board, Harry Freund, Vice Chairman of the Board (together, the "Executive
Directors"), and Clifford B. Cohn, Richard P. Rifenburgh, Larry Schafran and
William J. Nightingale, as directors (collectively, the "Remaining Directors").
The 1995 Stockholders Agreement terminated upon consummation of the Merger, and
each of the directors resigned.
In connection with their appointments and performance as the Executive
Directors, each Executive Director received annual compensation of approximately
$25,000 and 58,823 options to purchase shares of common stock at $20.00 per
share in fiscal 1995, annual compensation of $95,333, a bonus of $200,000 and
warrants to purchase 32,645 shares of common stock at $25.00 per share in fiscal
1996 and during fiscal 1997 annual compensation of $108,333 and a bonus of
$300,000. In connection with their appointments and performance as the Remaining
Directors, each Remaining Director received approximately $23,000 in annual
compensation and meeting fees and 5,000 options to purchase shares of common
stock at $20.00 per share in fiscal 1995, annual compensation and meeting fees
of approximately $46,000 in fiscal 1996 and annual compensation and meeting fees
of approximately $52,500 in fiscal 1997. All options and warrants were exercised
in connection with the Transactions.
In fiscal 1996, the Company also paid consulting fees to Anthony Pacchia
and Donald Weisburg, affiliates of Balfour Investors Inc., of approximately
$110,000 and $88,000, respectively, and in fiscal 1997 the Company paid Mr.
Pacchia and Mr. Weisburg consulting fees in the amount of approximately $125,000
and $63,000, respectively. Balfour Investors Inc. was an affiliate of the
Company since the Reorganization.
KECC received a financing fee in an amount equal to $1.0 million for its
assistance in structuring, arranging and closing the Transactions.
The Company arranged for the payment of success bonuses to members of
Executive Management in connection with the successful completion of the
Transactions. The aggregate amount of such success bonuses was $2.7 million, the
allocation of which was as follows: (i) Mark D. Christman received $1,865,000;
(ii) John S. Baxter received $280,000; (iii) Kenneth H. Wetmore received
$165,000; (iv) Diane S. Tymiak received 165,000; (v) Larry E. Elliott received
$95,000; and (vi) James P. Schnabel, Jr. received $95,000.
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<PAGE> 59
OWNERSHIP AND CONTROL
Holding owns 100% of the issued and outstanding common stock of the
Company. As of July 2, 1997, the following entities or persons owned the
outstanding Common Stock of Holding as set forth below.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES OF SHARES OF PERCENT SHARES OF PERCENT SHARES OF PERCENT
CLASS A PERCENT OF CLASS B OF CLASS CLASS C OF CLASS D OF
COMMON CLASS A COMMON B COMMON CLASS C COMMON CLASS D
STOCK(a) OWNERSHIP(b) STOCK(c) OWNERSHIP STOCK OWNERSHIP STOCK OWNERSHIP
--------- ------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio
44114-1306(d)(e)............. 1,600 38.7% 8,405 100.0% -- -- -- --
Key Equity Partners 97
127 Public Square, 6th Floor
Cleveland, Ohio
44114-1306(e)................ -- -- -- -- 3,335 66.7% -- --
David Given(f)
127 Public Square, 6th Floor
Cleveland, Ohio 44114-1306... 1,600 38.7 8,405 100.0% 3,335 66.7% -- --
Executive Management(g)
Mark D. Christman............ 1,010 24.4% -- -- 834 16.7% 4,000 40.0%
John S. Baxter............... 175 4.2% -- -- 267 5.3% 1,800 18.0%
Kenneth H. Wetmore........... 125 3.0% -- -- 133 2.7% 1,000 10.0%
Ronald A. McMaster, Ph.D..... 150 3.6% -- -- 67 1.3% 500 5.0%
Diane S. Tymiak.............. 90 2.2% -- -- 100 1.9% 700 7.0%
Larry E. Elliot.............. 35 0.9% -- -- 133 2.7% 1,000 10.0%
James P. Schabel............. 75 1.8% -- -- 133 2.7% 1,000 10.0%
Key Equity Group(h)............ 3,260 78.8% 8,405 100.0% 5,002 100.0% 10,000 100.0%
All officers and directors as a
group........................ 3,260 78.8% 8,405 100.0% 5,002 100.0% 10,000 100.0%
</TABLE>
- ---------------
(a) Does not include shares of Class A Common Stock issuable upon conversion of
Class B Common Stock, or following the occurrence of a Conversion Event,
Class C Common Stock.
(b) Assumes 877.21 shares of Class A Common Stock issuable pursuant to the
Warrants are outstanding.
(c) Does not include shares of Class B Common Stock issuable upon conversion of
Class A Common Stock.
(d) KECC is a wholly-owned subsidiary of Key Bank, N.A., which is a wholly-owned
subsidiary of KeyCorp, a bank holding corporation.
(e) Mr. Given is the President and Director of KECC and is a partner of KEP 97.
Accordingly, Mr. Given may be deemed to beneficially own the shares owned by
KECC and KEP 97. Mr. Given disclaims beneficial ownership of the shares
owned by KECC.
(f) Includes all the shares of Class A Common Stock and Class B Common Stock
owned by KECC and all the shares of Class C Common Stock owned by KEP 97,
because as the President and a Director of KECC and a partner of KEP 97, Mr.
Given may be deemed to beneficially own all such shares.
(g) Simultaneously with the consummation of Transactions, Executive Management
purchased 1,660 shares of Class A Common Stock on the same terms and
conditions as those shares of Class A Common Stock that are purchased by
KECC. In addition, Executive Management received 1,667 shares of Class C
Common Stock in connection with the Restricted Stock Plan and up to 10,000
shares of Class D Common Stock that may be earned under the Performance
Share Program.
(h) The Key Equity Group is comprised of Executive Management, KECC and KEP 97.
See "Certain Transactions -- Post-Merger Transactions."
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<PAGE> 60
DESCRIPTION OF THE REVOLVING CREDIT FACILITY
The Company has entered into certain loan agreements with NationsBank, N.A.
("NationsBank") to provide the Revolving Credit Facility, a senior secured
revolving line of credit in an aggregate principal amount of $10.0 million. The
following summary of the Revolving Credit Facility is based upon the terms of
such loan agreements.
Borrowings under the Revolving Credit Facility bear interest either at: (i)
NationsBank's Prime Rate (as defined therein); or (ii) reserve adjusted LIBOR
plus 2.0% per annum. The Revolving Credit Facility provides for certain ongoing
fees, including an unused line fee on the portion of the Revolving Credit
Facility that is not utilized equal to 0.25% per annum.
The Revolving Credit Facility extends for an initial term of five years and
will renew in increments of one year thereafter, subject to termination as
provided for therein. The required minimum unused availability under the
Revolving Credit Facility was $2.0 million on its closing date and is $500,000
at all times thereafter.
The obligations of the Company under the Revolving Credit Facility are
secured by a first priority lien upon all of the Company's existing and acquired
or created assets, including, but not limited to, accounts receivable,
inventory, chattel paper, documents, instruments, deposit accounts, contract
rights, general intangibles, machinery, equipment, real estate and other
personal property.
The Revolving Credit Facility contains, among other things, covenants
restricting the ability of the Company to incur indebtedness, to dispose of
assets, make distributions to Holding or the Company's subsidiaries, create
liens, make capital expenditures, make certain investments or acquisitions,
enter into transactions with affiliates and otherwise restrict certain
activities. The Revolving Credit Facility contains financial covenants pursuant
to which the Company pledges to maintain a minimum net worth (with annual
step-ups) and minimum current, fixed charge and leverage ratios.
Events of default under the Revolving Credit Facility include those usual
and customary for facilities of this type, including, among other things,
default in the payment of principal or interest in respect of material amounts
of indebtedness of the Company or its subsidiaries; any nonpayment on such
indebtedness; a change of control (as defined therein); any breach of the
covenants or a material breach of the representations and warranties included in
the Revolving Credit Facility and related documents; the institution of any
bankruptcy proceedings; and the failure of any security agreement related to the
Revolving Credit Facility or lien granted thereunder to be valid and
enforceable. Upon the occurrence and continuance of an event of default under
the Revolving Credit Facility, the lender may terminate its commitment to lend
and declare the then-outstanding loan due and payable.
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<PAGE> 61
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company to the Initial Purchaser
pursuant to the Purchase Agreement. The Initial Purchaser subsequently resold
the Old Notes to qualified institutional buyers in reliance on Rule 144A under
the Securities Act. As a condition to the Purchase Agreement, Sub Co. entered
into the Registration Rights Agreement with the Initial Purchaser pursuant to
which the Company, as successor to Sub Co., has agreed, for the benefit of the
holders of the Old Notes, at the Company's cost, to use its best efforts to (i)
file the Exchange Offer Registration Statement within 60 days after the date of
the original issue of the Old Notes with the Commission with respect to the
Exchange Offer for the New Notes; (ii) use its best efforts to cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the date of the original issuance of the
Old Notes and (iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, commence the Exchange Offer and use its
best efforts to issue on or prior to 60 days after the date on which the
Exchange Offer Registration Statement was declared effective by the Commission
(the "Exchange Offer Effectiveness Date") New Notes in exchange for all Old
Notes tendered prior thereto in the Exchange Offer. Upon the Exchange Offer
Registration Statement being declared effective, the Company will offer the New
Notes in exchange for surrender of the Old Notes. The Company will keep the
Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date on which notice of the Exchange Offer is mailed
to the holders of the Old Notes. For each Old Note surrendered to the Company
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 Old Note. Each
New Note will bear interest from its issuance date. Holders of Old Notes that
are accepted for exchange will receive, in cash, accrued interest thereon to,
but not including, the issuance date of the New Notes. Such interest will be
paid with the first interest payment on the New Notes. Interest on the Old Notes
accepted for exchange will cease to accrue upon issuance of the New Notes.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes will in general be
freely tradeable after the Exchange Offer without further registration under the
Securities Act. However, any purchaser of Old Notes who is an affiliate of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the New Notes (i) will not be able to rely on the interpretation of
the staff of the Commission, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a brokerdealer referred to in the next
sentence) is not engaging, and does not intend to engage, in distribution of the
New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or any other
person participates in the Exchange Offer for the purpose of distributing the
New Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the New
Notes and cannot rely on those no-action Letters. As indicated above, each
Participating Broker-Dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that it (i) acquired the Old Notes for
its own account as a result of market-making activities or other trading
activities, (ii) has not entered into any arrangement or understanding with the
Company or any affiliate of the Company (within the meaning of Rule 405 under
the Securities Act) to distribute the New Notes to be received in the Exchange
Offer and (iii) will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. For a
description of the procedures for resales by Participating Broker-Dealers, see
"Plan of Distribution."
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<PAGE> 62
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
210 days of the date of the original issuance of the Old Notes, the Company will
(i), as promptly as possible, file the Shelf Registration Statement covering
resales of the Old Notes, (ii) use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act and
(iii) use its respective best efforts to keep effective the Shelf Registration
Statement until three years after its effective date. The Company will, in the
event of the filing of the Shelf Registration Statement, provide to each holder
of the Old Notes 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 resale of the Old Notes. A holder of the Old Notes that
sells such Old 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 Rights
Agreement which are applicable to such a holder (including certain
indemnification obligations).
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 60
days after the date of the original issue of the Old Notes, (ii) the Company
will use its best efforts to have the Exchange Offer Registration Statement
declared effective by the Commission on or prior to 150 days after the date of
the original issue of the Old Notes, (iii) unless the Exchange Offer would not
be permitted by applicable law or Commission policy, the Company will commence
the Exchange Offer and use its best efforts to issue on or prior to 60 days
after the effectiveness of the Exchange Offer Registration Statement New Notes
in exchange for all Old Notes tendered prior thereto in the Exchange Offer and
(iv) if obligated to file the Shelf Registration Statement, the Company will use
its best efforts to file the Shelf Registration Statement with the Commission in
a timely fashion. If (a) the Company fails to file any of the registration
statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such registration statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness, (c) the Company fails to consummate the Exchange Offer within 60
days of the effectiveness of the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities (as defined herein) during the
period specified in the Registration Rights Agreement (each such event referred
to in clauses (a) through (d) above a "Registration Default"), the sole remedy
available to holders of the Old Notes will be the immediate assessment of
Additional Interest as follows: the per annum interest rate on the Old Notes
will increase by 0.5% during the first 90-day period the Registration Default
exists and is not waived or cured and the per annum interest rate will increase
by an additional 0.25% for each subsequent 90-day period during which the
Registration Default remains uncured, up to a maximum additional interest rate
of 2.0% per annum in excess of 12 3/4% per annum. All Additional Interest will
be payable to holders of the Old Notes in cash on each January 1 and July 1,
commencing with the first such date occurring after any such Additional Interest
commences to accrue, until such Registration Default is cured. After the date on
which such Registration Default is cured, the interest rate on the Old Notes
will revert to 12 3/4% per annum. For purposes of the foregoing, "Transfer
Restricted Securities" means each Note until (i) the date on which such Note has
been exchanged by a person other than a broker-dealer for a New Note in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of a Note for a New Note, the date on which such New 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 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 Note is distributed to the
public pursuant to Rule 144 under the Act.
Holders of Old Notes will be required to make certain representations (as
described in the Registration Rights Agreement) in order to participate in the
Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement within the time periods set
forth in the
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<PAGE> 63
Registration Rights Agreement in order to have their Old Notes included in the
Shelf Registration Statement and benefit from the provisions regarding
Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly 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 Old Notes accepted in the
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the New Notes will not be entitled
to certain rights under the Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Old Notes in
certain circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is terminated. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $70,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
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. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "-- Fees and Expenses."
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<PAGE> 64
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company in its sole discretion extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, prior to the
Expiration Date (i) to delay accepting any Old Notes, to extend the Exchange
Offer or to terminate the Exchange Offer if any of the conditions set forth
below under "Conditions" shall not have been satisfied, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent or
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of
Old Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes on
January 1, 1998. Interest on the Old Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
Interest on the New Notes is payable semiannually on each January 1 and
July 1, commencing on January 1, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
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 and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. To be tendered effectively,
the Old Notes, Letter of Transmittal or an Agent's Message (as defined herein)
in connection with a book-entry transfer and other required documents must be
completed and received by the Exchange Agent at the address set forth below
under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration
Date. Delivery of the Old Notes may be made by book-entry transfer in accordance
with the procedures described below. Confirmation of such book-entry transfer
must be received by the Exchange Agent prior to the Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent, forming a part of a
confirmation of a book-entry transfer, which states that such book-entry
transfer facility has received an express acknowledgment from the participant in
such book-entry transfer facility tendering the Notes that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal, each holder will make the
representations set forth above in the third paragraph under the heading
"-- Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute 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.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY
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<PAGE> 65
MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALER,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (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 a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at DTC for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC's system may make book-entry delivery of Old Notes by causing
DTC to transfer such Old Notes into the Exchange Agent's account with respect to
the Old Notes in accordance with DTC's procedures for such transfer. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the Exchange Agent at its address set forth below on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures. Delivery
of documents to DTC does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of 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 property 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 right in its sole discretion to waive
any defects, 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. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the
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<PAGE> 66
defects or irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering holders, unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution,
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a property completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder, the certificate number(s) of such Old Notes and
the principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within three New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificates) representing the Old Notes (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at DTC), and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such property completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificates) representing all tendered Old
Notes in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at DTC), and all other
documents required by the Letter of Transmittal are received by the Exchange
Agent upon three New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their old Notes according to the guaranteed
delivery procedures set forth above.
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 telegram, telex,
letter or facsimile transmission 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) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at DTC to be credited); (iii) be signed by the holder 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 have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
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) of such 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 retendered by following
one of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein prior to the
Expiration Date, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable discretion that any of the
above conditions are not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw such
Old Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all property tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
BY REGISTERED OR BY OVERNIGHT COURIER AND
BY HAND TO 4:30 P.M.: CERTIFIED MAIL: BY HAND AFTER 4:30 P.M.:
United States Trust United States Trust Company United States Trust
Company of New York Company
of New York P.O. Box 844 of New York
111 Broadway Cooper Station 770 Broadway
Lower Level New York, New York New York, New York 10003
Corporate Trust Window 10276-0844 Attn: Corporate Trust
New York, New York 10006
</TABLE>
BY FACSIMILE:
United States Trust Company of New York
(212) 780-0592
Attn: Corporate Trust
CONFIRM BY TELEPHONE:
(800) 548-6565
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less the value attributable to the Warrants upon the
issuance of the Old Notes, as reflected in the Company's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, (iii) in accordance with
Rule 144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel reasonably acceptable to the Company), (iv) outside the United States to
a foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (v) pursuant to an effective registration under the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States.
RESALE OF THE NEW NOTES
With respect to resales of 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 a holder or other person who receives New Notes, whether
or not such person is the holder (other than a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) who
receives New Notes in exchange for Old Notes in the ordinary course of business
and who is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes, will be allowed to resell the New Notes to the public without
further registration under the Securities Act and without delivering to the
purchasers of the New Notes a prospectus that satisfies the requirements of
Section 10 of the Securities Act. However, if any holder acquires New Notes in
the Exchange Offer for the purpose of distributing or participating in a
distribution of the New Notes, such holder cannot rely on the position of the
staff of the Commission set forth in such no-action letters or any similar
interpretive letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction, unless an exemption from registration is otherwise available.
Further, each Participating Broker-Dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
Participating 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.
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<PAGE> 69
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a brokerdealer referred to in the next
sentence) is not engaging, and does not intend to engage, in the distribution of
the New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Exchange Offer for the purpose of distributing the New Notes
it must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale of the New Notes and cannot rely on
those no-action letters. As indicated above, each Participating Broker-Dealer
that receives a New Note for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. For a description of the procedures for such resales by
Participating Broker-Dealers, see "Plan of Distribution."
DESCRIPTION OF THE NOTES
The Old Notes were issued under the Indenture and the New Notes will be
issued under the Indenture. The terms of the New Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") as in effect on
the date of the Indenture. The form and terms of the New Notes are the same as
the form and terms of the Old Notes (which they replace) except that (i) the New
Notes bear a Series B designation, (ii) the New Notes have been registered under
the Securities Act and, therefore, will not bear legends restricting transfer
thereof, and (iii) the holders of New Notes will not be entitled to certain
rights under the Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Old Notes in certain
circumstances relating to the timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated. The New Notes are subject to
all such terms, and holders of the New Notes are referred to the Indenture and
the Act for a statement of them. The following is a summary of the material
terms and provisions of the New Notes. This summary does not purport to be a
complete description of the New Notes and is subject to the detailed provisions
of, and qualified in its entirety by reference to, the New Notes and the
Indenture (including the definitions contained therein). A copy of the form of
Indenture may be obtained from the Company by any holder or prospective investor
upon request. Definitions relating to certain capitalized terms are set forth
under " -- Certain Definitions" and throughout this description. Capitalized
terms that are used but not otherwise defined herein have the meanings assigned
to them in the Indenture and such definitions are incorporated herein by
reference. The term Notes means the New Notes and the Old Notes treated as a
single class.
GENERAL
The Notes will be general senior unsecured obligations of the Company,
limited in aggregate principal amount to $70,000,000.
The Notes will be unconditionally guaranteed, on a senior unsecured basis,
as to payment of principal, premium, if any, and interest, jointly and
severally, by each Restricted Subsidiary which guarantees payment of the Notes
pursuant to the covenant described under " -- Certain Covenants -- Limitation on
Creation of Subsidiaries".
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on July 1, 2004. The Notes will bear interest at a
rate of 12 3/4% per annum from the date of original issuance until maturity.
Interest is payable semi-annually in arrears on January 1 and July 1, commencing
January 1, 1998, to holders of record of the Notes at the close of business on
the immediately preceding December 15 and June 15, respectively.
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<PAGE> 70
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after July 1, 2002 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest to the redemption date, if redeemed during the
twelve-month period beginning on July 1 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
--------------------------------------------------------------- ----------
<S> <C>
2002........................................................... 103.188%
2003........................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate up
to 25% of the original principal amount of Notes at any time and from time to
time prior to July 1, 2000 at a redemption price equal to 112.75% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest to the
redemption date out of the Net Proceeds of one or more Qualified Equity
Offerings; provided, that at least $52.5 million of the principal amount of
Notes originally issued remain outstanding immediately after the occurrence of
any such redemption and that any such redemption occurs within 90 days following
the closing of any such Qualified Equity Offering.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not then listed on a
national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; and provided,
further, that if a partial redemption is made with the proceeds of a Qualified
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to the procedures of the Depository Trust Company),
unless such method is otherwise prohibited. Notice of redemption shall be mailed
by first-class mail at least 30 but not more than 60 days before the redemption
date to each holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the Paying Agent for the Notes funds in satisfaction of the
applicable redemption price pursuant to the Indenture.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants. Except as
otherwise specified, all of the covenants described below appear in the
Indenture.
Limitation on Additional Indebtedness
The Company will not, and will not permit any Restricted Subsidiary of the
Company to, directly or indirectly, incur (as defined) any Indebtedness
(including Acquired Indebtedness) unless (a) after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Company's Fixed Charge Coverage Ratio (determined on a pro forma
basis for the last four fiscal quarters of the Company for which financial
statements are available at the date of determination) is greater than 2.25 to
1, and (b) no Default or Event of Default shall have occurred and be continuing
at the time or as a consequence of the incurrence of such Indebtedness.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may incur Permitted Indebtedness.
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<PAGE> 71
Limitation on Restricted Payments
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the covenant set forth under
" -- Limitation on Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 50% of the cumulative Consolidated Net
Income of the Company (or in the event such Consolidated Net Income shall
be a deficit, minus 100% of such deficit), plus (2) 100% of the aggregate
Net Proceeds and the fair market value of securities or other property
received by the Company from the issue or sale, after the Issue Date, of
Capital Stock (other than Disqualified Capital Stock or Capital Stock of
the Company issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised or
exchanged, as the case may be. For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash distributed
shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) so long as no Default or Event of Default shall have occurred
and be continuing, the retirement of any shares of Capital Stock of the Company
or subordinated Indebtedness (A) by conversion into, or by or in exchange for,
shares of Capital Stock (other than Disqualified Capital Stock) of the Company,
or (B) out of, the Net Proceeds of the substantially concurrent sale (other than
to a Subsidiary of the Company) of other shares of Capital Stock of the Company
(other than Disqualified Capital Stock), (iii) so long as no Default or Event of
Default shall have occurred and be continuing, the redemption or retirement of
Indebtedness of the Company subordinated to the Notes in exchange for, by
conversion into, or out of the Net Proceeds of, a substantially concurrent sale
or incurrence of Indebtedness (other than any Indebtedness owed to a Subsidiary)
of the Company that is contractually subordinated in right of payment to the
Notes to at least the same extent as the Subordinated Indebtedness being
redeemed or retired, (iv) so long as no Default or Event of Default shall have
occurred and be continuing, the retirement of any shares of Disqualified Capital
Stock by conversion into, or by exchange for, shares of Disqualified Capital
Stock, or out of the Net Proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of other shares of Disqualified Capital
Stock; provided that (a) such Disqualified Capital Stock is not subject to
mandatory redemption earlier than the maturity of the Notes, (b) such
Disqualified Capital Stock is in an aggregate liquidation preference that is
equal to or less than the sum of (x) the aggregate liquidation preference of the
Disqualified Capital Stock being retired, (y) the amount of accrued and unpaid
dividends, if any, and premiums owed, if any, on the Disqualified Capital Stock
being required and (z) the amount of customary fees, expenses and costs related
to the incurrence of such Disqualified Capital Stock and (c) such Disqualified
Capital Stock is incurred by the same person that initially incurred the
disqualified Capital Stock being retired, except that the Company may incur
Disqualified Capital Stock to refund or refinance Disqualified Capital Stock of
any Wholly-Owned Restricted Subsidiary of the Company, (v) the payment by the
Company of cash dividends to Holding for the purpose of paying, so long as all
proceeds thereof are promptly used by Holding to pay, franchise taxes and
federal, state and local income taxes and interest and penalties with respect
thereto, if any, payable by Holding, provided that any refund shall be promptly
returned by Holding to the Company, (vi) so long as no Default or Event of
Default shall have occurred and be continuing, payments to employees for
repurchases of Capital Stock of Holding; provided, however, that the amount of
all such payments under this clause (vi) does not exceed $250,000 during any
twelve month period;
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<PAGE> 72
(vii) deposits and loans, not to exceed $3.0 million at any time outstanding,
made in connection with acquisition agreements; (viii) the making of payments by
the Company to Holding to pay (A) upon consummation of the Transactions, up to
$65,000 in connection with the delivery of an opinion relating to the solvency
of the Company on the Issue Date and (B) operating expenses, not to exceed
$25,000 in any fiscal year; or (ix) any payment from the Company to Holding in
the amount of any payment received by the Company pursuant to a distribution
from the Escrow Accounts in connection with the Merger under the terms of the
Merger Agreement, not to exceed $50,000. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance with clause
(c) of the immediately preceding paragraph, amounts expended pursuant to clauses
(i), (ii)(B) and (iv) shall be included in such calculation and, in the event
the acquisition contemplated in clause (vii) is not consummated within 180 days
after the deposit or loan is made in connection therewith, (vii) shall also be
included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant " -- Limitation on Restricted Payments" were computed,
which calculations may be based upon the Company's latest available financial
statements, and that no Default or Event of Default exists and is continuing and
no Default or Event of Default will occur immediately after giving effect to any
Restricted Payments.
Limitations on Investments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with the
" -- Limitation on Restricted Payments" covenant, after the Issue Date.
Limitations on Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Company or any Restricted Subsidiary or any shares of stock or
debt of any Restricted Subsidiary which owns property or assets, now owned or
hereafter acquired, unless (i) if such Lien secures Indebtedness which is pari
passu with the Notes, then the Notes are secured on an equal and ratable basis
with the obligations so secured until such time as such obligation is no longer
secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to a Lien on such
property or asset or shares of stock or debt granted to the holders of the Notes
to the same extent as such subordinated Indebtedness is subordinated to the
Notes.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (including entities in which the Company or any of its Restricted
Subsidiaries own a minority interest) or holder of 10% or more of the Common
Stock of the Company (an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior to
the Issue Date unless (i) such Affiliate Transaction is between or among the
Company and its Wholly-Owned Restricted Subsidiaries; or (ii) the terms of such
Affiliate Transaction are fair and reasonable to the Company or such Restricted
Subsidiary, as the case may be, and the terms of such Affiliate Transaction are
at least as favorable as the terms which could be obtained by the Company or
such Restricted Subsidiary, as the case may be, in a comparable transaction made
on an arm's-length basis between unaffiliated parties. In any Affiliate
Transaction involving an amount or having a value in excess of $1.0 million
which is not permitted under clause (i) above, the Company must obtain a
resolution of the Board of Directors certifying that such Affiliate Transaction
complies with clause (ii) above. In transactions with a value in excess of $5.0
million which are not permitted under clause (i) above, the Company must obtain
a written opinion as to the fairness of such a transaction from a nationally
recognized independent investment banking firm.
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The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under " -- Limitations on
Restricted Payments" contained herein, (ii) any transaction, approved by the
Board of Directors of the Company, with an officer or director of the Company or
of any Subsidiary in his or her capacity as officer or director entered into in
the ordinary course of business, (iii) any transactions with KECC for advisory
services to the extent the payment for such services do not exceed $200,000 per
year, (iv) customary banking transactions with an Affiliate of KECC, (v)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Subsidiary
of the Company as determined in good faith by the Company's Board of Directors,
or (vi) transactions exclusively between or among the Company and any of its
Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by the
Indenture.
Limitation on Creation of Subsidiaries
The Company shall not create or acquire, nor permit any of its Restricted
Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted
Subsidiary existing as of the date of the Indenture, (ii) a Restricted
Subsidiary conducting a business similar or reasonably related to the business
of the Company and its Subsidiaries on the Issue Date, or (iii) an Unrestricted
Subsidiary; provided, however, that each Restricted Subsidiary organized under
the laws of the United States or any State thereof or the District of Columbia
acquired or created pursuant to clause (ii) shall, at the time it has either
assets or shareholder's equity in excess of $10,000, execute a guarantee, in the
form attached to the Indenture and reasonably satisfactory in form and substance
to the Trustee (and with such documentation relating thereto as the Trustee
shall require, including, without limitation a supplement or amendment to the
Indenture and opinions of counsel as to the enforceability of such guarantee).
See "-- Future Guarantees."
Limitation on Certain Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or its
Restricted Subsidiaries, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Company's board of directors, and
evidenced by a board resolution); (ii) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the form
of cash or cash equivalents (those equivalents allowed under "Temporary Cash
Investments"); and (iii) the Asset Sale Proceeds received by the Company or such
Restricted Subsidiary are applied (a) first, to the extent the Company elects,
or is required to prepay, repay or purchase Indebtedness (other than
Subordinated Indebtedness) of the Company or any Restricted Subsidiary within
270 days following the receipt of the Asset Sale Proceeds from any Asset Sale,
provided that any such repayment shall result in a permanent reduction of the
commitments thereunder in an amount equal to the principal amount so repaid; (b)
second, to the extent of the balance of Asset Sale Proceeds after application as
described above, to the extent the Company elects, to an investment in assets
(including Capital Stock or other securities purchased in connection with the
acquisition of Capital Stock or property of another person) used or useful in
businesses similar or ancillary to the business of the Company or Restricted
Subsidiary as conducted at the time of such Asset Sale, provided that such
investment occurs or the Company or a Restricted Subsidiary enters into
contractual commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 271st day
following receipt of such Asset Sale Proceeds (the "Reinvestment Date") and
Asset Sale Proceeds contractually committed are so applied within 365 days
following the receipt of such Asset Sale Proceeds; and (c) third, if on the
Reinvestment Date with respect to any Asset Sale, the Available Asset Sale
Proceeds exceed $5.0 million, the Company shall apply an amount equal to
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase (an "Excess Proceeds Offer").
If an Excess Proceeds Offer is not fully subscribed, the Company may retain the
portion of the Available Asset Sale Proceeds not required to repurchase Notes.
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If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
Holders stating, among other things: (1) that such holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than 60
days from the date such notice is mailed; (3) the instructions, determined by
the Company, that each Holder must follow in order to have such Notes
repurchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such Notes.
Limitation on Preferred Stock of Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary to issue any
Preferred Stock (except Preferred Stock to the Company or a Restricted
Subsidiary) or permit any Person (other than the Company or a Subsidiary) to
hold any such Preferred Stock unless the Company or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under the first paragraph of
the covenant described under " -- Limitation on Additional Indebtedness" in the
aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued.
Limitation on Capital Stock of Restricted Subsidiaries
The Company will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Subsidiary (other than under the Revolving
Credit Facility or a successor facility) or (ii) permit any of its Subsidiaries
to issue any Capital Stock, other than to the Company or a Wholly-Owned
Restricted Subsidiary of the Company. The foregoing restrictions shall not apply
to an Asset Sale made in compliance with " -- Limitation on Certain Asset Sales"
or the issuance of Preferred Stock in compliance with the covenant described
under " -- Limitation on Preferred Stock of Restricted Subsidiaries."
Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined by a board resolution of the
Company and (ii) the Company could incur the Attributable Indebtedness in
respect of such Sale and Lease-Back Transaction in compliance with the covenant
described under " -- Limitation on Additional Indebtedness."
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances or capital contributions to
the Company or any of its Restricted Subsidiaries or (c) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (i)
encumbrances or restriction existing on the Issue Date or under the Revolving
Credit Facility, (ii) the Indenture, the Notes and the Guarantees, if
applicable, (iii) applicable law, (iv) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries or of any Person that becomes a Restricted Subsidiary as in effect
at the time of such acquisition or such Person becoming a Restricted Subsidiary
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition or such Person becoming a Restricted
Subsidiary), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person (including any Subsidiary of the Person), so
acquired, provided that the EBITDA of such Person is not taken into account (to
the extent of such restriction) in determining whether any financing or
Restricted Payment in connection with such acquisition was permitted by the
terms of the Indenture,
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(v) customary nonassignment provisions in leases or other agreements entered
into in the ordinary course of business and consistent with past practices, (vi)
Refinancing Indebtedness; provided that such restrictions are in the aggregate
no more restrictive than those contained in the agreements governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
or (vii) customary restrictions in security agreements, liens or mortgages
securing Indebtedness of the Company or a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements and mortgages.
Payments for Consent
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, including out-of-pocket costs and expenses, to any
holder of any Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or agreed to be paid to all holders of the
Notes which so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
CHANGE OF CONTROL OFFER
Within 20 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof plus any accrued and unpaid
interest thereon to the Change of Control Payment Date (as hereinafter defined)
(such applicable purchase price being hereinafter referred to as the "Change of
Control Purchase Price") in accordance with the procedures set forth in this
covenant.
Within 30 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each holder of the Notes, at the address appearing in the register maintained by
the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment, and
otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 30 business days from the date such
notice is mailed (the "Change of Control Payment Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
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(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Company shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered; provided that each such new Note shall be
issued in an original principal amount in denominations of $1,000 and integral
multiples thereof.
The Revolving Credit Facility restricts the Company's ability to repurchase
any Notes pursuant to a Change of Control Offer prior to repayment in full of
all obligations under or in respect of the Revolving Credit Facility or requires
the Company to obtain the requisite consent under the Revolving Credit Facility
to permit the repurchase of the Notes pursuant to a Change of Control Offer. The
Revolving Credit Facility contains a "change of control" provision that is
similar in most respects to the provision of the Indenture relating to a Change
of Control, and the occurrence of such a "change of control" will constitute an
event of default under the Revolving Credit Facility.
The Indenture requires that if the Revolving Credit Facility is in effect,
or any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to holders
described in the second preceding paragraph, but in any event within 30 days
following any Change of Control, the Company shall (i) repay in full all
obligations under or in respect of the Revolving Credit Facility or offer to
repay in full all obligations under or in respect of the Revolving Credit
Facility and repay the obligations under or in respect of the Revolving Credit
Facility of each lender who has accepted such offer or (ii) obtain the requisite
consent under the Revolving Credit Facility to permit the repurchase of the
Notes as described above. The Company must first comply with the covenant
described in the preceding sentence before it may commence a Change of Control
Offer in the event of a Change of Control; provided that the Company's failure
to comply with the covenant described in the preceding sentence constitutes an
Event of Default described in clause (iii) under "-- Events of Default" below if
not cured within 30 days after the notice required by such clause. As a result
of the foregoing, a holder of the Notes may not be able to compel the Company to
purchase the Notes unless the Company is able at the time to refinance all of
the obligations under or in respect of the Revolving Credit Facility or obtain
requisite consents under the Revolving Credit Facility. There can be no
assurance that if a Change of Control were to occur, the Company would have
sufficient assets to first satisfy its obligations in respect of the Revolving
Credit Facility and then to repurchase all of the Notes that might be delivered
by holders seeking to accept a Change of Control Offer. Failure by the Company
to make a Change of Control Offer when required by the Indenture constitutes a
default under the Indenture and, if not cured within 30 days after notice,
constitutes an Event of Default.
The Indenture provides that, (A) if the Company or any Subsidiary thereof
has issued any outstanding (i) Indebtedness that is subordinated in right of
payment to the Notes or (ii) Preferred Stock, and the Company or such Subsidiary
is required to make a Change of Control Offer or to make a distribution with
respect to such subordinated Indebtedness or Preferred Stock in the event of a
change of control, the Company shall not consummate any such offer or
distribution with respect to such subordinated Indebtedness or Preferred Stock
until such time as the Company shall have paid the Change of Control Purchase
Price in full to the holders of Notes that have accepted the Company's Change of
Control Offer and shall otherwise have consummated the Change of Control Offer
made to holders of the Notes and (B) the Company will not issue Indebtedness
that is subordinated in right of payment to the Notes or Preferred Stock with
change of control provisions requiring the payment of such Indebtedness or
Preferred Stock prior to the payment of the Notes in the event of a Change in
Control under the Indenture.
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In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Company will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not and will not permit any Guarantor, if applicable, to
consolidate with, merge with or into, or transfer all or substantially all of
its assets (as an entirety or substantially as an entirety in one transaction or
a series of related transactions), to any Person unless: (i) the Company or the
Guarantor, as the case may be, shall be the continuing Person, or the Person (if
other than the Company or the Guarantor) formed by such consolidation or into
which the Company or the Guarantor, as the case may be, is merged or to which
the properties and assets of the Company or the Guarantor, as the case may be,
are transferred shall be a corporation organized and existing under the laws of
the United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company or the Guarantor, as the case may be, under the Notes and the Indenture,
and the obligations under the Indenture shall remain in full force and effect;
(ii) immediately before and immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis the Consolidated Net Worth of the Company or the surviving
entity as the case may be is at least equal to the Consolidated Net Worth of the
Company immediately before such transaction or series of transactions; and (iv)
immediately after giving effect to such transaction on a pro forma basis the
Company or such Person could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the covenant set forth under
"-- Certain Covenants -- Limitation on Additional Indebtedness;" provided that a
Person that is a Guarantor may consolidate with, merge into or transfer all or
substantially all of its assets to the Company or another Person that is a
Guarantor without complying with this clause (iv).
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with by the appropriate Persons.
FUTURE GUARANTEES
The Notes will be jointly and severally unconditionally guaranteed on a
senior unsecured basis by the Guarantors.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of such Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under "-- Certain Covenants -- Limitation on Certain Asset
Sales," or the Guarantor merges with or into or consolidates with, or transfers
all or substantially all of its assets to, the Company or another Guarantor in a
transaction in compliance with "-- Merger, Consolidation or Sale of Assets," and
such
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Guarantor has delivered to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent herein provided for
relating to such transaction have been complied with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on
the Notes;
(ii) default for 30 days in payment of any interest on the Notes;
(iii) default by the Company or any Guarantor in the observance or
performance of any other covenant in the Notes or the Indenture for 30 days
after written notice from the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding;
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $5.0 million or more with respect to any Indebtedness
of the Company or any Restricted Subsidiary thereof, or the acceleration of
any such Indebtedness aggregating $5.0 million or more which default shall
not be cured, waived or postponed pursuant to an agreement with the holders
of such Indebtedness within 60 days after written notice as provided in the
Indenture, or such acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $3.0 million (which are not paid or
covered by insurance so long as the insurer has not disclaimed coverage or
so long as a court of competent jurisdiction has ordered, in a final and
nonappealable order, the insurer to make payment) shall be rendered against
the Company or any Restricted Subsidiary thereof, and shall not be
discharged for any period of 60 consecutive days during which a stay of
enforcement shall not be in effect; and
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Restricted Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if any,
or interest on the Notes) if the Trustee considers it to be in the best interest
of the holders of the Notes to do so.
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued interest to the date of
acceleration; provided, however, that after such acceleration but before a
judgment or decree based on acceleration is obtained by the Trustee, the holders
of a majority in aggregate principal amount of outstanding Notes may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than nonpayment of accelerated principal, premium or interest,
have been cured or waived as provided in the Indenture. In case an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization shall occur, the principal, premium and interest amount with
respect to all of the Notes shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute
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such proceeding as a trustee, and unless the Trustee shall not have received
from the holders of a majority in aggregate principal amount of the outstanding
Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not apply
to a suit instituted on such Note on or after the respective due dates expressed
in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of such Notes, to replace
temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office
or agency in respect of the Notes and to hold monies for payment in trust)
("defeasance") or (b) to be released from their obligations with respect to the
Notes under certain covenants contained in the Indenture and described above
under "-- Certain Covenants" ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money
and/or U.S. Government Obligations which through the payment of principal and
interest in accordance with their terms will provide money, in an amount
sufficient to pay the principal of, premium, if any, and interest on the Notes,
on the scheduled due dates therefor or on a selected date of redemption in
accordance with the terms of the Indenture. Such a trust may only be established
if, among other things, the Company has delivered to the Trustee an Opinion of
Counsel (as specified in the Indenture) (i) to the effect that neither the trust
nor the Trustee will be required to register as an investment company under the
Investment Company Act of 1940, as amended, and (ii) describing either a private
ruling concerning the Notes or a published ruling of the Internal Revenue
Service, to the effect that holders of the Notes or persons in their positions
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge 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, defeasance and discharge had not
occurred.
MODIFICATION OF INDENTURE
From time to time, the Company, the Guarantors, if applicable, and the
Trustee may, without the consent of holders of the Notes, amend or waive
provisions of the Indenture or the Notes or supplement the Indenture for certain
specified purposes, including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
holder. The Indenture contains provisions permitting the Company, the
Guarantors, if applicable, and the Trustee, with the consent of holders of at
least a majority in principal amount of the outstanding Notes, to modify or
supplement the Indenture or the Notes, except that no such modification shall,
without the consent of each holder affected thereby, (i) reduce the principal
amount of outstanding Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes, (ii) reduce the rate of or
change the time for payment of interest on any Note, (iii) reduce the principal
of or premium on or change the stated maturity of any Note, (iv) make any Note
payable in money other than that stated in the Note or change the place of
payment from New York, New York, (v) change the amount or time of any payment
required by the Notes or reduce the premium payable upon any redemption of
Notes, or change the time before which no such redemption may be made, (vi)
waive a default on the payment of the principal of, interest on, or redemption
payment with respect to any Note, (vii) alter the Company's obligation to
purchase the Notes in accordance with the Indenture following the occurrence of
an Asset Sale or a Change of Control or waive any default in the performance
thereof, (viii) affect the ranking of the Notes in a manner adverse to the
holders of the Notes or (ix) take any other action otherwise prohibited by the
Indenture to be taken without the consent of each holder affected thereby.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it will furnish the information required thereby to the
Commission and to the holders of the Notes. The Indenture provides that even if
the Company is entitled under the Exchange Act not to furnish such information
to the Commission or to the holders of the Notes, it will nonetheless furnish to
the Commission and holders of the
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Notes (i) within 120 days after the end of each fiscal year of the Company, (x)
audited year-end consolidated financial statements (including a balance sheet,
income statement and statement of changes of cash flow) prepared in accordance
with GAAP and substantially in the form required under Regulation S-X under the
Securities Act and (y) the information described in Item 303 of Regulation S-K
under the Securities Act with respect to such period and (ii) within 60 days
after the end of each of the first three fiscal quarters of each fiscal year of
the Company, (x) unaudited quarterly consolidated financial statements
(including a balance sheet, income statement and statement of changes of cash
flows) prepared in accordance with GAAP and substantially in the form required
by Regulation S-X under the Securities Act and (y) the information described in
Item 303 of Regulation S-K under the Securities Act with respect to such period.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 120 days after the end
of the Company's fiscal year and on or before 50 days after the end of each the
first, second and third fiscal quarters in each year an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
has occurred. If they do, the certificate will describe the Default or Event of
Default and its status.
THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the continuance
of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indentures. The Registrar
is not required to transfer or exchange any Note selected for redemption. Also,
the Registrar is not required to transfer or exchange any Note for a period of
15 days before selection of the Notes to be redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
GOVERNING LAW
The Indenture provides that the Indenture, the Notes and any Guarantee will
be governed by and construed in accordance with the internal laws of the State
of New York, without giving effect to principles of conflicts of laws.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee, of such Guarantor at such date
and (y) the present fair salable value of the assets of such Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
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such Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities and after giving effect to any collection from any
subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding Indebtedness in respect of the Guarantee, as
they become absolute and matured.
"Affiliate" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that the term "Affiliate" shall not include any portfolio
company of KECC so long as such portfolio company does not own or control any
shares of capital stock of the Company or Holding and the Company or Holding
does not own or control any shares of the capital stock of such portfolio
company.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary of the Company, (b) all or substantially
all of the assets of the Company or of any Restricted Subsidiary thereof, (c)
real property, other than the lease thereof in the ordinary course of business,
or (d) all or substantially all of the assets of any business owned by the
Company or any Restricted Subsidiary thereof, or a division, line of business or
comparable business segment of the Company or any Restricted Subsidiary thereof;
provided that Asset Sales shall not include sales, leases, conveyances,
transfers or other dispositions to the Company or to a Restricted Subsidiary or
to any other Person if after giving effect to such sale, lease, conveyance,
transfer or other disposition such other Person becomes a Restricted Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts to be provided by the Company or a Restricted Subsidiary as
a reserve, in accordance with GAAP, against any liabilities associated with the
assets sold or disposed of in such Asset Sale and retained by the Company or a
Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other noncash consideration received by the Company or any Restricted Subsidiary
from such Asset Sale or other disposition upon the liquidation or conversion of
such notes or noncash consideration into cash.
"Attributable Indebtedness" under the Indenture in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(i) the fair value of the property subject to such arrangement (as determined by
the Board of Directors) and (ii) the present value (discounted according to GAAP
at the cost of indebtedness implied in the lease) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale and Lease-Back Transaction (including any period for which such
lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sales that have not been applied
or committed in accordance with clauses (iii)(a) or (iii)(b), and which has not
yet been the basis for an Excess Proceeds Offer in accordance with clause
(iii)(c) of the first paragraph of "Certain Covenants -- Limitation on Certain
Asset Sales".
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into any of the foregoing.
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"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
A "Change of Control" will be deemed to have occurred at such time as (i)
the Permitted Holders, individually or in the aggregate, cease to beneficially
own (as defined under Rule 13d-3 or any successor rule or regulation promulgated
under the Exchange Act), directly or indirectly, 50.1% or more of the Common
Equity Interests of the Company or Holding, (ii) there shall be consummated any
consolidation or merger of the Company or Holding in which the Company or
Holding, as the case may be, is not the continuing or surviving corporation or
pursuant to which the Common Equity Interests of the Company or Holding, as the
case may be, would be converted into cash, securities or other property, other
than a merger or consolidation of the Company in which the holders of the Common
Equity Interests of the Company or Holding, as the case may be, outstanding
immediately prior to the consolidation or merger hold, directly or indirectly,
at least a majority of the Common Equity Interests of the surviving corporation
immediately after such consolidation or merger, (iii) there is a sale, lease or
transfer of all or substantially all of the assets of the Company or Holding to
any Person or group (as such term is defined in Section 13(d)(3) of the Exchange
Act), other than a Permitted Holder or (iv) the replacement of a majority of the
Board of Directors of Holding over a two-year period from the directors who
constituted the Board of Directors of Holding at the beginning of such period,
and such replacement shall not have been approved or recommended by a vote of at
least a majority of the Board of Directors of Holding then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
"Common Equity Interests" of any Person means all Equity Interests of such
Person that are generally entitled to (i) vote in the election of directors of
such person or (ii) if such person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Consolidated Fixed Charges" means, with respect to any Person the sum of a
Person's (i) Consolidated Interest Expense, plus (ii) the product of (x) the
aggregate amount of all dividends paid on Disqualified Capital Stock of the
Company or on each series of preferred stock of each Subsidiary of such Person
(other than dividends paid or payable in additional shares of preferred stock or
to the Company or any of its Wholly-Owned Restricted Subsidiaries) times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective combined federal, state and local tax rate of
such Person (expressed as a decimal), in each case, for such four-quarter
period.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis,
imputed interest included in Capitalized Lease Obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, the net costs associated with hedging
obligations, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or premium,
if any, and all other non-cash interest expense (other than interest amortized
to cost of sales) plus, without duplication, all net capitalized interest for
such period and all interest incurred or paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income (before preferred stock dividends) of
such Person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP; provided, however, that (a) the Net Income
of any Person (the "other Person") in which the Person in question or any of its
Subsidiaries has less than a 100%
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interest (which interest does not cause the net income of such other Person to
be consolidated into the net income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the Notes or the Indenture) shall be
excluded to the extent of such restriction or limitation, (c)(i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded,
and (d) extraordinary, unusual and non-recurring gains and losses shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person at any date, the
consolidated stockholder's equity of such Person less the amount of such
stockholder's equity attributable to Disqualified Capital Stock of such Person
and its Subsidiaries, as determined in accordance with GAAP.
"Currency Agreement" means, for any Person, any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person against fluctuations in currency values.
"Disqualified Capital Stock" means any Capital Stock of the Company or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary of
the Company and (ii) any Preferred Stock of the Company, with respect to either
of which, under the terms of such Preferred Stock, by agreement or otherwise,
such Restricted Subsidiary or the Company is obligated to pay current dividends
or distributions in cash during the period prior to the maturity date of the
Notes; provided, however, that Preferred Stock of the Company or any Restricted
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of the Company or Restricted Subsidiary, which provisions have
substantially the same effect as the provisions of the Indenture described under
"Change of Control," shall not be deemed to be Disqualified Capital Stock solely
by virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
Consolidated Net Income for such period, plus, minus (b) all non-cash items
increasing Consolidated Net Income for such period, all for such Person and its
Subsidiaries determined in accordance with GAAP, except that with respect to the
Company each of the foregoing items shall be determined on a consolidated basis
with respect to the Company and its Restricted Subsidiaries only; and provided,
however, that, for purposes of calculating EBITDA during any fiscal quarter,
cash income from a particular Investment of such Person shall be included only
(x) if cash income has been received by such Person with respect to such
Investment during each of the previous four fiscal quarters, or (y) if the cash
income derived from such Investment is attributable to Temporary Cash
Investments.
"Equity Interests" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible or
exchangeable for any of the foregoing.
"Fixed Charge Coverage Ratio" of any Person means, with respect to any
determination date, the ratio of (i) EBITDA for such Person's prior four full
fiscal quarters for which financial results have been reported
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immediately preceding the determination date, to (ii) Consolidated Fixed Charges
of such Person. For purposes of computing the Fixed Charge Coverage Ratio, (A)
if the Indebtedness which is the subject of a determination under this provision
is Acquired Indebtedness, or Indebtedness incurred in connection with the
simultaneous acquisition (by way of merger, consolidation or otherwise) of any
Person, business, property or assets (an "Acquisition"), then such ratio shall
be determined by giving effect to (on a pro forma basis, as if the transaction
had occurred at the beginning of the four-quarter period used to make such
calculation) to both the incurrence or assumption of such Acquired Indebtedness
or such other Indebtedness and the inclusion in the Company's EBITDA of the
EBITDA of the acquired Person, business, property or assets, (B) if any
Indebtedness outstanding or to be incurred (x) bears a floating rate of
interest, the interest expense on 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 on a pro forma basis any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months), (y)
bears, at the option of the Company or a Restricted Subsidiary, a fixed or
floating rate of interest, the interest expense on such Indebtedness shall be
computed by applying, at the option of the Company or such Restricted
Subsidiary, either a fixed or floating rate and (z) was incurred under a
revolving credit facility, the interest expense on such Indebtedness shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period, (C) for any quarter prior to the date hereof included in the
calculation of such ratio, such calculation shall be made on a pro forma basis,
giving effect to the issuance of the Notes and the use of the net proceeds
therefrom as if the same had occurred at the beginning of the four-quarter
period used to make such calculation and (D) for any quarter included in the
calculation of such ratio prior to the date that any Asset Sale was consummated,
or that any Indebtedness was incurred, or that any Acquisition was effected, by
the Company or any of its Subsidiaries, such calculation shall be made on a pro
forma basis, giving effect to each Asset Sale, incurrence of Indebtedness or
Acquisition, as the case may be, and the use of any proceeds therefrom, as if
the same had occurred at the beginning of the four quarter period used to make
such calculation.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States on the Issue Date.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such person (and
"incurrence," "incurred," "incurable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities (including long-term
pension and healthcare liabilities) arising in the ordinary course of business)
if and to the extent any of the foregoing indebtedness would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
and shall also include, to the extent not otherwise included (i) any Capitalized
Lease Obligations, (ii) obligations secured by a lien to which the property or
assets owned or held by such Person is subject, whether or not the obligation or
obligations secured thereby shall have been assumed, (iii) guarantees of items
of other Persons which would be included within this definition for such other
Persons, (iv) all obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction, (v) in the case of
the Company, Disqualified Capital Stock of the Company or any Restricted
Subsidiary thereof, and (vi) obligations of any such Person under any Interest
Rate Agreement applicable to any of the foregoing (if and to the extent such
Interest Rate Agreement obligations would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP). The amount of
Indebtedness of any Person at any date
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shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided (i) that the amount outstanding at any time of any Indebtedness issued
with original issue discount, including the Notes, is the principal 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
and (ii) that Indebtedness shall not include any liability for federal, state,
local or other taxes. Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Company or any Restricted Subsidiaries for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business), loan or capital contribution to (by means of transfers of property to
others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and (ii) the repurchase of securities of any Person by such Person.
"Issue Date" means the date the Notes were first issued by Sub Co. and
authenticated by the Trustee under the Indenture.
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
Holding or the Company, the aggregate net proceeds received by such Person,
after payment of expenses, commissions and the like incurred in connection
therewith, whether such proceeds are in cash or in property (valued at the fair
market value thereof, as determined in good faith by the board of directors, at
the time of receipt), (b) in the case of any exchange, exercise, conversion or
surrender of outstanding securities of any kind for or into shares of Capital
Stock of the Company which is not Disqualified Capital Stock, the net book value
of such outstanding securities on the date of such exchange, exercise,
conversion or surrender (plus any additional amount required to be paid by the
holder to the Company upon such exchange, exercise, conversion or surrender,
less any and all payments made to the holders, e.g., on account of fractional
shares and less all expenses incurred by the Company in connection therewith)
and (c) in the case of any issuance of any Indebtedness by the Company or any
Restricted Subsidiary, the aggregate net cash proceeds received by such Person
after the payment of expenses, commissions, underwriting discounts and the like
incurred in connection therewith.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the Chief Operating Officer, the
President or any Vice President and the Chief Financial Officer or any Treasurer
of such Person that shall comply with applicable provisions of the Indenture.
"Permitted Holders" means (i) KECC and its Affiliates, (ii) any "group" (as
such term is used in Section 13(d) and 14(d) of the Exchange Act) comprised
solely of the Key Equity Group and its Affiliates
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(it being understood that a "group" that includes any other Person shall not be
a Permitted Holder) and (iii) any Person if (A) at least a majority of the total
voting and economic power of the Common Stock in such Person is owned by at
least a majority of the officers of KECC at the time of such transfer, (B) such
Person has at least $50.0 million in cash funds available for investment, and
(C) such Person is under no contractual restriction (whether pursuant to its
charter documents or otherwise) to make further investments in the Company.
"Permitted Indebtedness" means:
(i) Indebtedness incurred pursuant to the Revolving Credit
Facility in an aggregate principal amount at any time outstanding not to
exceed the greater of (i) the sum of (x) 85.0% of the net book value of
eligible accounts receivable of the Company and its Restricted
Subsidiaries and (y) 65.0% of the net book value of eligible inventory of
the Company and its Restricted Subsidiaries and (ii) $10.0 million, in
each case, reduced by any required permanent repayments thereunder;
(ii) Indebtedness under the Notes and the Guarantees, if applicable;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(iv) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Indebtedness and Capitalized Lease Obligations do not in the aggregate
exceed 5% of the Company's consolidated total assets;
(vi) Interest Rate Agreements and Currency Agreements;
(vii) Additional Indebtedness of the Company not to exceed $3.0
million in principal amount outstanding at any time;
(viii) Refinancing Indebtedness;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of day-light overdrafts) drawn against insufficient
funds in the ordinary course of business;
(x) Indebtedness of the Company and any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(xi) Indebtedness arising from guarantees of loans and advances by
third parties to employees and officers of the Company or its Subsidiaries
in the ordinary course of business for bona fide business purposes,
provided that the aggregate amount of such guarantees does not exceed
$250,000; and
(xii) Indebtedness arising from the repurchase of Capital Stock of
Holding if otherwise permitted under "--Certain Covenants -- Limitation on
Restricted Payments."
"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary
thereof, in the Company or a Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company or (b) such Person
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is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary thereof;
(iv) reasonable and customary loans made to employees not to exceed
$250,000 in the aggregate at any one time outstanding and other loans to
Holding or employees of the Company to the extent the proceeds of such
loans are used by such employees of the Company exclusively to purchase
shares of Capital Stock of Holding pursuant to the terms of the
Stockholders Agreement;
(v) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to the Company or Restricted Subsidiary (i) solely as
consideration for the consummation of an Asset Sale of Stir Melter or (ii)
otherwise permitted under the covenant described under "-- Certain
Covenants -- Limitation on Sale of Assets";
(vi) any Investment existing on the Issue Date;
(vii) any Investment acquired by the Company or any of its Restricted
Subsidiaries (a) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such Investment or accounts receivable or
(b) as the result of a foreclosure by the Company or any of its Restricted
Subsidiaries with respect to any secured Investment or other transfer of
title with respect to any secured Investment in default;
(viii) Investments the payment for which consists of Capital Stock of
the Company (exclusive of Disqualified Capital Stock); and
(ix) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (ix)
that are at that time outstanding, not to exceed $1.0 million.
"Permitted Liens" means (i) Liens on property or assets of, or any shares
of stock of or secured debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Restricted Subsidiaries,
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Restricted Subsidiary of the
Company or merging into the Company or any of its Restricted Subsidiaries, (ii)
Liens securing Refinancing Indebtedness, provided that any such Lien does not
extend to or cover any Property, shares or debt other than the Property, shares
or debt securing the Indebtedness so refunded, refinanced or extended, (iii)
Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens
securing industrial revenue bonds, (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under the Indenture, provided that (a)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item, (vi) statutory liens or landlords', carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor, (vii) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed $1.0 million in the aggregate
at any one time outstanding, (viii) Liens for taxes, assessments or governmental
charges that either are not delinquent or are being contested in good faith by
appropriate proceedings, (ix) Liens securing Capital Lease Obligations permitted
to be incurred under clause (v) of the definition of "Permitted Indebtedness,"
provided that such Lien does not extend to any property other than that subject
to the underlying lease, (x) Liens securing Indebtedness under the Revolving
Credit Facility, (xi) Liens of the Company's customers encumbering property or
assets under construction arising from the obligations of such
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<PAGE> 88
customers to make progress or partial payment relating to such construction,
(xii) judgment Liens that otherwise would not give rise to an Event of Default,
(xiii) easements, rights-of-way, zoning restrictions and other similar charges
or encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company or any of its
Subsidiaries, (xiv) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property relating
to such letters of credit and products and proceeds thereof, (xv) Liens
encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual, or warranty requirements of the Company or any of its
Subsidiaries, including rights of offset and set-off, (xvi) Liens existing on
the Issue Date and (xvii) any extensions, substitutions, replacements or
renewals of the foregoing.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified Equity Offering" means an offering by the Company or Holding of
shares of its common stock (however designated and whether voting or non-voting)
and any and all rights, warrants or options to acquire such common stock,
whether registered or exempt from registration under the Securities Act;
provided, however, that in connection with a Qualified Equity Offering of
Holding, the net proceeds of such Qualified Equity Offering are contributed to
the Company as common equity.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company outstanding on the Issue Date or other
Indebtedness permitted to be incurred by the Company or its Restricted
Subsidiaries pursuant to the terms of the Indenture, but only to the extent that
(i) if the Indebtedness being refunded, refinanced or extended was subordinate
to the Indebtedness represented by the Notes, then the Refinancing Indebtedness
is subordinated to the Notes to at least the same extent, (ii) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness
being refunded, refinanced or extended, or (b) after the maturity date of the
Notes, (iii) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a weighted
average life to maturity at the time such Refinancing Indebtedness is incurred
that is equal to or greater than the weighted average life to maturity of the
portion of the Indebtedness being refunded, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the Notes, (iv) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded, refinanced or extended, (b) the amount of
accrued and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly-Owned Restricted Subsidiary of the Company; provided, however,
that subclauses (ii) and (iii) of this definition will not apply to any
refunding, refinancing or extension of any Indebtedness under the Revolving
Credit Facility.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Restricted Subsidiary of the Company
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<PAGE> 89
or any payment made to the direct or indirect holders (in their capacities as
such) of Capital Stock of the Company or any Restricted Subsidiary of the
Company (other than (x) dividends or distributions payable solely in Capital
Stock (other than Disqualified Capital Stock) or in options, warrants or other
rights to purchase Capital Stock (other than Disqualified Capital Stock), and
(y) in the case of Restricted Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly-Owned Restricted Subsidiary
of the Company), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company or any of its
Restricted Subsidiaries (other than Capital Stock owned by the Company or a
Wholly-Owned Restricted Subsidiary of the Company, excluding Disqualified
Capital Stock), (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for value,
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, of any Subordinated Indebtedness (other than Subordinated Indebtedness
acquired in anticipation of satisfying a scheduled sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition), (iv) the making of any Investment or guarantee of any
Investment in any Person other than a Permitted Investment, (v) any designation
of a Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the
Investment by the Company therein and (vi) forgiveness of any Indebtedness of an
Affiliate of the Company to the Company or a Restricted Subsidiary. For purposes
of determining the amount expended for Restricted Payments, cash distributed or
invested shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"-- Certain Covenants -- Limitation on Additional Indebtedness" covenant.
"Revolving Credit Facility" means the revolving credit facility by and
among the Company, the lender named therein, and NationsBank, N.A., as agent, as
amended, modified, replaced, renewed, refunded, refinanced or supplemented from
time to time, and whether by the same or any other agent, lender or group of
lenders.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal property, which property has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person in contemplation of such leasing.
"Subordinated Indebtedness" means any Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries; or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with generally accepted accounting principles such entity is
consolidated with the first-named Person for financial statement purposes.
"Temporary Cash Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase; (ii) Investments in certificates of deposit issued by a
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500,000,000 and rated at least A by
Standard & Poor's Corporation and A-2 by Moody's Investors Service, Inc.,
maturing within 365 days of
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<PAGE> 90
purchase; (iii) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of Investment, having a rating of at least A-1
from S&P or at least P-1 from Moody's; (iv) repurchase obligations with a term
of not more than seven days for the underlying securities of the types described
in clause (i) above entered into with any bank meeting the qualifications
specified in clause (ii) above; or (v) Investments not exceeding 365 days in
duration in money market funds that invest substantially all of such funds'
assets in the Investments described in the preceding clauses (i) and (ii).
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company; provided that a Subsidiary organized or acquired after
the Issue Date may be so classified as an Unrestricted Subsidiary only if such
classification is in compliance with the covenant set forth under "-- Certain
Covenants -- Limitation on Restricted Payments." The Trustee shall be given
prompt notice by the Company of each resolution adopted by the Board of
Directors of the Company under this provision, together with a copy of each such
resolution adopted.
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares)
of which are owned, directly or indirectly, by the Company.
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<PAGE> 91
BOOK-ENTRY, DELIVERY AND FORM
The New Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Global
Note"). The Global Note will be deposited upon issuance with the Trustee, as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant as described below. Notes sold to Accredited Investors (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) may be represented
by the Global Note or, if such an investor may not hold an interest in the
Global Note, a certificated Note.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
" -- Exchange of Book-Entry Notes for Certificated Notes."
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar of the Notes.
Depository Procedures
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the Exchange Agent with portions of the principal
amount of the Global Note and (ii) ownership of such interests in the Global
Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in the Global Note to pledge such interests
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Notes, See " -- Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of (and premium, if any) and interest
on the Global Note registered in the name of DTC or its nominee will be payable
to DTC or its nominee in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee will
treat the
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<PAGE> 92
persons in whose names the Notes, including the Global Note, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Company, the Trustee
nor any agent of the Company or the Trustee has or will have any responsibility
or liability for (i) any aspect or accuracy of DTC's records or any
Participant's or Indirect Participant's records relating to our payments made on
account of beneficial ownership interests in the Global Note, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Note, or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Note as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of the Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
Interest in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account will DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if any of the events described under " -- Exchange of Book Entry Notes
for Certificated Notes" occur, DTC reserves the right to exchange the Global
Note for Notes in certificated form, and to distribute such Notes to the
relevant Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Note among accountholders in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company, the Trustee nor
any agent of the Company or Trustee will have any responsibility for the
performance of DTC, or its respective accountholders, indirect participants or
accountholders of their respective obligations under the rules and procedures
governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
The Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act; (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for the Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
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<PAGE> 93
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury Regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "IRS") will not take a contrary view, and
no ruling from the IRS has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the ta
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. The Company recommends that
each holder consult such holder's own tax adviser as to the particular tax
consequences of exchanging such holder's Old Notes for New Notes, including the
applicability and effect of any state, local or foreign tax laws.
The Company believes that the exchange of Old Notes for New Notes pursuant
to the Exchange Offer will not be treated as an "exchange" for federal income
tax purposes because the New Notes will not be considered to differ materially
in kind or extent from the Old Notes. Rather, the New Notes received by a holder
will be treated as a continuation of the Old Notes in the hands of such holder.
As a result, there will be no federal income tax consequences to holders
exchanging Old Notes for New Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating 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
Participating 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 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1997 (90 days after the commencement of the Exchange Offer), all
dealers effecting transactions in the New Notes, whether or not participating in
this distribution, may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the New Notes
by Participating Broker Dealers. New Notes received by Participating
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 Participating BrokerDealer and/or the purchasers of
any such New Notes. Any Participating Broker-Dealer that resells the 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 Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by Baker
& Hostetler LLP.
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EXPERTS
The consolidated financial statements of Glasstech, Inc. (and its
predecessor Glasstech Industries, Inc., as applicable) as of June 30, 1997 and
1996 and for each of the periods in the three years ended June 30, 1997
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
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<PAGE> 95
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors......................................................... F-2
Consolidated Balance Sheets at June 30, 1996 and 1997.................................. F-3
For the periods ended January 3 and June 30, 1995 and the years ended June 30, 1996 and
1997:
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> 96
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Glasstech, Inc.
We have audited the accompanying consolidated balance sheets of Glasstech, Inc.
as of June 30, 1997 and 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for the years ended June 30, 1997 and 1996,
and for the period from January 4, 1995 through June 30, 1995 and as to its
predecessor (see Note 1) the period from July 1, 1994 through January 3, 1995.
Our audits also included the financial statement schedule listed in item 21(b)
of this Registration Statement. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as an evaluation of the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As more fully described in the notes to the consolidated financial statements,
effective January 3, 1995, the Company emerged from bankruptcy pursuant to a
plan of reorganization confirmed by the Bankruptcy Court on December 6, 1994. In
accordance with an American Institute of Certified Public Accountants' Statement
of Position, the Company has adopted "fresh start" reporting whereby its assets,
liabilities and new capital structure have been adjusted to reflect estimated
fair values as of January 3, 1995. As a result, the consolidated financial
statements as of June 30, 1997 and 1996 and for the years ended June 30, 1997
and 1996, and for the period from January 4, 1995 through June 30, 1995 reflect
this basis of reporting and are not comparable to the Company's
pre-reorganization consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Glasstech, Inc. at June 30, 1997 and 1996, and the consolidated results of its
operations and its cash flows for the years ended June 30, 1997 and 1996, and
for the period from January 4, 1995 through June 30, 1995, and the consolidated
results of its predecessor's operations and its predecessor's cash flows for the
period from July 1, 1994 through January 3, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 6 to the consolidated financial statements, effective July
1, 1994, the Company changed its method of accounting for post-retirement
benefits other than pensions.
ERNST & YOUNG LLP
Toledo, Ohio
August 15, 1997
F-2
<PAGE> 97
GLASSTECH, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30,
------------------
1996 1997
------- -------
<S> <C> <C>
ASSETS (NOTE 4)
Current assets:
Cash and cash equivalents............................................... $43,815 $51,805
Restricted cash......................................................... 1,418 1,529
Accounts receivable:
Contracts:
Uncompleted, including unbilled amounts of $3,041 and $2,188....... 4,902 3,652
Completed, less allowance of $138 and $101 for doubtful accounts... 1,588 1,676
Trade, less allowance of $40 for doubtful accounts................... 1,764 1,530
------- -------
8,254 6,858
Inventory:
Replacement and service parts........................................ 1,607 2,083
Furnace contracts and other.......................................... 962 2,182
------- -------
2,569 4,265
Prepaid expenses........................................................ 315 481
------- -------
Total current assets...................................................... 56,371 64,938
Property, plant and equipment, net (Note 3)............................... 8,882 8,390
Other assets:
Patents, less accumulated amortization of $2,590 and $4,317............. 20,009 18,283
Reorganization value in excess of amounts allocable to identifiable
assets, less accumulated amortization of $1,020 and $1,599........... 10,713 7,583
Other................................................................... 2 170
------- -------
Total other assets........................................................ 30,724 26,036
------- -------
$95,977 $99,364
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 3,863 $ 3,413
Billings in excess of costs and estimated earnings on uncompleted
contracts............................................................ 15,637 10,720
Accrued liabilities:
Salaries and wages................................................... 2,760 3,606
Contract costs....................................................... 2,701 3,780
Interest............................................................. 2,100 2,100
Other................................................................ 1,711 1,801
------- -------
9,272 11,287
------- -------
Total current liabilities................................................. 28,772 25,420
Long-term debt (Note 4)................................................... 42,000 42,000
Non-pension post-retirement benefit obligation (Note 6)................... 2,553 2,712
Shareholders' equity (Note 5):
Common stock $.01 par value; 10,000,000 shares authorized; 1,000,001
shares issued and outstanding........................................ 10 10
Additional capital...................................................... 20,295 20,377
Retained earnings....................................................... 2,347 8,845
------- -------
Total shareholders' equity................................................ 22,652 29,232
======= =======
$95,977 $99,364
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 98
GLASSTECH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY REORGANIZED COMPANY
------------ -------------------------------------------------------
PERIOD FROM PERIOD FROM
JULY 1, 1994 JANUARY 4, 1995
THROUGH THROUGH YEARS ENDED JUNE 30,
JANUARY 3, JUNE 30, -----------------------------------
1995 1995 1996 1997
------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenue......................... $ 25,948 $27,854 $62,771 $76,433
Cost of goods sold.................. 16,576 17,036 39,024 45,603
------- ------- ------- -------
Gross profit........................ 9,372 10,818 23,747 30,830
Selling, general and administrative
expenses.......................... 3,430 5,105 10,723 12,866
Research and development expenses... 2,082 2,302 4,557 4,594
Amortization expense................ 2,512 1,203 2,407 2,306
------- ------- ------- -------
Operating profit.................... 1,348 2,208 6,060 11,064
Interest expense.................... -- (2,077) (4,200) (4,200)
Other income (expense) -- net....... 35 784 1,540 2,263
------- ------- ------- -------
Income before items below........... 1,383 915 3,400 9,127
Reorganization items (Note 1)....... (1,164) -- -- --
------- ------- ------- -------
Income before income taxes,
extraordinary gain and change in
method of accounting.............. 219 915 3,400 9,127
Income taxes not payable in cash
(Note 7).......................... -- (445) (1,418) (2,551)
Federal income taxes, current....... -- -- (105) (78)
------- ------- ------- -------
Income before extraordinary gain and
change in method of accounting.... 219 470 1,877 6,498
Extraordinary gain (Note 1)......... 214,773 -- -- --
Cumulative effect on prior years of
change in method of accounting for
non-pension post-retirement
benefits (Note 6)................. (1,906) -- -- --
------- ------- ------- -------
Net income.......................... $213,086 $ 470 $ 1,877 $ 6,498
======= ======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 99
GLASSTECH, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK SHAREHOLDERS' RETAINED TREASURY STOCK
-------------------- ADDITIONAL BASIS EARNINGS -------------------
SHARES AMOUNT CAPITAL REDUCTION (DEFICIT) SHARES AMOUNT
--------- ------ ---------- ------------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1994................ 430,000 $ 4 $ 43,010 $ (46,705) $(189,158) 635 $ (63)
Net income......................... -- -- -- -- 213,086 -- --
Cancellation of predecessor common
stock.............................. (430,000) (4) (43,010) 46,705 (3,754) (635) 63
Issuance of reorganized company
common stock....................... 1,000,001 10 (10) -- -- -- --
Record enterprise value of
reorganized company................ -- -- 20,174 -- (20,174) -- --
--------- --- ------- -------- --------- ---- ----
Balance, January 3, 1995............. 1,000,001 10 20,164 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income......................... -- -- -- -- 470 -- --
--------- --- ------- -------- --------- ---- ----
Balance June 30, 1995................ 1,000,001 10 20,164 -- 470 -- --
Net income......................... -- -- -- -- 1,877 -- --
Issuance of common stock
warrants........................ -- -- 131 -- -- -- --
--------- --- ------- -------- --------- ---- ----
Balance June 30, 1996................ 1,000,001 10 20,295 -- 2,347 -- --
Net income......................... -- -- -- -- 6,498 -- --
Issuance of common stock........... 4,118 -- 82 -- -- -- --
--------- --- ------- -------- --------- ---- ----
Balance June 30, 1997................ 1,004,119 $ 10 $ 20,377 $ -- $ 8,845 -- $ --
========= === ======= ======== ========= ==== ====
<CAPTION>
TOTAL
---------
<S> <C>
Balance, July 1, 1994................ $(192,912)
Net income......................... 213,086
Cancellation of predecessor common
stock.............................. --
Issuance of reorganized company
common stock....................... --
Record enterprise value of
reorganized company................ --
---------
Balance, January 3, 1995............. 20,174
- ----------------------------------------------------------
Net income......................... 470
---------
Balance June 30, 1995................ 20,644
Net income......................... 1,877
Issuance of common stock
warrants........................ 131
---------
Balance June 30, 1996................ 22,652
Net income......................... 6,498
Issuance of common stock........... 82
---------
Balance June 30, 1997................ $ 29,232
=========
</TABLE>
See accompanying notes.
F-5
<PAGE> 100
GLASSTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY REORGANIZED COMPANY
------------- ---------------------------------------
PERIOD FROM PERIOD FROM
JULY 1, 1994 JANUARY 4,
THROUGH 1995 THROUGH YEARS ENDED JUNE 30,
JANUARY 3, JUNE 30, ----------------------
1995 1995 1996 1997
------------- ------------ -------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income before extraordinary gain and change in
method of accounting......................... $ 219 $ 470 $ 1,877 $ 6,498
Adjustment to reconcile income before
extraordinary item and change in method of
accounting to net cash provided by (used in)
operating activities:
Depreciation and amortization................ 3,277 1,901 3,721 3,764
Income taxes not payable in cash............. -- 445 1,418 2,551
Non-pension post-retirement benefit
obligation expense in excess of
payments.................................. 135 135 377 159
Other........................................ (193) 33 13 11
Changes in assets and liabilities affecting
operations:
Restricted cash.............................. 3,384 1,051 1,095 (111)
Accounts receivable.......................... (724) (4,056) 3,978 1,397
Inventory.................................... (181) (427) 246 (1,697)
Prepaid expenses............................. 71 10 6 (166)
Accounts payable............................. 531 (976) 817 (450)
Billings in excess of costs and estimated
earnings on uncompleted contracts......... 4,914 (2,153) 8,274 (4,917)
Accrued liabilities.......................... 2,370 2,178 699 1,934
------- ------- ------- -------
Net cash provided by (used in) operating
activities................................... 13,803 (1,389) 22,521 8,973
INVESTING ACTIVITIES
Additions to property, plant and equipment..... (480) (680) (2,152) (990)
Proceeds on sale of prototype.................. -- 755 491 --
Other.......................................... 1 15 (2) 12
------- ------- ------- -------
Net cash provided by (used in) investing
activities................................... (479) 90 (1,663) (978)
FINANCING ACTIVITIES
Issuance of stock warrants..................... -- -- 131 --
Issuance of common stock....................... -- -- -- 82
Effective date payments to noteholders and
other........................................ (6,200) (3,797) (6) (87)
------- ------- ------- -------
Net cash provided by (used in) financing
activities................................... (6,200) (3,797) 125 (5)
------- ------- ------- -------
Increase (decrease) in cash and cash
equivalents.................................. 7,124 (5,096) 20,983 7,990
Cash and cash equivalents at beginning of
period....................................... 20,804 27,928 22,832 43,815
------- ------- ------- -------
Cash and cash equivalents at end of period..... $27,928 $ 22,832 $ 43,815 $51,805
======= ======= ======= =======
Supplemental disclosure of cash flow
information:
Cash paid during the period for the
following:
Interest.................................. $ -- $ -- $ 4,177 $ 4,200
------- ------- ------- -------
Income taxes.............................. $ -- $ -- $ 105 $ 337
======= ======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 101
GLASSTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
Glasstech Industries, Inc. (Industries and Predecessor), a Delaware
corporation, and its wholly-owned subsidiary, GLT Corp., were formed to acquire
most of the assets and certain liabilities of Glasstech International L.P.
(GILP), a Delaware limited partnership, in a leveraged buyout transaction. The
acquisition was completed by GLT Corp. as of May 19, 1989 and thereafter it was
merged into Glasstech, Inc. (Glasstech and Successor), a Delaware corporation.
Prior to such date, Industries and GLT Corp. engaged only in activities related
to the acquisition. Glasstech has two wholly-owned subsidiaries, Glasstech Ltd.,
a corporation in the United Kingdom, and Stir-Melter, Inc., a Delaware
corporation.
On May 24 and 25, 1993, respectively, Industries and Glasstech filed
voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code
(Reorganization). A Joint Second Amended Plan of Reorganization (the "Joint
Plan") proposed by Industries and Glasstech on December 6, 1994, was confirmed
by the Federal Bankruptcy Court in the District of Delaware and became effective
on January 3, 1995 (the "Effective Date"). Industries was merged into Glasstech
and the bankruptcy effectively ended on that date.
Reorganization items included in the consolidated statements of income for
the period from July 1, 1994 through January 3, 1995 consisted of approximately
$1,341 of professional fees and related costs, $704 of incentive compensation, a
$193 gain on fair value adjustments to the Company's assets and liabilities and
$688 of interest earned on accumulated cash.
Glasstech designs and assembles glass bending and tempering equipment and
markets and sells such equipment worldwide to both automotive glass fabricators
and architectural glass producers. Glasstech Ltd. provides engineering, sales,
and service support in Europe, the Middle East, and Africa. Stir-Melter, Inc.
designs and markets glass-melting equipment for the treatment of certain waste
products.
In accounting for the effects of emergence from bankruptcy, Glasstech
implemented Statement of Financial Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code," (SOP 90-7) issued by the
American Institute of Certified Public Accountants. Accordingly, Glasstech
adopted "fresh start" reporting; its assets and liabilities were adjusted to
reflect their estimated fair value and the accumulated deficit as of January 3,
1995 was eliminated. Accordingly, the consolidated financial statements for
periods prior to January 3, 1995 are not necessarily comparable to consolidated
financial statements presented subsequent to that date. Black lines on the
consolidated financial statements distinguish between pre-reorganization and
post-reorganization activity.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
For financial reporting purposes, the Company includes in income the
ratable portion of profits on uncompleted contracts determined in accordance
with the stage of completion measured by the percentage of costs incurred to
estimated total costs of each contract. For income tax purposes, contracts are
accounted for on the inventory accrual basis whereby income is recognized when
the equipment is accepted by the customer. Unbilled amounts included in
uncompleted contract accounts receivable represent revenues recognized in excess
of amounts billed. Billings in excess of costs and estimated earnings on
uncompleted contracts represent amounts billed in excess of revenues recognized.
Revenue from sales other than contracts is recognized when the products are
shipped.
F-7
<PAGE> 102
GLASSTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CREDIT PRACTICES
Credit terms are granted to customers and periodically revised based on
evaluations of the customers' financial condition with collateral generally not
being required. In certain instances, letters of credit may be obtained to
secure payment. Credit losses relating to customers consistently have been
within management's expectations.
CASH AND CASH EQUIVALENTS
The Company considers all unrestricted highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Restricted cash primarily represents cash collateral for outstanding
standby letters of credit issued on behalf of the Company in support of the
Company's performance obligations under various sales contracts. These funds
become available upon performance under the applicable sales contracts or
expiration of the underlying letter of credit, or both.
INVENTORY
Inventory is stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method.
DEPRECIATION AND AMORTIZATION
Depreciation is based on the estimated useful lives of the assets and is
generally computed using accelerated methods. Amortization of leasehold
improvements is provided on the straight-line basis over the estimated useful
lives of the assets or the terms of the leases, whichever is shorter. The useful
lives range from 10 to 40 years for building and leasehold improvements; 3 to 12
years for machinery and equipment; 7 to 12 years for prototype glass tempering
furnaces; and 3 to 12 years for office equipment and other.
Patents are being amortized on the straight-line basis over their estimated
useful lives of 12 to 15 years.
Reorganization value in excess of amounts allocable to identifiable assets
is being amortized on the straight-line basis over 20 years.
STOCK OPTIONS
The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APBO No. 25). The disclosure requirements of Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" are not
material.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE> 103
GLASSTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
AS OF JUNE 30,
-----------------
1996 1997
------- ------
<S> <C> <C>
Cost:
Land..................................................................... $ 110 $ 110
Building and leasehold improvements...................................... 2,448 2,512
Machinery and equipment.................................................. 1,448 1,830
Prototype glass tempering furnaces....................................... 4,554 4,776
Office equipment......................................................... 2,165 2,456
Other.................................................................... 33 17
------ -------
10,758 11,701
Less accumulated depreciation and amortization........................... (1,876) (3,311)
------ -------
Net property, plant and equipment.......................................... $ 8,882 $8,390
====== =======
</TABLE>
4. LONG-TERM DEBT
Long-term debt at June 30, 1996 and 1997 consists of $42,000 of senior
notes. The senior notes have a maturity date of July 1, 2001 and bear interest,
payable semi-annually, at the rate of 10%. The notes may be redeemed at the
Company's option after December 31, 1996 at 110% of the principal amount,
declining to 102% after December 31, 2000. Mandatory sinking fund requirements
during the five fiscal years subsequent to June 30, 1997 are as follows:
1998-1999 -- $0; 2000 -- $10,000; 2001 -- $10,000; 2002 -- $22,000.
The senior notes are secured by all assets of Glasstech. In addition, the
Indenture pursuant to which the senior notes were issued contains numerous
financial and other covenants which include the maintenance of certain levels of
earnings as defined in the Indenture, a prohibition on the payment of dividends,
and a restriction on additional indebtedness and obligations as well as certain
types of business activities and investments. The Company is in compliance with
all such covenants.
At June 30, 1996 and 1997, the carrying value of the Company's long-term
debt approximates its fair value based on the Company's incremental borrowing
rates.
5. COMMON STOCK
Effective January 5, 1995, the Company adopted a nonqualified stock option
plan ("Plan") authorizing the issuance of up to 5% of the Company's outstanding
Common Stock on a fully diluted basis. The Plan provides for granting options to
officers and key employees to purchase shares of the Company's common stock at a
price established by the Board of Directors, which approximates fair market
value. Options have terms of ten years and become vested and exercisable in 20%
increments beginning on the grant date and on each successive anniversary date
of the grant. Options for 58,823 shares have been authorized and granted under
the Plan at an exercise price of $20.00 per share. In addition, the Company
granted options for an additional 181,646 shares under separate agreements. The
options were granted at an exercise price of $20.00 per share with terms
identical to those contained in the Plan. No options were exercised or cancelled
through June 30, 1996. During 1997, options for 4,118 shares were exercised and
options for 6,176 shares were cancelled.
During 1996, the Company issued 65,290 common stock purchase warrants to
certain directors for total proceeds of $131. Subject to certain anti-dilution
provisions, each warrant entitles the holder to purchase one
F-9
<PAGE> 104
GLASSTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMON STOCK (CONTINUED)
share of the Company's common stock for $25.00 per share through January 5,
2001. No warrants have been exercised through June 30, 1997.
6. EMPLOYEE BENEFIT PLANS
Glasstech has defined contribution retirement plans which cover
substantially all employees. Contributions, which are based on participants'
compensation, are funded and approximated $270, $189, $541 and $604, for the
periods from July 1, 1994 through January 3, 1995, January 4, 1995 through June
30, 1995, and the years ended June 30, 1996 and 1997, respectively.
In addition, Glasstech provides certain retiree health care insurance
benefits to eligible retired employees. Employees are generally eligible for
benefits upon retirement and completion of a specified number of years of
creditable service. These benefits are provided at the discretion of Glasstech
and are subject to revision or termination at any time.
Effective July 1, 1994, Glasstech adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," on the immediate recognition
basis. Previously, the Company had expensed the cost of such benefits on the
pay-as-you-go (cash) basis. The cumulative effect as of July 1, 1995 of adopting
SFAS No. 106 was to decrease net earnings by $1,906. The change resulted in a
decrease in net income of approximately $135 for the period ended January 3,
1995 and $89 for the period ended June 30, 1995. The Company funds such costs as
they are incurred.
The components of the net periodic post-retirement benefit cost are as
follows:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY REORGANIZED COMPANY
--------------- ---------------------------------
PERIOD FROM PERIOD FROM
JULY 1, 1994 JANUARY 4, 1995 YEARS ENDED
THROUGH THROUGH JUNE 30,
JANUARY 3, JUNE 30, -------------
1995 1995 1996 1997
--------------- --------------- ---- ----
<S> <C> <C> <C> <C>
Service cost (benefits earned during the
period)........................................ $ 83 $ 79 $206 $117
Interest cost on accumulated post-retirement
benefit obligation............................. 77 73 200 128
Net amortization and deferral.................... -- -- 9 (55)
---- ---- ----
Net periodic post-retirement benefit cost........ $ 160 $ 152 $415 $190
==== ==== ====
</TABLE>
The components of the accumulated post-retirement benefit obligation and
amounts accrued at June 30 were as follows:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Actuarial present value of benefit obligations:
Retirees and dependents.................................................. $ 214 $ 174
Eligible active employees................................................ 438 97
Other active employees................................................... 1,792 120
Unrecognized prior service credit.......................................... -- 2009
Unrecognized net gain...................................................... 109 312
------ ------
Total accrued post-retirement benefits..................................... $2,553 $2,712
====== ======
</TABLE>
Effective February 1, 1997, the Company portion of the retiree health care
insurance benefits was revised to a fixed monthly contribution amount. Prior to
the date, the Company's monthly contribution was the actual
F-10
<PAGE> 105
GLASSTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. EMPLOYEE BENEFIT PLANS (CONTINUED)
cost in excess of a fixed monthly contribution by each retiree. The effect of
this amendment will reduce the Company's non-pension post-retirement benefit
obligation by approximately $2,009 which is being amortized on the straight-line
method over approximately 20 years.
Assumed health care cost inflation was based on an initial rate of 8.6%
declining ratably over 14 years to an ultimate rate of 5.5%. A one percentage
point increase in these rates would have no impact on the accumulated
post-retirement benefit obligation at June 30, 1997 and increased the net
post-retirement benefit cost for 1997 by $51. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 8.25% at June
30, 1997 and 1996 (8.00% at June 30, 1995).
7. FEDERAL INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income tax liabilities and assets at June 30 are as
follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred income tax liabilities:
Contract revenues..................................................... $(4,040) $(5,388)
Property, plant and equipment......................................... (951) (892)
Other................................................................. (205) --
-------- -------
Total deferred income tax liabilities................................... (5,196) (6,280)
Deferred income tax assets:
Federal income tax operating loss carryovers.......................... 8,178 7,155
Accrued liabilities and reserves...................................... 2,126 2,326
Excess tax basis on purchased assets.................................. 3,909 2,404
Other................................................................. 399 431
-------- -------
Total deferred income tax assets........................................ 14,612 12,316
Less valuation reserve.................................................. 9,416 6,036
-------- -------
Net deferred income tax assets.......................................... 5,196 6,280
-------- -------
Total deferred income taxes -- net...................................... $ -- $ --
======== =======
</TABLE>
The valuation allowance has been recorded against the Company's net
deferred income tax assets due to the uncertainties surrounding the realization
of any future tax benefit.
F-11
<PAGE> 106
GLASSTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FEDERAL INCOME TAXES (CONTINUED)
The consolidated effective income tax rate differs from the statutory U.S.
federal tax rate for the following reasons and by the following percentages:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY REORGANIZED COMPANY
------------- -----------------------------------
PERIOD FROM PERIOD FROM
JULY 1, JANUARY 4,
1994 1995 YEARS ENDED
THROUGH THROUGH JUNE 30,
JANUARY 3, JUNE 30, --------------------
1995 1995 1996 1997
------------- ------------ --------- --------
<S> <C> <C> <C> <C>
Statutory U.S. federal tax rate.................... 34.0% 34.0% 34.0% 34.0%
Increase (reduction) in tax rate resulting from:
Effect of reduction in valuation reserve for
deferred income taxes......................... -- -- -- (8.6)
Amortization of excess reorganization value...... -- 12.6 6.8 2.2
Effects of net operating losses.................. (187.0) -- -- --
Write-off on non-deductible intangible assets.... 147.6 -- -- --
Other............................................ 5.4 2.0 4.0 1.2
------ ------- ------
Effective tax rate................................. --% 48.6% 44.8% 28.8%
====== ======= ====== ======
</TABLE>
The "Effect of reduction in valuation reserve for deferred income taxes"
represents the effect of change in post reorganization temporary differences
fully reserved by the Company's valuation reserve.
At June 30, 1997, the Company has net operating loss carryforwards for
regular and alternative minimum tax purposes of approximately $21,045 and
$17,517, respectively, which expire in the years 2009 through 2011. For regular
and alternative minimum tax purposes, approximately $18,168 and $12,886 of each
loss carryforward has an annual usage limitation of $1,378 which, if not
utilized in a given year, may be utilized in subsequent years.
Income taxes not payable in cash represent the tax effect of certain
temporary differences existing prior to the reorganization and are recorded as a
reduction to reorganization value in excess of amounts allocated to identifiable
assets as required by SOP 90-7.
8. FOREIGN SALES AND SALES CONCENTRATION
Revenues by geographic region are as follows:
<TABLE>
<CAPTION>
PREDECESSOR REORGANIZED COMPANY
COMPANY ------------------------------------
------------ PERIOD FROM
PERIOD FROM JANUARY 4,
JULY 1, 1994 1995
1995 THROUGH THROUGH YEARS ENDED JUNE 30,
JANUARY 3, JUNE 30, --------------------
1995 1995 1996 1997
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
United States..................................... $ 9,924 $ 9,608 $ 18,794 $ 22,269
Asia-Pacific...................................... 5,341 10,261 20,101 39,371
Europe............................................ 3,250 5,351 9,827 5,030
Latin American.................................... 5,889 1,992 6,208 2,616
Other............................................. 1,544 642 7,841 7,147
-------- -------- -------- --------
$ 25,948 $ 27,854 $ 62,771 $ 76,433
======== ======== ======== ========
</TABLE>
Four customers accounted for approximately 48%, 34%, 41% and 51% of net sales
during the periods, respectively.
F-12
<PAGE> 107
GLASSTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. LEASES
The Company leases a manufacturing and office building under a long-term
agreement with a partnership comprised of certain former shareholders of
Industries. The minimum annual rental associated with this lease through its
expiration on December 31, 1999 is approximately $300. The Company has the
option to renew the lease for two additional five-year periods at slightly
higher rates. Total rental expense amounted to approximately $150, $150, $300
and $300 for the periods from July 1, 1994 through January 3, 1995, January 4,
1995 through June 30, 1995, and the years ended June 30, 1996 and 1997,
respectively.
10. LEGAL PROCEEDINGS
On January 15, 1997, James E. Heider, a former executive officer of the
Company, commenced an action against the Company and Mark Christman, the
President of the Company, in the Common Pleas Court of Wood County, Ohio,
relating to the nonrenewal of his employment agreement. In the amended
complaint, Mr. Heider alleges that the Company breached his written employment
agreement and breached implied and express employment agreements that, according
to the complaint, were created pursuant to certain alleged oral statements. The
complaint also alleges that Mr. Heider was terminated in retaliation for
reporting on the conduct of certain employees and that Mr. Heider was wrongfully
denied the ability to exercise certain stock options. Mr. Heider seeks
compensation of approximately $9.5 million for lost wages, bonuses, back pay,
vacation pay and the value of other fringe benefits he would have received
through continued employment with the Company. The Company believes that this
action is without merit and is barred by the provisions of Mr. Heider's written
employment agreement with the Company. The Company intends to contest this
action vigorously and does not believe that this action will have a material
adverse effect on the Company's financial condition or operating results.
11. SALE OF COMPANY
Effective July 2, 1997, a sale of the Company was completed to Key Equity
Capital Corporation and certain members of management of the Company for
approximately $76.2 million, subject to certain adjustments. The transaction
resulted in the new company having substantial goodwill, an increase in long-
term debt, original equity of approximately $15.8 million, and a significant
reduction in cash. Also in connection with the proposed transaction all existing
stock options and common stock warrants of the Company were deemed exercised and
exchanged for their pro rata share of the purchase price. In addition, the
Company incurred an extraordinary charge of $4.2 million relating to the early
extinguishment of debt and other charges aggregating approximately $3.7 million
to be reflected in its income statement for the period of July 1, 1997 through
July 2, 1997.
F-13
<PAGE> 108
===============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH AN OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO 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 ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.............................. iv
Prospectus Summary................................. 1
Risk Factors....................................... 14
The Transactions................................... 21
Use of Proceeds.................................... 22
Capitalization..................................... 22
Unaudited Pro Forma Financial Data................. 23
Selected Historical Consolidated Financial and
Other Data....................................... 29
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 31
Business........................................... 35
Management......................................... 46
Certain Transactions............................... 50
Ownership and Control.............................. 53
Description of the Revolving Credit Facility....... 54
The Exchange Offer................................. 55
Description of the Notes........................... 63
Certain U.S. Federal Income Tax Considerations..... 87
Plan of Distribution............................... 87
Legal Matters...................................... 87
Experts............................................ 88
Index to Consolidated Financial Statements......... F-1
</TABLE>
UNTIL , 1997 (90 DAYS AFTER THE COMMENCEMENT OF THE
EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT 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.
===============================================================
===============================================================
$70,000,000
GLASSTECH, INC.
OFFER TO EXCHANGE $1,000
IN PRINCIPAL AMOUNT OF ITS
SERIES B 12 3/4% SENIOR NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT FOR EACH $1,000
IN PRINCIPAL AMOUNT OF ITS OUTSTANDING
12 3/4% SENIOR NOTES DUE 2004
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
----------------------------------
PROSPECTUS
----------------------------------
, 1997
===============================================================
<PAGE> 109
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation incorporates substantially
the provisions of the General Corporation Law of the State of Delaware providing
for indemnification of directors and officers of the Registrant against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that such person is or was an officer or director of the Registrant or is
or was serving at the request of the Registrant as a director, officer,
employee, agent or trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise.
As permitted by Section 102 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation contains provisions eliminating a
director's personal liability for monetary damages to the Registrant and its
stockholders arising from a breach of a director's fiduciary duty except for
liability (a) for any breach of the director's duty of loyalty to the Registrant
or its stockholders, (b) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (c) under Section
174 of the Delaware General Corporation Law, or (d) for any transaction from
which the director derived an improper personal benefit.
Section 145 of the Delaware General Corporation Law provides generally that
a person sued as a director, officer, employee or agent of a corporation may be
indemnified by the corporation for reasonable expenses, including attorney's
fees, if in the case of other than derivative suits he has acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation (and, in the case of a criminal proceeding, had no
reasonable cause to believe that his conduct was unlawful). In the case of a
derivative suit, an officer, employee or agent of the corporation who is not
protected by the Certificate of Incorporation may be indemnified by the
corporation for reasonable expenses, including attorney's fees, if he has acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, except that no indemnification shall be
made in the case of a derivative suit in respect of any claim as to which an
officer, employee or agent has been adjudged to be liable to the corporation
unless that person is fairly and reasonably entitled to indemnity for proper
expenses.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger
2.2 Amendment to Agreement and Plan of Merger
3.1 Restated Certificate of Incorporation of the Registrant
3.2 By-laws of the Registrant
4.1 Indenture (including form of Note)
4.2 First Supplemental Indenture
5.1 Opinion of Baker & Hostetler LLP as to the legality of the securities being
registered
10.1 Financing and Security Agreement between NationsBank, N.A. and the Registrant
10.2 Plant and Office Lease
10.3 Warehouse Lease
10.4 Advisory Agreement between the Registrant and Key Equity Capital Corporation
10.5 Form of Exchange Agent Agreement between United States Trust Company of New York
and the Registrant
10.6 Employment Agreement among Glasstech Holding Co., the Registrant and John S.
Baxter
10.7 Employment Agreement among Glasstech Holding Co., the Registrant and Mark D.
Christman
10.8 Employment Agreement among Glasstech Holding Co., the Registrant and Larry E.
Elliott
</TABLE>
II-1
<PAGE> 110
<TABLE>
<S> <C>
10.9 Employment Agreement among Glasstech Holding Co., the Registrant and Ronald A.
McMaster
10.10 Employment Agreement among Glasstech Holding Co., the Registrant and James P.
Schnabel, Jr.
10.11 Employment Agreement among Glasstech Holding Co., the Registrant and Diane S.
Tymiak
10.12 Employment Agreement among Glasstech Holding Co., the Registrant and Kenneth H.
Wetmore
10.13 Securities Purchase Agreement between the Registrant, as successor to Glasstech
Sub Co., and CIBC Wood Gundy Securities Corp.
10.14 Registration Rights Agreement between the Registrant, as successor to Glasstech
Sub Co., and CIBC Wood Gundy Securities Corp.
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
21.1 List of Subsidiaries
23.1 Consent of Ernst and Young LLP
23.2 Consent of Baker & Hostetler LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on page II-4)
25.1 Statement of Eligibility and Qualification on Form T-1 Under the Trust Indenture
Act of 1939 of United States Trust Company of New York, as Trustee Under the
Indenture
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
(b) Financial Statement Schedule.
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION OF DOCUMENT PAGE
-------- ------------------------------------------------ ----
<S> <C> <C>
II Valuation and Qualifying Accounts S-1
</TABLE>
(c) Report, Opinion or Appraisal.
Not Applicable.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 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 includes information contained in the documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-2
<PAGE> 111
(d) The undersigned Registrant hereby undertakes:
1. To file during any period in which offers and sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
2. That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 112
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PERRYSBURG, STATE OF
OHIO, ON THE 26TH DAY OF AUGUST, 1997.
GLASSTECH, INC.
/s/ MARK D. CHRISTMAN
--------------------------------------
Mark D. Christman
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Mark D. Christman, Kenneth H. Wetmore and Diane
S. Tymiak or any one of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all pre- or
post-effective amendments to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents, or any of them, or their or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------------- ----------------
<S> <C> <C>
/s/ MARK D. CHRISTMAN Director, President and Chief Executive August 26, 1997
- ------------------------------------- Officer (Principal Executive Officer)
Mark D. Christman
/s/ DIANE S. TYMIAK Chief Financial Officer (Principal August 26, 1997
- ------------------------------------- Financial Officer and Principal
Diane S. Tymiak Accounting Officer)
/s/ JOHN S. BAXTER Director August 26, 1997
- -------------------------------------
John S. Baxter
/s/ DAVID P. GIVEN Director August 26, 1997
- -------------------------------------
David P. Given
</TABLE>
II-4
<PAGE> 113
GLASSTECH, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO COSTS AMOUNT BALANCE AT
DESCRIPTION OF PERIOD AND EXPENSES CHARGED OFF END OF PERIOD
- ------------------------------------------------ ---------- ---------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended June 30, 1997:
Allowance for doubtful accounts............... $ 178 $ (37) $ -- $ 141
====== ====== ======= =======
Year ended June 30, 1996:
Allowance for doubtful accounts............... $ 281 $ (103) $ -- $ 178
====== ====== ======= =======
Period from January 4, 1995 through June 30,
1995:
Allowance for doubtful accounts............... $ 274 $ 7 $ -- $ 281
====== ====== ======= =======
Period from July 1, 1994 through January 3,
1995:
Allowance for doubtful accounts............... $ 372 $ (98) $ -- $ 274
====== ====== ======= =======
</TABLE>
S-1
<PAGE> 114
EXHIBIT INDEX
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger
2.2 Amendment to Agreement and Plan of Merger
3.1 Restated Certificate of Incorporation of the Registrant
3.2 By-laws of the Registrant
4.1 Indenture (including form of Note)
4.2 First Supplemental Indenture
5.1 Opinion of Baker & Hostetler LLP as to the legality of the securities being
registered
10.1 Financing and Security Agreement between NationsBank, N.A. and the Registrant
10.2 Plant and Office Lease
10.3 Warehouse Lease
10.4 Advisory Agreement between the Registrant and Key Equity Capital Corporation
10.5 Form of Exchange Agent Agreement between United States Trust Company of New York
and the Registrant
10.6 Employment Agreement among Glasstech Holding Co., the Registrant and John S.
Baxter
10.7 Employment Agreement among Glasstech Holding Co., the Registrant and Mark D.
Christman
10.8 Employment Agreement among Glasstech Holding Co., the Registrant and Larry E.
Elliott
10.9 Employment Agreement among Glasstech Holding Co., the Registrant and Ronald A.
McMaster
10.10 Employment Agreement among Glasstech Holding Co., the Registrant and James P.
Schnabel, Jr.
10.11 Employment Agreement among Glasstech Holding Co., the Registrant and Diane S.
Tymiak
10.12 Employment Agreement among Glasstech Holding Co., the Registrant and Kenneth H.
Wetmore
10.13 Securities Purchase Agreement between the Registrant, as successor to Glasstech
Sub Co., and CIBC Wood Gundy Securities Corp.
10.14 Registration Rights Agreement between the Registrant, as successor to Glasstech
Sub Co., and CIBC Wood Gundy Securities Corp.
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
21.1 List of Subsidiaries
23.1 Consent of Ernst and Young LLP
23.2 Consent of Baker & Hostetler LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on page II-4)
25.1 Statement of Eligibility and Qualification on Form T-1 Under the Trust Indenture
Act of 1939 of United States Trust Company of New York, as Trustee Under the
Indenture
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
GLASSTECH HOLDING CO.
GLASSTECH SUB CO.
AND
GLASSTECH, INC.
DATED JUNE 5, 1997
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
1. The Merger............................................................................................. 1
1.1 The Merger.................................................................................... 1
1.2 Consummation of the Merger.................................................................... 1
1.3 Effects of the Merger......................................................................... 1
1.4 Certificate of Incorporation and Bylaws....................................................... 1
1.5 Directors and Officers........................................................................ 2
1.6 Conversion of Shares.......................................................................... 2
1.7 Conversion of Common Stock of the Sub......................................................... 2
1.8 Adjustment to Aggregate Merger Consideration.................................................. 2
1.9 Determination of Adjustment to Aggregate Merger
Consideration................................................................................. 4
2. Dissenting Shares; Payment for Shares; Options......................................................... 5
2.1 Dissenting Shares............................................................................. 5
2.2 Payment for Shares............................................................................ 6
2.3 Closing of the Company's Transfer Books....................................................... 8
2.4 Options and Warrants.......................................................................... 8
3. Representations and Warranties of the Company.......................................................... 8
3.1 Authority; No Conflicts....................................................................... 8
3.2 Capitalization................................................................................ 9
3.3 Compliance with Applicable Laws............................................................... 10
3.4 Financial Statements.......................................................................... 10
3.5 Taxes......................................................................................... 10
3.6 Absence of Changes or Events.................................................................. 11
3.7 Employee Benefit Matters...................................................................... 11
3.8 Contracts..................................................................................... 14
3.9 Litigation.................................................................................... 15
3.10 Intellectual Property......................................................................... 15
3.11 Brokers....................................................................................... 16
3.12 Environmental Matters......................................................................... 16
3.13 Percentage Completion of Accounting; Accounts
Receivable; Inventories....................................................................... 18
3.14 Backlog....................................................................................... 19
3.15 Customers and Suppliers....................................................................... 19
3.16 Product Warranties............................................................................ 19
3.17 Title to Assets; Liens........................................................................ 20
3.18 Labor Relations............................................................................... 20
3.19 Insurance..................................................................................... 20
3.20 Intercompany and Affiliate Transactions; Insider
Interests..................................................................................... 20
3.21 Absence of Undisclosed Liabilities............................................................ 21
3.22 Officers and Directors........................................................................ 21
3.23 Bankruptcy Matters............................................................................ 21
3.24 Disclosure.................................................................................... 22
4. Representations and Warranties of the Parent and Sub................................................... 22
4.1 Authority; No Conflicts....................................................................... 22
4.2 Interim Operations of Parent and Sub.......................................................... 23
4.3 Brokers....................................................................................... 23
4.4 Financing..................................................................................... 23
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
5. Covenants.............................................................................................. 23
5.1 Capitalization................................................................................ 23
5.2 Access to Information......................................................................... 23
5.3 Reasonable Efforts............................................................................ 24
5.4 Antitrust Notification........................................................................ 24
5.5 Notification of Certain Matters............................................................... 24
5.6 Fees and Expenses............................................................................. 25
5.7 Employee Benefits............................................................................. 25
5.8 Indemnification; Directors' and Officers'
Insurance..................................................................................... 25
5.9 Conduct of the Business of the Company........................................................ 27
5.10 Meeting of Company Shareholders............................................................... 28
5.11 No Negotiations............................................................................... 28
5.12 Financial Statements.......................................................................... 29
6. Conditions to Consummation of the Merger............................................................... 30
6.1 Conditions to Each Party's Obligations to
Consummate the Merger......................................................................... 30
6.2 Conditions to the Parent's and Sub's Obligations
to Effect the Merger.......................................................................... 30
6.3 Conditions to the Company's Obligations to Effect
the Merger.................................................................................... 32
7. Termination; Amendment; Waiver......................................................................... 33
7.1 Termination................................................................................... 33
7.2 Effect of Termination......................................................................... 33
7.3 Amendment..................................................................................... 34
7.4 Extension; Waiver............................................................................. 34
8. Survival of Representations and Warranties;
Indemnification........................................................................................ 34
8.1 Survival of Representations and Warranties.................................................... 34
8.2 Indemnification From Indemnification Escrowed
Funds......................................................................................... 35
8.3 Limitation on Indemnity Obligation............................................................ 35
8.4. Procedure for Indemnification with Respect to
Third-Party Claims............................................................................ 35
8.5. Procedure For Indemnification with Respect to Non-
Third-Party Claims............................................................................ 36
9. Miscellaneous.......................................................................................... 37
9.1 Shareholders' Representative.................................................................. 37
9.2 Validity...................................................................................... 38
9.3 Notices....................................................................................... 38
9.4 Governing Law................................................................................. 39
9.5 Interpretation................................................................................ 39
9.6 Parties in Interest........................................................................... 40
9.7 Counterparts.................................................................................. 40
9.8 Press Releases; Confidentiality............................................................... 40
9.9 Entire Agreement.............................................................................. 40
</TABLE>
-ii-
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
Dated as of June 5, 1997
------------------------
The parties to this agreement and plan of merger are Glasstech
Holding Co., a Delaware corporation (the "Parent"), Glasstech Sub Co., a
Delaware corporation and a wholly-owned subsidiary of the Parent (the "Sub"),
and Glasstech, Inc., a Delaware corporation (the "Company").
The board of directors of each of the Parent, the Sub and the
Company has determined it is in the best interests of its stockholders for the
Parent to acquire the Company upon the terms and subject to the conditions set
forth in this agreement.
Accordingly, the parties agree as follows:
1. THE MERGER
1.1 THE MERGER. Upon the terms of this agreement and subject to the
provisions of the Delaware General Corporation Law (the "DGCL"), the Sub shall
be merged with and into the Company (the "Merger") as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in section 6. The Company shall be the surviving corporation in the Merger
(the "Surviving Corporation") and shall continue its existence under the law of
the State of Delaware. At the Effective Time (as defined in section 1.2), the
separate corporate existence of the Sub shall cease.
1.2 CONSUMMATION OF THE MERGER. Subject to the provisions of this
agreement, the parties shall cause the Merger to be consummated by filing with
the secretary of state of the state of Delaware a duly executed certificate of
merger, which certificate of merger shall be filed as soon as practicable on the
date of the Closing and shall take all other action required by law to effect
the Merger. At 9:00 a.m., New York time, on the second business day following
the satisfaction or waiver of all of the conditions referred to in section 6,
and prior to the filing referred to above, a closing (the "Closing") shall be
held at the offices of Baker & Hostetler LLP, 3200 National City Center, 1900
East 9th Street, Cleveland, Ohio (or such other place, time or date as the
parties may agree in writing) for the purpose of completing the foregoing. The
time and date the Merger becomes effective in accordance with applicable law is
referred to as the "Effective Time."
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL and this agreement.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of
incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the certificate
<PAGE> 5
of incorporation of the Surviving Corporation until thereafter amended as
provided therein or by applicable law; PROVIDED, HOWEVER, that the certificate
of incorporation of the Surviving Corporation shall be amended to read in its
entirety substantially as set forth on Exhibit 1.4.
The bylaws of the Sub as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided therein or by applicable law, except that the
name in the heading shall be changed to "Glasstech," Inc.
1.5 DIRECTORS AND OFFICERS. The directors of the Sub immediately prior
to the Effective Time and the officers of the Company immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation, until their respective successors are duly elected and
qualified.
1.6 CONVERSION OF SHARES. At the Effective Time, each share of common
stock of the Company, par value $.01 per share, issued and outstanding
immediately prior to the Effective Time (each, a "Share") (other than Shares
owned by the Parent, the Sub or any subsidiary of the Parent or Sub or held in
the treasury of the Company, all of which shall be cancelled and retired and no
consideration shall be delivered or deliverable in exchange therefor, and other
than Dissenting Shares (as defined in Section 2.1)) shall, by virtue of the
Merger and without any action on the part of the Parent, the Sub, the Company or
the holder, shall cease to exist and be converted into the right to receive in
cash, without interest, an amount determined by dividing the amount of Seventy
Eight Million Dollars ($78,000,000), as adjusted pursuant to Section 1.8 (the
"Aggregate Merger Consideration") plus the exercise price of all outstanding
Options ( as defined in Section 2.4) by the total number of Shares issued and
outstanding immediately prior to the Effective Time (including Shares issued
upon exercise of Options (as defined in Section 2.4), but excluding Shares owned
by the Parent, the Sub or any subsidiary of the Parent or Sub or held in
treasury of the Company) (the "Merger Consideration"), upon the surrender of
certificates representing the Shares in accordance with Section 2.2.
1.7 CONVERSION OF COMMON STOCK OF THE SUB. At the Effective Time, each
share of common stock, par value $.01 per share, of the Sub issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Parent, the Sub or the Company,
be converted into and become one share of common stock of the Surviving
Corporation.
1.8 ADJUSTMENT TO AGGREGATE MERGER CONSIDERATION. The Aggregate
Merger Consideration shall be $78,000,000 (the "Merger Amount") as adjusted
upward or downward dollar for dollar to the extent that Net Working Capital (as
defined below) as of the
-2-
<PAGE> 6
Closing is more positive or more negative than NEGATIVE $6,320,000 (the
"Adjustment Amount"). To the extent Net Working Capital at the Closing is (i)
more positive than NEGATIVE $6,319,999 (I.E., negative $6,320,000 or more), the
Aggregate Merger Consideration shall be increased dollar for dollar by the
Adjustment Amount and (ii) more negative than NEGATIVE $6,320,000 (I.E.,
negative $6,320,001 or less), the amount of Aggregate Merger Consideration will
be decreased dollar for dollar by the Adjustment Amount.
"Unrestricted Cash" is cash other than Restricted Cash.
"Restricted Cash" shall mean cash collateral for outstanding standby letters of
credit issued on behalf of the Company in support of the Company's performance
obligations under various sales contracts. Restricted Cash becomes Unrestricted
Cash upon performance by the Company under the applicable sales contract and/or
expiration of the underlying letter of credit.
"Net Working Capital" shall mean the sum of the following
items, each determined in accordance with generally accepted accounting
principles, applied on a basis consistent with that used to prepare the
Financial Statements (as defined in Section 3.4) after giving effect to the
payments by the Company contemplated by Sections 3.11, 6.2(j), 6.2(k) and
6.2(n):
(i) any Unrestricted Cash retained in the Company as
of Closing;
(ii) Restricted Cash;
(iii) accounts receivable;
(iv) inventories stated at their FIFO values; and
(v) prepaid expenses;
MINUS
(A) the "Accounts Payable Amount" (as defined below);
(B) billings in excess of costs and estimated earnings
on uncompleted contracts;
(C) accrued payroll, pension, contract and tax expenses,
and items categorized as "Other Expenses" in the
Financial Statements; PROVIDED, HOWEVER, that this
item shall not include accrued incentive compensation
which shall be discharged at Closing in accordance
with Section 6.2; and
(D) all amounts, including interest and prepayment
penalties, required to pay off and discharge as of
the date of the Closing all third-party indebtedness
of the Company and its subsidiaries, including
capitalized lease obligations (to the
-3-
<PAGE> 7
extent any such indebtedness remains outstanding as
of the Closing), but excluding any indebtedness
incurred in connection with the financing of the
Merger.
The anticipated Net Working Capital as of the date of the
Closing is as set forth on Schedule 1.8.
The Accounts Payable Amount shall be determined as follows,
determined in accordance with generally accepted accounting principles, applied
on a basis consistent with that used to prepare the Financial Statements, after
giving effect to the payments contemplated by Sections 3.11, 6.2(j), 6.2(k) and
6.2(n):
(x) if the accounts payable of the Company total between
$3,000,000 and $3,800,000, the Accounts Payable Amount shall be $3,393,000;
(y) if the accounts payable of the Company total greater than
$3,800,000, the Accounts Payable Amount shall be the sum of (i) $3,393,000 and
(ii) the excess of the accounts payable of the Company over $3,800,000; and
(z) if the accounts payable of the Company total less than
$3,000,000, the Accounts Payable Amount shall be $3,393,000 minus the difference
between (i) $3,000,000 and (ii) the accounts payable of the Company.
1.9 DETERMINATION OF ADJUSTMENT TO AGGREGATE MERGER CONSIDERATION. No
later than 14 days prior to the Closing, the Company shall provide Parent with
the Company's good faith estimate of the Net Working Capital at Closing (based
on signed contracts as of the date of such good faith estimate), determined in
accordance with Section 1.8 (the "Estimated NWC") and, based on such Estimated
NWC, a preliminary estimate of the Adjustment Amount and the Aggregate Merger
Consideration (the "Preliminary Aggregate Merger Consideration").
Within 60 days of the Effective Date, an audit of the Company shall be
completed by Ernst & Young LLP ("Ernst & Young"). Pursuant to such audit, Ernst
& Young shall determine the Net Working Capital at Closing (the "NWC
Calculation") in accordance with Section 1.8 and, based on such NWC Calculation,
the final Adjustment Amount and the Aggregate Merger Consideration. Within 60
days of the Effective Date, Ernst & Young shall deliver to the Company, the
Parent, Kaye, Scholer, Fierman, Hays & Handler, LLP (the "Shareholders'
Representative") and the Paying Agent (as defined in Section 2.2), a report
("E&Y Report") setting forth the NWC Calculation and its calculation of the
Adjustment Amount and the Aggregate Merger Consideration. Expenses of the audit
shall be borne by the Company after the Effective Time and shall not be
considered in the NWC Calculation.
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If within 30 days following delivery of the E&Y Report, the
Shareholders' Representative has not given the Parent notice of its objection to
the NWC Calculation, the Adjustment Amount and the Aggregate Merger
Consideration (such notice must contain a reasonably detailed statement of the
basis of Shareholders' Representative's objection), then the NWC Calculation,
the Adjustment Amount and the Aggregate Merger Consideration set forth in the
E&Y Report shall be considered accepted and binding on all parties. If the
Shareholders' Representative gives such notice of objection, then the issues in
dispute will be submitted to Deloitte & Touche, certified public accountants
(the "Accountants"), for resolution. If issues in dispute are submitted to the
Accountants for resolution, (i) each party will furnish to the Accountants such
work papers and other documents and information relating to the disputed issues
as the Accountants may request and are available to that party or its
subsidiaries (or its independent public accountants), and will be afforded the
opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants: (ii) the
determination by the Accountants, as set forth in a notice delivered to both
parties by the Accountants, will be binding and conclusive on the parties; and
(iii) Shareholders' Representative and the Parent will each bear 50% of the fees
of the Accountants for such determination.
If the Aggregate Merger Consideration as determined pursuant to the
preceding paragraph is greater than the Preliminary Aggregate Merger
Consideration, Parent shall contribute the amount of such excess to the Working
Capital Escrow (the "Excess Amount") and the entire amount of the Working
Capital Escrow (including all earnings thereon) shall be paid to record holders
of Shares and Options as of the Effective Time. The Parent also shall contribute
to the Working Capital Escrow the amount of interest, at the average rate earned
in the Working Capital Escrow, on the Excess Amount that would have been earned
beginning on the Closing Date and ending on the date of payment thereof. If the
Aggregate Merger Consideration is less than the Preliminary Aggregate Merger
Consideration, the deficiency shall be paid to Parent out of the Working Capital
Escrow (together with all earnings thereon) and the balance of the Working
Capital Escrow (together with the earnings thereon) shall be paid to record
holders of the Shares and Options as of the Effective Time.
The parties will instruct the Paying Agent to pay the Working Capital
Escrow in accordance with the previous paragraph. Payments must be made in
immediately available funds.
2. DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
2.1 DISSENTING SHARES. Notwithstanding anything in this agreement to
the contrary, Shares issued and outstanding immediately prior to the Effective
Time and held by any stockholder who did not vote in favor of the Merger or
consent
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thereto in writing and comply with Section 262 of the DGCL (the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration, unless and until any such stockholder shall have failed to
perfect or shall have effectively withdrawn or lost his or her rights to
appraisal under the DGCL, but the holder of such Dissenting Shares shall be
entitled to payment from the Surviving Corporation of the appraised value of
such Shares in accordance with the provisions of the DGCL. If any such holder
shall have failed to perfect or shall have effectively withdrawn or lost that
right, that holder's Shares shall thereupon be converted into and become
exchangeable for the right to receive, as of the Effective Time, the Merger
Consideration without any interest. The Company shall give the Parent (a) prompt
notice of any written demands for appraisal of any Shares, attempted withdrawals
of such demand and any other instruments served pursuant to the DGCL and
received by the Company relating to stockholders' rights of appraisal and (b)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of the Parent, voluntarily make any payment with respect
to demands for appraisal of Shares, offer to settle or settle any demands or
approve any withdrawal of any such demands.
2.2 PAYMENT FOR SHARES
(a) At the Effective Time, the Parent shall cause the Sub to
deposit with National City Bank (or another bank or trust company reasonably
satisfactory to the Company) (the "Paying Agent") the Preliminary Aggregate
Merger Consideration (such funds, the "Payment Fund"). Of the Payment Fund, (i)
$3,000,000 (the "Indemnification Escrowed Fund") shall be held by the Paying
Agent pursuant to the terms of an Escrow Agreement in substantially the form of
Exhibit 2.2 attached hereto (the "Indemnification Escrow Agreement") in escrow
for any Losses (as defined in Section 8.2); (ii) $500,000 (the "Working Capital
Escrow" and collectively with the Indemnification Escrow Fund the "Escrow
Funds") shall be held in escrow by the Paying Agent pursuant to the terms of an
Escrow Agreement in substantially the form of Exhibit 2.2 attached hereto (the
"Working Capital Escrow Agreement") and; (iii) $250,000 shall paid to the
Shareholders' Representative (to be held in its escrow account) and shall be
used to pay the fees and expenses of the Shareholders' Representative. The
Paying Agent shall, pursuant to irrevocable instructions, make the payments
provided for in this paragraph (a) out of the Payment Fund. The Payment Fund
shall not be used for any other purpose, except as provided in this agreement.
(b) The amount resulting from the following formula
shall be the "Per Share Merger Amount":
1. (x) the excess of the Preliminary Aggregate
Merger Consideration over the aggregate amount of the Escrow Funds plus (y) the
exercise price of all outstanding Options (as defined in Section 2.4)
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divided by
2. (z) the number of Shares outstanding
immediately prior to the Effective Time (counting as
outstanding any Shares issued or issuable upon exercise or
deemed exercise of Options).
(c) Immediately after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each record holder of Shares
and Options as of the Effective Time, a form of letter of transmittal and
instructions for use in effecting the surrender of certificates that immediately
prior to the Effective Time represented outstanding Shares and Options (the
"Certificates") for payment. Immediately upon surrender to the Paying Agent of a
Certificate, together with the letter of transmittal duly executed, and except
as set forth below with respect to the holders of Options, the holder of
Certificates representing Shares shall be paid in cash an amount equal to the
product of the Per Share Merger Amount and the number of Shares represented by
such Certificate. The holders of Certificates representing Options shall be paid
in cash an amount equal to the product of the Per Share Merger Amount and the
number of Options represented by such Certificate MINUS the aggregate exercise
price of such Options.
No interest shall be paid or accrued on the cash payable upon
the surrender of a Certificate. If payment is to be made to a person other than
the person in whose name a Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that the tax has been
paid or is not applicable. From and after the Effective Time and until
surrendered in accordance with this Section 2.2, each Certificate (other than
Certificates representing Shares owned by the Parent or the Sub or any of their
subsidiaries, treasury shares and Dissenting Shares) shall represent for all
purposes solely the right to receive in cash an amount equal to the product of
the Per Share Merger Amount and the number of Shares or Options evidenced by the
Certificate, without interest.
(d) Any portion of the Payment Fund (including the proceeds of
any investments of the Payment Fund) that remains unclaimed by the former
stockholders of the Company for six months after the Effective Time and that is
not held in an Escrow Fund shall be repaid to the Surviving Corporation. Any
former stockholders of the Company who have theretofore complied with Section
2.1 shall thereafter look only to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) for payment of their claim
for the Per Share Merger Amount, without interest. Neither the Parent nor the
Surviving
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Corporation shall be liable to any holder of Shares for any monies delivered
from the Payment Fund or otherwise to a public official pursuant to any
applicable abandoned property, escheat or similar law.
2.3 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
shall thereafter be made. If, on or after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for cash as provided in this Section 2, subject to applicable law in the case of
Dissenting Shares.
2.4 OPTIONS AND WARRANTS. At the Effective Time of the Merger, the
Company shall cause each option or warrant to purchase Shares outstanding on
such date (an "Option") to be cancelled by virtue of the Merger, without
consideration except as provided in this Section 2.4, and such Options shall
cease to exist. Each holder of an Option at the Effective Time, whether or not
then exercisable, shall be deemed to have exercised such Option at the Effective
Time and thus entitled to receive by virtue of the Merger the amount set forth
in Section 2.2(c).
All Shares issuable upon exercise of Options pursuant to this
Section 2.4 shall be deemed issued and outstanding at the Effective Time for
purposes of the Merger. No payment, assumption or conversion shall occur in the
Merger with respect to cancelled Options.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Parent and Sub as follows:
3.1 AUTHORITY; NO CONFLICTS. Each of the Company and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
law its jurisdiction of incorporation. The Company and its subsidiaries are each
duly qualified to do business and in good standing in each jurisdiction listed
on Schedule 3.1 and neither the nature of the business conducted by the Company
or its subsidiaries or the properties owned by it or its subsidiaries requires
any of them to qualify to do business as a foreign corporation in any other
jurisdiction, except where the failure to so qualify would not have a material
adverse effect on the business and financial condition of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"). This agreement and
the transactions contemplated hereby have been duly authorized by the board of
directors of the Company and, assuming this agreement has been approved by the
shareholders of the Company and assuming this agreement constitutes a valid and
binding obligation of each of the Parent and Sub, constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject to general principles of
equity (whether considered in a proceeding in equity or at law). Except as set
forth on Schedule 3.1, the
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execution and delivery of this agreement does not, and the consummation of the
transactions contemplated by this agreement will not, (a) violate the Company's
or any of its subsidiaries' certificate of incorporation or bylaws, (b) result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, any note,
bond, mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement to which the Company or any of its subsidiaries is a
party or by which the Company or any of its assets or subsidiaries may be bound
or (c) violate any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
property or assets, other than, in the case of clauses (b) and (c) above, any
such conflicts, violations and defaults that, in the aggregate, would not have a
Material Adverse Effect. No consent, approval, order or authorization of, or
filing with or notification to any court or governmental or regulatory authority
is required to be obtained or made by or with respect to the Company or any of
its subsidiaries in connection with the execution and delivery of this agreement
or the consummation by the Company of the transactions contemplated by this
agreement, except (A) as may be required to comply with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), (B) the filing of a
certificate of merger pursuant to the DGCL, and (C) tax and other filing
requirements the absence of which will not effect the validity or enforceability
of this Agreement.
3.2 CAPITALIZATION
(a) The authorized and outstanding capital stock of the
Company, and the record owners of capital stock of the Company, are as set forth
on schedule 3.2(a) to this Agreement. All the outstanding Shares have been duly
authorized and validly issued, are fully paid and nonassessable and are free of
preemptive rights. Except as set forth on schedule 3.2(a), there are no
outstanding subscriptions, options, warrants, puts, calls, rights or other
agreements or commitments relating to the issuance, transfer, purchase or sale
by the Company or any of its subsidiaries of any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company, or obligations of the Company to grant, extend
or enter into any subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment.
(b) Except as set forth on schedule 3.2(b), the Company is the
record owner of all the outstanding shares of capital stock of each of its
subsidiaries, free and clear of any adverse claim. There are no irrevocable
proxies with respect to any such shares. There are no outstanding (i) securities
of the Company or any of its subsidiaries convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in any
of its subsidiaries or (ii) options or
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other rights to acquire from the Company or any of its subsidiaries, or other
obligations of the Company or any of its subsidiaries to issue capital stock,
voting securities or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interests in, any of its subsidiaries, or other obligations of the Company or
any of its subsidiaries to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other similar agreement
or commitment. There are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the Company's or
its subsidiaries' outstanding securities.
3.3 COMPLIANCE WITH APPLICABLE LAWS. The business of the Company and
its subsidiaries is being conducted in compliance with all applicable laws,
orders, ordinances, rules and regulations of any governmental authority, except
to the extent noncompliance would not have a Material Adverse Effect.
3.4 FINANCIAL STATEMENTS. Schedule 3.4 sets forth the unaudited
consolidated balance sheet and related income statement and statement of cash
flow of the Company and its subsidiaries (the "Interim Financials") as of and
for the nine months ended March 31, 1997 (the "Interim Financial Statement
Date") and the audited consolidated balance sheets and related income statements
and statements of cash flow of the Company and its subsidiaries of and for the
year ended June 30, 1996, the period from January 4, 1995 through June 30, 1995,
the period from July 1, 1994 though January 3, 1995 and the year ended June 30,
1994 (including the notes thereto, together with the Interim Financials, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied,
except as may be indicated in the notes thereto and except that the Interim
Financials (i) are subject to normal, recurring year-end adjustments and (ii) do
not include notes in accordance with generally accepted accounting principles.
The Financial Statements fairly present the financial position, results of
operations, cash flows and shareholders' equity of the Company and its
subsidiaries for the periods and at the dates presented. To the best knowledge
of the Company, the Financial Statements are true and complete in all material
respects.
3.5 TAXES. The Company has and each of its subsidiaries has (a) duly
and timely filed with the appropriate taxing authorities all federal income tax
returns and all other material federal, state, local and foreign income,
franchise, excise, real and personal property and other tax returns and reports
required to be filed by or with respect to it on or before the Closing Date
(except for those for which an extension beyond the date of the Closing was
properly obtained) (the "Returns"), and (b) paid in full or made adequate
provision for the payment of all amounts owed to any taxing authority for all
periods covered by such Returns. The Returns are true, correct and complete in
all material respects and have been prepared from and in accordance
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with the Company's books and records. Neither the Company nor any of its
subsidiaries has received any notice of deficiency or assessment from any
federal, state or local taxing authority with respect to liabilities for taxes
of the Company or any of its subsidiaries that have not been fully paid or
finally settled. Schedule 3.5 sets forth the year and result of all audits of
federal, state, local and foreign tax returns of the Company and each of its
subsidiaries. There are no pending or, to the best knowledge of the Company,
threatened tax audit, administrative proceeding or judicial proceeding being
conducted with respect to the Company or any of its subsidiaries. Neither the
Company nor any of its subsidiaries has executed or filed with the Internal
Revenue Service or any other taxing authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any taxes. Attached hereto as Schedule 3.5 is correspondence to a
predecessor of the Company from the Internal Revenue Service (the "IRS")
relating to the recognition of income by the Company (the "IRS Letter"). The
Company has received no other or further communication from the IRS relating to
the subject matter of the IRS Letter and the Company knows of no facts or
circumstances which might jeopardize its continued reliance on the IRS Letter.
3.6 ABSENCE OF CHANGES OR EVENTS. Since June 30, 1996, the business of
the Company and its subsidiaries has been conducted in all material respects in
the ordinary course and there has not been any material adverse change in the
business or financial condition of the Company and its subsidiaries taken as a
whole, other than changes relating to the United States economy or foreign
economies in general or the Company's industry in general, provided, however,
that solely with regard to the period between the date of this Agreement and the
date of the Closing, disruptions to the Company's business as a result of the
announcement of the Merger and changes attributable solely thereto shall not
constitute such a material adverse change.
3.7 EMPLOYEE BENEFIT MATTERS
(a) Schedule 3.7 sets forth a true and complete list of all
written bonus, incentive, stock purchase, stock option, severance, deferred
compensation, medical, pension, life or other insurance, profit-sharing or
retirement plans or arrangements sponsored or maintained, or that have been
sponsored or maintained, or contributed to by the Company, any of its
subsidiaries or by any trade or business, whether or not incorporated, that,
together with the Company, would be deemed a "single employer" within the
meaning of section 414(b), (c), (m) or (o) of the Internal Revenue Code or
section 4001 of the Employee Retirement Income Security Act of 1974 ("ERISA") (a
"Company ERISA Affiliate") (collectively, the "Company Plans"). The Company has
delivered to the Parent true and complete copies of all written Company Plan
documents, insurance contracts and other financing vehicles, and administrative
service agreements, as they may have been amended to the date hereof, embodying
or relating to the Company Plans; and with respect to each "employee benefit
plan,"
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within the meaning of Section 3(3) of ERISA, listed in Schedule 3.7, the Company
has delivered to the Parent true and complete copies of (A) the last filed Form
5500 Series, including all schedules and attachments, (B) the summary plan
description, and all modifications thereto, and (C) the most recent annual
accountings related to plan assets and liabilities, each of which shall be
correct in all material respects. Each Company Plan which is a "pension plan"
within the meaning of Section 3(2) of ERISA has received a favorable
determination letter from the Internal Revenue Service with respect to its
qualification under Section 401(a) of the Internal Revenue Code, and the related
trusts have been determined to be exempt from taxation under Section 501(a) of
the Internal Revenue Code. A copy of the most recent determination letter with
respect to each such plan has been delivered to the Parent and, nothing has
occurred since the date of such letter that would cause the loss of or vacation
of such exemption.
(b) Each Company Plan is and has been operated and
administered in all material respects in accordance with the terms of such
Company Plan and in accordance with the applicable requirements prescribed by
all applicable statutes and governmental rules and regulations, including
without limitation ERISA and the Internal Revenue Code. The Company has
performed all material obligations required to be performed by it under, and is
not in material default under or in material violation of, any Company Plan.
Full payment has been made, in a timely manner, of all amounts which the Company
or any of its subsidiaries is required to pay under the terms of each of the
Company Plans and none of the Company Plans nor any trust established thereunder
has incurred any "accumulated funding deficiency" (as defined in ERISA), whether
or not waived. The Financial Statements reflect an accrual of all amounts of
employer contributions accrued but unpaid under each of the Company Plans,
including without limitation the unpaid benefit expense for each of the Company
Plans for any portion of the fiscal year of each of the Company Plans ending on
the Closing.
(c) Except as disclosed on Schedule 3.7, neither the Company
nor any Company ERISA Affiliate nor any predecessors of the Company or any
Company ERISA Affiliate maintains, has maintained, contributes to or has
contributed to a plan subject to section 412 of the Internal Revenue Code or
Title IV of ERISA within the five years preceding this year. No Company Plan is
a multiemployer plan (within the meaning of sections 3(37) or 4003(a)(3) of
ERISA or section 414(f) of the Internal Revenue Code) ("Multiemployer Plan") and
no Company Plan is a multiple employer plan as defined in section 413 of the
Internal Revenue Code ("Multiple Employer Plan). Neither the Company nor any
ERISA Affiliate is or was obligated to contribute to any Multiemployer Plan or
Multiple Employer Plan. Between the date of the most recent Financial Statement
and the date hereof, no material funding changes have been made to the Company
Plans, except as expressly noted in Schedule 3.7.
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(d) Neither the Company nor any other "disqualified person" or
"party in interest" (as defined in Section 4975 of the Internal Revenue Code and
Section 3(14) of ERISA, respectively) has engaged in any "prohibited
transaction," as such term is defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA, which could subject any Company Plan (or its
related trust), any officer, director or employee of the Company, or any
trustee, administrator or other fiduciary of any Company Plan to the penalty
imposed under Section 4975 of the Internal Revenue Code or Section 502(i) or
ERISA.
(e) The Company hereby represents, covenants and warrants that
all Company Plans are and remain fully terminable by the Company at any time
(subject only to the payment of benefits accrued to date of such plan
termination), and that no written or oral statements or representations have
been made to any current or former employees of the Company (or to such current
or former employees' beneficiaries), which are in any way inconsistent
therewith.
(f) To the best knowledge of the Company, the "administrator"
(as described in Section 3(16)(A) of ERISA) of each of the Company Plans (as
described in Section 3(3) of ERISA) of the Company has complied, in all material
respects, with all applicable reporting and disclosure requirements of Part 1 of
Title 1 of ERISA and the Internal Revenue Code in a timely manner, and no
material penalties have been or will be imposed on the Company or the
administrator with respect thereto. With respect to such Company Plans, and any
trust(s), contracts or policies related thereto, the Company has no accrued or
contingent liability, including without limitation, liabilities for federal,
state or local taxes, other than routine administrative expenses. Moreover, to
the best knowledge of the Company, there is no material pending litigation,
arbitration, or disputed claim settlement or adjudication proceeding, and the
Company is not aware of any material pending, threatened or anticipated
litigation, arbitration or disputed claim, or any governmental or other
proceeding, or investigation with respect to any of the Company Plans or related
trust(s), or with respect to any fiduciary, administrator, or sponsor thereof
(in their capacities as such), or any party-in-interest thereof, (other than
routine claims for benefits).
(g) Except as disclosed on Schedule 3.7, or as reflected on
the Financial Statements, the Company has no material liability for unpaid
compensation or fringe benefits, including without limitation accrued vacation,
sick leave, post employment medical or other benefits, severance pay or "excess
parachute payments" (within the meaning of Section 280(G) of the Code).
(h) Except as set forth in Schedule 3.7, no Company Plan
provides benefits, including death or medical benefits (whether or not insured),
with respect to current or former employees after retirement or other
termination of service other
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than (i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension plan", as that term is defined in Section
3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on
the books of the Company or a Company ERISA Affiliate, or (iv) benefits, the
full cost of which is borne by the current or former employee (or his
beneficiary).
(i) With respect to each Company Plan that is funded wholly or
partially through an insurance policy, there will be no liability of the Company
or a Company ERISA Affiliate, as of the Effective Date, under any such insurance
policy or ancillary agreement with respect to such insurance policy in the
nature of a retroactive rate adjustment, loss sharing arrangement or other
material actual or contingent liability arising wholly or partially out of
events occurring prior to the Effective Date.
(j) Except as set forth in Schedule 3.7, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any current
or former employee or officer of the Company to severance pay, unemployment
compensation or any other similar payment other than as provided under
applicable law, except as expressly provided in this Agreement, (ii) accelerate
the time of payment or vesting, or increase the amount of, any compensation due
to any such employee or officer, or (iii) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
3.8 CONTRACTS. Schedule 3.8 sets forth a list of all legally binding
contracts, leases, agreements, purchase orders, obligations and undertakings,
whether verbal or written, material to the business or financial condition of
the Company and its subsidiaries, taken as a whole ("Contracts") (it being
understood that the following shall not be deemed to be material:
(i) any contract or agreement that involves an aggregate
commitment by the Company or any of its subsidiaries of not more
than $100,000;
(ii) any contract or agreement for the sale of goods in the
ordinary course of business that involves an aggregate commitment by
the Company or any of its subsidiaries of less than $250,000;
(iii) any contract or agreement terminable by the
Company by notice of not more than 60 days for a cost of
less than $100,000; or
(iv) executive compensation and bonus arrangements that will
terminate on or before the Effective Time.)
Each Contract is a valid and binding obligation of the Company or the subsidiary
of the Company that is a party to it and is in full force and effect and is
enforceable against the Company or
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such subsidiary, as the case may be, in accordance with its provisions. Except
as set forth on Schedule 3.8, neither the Company nor any of its subsidiaries
has assigned, mortgaged, pledged or otherwise encumbered its interest in any
Contract. Except as set forth on Schedule 3.8, neither the Company nor any of
its subsidiaries nor, to the best knowledge of the Company and its subsidiaries
any other party thereto, is in violation of, or in default under, any Contract,
nor has there occurred any event or condition which, with the passage of time or
giving of notice (or both) would constitute a violation of or default under any
Contract which could lead to termination of the Contract and/or damages in
excess of $100,000 plus the amounts reserved for or reflected on the Financial
Statements for the cost of completion for such Contract. No notice has been
received by the Company or any of its subsidiaries claiming any such default by
the Company or any of its subsidiaries, or indicating the desire or intention of
the other party thereto to amend rescind or terminate the Contract.
3.9 LITIGATION. Except as disclosed on Schedule 3.9, there are no
actions, suits, arbitrations, investigations or proceedings (adjudicatory,
rulemaking or otherwise) pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries (or any Company Plan), or any
property of the Company or any such subsidiary (including Intellectual Property
as defined in Section 3.10), in any court or before any arbitrator of any kind
or before or by any governmental entity or authority, except actions, suits,
arbitrations, investigations or proceedings which, individually or in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect.
3.10 INTELLECTUAL PROPERTY. All patents, trademarks and service marks
(registered or unregistered), and trade names, including pending applications
for any of the foregoing, that are owned, licensed or used by the Company or any
of its subsidiaries in the United States or abroad, are listed on Schedule 3.10
(the "Intellectual Property"; U.S. patents, U.S. trademarks and U.S.
servicemarks (registered or unregistered) and U.S. trade names, including
pending applications for any of the foregoing included in Intellectual Property
are "Domestic Intellectual Property." Intellectual Property other than Domestic
Intellectual Property is "Foreign Intellectual Property."
Except as disclosed on Schedule 3.10, the Company is the sole
and exclusive owner of all right, title and interest in and to the Domestic
Intellectual Property free and clear of all liens, claims, charges, rights of
use, encumbrances, and restrictions whatsoever and to the best of its knowledge
the Company is the sole and exclusive owner of all right, title and interest in
and to the Foreign Intellectual Property free and clear of all liens, claims,
charges, rights of use, encumbrances, and restrictions whatsoever (in all cases
without payment to any other person or entity, except as set forth in the Sales
Contracts in the ordinary course of business, and except for
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maintenance fees payable to governmental entities in the ordinary
course of business).
Except as disclosed on Schedule 3.10, to the best of the
Company's knowledge, the business of the Company, or any of its subsidiaries, as
conducted prior to the Closing, and the consummation of the transactions
contemplated by this agreement was not, is not, and will not be in contravention
of any patent, trademark, service mark, trade name, copyright, or other
proprietary right of any third party.
Except as disclosed on Schedule 3.10, to the best of the
Company's knowledge, the Intellectual Property rights are not infringed by any
person or other entity.
Except as provided in the sales Contracts in the ordinary
course of business and as disclosed on Schedule 3.10, neither the Company nor
any of its subsidiaries has indemnified any person or other entity with respect
to any claim by any third party of patent, trademark, or copyright infringement
arising from the use of equipment, materials, or products or processes produced,
licensed or sold by the Company.
To the best of the Company's knowledge, no product, process,
method or operation presently sold, engaged in or employed by the Company or any
of its subsidiaries infringes upon any rights owned by any other person, firm,
corporation or other legal entity.
3.11 BROKERS. No broker, finder or other investment banker (other than
CIBC Wood Gundy Securities Corp. ("CIBC") and Salomon Brothers) is entitled to
receive any brokerage, finder's or other fee or commission in connection with
this agreement or the transactions contemplated by this agreement based upon
agreements made by or on behalf of the Company. The advisory fees due to CIBC
and Salomon Brothers in connection with the Merger and legal fees due to Kaye,
Scholer, Fierman, Hays & Handler, LLP in connection with the Merger, as well as
all other fees and expenses incurred by the Company in connection with the
Merger shall be paid at or prior to the Closing, and such payment shall not
diminish the assets of the Company. Fees and expenses due to CIBC in connection
with the financing arrangements for the transactions contemplated by this
agreement shall be paid by Parent.
3.12 ENVIRONMENTAL MATTERS. For purposes of this section
the following definitions shall apply:
"Environmental Laws" shall mean all applicable federal, state, foreign,
and local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent order, judgment, decree, injunction, or
agreement with any Governmental Authority, relating to: the protection of human
health; the protection, preservation, or restoration of the environment
(including, without limitation, ambient air, surface
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water, ground water, land surface, or subsurface strata); and the exposure to,
or the emission, discharge, generation, use, manufacture, storage, treatment,
processing, handling, labeling, production, transportation, distribution,
release or threatened release into the environment, or disposal of Hazardous
Substances, as herein defined. The term Environmental Laws includes, without
limitation, the federal statutes the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Occupational Health and Safety Acts, each as
amended, and the regulations promulgated under them, and their state and local
counterparts.
"Governmental Authority" shall mean any federal, state, local, agency;
or any department, commission, court, judiciary, board, bureau, or other
instrumentality.
"Hazardous Substances" shall mean any material listed, defined,
designated or classified or which could be construed to be, by type and/or
quantity as hazardous or toxic or injurious to public health under any
applicable Environmental Laws.
"Property" means the Real Property and all structures, fixtures, and
other assets that could be contaminated thereon.
"Real Property" means the land owned, leased, or occupied by
the Company or any of its subsidiaries.
Except as disclosed in Schedule 3.12 hereto:
- -------------------------------------------
(a) The Company and each of its subsidiary's operation and use of its
Property are in compliance with all applicable Environmental Laws except to the
extent noncompliance would not have a Material Adverse Effect;
(b) The Company and each of its subsidiaries have obtained all
environmental, health and safety permits necessary for the operation of the
business of the Company and its subsidiaries as presently conducted, and all
such permits are in full force and effect and the Company and each of its
subsidiaries is in compliance in all material respects with the terms and
conditions of each such permit except for such permits the lack of which or
noncompliance with the terms and conditions of which would not have a Material
Adverse Effect;
(c) Neither the Company nor any of its subsidiaries has received any
notice of any material violation of any Environmental Laws that has not been
resolved without prospective effect and there are no civil, criminal or
administrative actions, suits, hearings, proceedings, written notices of
violation, claims or demands pending, with respect to any material violation,
alleged or proven, of Environmental Laws by the Company or any such subsidiary;
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(d) Neither the Company nor any of its subsidiaries are aware of any
potential claims, damages, liabilities or costs associated with the condition of
the Property including, without limitation, air, soil, and groundwater
conditions that would have a Material Adverse Effect.
(e) Neither the Company nor any of its subsidiaries has been involved
in any activity in, upon, about, or under the Property in connection with the
generation, use, handling, treatment, removal, storage, clean up, transport, or
disposal of any Hazardous Substances which (i) has resulted in a release or
threat or release of Hazardous Substances in material violation of any
Environmental Law or (ii) has given or may give rise to any claims, losses,
damages, liabilities, penalties, expenses, demands, fines or cleanup or
monitoring cost which would have a Material Adverse Effect;
(f) All Hazardous Substances which have been removed from the Property,
have been removed, stored, cleaned-up, transported, and disposed of in
compliance with all applicable Environmental Laws. Neither the Company nor any
of its subsidiaries have been notified in writing that they are potentially
liable, and have not received any written requests for information or other
correspondence concerning the Real Property or off-site properties or facilities
and, to the Company's knowledge, neither the Company nor its subsidiaries are
considered potentially liable under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, or any equivalent state law which
liabilities or potential liabilities would have a Material Adverse Effect.
(g) To the best knowledge of the Company, there are no areas in, upon,
or under the Property which are required to be permitted as treatment, storage,
or disposal facilities under the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 ET SEQ.; and
(h) To the best knowledge of the Company, there are no underground
storage tanks (as the term is defined in 40 CFR ss. 280.12) in, or under, any of
the Real Property.
3.13 PERCENTAGE COMPLETION OF ACCOUNTING; ACCOUNTS RECEIVABLE;
INVENTORIES. The Company utilizes the percentage of completion method of
accounting. The methodology used by the Company in estimating total contract
costs and profits, including the nature of judgments and estimations, at March
31, 1997 is consistent with the methodology utilized at June 30, 1995 and June
30, 1996. As such, the Company believes that contract gross profit through March
31, 1997 has been recorded on a basis consistent with contract gross profit
recognized in the periods ended June 30, 1995 and June 30, 1996. The Company has
no knowledge of any factors which would require material adjustment to the
estimated profit on uncompleted contracts at March 31, 1997.
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All of the accounts receivable of the Company and its subsidiaries as
of March 31, 1997 are set forth in Schedule 3.13.
The accounts receivable reflected on the Interim Financials, net of (i)
estimated costs of materials and services supplied by customers and (ii)
contract adjustments in the ordinary course of business, will be collectible as
billed in accordance with the terms of the underlying contracts.
All of the inventories of the Company and its subsidiaries as reflected
in the Financial Statements (the "Inventories") and each of its subsidiaries
consist of a quality and quantity usable and saleable in the ordinary course of
business, except for items of obsolete materials and materials of below-standard
quality, all of which have been written off or written down to net realizable
value.
3.14 BACKLOG. All unfilled orders to purchase goods of the Company and
its subsidiaries at a purchase price in excess of $100,000 are firm and binding
commitments of the respective purchasers (assuming that such purchaser has
properly authorized by all requisite corporate action and has properly executed
and delivered such purchase order, which, to the best knowledge of the Company,
is the case) to purchase the goods indicated. Set forth on Schedule 3.14 are the
amounts of OEM architectural, OEM automotive and aftermarket backlog on a
percent completion basis at June 30, 1996, June 30, 1995 and March 31, 1997.
3.15 CUSTOMERS AND SUPPLIERS. Set forth on Schedule 3.15(a) is a list
of all customers of the Company, transactions with any of whom represented more
than 5% of the Company's revenue in any of the preceding three fiscal years
("Customers"). Set forth on Schedule 3.15(b) is a list of all suppliers of raw
material or equipment to the Company who, in the preceding year, were paid more
than $250,000 ("Suppliers"). The Company's relationship with each of the
Customers and Suppliers is generally good and the Company knows of no plans by
any Customer or Supplier to terminate or alter its relationship with the Company
in a manner materially adverse to the Company.
3.16 PRODUCT WARRANTIES. Schedule 3.16 sets forth all losses and
expenses incurred by reason of liabilities arising under any warranties during
each of the three years ended June 30, 1994, 1995 and 1996 and the nine month
period ended March 31, 1997. There has been no material adverse change in that
experience since March 31, 1997.
3.17 TITLE TO ASSETS; LIENS. Except as disclosed in Schedule 3.17, the
Company and its subsidiaries have good and marketable title, insurable and
indefeasible fee simple title in the case of owned Real Property, to all of
their respective property, equipment and other assets, and such assets are free
and clear of any mortgages, liens, security interests, charges, encumbrances or
title defects of any nature whatsoever other than Permitted Liens (as
hereinafter defined). Schedule 3.17(a)
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contains a complete and accurate legal description of each parcel of real
property owned by each of the Company and its subsidiaries in the conduct of its
business. Schedule 3.17(b) contains a complete and accurate description of all
material tangible personal property owned or used by the Company or any
subsidiary in the conduct of its business. There are no pending or, to the best
knowledge of the Company, threatened zoning, condemnation or eminent domain
proceedings, building, utility or other moratoria, or injunctions or court
orders which would materially effect such continued operation. The current use
of the owned Real Property is permissible and in material compliance with
applicable zoning ordinances.
Permitted Liens shall mean: (A) statutory liens; (B) rights of
way disclosed on an ALTA survey of the property; and (C) items listed on
Schedule 3.17(a).
3.18 LABOR RELATIONS. Neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement covering any of their
respective employees and no such agreement is currently contemplated by the
Company or any of its subsidiaries. There is no unfair labor practice complaint
against the Company or any of its subsidiaries pending before the National Labor
Relations Board and there is no labor strike, dispute, slowdown or stoppage, or
any union-organizing campaign, actually pending or, to the best knowledge of the
Company, threatened against or involving the Company or any of its subsidiaries.
3.19 INSURANCE. Schedule 3.19 lists all material insurance policies of
the Company and its subsidiaries with respect to their respective businesses
and/or assets. All such insurance policies are in full force and effect and all
premiums due thereon have been paid. No written notice of termination or premium
increase has been received under any such insurance policy.
3.20 INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS.
Schedule 3.20 lists all intercompany agreements or arrangements of any kind
between or among the Company and/or any of its subsidiaries, on the one hand,
and the Company's officers, directors or stockholders owning more than 5% of the
Shares of the Company, on the other hand.
Except as set forth in Schedule 3.20, none of the Company's officers
has any direct or indirect interest either by way of stock ownership or
otherwise, in any firm, corporation, association or business enterprise which
competes with the Company or any of its subsidiaries; is a supplier, client,
customer, agent or broker of the Company or any of its subsidiaries; or is
otherwise engaged in the business engaged in by the Company and such
subsidiaries. Except as set forth on Schedule 3.20, none of the Company's
directors has any direct or indirect interest either by way of stock ownership
or otherwise, in any firm, corporation, association or business enterprise
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which competes with the Company or any of its subsidiaries. Ownership of capital
stock listed on a national securities exchange or traded in the over-the-counter
market of any corporation shall not be deemed a violation of this Section,
provided the owner thereof and his affiliates do not own more than an aggregate
of 5% of the capital stock of such corporation.
3.21 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Schedule 3.21, neither the Company nor any of its subsidiaries has any
liabilities or obligations (whether choate or inchoate, absolute or contingent,
or otherwise) except (i) liabilities which are reflected and reserved against or
disclosed on the Financial Statements, (ii) liabilities incurred in the ordinary
course of business and consistent with past practice since June 30, 1996 and
which have not resulted in, and could not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect; (iii) liabilities
and obligations under any matter listed on a schedule to this agreement and
contracts not required to be listed on Schedule 3.8.
3.22 OFFICERS AND DIRECTORS. Schedule 3.22 sets forth the
names of all directors and officers of the Company and each of
its subsidiaries.
3.23 BANKRUPTCY MATTERS. Predecessors to the Company, Glasstech
Industries, Inc. and Glasstech, Inc., filed for bankruptcy protection under
Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") on May
24 and May 25, 1993, respectively, in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). The Company is the substantively
consolidated, reorganized debtor pursuant to the plan of reorganization and
confirmation order of the Bankruptcy Court. The Company has fully performed in
all material respects all conditions precedent to confirmation and effectiveness
of the plan of reorganization approved by the Bankruptcy court on or about
December 6, 1994, with the technical amendments thereto (the "Plan of
Reorganization") has become effective. Except as set forth in Schedule 3.23, the
Company has satisfied in all material respects all terms of the Plan of
Reorganization, including, but not limited to, payment in full of claims in
Classes 1 through 4, inclusive, payment to claims in Classes 5 through 8,
inclusive, as specified in the Plan of Reorganization, and treatment of Classes
9 and 10, inclusive, as specified in the Plan of Reorganization. Except as set
forth in Schedule 3.23, the Company has assumed obligations for health and
welfare plans, pension plans, and executory contracts as specified in the Plan
or Reorganization (the "Assumed Obligations") and is current and no default
exists with respect to all such Assumed Obligations and payment of such Assumed
Obligations are reflected on the Financial Statements. The Company represents
that no further orders to approve this Agreement and Plan of Merger are required
to be obtained from the Bankruptcy Court. The Company is current on its payments
to Senior Noteholders as defined in the Plan of Reorganization as
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Class 5 creditors and there is presently no default in the terms of the notes to
the Senior Noteholders and the balance outstanding, including both principal and
interest, is set forth in Schedule 3.23.
3.24 DISCLOSURE. None of this Agreement or any certificate or other
document delivered by the Company contains any untrue statement of a material
fact or omits any statement of a material fact necessary to make any statement
contained herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND SUB. The
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
4.1 AUTHORITY; NO CONFLICTS. Each of the Parent and Sub is a
corporation duly organized, validly existing and in good standing under the law
of its jurisdiction of incorporation. All the issued and outstanding capital
stock of the Sub is owned of record directly by the Parent. This agreement and
the transactions contemplated hereby have been duly authorized by the board of
directors of each of the Parent and Sub and by the Parent, as the sole
stockholder of the Sub, and, assuming this agreement constitutes a valid and
binding obligation of the Company, this agreement constitutes a valid and
binding obligation of each of the Parent and Sub, enforceable against each of
the Parent and Sub in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting
creditors rights generally and subject to general principles of equity (whether
considered in a proceeding in equity or at law). The execution and delivery of
this agreement does not, and the consummation of the transactions contemplated
by this agreement will not, (a) conflict with the Parent's or the Sub's
certificate of incorporation or by-laws; (b) result in any violation of or
default (with or without notice or lapse of time or both) under, any material
note, bond, mortgage, indenture, deed of trust, license, lease, contract,
commitment, agreement or arrangement to which the Parent or Sub is a party or
(c) violate any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Parent, the Sub or any of their property or assets,
other than, in the case of clauses (b) and (c) above, any such conflicts,
violations and defaults that, in the aggregate, would not have a Material
Adverse Effect. No material consent, approval, order or authorization of or
filing with or notification to, any court or governmental or regulatory
authority is required to be made by or with respect to the Parent or Sub in
connection with the execution and delivery of this agreement or the consummation
by the Parent and Sub of the transactions contemplated by this agreement, except
(A) in as may be required to comply with the HSR Act and (B) the filing of a
certificate of merger pursuant to the DGCL.
4.2 INTERIM OPERATIONS OF PARENT AND SUB. Each of the
Parent and the Sub was formed solely for the purpose of engaging
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in the transactions contemplated by this agreement, and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated by this agreement.
4.3 BROKERS. No broker, finder or other investment banker (other than
CIBC in connection with the financing of the transaction contemplated hereby) is
entitled to any brokerage, finder's or other similar fee or commission in
connection with this agreement or the transactions contemplated by this
agreement based upon agreements made by or on behalf of the Parent or Sub.
4.4 FINANCING. The Parent and the Sub shall use all reasonable efforts
to obtain financing for the Merger through a sale of $70,000,000 of senior notes
of Sub in a Rule 144A offering. Key Equity Capital and certain members of the
management of the Company have agreed, subject to the availability of such
financing, to provide an aggregate equity investment in the Parent equal to
$15,000,000.
5. COVENANTS
5.1 CAPITALIZATION. The Company shall not, and shall not allow any of
its subsidiaries to, on or before the Effective Time, issue any shares of
capital stock (other than pursuant to the exercise or conversion of options or
warrants outstanding on the date of this agreement) or options, warrants, rights
or other instruments to acquire capital stock of the company or any of its
subsidiaries, make any material changes in its capitalization, declare dividends
or enter into any transaction not in the ordinary course of business without the
prior written consent of the Parent.
5.2 ACCESS TO INFORMATION
(a) Subject to any limitations imposed by applicable law,
between the date of this Agreement and the Effective Time, the Company shall (i)
give the Parent and Sub and their authorized representatives all reasonable
access (during regular business hours upon reasonable notice) to all employees,
plants, properties, offices, warehouses and other facilities and to all books
and records (including, without limitation, tax returns) documents, and subject
to the Company's reasonable approval and in a manner arranged by the Company,
customers, employees and lenders of the Company and its subsidiaries and cause
the Company's and its subsidiaries' independent accountants to provide access to
their work papers and such other information as the Parent or Sub may reasonably
request, (ii) permit the Parent and Sub to make such inspections as they may
reasonably require and (iii) cause its officers and those of its subsidiaries to
meet with and furnish the Parent and Sub with such financial and operating data
and other information with respect to the business, properties and personnel of
the Company and its subsidiaries as the Parent or Sub may from time to time
reasonably request. The rights of Parent under this Section
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5.2(a) shall not be exercised in such a manner as to interfere unreasonably with
the conduct of the business of the Company.
(b) Prior to the Effective Time, the Parent and Sub shall keep
confidential all information obtained pursuant to this section 5.2, in
accordance with the Confidentiality Agreement dated March 18, 1997 between Key
Equity Capital and the Company (the "Confidentiality Agreement") to the same
extent as if the Parent and the Sub were the parties to the Confidentiality
Agreement; provided, however, that Key Equity Capital and Parent may, in
connection with obtaining financing for the transactions contemplated by this
Agreement and with the prior approval of the Company, which shall not be
unreasonably withheld or delayed, disclose such information to lenders and other
entities as is reasonably required to obtain such financing.
5.3 REASONABLE EFFORTS. Each party shall use its reasonable best
efforts to cause the fulfillment at or prior to the Closing of all the
conditions to such other party's obligation to consummate the Merger.
5.4 ANTITRUST NOTIFICATION. Each of the Company and Parent shall, as
promptly as practicable, but in no event later than ten business days following
the execution and delivery of this agreement, determine if the Company and
Parent are required to file with the United States Federal Trade Commission (the
"FTC") and the United States Department of Justice (the "DOJ") the notification
and report form required for the transactions contemplated by this agreement and
if such filing is required to make such filing and thereafter shall promptly
file any supplemental information requested in connection with the filing
pursuant to the HSR Act. Any such notification and report form and supplemental
information shall be in substantial compliance with the requirements of the HSR
Act. Each of the parties shall furnish the other(s) such necessary information
and reasonable assistance as may reasonably be requested in connection with a
party's preparation of any filing or submission under the HSR Act. The parties
shall keep each other apprised of the status of any communications with, and
inquiries or requests for additional information from, the FTC and the DOJ and
shall comply promptly with any such inquiry or request. Each of the Company and
Parent shall use its reasonable best efforts to obtain any clearance required
under the HSR Act for the Merger at the earliest date practicable.
5.5 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to the Parent and Sub, and the Parent or Sub, as the case may be, shall
give prompt notice to the Company, of (a) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which is likely to cause any
representation or warranty of that party in this agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (b) any
failure of that party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this agreement; PROVIDED,
HOWEVER, that the
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delivery of any notice pursuant to this Section 5.5 shall not limit or otherwise
affect the remedies available under this agreement to any of the parties
receiving such notice.
5.6 FEES AND EXPENSES. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this agreement and the
transactions contemplated by this agreement shall be paid by the party incurring
the cost or expense, subject to Sections 3.11 and 4.3.
5.7 EMPLOYEE BENEFITS. The Parent and Sub agree that, for a period of
at least two years following the Effective Time, the Surviving Corporation shall
maintain benefit plans or arrangements for the employees of the Company and its
subsidiaries with terms that, in the aggregate, are substantially equivalent or
better than those of the Company Plans covering such employees immediately
preceding the Effective Time, to the extent permitted under laws and regulations
in force from time to time.
5.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, the Parent and the
Surviving Corporation shall indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof or who becomes prior
the Effective Time, an officer, director or employee of the Company or any of
its subsidiaries (the "Indemnified Parties") against (i) all losses, claims,
damages, costs, expenses (including attorneys' fees and expenses), liabilities
or judgments or amounts that are paid in settlement of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer or employee of the Company or any subsidiary of the Company,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time (the "Indemnified Liabilities") and (ii) all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out of,
or pertaining to this agreement, the transactions contemplated hereby or the
financing thereof, in each case to the full extent the Company is permitted
under Delaware law and would have been permitted under its Certificate of
Incorporation and By-laws as they existed prior to the Effective Time to
indemnify such person (and the Surviving Corporation shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law upon receipt of any
undertaking required by Section 145(e) of the DGCL), provided that neither the
Parent not the Surviving Corporation shall be liable for any settlement of any
claim effected without its written consent, which consent, however, shall not be
unreasonably withheld. Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising
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before or after the Effective Time), (i) any counsel retained by the Indemnified
Parties for any period after the Effective Time must be reasonably satisfactory
to the Surviving Corporation, (ii) after the Effective Time, the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received, and (iii)
after the Effective Time, the Parent and the Surviving Corporation shall use all
reasonable efforts to assist in the vigorous defense of any such matter. Any
Indemnified Party wishing to claim indemnification under this Section 5.8 shall
within 20 days of becoming aware of such claim, action, suit, proceeding or
investigation, notify the Parent and the Surviving Corporation and shall deliver
to the Surviving Corporation the undertaking, if any, required by Section 145(e)
of the DGCL; provided, however, that the rights of the Indemnified Party to be
indemnified hereunder shall not be adversely affected by its failure to give
notice pursuant to the foregoing unless and only to the extent that the Parent
and the Surviving Corporation are prejudiced thereby. The Parent and the
Surviving Corporation shall be liable for the fees and expenses hereunder with
respect to only one law firm, in addition to local counsel in each applicable
jurisdiction, to represent the Indemnified Parties as a group with respect to
each such matter unless there is, under applicable standards of professional
conduct, a conflict between the positions of any two or more Indemnified Parties
that would preclude or render inadvisable joint or multiple representation of
such parties.
(b) For a period of six years after the Effective Time, the
Parent shall cause the Surviving Corporation to maintain in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous to the Indemnified Parties and
underwritten by an insurance carrier of at least as favorable a financial
rating) with respect to claims arising from facts or events which occurred
before the Effective Time.
(c) In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of the Surviving Corporation assume the obligations set forth in this
Section 5.8.
(d) The provisions of this Section 5.8: (i) are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his
heirs and his representatives; and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have contract or otherwise.
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5.9 CONDUCT OF THE BUSINESS OF THE COMPANY. During the period from the
date of this agreement to the Effective Time, except as otherwise agreed to in
writing by the Company and Parent: (i) the Company will, and will cause each of
its subsidiaries to, conduct its business only in, and the Company will not
take, and will cause each of its subsidiaries not to take, any material action
except in, the ordinary course consistent with past practice, (ii) the Company
will not, and the Company will cause each of its subsidiaries not to, enter into
any material transaction other than in the ordinary course of business
consistent with past practice, and (iii) to the extent consistent with the
foregoing, with no less diligence and effort than would be applied in the
absence of this Agreement, the Company will, and will cause each of its
subsidiaries to, preserve intact its current business organizations and
reputation, use its reasonable best efforts to preserve its relationships with
customers, suppliers and others having business dealings with it with the
objective that their goodwill and ongoing businesses shall be unimpaired at the
Effective Time, and comply in all material respects with all laws, rules,
regulations and orders of all governmental entities or regulatory authorities
applicable to it. Without limiting the generality of the foregoing and except as
otherwise expressly permitted in this Agreement, prior to the Effective Time,
the Company will not and will not permit any of its Subsidiaries to, without the
prior written consent of the Parent:
(a) (i) increase the compensation of any of its directors,
officers or employees, except for normal increases in the ordinary
course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company and its subsidiaries taken as a
whole, (ii) pay or agree to pay any pension, retirement allowance or
other employee benefit not required or contemplated by any of the
Company Plans, to any director, officer or employee, whether past or
present, (iii) enter into any new or amend any existing employment
agreement with any director, officer or employee, (iv) enter into any
new or amend any existing severance agreement with any director,
officer or employee, (v) except as may be required to comply with
applicable law, become obligated under any new pension plan or
arrangement, welfare plan or arrangement, multiemployer plan or
arrangement, employee benefit plan or arrangement, severance plan or
arrangement, benefit plan or arrangement, or similar plan or
arrangement, which was not in existence on the date hereof, or amend
any such plan or arrangement in existence on the date hereof;
(b) enter into any contract or amend any existing contract, or
engage in any new transaction outside the ordinary course of business
consistent with past practice or not on an arm's-length basis, with any
affiliate of the Company or any of its subsidiaries;
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(c) except to the extent required by applicable law, (i)
permit any material change in (A) accounting, financial reporting,
inventory, allowance or tax practice or policy or (B) any method of
calculating any bad debt, contingency or other reserve for accounting,
financial reporting or tax purposes or (ii) make any material tax
election or settle or compromise any material income tax liability with
any governmental entity or regulatory authority;
(d) take any action that would cause any representations set
forth in Article 3 not to be true in all material respects from and
after the date hereof until the Effective Time;
(e) fail to maintain in full force the insurance
policies in effect on the date hereof or change any self-
insurance program in effect in any material respect;
(f) do any act or omit to do any act, or permit any act or
omission to act, which will cause a breach of any contract or
commitment of the Company or any of its subsidiaries, except to the
extent that such breach would not have a Material Adverse Effect.
5.10 MEETING OF COMPANY SHAREHOLDERS.
The Company will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and Bylaws to convene a
meeting of its stockholders or solicit shareholder consents as promptly as
practicable to consider and vote upon the approval of the Merger and the other
transactions contemplated hereby (the "Company's Stockholders' Approval") and
(ii) the Board of Directors of the Company shall recommend and declare advisable
such approval and shall not modify or revoke such recommendation and declaration
and the Company shall take all lawful action to solicit, and use all reasonable
efforts to obtain, such approval. Each of the Parent and the Sub agrees to
cooperate in all reasonable respects with the Company in the Company's efforts
to obtain the Company Stockholders' Approval.
5.11 NO NEGOTIATIONS. From the date hereof until the Effective Time or
the termination of this agreement, neither the Company nor any of its
subsidiaries shall directly or indirectly, through any officer, director, agent,
employee, representative or otherwise, make, solicit, initiate or knowingly
encourage the submission of proposals or offers from any person or entity
(including any of its officers or employees) relating to any recapitalization,
merger, consolidation or other business combination involving the Company or any
of its subsidiaries, any sale of all or a substantial portion of the assets of
the Company or any of its subsidiaries, or the sale of any material equity
interest in the Company or any of its subsidiaries (any of the foregoing, a
"Competing Transaction"). During the term hereof, neither the Company nor any of
its subsidiaries shall, directly
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or indirectly, participate in any negotiations regarding, furnish to any other
person or entity any information with respect to, or otherwise cooperate, assist
or participate in any effort or attempt by any third party to propose or effect
any Competing Transaction. The Company shall immediately notify the Parent of
any proposal relating to a possible Competing Transaction and shall, if legally
permissible, immediately deliver to the Parent any information furnished to or
by any such third party.
5.12 FINANCIAL STATEMENTS. The Company covenants and agrees that it
will deliver to the Parent, within 30 days after the end of each month from the
date hereof until the Closing, unaudited consolidated statements of operations
and cash flows for the business of the Company and each of its subsidiaries for
the month then ended, along with a consolidated balance sheet of the business of
the Company and each of its subsidiaries as of the end of such month. All
financial statements furnished pursuant to this Section shall fairly present the
financial position, results of operations, cash flows and shareholders' equity
as of the dates and for the periods covered by such statements. To the best
knowledge of the Company, such financial statements shall be true and complete
in all material respects.
5.13 NON-CONTRACT INVENTORY. As the inventory set forth on Schedule
5.13 (the "Non-Contract Inventory") is sold, the Company shall pay to the
shareholders set forth on a schedule to be delivered prior to the Closing, at
the addresses and in the percentages specified on such schedule (the
"Shareholders") an amount equal to 50% of the Company's gross profit resulting
from such sales, calculated in a manner consistent with that used to prepare the
Financial Statements. Such payments shall be made within 45 days following the
end of each fiscal quarter in which such sales is recognized and any accounts
receivable attributed to such gross profit are collected, and shall be
accompanied by a schedule setting forth in reasonable detail the calculation of
such gross profit (the "Gross Profit Schedule"). A copy of the Gross Profit
Schedule shall concurrently be delivered to the Shareholders' Representative. If
within 30 days following delivery of the Gross Profit Schedule, the
Shareholders' Representative has not given the Parent notice of its objection to
the Gross Profit Schedule (such notice must contain a reasonably detailed
statement of the basis of such objection), then the Gross Profit Schedule shall
be considered accepted and binding on all parties. If the Shareholders'
Representative gives such notice, the issues in dispute will be submitted to the
Accountants for resolution in accordance with the procedures set forth in the
third paragraph of Section 1.9.
5.14. NO DISTRIBUTIONS. Between the date of this Agreement and the
Closing, the Company shall make no distributions, whether by way of dividends
or otherwise, to any holder of Shares, Options or warrants.
5.15. ASSISTANCE IN FINANCING. Parent and Sub acknowledge that
Sub currently intends that payment of the Merger
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Consideration will be financed by an offering of securities and the arranging of
senior bank debt financing. The Company will provide customary assistance in
connection with Parent and Sub's efforts to raise such financing, including,
without limitation, making senior management reasonably available for meetings
with prospective lenders and investors and cooperating in the preparation of
offering documents and necessary financial and business information to enable
documents, including the financial statements of the Company, to comply with the
rules and regulations of the Securities and Exchange Commission, it being
recognized that (a) neither the Company or any of the stockholders of the
Company will have any responsibility with respect to such compliance, (b) it is
contemplated that the indemnification described at Section 5.8 will apply to
such efforts, and (c) Parent and Sub will pay any travel expenses incurred by
the Company's executive officers in connection therewith.
6. CONDITIONS TO CONSUMMATION OF THE MERGER.
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE
THE MERGER. The obligation of each party to effect the Merger is
subject to the satisfaction or waiver, prior to the Closing, of
the following conditions:
(a) all necessary waiting periods under the HSR Act
applicable to the Merger shall have expired or been terminated;
and
(b) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental authority against the Parent, the Sub or the Company and
be in effect that prohibits or restricts the consummation of the Merger or makes
such consummation illegal (each party agreeing to use all reasonable efforts to
have such prohibition or restriction lifted or vacated).
6.2 CONDITIONS TO THE PARENT'S AND SUB'S OBLIGATIONS TO EFFECT THE
MERGER. The obligations of the Parent and Sub to effect the Merger shall be
subject to the satisfaction or waiver, prior to the Closing, of the following
conditions:
(a) since the date of this agreement, there shall not have
been occurred any material adverse change in the business or financial condition
of the Company and its subsidiaries, other than changes relating to the
Company's industry or the economy in general and not specifically relating to
the Company and its subsidiaries. Each of the Parent and Sub acknowledges that
there may be disruptions to the Company's business as a result of the
announcement of the Merger and changes attributable solely thereto shall not
constitute a Material Adverse Change. Except as scheduled the Company knows of
no disruptions or changes which will be attributed to the announcement of the
Merger;
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(b) the representations and warranties of the Company in this
agreement shall be true and correct in all material respects as of the Closing
as if made again on and as of the Closing, and all the covenants in this
agreement to be complied with or performed by the Company or waived by Parent or
Sub at or before the Closing shall have been complied with and performed; and
(c) the Parent shall have received an opinion of Kaye,
Scholer, Fierman, Hays & Handler, LLP addressed to the Parent and Sub and dated
the Closing, reasonably satisfactory in form and substance to counsel for the
Parent and Sub, covering the first and third sentences of section 3.1, clause
(a) of the fourth sentence of section 3.1 as to the Company only, the first
sentence of section 3.2(a) and, to the best of the knowledge of such counsel
based solely on a certificate of an officer of the Company as to the existence
of the matters to be opined and the absence of any contrary knowledge on the
part of attorneys performing work for the Company, clauses (b) and (c) of the
fourth sentence of section 3.1, the second sentence of section 3.2(a) and the
first sentence and last two sentences of section 3.2(b);
(d) the Company shall not have received notice from the holder
or holders of more than 10% of the Shares that such holder or holders have
exercised or intend to exercise its or their appraisal rights under the DGCL,
and the Company shall have obtained approval of the Merger from the requisite
holders of Shares in accordance with applicable law and the Certificate of
Incorporation and Bylaws of the Company.
(e) the Company shall have furnished the Parent with a
certificate dated the Closing signed on its behalf by its Chairman, President or
any Vice President to the effect that the conditions set forth in paragraphs
(a), (b) and (d) above have been satisfied.
(f) the Company and each of the individuals listed on the
Schedule 6.2(f) shall have entered into employment and/or noncompetition
agreements reasonably satisfactory in form and substance to the Parent.
(g) the Company shall have delivered to the Parent its balance
sheet as at March 31, 1997, and the related statements of operations and
shareholders' equity and cash flows for the nine month period then ended.
(h) the Parent shall be satisfied with the results of its
legal and business due diligence review of the Company, Stir-Melter and [UK
Sub] and their respective properties and assets including, without limitation, a
review of the Company's financial results for fiscal 1997 year to date.
(i) the Company shall have delivered to Parent a
certificate of the Secretary of State of the State of Delaware,
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as of a recent date, certifying as to the good standing of the Company in the
State of Delaware.
(j) the Company shall have paid all incentive compensation
costs attributable to the period prior to the Closing;
(k) all third party debt of the Company and any accrued
interest and any pre-payment penalties thereon, and any capitalized lease
obligations of the Company shall have been paid;
(l) all required authorizations, consents or approvals
of any third party, the failure to obtain which could have a
Material Adverse Effect;
(m) the Parent shall have obtained debt and/or equity
financing to acquire the Shares on terms and conditions
reasonably satisfactory to it; and
(n) the Company shall have delivered to Parent an owners
policy of title insurance on ALTA Form B-1970 (amended) from Chicago Title
Insurance Company (the "Title Company") in an amount acceptable to Parent (with
each of the Title Company's standard printed exceptions deleted) insuring
indefeasible fee simple title to the Real Property owned by the Company to be
good in the Company from and after the Effective Time, subject only to: (i)
zoning ordinances and regulations which do not prohibit or restrict the present
use of such Real Property; (ii) real estate taxes and assessments both general
and special which are a lien but not yet due and payable at the Effective Time;
and (iii) mortgages, liens, easements, covenants, conditions, reservations and
restrictions of record, if any, as have been approved in writing by Parent prior
to Closing. With regard to such title policy, the Company shall bear the cost of
the title commitment and the cost of the issuance of a title guaranty in the
amount of $2,500,000, and Parent shall bear the difference between the cost of
the title guaranty and the cost of the title policy.
(p) Holders of a majority of the outstanding Shares
shall have voted for the adoption of this agreement.
6.3 CONDITIONS TO THE COMPANY'S OBLIGATIONS TO EFFECT THE MERGER. The
obligations of the Company to effect the Merger is subject to the satisfaction
or waiver, prior to the Closing, of the following conditions:
(a) the representations and warranties of the Parent and Sub
in this agreement shall be true and correct in all material respects as of the
Closing as if made again on and as of the Closing, and all the covenants in this
agreement to be complied with or performed by the Parent and Sub at or before
the Closing shall have been complied with and performed;
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(b) the Company shall have received an opinion of Baker &
Hostetler LLP, counsel for the Parent and Sub, addressed to the Company and
dated the Closing, reasonably satisfactory in form and substance to counsel for
the Company, covering the first three sentences and clause (a) of the fourth
sentence of section 4.1 and, to the best of the knowledge of such counsel,
clauses (b) and (c) of the fourth sentence of Section 4.1; and
(c) the holders of a majority of the authorized and
outstanding Shares shall have voted for the adoption of this agreement.
7. TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. This agreement may be terminated and the Merger
abandoned at any time, notwithstanding approval of the Merger by the
stockholders of the Company or the Sub, but prior to the Effective Time:
(a) by mutual written action of the respective boards
of directors of the Company and Parent;
(b) by the Parent or Company, if such terminating party is not
in material breach of its obligations under this agreement, if the Merger has
not been consummated on or after September 30, 1997;
(c) by the Parent or Company, if any court of competent
jurisdiction shall have issued an order (other than a temporary restraining
order), decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger; PROVIDED, HOWEVER, that the party seeking to
terminate this agreement shall have used its reasonable best efforts to remove
or lift such order, decree or ruling;
(d) by the Parent, if events occur that render impossible
compliance with one or more of the conditions set forth in section 6.1 or 6.2
that are not waived by the Parent or Sub, or by the Company, if events occur
that render impossible one or more of the conditions set forth in sections 6.1
or 6.3 that are not waived by the Company; or
(e) by either the Parent or the Company if this agreement
shall fail to receive the requisite vote for approval and adoption by the
shareholders of the Company.
7.2 EFFECT OF TERMINATION. If this agreement is terminated and the
Merger abandoned pursuant to section 7.1, this agreement, except for section
5.2(b) and 5.6 and (to the extent applicable to the foregoing sections) section
8, shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders. Nothing in this
section 7.2 shall relieve any party of liability for breach of this agreement.
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7.3 AMENDMENT. To the extent permitted by applicable law, this
agreement may be amended by action by or on behalf of the boards of directors of
the Company, the Parent and the Sub, at any time before or after adoption of
this Agreement by the stockholders of the Company, but no amendment shall be
made that decreases the amount or form of the Merger Consideration or adversely
affects the rights of the Company's stockholders under this Agreement, without
the approval of the stockholders of the Company. This Agreement may not be
amended, except by an instrument in writing signed on behalf of all the parties.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by or on behalf of the boards of
directors of the Company, the Parent and the Sub may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties in this agreement, (b) waive any inaccuracies in
the representations and warranties by any other party or in any document,
certificate or writing delivered pursuant to this agreement by any other party
or (c) waive compliance with any of the agreements or conditions in this
agreement. Any agreement by any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of that
party.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this agreement or in any certificate, document or
instrument delivered pursuant to this agreement shall survive the Closing
provided that, except as set forth below with respect to claims relating to tax
matters, there shall be no liability with respect to any representation or
warranty nor any rights to indemnification hereunder, except to the extent that
the Shareholders' Representative is given notice of a claim with respect thereto
within 18 months of the Effective Time specifying the factual basis for the
claim in reasonable detail, and provided further that the Shareholders'
aggregate liability with respect thereto shall be satisfied solely from to the
Indemnification Escrowed Funds and no shareholder shall have any personal
liability therefor. Any investigation by or on behalf of any party hereto shall
not constitute a waiver as to enforcement of any representation or warranty. Any
such claims relating to tax liabilities for a period (including any extensions
provided of such statutory period) prior to Closing, whether or not arising
prior to Closing, must be brought prior to the expiration of the statutory
period of limitations for such period, and Losses (as defined below) for such
claim shall include but not be limited to any tax paid, interest, legal costs,
penalties and the tax equivalent of any net operating losses utilized. Upon the
expiration of the final period during which claims may be brought, the parties
shall direct the Escrow Agent to pay to the Shareholders (as defined in the
Indemnification Escrow Agreement) the amounts remaining in the Indemnification
Escrow Fund.
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8.2 INDEMNIFICATION FROM INDEMNIFICATION ESCROWED FUNDS.
Notwithstanding the Closing and subject to the limitations set forth herein, the
Parent and the Surviving Corporation shall be entitled to be indemnified and
held harmless from the amount of the Indemnification Escrowed Funds from and
against, and pay or reimburse each such person for, any and all claims,
liabilities, obligations, losses, fines, costs, proceedings or damages (whether
absolute, accrued, conditional or otherwise, and whether or not resulting from
third party claims), including out-of-pocket expenses and reasonable attorneys'
and accountants' fees incurred in the investigation or defense of any of the
same or in asserting any of their respective rights hereunder (collectively,
"Losses") resulting from or arising out of:
(a) any breach or inaccuracy of any representation or warranty (or
the schedules relating thereto) or nonperformance of any covenant of the
Company; and
(b) any claim, liability or obligation arising with respect to or
relating to any holder of Shares' exercise of his, her or its appraisal rights
under Section 262 of the DGCL; provided, however, that the amount of
indemnification hereunder shall be limited to the difference between the price
per share for each outstanding Share held by such shareholder that such
shareholder would have received under this Agreement and the amount such
shareholder is entitled to as a result of such shareholder's exercise of his,
her or their appraisal rights under Section 262 of the DGCL.
8.3 LIMITATION ON INDEMNITY OBLIGATION. Notwithstanding anything in
this agreement to the contrary, indemnification sought under Article 8 shall be
satisfied solely from the Indemnification Escrowed Funds. The Parent and the
Surviving Corporation shall not be entitled to indemnification hereunder with
respect to an Indemnifiable Claim (as defined below) (or, if more than one
Indemnifiable Claim is asserted, with respect to all Indemnifiable Claims) until
the aggregate amount of Losses with respect to such Indemnifiable Claim or
Claims exceeds $10,000, in which event the indemnity provided for in this
Article 8 shall be with respect to the entire amount of Losses without regard to
the limitations set forth above, and further provided, that prior to termination
of the Indemnification Escrow, the Parent and the Surviving Corporation shall be
entitled to indemnification with respect to all Indemnifiable Claims, regardless
of the aggregate amount of such Claims.
8.4. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY CLAIMS.
(a) If the Parent determines to seek indemnification under
this Article with respect to Losses resulting from the assertion of liability by
third parties (an "Indemnifiable Claim"), it shall give notice to the
Shareholders' Representative as provided in Section 9.3, within 20 days of the
Parent becoming aware of any such Indemnifiable Claim or of facts upon which any
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such Indemnifiable Claim will be based; the notice shall set forth such
information with respect thereto as is then reasonably available to the Parent.
If the Parent so notifies the Shareholders' Representative thereof, the
Shareholders' Representative will be entitled, if the Shareholders'
Representative so elects by written notice delivered to the Parent within 20
days after receiving the Parent's notice, to assume the defense thereof with
counsel reasonably satisfactory to the Parent. Notwithstanding the foregoing (i)
the Parent shall also have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of the Parent;
and (ii) the rights of the Parent to be indemnified hereunder in respect of
Losses resulting from the assertion of liability by third parties shall not be
adversely affected by its failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, the Holders are materially
prejudiced thereby. With respect to any assertion of liability by a third party
that results in Losses, the parties hereto shall make available to each other
all relevant information in their possession material to any such assertion.
(b) In the event that the Shareholders' Representative, within
20 days after receipt of the aforesaid notice of Losses, fail to assume the
defense of the Parent against such Losses, the Parent shall have the right to
undertake the defense, compromise or settlement of such action on behalf of and
for the account and risk of the Indemnification Escrowed Funds.
(c) Notwithstanding anything in this Section to the contrary,
(i) if there is a reasonable probability that Losses may materially and
adversely affect the Parent or the Surviving Corporation, other than as a result
of money damages or other money payments, the Parent shall have the right, at
its own cost and expense, to defend, compromise or settle such Losses, provided
that the Shareholders' Representative shall not be bound by any such defense,
compromise or settlement made without the consent of the Shareholders'
Representative; and (ii) the Shareholders' Representative shall not, without the
Parent's written consent (which consent shall not be unreasonably withheld),
settle or compromise any Loss or consent to entry of any judgment in respect
thereof unless such settlement, compromise or consent includes as an
unconditional term thereof providing for the giving by the claimant or the
plaintiff to the Parent or the Company, as the case may be, and all affiliates
of the Parent and the Company a release from all liability in respect of such
Loss.
8.5. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD-PARTY
CLAIMS. In the event that the Parent asserts the existence of a Loss (but
excluding claims resulting from the assertion of liability by third parties), it
shall give written notice to the Shareholders' Representative specifying the
nature and amount of the claim asserted. If the Shareholders' Representative,
within 30 days after receiving the notice from
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the Parent, shall not give written notice to the Parent announcing its intent to
contest such assertion by the Parent, such assertion shall be deemed accepted,
and the amount of the Losses shall be paid to Parent out of the Indemnification
Escrowed Funds.
9. MISCELLANEOUS
9.1 SHAREHOLDERS' REPRESENTATIVE. (a) The Company hereby designates
Kaye, Scholer, Fierman, Hays & Handler, LLP (the "Shareholders'
Representative"), as the representative of the shareholders of the Company. The
Shareholders' Representative shall have, among others, the following powers and
duties: (i) to take such actions and to incur such costs and expenses as the
Shareholders' Representative in its sole discretion deems necessary or advisable
to safeguard the interests of the shareholders in the [Escrow Accounts],
including, but not limited to, contesting any claim for Losses and commencing or
defending litigation and settling any such claim or litigation; (ii) to employ
accountants, attorneys and such other agents as the Shareholders' Representative
may deem advisable and to pay reasonable compensation for such services; (iii)
to maintain a register of the shareholders; and (iv) to take all actions which
the Shareholders' Representative deems necessary or advisable in order to carry
out the foregoing and the consummation and completion of the transactions
contemplated hereby.
(b) The Shareholders' Representative may resign at any time at
its sole and absolute discretion. The shareholders may, at any time, by a
majority vote (one vote for each Share held by a shareholder at the Effective
Time and assuming all Options outstanding at the Effective Time shall have been
exercised), remove, replace or appoint as necessary, the Shareholders'
Representative.
(c) The Shareholders' Representative shall be compensated for
its services on the basis of its customary fees and shall be reimbursed for
out-of-pocket expenses from the Shareholders' Representative's Escrow Fund). The
Shareholders' Representative shall direct the Paying Agent to pay expenses
incurred by it in performing its duties under this Section 9.1 out of the
Shareholders' Representative's Escrow Fund. Upon a determination by the
Shareholders' Representative that it will not incur any additional expenses, the
Shareholders' Representative shall direct the Paying Agent to pay any remaining
balance of the Shareholders' Representative's Fund proportionally to the
shareholders (other than to the holders of Dissenting Shares).
(d) The Shareholders' Representative shall not be liable to
any shareholder or by reason of any error of judgment or for any act done or
step taken or omitted by the Shareholders' Representative or for any mistake of
fact or law or anything which the Shareholders' Representative may do or refrain
from doing in connection herewith, unless caused by or arising out of
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willful misconduct. The Shareholders' Representative shall have full and
complete authorization and protection for any action taken or suffered by the
Shareholders' Representative hereunder in good faith and in accordance with the
advice of attorneys, accountants, experts or other agents engaged by the
Shareholders' Representative. The shareholders agree to indemnify and hold the
Shareholders' Representative harmless against any and all liabilities,
obligations, losses or expenses arising from the Shareholders' Representative's
actions in its capacity as a representative of the shareholders. The
Shareholders' Representative may, in its sole discretion, request instructions
from the shareholders at any time the Shareholders' Representative determines
such instructions are necessary or advisable prior to the execution of any act
or decision and shall have full and complete protection for any action taken in
good faith in reliance upon the instructions received by a majority of
shareholders responding to such request. It is a condition to the agreement by
the Shareholders' Representative to act in such capacity that a majority of the
shareholders confirm, in the letter of transmittal or other similar document,
their agreement to the provisions of this Section 9.1.
9.2 VALIDITY. The invalidity or unenforceability of any provision of
this agreement shall not affect the validity or enforceability of any other
provision of this agreement, which shall remain in full force and effect, unless
the invalidity or unenforceability of such provision would (a) result in such a
material change to this agreement as to be unreasonable, or (b) materially or
adversely frustrate the obligations of the parties in this agreement as
originally written.
9.3 NOTICES. All notices, requests, claims, demands and other
communications under this agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by nationally recognized overnight delivery service,
or five business days after the date of mailing if sent registered or certified
mail (postage prepaid, return receipt requested) to the respective parties as
follows:
if to the Parent or Sub:
Glasstech Holding Co.
127 Public Square, 6th Floor
Cleveland, Ohio 44114-1306
Telecopier: (216) 689-3204
Attention: David P. Given
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with a copy to:
Baker & Hostetler LLP
3200 National City Center
1900 E. 9th Street
Cleveland, Ohio 44114-3485
Telecopier: (216) 696-0740
Attention: R. Steven Kestner
if to the Company:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Telecopier: 419-661-9366
Attention: General Counsel
with copies to:
Balfour Investors, Inc.
620 Fifth Avenue
7th Floor
New York, New York 10020
Telecopier: 212-265-8049
Attention: Mr. Harry Freund
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telecopier: 212-836-7149
Attention: Joel I. Greenberg
if to Shareholders' Representative:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telecopier 212-836-7149
Attention: Joel I. Greenberg
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt of notice of the change).
9.4 GOVERNING LAW. This agreement shall be governed by and construed
in accordance with the law of the state of Delaware, without giving effect to
principles of conflicts of laws applicable thereto.
9.5 INTERPRETATION. Whenever a reference is made in this agreement to
Sections, such reference shall be to a Section of this agreement unless
otherwise indicated. The headings in this agreement are for convenience of
reference only and are not
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<PAGE> 43
intended to be part of or to affect the meaning or interpretation
of this agreement.
9.6 PARTIES IN INTEREST. This agreement shall be binding upon and inure
solely to the benefit of each party to this agreement, and nothing in this
agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature under or by reason of this agreement (other
than sections 5.7 and 5.8).
9.7 COUNTERPARTS. This agreement may be executed in counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.
9.8 PRESS RELEASES; CONFIDENTIALITY. The Parent, the Sub and the
Company shall consult with each other before issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated by this agreement, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law. Except in connection with the financing of the transactions
contemplated hereby, no party shall discuss or otherwise disclose to an
unrelated third party the terms and conditions of this agreement and the
transactions contemplated hereby prior to the Effective Time.
9.9 ENTIRE AGREEMENT. This agreement, together with the Confidentiality
Agreement, constitutes the entire agreement among the parties with respect to
its subject matter and supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to that subject matter.
GLASSTECH HOLDING CO.
By:/s/ David P. Given
---------------------------------
Name: David P. Given
Title: Vice President
GLASSTECH SUB CO.
By:/s/ David P. Given
---------------------------------
Name: David P. Given
Title: Vice President
GLASSTECH, INC.
By:/s/ Mark D. Christman
---------------------------------
President, Chief Operating
Officer
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<PAGE> 1
Exhibit 2.2
AMENDMENT TO AGREEMENT
AND PLAN OF MERGER
This Amendment to Agreement and Plan of Merger dated as of
July 2, 1997 is by and among Glasstech Holding Co., a Delaware corporation (the
"Parent"), Glasstech Sub Co., a Delaware corporation and a wholly-owned
subsidiary of the Parent (the "Sub"), and Glasstech, Inc., a Delaware
corporation (the "Company").
WHEREAS, the parties entered into an Agreement and Plan of
Merger dated as of June 5, 1997, pursuant to which Sub Co. will be merged with
and into the Company, with the Company as the surviving entity (the "Merger");
WHEREAS, pursuant to the Merger, all outstanding Shares of
Glasstech shall be cancelled and, except for Shares owned by the Parent, the
Sub, any subsidiary of the Parent or the Sub, or held in the treasury of the
Company, shall be converted into the right to receive the Merger Consideration;
WHEREAS, certain stockholders of the Company set forth on
Exhibit A hereto (the "Management Stockholders") are desirous of contributing
their Shares of the Company (the "Management Shares") to the Parent in exchange
for stock of the Parent prior to the Effective Time of the Merger;
WHEREAS, such a contribution and exchange would result in the
Parent owning Shares of the Company at the Effective Time;
WHEREAS, pursuant to the Merger Agreement such Shares of the
Company will not be entitled to participate in the Merger Consideration;
<PAGE> 2
WHEREAS, the parties are desirous of facilitating the
exchange of the Management Shares by the Management Stockholders
for shares of the Parent;
WHEREAS, to facilitate such exchange, the parties are desirous
of amending the Merger Agreement to adjust the Merger Consideration to reflect
the exclusion of the Management Shares from participation in the Merger
Consideration;
WHEREAS, the parties are desirous of effecting certain
other changes to the Merger Agreement;
NOW, THEREFORE, in consideration of the promises and covenants
set forth herein, and in the Merger Agreement, the parties hereto hereby agree
as follows:
1. DEFINED TERMS. All defined terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Merger
Agreement.
2. AMENDMENT TO SECTION 1.9. The fourth paragraph of
Section 1.9 shall be amended by the addition at the end thereof of the
following sentence:
The amount, if any, payable to record holders of
Shares and Options pursuant to the foregoing provisions of this
paragraph shall be paid (x) to the extent not exceeding $30,160 to
Shareholders' Representative to be held and used as provided in clause
(iii) of the second sentence of Section 2.2(a) and (y) the balance, if
any, to record holders of the Shares and Options as of the Effective
Time.
3. AMENDMENT TO MERGER AGREEMENT FOR MANAGEMENT SHARES.
Sections 2.2(a) and 2.2(b) and the first paragraph of Section
2.2(c) of the Merger Agreement shall be deleted in their entirety and the
following inserted in lieu thereof:
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<PAGE> 3
(a) At the Effective Time, the Parent shall cause the
Sub to deposit with The Bank of New York (or another bank or
trust company reasonably satisfactory to the Company) (the
"Paying Agent") the excess of (i) the Preliminary Aggregate
Merger Consideration over (ii) the sum of (x) the product of
the Per Share Merger Amount (as defined in subparagraph (b)
below) and the number of Management Shares (as defined in
subparagraph (e) below) and (y) the aggregate amount payable
by the Surviving Corporation with respect to Options pursuant
to paragraph (c) (such funds, the "Payment Fund"). Of the
Payment Fund, (i) $3,000,000 (the "Indemnification Escrowed
Fund") shall be held by the Paying Agent pursuant to the terms
of an Escrow Agreement in substantially the form of Exhibit
2.2 attached thereto (the "Indemnification Escrow Agreement")
in escrow for any Losses (as defined in Section 8.2); (ii)
$500,000 (the "Working Capital Escrow" and collectively with
the Indemnification Escrow Fund the "Escrow Funds") shall be
held in escrow by the Paying Agent pursuant to the terms of an
Escrow Agreement in substantially the form of Exhibit 2.2
attached hereto (the "Working Capital Escrow Agreement") and;
(iii) $219,840 shall be paid to the Shareholders'
Representative (to be held in its escrow account) and shall be
used to pay the fees and expenses of the Shareholders'
Representative. The Paying Agent shall, pursuant to
irrevocable instructions, make the payments provided for in
this paragraph (a) out of the Payment Fund. The Payment Fund
shall not be used for any other purpose, except as provided in
this agreement.
(b) The amount resulting from the following formula
shall be the "Per Share Merger Amount":
1. (x) the excess of the Preliminary Aggregate
Merger Consideration over the aggregate amount of the Escrow
Funds plus (y) the exercise price of all outstanding Options
(as defined in Section 2.4)
divided by
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<PAGE> 4
2. (z) the number of Shares outstanding
immediately prior to the Effective Time (counting as
outstanding any Shares issues or issuable upon exercise or
deemed exercise of Options).
(c) Immediately after the Effective Time, the
Surviving Corporation shall cause the Paying Agent to mail to
each record holder of Shares as of the Effective Time, a form
of letter of transmittal and instructions for use in effecting
the surrender of certificates that immediately prior to the
Effective Time represented outstanding Shares (the
"Certificates") for payment. Immediately upon surrender to the
Paying Agent of a Certificate representing Shares, together
with the letter of transmittal duly executed, the holder shall
be paid in cash from the Payment Fund an amount equal to the
product of the Per Share Merger Amount and the number of
Shares represented by such Certificate. At the Effective Time,
the Surviving Corporation shall pay in cash to each holder of
Options listed on Schedule 3.2(a), pursuant to instructions
provided to the Surviving Corporation by such holder, an
amount equal to the product of the Per Share Merger Amount and
the number of such holder's Options as set forth on such
Schedule MINUS the aggregate exercise price of such Options
and applicable withholding taxes, if any.
4. FURTHER AMENDMENT TO MERGER AGREEMENT FOR MANAGEMENT
SHARES.
The following language shall be added to the end of Section
2.2 of the Merger Agreement:
(e) "Management Shares" shall mean the Shares
contributed to Parent by the former stockholders of the
Company as set forth on Schedule 2.2(e). For purposes of
paragraphs (c) and (d) of this Section, Management Shares
shall not be considered Shares.
5. PAYMENTS FROM ESCROWS. The Parent shall be
included on the list of Shareholders set forth as Schedule 2 to
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<PAGE> 5
the Indemnification Escrow Agreement and Schedule 2 to the Working Capital
Escrow Agreement, and the percentage attributable to the Parent on such
schedules shall be the percentage the Management Shares bear to the total number
of Shares outstanding immediately prior to the Effective Time (including Shares
issued or issuable upon exercise or deemed exercise of Options).
6. AMENDMENT TO MERGER AGREEMENT FOR NON-CONTRACT
INVENTORY PAYMENTS. Section 5.13 of the Merger Agreement shall be deleted in
its entirety.
7. AMENDMENT TO MERGER AGREEMENT FOR AGGREGATE MERGER
CONSIDERATION. The words "Seventy Eight Million Dollars ($78,000,000) in Section
1.6 of the Merger Agreement shall be changed to "Seventy Six Million Two Hundred
Thousand Dollars ($76,200,000)." In Section 1.8 of the Merger Agreement, the
words "$78,000,000" shall be changed to "$76,200,000."
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<PAGE> 6
8. NO FURTHER CHANGES. Except as expressly set forth
herein, the Merger Agreement shall remain unchanged in all respects and shall
remain in full force and effect.
GLASSTECH HOLDING CO.
By:/S/ Mark D. Christman
----------------------------------------
Title:President
-------------------------------------
GLASSTECH SUB CO.
By:/S/ Mark D. Christman
----------------------------------------
Title:President
-------------------------------------
GLASSTECH, INC.
By:/S/ Mark D. Christman
----------------------------------------
Title:President
-------------------------------------
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<PAGE> 7
Schedule 2.2(e)
---------------
Management Shares
-----------------
John S. Baxter 1100
Ron A. McMaster 2000
Diane S. Tymiak 1500
Kenneth H. Wetmore 1000
James P. Schnabel 150
Larry E. Elliott 100
Mark D. Christman 17508
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<PAGE> 1
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
GLASSTECH, INC.
FIRST: The name of the corporation (the "Corporation") is
Glasstech, Inc.
SECOND: The address of the Corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware 19801. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation
shall have authority to issue is One Thousand (1,000) shares of Common Stock,
par value $.01 per share.
FIFTH: The Board of Directors is authorized to make, alter or
repeal the By-laws of the Corporation.
SIXTH: Meetings of stockholders shall be held at such place,
within or without the State of Delaware, as may be designated by or in the
manner provided in the By-Laws of the Corporation, or, if not so designated, at
the registered office of the Corporation in the State of Delaware. Elections of
directors need not be by written ballot except and to the extent provided in the
By-Laws of the Corporation.
<PAGE> 2
SEVENTH: Any one or more directors may be removed with or
without cause, by the vote or written consent of the holders of a majority of
the issued and outstanding shares of stock of the Corporation entitled to be
voted at an election of directors.
EIGHTH: The Corporation reserves the right to amend, alter or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by statute, and all rights of the
stockholders herein are subject to this reservation.
NINTH: To the full extent permitted by the General
Corporation Law of the State of Delaware or any other applicable laws presently
or hereafter in effect, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for or with respect to any acts or
omissions in the performance of his or her duties as a director of the
Corporation. Any repeal or modification of this Article Tenth shall not
adversely affect any right or protection of a director of the Corporation
existing immediately prior to such repeal or modification.
TENTH: Each person who is or was or had agreed to become a
director or officer of the Corporation, or each such person who is or was
serving or who had agreed to serve at the request of the Board of Directors or
an officer of the Corporation as an employee or agent of the Corporation or as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person),
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<PAGE> 3
shall be indemnified by the Corporation to the full extent permitted by the
General Corporation Law of the State of Delaware or any other applicable laws as
presently or hereafter in effect. Without limiting the generality or the effect
of the foregoing, the Corporation may enter into one or more agreements with any
person which provide for indemnification greater or different than that provided
in this Article Eleventh. Any repeal or modification of this Article Eleventh
shall not adversely affect any right or protection existing hereunder
immediately prior to such repeal or modification.
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<PAGE> 1
EXHIBIT 3.2
GLASSTECH, INC.
BY-LAWS
Adopted as of June 4, 1997
<PAGE> 2
GLASSTECH, INC.
BY-LAWS
(Adopted as of June 4, 1997)
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE OF MEETING. All meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as may be designated by
the Board of Directors, or by the President, the Vice President or the Secretary
in the absence of a designation by the Board of Directors, and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders,
commencing with the year 1998, shall be held on the second Tuesday in May if not
a legal holiday, and if a legal holiday, then on the next business day
following, at 1:30 p.m., or at such other date and time as shall be designated
from time to time by the Board of Directors, at which meeting the stockholders
shall elect by a plurality vote the directors to succeed those whose terms
expire and shall transact such other business as may properly be brought before
the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by law or by Certificate of
Incorporation, may be called by the Board of Directors, the President or the
Vice President, and shall be called by the President or the Secretary at the
request in writing of stockholders owning twenty-five percent or more of the
Common Stock of the Corporation issued and outstanding and entitled to vote.
Such request shall be sent to the President and the Secretary and shall state
the purpose or purposes of the proposed meeting.
Section 4. NOTICE OF MEETINGS. Written notice of every meeting of the
stockholders, stating the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting, except as
otherwise provided herein or by law. When a meeting is adjourned to another
place, date or time, written notice need not be given of the adjourned meeting
if the place, date and time thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than thirty days, or if after the adjournment a new record date is
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<PAGE> 3
fixed for the adjourned meeting, written notice of the place, date and time of
the adjourned meeting shall be given in conformity herewith. At any adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting.
Section 5. QUORUM. The holders of fifty-five percent of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by law
or by the Certificate of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
Section 6. VOTING. Except as otherwise provided by law or by the
Certificate of Incorporation, each stockholder shall be entitled at every
meeting of the stockholders to one vote for each share of stock having voting
power standing in the name of such stockholder on the books of the Corporation
on the record date for the meeting and such votes may be cast either in person
or by written proxy. Every proxy must be duly executed and filed with the
Secretary of the Corporation. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. The vote upon any question
brought before a meeting of the stockholders may be by voice vote, unless the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon present in person or by proxy at such meeting shall so
determine. Every vote taken by written ballot shall be counted by one or more
inspectors of election appointed by the Board of Directors. When a quorum is
present at any meeting, the vote of the holders of a majority of the stock which
has voting power present in person or represented by proxy shall decide any
question properly brought before such meeting, unless the question is one upon
which by express provision of law, the Certificate of Incorporation or these
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question.
ARTICLE II
DIRECTORS
Section 1. POWERS. The business and affairs of the Corporation shall
be managed by or under the direction of its
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<PAGE> 4
Board of Directors, which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by law or by the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
Section 2. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of one or more members. The number of directors shall be fixed by
resolution of the Board of Directors or by the stockholders at the annual
meeting or a special meeting. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 3 of this Article,
and each director elected shall hold office until his successor is elected and
qualified, except as required by law. Any decrease in the authorized number of
directors shall not be effective until the expiration of the term of the
directors then in office, unless, at the time of such decrease, there shall be
vacancies on the Board which are being eliminated by such decrease.
Section 3. VACANCIES AND NEW DIRECTORSHIPS. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
which occur between annual meetings of the stockholders may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so elected shall hold office until
the next annual meeting of the stockholders and until their successors are
elected and qualified, except as required by law.
Section 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President on one day's written
notice to each director by whom such notice is not waived, given either
personally or by mail or telegram.
Section 6. QUORUM. At all meetings of the Board of Directors, a
majority of the total number of directors then in office shall constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time to another place, time or date, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 7. WRITTEN ACTION. Any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all
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<PAGE> 5
members of the Board of Directors or Committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes or
proceedings of the Board of Directors or Committee.
Section 8. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any such
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
Section 9. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the directors, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation and each to have
such lawfully delegable powers and duties as the Board may confer. Each such
committee shall serve at the pleasure of the Board of Directors. Unless
otherwise prescribed by the Board of Directors, a majority of the members of the
committee shall constitute a quorum for the transaction of business, and the act
of a majority of the members present at a meeting at which there is a quorum
shall be the act of such committee. Each committee shall prescribe its own rules
for calling and holding meetings and its method of procedure, subject to any
rules prescribed by the Board of Directors, and shall keep a written record of
all actions taken by it.
ARTICLE III
NOTICES
Section 1. GENERALLY. Whenever by law or under the provisions of the
Certificate of Incorporation or these By-Laws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram or telephone.
Section 2. WAIVERS. Whenever any notice is required to be given by law
or under the provisions of the Certificate of Incorporation or these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time of the event for which notice is to be
given, 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 the
person attends a meeting for the express
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<PAGE> 6
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE IV
OFFICERS
Section 1. GENERALLY. The officers of the Corporation shall be elected
by the Board of Directors and shall consist of a President, a Secretary and a
Treasurer. The Board of Directors may also elect any or all of the following: a
Chairman of the Board, one or more Vice Presidents, one or more Assistant
Secretaries and Assistant Treasurers and such other officers as the Board of
Directors may deem necessary. Any number of offices may be held by the same
person.
Section 2. COMPENSATION. The compensation of all officers and agents of
the Corporation who are also directors of the Corporation shall be fixed by the
Board of Directors. The Board of Directors may delegate the power to fix the
compensation of other officers and agents of the Corporation to an officer of
the Corporation.
Section 3. SUCCESSION. The officers of the Corporation shall hold
office until their successors are elected and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the directors. Any vacancy occurring in any
office of the Corporation may be filled by the Board of Directors.
Section 4. AUTHORITY AND DUTIES. Each of the officers of the
Corporation shall have such authority and shall perform such duties as are
customarily incident to their respective offices, or as may be specified from
time to time by the Board of Directors in a resolution which is not inconsistent
with these By-Laws.
Section 5. EXECUTION OF DOCUMENTS AND ACTION WITH RESPECT TO SECURITIES
OF OTHER ENTITIES. Each of the President and any Vice President shall have and
is hereby given, full power and authority, except as otherwise required by law
or directed by the Board of Directors, (a) to execute, on behalf of the
Corporation, all duly authorized contracts, agreements, deeds, conveyances or
other obligations of the Corporation, applications, consents, proxies and other
powers of attorney, and other documents and instruments, and (b) to vote and
otherwise act on behalf of the corporation, in person or by proxy, at any
meeting of stockholders (or with respect to any action of such stockholders) of
any other corporation, partnership or other entity in which the Corporation may
hold securities and otherwise to exercise any
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<PAGE> 7
and all rights and powers which the Corporation may possess by reason of its
ownership of securities of such other corporation, partnership or other entity.
ARTICLE V
STOCK
Section 1. CERTIFICATES. Certificates representing shares of stock of
the Corporation shall be in such form as shall be determined by the Board of
Directors, subject to applicable legal requirements. Such certificates shall be
numbered and their issuance recorded in the books of the Corporation, and such
certificate shall exhibit the holder's name and the number of shares and shall
be signed by, or.in the name of the Corporation by the President or the Vice
President and the Treasurer or Secretary or Assistant Secretary of the
Corporation. Any or all of the signatures upon such certificates may be
facsimiles, engraved or printed.
Section 2. FRACTIONAL SHARES. The Corporation may issue fractions of a
share of any of the classes of its stock.
Section 3. TRANSFER. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue, or to cause its
transfer agent to issue, a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Secretary or
Assistant Secretary may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed upon the making of an affidavit
of that fact, satisfactory to the Secretary or Assistant Secretary, by the
person claiming the certificate of stock to be lost, stolen or destroyed. As a
condition precedent to the issuance of a new certificate or certificates the
Secretary or Assistant Secretary may require the owner of such lost, stolen or
destroyed certificate or certificates to give the Corporation a bond in such sum
and with such surety or sureties as the Secretary or Assistant Secretary may
direct as indemnity against any claims that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed
or the issuance of the new certificate.
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<PAGE> 8
ARTICLE VI
GENERAL PROVISIONS
Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed from time to time by the Board of Directors.
Section 2. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal and use the same by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of a committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the records of the Corporation and
upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or committees of
the Board of Directors, or by any other person as to matters the director,
committee member or officer believes are within such other person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the corporation.
Section 4. TIME PERIODS. In applying any provision of these By-Laws
which requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded and the day of the event shall be included.
Section 5. AMENDMENTS. These By-Laws may be altered, amended or
repealed, or new by-laws may be adopted, by the holders of fifty-five percent of
the stock issued and outstanding and entitled to vote or by the Board of
Directors.
[End Of Document]
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<PAGE> 1
Exhibit 4.1
================================================================================
GLASSTECH SUB CO., as Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
---------------------
INDENTURE
Dated as of July 2, 1997
---------------------
Up to $70,000,000
12 3/4% Senior Notes due 2004
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
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TIA Indenture
Section Section
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310 (a)(1)......................................................................... 7.10
(a)(2)......................................................................... 7.10
(a)(3)......................................................................... N.A.
(a)(4)......................................................................... N.A.
(b)............................................................................ 7.08; 7.10;
11.02
(b)(1)......................................................................... 7.10
(b)(9)......................................................................... 7.10
(c)............................................................................ N.A.
311 (a)............................................................................ 7.11
(b)............................................................................ 7.11
(c)............................................................................ N.A.
312 (a)............................................................................ 2.04
(b)............................................................................ 11.03
(c)............................................................................ 11.03
313 (a)............................................................................ 7.06
(b)(1)......................................................................... 7.06
(b)(2)......................................................................... 7.06
(c)............................................................................ 11.02
(d)............................................................................ 7.06
314 (a)............................................................................ 4.02; 4.04
11.02
(b)............................................................................ N.A.
(c)(1)......................................................................... 11.04; 11.05
(c)(2)......................................................................... 11.04; 11.05
(c)(3)......................................................................... N.A.
(d)............................................................................
(e)............................................................................ 11.05
(f)............................................................................ N.A.
315 (a)............................................................................ 7.01; 7.02
(b)............................................................................ 7.05; 11.02
(c)............................................................................ 7.01
(d)............................................................................ 6.05; 7.01;
7.02
(e)............................................................................ 6.11
316 (a) (last sentence)............................................................ 11.06
(a)(1)(A)...................................................................... 6.05
(a)(1)(B)...................................................................... 6.04
(a)(2)......................................................................... 8.02
(b)............................................................................ 6.07
(c)............................................................................ 8.04
317 (a)(1)......................................................................... 6.08
(a)(2)......................................................................... 6.09
(b)............................................................................ 7.12
318 (a)............................................................................ 11.01
</TABLE>
N.A. means Not Applicable
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NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of the Indenture.
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
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Section 1.01. Definitions................................................................... 1
Section 1.02. Other Definitions............................................................. 24
Section 1.03. Incorporation by Reference of
Trust Indenture Act......................................................... 25
Section 1.04. Rules of Construction......................................................... 26
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating............................................................... 26
Section 2.02. Execution and Authentication.................................................. 27
Section 2.03. Registrar and Paying Agent.................................................... 28
Section 2.04. Paying Agent To Hold Money in Trust........................................... 29
Section 2.05. Noteholder Lists.............................................................. 30
Section 2.06. Transfer and Exchange......................................................... 30
Section 2.07. Replacement Notes............................................................. 31
Section 2.08. Outstanding Notes............................................................. 31
Section 2.09. Treasury Notes................................................................ 32
Section 2.10. Temporary Notes............................................................... 33
Section 2.11. Cancellation.................................................................. 33
Section 2.12. Defaulted Interest............................................................ 33
Section 2.13. CUSIP Number.................................................................. 34
Section 2.14. Deposit of Moneys............................................................. 34
Section 2.15. Book-Entry Provisions for Global Notes........................................ 34
Section 2.16. Special Transfer Provisions................................................... 37
Section 2.17. Computation of Interest....................................................... 39
ARTICLE 3
REDEMPTION
Section 3.01. Election to Redeem; Notices to Trustee........................................ 39
Section 3.02. Selection by Trustee of Notes
To Be Redeemed.............................................................. 40
Section 3.03. Notice of Redemption.......................................................... 40
Section 3.04. Effect of Notice of Redemption................................................ 41
Section 3.05. Deposit of Redemption Price................................................... 42
Section 3.06. Notes Redeemed in Part........................................................ 42
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.............................................................. 42
Section 4.02. SEC Reports................................................................... 43
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Section 4.03. Waiver of Stay, Extension or
Usury Laws.................................................................. 44
Section 4.04. Compliance Certificate........................................................ 44
Section 4.05. Taxes......................................................................... 45
Section 4.06. Limitation on Additional
Indebtedness................................................................ 45
Section 4.07. Limitation on Preferred Stock of
Restricted Subsidiaries..................................................... 46
Section 4.08. Limitation on Capital Stock of
Restricted Subsidiaries..................................................... 46
Section 4.09. Limitation on Restricted Payments............................................. 46
Section 4.10. Limitation on Certain Asset Sales............................................. 49
Section 4.11. Limitation on Transactions with
Affiliates.................................................................. 51
Section 4.12. Limitations on Liens.......................................................... 52
Section 4.13. Limitations on Investments.................................................... 53
Section 4.14. Limitation on Creation of Subsidiaries........................................ 53
Section 4.15. Limitation on Sale and Lease-Back
Transactions................................................................ 53
Section 4.16. Limitation on Dividend and
Other Payment Restrictions
Affecting Subsidiaries...................................................... 54
Section 4.17. Payments for Consent.......................................................... 55
Section 4.18. Legal Existence............................................................... 55
Section 4.19. Change of Control............................................................. 55
Section 4.20. Maintenance of Properties; Insurance;
Books and Records; Compliance with
Law......................................................................... 58
Section 4.21. Further Assurance to the Trustee.............................................. 59
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation,
Merger and Sale of Assets................................................... 59
Section 5.02. Successor Person Substituted.................................................. 60
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default............................................................. 60
Section 6.02. Acceleration.................................................................. 62
Section 6.03. Other Remedies................................................................ 63
Section 6.04. Waiver of Past Defaults and
Events of Default........................................................... 63
Section 6.05. Control by Majority........................................................... 64
Section 6.06. Limitation on Suits........................................................... 64
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Section 6.07. No Personal Liability of Directors,
Officers, Employees and Stockholders........................................ 65
Section 6.08. Rights of Holders To Receive
Payment..................................................................... 65
Section 6.09. Collection Suit by Trustee.................................................... 65
Section 6.10. Trustee May File Proofs of Claim.............................................. 65
Section 6.11. Priorities.................................................................... 66
Section 6.12. Undertaking for Costs......................................................... 66
Section 6.13. Restoration of Rights and Remedies............................................ 67
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee............................................................. 67
Section 7.02. Rights of Trustee............................................................. 69
Section 7.03. Individual Rights of Trustee.................................................. 70
Section 7.04. Trustee's Disclaimer.......................................................... 70
Section 7.05. Notice of Defaults............................................................ 70
Section 7.06. Reports by Trustee to Holders................................................. 70
Section 7.07. Compensation and Indemnity.................................................... 71
Section 7.08. Replacement of Trustee........................................................ 72
Section 7.09. Successor Trustee by Consolidation,
Merger, etc................................................................. 73
Section 7.10. Eligibility; Disqualification................................................. 73
Section 7.11. Preferential Collection of Claims
Against Company............................................................. 73
Section 7.12. Paying Agents................................................................. 74
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.................................................... 74
Section 8.02. With Consent of Holders....................................................... 75
Section 8.03. Compliance with Trust Indenture Act........................................... 76
Section 8.04. Revocation and Effect of Consents............................................. 76
Section 8.05. Notation on or Exchange of Notes.............................................. 77
Section 8.06. Trustee To Sign Amendments, etc............................................... 77
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture........................................................ 78
Section 9.02. Legal Defeasance.............................................................. 78
Section 9.03. Covenant Defeasance........................................................... 79
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Section 9.04. Conditions to Legal Defeasance or
Covenant Defeasance......................................................... 80
Section 9.05. Deposited Money and U.S.
Government Obligations To Be
Held in Trust; Other
Miscellaneous Provisions.................................................... 82
Section 9.06. Reinstatement................................................................. 82
Section 9.07. Moneys Held by Paying Agent................................................... 83
Section 9.08. Moneys Held by Trustee........................................................ 83
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee..................................................................... 84
Section 10.02. Execution and Delivery of
Guarantees.................................................................. 86
Section 10.03. Limitation of Guarantee....................................................... 86
Section 10.04. Additional Guarantors......................................................... 86
Section 10.05. Release of Guarantor.......................................................... 87
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls ................................................. 87
Section 11.02. Notices....................................................................... 87
Section 11.03. Communications by Holders
with Other Holders.......................................................... 89
Section 11.04. Certificate and Opinion as
to Conditions Precedent..................................................... 90
Section 11.05. Statements Required in
Certificate and Opinion..................................................... 90
Section 11.06. Rules by Trustee and Agents................................................... 90
Section 11.07. Business Days; Legal Holidays................................................. 91
Section 11.08. Governing Law................................................................. 91
Section 11.09. No Adverse Interpretation of
Other Agreements............................................................ 91
Section 11.10. No Recourse Against Others.................................................... 91
Section 11.11. Successors.................................................................... 92
Section 11.12. Multiple Counterparts......................................................... 92
Section 11.13. Table of Contents, Headings, etc.............................................. 92
Section 11.14. Separability.................................................................. 92
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EXHIBITS
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Exhibit A. Form of Note....................................................................... A-1
Exhibit B. Form of Legend and Assignment for
144A Note........................................................................ B-1
Exhibit C. Form of Legend and Assignment
for Regulation S Note............................................................ C-1
Exhibit D. Form of Legend for Global Note..................................................... D-1
Exhibit E. Form of Certificate to Be Delivered
in Connection with Transfers to
Non-QIB Accredited Investors..................................................... E-1
Exhibit F. Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S......................................................... F-1
Exhibit G. Form of Guarantee.................................................................. G-1
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<PAGE> 8
INDENTURE, dated as of July 2, 1997, by and between GLASSTECH
SUB CO., a Delaware corporation (the "COMPANY"), and UNITED STATES TRUST COMPANY
OF NEW YORK, a New York trust company (the "TRUSTEE")
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
------------
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person
(including an Unrestricted Subsidiary) existing at the time such Person becomes
a Restricted Subsidiary or assumed in connection with the acquisition of assets
from such Person.
"ADDITIONAL INTEREST" means additional interest on the Notes
which the Company agrees to pay to the Holders pursuant to Section 4 of the
Registration Rights Agreement.
"ADJUSTED NET ASSETS" of a Guarantor at any date means the
lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities), but excluding liabilities under the Guarantee of such
Guarantor at such date and (y) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities and after giving effect to any collection
from any Subsidiary of such Guarantor in respect of the obligations of such
Subsidiary under the Guarantee) excluding Indebtedness in respect of the
Guarantee, as they become absolute and matured.
"AFFILIATE" of any specified Person means any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether
<PAGE> 9
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through the ownership of voting securities, by agreement or otherwise; PROVIDED
that the term "Affiliate" shall not include any portfolio company of KECC so
long as such portfolio company does not own or control any shares of capital
stock of the Company or Holding and the Company or Holding does not own or
control any shares of the capital stock of such portfolio company.
"AGENT" means any Registrar, Paying Agent, or agent for
service of notices and demands.
"ASSET SALE" means the sale, transfer or other disposition
(other than to the Company or any of its Restricted Subsidiaries) in any single
transaction or series of related transactions of (a) any Capital Stock of or
other equity interest in any Restricted Subsidiary of the Company, (b) all or
substantially all of the assets of the Company or of any Restricted Subsidiary
thereof, (c) real property, other than the lease thereof in the ordinary course
of business, or (d) all or substantially all of the assets of any business owned
by the Company or any Restricted Subsidiary thereof, or a division, line of
business or comparable business segment of the Company or any Restricted
Subsidiary thereof; PROVIDED that Asset Sales shall not include sales, leases,
conveyances, transfers or other dispositions to the Company or to a Restricted
Subsidiary or to any other Person if after giving effect to such sale, lease,
conveyance, transfer or other disposition such other Person becomes a Restricted
Subsidiary.
"ASSET SALE PROCEEDS" means, with respect to any Asset Sale,
(i) cash received by the Company or any Restricted Subsidiary from such Asset
Sale (including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts to be provided by the Company or a Restricted Subsidiary as
a reserve, in accordance with GAAP, against any liabilities associated with the
assets sold or disposed of in such Asset Sale and retained by the Company or a
Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and
<PAGE> 10
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(ii) promissory notes and other noncash consideration received by the Company or
any Restricted Subsidiary from such Asset Sale or other disposition upon the
liquidation or conversion of such notes or noncash consideration into cash.
"ATTRIBUTABLE INDEBTEDNESS" under this Indenture in respect of
a Sale and Lease-Back Transaction means, as at the time of determination, the
greater of (i) the fair value of the property subject to such arrangement (as
determined by the Board of Directors) and (ii) the present value (discounted
according to GAAP at the cost of indebtedness implied in the lease) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"AVAILABLE ASSET SALE PROCEEDS" means, with respect to any
Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not
been applied or committed in accordance with clauses (iii)(a) or (iii)(b), and
which has not yet been the basis for an Excess Proceeds Offer in accordance with
clause (iii)(c), of the first paragraph of Section 4.10.
"BOARD OF DIRECTORS" with respect to any Person means the
board of directors of such Person or any committee authorized to act therefor.
"BOARD RESOLUTION" means a copy of a resolution certified
pursuant to an Officers' Certificate to have been duly adopted by the Board of
Directors of the Company and to be in full force and effect, and delivered to
the Trustee.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"CAPITALIZED LEASE OBLIGATIONS" means Indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"CASH EQUIVALENTS" means (i) direct obligations of the United
States of America or any agency thereof, or obligations
<PAGE> 11
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guaranteed or insured by the United States of America, PROVIDED that in each
case such obligations mature within one year from the date of acquisition
thereof, (ii) certificates of deposit maturing within one year from the date of
creation thereof issued by any U.S. national or state banking institution having
capital, surplus and undivided profits aggregating at least $250,000,000 and at
the time of investment rated at least A-1 by S&P and P-1 by Moody's, (iii)
commercial paper with a maturity of 180 days or less issued by a corporation
(except an Affiliate of the Company) organized under the laws of any state of
the United States or the District of Columbia and at the time of investment
rated at least A-1 by S&P or at least P-1 by Moody's and (iv) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or issued by an agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one year from the date of
acquisition; PROVIDED that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the Comptroller
of the Currency and (v) tax-exempt auction rate securities and municipal
preferred stock, in each case, subject to reset no more than 35 days after the
date of acquisition and having a rating of at least AA by S&P or AA by Moody's
at the time of investment.
A "CHANGE OF CONTROL" will be deemed to have occurred at such
time as (i) the Permitted Holders, individually or in the aggregate, cease to
beneficially own (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act), directly or indirectly, 50.1% or
more of the Common Equity Interests of the Company or Holding, (ii) there shall
be consummated any consolidation or merger of the Company or Holding in which
the Company or Holding, as the case may be, is not the continuing or surviving
corporation or pursuant to which the Common Equity Interests of the Company or
Holding, as the case may be, would be converted into cash, securities or other
property, other than a merger or consolidation of the Company in which the
holders of the Common Equity Interests of the Company or Holding, as the case
may be, outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of the Common Equity Interests of
the surviving corporation immediately after such consolidation or merger, (iii)
there is a sale, lease or transfer of all or substantially all of the assets of
the Company or Holding to any Person or group (as such term is defined in
Section 13(d)(3) of the Exchange Act), other than a Permitted Holder or (iv) the
replacement of a majority of the Board of Directors of Holding
<PAGE> 12
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over a two-year period from the directors who constituted the Board of Directors
of Holding at the beginning of such period, and such replacement shall not have
been approved or recommended by a vote of at least a majority of the Board of
Directors of Holding then still in office who either were members of such Board
of Directors at the beginning of such period or whose election as a member of
such Board of Directors was previously so approved.
"COMMON EQUITY INTERESTS" of any Person means all Equity
Interests of such Person that are generally entitled to (i) vote in the election
of directors of such person or (ii) if such person is not a corporation, vote or
otherwise participate in the selection of the governing body, partners, managers
or others that will control the management and policies of such Person.
"COMMON STOCK" of any Person means all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"COMPANY" means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to of this
Indenture and thereafter means the successor.
"COMPANY REQUEST" means any written request signed in the name
of the Company by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer or the
Treasurer of the Company and attested to by the Secretary or any Assistant
Secretary of the Company.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person
the sum of a Person's (i) Consolidated Interest Expense, plus (ii) the product
of (x) the aggregate amount of all dividends paid on Disqualified Capital Stock
of the Company or on each series of preferred stock of each Subsidiary of such
Person (other than dividends paid or payable in additional shares of preferred
stock or to the Company or any of its Wholly-Owned Restricted Subsidiaries)
times (y) a fraction, the numerator of which is one and the denominator of which
is one minus the then current effective combined federal, state and local tax
rate of such Person (expressed as a decimal), in each case, for such
four-quarter period.
<PAGE> 13
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"CONSOLIDATED INTEREST EXPENSE" means, with respect to any
Person, for any period, the aggregate amount of interest which, in conformity
with GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Subsidiaries on a
consolidated basis, imputed interest included in Capitalized Lease Obligations,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, the net costs associated
with hedging obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense (other than interest
amortized to cost of sales) plus, without duplication, all net capitalized
interest for such period and all interest incurred or paid under any guarantee
of Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person.
"CONSOLIDATED NET INCOME" means, with respect to any Person,
for any period, the aggregate of the Net Income (before preferred stock
dividends) of such Person and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; provided, however, that
(a) the Net Income of any Person (the "other Person") in which the Person in
question or any of its Subsidiaries has less than a 100% interest (which
interest does not cause the net income of such other Person to be consolidated
into the net income of the Person in question in accordance with GAAP) shall be
included only to the extent of the amount of dividends or distributions paid to
the Person in question or the Subsidiary, (b) the Net Income of any Subsidiary
of the Person in question that is subject to any restriction or limitation on
the payment of dividends or the making of other distributions (other than
pursuant to the Notes or this Indenture) shall be excluded to the extent of such
restriction or limitation, (c)(i) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition and (ii) any net gain (but not loss) resulting from an Asset Sale by
the Person in question or any of its Subsidiaries other than in the ordinary
course of business shall be excluded, and (d) extraordinary, unusual and
non-recurring gains and losses shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person at
any date, the consolidated stockholder's equity of such Person less the amount
of such stockholder's equity attributable to Disqualified Capital Stock of such
Person and its Subsidiaries, as determined in accordance with GAAP.
<PAGE> 14
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"CORPORATE TRUST OFFICE" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 114 West 47th Street, New York, New York 10036-1532.
"CURRENCY AGREEMENT" means, for any Person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person against fluctuations in currency
values.
"DEFAULT" means any event that is, or with the passing of time
or giving of notice or both would be, an Event of Default.
"DEPOSITORY" means, with respect to the Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of the
Company or a Restricted Subsidiary thereof which, by its terms (or by the terms
of any security into which it is convertible or for which it is exchangeable at
the option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary of
the Company and (ii) any Preferred Stock of the Company, with respect to either
of which, under the terms of such Preferred Stock, by agreement or otherwise,
such Restricted Subsidiary or the Company is obligated to pay current dividends
or distributions in cash during the period prior to the maturity date of the
Notes; PROVIDED, HOWEVER, that Preferred Stock of the Company or any Restricted
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of the Company or Restricted Subsidiary, which provisions have
substantially the same effect as the provisions of this Indenture described in
Section 4.19, shall not be deemed to be Disqualified Capital Stock solely by
virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount
equal to (a) the sum of (i) Consolidated Net Income for
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such period, plus (ii) the provision for taxes for such period based on income
or profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in computing net
loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such
period, plus (iv) depreciation for such period on a consolidated basis, plus (v)
amortization of intangibles for such period on a consolidated basis, plus (vi)
any other non-cash items reducing Consolidated Net Income for such period, plus,
minus (b) all non-cash items increasing Consolidated Net Income for such period,
all for such Person and its Subsidiaries determined in accordance with GAAP,
except that with respect to the Company each of the foregoing items shall be
determined on a consolidated basis with respect to the Company and its
Restricted Subsidiaries only; and PROVIDED, HOWEVER, that, for purposes of
calculating EBITDA during any fiscal quarter, cash income from a particular
Investment of such Person shall be included only (x) if cash income has been
received by such Person with respect to such Investment during each of the
previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Temporary Cash Investments.
"EQUITY CONTRIBUTION" means the equity contribution of
$15,000,000 from Holding to the Company.
"EQUITY INTERESTS" means, with respect to any Person, any and
all shares or other equivalents (however designated) of capital stock,
partnership interests or any other participation, right or other interest in the
nature of an equity interest in such Person or any option, warrant or other
security convertible or exchangeable for any of the foregoing.
"ESCROW ACCOUNTS" means certain escrow accounts established in
connection with the Merger to secure any payment for losses incurred as a result
of any breach of certain representations and warranties made in the Merger
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE NOTES" has the meaning provided in the Registration
Rights Agreement.
"EXECUTIVE MANAGEMENT" means the management group initially
comprised of Mark D. Christman, John S. Baxter, Kenneth H. Wetmove, Ronald A.
McMaster, Diane S. Tymiak, Larry E. Elliot and James P. Schnabel.
<PAGE> 16
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"FIXED CHARGE COVERAGE RATIO" of any Person means, with
respect to any determination date, the ratio of (i) EBITDA for such Person's
prior four full fiscal quarters for which financial results have been reported
immediately preceding the determination date, to (ii) Consolidated Fixed Charges
of such Person. For purposes of computing the Fixed Charge Coverage Ratio, (A)
if the Indebtedness which is the subject of a determination under this provision
is Acquired Indebtedness, or Indebtedness incurred in connection with the
simultaneous acquisition (by way of merger, consolidation or otherwise) of any
Person, business, property or assets (an "Acquisition"), then such ratio shall
be determined by giving effect to (on a PRO FORMA basis, as if the transaction
had occurred at the beginning of the four-quarter period used to make such
calculation) to both the incurrence or assumption of such Acquired Indebtedness
or such other Indebtedness and the inclusion in the Company's EBITDA of the
EBITDA of the acquired Person, business, property or assets, (B) if any
Indebtedness outstanding or to be incurred (x) bears a floating rate of
interest, the interest expense on 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 on a PRO FORMA basis any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months), (y)
bears, at the option of the Company or a Restricted Subsidiary, a fixed or
floating rate of interest, the interest expense on such Indebtedness shall be
computed by applying, at the option of the Company or such Restricted
Subsidiary, either a fixed or floating rate and (z) was incurred under a
revolving credit facility, the interest expense on such Indebtedness shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period, (C) for any quarter prior to the date hereof included in the
calculation of such ratio, such calculation shall be made on a PRO FORMA basis,
giving effect to the issuance of the Notes and the use of the net proceeds
therefrom as if the same had occurred at the beginning of the four-quarter
period used to make such calculation and (D) for any quarter included in the
calculation of such ratio prior to the date that any Asset Sale was consummated,
or that any Indebtedness was incurred, or that any Acquisition was effected, by
the Company or any of its Subsidiaries, such calculation shall be made on a PRO
FORMA basis, giving effect to each Asset Sale, incurrence of Indebtedness or
Acquisition, as the case may be, and the use of any proceeds therefrom, as if
the same had occurred at the beginning of the four quarter period used to make
such calculation.
<PAGE> 17
-10-
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States on the Issue Date.
"GLASSTECH" means Glasstech, Inc., a Delaware corporation.
"GUARANTEE" means, as the context may require, individually, a
guarantee, or collectively, any and all guarantees, of the Obligations of the
Company with respect to the Notes by each Guarantor, if any, pursuant to the
terms of Article 10 hereof, substantially in the form set forth in Exhibit G.
"GUARANTOR" means each Restricted Subsidiary that hereinafter
becomes a Guarantor pursuant to Section 4.14, and "Guarantors" means such
entities, collectively.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note
is registered on the Registrar's books.
"HOLDING" means Glasstech Holding Co., a Delaware corporation,
the Company's parent and the owner of 100% of the capital stock of the Company.
"INCUR" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable," and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"INDEBTEDNESS" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
(including long-term pension and healthcare liabilities) arising in the ordinary
<PAGE> 18
-11-
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations, (ii) obligations secured by a lien to which the
property or assets owned or held by such Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed, (iii)
guarantees of items of other Persons which would be included within this
definition for such other Persons, (iv) all obligations for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (v) in the case of the Company, Disqualified Capital Stock of the
Company or any Restricted Subsidiary thereof, and (vi) obligations of any such
Person under any Interest Rate Agreement applicable to any of the foregoing (if
and to the extent such Interest Rate Agreement obligations would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP).
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,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, PROVIDED (i) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount, including the Notes, is the principal 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
and (ii) that Indebtedness shall not include any liability for federal, state,
local or other taxes. Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Company or any Restricted Subsidiaries for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"INDENTURE" means this Indenture as amended, restated or
supplemented from time to time.
"INITIAL PURCHASER" means CIBC Wood Gundy Securities Corp.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that
is an "accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3)
or (7) promulgated under the Securities Act.
<PAGE> 19
-12-
"INTEREST PAYMENT DATE" means the stated maturity of an
installment of interest on the Notes.
"INTEREST RATE AGREEMENT" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"INVESTMENTS" means, directly or indirectly, any advance,
account receivable (other than an account receivable arising in the ordinary
course of business), loan or capital contribution to (by means of transfers of
property to others, payments for property or services for the account or use of
others or otherwise), the purchase of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities of, the acquisition,
by purchase or otherwise, of all or substantially all of the business or assets
or stock or other evidence of beneficial ownership of, any Person or the making
of any investment in any Person. Investments shall exclude (i) extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices and (ii) the repurchase of securities of any Person by such Person.
"ISSUE DATE" means July 2, 1997.
"KECC" means Key Equity Capital Corporation, a wholly-owned
subsidiary of Key Bank, N.A., which is a wholly-owned subsidiary of KeyCorp., a
bank holding corporation.
"KEP 97" means Key Equity Partners 97, an Affiliate of KECC.
"KEY EQUITY GROUP" means, as of the Issue Date, KECC, KEP 97
and Executive Management.
"LIEN" means, with respect to any property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"MATURITY DATE" means July 1, 2004.
<PAGE> 20
-13-
"MERGER" means the merger of the Company with and into
Glasstech.
"MERGER AGREEMENT" means the merger agreement dated June 5,
1997 by and between the Company, Holding and Glasstech, as amended.
"MOODY'S" means Moody's Investors Service, Inc. and its
successors.
"NET INCOME" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"NET PROCEEDS" means (a) in the case of any sale of Capital
Stock by Holding or the Company, the aggregate net proceeds received by such
Person, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the board of
directors, at the time of receipt), (b) in the case of any exchange, exercise,
conversion or surrender of outstanding securities of any kind for or into shares
of Capital Stock of the Company which is not Disqualified Capital Stock, the net
book value of such outstanding securities on the date of such exchange,
exercise, conversion or surrender (plus any additional amount required to be
paid by the holder to the Company upon such exchange, exercise, conversion or
surrender, less any and all payments made to the holders, e.g., on account of
fractional shares and less all expenses incurred by the Company in connection
therewith) and (c) in the case of any issuance of any Indebtedness by the
Company or any Restricted Subsidiary, the aggregate net cash proceeds received
by such Person after the payment of expenses, commissions, underwriting
discounts and the like incurred in connection therewith.
"NON-U.S. PERSON" means a Person who is not a U.S. person, as
defined in Regulation S.
"NOTES" means the securities issued by the Company, including,
without limitation, the Private Exchange Notes, if any, and the Exchange Notes,
treated as a single class of securities, as amended or supplemented from time to
time in accordance with the terms hereof, that are issued pursuant to this
Indenture.
"OBLIGATIONS" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees,
<PAGE> 21
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indemnifications, reimbursements, damages and other expenses payable under the
documentation governing such Indebtedness.
"OFFERING" means the offering of the Notes as described
in the Offering Memorandum.
"OFFERING MEMORANDUM" means the Offering Memorandum dated June
27, 1997 pursuant to which the Notes issued on the Issue Date were offered.
"OFFICER", with respect to any Person (other than the
Trustee), means the Chairman of the Board of Directors, Chief Executive Officer,
Chief Operating Officer, the President, any Vice President and the Chief
Financial Officer, the Treasurer or the Secretary of such Person, or any other
officer of such Person designated by the Board of Directors of such Person and
set forth in an Officers' Certificate delivered to the Trustee.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the Chief Operating Officer,
the President or any Vice President and the Chief Financial Officer and
Treasurer of such Person that shall comply with applicable provisions of this
Indenture.
"OPINION OF COUNSEL" means a written opinion reasonably
satisfactory in form and substance to the Trustee from legal counsel which
counsel is reasonably acceptable to the Trustee, stating the matters required by
Section 11.05 and delivered to the Trustee.
"PERMITTED HOLDERS" means (i) KECC and its Affiliates, (ii)
any "group" (as such term is used in Section 13(d) and 14(d) of the Exchange
Act) comprised solely of the Key Equity Group and its Affiliates (it being
understood that a "group" that includes any other Person shall not be a
Permitted Holder) and (iii) any Person if (A) at least a majority of the total
voting and economic power of the Common Stock in such Person is owned by at
least a majority of the officers of KECC at the time of such transfer, (B) such
Person has at least $50.0 million in cash funds available for investment, and
(C) such Person is under no contractual restriction (whether pursuant to its
charter documents or otherwise) to make further investments in the Company.
"PERMITTED INDEBTEDNESS" means:
(i) Indebtedness incurred pursuant to the Revolving Credit
Facility in an aggregate principal amount at any time
<PAGE> 22
-15-
outstanding not to exceed the greater of (i) the sum of (x) 85.0% of
the net book value of eligible accounts receivable of the Company and
its Restricted Subsidiaries and (y) 65.0% of the net book value of
eligible inventory of the Company and its Restricted Subsidiaries and
(ii) $10.0 million, in each case, reduced by any required permanent
repayments thereunder;
(ii) Indebtedness under the Notes and the Guarantees, if
applicable;
(iii) Indebtedness not covered by any other clause of this
definition which is outstanding on the date of this Indenture;
(iv) Indebtedness of the Company to any Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease
Obligations incurred to acquire property in the ordinary course of
business which Indebtedness and Capitalized Lease Obligations do not in
the aggregate exceed 5% of the Company's consolidated total assets;
(vi) Interest Rate Agreements and Currency Agreements;
(vii) additional Indebtedness of the Company not to exceed
$3.0 million in principal amount outstanding at any time;
(viii) Refinancing Indebtedness;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of day-light overdrafts) drawn
against insufficient funds in the ordinary course of business;
(x) Indebtedness of the Company and any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations
in connection with self-insurance or similar requirements in the
ordinary course of business;
<PAGE> 23
-16-
(xi) Indebtedness arising from guarantees of loans and
advances by third parties to employees and officers of the Company or
its Subsidiaries in the ordinary course of business for bona fide
business purposes, provided that the aggregate amount of such
guarantees does not exceed $250,000; and
(xii) Indebtedness arising from the repurchase of Capital
Stock of Holding if otherwise permitted under Section 4.09.
"PERMITTED INVESTMENTS" means, for any Person, Investments
made on or after the date of this Indenture consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary
thereof, in the Company or a Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted
Subsidiary thereof, in a Person, if as a result of such Investment (a)
such Person becomes a Restricted Subsidiary of the Company or (b) such
Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary thereof;
(iv) reasonable and customary loans made to employees not to
exceed $250,000 in the aggregate at any one time outstanding and other
loans to Holding or employees of the Company to the extent the proceeds
of such loans are used by such employees of the Company exclusively to
purchase shares of Capital Stock of Holding pursuant to the terms of
the Stockholders Agreement;
(v) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are
issued by a third party to the Company or Restricted Subsidiary (i)
solely as consideration for the consummation of an Asset Sale of Stir
Melter or (ii) otherwise permitted under Section 4.10;
(vi) any Investment existing on the Issue Date;
<PAGE> 24
-17-
(vii) any Investment acquired by the Company or any of its
Restricted Subsidiaries (a) in exchange for any other Investment or
accounts receivable held by the Company or any such Restricted
Subsidiary in connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the issuer of such Investment or
accounts receivable or (b) as the result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any
secured Investment or other transfer of title with respect to any
secured Investment in default;
(viii) Investments the payment for which consists of Capital
Stock of the Company (exclusive of Disqualified Capital Stock); and
(ix) additional Investments having an aggregate fair market
value, taken together with all other Investments made pursuant to this
clause (ix) that are at that time outstanding, not to exceed $1.0
million.
"PERMITTED LIENS" means (i) Liens on property or assets of, or
any shares of stock of or secured debt of, any corporation existing at the time
such corporation becomes a Restricted Subsidiary of the Company or at the time
such corporation is merged into the Company or any of its Restricted
Subsidiaries, PROVIDED that such Liens are not incurred in connection with, or
in contemplation of, such corporation becoming a Restricted Subsidiary of the
Company or merging into the Company or any of its Restricted Subsidiaries, (ii)
Liens securing Refinancing Indebtedness, PROVIDED that any such Lien does not
extend to or cover any Property, shares or debt other than the Property, shares
or debt securing the Indebtedness so refunded, refinanced or extended, (iii)
Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens
securing industrial revenue bonds, (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under this Indenture, PROVIDED that (a)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item, (vi) statutory liens or landlords', carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of
<PAGE> 25
-18-
business which do not secure any Indebtedness and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings, if a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor, (vii) other Liens securing
obligations incurred in the ordinary course of business which obligations do not
exceed $1.0 million in the aggregate at any one time outstanding, (viii) Liens
for taxes, assessments or governmental charges that either are not delinquent or
are being contested in good faith by appropriate proceedings, (ix) Liens
securing Capital Lease Obligations permitted to be incurred under clause (v) of
the definition of "Permitted Indebtedness," PROVIDED that such Lien does not
extend to any property other than that subject to the underlying lease, (x)
Liens securing Indebtedness under the Revolving Credit Facility, (xi) Liens of
the Company's customers encumbering property or assets under construction
arising from the obligations of such customers to make progress or partial
payment relating to such construction, (xii) judgment Liens that otherwise would
not give rise to an Event of Default, (xiii) easements, rights-of-way, zoning
restrictions and other similar charges or encumbrances in respect of real
property not interfering in any material respect with the ordinary conduct of
the business of the Company or any of its Subsidiaries, (xiv) Liens securing
reimbursement obligations with respect to commercial letters of credit that
encumber documents and other property relating to such letters of credit and
products and proceeds thereof, (xv) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Subsidiaries, including rights of
offset and set-off, (xvi) Liens existing on the Issue Date and (xvii) any
extensions, substitutions, replacements or renewals of the foregoing.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
"PHYSICAL NOTES" means certificated Notes in registered form
in substantially the form set forth in EXHIBIT A.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
<PAGE> 26
-19-
"PRIVATE EXCHANGE" has the meaning set forth in the
Registration Rights Agreement.
"PRIVATE EXCHANGE NOTES" has the meaning set forth in the
Registration Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend initially set
forth on the Rule 144A Notes in the form set forth in EXHIBIT B.
"PROPERTY" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"PURCHASE AGREEMENT" means the Securities Purchase Agreement
dated as of June 27, 1997 by and among the Company and the Initial Purchaser.
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness incurred
in the ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"QUALIFIED EQUITY OFFERING" means an offering by the Company
or Holding of shares of its common stock (however designated and whether voting
or non-voting) and any and all rights, warrants or options to acquire such
common stock, whether registered or exempt from registration under the
Securities Act; PROVIDED, HOWEVER, that in connection with a Qualified Equity
Offering of Holding, the net proceeds of such Qualified Equity Offering are
contributed to the Company as common equity.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the
meaning specified in Rule 144A promulgated under the Securities Act.
"REDEMPTION DATE" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to the terms of the
Notes.
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company outstanding on the Issue
Date or other Indebtedness permitted to be incurred by the Company or its
Restricted Subsidiaries pursuant to the terms of this Indenture, but only to the
extent
<PAGE> 27
-20-
that (i) if the Indebtedness being refunded, refinanced or extended was
subordinate to the Indebtedness represented by the Notes, then the Refinancing
Indebtedness is subordinated to the Notes to at least the same extent, (ii) the
Refinancing Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the maturity
date of the Notes, (iii) the portion, if any, of the Refinancing Indebtedness
that is scheduled to mature on or prior to the maturity date of the Notes has a
weighted average life to maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the weighted average life to maturity
of the portion of the Indebtedness being refunded, refinanced or extended that
is scheduled to mature on or prior to the maturity date of the Notes, (iv) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded, refinanced or extended, (b) the amount of
accrued and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly-Owned Restricted Subsidiary of the Company; PROVIDED, HOWEVER,
that subclauses (ii) and (iii) of this definition will not apply to any
refunding, refinancing or extension of any Indebtedness under the Revolving
Credit Facility.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the Issue Date by and between the Company and the Initial
Purchaser, as amended from time to time.
"REGULATION S" means Regulation S promulgated under the
Securities Act.
"RESPONSIBLE OFFICER" when used with respect to the Trustee,
means an officer or assistant officer assigned to the corporate trust department
of the Trustee (or any successor group of the Trustee) with direct
responsibility for the administration of this Indenture and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
<PAGE> 28
-21-
"RESTRICTED NOTE" has the same meaning as "Restricted
Security" set forth in Rule 144(a)(3) promulgated under the Securities Act;
PROVIDED, that the Trustee shall be entitled to request and conclusively rely
upon an Opinion of Counsel with respect to whether any Note is a Restricted
Note.
"RESTRICTED PAYMENT" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Capital Stock of the Company or any Restricted Subsidiary of the Company or any
payment made to the direct or indirect holders (in their capacities as such) of
Capital Stock of the Company or any Restricted Subsidiary of the Company (other
than (x) dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital Stock), and (y) in the case of
Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Wholly-Owned Restricted Subsidiary of the Company), (ii) the
purchase, redemption or other acquisition or retirement for value of any Capital
Stock of the Company or any of its Restricted Subsidiaries (other than Capital
Stock owned by the Company or a Wholly-Owned Restricted Subsidiary of the
Company, excluding Disqualified Capital Stock), (iii) the making of any
principal payment on, or the purchase, defeasance, repurchase, redemption or
other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Subordinated
Indebtedness (other than Subordinated Indebtedness acquired in anticipation of
satisfying a scheduled sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of acquisition), (iv) the
making of any Investment or guarantee of any Investment in any Person other than
a Permitted Investment, (v) any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary on the basis of the Investment by the Company therein
and (vi) forgiveness of any Indebtedness of an Affiliate of the Company to the
Company or a Restricted Subsidiary. For purposes of determining the amount
expended for Restricted Payments, cash distributed or invested shall be valued
at the face amount thereof and property other than cash shall be valued at its
fair market value.
"RESTRICTED SUBSIDIARY" means a Subsidiary of the Company
other than an Unrestricted Subsidiary and includes all of the Subsidiaries of
the Company existing as of the Issue Date. The Board of Directors of the Company
may designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving
<PAGE> 29
-22-
effect to such action (and treating any Acquired Indebtedness as having been
incurred at the time of such action), the Company could have incurred at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the Section 4.06 of this Indenture.
"REVOLVING CREDIT FACILITY" means the revolving credit
facility by and among the Company, the lender named therein, and NationsBank,
N.A., as agent, as amended, modified, replaced, renewed, refunded, refinanced or
supplemented from time to time, and whether by the same or any other agent,
lender or group of lenders.
"RULE 144" means Rule 144 promulgated under the Securities
Act.
"RULE 144A" means Rule 144A promulgated under the Securities
Act.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement with
any Person providing for the leasing by the Company or any Restricted Subsidiary
of the Company of any real or tangible personal Property, which Property has
been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person in contemplation of such leasing.
"S&P" means Standard & Poor's Ratings Services and its
successors.
"SEC" means the United States Securities and Exchange
Commission as constituted from time to time or any successor performing
substantially the same functions.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted
Subsidiary of the Company that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(v) of Regulation S-X under the Securities
Act.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated July 2, 1997 by and among KECC, KEP 97, Holding and the members of
Executive Management.
"SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or
<PAGE> 30
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acquired, (i) in the case of a corporation, of which more than 50% of the total
voting power of the Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, officers or trustees
thereof is held by such first-named Person or any of its Subsidiaries; or (ii)
in the case of a partnership, joint venture, association or other business
entity, with respect to which such first-named Person or any of its Subsidiaries
has the power to direct or cause the direction of the management and policies of
such entity by contract or otherwise or if in accordance with GAAP such entity
is consolidated with the first-named Person for financial statement purposes.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the
Company which is expressly subordinated in right of payment to the Notes.
"TEMPORARY CASH INVESTMENTS" means (i) Investments in
marketable, direct obligations issued or guaranteed by the United States of
America, or of any governmental agency or political subdivision thereof,
maturing within 365 days of the date of purchase; (ii) Investments in
certificates of deposit issued by a bank organized under the laws of the United
States of America or any state thereof or the District of Columbia, in each case
having capital, surplus and undivided profits totaling more than $500,000,000
and rated at least A by Standard & Poor's Corporation and A-2 by Moody's
Investors Service, Inc., maturing within 365 days of purchase; (iii) commercial
paper maturing no more than one year from the date of creation thereof and, at
the time of Investment, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) repurchase obligations with a term of not more than seven
days for the underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (ii)
above; or (v) Investments not exceeding 365 days in duration in money market
funds that invest substantially all of such funds' assets in the Investments
described in the preceding clauses (i) and (ii).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of this Indenture (except as
provided in Section 8.03 hereof).
"TRANSACTIONS" means the Merger, the Offering, the Equity
Contribution and the Revolving Credit Facility.
<PAGE> 31
-24-
"TRUSTEE" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of an
Unrestricted Subsidiary and (b) any Subsidiary of the Company which is
classified as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company; PROVIDED that a Subsidiary organized or acquired after
the Issue Date may be so classified as an Unrestricted Subsidiary only if such
classification is in compliance with the covenant set forth in Section 4.09
hereof. The Trustee shall be given prompt notice by the Company of each
resolution adopted by the Board of Directors of the Company under this
provision, and furnished with a Board Resolution with respect to each such
resolution adopted.
"U.S. GOVERNMENT OBLIGATIONS" means (a) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted
Subsidiary, all of the outstanding voting securities (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company.
Section 1.02. OTHER DEFINITIONS.
The definitions of the following terms may be found in the
sections indicated as follows:
<PAGE> 32
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<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction"................................................. 4.11
"Agent Members"......................................................... 2.15(a)
"Bankruptcy Law"........................................................ 6.01
"Business Day".......................................................... 11.07
"CEDEL"................................................................. 2.15(a)
"Change of Control Offer"............................................... 4.19
"Change of Control Payment Date"........................................ 4.19
"Change of Control Purchase Price"...................................... 4.19
"Covenant Defeasance"................................................... 9.03
"Custodian"............................................................. 6.01
"Euroclear"............................................................. 2.15(a)
"Event of Default"...................................................... 6.01
"Excess Proceeds Offer"................................................. 4.10
"Global Notes".......................................................... 2.15
"Legal Defeasance"...................................................... 9.02
"Legal Holiday"......................................................... 11.07
"Offer Period".......................................................... 4.10
"Other Notes"........................................................... 2.01
"Paying Agent".......................................................... 2.03
"Purchase Date"......................................................... 4.10
"Registrar"............................................................. 2.03
"Regulation S Global Notes"............................................. 2.15(a)
"Regulation S Notes".................................................... 2.01
"Reinvestment Date"..................................................... 4.10
"Restricted Global Note"................................................ 2.15(a)
"Restricted Period"..................................................... 2.15(l)
"Rule 144A Notes"....................................................... 2.01
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITYHOLDER" means a Holder or
Noteholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
<PAGE> 33
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"INDENTURE TRUSTEE" or "institutional trustee" means
the Trustee.
"OBLIGOR ON THE INDENTURE SECURITIES" means the
Company, the Guarantors or any other obligor on the
Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
Section 1.04. Rules of Construction.
----------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) words used herein implying any gender shall apply to both
genders; and
(6) whenever in this Indenture there is mentioned, in any
context, principal, interest or any other amount payable under or with
respect to any Note, such mention shall be deemed to include mention of
the payment of Additional Interest to the extent that, in such context,
Additional Interest is, was or would be payable in respect thereof.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
----------------
The Notes and the Trustee's certificate of authentication with
respect thereto shall be substantially in the form set forth in EXHIBIT A, which
is incorporated in and forms a part of this Indenture. The Notes may have
notations, legends or
<PAGE> 34
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endorsements required by law, rule or usage to which the Company is subject.
Without limiting the generality of the foregoing, Notes offered and sold to
Qualified Institutional Buyers in reliance on Rule 144A ("RULE 144A NOTES")
shall bear the legend and include the form of assignment set forth in EXHIBIT B,
Notes offered and sold in offshore transactions in reliance on Regulation S
("REGULATION S NOTES") shall bear the legend and include the form of assignment
set forth in EXHIBIT C, and Notes offered and sold to Institutional Accredited
Investors in transactions exempt from registration under the Securities Act
("OTHER NOTES") shall be represented by a Physical Note bearing the Private
Placement Legend. Each Note shall be dated the date of its authentication and
show the date of its authentication.
The terms and provisions contained in the Notes shall
constitute, and are expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and agree to be bound
thereby.
The Notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
Section 2.02. Execution and Authentication.
----------------------------
Two Officers shall sign, or one Officer shall sign and one
Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to, the Notes for the Company by
manual or facsimile signature.
If an Officer whose signature is on a Note was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Note, the Note shall be valid nevertheless.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Notwithstanding the foregoing, if
any Note shall have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such Note to the Trustee
for cancellation as provided in Section 2.11, for all purposes of this Indenture
such Note shall be deemed never to
<PAGE> 35
-28-
have been authenticated and delivered hereunder and shall never be entitled to
the benefits of this Indenture.
The Trustee or an authenticating agent shall authenticate
Notes for original issue in the aggregate principal amount of up to $70,000,000
upon a Company Request. The aggregate principal amount of Notes outstanding at
any time may not exceed such amount except as provided in Section 2.07 hereof.
Upon receipt of the Company Request and an Officers' Certificate certifying that
the registration statement relating to the exchange offer specified in the
Registration Rights Agreement is effective and that the conditions precedent to
a private exchange thereunder have been met, the Trustee shall authenticate an
additional series of Notes in an aggregate principal amount not to exceed
$70,000,000 for issuance in exchange for all Notes previously issued pursuant to
an exchange offer registered under the Securities Act or pursuant to a Private
Exchange. Exchange Notes or Private Exchange Notes may have such distinctive
series designations and such changes in the form thereof as are specified in the
Company Request referred to in the preceding sentence. The Notes shall be
issuable only in registered form without coupons and only in denominations of
$1,000 and integral multiples thereof.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Notes. Unless otherwise provided
in the appointment, an authenticating agent may authenticate the Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
Each Paying Agent is designated as an authenticating agent for purposes of this
Indenture.
The Notes shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
Section 2.03. Registrar and Paying Agent.
---------------------------
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where Notes may be presented for registration of transfer or for exchange (the
"REGISTRAR"), and an office or agency where Notes may be presented for payment
(the "PAYING AGENT") and an office or agency where notices and demands to or
upon the Company, if any, in respect of the Notes and this Indenture may be
served. The Registrar shall keep a register of
<PAGE> 36
-29-
the Notes and of their transfer and exchange. The Company may have one or more
additional Paying Agents. The term "Paying Agent" includes any additional Paying
Agent. Neither the Company nor any Affiliate thereof may act as Paying Agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall incorporate the
provisions 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, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar,
Paying Agent and agent for service of notices and demands in connection with the
Notes and this Indenture.
Section 2.04. Paying Agent To Hold Money in Trust.
------------------------------------
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of or premium or interest on the Notes (whether such money has been
paid to it by the Company or any other obligor on the Notes), and the Company
and the Paying Agent shall notify the Trustee of any default by the Company (or
any other obligor on the Notes) in making any such payment. Money held in trust
by the Paying Agent need not be segregated except as required by law and in no
event shall the Paying Agent be liable for any interest on any money received by
it hereunder. The Company at any time may require the Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Event of Default specified
in Section 6.01 (1) or (2), upon written request to the Paying Agent, require
such Paying Agent to pay forthwith all money so held by it to the Trustee and to
account for any funds disbursed. Upon making such payment, the Paying Agent
shall have no further liability for the money delivered to the Trustee.
Any money deposited with any Paying Agent, or then held by the
Company or a Subsidiary in trust for the payment of principal or interest on any
Note and remaining unclaimed for two years after such principal and interest has
become due and payable shall be paid to the Company at its request, or, if then
held by the Company or a Subsidiary, shall be discharged from such trust; and
the Noteholders shall thereafter, as unsecured
<PAGE> 37
-30-
general creditors, look only to the Company for payment thereof, and all
liability of the Paying Agent with respect to such money, and all liability of
the Company or such Subsidiary as trustee thereof, shall thereupon cease.
Section 2.05. Noteholder Lists.
-----------------
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of the Noteholders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee 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 the Noteholders.
Section 2.06. Transfer and Exchange.
----------------------
Subject to Sections 2.15 and 2.16, when Notes are presented to
the Registrar with a request from the Holder of such Notes to register a
transfer or to exchange them for an equal principal amount of Notes of other
authorized denominations, the Registrar shall register the transfer as
requested. Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar, duly executed by
the Holder thereof or his attorneys duly authorized in writing. To permit
registrations of transfers and exchanges, the Company shall issue and execute
and the Trustee shall authenticate new Notes (and the Guarantors shall execute
the guarantee thereon) evidencing such transfer or exchange at the Registrar's
request. No service charge shall be made to the Noteholder for any registration
of transfer or exchange. The Company may require from the Noteholder payment of
a sum sufficient to cover any transfer taxes or other governmental charge that
may be imposed in relation to a transfer or exchange, but this provision shall
not apply to any exchange pursuant to Section 2.02, 2.10, 3.06, 4.10, 4.19 or
8.05 (in which events the Company shall be responsible for the payment of such
taxes). The Registrar shall not be required to exchange or register a transfer
of any Note for a period of 15 days immediately preceding the mailing of notice
of redemption of Notes to be redeemed or of any Note selected, called or being
called for redemption except the unredeemed portion of any Note being redeemed
in part.
Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of the beneficial
<PAGE> 38
-31-
interests in such Global Note may be effected only through a book entry system
maintained by the Holder of such Global Note (or its agent), and that ownership
of a beneficial interest in the Global Note shall be required to be reflected in
a book entry.
Each Holder of a Note agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Note in violation of any provision of this Indenture
and/or applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor
the Registrar shall have any duty to monitor the Company's compliance with or
have any responsibility with respect to the Company's compliance with any
Federal or state securities laws.
Section 2.07. Replacement Notes.
------------------
If a mutilated Note is surrendered to the Registrar or the
Trustee, or if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note (and the Guarantors shall execute the guarantee
thereon) if the Holder of such Note furnishes to the Company and the Trustee
evidence reasonably acceptable to them of the ownership and the destruction,
loss or theft of such Note and if the requirements of Section 8-405 of the New
York Uniform Commercial Code as in effect on the date of this Indenture are met.
If required by the Trustee or the Company, an indemnity bond shall be posted,
sufficient in the judgment of both to protect the Company, the Trustee or any
Paying Agent from any loss that any of them may suffer if such Note is replaced.
The Company may charge such Holder for the Company's reasonable out-of-pocket
expenses in replacing such Note and the Trustee may charge the Company for the
Trustee's expenses (including, without limitation, attorneys' fees and
disbursements) in replacing such Note. Every replacement Note shall constitute a
contractual obligation of the Company. In the event any such mutilated, lost,
destroyed or wrongfully taken Note has become due and payable, the Company in
its discretion may pay such Note instead of issuing a new Note in replacement
thereof.
Section 2.08. Outstanding Notes.
------------------
The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those cancelled by it, (b) those
delivered to it for cancellation,
<PAGE> 39
-32-
(c) to the extent set forth in Sections 9.01 and 9.02, on or after the date on
which the conditions set forth in Section 9.01 or 9.02 have been satisfied,
those Notes theretofore authenticated and delivered by the Trustee hereunder and
(d) those described in this Section 2.08 as not outstanding. Subject to Section
2.09, a Note does not cease to be outstanding because the Company or one of its
Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser in whose hands such Note is a legal, valid and binding
obligation of the Company. A mutilated Note ceases to be outstanding upon
surrender of such Note and replacement thereof pursuant to Section 2.07.
If the Paying Agent holds, in its capacity as such, on any
Maturity Date or on any optional redemption date, money sufficient to pay all
accrued interest and principal with respect to the Notes payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Section 2.09. Treasury Notes.
---------------
In determining whether the Holders of the required principal
amount of Notes have concurred in any declaration of acceleration or notice of
default or direction, waiver or consent or any amendment, modification or other
change to this Indenture, Notes owned by the Company or any other Affiliate of
the Company shall be disregarded as though they were not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent or any amendment, modification
or other change to this Indenture, only Notes as to which a Responsible Officer
of the Trustee has received an Officers' Certificate stating that such Notes are
so owned shall be so disregarded. Notes so owned which have been pledged in good
faith shall not be disregarded if the pledgee established to the satisfaction of
the Trustee the pledgee's right so to act with respect to the Notes and that the
pledgee is not the Company, a Guarantor, any other obligor on the Notes or any
of their respective Affiliates.
<PAGE> 40
-33-
Section 2.10. Temporary Notes.
----------------
Until definitive Notes are prepared and ready for delivery,
the Company may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
Section 2.11. Cancellation.
-------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall (subject to the
record-retention requirements of the Exchange Act) destroy cancelled Notes and
deliver a certificate of destruction thereof to the Company. The Company may not
reissue or resell, or issue new Notes to replace, Notes that the Company has
redeemed or paid, or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
-------------------
If the Company defaults on a payment of interest on the Notes,
it shall pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms hereof,
to the Persons who are Noteholders on a subsequent special record date, which
date shall be at least five Business Days prior to the payment date. The Company
shall fix such special record date and payment date in a manner satisfactory to
the Trustee. At least 15 days before such special record date, the Company shall
mail to each Noteholder a notice that states the special record date, the
payment date and the amount of defaulted interest, and interest payable on
defaulted interest, if any, to be paid. The Company may make payment of any
defaulted interest in any other lawful manner not inconsistent with the
requirements (if applicable) of any securities exchange on which the Notes may
be listed and, upon such notice as may be required by such exchange, if, after
written notice given by the Company to the Trustee of the
<PAGE> 41
-34-
proposed payment pursuant to this sentence, such manner of payment shall be
deemed practicable by the Trustee.
Section 2.13. CUSIP Number.
-------------
The Company in issuing the Notes may use a "CUSIP" number, and
if so, such CUSIP number shall be included in notices of redemption or exchange
as a convenience to Holders; PROVIDED, that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any such CUSIP number used by the Company in
connection with the issuance of the Notes and of any change in the CUSIP number.
Section 2.14. Deposit of Moneys.
------------------
Prior to 10:00 a.m., New York City time, on each Interest
Payment Date and Maturity Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Maturity Date, as the case may be, in
a timely manner which permits the Trustee to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be. The principal
and interest on Global Notes shall be payable to the Depository or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Global Notes represented thereby. The principal and interest on Physical Notes
shall be payable at the office of the Paying Agent.
Section 2.15. Book-Entry Provisions for Global Notes.
---------------------------------------
(a) Rule 144A Notes initially shall be represented by one or
more notes in registered, global form without interest coupons (collectively,
the "RESTRICTED GLOBAL NOTE"). Regulation S Notes initially shall be represented
by one or more notes in registered, global form without interest coupons
(collectively, the "REGULATION S GLOBAL NOTE," and, together with the Restricted
Global Note and any other global notes representing Notes, the "GLOBAL NOTES").
The Global Notes initially shall (i) be registered in the name of the Depository
or the nominee of such Depository, in each case for credit to an account of an
Agent Member (or, in the case of the Regulation S Global Notes, of Euroclear
System ("EUROCLEAR") and Cedel Bank, S.A. ("CEDEL")), (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
EXHIBIT D.
<PAGE> 42
-35-
Members of, or direct or indirect participants in, the
Depository ("AGENT MEMBERS") shall have no rights under this Indenture with
respect to any Global Note held on their behalf by the Depository, or the
Trustee as its custodian, or under the Global Notes, and the Depository may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of Global Notes shall be limited to transfer in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.16. In addition, a Global Note
shall be exchangeable for Physical Notes if (i) the Depository (x) notifies the
Company that it is unwilling or unable to continue as depository for such Global
Note and the Company thereupon fails to appoint a successor depository or (y)
has ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of such Physical Notes or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Notes. In all cases, Physical
Notes delivered in exchange for any Global Note or beneficial interests therein
shall be registered in the names, and issued in any approved denominations,
requested by or on behalf of the Depository (in accordance with its customary
procedures).
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
<PAGE> 43
-36-
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Note delivered
in exchange for an interest in a Global Note pursuant to paragraph (b), (c) or
(d) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.16, bear the Private Placement Legend or, in the case of the
Regulation S Global Note, the legend set forth in EXHIBIT C, in each case,
unless the Company determines otherwise in compliance with applicable law.
(f) On or prior to the 40th day after the later of the
commencement of the offering of the Notes represented by the Regulation S Global
Note and the issue date of such Notes (such period through and including such
40th day, the "RESTRICTED PERIOD"), a beneficial interest in a Regulation S
Global Note may be transferred to a Person who takes delivery in the form of an
interest in the corresponding Restricted Global Note only upon receipt by the
Trustee of a written certification from the transferor to the effect that such
transfer is being made (i)(a) to a Person whom the transferor reasonably
believes is a Qualified Institutional Buyer in a transaction meeting the
requirements of Rule 144A or (b) pursuant to another exemption from the
registration requirements under the Securities Act which is accompanied by an
opinion of counsel regarding the availability of such exemption and (ii) in
accordance with all applicable securities laws of any state of the United States
or any other jurisdiction.
(g) Beneficial interests in the Restricted Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written certificate to the effect that such transfer is being made in accordance
with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if
such transfer occurs prior to the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through Euroclear or
CEDEL.
(h) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of
<PAGE> 44
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an interest in another Global Note shall, upon transfer, cease to be an interest
in such Global Note and become an interest in such other Global Note and,
accordingly, shall thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interests in such other Global Note for as
long as it remains such an interest.
(i) The Holder of any Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
Section 2.16. Special Transfer Provisions.
----------------------------
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
AND NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted Note
to any Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Note, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after July
2, 1999 or such other date as such Note shall be freely transferable
under Rule 144 as certified in an Officers' Certificate or (y) (1) in
the case of a transfer to an Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons), the proposed transferee has
delivered to the Registrar a certificate substantially in the form of
EXHIBIT E hereto or (2) in the case of a transfer to a Non-U.S. Person
(including a QIB), the proposed transferor has delivered to the
Registrar a certificate substantially in the form of EXHIBIT F hereto;
PROVIDED that in the case of a transfer of a Note bearing the Private
Placement Legend for a Note not bearing the Private Placement Legend,
the Registrar has received an Officers' Certificate authorizing such
transfer; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount
<PAGE> 45
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of a Global Note in an amount equal to the principal amount of the beneficial
interest in a Global Note to be transferred, and (b) the Company shall execute
and the Trustee shall authenticate and make available for delivery one or more
Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed registration of transfer of a
Note constituting a Restricted Note to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on such Holder's Note stating, or has otherwise advised
the Company and the Registrar in writing, that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on such Holder's Note stating, or
has otherwise advised the Company and the Registrar in writing, that it
is purchasing the Note for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in the Global Note, upon receipt by
the Registrar of instructions given in accordance with the Depository's
and the Registrar's procedures, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of
the Global Note in an amount equal to the principal amount of the
Physical Notes to be transferred, and the Trustee shall cancel the
Physical Notes so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the registration of
transfer, exchange or replacement of Notes not bearing the Private Placement
Legend, the Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of Notes
bearing the Private
<PAGE> 46
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Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless (i) it has received the Officers' Certificate required
by paragraph (a)(i)(y) of this Section 2.16, (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act or (iii) such Note has been sold pursuant to an effective
registration statement under the Securities Act and the Registrar has received
an Officers' Certificate from the Company to such effect.
(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for a period of two years copies of
all letters, notices and other written communications received pursuant to
Section 2.15 or this Section 2.16. The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable notice to the Registrar.
Section 2.17. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
ARTICLE 3
REDEMPTION
Section 3.01. Election to Redeem; Notices to Trustee.
---------------------------------------
If the Company elects to redeem Notes pursuant to paragraph 5
of the Notes, at least 45 days prior to the Redemption Date (unless a shorter
notice shall be agreed to in writing by the Trustee) but not more than 65 days
before the Redemption Date, the Company shall notify the Trustee in writing of
the Redemption Date, the principal amount of Notes to be redeemed and the
redemption price, and deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel stating that such
<PAGE> 47
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redemption will comply with the conditions contained in paragraph 5 of the
Notes.
If fewer than all the Notes are to be redeemed, the record
date relating to such redemption shall be selected by the Company and given to
the Trustee, which record date shall be not less than 15 days after the date of
notice to the Trustee (unless a shorter period shall be acceptable to the
Trustee). Any such notice may be canceled by notice in writing to the Trustee at
any time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
Section 3.02. Selection by Trustee of Notes To Be Redeemed.
---------------------------------------------
In the event that fewer than all of the Notes are to be
redeemed, the Trustee shall select the Notes to be redeemed, if the Notes are
listed on a national securities exchange, in accordance with the rules of such
exchange or, if the Notes are not so listed, either on a pro rata basis or by
lot, or such other method as it shall deem fair and equitable; PROVIDED,
HOWEVER, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portion thereof for redemption shall
be made by the Trustee on a PRO RATA basis to the extent practical, unless such
a method is prohibited. The Trustee shall promptly notify the Company of the
Notes selected for redemption and, in the case of any Notes selected for partial
redemption, the principal amount thereof to be redeemed. The Trustee may select
for redemption portions of the principal of the Notes that have denominations
larger than $1,000. Notes and portions thereof the Trustee selects shall be
redeemed in amounts of $1,000 or whole multiples of $1,000. For all purposes of
this Indenture unless the context otherwise requires, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
Section 3.03. Notice of Redemption.
---------------------
At least 30 days, and no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at his or
her last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including
the CUSIP numbers thereof) and shall state:
<PAGE> 48
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(1) the Redemption Date;
(2) the redemption price and the amount of premium and accrued
interest to be paid;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date and upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date;
(7) the provision of paragraph 5 of the Notes pursuant to
which the Notes called for redemption are being redeemed;
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes; and
(9) the aggregate principal amount of Notes that are being
redeemed.
At the Company's written request made at least five Business
Days prior to the date on which notice is to be given, the Trustee shall give
the notice of redemption in the Company's name and at the Company's sole
expense.
Section 3.04. Effect of Notice of Redemption.
-------------------------------
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, including any premium, plus interest accrued
to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be
paid at the redemption price, including any premium, plus interest accrued to
the Redemption Date, PROVIDED that if the Redemption Date is after a regular
record date and on or prior to the Interest Payment Date, the accrued interest
shall be payable to the Holder of the redeemed Notes registered on the relevant
record date, and
<PAGE> 49
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PROVIDED, FURTHER, that if a Redemption Date is a Legal Holiday, payment shall
be made on the next succeeding Business Day and no interest shall accrue for the
period from such Redemption Date to such succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
----------------------------
On or prior to 10:00 A.M., New York City time, on each
Redemption Date, the Company shall deposit with the Paying Agent in immediately
available funds money sufficient to pay the redemption price of, including
premium, if any, and accrued interest on all Notes to be redeemed on that date
other than Notes or portions thereof called for redemption on that date which
have been delivered by the Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay
the redemption price of, including premium, if any, and accrued interest on
Notes called for redemption shall have been made available in accordance with
the preceding paragraph, the Notes called for redemption will cease to accrue
interest and the only right of the Holders of such Notes will be to receive
payment of the redemption price of and, subject to the first proviso in Section
3.04, accrued and unpaid interest on such Notes to the Redemption Date. If any
Note surrendered for redemption shall not be so paid, interest will be paid,
from the Redemption Date until such redemption payment is made, on the unpaid
principal of the Note and any interest not paid on such unpaid principal, in
each case, at the rate and in the manner provided in the Notes.
Section 3.06. Notes Redeemed in Part.
-----------------------
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for the Holder thereof a new Note equal in principal amount
to the unredeemed portion of the Note surrendered.
<PAGE> 50
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ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
----------------
The Company shall pay the principal of, premium (if any) and
interest (including all Additional Interest as provided in the Registration
Rights Agreement or, in the case of Notes issued subsequent to the Issue Date, a
registration rights agreement substantially identical to the Registration Rights
Agreement which shall be deemed to be included in the term "interest" for
purposes of this Indenture and the Notes) on the Notes on the dates and in the
manner provided in the Notes and this Indenture. An installment of principal or
interest shall be considered paid on the date it is due if the Trustee or Paying
Agent holds on that date money designated for and sufficient to pay such
installment.
The Company shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC Reports.
------------
(a) The Company shall mail to each Holder of the Notes, and
shall file with the Trustee within 15 days after it is required to file the same
with the SEC, copies of the annual reports and quarterly reports or any
amendments to such reports and of the information, documents and other reports
which it may be required to file with the SEC pursuant to Section 13(a), 13(c)
or 15(d) of the Securities Exchange Act. The Company shall also comply with the
other provisions of TIA Section 314(a).
(b) Whether or not the Company is required to file with the
SEC such reports and other information referred to in Section 4.2(a), the
Company shall furnish without cost to each Holder of the Notes and file with the
SEC and the Trustee (i) within 120 days after the end of each fiscal year of the
Company, (x) audited year-end consolidated financial statements (including a
balance sheet, income statement and statement of changes of cash flow) prepared
in accordance with GAAP and substantially in the form required under Regulation
S-X under the Securities Act and (y) the information described in Item 303 of
Regulation S-K under the Securities Act with respect to such period and (ii)
within 50 days after the end of each of the first three fiscal
<PAGE> 51
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quarters of each fiscal year of the Company, (x) unaudited quarterly
consolidated financial statements (including a balance sheet, income statement
and statement of changes of cash flows) prepared in accordance with GAAP and
substantially in the form required by Regulation S-X under the Securities Act
and (y) the information described in Item 303 of Regulation S-K under the
Securities Act with respect to such period.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
----------------------------------------
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Company from paying all or any portion of the principal of,
premium, if any, and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
Section 4.04. Compliance Certificate.
-----------------------
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year and on or before 50 days after the end of the
first, second and third quarters of each fiscal year, 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 a
review of the activities of the Company and its Subsidiaries during such fiscal
year or fiscal quarter, as the case may be, has been made under the supervision
of the signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge, the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and are not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action they are taking or propose to take with respect
thereto) and that to the
<PAGE> 52
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best of his or her knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal of or interest, if any, on
the Notes is prohibited or if such event has occurred, a description of the
event and what action the Company is taking or proposes to take with respect
thereto.
(b) So long as (and to the extent) not contrary to the then
current recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to Section
4.02 above shall be accompanied by a written statement of the Company's
independent public accountants (who shall be a firm of established national
reputation) that in making the examination necessary for certification of such
financial statements nothing has come to their attention which would lead them
to believe that the Company or any Guarantor has violated any provisions of this
Article 4 or Article 5 of this Indenture or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly for any failure to
obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes.
------
The Company and the Guarantors, if any, shall, and shall cause
each of their Subsidiaries to, pay prior to delinquency all material taxes,
assessments, and governmental levies except as contested in good faith and by
appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
--------------------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, directly or indirectly, incur (as defined) any
Indebtedness (including Acquired Indebtedness) unless (a) after giving effect to
the incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the Company's Fixed Charge Coverage Ratio (determined on a pro
forma basis for the last four fiscal quarters of the Company for which financial
statements are available at the date of determination) is greater than 2.25 to
1, and (b) no Default
<PAGE> 53
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or Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness.
Notwithstanding any restrictions set forth in this Section
4.06, the Company and its Restricted Subsidiaries may incur Permitted
Indebtedness.
Section 4.07. Limitation on Preferred Stock of Restricted Subsidiaries.
---------------------------------------------------------
The Company shall not permit any Restricted Subsidiary to
issue any Preferred Stock (except Preferred Stock to the Company or a Restricted
Subsidiary) or permit any Person (other than the Company or a Subsidiary) to
hold any such Preferred Stock unless the Company or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under the first paragraph of
Section 4.06 in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Section 4.08. Limitation on Capital Stock of Restricted Subsidiaries.
-------------------------------------------------------
The Company shall not (i) sell, pledge, hypothecate or
otherwise convey or dispose of any Capital Stock of a Subsidiary (other than
under the Revolving Credit Facility or a successor facility) or (ii) permit any
of its Subsidiaries to issue any Capital Stock, other than to the Company or a
Wholly-Owned Restricted Subsidiary of the Company. The foregoing restrictions
shall not apply to an Asset Sale made in compliance with Section 4.10 or the
issuance of Preferred Stock in compliance with Section 4.07.
Section 4.09. Limitation on Restricted Payments.
----------------------------------
The Company shall not make, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, make, any Restricted
Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.06
hereof; and
<PAGE> 54
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(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (1) 50% of the
cumulative Consolidated Net Income of the Company (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit), plus (2) 100% of the aggregate Net Proceeds and the fair
market value of securities or other property received by the Company
from the issue or sale, after the Issue Date, of Capital Stock (other
than Disqualified Capital Stock or Capital Stock of the Company issued
to any Subsidiary of the Company) of the Company or any Indebtedness or
other securities of the Company convertible into or exercisable or
exchangeable for Capital Stock (other than Disqualified Capital Stock)
of the Company which has been so converted or exercised or exchanged,
as the case may be. For purposes of determining under this clause (c)
the amount expended for Restricted Payments, cash distributed shall be
valued at the face amount thereof and property other than cash shall be
valued at its fair market value.
The provisions of this Section 4.09 shall not prohibit (i) the
payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of this Indenture, (ii) so long as no Default or Event of Default
shall have occurred and be continuing, the retirement of any shares of Capital
Stock of the Company or subordinated Indebtedness (A) by conversion into, or by
or in exchange for, shares of Capital Stock (other than Disqualified Capital
Stock) of the Company, or (B) out of, the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of other shares of
Capital Stock of the Company (other than Disqualified Capital Stock), (iii) so
long as no Default or Event of Default shall have occurred and be continuing,
the redemption or retirement of Indebtedness of the Company subordinated to the
Notes in exchange for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale or incurrence of Indebtedness (other than any
Indebtedness owed to a Subsidiary) of the Company that is contractually
subordinated in right of payment to the Notes to at least the same extent as the
Subordinated Indebtedness being redeemed or retired, (iv) so long as no Default
or Event of Default shall have occurred and be continuing, the retirement of any
shares of Disqualified Capital Stock by conversion into, or by exchange for,
shares of Disqualified Capital Stock, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Disqualified Capital Stock; provided
<PAGE> 55
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that (a) such Disqualified Capital Stock is not subject to mandatory redemption
earlier than the maturity of the Notes, (b) such Disqualified Capital Stock is
in an aggregate liquidation preference that is equal to or less than the sum of
(x) the aggregate liquidation preference of the Disqualified Capital Stock being
retired, (y) the amount of accrued and unpaid dividends, if any, and premiums
owed, if any, on the Disqualified Capital Stock being required and (z) the
amount of customary fees, expenses and costs related to the incurrence of such
Disqualified Capital Stock and (c) such Disqualified Capital Stock is incurred
by the same person that initially incurred the disqualified Capital Stock being
retired, except that the Company may incur Disqualified Capital Stock to refund
or refinance Disqualified Capital Stock of any Wholly-Owned Restricted
Subsidiary of the Company, (v) the payment by the Company of cash dividends to
Holding for the purpose of paying, so long as all proceeds thereof are promptly
used by Holding to pay, franchise taxes and federal, state and local income
taxes and interest and penalties with respect thereto, if any, payable by
Holding, provided that any refund shall be promptly returned by Holding to the
Company, (vi) so long as no Default or Event of Default shall have occurred and
be continuing, payments to employees for repurchases of Capital Stock of
Holding; provided, however, that the amount of all such payments under this
clause (vi) does not exceed $250,000 during any twelve month period; (vii)
deposits and loans, not to exceed $3.0 million at any time outstanding, made in
connection with acquisition agreements; (viii) the making of payments by the
Company to Holding to pay (A) upon consummation of the Transactions, up to
$65,000 in connection with the delivery of an opinion relating to the solvency
of the Company on the Issue Date and (B) operating expenses, not to exceed
$25,000 in any fiscal year; or (ix) any payment from the Company to Holding in
the amount of any payment received by the Company pursuant to a distribution
from the Escrow Accounts in connection with the Merger under the terms of the
Merger Agreement, not to exceed $50,000. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance with clause
(c) of the immediately preceding paragraph, amounts expended pursuant to clauses
(i), (ii)(B) and (iv) shall be included in such calculation and, in the event
the acquisition contemplated in clause (vii) is not consummated within 180 days
after the deposit or loan is made in connection therewith, (vii) shall also be
included in such calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by
<PAGE> 56
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this Section 4.09 were computed, which calculations may be based upon the
Company's latest available financial statements, and that no Default or Event of
Default exists and is continuing and no Default or Event of Default will occur
immediately after giving effect to any Restricted Payments.
Section 4.10. Limitation on Certain Asset Sales.
----------------------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
its Restricted Subsidiaries, as the case may be, receives consideration at the
time of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Company's Board of Directors, and
evidenced by a board resolution); (ii) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the form
of cash or cash equivalents (those equivalents allowed under "Temporary Cash
Investments"); and (iii) the Asset Sale Proceeds received by the Company or such
Restricted Subsidiary are applied (a) first, to the extent the Company elects,
or is required to prepay, repay or purchase Indebtedness (other than
Subordinated Indebtedness) of the Company or any Restricted Subsidiary within
270 days following the receipt of the Asset Sale Proceeds from any Asset Sale,
provided that any such repayment shall result in a permanent reduction of the
commitments thereunder in an amount equal to the principal amount so repaid; (b)
second, to the extent of the balance of Asset Sale Proceeds after application as
described above, to the extent the Company elects, to an investment in assets
(including Capital Stock or other securities purchased in connection with the
acquisition of Capital Stock or property of another person) used or useful in
businesses similar or ancillary to the business of the Company or Restricted
Subsidiary as conducted at the time of such Asset Sale, provided that such
investment occurs or the Company or a Restricted Subsidiary enters into
contractual commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 271st day
following receipt of such Asset Sale Proceeds (the "REINVESTMENT DATE") and
Asset Sale Proceeds contractually committed are so applied within 365 days
following the receipt of such Asset Sale Proceeds; and (c) third, if on the
Reinvestment Date with respect to any Asset Sale, the Available Asset Sale
Proceeds exceed $5.0 million, the Company shall apply an amount equal to
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase (an "EXCESS PROCEEDS OFFER").
If an Excess Proceeds Offer is not fully
<PAGE> 57
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subscribed, the Company may retain the portion of the Available Asset Sale
Proceeds not required to repurchase Notes.
If the Company is required to make an Excess Proceeds Offer,
the Company shall mail, within 30 days following the Reinvestment Date, a notice
to the Holders stating, among other things: (1) that such Holders have the right
to require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date (the "PURCHASE DATE"), which shall be no earlier than 30 days
and not later than 60 days from the date such notice is mailed; (3) the
instructions, determined by the Company, that each Holder must follow in order
to have such Notes repurchased; and (4) the calculations used in determining the
amount of Available Asset Sale Proceeds to be applied to the repurchase of such
Notes. The Excess Proceeds Offer shall remain open for a period of 20 Business
Days following its commencement (the "OFFER PERIOD"). The notice, which shall
govern the terms of the Excess Proceeds Offer, shall state:
(1) that the Excess Proceeds Offer is being made pursuant to
this Section 4.10 and the length of time the Excess Proceeds Offer will
remain open;
(2) the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will
continue to accrue interest;
(4) that any Note accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Purchase
Date and the deposit of the purchase price with the Trustee;
(5) that Holders electing to have a Note purchased pursuant to
any Excess Proceeds Offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice
prior to the close of business on the Business Day preceding the
Purchase Date;
(6) that Holders will be entitled to withdraw their election
if the Company, depositary or Paying Agent, as the case may be,
receives, not later than the expiration of the
<PAGE> 58
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Offer Period, a facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note the Holder delivered
for purchase and a statement that such Holder is withdrawing his
election to have the Note purchased;
(7) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Available Asset Sale Proceeds, the
Company shall select the Notes to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so
that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part will
be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
Notes or portions thereof tendered pursuant to the Excess Proceeds Offer,
deposit with the Paying Agent U.S. legal tender sufficient to pay the purchase
price plus accrued interest, if any, on the Notes to be purchased and deliver to
the Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by the Company in accordance with the terms of this
Section 4.10. The Paying Agent shall promptly (but in any case not later than 5
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Note tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, any
Guarantor shall endorse the guarantee thereon and the Trustee shall authenticate
and mail or make available for delivery such new Note to such Holder equal in
principal amount to any unpurchased portion of the Note surrendered. Any Note
not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company will publicly announce the results of the Excess
Proceeds Offer on the Purchase Date by sending a press release to the Dow Jones
News Service or similar business news service in the United States. If an Excess
Proceeds Offer is not fully subscribed, the Company may retain that portion of
the Available Asset Sale Proceeds not required to repurchase Notes.
Section 4.11. Limitation on Transactions with Affiliates.
-------------------------------------------
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter
<PAGE> 59
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into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
property or services) with any Affiliate (including entities in which the
Company or any of its Restricted Subsidiaries own a minority interest) or holder
of 10% or more of the Common Stock of the Company (an "AFFILIATE TRANSACTION")
or extend, renew, waive or otherwise modify the terms of any Affiliate
Transaction entered into prior to the Issue Date unless (i) such Affiliate
Transaction is between or among the Company and its Wholly-Owned Restricted
Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Company or such Restricted Subsidiary, as the case may be, and
the terms of such Affiliate Transaction are at least as favorable as the terms
which could be obtained by the Company or such Restricted Subsidiary, as the
case may be, in a comparable transaction made on an arm's-length basis between
unaffiliated parties. In any Affiliate Transaction involving an amount or having
a value in excess of $1.0 million which is not permitted under clause (i) above,
the Company must obtain a resolution of the Board of Directors certifying that
such Affiliate Transaction complies with clause (ii) above. In transactions with
a value in excess of $5.0 million which are not permitted under clause (i)
above, the Company must obtain a written opinion as to the fairness of such a
transaction from a nationally recognized independent investment banking firm.
(b) The foregoing provisions will not apply to (i) any
Restricted Payment that is not prohibited by Section 4.09 hereof, (ii) any
transaction, approved by the Board of Directors of the Company, with an officer
or director of the Company or of any Subsidiary in his or her capacity as
officer or director entered into in the ordinary course of business, (iii) any
transactions with KECC for advisory services to the extent the payment for such
services do not exceed $200,000 per year, (iv) customary banking transactions
with an Affiliate of KECC, (v) reasonable fees and compensation paid to and
indemnity provided on behalf of, officers, directors, employees or consultants
of the Company or any Subsidiary of the Company as determined in good faith by
the Company's Board of Directors, or (vi) transactions exclusively between or
among the Company and any of its Restricted Subsidiaries or exclusively between
or among such Restricted Subsidiaries, provided such transactions are not
otherwise prohibited by this Indenture.
Section 4.12. Limitations on Liens.
---------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, create, incur or otherwise cause or
<PAGE> 60
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suffer to exist or become effective any Liens of any kind (other than Permitted
Liens) upon any property or asset of the Company or any Restricted Subsidiary or
any shares of stock or debt of any Restricted Subsidiary which owns property or
assets, now owned or hereafter acquired, unless (i) if such Lien secures
Indebtedness which is pari passu with the Notes, then the Notes are secured on
an equal and ratable basis with the obligations so secured until such time as
such obligation is no longer secured by a Lien or (ii) if such Lien secures
Indebtedness which is subordinated to the Notes, any such Lien shall be
subordinated to a Lien on such property or asset or shares of stock or debt
granted to the holders of the Notes to the same extent as such subordinated
Indebtedness is subordinated to the Notes.
Section 4.13. Limitations on Investments.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any Investment other than (i) a Permitted
Investment or (ii) an Investment that is made as a Restricted Payment in
compliance with Section 4.09 hereof, after the Issue Date.
Section 4.14. Limitation on Creation of Subsidiaries.
---------------------------------------
The Company shall not create or acquire, nor permit any of its
Restricted Subsidiaries to create or acquire, any Subsidiary other than (i) a
Restricted Subsidiary existing as of the date of the Indenture, (ii) a
Restricted Subsidiary conducting a business similar or reasonably related to the
business of the Company and its Subsidiaries on the Issue Date, or (iii) an
Unrestricted Subsidiary; PROVIDED, HOWEVER, that each Restricted Subsidiary
organized under the laws of the United States or any State thereof or the
District of Columbia acquired or created pursuant to clause (ii) shall, at the
time it has either assets or shareholder's equity in excess of $10,000, execute
a guarantee, in the form attached hereto as EXHIBIT G and reasonably
satisfactory in form and substance to the Trustee (and with such documentation
relating thereto as the Trustee shall require, including, without limitation a
supplement or amendment to this Indenture and an Opinion of Counsel as to the
enforceability of such Guarantee).
Section 4.15. Limitation on Sale and Lease-Back Transactions.
-----------------------------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least equal
to the fair market
<PAGE> 61
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value of the property sold, as determined by a board resolution of the Company
and (ii) the Company could incur the Attributable Indebtedness in respect of
such Sale and Lease-Back Transaction in compliance with Section 4.06.
Section 4.16. Limitation on Dividend and Other Payment Restrictions Affecting
---------------------------------------------------------------
Subsidiaries.
-------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a)(i) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (A) on its
Capital Stock or (B) with respect to any other interest or participation in, or
measured by, its profits, or (ii) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (b) make loans or advances or capital
contributions to the Company or any of its Restricted Subsidiaries or (c)
transfer any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (i) encumbrances or restriction existing on the Issue Date or under
the Revolving Credit Facility, (ii) this Indenture, the Notes and the
Guarantees, if applicable, (iii) applicable law, (iv) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries or of any Person that becomes a Restricted Subsidiary as
in effect at the time of such acquisition or such Person becoming a Restricted
Subsidiary (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition or such Person becoming a
Restricted Subsidiary), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person (including any Subsidiary of the Person),
so acquired, provided that the EBITDA of such Person is not taken into account
(to the extent of such restriction) in determining whether any financing or
Restricted Payment in connection with such acquisition was permitted by the
terms of the Indenture, (v) customary nonassignment provisions in leases or
other agreements entered into in the ordinary course of business and consistent
with past practices, (vi) Refinancing Indebtedness; provided that such
restrictions are in the aggregate no more restrictive than those contained in
the agreements governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded or (vii) customary restrictions in security
agreements, liens or mortgages securing Indebtedness of the
<PAGE> 62
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Company or a Restricted Subsidiary to the extent such restrictions restrict the
transfer of the property subject to such security agreements and mortgages.
Section 4.17. Payments for Consent.
---------------------
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, including out-of-pocket costs and expenses,
to any Holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Notes
unless such consideration is offered to be paid or agreed to be paid to all
Holders of the Notes which so consent, waive or agree to amend in the time frame
set forth in solicitation documents relating to such consent, waiver or
agreement.
Section 4.18. Legal Existence.
---------------
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its legal existence, and the corporate, partnership or other existence of each
Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Company and its Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Restricted Subsidiaries
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders.
Section 4.19. Change of Control.
------------------
(a) Within 20 days of the occurrence of a Change of Control,
the Company shall notify the Trustee in writing of such occurrence and shall
make an offer to purchase (the "CHANGE OF CONTROL OFFER") the outstanding Notes
at a purchase price equal to 101% of the principal amount thereof plus any
accrued and unpaid interest thereon to the Change of Control Payment Date (as
hereinafter defined) (such applicable purchase price being hereinafter referred
to as the "CHANGE OF CONTROL PURCHASE PRICE") in accordance with the procedures
set forth below.
<PAGE> 63
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If the Revolving Credit Facility is in effect, or any amounts
are owing thereunder, at the time of the occurrence of a Change of Control,
prior to the mailing of the notice to Holders described in paragraph (b) below,
but in any event within 30 days following any Change of Control, the Company
covenants to (i) repay in full all obligations under the Revolving Credit
Facility or offer to repay in full all obligations under or in respect of the
Revolving Credit Facility and repay the obligations under or in respect of the
Revolving Credit Facility of each lender who has accepted such offer or (ii)
obtain the requisite consent under the Revolving Credit Facility to permit the
repurchase of the Notes pursuant to this Section 4.19. The Company must first
comply with the covenant described in the preceding sentence before it may
commence a Change of Control Offer in the event of a Change of Control; PROVIDED
that the Company's failure to comply with the covenant described in the
preceding sentence constitutes an Event of Default described in clause (3) under
Section 6.01 hereof if not cured within 30 days after the notice required by
such clause.
(b) Within 30 days of the occurrence of a Change of Control,
the Company also shall (i) cause a notice of the Change of Control Offer to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage prepaid,
to the Trustee and to each Holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.19 and that all Notes tendered will be accepted for
payment, and otherwise subject to the terms and conditions set forth
herein;
(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 Business Days from
the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"));
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
<PAGE> 64
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(5) that Holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to a depository, if
appointed, or the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day preceding the Change
of Control Payment Date;
(6) that Holders will be entitled to withdraw their
acceptance if the depository or Paying Agent receives, not later than
the close of business on the third Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(7) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, PROVIDED that each Note
purchased and each such new Note issued shall be in an original
principal amount in denominations of $1,000 and integral multiples
thereof;
(8) any other procedures that a Holder must follow to accept
a Change of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the depository or Paying Agent.
On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the depository or
Paying Agent money sufficient to pay the purchase price of all Notes or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof tendered to the Company. The Paying Agent shall promptly mail
to each Holder of Notes so accepted payment in an amount equal to the purchase
price for such Notes, and the Company shall execute and issue, and the Trustee
shall promptly authenticate and mail to such Holder, a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered; PROVIDED
that each such new Note shall be issued in an original principal amount in
denominations of $1,000 and integral multiples thereof.
<PAGE> 65
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(c) (A) If either Company or any Subsidiary thereof has issued
any outstanding (i) Indebtedness that is subordinated in right of payment to the
Notes or (ii) Preferred Stock, and the Company or such Subsidiary is required to
make a Change of Control offer or to make a distribution with respect to such
subordinated Indebtedness or Preferred Stock in the event of a change of
control, the Company shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
Holders of Notes that have accepted the Company's Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to Holders of
the Notes and (B) the Company will not issue Indebtedness that is subordinated
in right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under this
Indenture.
In the event that a Change of Control occurs and the Holders
of Notes exercise their right to require the Company to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of Rule
14e-1 as then in effect with respect to such repurchase.
Section 4.20. Maintenance of Properties; Insurance; Books and Records;
--------------------------------------------------------
Compliance with Law.
--------------------
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, at all times cause all properties used or useful in the conduct
of their business to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all repairs, renewals,
replacements and betterments thereto.
(b) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain insurance in such amounts and covering such risks as
are usually and customarily carried with respect to similar facilities according
to their respective locations.
(c) The Company shall, and shall cause each of its
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company and each
<PAGE> 66
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Subsidiary of the Company, in accordance with GAAP consistently applied to the
Company and its Subsidiaries taken as a whole.
(d) The Company shall, and shall cause each of its
Subsidiaries to, comply with all statutes, laws, ordinances or government rules
and regulations to which they are subject, non-compliance with which would
materially adversely affect the business, prospects, earnings, properties,
assets or financial condition of the Company and their Subsidiaries taken as a
whole.
Section 4.21. Further Assurance to the Trustee.
---------------------------------
The Company shall, upon the reasonable request of the Trustee,
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the provisions of
this Indenture.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets.
-------------------------------------------------------
(a) The Company shall not, nor shall it permit any Guarantor,
if applicable, to consolidate with, merge with or into, or transfer all or
substantially all of its assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions), to any Person unless:
(i) the Company or such Guarantor, as the case may be, shall be the continuing
Person, or the Person (if other than the Company or such Guarantor) formed by
such consolidation or into which the Company or such Guarantor, as the case may
be, is merged or to which the properties and assets of the Company or such
Guarantor, as the case may be, are transferred shall be a corporation organized
and existing under the laws of the United States or any State thereof or the
District of Columbia and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
of the obligations of the Company or the Guarantor, as the case may be, under
the Notes and this Indenture, and the obligations under this Indenture shall
remain in full force and effect; (ii) immediately before and immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction or series of transactions on a pro forma basis the
<PAGE> 67
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Consolidated Net Worth of the Company or the surviving entity as the case may be
is at least equal to the Consolidated Net Worth of the Company immediately
before such transaction or series of transactions; and (iv) immediately after
giving effect to such transaction on a PRO FORMA basis the Company or the
Surviving Person could incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 4.06 hereof; PROVIDED that a
Person that is a Guarantor may consolidate with, merge into or transfer all or
substantially all of its assets to the Company or another Person that is a
Guarantor without complying with this clause (iv).
(b) In connection with any consolidation, merger or transfer
of assets contemplated by this Section 5.01, the Company shall deliver, or cause
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto, if any, comply with this Section 5.01 and that all conditions
precedent herein provided for relating to such transaction or transactions have
been complied with.
Section 5.02. Successor Person Substituted.
-----------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Guarantor, if applicable,
in accordance with Section 5.01 above, the successor corporation formed by such
consolidation or into which the Company or such Guarantor is merged or to which
such transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor under this Indenture
with the same effect as if such successor corporation had been named as the
Company or such Guarantor herein, and thereafter the predecessor corporation
shall be relieved of all obligations and covenants under this Indenture and the
Notes.
<PAGE> 68
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
------------------
An "Event of Default" occurs if
(1) there is a default in the payment of any principal of, or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise;
(2) there is a default in the payment of any interest on any
Note when the same becomes due and payable and the Default continues
for a period of 30 days;
(3) either the Company or any Guarantor defaults in the
observance or performance of any other covenant in the Notes or this
Indenture for 30 days after written notice from the Trustee or the
Holders of not less than 25% in the aggregate principal amount of the
Notes then outstanding;
(4) there is a default in the payment when due of principal,
interest or premium in an aggregate amount of $5,000,000 or more with
respect to any Indebtedness of the Company or any Restricted Subsidiary
thereof, or there is an acceleration of any such Indebtedness
aggregating $5,000,000 or more, which default shall not be cured,
waived or postponed pursuant to an agreement with the holders of such
Indebtedness within 60 days after written notice of such default to the
Company by the Trustee or to the Company and the Trustee by any Holder,
or which acceleration shall not be rescinded or annulled within 20 days
after written notice of such Default to the Company by the Trustee or
to the Company and the Trustee by any Holder;
(5) the entry of a final judgment or judgments which can no
longer be appealed for the payment of money in excess of $3,000,000
(which are not paid or covered by third party insurance by financially
sound insurers that have not disclaimed coverage or so long as a court
of competent jurisdiction has ordered, in a final and nonappealable
order, the issuer to make payment) shall be rendered against the
Company or any Restricted Subsidiary thereof and such judgment remains
undischarged, for a period of 60
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consecutive days during which a stay of enforcement of such judgment
shall not be in effect;
(6) the Company or any Significant Restricted Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become
due; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against either of the Company or
any Restricted Subsidiary in an involuntary case,
(B) appoints a Custodian of either of the Company or
any Restricted Subsidiary or for all or substantially all of
the property of either of the Company or any Restricted
Subsidiary, or
(C) orders the liquidation of either of the Company
or any Restricted Subsidiary,
and the order or decree remains unstayed and in effect for
60 days.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
Subject to Sections 7.01 and 7.02, the Trustee shall not be
charged with knowledge of any Default, Event of Default, Change of Control or
Asset Sale or the requirement for payment of Additional Interest unless written
notice thereof shall have been
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given to a Responsible Officer at the Corporate Trust Office of the Trustee by
the Company or any other Person.
Section 6.02. Acceleration.
-------------
If an Event of Default (other than an Event of Default arising
under Section 6.01(6) or (7) with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of not less
than 25% in aggregate principal amount of the Notes then outstanding may by
written notice to the Company and the Trustee declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued but unpaid interest to the date of acceleration; PROVIDED, HOWEVER, that
after such acceleration but before a judgment or decree based on such
acceleration is obtained by the Trustee, the Holders of a majority in aggregate
principal amount of the outstanding Notes may rescind and annul such
acceleration and its consequences if all existing Events of Default, other than
the nonpayment of accelerated principal, premium, if any, or interest that has
become due solely because of the acceleration, have been cured or waived and if
the rescission would not conflict with any judgment or decree. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In case an Event of Default specified in Section 6.01(6) or (7) with
respect to the Company occurs, such principal, premium, if any, and interest
amount with respect to all of the Notes shall be due and payable immediately
without any declaration or other act on the part of the Trustee or the Holders
of the Notes.
Section 6.03. Other Remedies.
---------------
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder 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.
<PAGE> 71
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No remedy is exclusive of any other remedy. All available remedies are
cumulative.
Section 6.04. Waiver of Past Defaults and Events of Default.
----------------------------------------------
Subject to Sections 6.02, 6.08 and 8.02 hereof, the Holders of
a majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines may be unduly prejudicial to the rights of another
Noteholder not taking part in such direction, and the Trustee shall have the
right to decline to follow any such direction if the Trustee, being advised by
counsel, determines that the action so directed may not lawfully be taken or if
the Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed may involve it in personal liability; PROVIDED that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
--------------------
Subject to Section 6.08 below, a Noteholder may not institute
any proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount
of the Notes then outstanding make a written request to the Trustee to
pursue the remedy;
<PAGE> 72
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(3) such Holder or Holders offer and if requested provide to
the Trustee indemnity reasonably satisfactory to the Trustee 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, and, if requested,
provision of, indemnity; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of a
majority in aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. No Personal Liability of Directors, Officers, Employees and
-----------------------------------------------------------
Stockholders.
-------------
No director, officer, employee, incorporator or stockholder of
the Company or any Guarantor shall have any liability for any obligations of the
Company or the Guarantors under the Notes, the Guarantees, if any, or this
Indenture or for a claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Section 6.08. Rights of Holders To Receive Payment.
-------------------------------------
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal of, or premium, if
any, and interest of the Note (including Additional Interest) on or after the
respective due dates expressed in the Note, or to bring suit for the enforcement
of any such payment on or after such respective dates, is absolute and
unconditional and shall not be impaired or affected without the consent of the
Holder.
Section 6.09. Collection Suit by Trustee.
---------------------------
If an Event of Default in payment of principal, premium or
interest specified in Section 6.01(1) or (2) hereof occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Company or the Guarantors (or any other obligor on the Notes)
for the whole amount of unpaid principal and accrued interest remaining unpaid,
<PAGE> 73
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together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate set forth in the Notes, and such further amounts as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.10. Trustee May File Proofs of Claim.
---------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof) and the Noteholders allowed
in any judicial proceedings relative to the Company or the Guarantors (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same after
deduction of its charges and expenses to the extent that any such charges and
expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan or reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
proceedings.
Section 6.11. Priorities.
-----------
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07
hereof;
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SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest (including Additional
Interest, if any) as to each, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Notes; and
THIRD: to the Company or, to the extent the Trustee collects
any amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.11.
Section 6.12. Undertaking for Costs.
----------------------
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.12 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.08 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
Section 6.13. Restoration of Rights and Remedies.
-----------------------------------
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
<PAGE> 75
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ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
------------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(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 but, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in
<PAGE> 76
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accordance with a direction received by it pursuant to Sections 6.02 or
6.05 hereof.
(4) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its rights, powers or duties if
it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity satisfactory to it against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, paragraphs
(a), (b), (c), (e) and (f) of this Section 7.01 shall govern every provision of
this Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it in its sole
discretion against any loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by the law.
Section 7.02. Rights of Trustee.
------------------
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably 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.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both,
which shall conform to the provisions of Section 11.05 hereof. The
Trustee shall be protected and shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion.
(3) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed by it with due care.
<PAGE> 77
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(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers; PROVIDED that the Trustee's
conduct does not constitute negligence or bad faith.
(5) The Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such
counsel.
(6) The Trustee shall be under no obligation to exercise any
of the rights or powers created in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(7) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any document, but the Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
Section 7.03. Individual Rights of Trustee.
-----------------------------
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with the either of the Company or any
Guarantor, or any Affiliates thereof, with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights. The Trustee,
however, shall be subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
---------------------
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the sale of
Notes or any money paid to the Company pursuant to the terms of this Indenture
and it shall not be responsible for any statement in the Notes or this Indenture
other than its certificate of authentication.
<PAGE> 78
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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 Noteholder notice of the Default
within 90 days after it occurs. Except in the case of a Default in payment of
the principal of, or premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determine(s) that withholding the notice is in the interests of the
Noteholders.
Section 7.06. Reports by Trustee to Holders.
------------------------------
If required by TIA Section 313(a), within 60 days after May
15 of any year, commencing May 15, 1998, the Trustee shall mail to each
Noteholder a brief report dated as of such May 15 that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c) and TIA Section 313(d).
A copy of each report at the time of its mailing to
Noteholders shall be filed with the SEC and each stock exchange on which the
Notes are listed. The Company shall promptly notify the Trustee when the Notes
are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
---------------------------
The Company and the Guarantors shall pay to the Trustee and
Agents from time to time such compensation as shall be agreed in writing between
the Company and the Trustee for its services hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust). The Company and the Guarantors shall reimburse the
Trustee and Agents promptly upon request for all reasonable disbursements,
expenses and advances incurred or made by it, including costs of collection, in
connection with its duties under this Indenture, including the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants
and counsel.
The Company and the Guarantors shall indemnify each of the
Trustee and any predecessor Trustee for, and hold each of them harmless against,
any and all loss, damage, claim, liability or expense, including without
limitation taxes (other than taxes based on the income of the Trustee or such
Agent) and reasonable attorneys' fees and expenses incurred by each of them in
connection with the acceptance or performance of its duties under this Indenture
and the enforcement of this Indenture (including
<PAGE> 79
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this Section 7.07) against the Company and any Guarantor, including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder (including, without limitation, settlement costs). The Trustee or
Agent shall notify the Company and the Guarantors in writing promptly of any
claim asserted against the Trustee or Agent for which it may seek indemnity.
However, the failure by the Trustee or Agent to so notify the Company and the
Guarantors shall not relieve the Company and Guarantors of their obligations
hereunder.
Notwithstanding the foregoing, the Company and the Guarantors
need not reimburse the Trustee for any expense or indemnify it against any loss
or liability incurred by the Trustee through its negligence or bad faith. To
secure the payment obligations of the Company and the Guarantors in this Section
7.07, the Trustee shall have a lien prior to the Notes on all money or property
held or collected by the Trustee except such money or property held in trust to
pay principal of and interest on particular Notes. The Trustee's right to
receive payment of any amounts under this Section 7.07 shall not be subordinate
to any other liability or indebtedness of the Company or the Guarantors. The
obligations of the Company and the Guarantors under this Section 7.07 to
compensate and indemnify the Trustee, Agents and each predecessor Trustee and to
pay or reimburse the Trustee, Agents and each predecessor Trustee for expenses,
disbursements and advances shall be joint and several liabilities of the Company
and each of the Guarantors and shall survive the satisfaction and discharge of
this Indenture, including any termination or rejection hereof under any
Bankruptcy Law.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall
include any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
-----------------------
The Trustee may resign by so notifying the Company and the
Guarantors in writing. The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee by notifying the Company and the
removed Trustee in writing and
<PAGE> 80
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may appoint a successor Trustee with the Company's written consent, which
consent shall not be unreasonably withheld. The Company may remove the Trustee
at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of a majority in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee (provided that the amounts owing to the Trustee hereunder have been paid
in full), 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. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
<PAGE> 81
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Section 7.09. Successor Trustee by Consolidation, Merger, etc.
------------------------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
------------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1);
PROVIDED that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities, or
conflicts of interest or participation in other securities, of the Company or
the Guarantors are outstanding if the requirements for 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 therein.
Section 7.12. Paying Agents.
--------------
The Company shall cause each Paying Agent other than the
Trustee to execute and deliver to it and the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
7.12:
(A) that it will hold all sums held by it as agent for the
payment of principal of, or premium, if any, or interest on, the Notes
(whether such sums have been paid to it by the Company or by any
obligor on the Notes) in trust for the benefit of Holders of the Notes
or the Trustee;
(B) that it will at any time during the continuance of any
Event of Default, upon written request from the Trustee,
<PAGE> 82
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deliver to the Trustee all sums so held in trust by it together with a
full accounting thereof; and
(C) that it will give the Trustee written notice within three
(3) Business Days of any failure of the Company (or by any obligor on
the Notes) in the payment of any installment of the principal of,
premium, if any, or interest on, the Notes when the same shall be due
and payable.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
---------------------------
The Company and the Guarantors, if any, when authorized by a
Board Resolution of each of them, and the Trustee may amend, waive or supplement
this Indenture or the Notes without notice to or consent of any Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(3) to comply with any requirements of the SEC under the TIA;
(4) to cure any ambiguity, defect or inconsistency;
(5) to make any other change that does not adversely affect
the rights of any Noteholders hereunder;
(6) to add or release a Guarantor; or
(7) to provide for the issuance of the Exchange Notes and the
Private Exchange Notes in accordance with Section 2.02 in a manner that
does not adversely affect the rights of any Noteholder.
The Trustee is hereby authorized to join with the Company and
the Guarantors, if any, in the execution of any supplemental indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee
<PAGE> 83
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shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
------------------------
The Company, the Guarantors, if any, and the Trustee may
modify, amend, waive or supplement this Indenture or the Notes with the written
consent of the Holders of not less than a majority in aggregate principal amount
of the outstanding Notes. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Company or any Guarantor with any provision of this Indenture or
the Notes. Subject to Section 8.04, without the consent of each Noteholder
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) reduce the principal amount of outstanding Notes whose
Holders must consent to an amendment, supplement or waiver to this
Indenture or the Notes;
(2) reduce the rate of or change the time for payment of
interest on any Note;
(3) reduce the principal of or premium on or change the stated
maturity of any Note;
(4) make any Note payable in money other than that stated in
the Note or change the place of payment from New York, New York;
(5) change the amount or time of any payment required by the
Notes or reduce the premium payable upon any redemption of the Notes in
accordance with Section 3.01 hereof, or change the time before which no
such redemption may be made;
(6) waive a default in the payment of the principal of, or
interest on, or redemption payment with respect to, any Note (including
any obligation to make a Change of Control Offer or, after the
Company's obligation to purchase Notes arises thereunder, an Excess
Proceeds Offer or modify any of the provisions or definitions with
respect to such offers);
(7) make any changes in Sections 6.04 or 6.08 hereof or this
sentence of Section 8.02; or
<PAGE> 84
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(8) affect the ranking of the Notes or any Guarantee in a
manner adverse to the Holders.
After a modification, amendment, supplement or waiver under
this Section 8.02 becomes effective, the Company shall mail to the Holders a
notice briefly describing the modification, amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such modification,
amendment, supplement or waiver.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
------------------------------------
Every amendment or supplement to this Indenture or the Notes
shall comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
----------------------------------
Until a modification, amendment, supplement, waiver or other
action becomes effective, a consent to it by a Holder of a Note is a continuing
consent conclusive and binding upon such Holder and every subsequent Holder of
the same Note or portion thereof, and of any Note issued upon the transfer
thereof or in exchange therefor or in place thereof, even if notation of the
consent is not made on any such Note. Any such Holder or subsequent Holder,
however, may revoke the consent as to his Note or portion of a Note, if the
Trustee receives the written notice of revocation before the date the
modification, amendment, supplement, waiver or other action becomes effective.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
modification, amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such modification, amendment, supplement, or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date unless the consent of the requisite
number of Holders has been obtained.
<PAGE> 85
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After a modification, amendment, supplement, waiver or other
action becomes effective, it shall bind every Noteholder, unless it makes a
change described in any of clauses (1) through (8) of Section 8.02 hereof. In
that case the modification, amendment, supplement, waiver or other action shall
bind each Holder of a Note who has consented to it and every subsequent Holder
of a Note or portion of a Note that evidences the same debt as the consenting
Holder's Note.
Section 8.05. Notation on or Exchange of Notes.
---------------------------------
If a modification, amendment, supplement or waiver changes the
terms of a Note, the Trustee may request the Holder of the Note deliver it to
the Trustee. In such case, the Trustee shall place an appropriate notation on
the Note about the changed terms and return it to the Holder. Alternatively, if
the Company or the Trustee so determines, the Company in exchange for the Note
shall issue, the Guarantors shall endorse, and the Trustee shall authenticate a
new Note that reflects the changed terms. Failure to make the appropriate
notation or issue a new Note shall not affect the validity and effect of such
amendment, supplement or waiver.
Section 8.06. Trustee To Sign Amendments, etc.
--------------------------------
The Trustee shall sign any modification, amendment, supplement
or waiver authorized pursuant to this Article 8 if the modification, amendment,
supplement or waiver does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing or refusing to sign such modification, amendment, supplement or
waiver the Trustee shall be entitled to receive and, subject to Section 7.01
hereof, shall be fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel stating that such modification, amendment, supplement or
waiver is authorized or permitted by this Indenture and is a legal, valid and
binding obligation of the Company and the Guarantors, if any, enforceable
against each of them in accordance with its terms (subject to customary
exceptions). The Company or any Guarantor may not sign a modification, amendment
or supplement until the Board of Directors of the Company or such Guarantor, as
appropriate, approves it.
<PAGE> 86
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ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
-----------------------
The Company and the Guarantors, if any, may terminate their
obligations under the Notes, the Guarantees, if any, and this Indenture, except
the obligations referred to in the last paragraph of this Section 9.01, if there
shall have been cancelled by the Trustee or delivered to the Trustee for
cancellation all Notes theretofore authenticated and delivered (other than any
Notes that are asserted to have been destroyed, lost or stolen and that shall
have been replaced as provided in Section 2.07 hereof) and the Company has paid
all sums payable by them hereunder or deposited all required sums with the
Trustee.
After such delivery, the Trustee upon Company Request shall
acknowledge in writing the discharge of the Company's and the Guarantors'
obligations under the Notes, the Guarantees and this Indenture except for those
surviving obligations specified below.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company in Sections 7.07, 9.05, 9.06 and 9.08
hereof shall survive.
Section 9.02. Legal Defeasance.
-----------------
The Company may at its option, by Board Resolution of the
Board of Directors of the Company, be discharged from its obligations with
respect to the Notes and the Guarantors, if any, discharged from their
obligations under the Guarantees, if any, on the date the conditions set forth
in Section 9.04 below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this
purpose, such Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the Notes and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall, subject to Section 9.06 hereof, execute instruments in form and substance
reasonably satisfactory to the Trustee and Company acknowledging the same),
except for the following which shall survive until otherwise terminated or
discharged hereunder: (A) the rights of Holders of outstanding Notes to receive
solely from the trust funds described in Section 9.04 hereof and as more fully
set forth in such Section, payments in respect of the principal of,
<PAGE> 87
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premium, if any, and interest on such Notes when such payments are due, (B) the
Company's obligations with respect to such Notes under Sections 2.03, 2.04,
2.05, 2.06, 2.07, 2.08, 2.09 and 4.20 hereof, (C) the rights, powers, trusts,
duties, and immunities of the Trustee hereunder (including claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof) and (D) this
Article 9. Subject to compliance with this Article 9, the Company may exercise
its option under this Section 9.02 with respect to the Notes notwithstanding the
prior exercise of its option under Section 9.03 below with respect to the Notes.
Section 9.03. Covenant Defeasance.
--------------------
At the option of the Company, pursuant to a Board Resolution
of the Board of Directors of the Company, the Company and the Guarantors, if
any, shall be released from their respective obligations under Sections 4.02
(except for obligations mandated by the TIA), 4.05 through 4.16, 4.19 and 4.21,
inclusive, and clause (a)(iii) of Section 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 9.04
hereof are satisfied (hereinafter, "COVENANT DEFEASANCE") and the Notes shall
thereafter be deemed to not be outstanding for purposes of any direction,
waiver, consent, declaration or act of the Holders (and the consequences
thereof) in connection with such covenants but shall continue to be outstanding
for all other purposes hereunder. For this purpose, such Covenant Defeasance
means that the Company and the Guarantors, if any, may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such specified Section or portion thereof, whether directly or
indirectly by reason of any reference elsewhere herein to any such specified
Section or portion thereof or by reason of any reference in any such specified
Section or portion thereof to any other provision herein or in any other
document, but the remainder of this Indenture and the Notes shall be unaffected
thereby.
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance.
------------------------------------------------------
The following shall be the conditions to application of
Section 9.02 or Section 9.03 hereof to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 9 applicable to it) as funds in trust for
the purpose of
<PAGE> 88
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making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of the Notes, (A)
money in an amount, or (B) U.S. Government Obligations which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than the due date
of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and accrued interest on
the outstanding Notes at the maturity date of such principal, premium,
if any, or interest, or on dates for payment and redemption of such
principal, premium, if any, and interest selected in accordance with
the terms of this Indenture and of the Notes;
(2) no Event of Default or Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit, or
shall have occurred and be continuing at any time during the period
ending on the 91st day after the date of such deposit or, if longer,
ending on the day following the expiration of the longest preference
period under any Bankruptcy Law applicable to the Company in respect of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not
cause the Trustee to have a conflicting interest for purposes of the
TIA with respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute default under any
other agreement or instrument to which the Company or any Guarantor is
a party or by which they are bound;
(5) the Company shall have delivered to the Trustee an Opinion
of Counsel stating that, as a result of such Legal Defeasance or
Covenant Defeasance, neither the trust nor the Trustee will be required
to register as an investment company under the Investment Company Act
of 1940, as amended;
<PAGE> 89
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(6) in the case of an election under Section 9.02 above, 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 to the effect that
or (ii) there has been a change in any applicable Federal income tax
law with the effect that, and such opinion shall confirm that, the
Holders of the outstanding Notes or Persons in their positions will not
recognize income, gain or loss for Federal income tax purposes solely
as a result of such Legal Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner, including as a
result of prepayment, and at the same times as would have been the case
if such Legal Defeasance had not occurred;
(7) in the case of an election under Section 9.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of
such Covenant Defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(8) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the Legal
Defeasance under Section 9.02 above or the Covenant Defeasance under
Section 9.03 hereof (as the case may be) have been complied with;
(9) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit under clause (1) was not
made by the Company with the intent of defeating, hindering, delaying
or defrauding any creditors of the Company or others; and
(10) the Company shall have paid or duly provided for payment
under terms mutually satisfactory to the Company and the Trustee all
amounts then due to the Trustee pursuant to Section 7.07 hereof.
<PAGE> 90
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Section 9.05. Deposited Money and U.S. Government Obligations To Be Held in
Trust; Other Miscellaneous Provisions.
--------------------------------------------------------------
All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 9.04 hereof in
respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent, to the Holders of such
Notes, of all sums due and to become due thereon in respect of principal,
premium, if any, and accrued interest, but such money need not be segregated
from other funds except to the extent required by law.
The Company and the Guarantors, if any, shall (on a joint and
several basis) pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 9.04 hereof or the principal, premium, if any, and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon an
Company Request any money or U.S. Government Obligations held by it as provided
in Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.06. Reinstatement.
--------------
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof
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 obligations of the Company and any Guarantor under this
Indenture, the Notes and the Guarantees, if any, shall be revived and reinstated
as though no deposit had occurred pursuant to this Article 9 until such time as
the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 9.01 hereof; PROVIDED,
HOWEVER, that if the Company or the Guarantors
<PAGE> 91
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have made any payment of principal of, premium, if any, or accrued interest on
any Notes because of the reinstatement of their obligations, the Company or the
Guarantors, as the case may be, shall be subrogated to the rights of the Holders
of such Notes to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
Section 9.07. Moneys Held by Paying Agent.
----------------------------
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon written demand of the Company, be paid to the Trustee, or
if sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Company upon an Company Request (or, if such moneys had been deposited by any
Guarantors, to such Guarantors), and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
Section 9.08. Moneys Held by Trustee.
-----------------------
Any moneys deposited with the Trustee or any Paying Agent or
then held by the Company or any Guarantors in trust for the payment of the
principal of, or premium, if any, or interest on any Note that are not applied
but remain unclaimed by the Holder of such Note for two years after the date
upon which the principal of, or premium, if any, or interest on such Note shall
have respectively become due and payable shall be repaid to the Company (or, if
appropriate, the Guarantors) upon an Company Request, or if such moneys are then
held by the Company or the Guarantors in trust, such moneys shall be released
from such trust; and the Holder of such Note entitled to receive such payment
shall thereafter, as an unsecured general creditor, look only to the Company and
the Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; PROVIDED,
HOWEVER, that the Trustee or any such Paying Agent, before being required to
make any such repayment, may, at the expense of the Company and the Guarantors,
if any, either mail to each Noteholder affected, at the address shown in the
register of the Notes maintained by the Registrar pursuant to Section 2.03
hereof, or cause to be published once a week for two successive weeks, in a
newspaper published in the English language, customarily published each Business
Day and of general circulation in the City of New York, New York, a notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such mailing or publication, any
unclaimed balance of such moneys then
<PAGE> 92
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remaining will be repaid to the Company. After payment to the Company or any
Guarantor or the release of any money held in trust by the Company or any
Guarantor, as the case may be, Noteholders entitled to the money must look only
to the Company and any Guarantors for payment as general creditors unless
applicable abandoned property law designates another Person.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee.
----------
Subject to the provisions of this Article 10, each Guarantor,
by execution of a Guarantee, will jointly and severally unconditionally
guarantee to each Holder and to the Trustee, on behalf of the Holders, (i) the
due and punctual payment of the principal of, and premium, if any, and interest
on each Note, when and as the same shall become due and payable, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
(including Additional Interest) on the overdue principal of, and premium, if
any, and interest on the Notes, to the extent lawful, and the due and punctual
performance of all other Obligations of the Company to the Holders or the
Trustee (including without limitation amounts due the Trustee under Section
7.07) all in accordance with the terms of such Note and this Indenture, and (ii)
in the case of any extension of time of payment or renewal of any Notes or any
of such other Obligations, that the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, at stated
maturity, by acceleration or otherwise. Each Guarantor, by execution of a
Guarantee, will agree that its obligations hereunder shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Note or this Indenture, any failure
to enforce the provisions of any such Note or this Indenture, any waiver,
modification or indulgence granted to the Company with respect thereto by the
Holder of such Note or the Trustee, or any other circumstances which may
otherwise constitute a legal or equitable discharge of a surety or such
Guarantor.
Each Guarantor, by execution of a Guarantee, will waive
diligence, presentment, demand for payment, filing of claims with a court in the
event of merger or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest
<PAGE> 93
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or notice with respect to any such Note or the Indebtedness evidenced thereby
and all demands whatsoever, and will covenant that the Guarantee will not be
discharged as to any such Note except by payment in full of the principal
thereof, premium if any, and interest thereon and as provided in Section 9.01
hereof. Each Guarantor, by execution of a Guarantee, will further agree that, as
between such Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (i) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article 6 hereof for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (ii) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6 hereof, such Obligations (whether or not due and payable) shall
forthwith become due and payable by each Guarantor for the purpose of this
Guarantee. In addition, without limiting the foregoing provisions, upon the
effectiveness of an acceleration under Article 6 hereof, the Trustee shall
promptly make a demand for payment on the Notes under the Guarantee provided for
in this Article 10 and not discharged. Failure to make such a demand shall not
affect the validity or enforceability of the Guarantee upon any Guarantor.
A Guarantee shall not be valid or become obligatory for any
purpose with respect to a Note until the certificate of authentication on such
Note shall have been signed by or on behalf of the Trustee.
A Guarantee shall remain in full force and effect and continue
to be effective should any petition be filed by or against the Company for
liquidation or reorganization, should the Company become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Securities
are, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee on the Securities, whether as a
"voidable preference," "fraudulent transfer" or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Securities shall,
to the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
<PAGE> 94
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No stockholder, officer, director, employer or incorporator,
past, present or future, of any Guarantor, as such, shall have any personal
liability under this Guarantee by reason of his, her or its status as such
stockholder, officer, director, employer or incorporator.
A Guarantor, by execution of a Guarantee, will have the right
to seek contribution from any non-paying Guarantor so long as the exercise of
such right does not impair the rights of the Holders under such Guarantee.
Section 10.02. Execution and Delivery of Guarantees.
-------------------------------------
A Guarantee shall be executed on behalf of a Guarantor by the
manual or facsimile signature of an Officer of such Guarantor.
If an Officer of a Guarantor whose signature is on the
Guarantee no longer holds that office, such Guarantee shall be valid
nevertheless.
Section 10.03. Limitation of Guarantee.
------------------------
The obligations of each Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under this Indenture, result in the obligations of such
Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount based on the Adjusted Net Assets
of each Guarantor.
Section 10.04. Additional Guarantors.
----------------------
Any person may become a Guarantor by executing and delivering
to the Trustee (a) a supplemental indenture in form and substance satisfactory
to the Trustee, which subjects such person to the provisions of this Indenture
as a Guarantor, and (b) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such person and
constitutes the legal, valid, binding and enforceable obligation of such person
(subject to such customary exceptions concerning fraudulent conveyance laws,
creditors' rights and
<PAGE> 95
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equitable principles as may be acceptable to the Trustee in its discretion).
Section 10.05. Release of Guarantor.
---------------------
A Guarantor shall be released from all of its obligations
under its Guarantee if:
(i) the Guarantor has sold all or substantially all of its
assets or the Company and its Restricted Subsidiaries have sold all of
the Capital Stock of the Guarantor owned by them, in each case in a
transaction in compliance with Sections 4.10 and 5.01 hereof; or
(ii) the Guarantor merges with or into or consolidates with,
or transfers all or substantially all of its assets to, the Company or
another Guarantor in a transaction in compliance with Section 5.01
hereof;
and in each such case, such Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
ARTICLE 11
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 given in writing and
delivered in person, sent by facsimile, delivered by commercial courier service
or mailed by first-class mail, postage prepaid, addressed as follows:
<PAGE> 96
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If to the Company or any Guarantor:
Glasstech Sub Co.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: President
Telephone: (419) 661-9500
Fax Number: (419) 661-9366
Copy to:
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Attention: R. Steven Kestner, Esq.
Telephone: (216) 621-0200
Fax Number: (216) 696-0740
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Telephone: (212) 852-1646
Fax Number: (212) 852-1625
Copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Tonny K. Ho, Esq.
Telephone: (212) 821-8000
Fax Number: (212) 821-8111
<PAGE> 97
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Such notices or communications shall be effective when
received and shall be sufficiently given if so given within the time prescribed
in this Indenture.
The Company, any Guarantors or the Trustee by written notice
to the others may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Noteholder shall be
mailed to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication to a Noteholder is mailed in the
manner provided above, it shall be deemed duly given, whether or not the
addressee receives it.
In case by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impossible to mail any notice as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
Section 11.03. Communications by Holders with Other Holders.
---------------------------------------------
Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or the
Notes. The Company, the Guarantors, if any, 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 or any
Guarantor to the Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.05 below) 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 (which shall include the statements
set forth in Section 11.05 below) stating that,
<PAGE> 98
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in the opinion of such counsel, all such conditions precedent have been
complied with.
Section 11.05. Statements Required in Certificate and Opinion.
-----------------------------------------------
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he
has made such examination or investigation as is necessary to enable it
or him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
Section 11.06. Rules by Trustee and Agents.
----------------------------
The Trustee may make reasonable rules for action by or
meetings of Noteholders. The Registrar and Paying Agent may make
reasonable rules for their functions.
Section 11.07. Business Days; Legal Holidays.
------------------------------
A "Business Day" is a day that is not a Legal Holiday. A
"Legal Holiday" is a Saturday, a Sunday, a federally-recognized holiday 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 at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
Section 11.08. Governing Law.
--------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF
<PAGE> 99
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NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR
THE NOTES.
Section 11.09. No Adverse Interpretation of Other Agreements.
----------------------------------------------
This Indenture may not be used to interpret another indenture,
loan, security or debt agreement of the Company or any Subsidiary thereof. No
such indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 11.10. No Recourse Against Others.
---------------------------
No recourse for the payment of the principal of or premium, if
any, or interest on any of the Notes, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company or any Guarantor in this Indenture or in
any supplemental indenture, or in any of the Notes, or because of the creation
of any Indebtedness represented thereby, shall be had against any stockholder,
officer, director, partner, affiliate, beneficiary or employee, as such, past,
present or future, of the Company or of any successor corporation or against the
property or assets of any such stockholder, officer, employee, partner,
affiliate, beneficiary or director, either directly or through the Company or
any Guarantor, or any successor corporation thereof, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
Notes are solely obligations of the Company and any Guarantors, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, any
stockholder, officer, employee, partner, affiliate, beneficiary or director of
the Company or any Guarantor, or any successor corporation thereof, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or the Notes or
implied therefrom, and that any and all such personal liability of, and any and
all claims against every stockholder, officer, employee, partner, affiliate,
beneficiary and director, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issuance of the Notes. It is understood that this limitation on recourse is
made expressly for the benefit of any such shareholder, employee, officer,
partner, affiliate, beneficiary or director and may be enforced by any one or
all of them.
<PAGE> 100
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Section 11.11. Successors.
-----------
All agreements of the Company and the Guarantors, if any, in
this Indenture and the Notes shall bind their respective successors. All
agreements of the Trustee, any additional trustee and any Paying Agents in this
Indenture shall bind its successor.
Section 11.12. Multiple Counterparts.
----------------------
The parties may sign multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 11.13. Table of Contents, Headings, etc.
---------------------------------
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 to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 11.14. Separability.
-------------
Each provision of this Indenture shall be considered separable
and if for any reason any provision which is not essential to the effectuation
of the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 101
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IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed all as of the date and year first written above.
GLASSTECH SUB CO.
By: /s/ Mark D. Christman
---------------------------------
Name: Mark D. Christman
Title: President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ Cynthia Chaney
---------------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
<PAGE> 102
EXHIBIT A
---------
[FORM OF FACE OF NOTE]
CUSIP [ ]
GLASSTECH SUB CO.
No. [ ] $
12 3/4% SENIOR NOTE DUE 2004
GLASSTECH SUB CO., a Delaware corporation (the "Company"), for
value received, promises to pay to CEDE & CO. or registered assigns the
principal sum of $70,000,000 dollars on July 1, 2004.
Interest Payment Dates: January 1 and July 1
Record Dates: December 15 and June 15
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
A-1
<PAGE> 103
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
GLASSTECH SUB CO.
By:
---------------------------------
Title:
By:
---------------------------------
Title:
Dated:
Certificate of Authentication
This is one of the 12 3/4% Senior Notes due 2004 referred to
in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:
------------------------------------
Authorized Signatory
A-2
<PAGE> 104
[FORM OF REVERSE OF NOTE]
GLASSTECH SUB CO.
12 3/4% SENIOR NOTE DUE 2004
1. INTEREST. Glasstech Sub Co., a Delaware corporation (the "Company"),
promises to pay, until the principal hereof is paid or made available for
payment, interest on the principal amount set forth on the face hereof at a rate
of 12 3/4% per annum. Interest hereon will accrue from and including the most
recent date to which interest has been paid or, if no interest has been paid,
from and including July 2, 1997 to but excluding the date on which interest is
paid. Interest shall be payable in arrears on each January 1 and July 1
commencing January 1, 1998. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Company shall pay interest on overdue
principal and on overdue interest (to the full extent permitted by law) at a
rate of 12 3/4% per annum.
2. METHOD OF PAYMENT. The Company will pay interest hereon (except
defaulted interest) to the Persons who are registered Holders at the close of
business on December 15 or June 15 next preceding the interest payment date
(whether or not a Business Day). Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Interest may be paid by check
mailed to the Holder entitled thereto at the address indicated on the register
maintained by the Registrar for the Notes.
3. PAYING AGENT AND REGISTRAR. Initially, United States Trust Company
of New York (the "Trustee") will act as a Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice. Neither the
Company nor any of its Affiliates may act as Paying Agent or Registrar.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of July 2, 1997 (the "Indenture") by and between the Company and the Trustee.
This is one of an issue of Notes of the Company issued, or to be issued, under
the Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb), as amended from time to time. The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of them. Capitalized and certain other terms used
herein and not otherwise defined have the meanings set forth in the Indenture.
The Notes are obligations of the Company limited in aggregate principal amount
to $70.0 million.
A-3
<PAGE> 105
5. OPTIONAL REDEMPTION. The Company, at its option, may redeem the
Notes, in whole or in part, at any time on or after July 1, 2002 upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount), set forth below, together, in each case, with
accrued and unpaid interest to the Redemption Date, if redeemed during the
twelve month period beginning on July 1 of each year listed below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002......................................... 103.188%
2003......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the
aggregate up to 25% of the original principal amount of Notes at any time and
from time to time on or prior to July 1, 2000 at a redemption price equal to
112.75% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the Redemption Date with the Net Proceeds of one or more
Qualified Equity Offerings of the Company or Holding to the extent such proceeds
were contributed to the Company as common equity; PROVIDED, that at least $52.5
million of the principal amount of Notes originally issued remains outstanding
immediately after the occurrence of any such redemption and that any such
redemption occurs within 90 days following the closing of any such Qualified
Equity Offering.
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
Notes to be redeemed at his registered address. On and after the Redemption
Date, unless the Company defaults in making the redemption payment, interest
ceases to accrue on Notes or portions thereof called for redemption.
7. OFFERS TO PURCHASE. The Indenture provides that upon the occurrence
of a Change of Control or an Asset Sale and subject to further limitations
contained therein, the Company shall make an offer to purchase outstanding Notes
in accordance with the procedures set forth in the Indenture.
8. REGISTRATION RIGHTS. Pursuant to a Registration Rights Agreement by
and between the Company and CIBC Wood Gundy Securities Corp., as Initial
Purchaser of the Notes, the Company will be obligated to consummate an exchange
offer pursuant to which the Holder of this Note shall have the right to exchange
this Note for notes of a separate series issued under the Indenture (or a trust
indenture substantially identical to the Indenture in accordance with the terms
of the Registration Rights Agreement) which have been registered under the
Securities Act, in like principal amount and having substantially identical
terms
A-4
<PAGE> 106
as the Notes. The Holders shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. A
Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay to it any taxes and fees required
by law or permitted by the Indenture. The Registrar need not register the
transfer of or exchange any Notes or portion of a Note selected for redemption,
or register the transfer of or exchange any Notes for a period of 15 days before
a mailing of notice of redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of this Note may be
treated as the owner of this Note for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee will pay the money back to the
Company at its written request. After that, Holders entitled to the money must
look to the Company for payment as general creditors unless an "abandoned
property" law designates another Person.
12. AMENDMENT, SUPPLEMENT, WAIVER, ETC. Subject to certain exceptions,
the Indenture or the Notes may be modified, amended or supplemented by the
Company, the Guarantors, if any, and the Trustee with the consent of the Holders
of at least a majority in principal amount of the Notes then outstanding and any
existing default or compliance with any provision may be waived in a particular
instance with the consent of the Holders of a majority in principal amount of
the Notes then outstanding. Without the consent of Holders, the Company, the
Guarantors, if any, and the Trustee may amend the Indenture or the Notes or
supplement the Indenture for certain specified purposes, including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any Holder.
13. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on
the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, enter into agreements restricting the
ability of Restricted Subsidiaries to pay dividends and make distributions,
issue Preferred Stock of
A-5
<PAGE> 107
any Restricted Subsidiaries of the Company, enter into sale and leaseback
transactions and on the ability of the Company to merge or consolidate with any
other Person or transfer all or substantially all of the Company's or any
Guarantor's assets. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.04 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.
14. SUCCESSOR CORPORATION. When a successor corporation assumes all the
obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article 5 of the Indenture, the
predecessor corporation will, except as provided in Article 5, be released from
those obligations.
15. DEFAULTS AND REMEDIES. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
or the Holders of not less than 25% in aggregate principal amount of the
outstanding Notes may, by written notice to the Trustee and the Company, and the
Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the outstanding Notes shall, declare all principal of and
accrued interest on all Notes to be immediately due and payable; PROVIDED,
HOWEVER, that after such acceleration but before judgment or decree based on
such acceleration is obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the outstanding Notes may rescind and annul such
acceleration and its consequences if all existing Events of Default, other than
the nonpayment of principal, premium or interest that has become due solely
because of the acceleration, have been cured or waived and if the rescission
would not conflict with any judgment or decree. If an Event of Default specified
in Section 6.01(6) or (7) of the Indenture occurs with respect to the Company,
the principal amount of and interest on, all Notes shall IPSO FACTO become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. Holders may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests.
16. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept
A-6
<PAGE> 108
deposits from, and perform services for the Company or its Affiliates, and may
otherwise deal with the Company or its Affiliates, as if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS. No director, officer, employee
incorporator or stockholder, of the Company or any Guarantor shall have any
liability for any obligations of the Company or the Guarantors, if any, under
the Notes, the Indenture or the Guarantees, if any, or for a claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
18. DISCHARGE. The Company's obligations pursuant to the Indenture will
be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Notes or upon
the irrevocable deposit with the Trustee of United States dollars or U.S.
Government Obligations sufficient to pay when due principal of and interest on
the Notes to maturity or redemption, as the case may be.
19. AUTHENTICATION. This Note shall not be valid until the Trustee
signs the certificate of authentication on the other side of this Note.
20. GOVERNING LAW. THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THE NOTES.
21. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
A-7
<PAGE> 109
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
GLASSTECH SUB CO.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: President
A-8
<PAGE> 110
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
A-9
<PAGE> 111
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.10 or Section 4.19 of the
Indenture, check the appropriate box:
[ ] Section 4.10 [ ] Section 4.19
If you want to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.19 of the Indenture, state the
amount you elect to have purchased:
$--------------------
(multiple of $1,000)
Date:
------------------
Your Signature:
------------------------------------
(Sign exactly as your name appears on the face of
this Note)
- ---------------------------
Signature Guaranteed
A-10
<PAGE> 112
EXHIBIT B
---------
[FORM OF LEGEND FOR 144A NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (C) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE ACT, (D) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT OR (F)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT
(IF AVAILABLE) (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER ORIGINAL ISSUANCE OF THIS
NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE 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 ACT.
B-1
<PAGE> 113
[FORM OF ASSIGNMENT FOR 144A NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.16 of the Indenture shall have been satisfied.
Date: Your Signature:
------------------- --------------------------------------
-------------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
------------------------------------------------
B-2
<PAGE> 114
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
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
B-3
<PAGE> 115
EXHIBIT C
---------
[FORM OF LEGEND FOR REGULATION S NOTE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES
ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
C-1
<PAGE> 116
[FORM OF ASSIGNMENT FOR REGULATION S NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.16 of the Indenture shall have been satisfied.
Date: Your Signature:
------------------ -------------------------------------
-----------------------------------------------------
(Sign exactly as your name appears on the other side
of this Note)
Signature Guarantee:
---------------------------------------------------
C-2
<PAGE> 117
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
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
C-3
<PAGE> 118
EXHIBIT D
---------
[FORM OF LEGEND FOR GLOBAL NOTE]
Any Global Note authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in the
case of a Restricted Note) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IT REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR 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.
D-1
<PAGE> 119
EXHIBIT E
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
-----------, ----
Attention:
Re: Glasstech Sub Co. (the "Company")
12 3/4% Senior Notes due 2004 (the "Notes")
Dear Sirs:
In connection with our proposed purchase of Notes of the
Company, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as of
July 2, 1997 relating to the Notes and we agree to be bound by, and not to
resell, pledge or otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered, sold, pledged or
otherwise transferred except as permitted in the following sentence. We agree,
on our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes, we will do so only (i) to
the Company or any subsidiary thereof, (ii) pursuant to an effective
registration statement under the Securities Act, (iii) in accordance with Rule
144A under the Securities Act to a "qualified institutional buyer" (as defined
in Rule 144A), (iv) to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to you a signed letter containing certain
E-1
<PAGE> 120
representations and agreements relating to the restrictions on transfer of the
Notes, (v) outside the United States to persons other than U.S. persons in
offshore transactions meeting the requirements of Rule 904 of Regulation S under
the Securities Act, or (vi) pursuant to any other exemption from registration
under the Securities Act (if available), and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
3. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974, as amended), except as
permitted in the section entitled "Notice to Investors" of the Memorandum.
4. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certifications, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting each are able to bear the economic risk of
our or their investment, as the case may be.
6. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
E-2
<PAGE> 121
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
---------------------------------------
Authorized Signature
<PAGE> 122
EXHIBIT F
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
----------, ----
Attention:
Re: Glasstech Sub Co.
(the "Company") 12 3/4% Senior Notes
due 2004 (the "Notes")
------------------------------------
Dear Sirs:
In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person or to a person
in the United States;
(2) either (a) at the time the buy offer was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting
on our behalf knows that the transaction has been pre-arranged with a buyer
in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
F-1
<PAGE> 123
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------
Authorized Signature
F-2
<PAGE> 124
EXHIBIT G
---------
[FORM OF GUARANTEE]
Each of the undersigned (the "GUARANTORS") hereby jointly and
severally unconditionally guarantees, to the extent set forth in the Indenture
dated as of July 2, 1997 by and between Glasstech Sub Co., as issuer and United
States Trust Company of New York, as Trustee (as amended, restated or
supplemented from time to time, the "INDENTURE"), and subject to the provisions
of the Indenture, (a) the due and punctual payment of the principal of, and
premium, if any, and interest on the Notes, when and as the same shall become
due and payable, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on overdue principal of, and premium and, to the
extent permitted by law, interest, and the due and punctual performance of all
other obligations of the Company to the Noteholders or the Trustee, all in
accordance with the terms set forth in Article 10 of the Indenture, and (b) in
case of any extension of time of payment or renewal of any Notes or any of such
other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Noteholders and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms and limitations of this Guarantee.
[GUARANTOR]
By:
------------------------------------
Name:
Title:
G-1
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
GLASSTECH, INC.
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
- --------------------------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of July 2, 1997
to
INDENTURE
Dated as of July 2, 1997
by and between
GLASSTECH SUB CO., as Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
------------------------
$70,000,000
12 3/4% Senior Notes Due 2004
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<PAGE> 2
TABLE OF CONTENTS
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Page
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ARTICLE I
ASSUMPTION OF OBLIGATIONS OF GLASSTECH SUB CO.
Section 1.01. Assumption .................................................2
ARTICLE II
MISCELLANEOUS PROVISIONS
Section 2.01. Terms Defined ..............................................2
Section 2.02. Indenture ..................................................2
Section 2.03. Governing Law ..............................................2
Section 2.04. Successors .................................................3
Section 2.05. Multiple Counterparts ......................................3
Section 2.06. Effectiveness ..............................................3
Section 2.07. Trustee Disclaimer .........................................3
SIGNATURES.................................................................4
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FIRST SUPPLEMENTAL INDENTURE dated as of July 2, 1997, by and between
GLASSTECH, INC., a Delaware corporation ("GLASSTECH"), and UNITED STATES TRUST
COMPANY OF NEW YORK (the "TRUSTEE").
WHEREAS, GLASSTECH SUB CO., a Delaware corporation (the "COMPANY"),
heretofore executed and delivered to the Trustee an Indenture dated as of July
2, 1997 (the "INDENTURE"), providing for the issuance of $70,000,000 aggregate
principal amount of the Company's 12 3/4% Senior Notes Due 2004 (the "NOTES");
and
WHEREAS, there have been issued and are now outstanding under the
Indenture, Notes in the aggregate principal amount of $70,000,000; and
WHEREAS, in connection with the merger of the Company with and into
Glasstech pursuant to an Agreement and Plan of Merger dated as of June 5, 1997,
the Company has been merged with and into Glasstech and in connection therewith,
Glasstech has assumed, by operation of law, all of the Company's debts,
liabilities, duties and obligations, including the Company's obligations in
respect of the Notes and under the Indenture; and
WHEREAS, Glasstech desires by this First Supplemental Indenture, to
expressly assume the covenants, agreements and undertakings of the Company in
the Indenture and under the Notes; and
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by a resolution of the Board of Directors of
Glasstech; and
WHEREAS, all conditions and requirements necessary to make this First
Supplemental Indenture a valid, binding and legal instrument in accordance with
its terms have been performed and fulfilled by the parties hereto and the
execution and delivery thereof have been in all respects duly authorized by the
parties hereto.
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the other and for the equal and ratable benefit of
the Holders of the Notes, as follows:
<PAGE> 4
ARTICLE I
ASSUMPTION OF OBLIGATIONS OF GLASSTECH SUB CO.
Section 1.01. ASSUMPTION. Glasstech hereby expressly and
unconditionally assumes each and every covenant, agreement and undertaking of
the Company in the Indenture as if Glasstech had been the original issuer of the
Notes, and also hereby expressly and unconditionally assumes each and every
covenant, agreement and undertaking in each Note outstanding on the date of this
First Supplemental Indenture and any Notes delivered hereafter. Any Notes
delivered after the date of this First Supplemental Indenture, including Notes
delivered in substitution or exchange for any outstanding Notes, as provided in
the Indenture, may be executed and delivered by Glasstech in its own name, with
such notations, legends or endorsements required by law, stock exchange rules or
usage, and each such Note shall constitute the obligation of Glasstech.
ARTICLE II
MISCELLANEOUS PROVISIONS
Section 2.01. TERMS DEFINED. For all purposes of this First
Supplemental Indenture, except as otherwise defined or unless the context
otherwise requires, terms used in capitalized form in this First Supplemental
Indenture and defined in the Indenture have the meanings specified in the
Indenture.
Section 2.02. INDENTURE. Except as amended hereby, the Indenture and
the Notes are in all respects ratified and confirmed and all the terms shall
remain in full force and effect.
Section 2.03. GOVERNING LAW. THIS FIRST SUPPLEMENTAL INDENTURE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Each of the parties hereto
agrees to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this First Supplemental
Indenture, provided that such jurisdiction shall be non-exclusive.
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Section 2.04. SUCCESSORS. All agreements of Glasstech in this First
Supplemental Indenture and the Notes shall bind its successors. All agreements
of the Trustee in this Indenture shall bind its successor.
Section 2.05. MULTIPLE COUNTERPARTS. The parties may sign multiple
counterparts of this First Supplemental Indenture. Each signed counterpart shall
be deemed an original, but all of them together represent the same agreement.
Section 2.06. EFFECTIVENESS. The provisions of this First Supplemental
Indenture will take effect immediately upon its execution and delivery by the
Trustee in accordance with the provisions of Section 8.06 of the Indenture.
Section 2.07. TRUSTEE DISCLAIMER. The Trustee accepts the amendment of
the Indenture effected by his First Supplemental Indenture and agrees to execute
the trust created by the Indenture and agrees to execute the trust created by
the Indenture as hereby amended, but only upon the terms and conditions set
forth in the Indenture, including the terms and provisions defining and limiting
the liabilities and responsibilities of the Trustee, which terms and provisions
shall in like manner define and limit its liabilities and responsibilities in
the performance of the trust created by the Indenture as hereby amended, and
without limiting the generality of the foregoing, the Trustee shall not be
responsible in any manner whatsoever for or with respect to any of the recitals
or statements contained herein, all of which recitals or statements are made
solely by Glasstech, or for or with respect to (i) the validity or sufficiency
of this First Supplemental Indenture or any of the terms or provisions hereof,
(ii) the proper authorization hereof by Glasstech by corporate action or
otherwise, (iii) the due execution hereof by Glasstech, (iv) the consequences
(direct or indirect and whether deliberate or inadvertent) of any amendment
herein provided for, and the Trustee makes no representation with respect to any
such matters.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first written above.
GLASSTECH, INC.
By: /s/ Mark D. Christman
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Name: Mark D. Christman
Title: President
Attest: /s/ Kenneth H. Wetmore
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UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ Cynthia Chaney
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Name: Cynthia Chaney
Title: Assistant Vice President
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Exhibit 5.1
[BAKER & HOSTETLER LLP LETTERHEAD]
August 26, 1997
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
RE: REGISTRATION STATEMENT OF FORM S-4 WITH RESPECT TO $70,000,000
AGGREGATE PRINCIPAL AMOUNT SERIES B 12 3/4% SENIOR NOTES DUE 2004
OF GLASSTECH, INC.
Gentlemen:
As counsel for Glasstech, Inc., a Delaware corporation (the "Issuer"), we
are familiar with the Issuer's Registration Statement on Form S-4 (the
"Registration Statement"), filed with the Securities & Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), on
August 26, 1997. Pursuant to the Registration Statement, the Issuer is proposing
to offer for exchange (the "Exchange Offer") up to $70,000,000 aggregate
principal amount Series B 12 3/4% Senior Notes due 2004 (the "New Notes") for
its $70,000,000 aggregate principal amount 12 3/4% Senior Notes due 2004 (the
"Old Notes") that are presently outstanding.
In connection with the foregoing, we have examined such records of the
Issuer and such other documents as we deem necessary to render this opinion.
Based on such examination, we are of the opinion that when the
Registration Statement has become effective under the Act, the New Notes, when
issued pursuant to the Indenture (as defined in the Registration Statement) in
exchange for the Old Notes pursuant to the Exchange Offer as contemplated in the
Registration Statement, in the form attached as Exhibit A to Exhibit 4.1 of the
Registration Statement, will be the legal, valid and binding obligation of the
Issuer, except as may be limited by bankruptcy, insolvency, reorganization or
other laws relating to the enforcement of creditor's rights generally or by
general principles of equity.
In connection with this opinion letter, we do not purport to be qualified
to express legal conclusions based on the laws of any state or jurisdiction
other than the laws of the State of Ohio and the United States of America and
the General Corporation Law of the
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Glasstech, Inc.
August 26, 1997
Page 2
State of Delaware. Accordingly, we express no opinion as to the laws of any
other state or jurisdiction.
We call your attention to the fact that the New Notes provide that they
are to be governed by and construed in accordance with the laws of the State of
New York. This opinion has been rendered as if the New Notes were governed in
all respects by the laws of the State of Ohio, without giving effect to
principles of conflict of laws, and we have assumed that there is no New York
law, legal decision or regulation of any governmental body that would render any
of the provisions of the New Notes illegal, invalid, not binding or
unenforceable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and the reference to us under the caption "Legal Matters"
in the Prospectus that is a part of the Registration Statement.
Sincerely,
/s/ Baker & Hostetler LLP
Baker & Hostetler LLP
<PAGE> 1
Exhibit 10.1
FINANCING AND SECURITY AGREEMENT
between
NATIONSBANK, N.A.
and
GLASSTECH, INC.
July 2, 1997
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FINANCING AND SECURITY AGREEMENT
--------------------------------
THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made as of
the 2nd day of July, 1997, by and between GLASSTECH, INC., a corporation
organized under the laws of Delaware (the "Borrower") and NATIONSBANK, N.A., a
national banking association (the "Lender").
RECITALS
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A. The Borrower has applied to the Lender for a revolving credit
facility in the maximum principal amount of $10,000,000 to be used by the
Borrower for the Permitted Uses described in this Agreement.
B. The Lender is willing to make the credit facilities available to the
Borrower upon the terms and subject to the conditions set forth in this
Agreement.
AGREEMENTS
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NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the terms
defined in the Preamble and Recitals hereto shall have the respective meanings
specified therein, and the following terms shall have the following meanings:
"Account" individually and "Accounts" collectively mean with
respect to the Borrower all presently existing or hereafter acquired or created
accounts, accounts receivable, contract rights, notes, drafts, instruments,
acceptances, chattel paper, leases and writings evidencing a monetary obligation
or a security interest in, or a lease of, goods, all rights to receive the
payment of money or other consideration under present or future contracts
(including, without limitation, all rights to receive payments under presently
existing or hereafter acquired or created letters of credit), or by virtue of
merchandise sold or leased, services rendered, loans and advances made or other
considerations given, by or set forth in or arising out of any present or future
chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy,
instrument, document or general intangible, and all extensions and renewals of
any thereof, all rights under or arising
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out of present or future contracts, agreements or general interest in
merchandise which gave rise to any or all of the foregoing, including all goods,
all claims or causes of action now existing or hereafter arising in connection
with or under any agreement or document or by operation of law or otherwise, all
collateral security of any kind (including, without limitation, real property
mortgages and deeds of trust) and letters of credit given by any Person with
respect to any of the foregoing, all books and records in whatever media (paper,
electronic or otherwise) recorded or stored, with respect to any or all of the
foregoing and all equipment and general intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records, and all proceeds (cash and non-cash) of the foregoing.
"Account Debtor" means any Person who is obligated on a
Receivable and "Account Debtors" means all Persons who are obligated on the
Receivables.
"Affiliate" means, with respect to a Person designated, any
other Person, directly or indirectly controlling, directly or indirectly
controlled by, or under direct or indirect common control with the Person
designated, as the case may be, PROVIDED that the term "Affiliate" shall not
include any portfolio company of either Key Equity Partners 97 or any of its
sister partnerships or Key Equity Capital Corporation so long as such portfolio
company does not own or control any shares of capital stock of Borrower and the
Borrower does not own or control any share of the capital stock of such
portfolio company.
"Agreement" means this Financing and Security Agreement, as
amended, restated, supplemented or otherwise modified in writing in accordance
with the provisions of Section 8.2 of this Agreement.
"Applicable Interest Rate" means (i) the LIBOR Rate, or
(ii) the Base Rate.
"Applicable Margin" means the applicable rate per annum added,
as set forth in Section 2.3.1, to the LIBOR Base Rate or the Prime Rate.
"Asset Disposition" means the disposition of any or all of the
Assets of the Borrower or any Subsidiary of the Borrower, whether by sale,
lease, transfer or other disposition (including any such disposition effected by
way of merger or consolidation).
"Assets" means at any date all assets that, in accordance with
GAAP consistently applied, should be classified as assets on a consolidated
balance sheet of the Borrower and its Subsidiaries.
"Assignment of Patents" means that certain collateral
assignment of patents as security dated the date hereof from the Borrower for
the benefit of the Lender, as amended, restated,
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supplemented or otherwise modified in writing at any time and from
time to time.
"Bankruptcy Code" means the United States Bankruptcy Code, as
amended from time to time.
"Base Rate" means the sum of (i) the Prime Rate PLUS (ii)
the Applicable Margin.
"Base Rate Loan" means any Loan for which interest is to be
computed with reference to the Base Rate.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State are authorized or required to
close.
"Capital Expenditure" means an expenditure for Fixed or
Capital Assets including, without limitation, the entering into of a Capital
Lease, but does not include (i) expenditures to purchase Fixed or Capital Assets
as part of an acquisition of an on-going business which acquisition is subject
to the restrictions and is in compliance with Section 6.1.11, (ii) an
expenditure made to replace Fixed or Capital Assets which are the subject of a
Casualty, provided that such expenditure is funded from Net Proceeds resulting
from such Casualty and (iii) an expenditure made to purchase Fixed or Capital
Assets, provided that such expenditure is funded solely from cash proceeds of a
Permitted Asset Disposition.
"Capital Lease" means any lease of real or personal property,
for which the related Lease Obligations have been or should be, in accordance
with GAAP consistently applied, capitalized on the balance sheet.
"Cash Equivalents" means "Temporary Cash Investments" as that
term and its constituent definitions are defined in the Indenture on the Closing
Date.
"Casualty" means any act or occurrence of any kind or nature
that results in material damage, loss or destruction to any of the Equipment or
other Fixed or Capital Assets.
"Chattel Paper" means a writing or writings which evidence
both a monetary obligation and a security interest in or lease of specific
goods; any returned, rejected or repossessed goods covered by any such writing
or writings and all proceeds (in any form including, without limitation,
accounts, contract rights, documents, chattel paper, instruments and general
intangibles) of such returned, rejected or repossessed goods; and all proceeds
(cash and non-cash) of the foregoing.
"Closing Date" means the date of this Agreement.
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"Collateral" means all property of the Borrower subject from
time to time to the Liens of this Agreement, the Security Documents and the
other Financing Documents, together with any and all cash and non-cash proceeds
and products thereof.
"Collateral Account" has the meaning described in Section
(The Collateral Account).
"Collateral Disclosure List" has the meaning described
in Section (Collateral Disclosure List).
"Commitment" means the Revolving Credit Commitment.
"Committed Amount" means the Revolving Credit Committed
Amount.
"Compliance Certificate" means a periodic Compliance
Certificate described in Section 6.1.1 (Financial Statements).
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 414(b) or (c) of the Internal Revenue Code.
"Condemnation" means any taking of title, of use, or of any
other property interest under the exercise of the power of eminent domain,
whether temporarily or permanently, partial or complete, by any Governmental
Authority or by any Person acting under Governmental Authority.
"Condemnation Awards" means any and all judgments, awards of
damages (including, but not limited to, severance and consequential damages),
payments, proceeds, settlements, amounts paid for a taking in lieu of
Condemnation, or other compensation heretofore or hereafter made, including
interest thereon, and the right to receive the same, as a result of, or in
connection with, any Condemnation or threatened Condemnation.
"Contingent Indemnification Obligations" means Obligations for
the indemnification of the Lender arising under Section 2.3.4 (Indemnity),
Section 6.1.13 (Hazardous Materials), Section 6.1.17 (Assignment of
Receivables) or under similar substantive provisions of this Agreement or any
of the Financing Documents, with respect to which there is no claim pending or
threatened and which expressly survive the termination of this Agreement.
"Copyrights" means and includes, in each case whether now
existing or hereafter arising, all of the Borrower's rights, title and interest
in and to (a) all copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations, copyright applications, and
all renewals of any of
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the foregoing, (b) all income, royalties, damages and payments now or hereafter
due and/or payable under any of the foregoing, including, without limitation,
damages or payments for past, current or future infringements of any of the
foregoing, (c) the right to sue for past, present and future infringements of
any of the foregoing, and (d) all rights corresponding to any of the foregoing
throughout the world.
"Credit Facility" means the Revolving Credit Facility and the
Letter of Credit Facility, and "Credit Facilities" means collectively the
Revolving Credit Facility, the Letter of Credit Facility and any and all other
credit facilities now or hereafter extended under or secured by this Agreement.
"Default" means an event which, with the giving of notice or
lapse of time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Documents" means with respect to the Borrower all documents
of title, whether now existing or hereafter acquired or created, and all
proceeds (cash and non-cash) of the foregoing.
"Early Termination Fee" has the meaning described in
Section 2.1.6 (Early Termination Fee).
"EBITDA" means as to the Borrower for any period of
determination thereof, the sum of (a) the net profit (or loss) determined in
accordance with GAAP consistently applied for such period (but excluding the
effect of a write-up of the value of purchased assets as required by GAAP), plus
(b) interest expense (including, without limitation, interest rate protection
agreements entered into in the ordinary course of business and not for
speculative purposes) and income tax provisions for such period, plus (c)
depreciation and amortization (including, without limitation, amortization of
deferred financing costs) and other non-cash charges of assets for such period.
"Enforcement Costs" means all reasonable expenses, charges,
costs and fees whatsoever (including, without limitation, reasonable outside and
reasonably allocated in-house counsel attorney's fees and expenses) of any
nature whatsoever paid or incurred by or on behalf of the Lender in connection
with (a) any or all of the Obligations, this Agreement and/or any of the other
Financing Documents, (b) the creation, perfection, collection, maintenance,
preservation, defense, protection, realization upon, disposition, sale or
enforcement of all or any part of the Collateral, this Agreement or any of the
other Financing Documents, including, without limitation, those costs and
expenses more specifically enumerated in Section 3.7 (Costs) and/or Section
8.10 (Enforcement Costs), and (c) the monitoring and/or servicing of any or
all of the Obligations, the Financing Documents, and/or the Collateral.
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"Equipment" means all equipment, machinery, computers,
chattels, tools, parts, machine tools, furniture, furnishings, fixtures and
supplies of every nature, presently existing or hereafter acquired or created
and wherever located, whether or not the same shall be deemed to be affixed to
real property, together with all accessions, additions, fittings, accessories,
special tools, and improvements thereto and substitutions therefor and all parts
and equipment which may be attached to or which are necessary or beneficial for
the operation, use and/or disposition of such personal property, all licenses,
warranties, franchises and general intangibles related thereto or necessary or
beneficial for the operation, use and/or disposition of the same, together with
all Accounts, Chattel Paper, Instruments and other consideration received by the
Borrower on account of the sale, lease or other disposition of all or any part
of the foregoing, and together with all rights under or arising out of present
or future Documents and contracts relating to the foregoing and all proceeds
(cash and non-cash) of the foregoing.
"Equity" means capital stock (except treasury stock and net of
any note receivable received upon the issuance of any shares of capital stock)
and contributed capital, as determined on a consolidated basis in accordance
with GAAP consistently applied, after eliminating all intercompany items.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Eurodollar Business Day" means any Business Day on which
dealings in United States Dollar deposits are carried out on the London
interbank market and on which commercial banks are open for domestic and
international business (including dealings in Dollar deposits) in London,
England.
"Eurodollar Lending Office" means with respect to the Lender
such branch or office of the Lender designated by the Lender, as applicable,
from time to time as the branch or office at which the LIBOR Loans are to be
made or maintained.
"Event of Default" has the meaning described in Article
7.
"Facilities" means the collective reference to the loan,
letter of credit, interest rate protection, foreign exchange risk, cash
management, and other credit facilities now or hereafter provided to the
Borrower by the Lender whether under this Agreement or otherwise.
"Fees" means the collective reference to each fee payable
to the Lender under the terms of this Agreement or under the terms
of any of the other Financing Documents, including, without
limitation, the following: Revolving Credit Unused Line Fees, the
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Early Termination Fee, Letter of Credit Fees, the Origination Fee,
and Servicing Fees.
"Financial Institution" means bank, finance company or other
Person or other Governmental Authority which is incorporated, organized or
formed under the Laws of the United States of America or a state thereof and
which in the ordinary course of business makes or purchases interests in
commercial credit facilities.
"Financing Documents" means at any time collectively this
Agreement, the Notes, the Security Documents, the Letter of Credit Documents and
any other instrument, agreement or document previously, simultaneously or
hereafter executed and delivered by the Borrower and/or any other Person, singly
or jointly with another Person or Persons, evidencing, securing, guarantying or
in connection with this Agreement, any Note, any of the Security Documents, any
of the Facilities, and/or any of the Obligations.
"Fixed or Capital Assets" of a Person at any date means all
assets which would, in accordance with GAAP consistently applied, be classified
on the balance sheet of such Person as property, plant or equipment at such
date.
"Fixed Charges" means for any period of determination, the
scheduled payments (including, without limitation, principal and interest, but
excluding prepayments) on all Indebtedness for Borrowed Money (other than under
item (d) (to the extent the applicable Lien is a security interest is in favor
of the Borrower's customers to secure amounts which the customer paid to
Borrower as a deposit or progress payment for the manufacture of identified
equipment), item (f) or item (g) of that term) of the Borrower and Holding, plus
Capital Expenditures not financed, plus cash Taxes paid by the Borrower and
Holding plus dividends declared or paid by the Borrower and Holding.
"Fixed Charge Coverage Ratio" means for the period of any
determination thereof the ratio of (a) EBITDA to (b) Fixed Charges.
"GAAP" means, subject to the provisions of Section 1.2,
generally accepted accounting principles in the United States of America in
effect from time to time.
"General Intangibles" means all general intangibles of every
nature, whether presently existing or hereafter acquired or created, and without
implying any limitation of the foregoing, further means all books and records,
claims (including without limitation all claims for income tax and other
refunds), choses in action, claims, causes of action in tort or equity, contract
rights, judgments, customer lists, Patents, Trademarks, licensing agreements,
rights in intellectual property, goodwill (including goodwill of the Borrower's
business symbolized by and associated with any and all trademarks, trademark
licenses, Copyrights and/or
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service marks), royalty payments, licenses, contractual rights, rights as lessee
under any lease of real or personal property, literary rights, Copyrights,
service names, service marks, logos, trade secrets, amounts received as an award
in or settlement of a suit in damages, deposit accounts, interests in joint
ventures, general or limited partnerships, or limited liability companies or
partnerships, rights in applications for any of the foregoing, books and records
in whatever media (paper, electronic or otherwise) recorded or stored, with
respect to any or all of the foregoing and all equipment and general intangibles
necessary or beneficial to retain, access and/or process the information
contained in those books and records, and all proceeds (cash and non-cash) of
the foregoing.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any department, agency or instrumentality thereof.
"Hazardous Materials" means (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976, as amended from
time to time, and regulations promulgated thereunder; (b) any "hazardous
substance" as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, and regulations
promulgated thereunder; (c) any substance the presence of which on any property
now or hereafter owned, acquired or operated by the Borrower is prohibited by
any Law similar to those set forth in this definition; and (d) any other
substance which by Law requires special handling in its collection, storage,
treatment or disposal.
"Hazardous Materials Contamination" means the contamination
(whether presently existing or occurring after the date of this Agreement) by
Hazardous Materials of any property owned, operated or controlled by the
Borrower or for which the Borrower has responsibility, including, without
limitation, improvements, facilities, soil, ground water, air or other elements
on, or of, any property now or hereafter owned, acquired or operated by the
Borrower, and any other contamination by Hazardous Materials for which the
Borrower is, or is claimed to be, responsible.
"Holding" means Glasstech Holding Co., a corporation organized
under the Laws of Delaware.
"Indebtedness" of a Person means at any date the total
liabilities of such Person at such time determined in accordance with GAAP
consistently applied.
"Indebtedness for Borrowed Money" of a Person means at any
time, without duplication, the sum at such time of (a) indebtedness of such
Person for borrowed money or for the deferred
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purchase price of property or services, (b) any obligations of such Person in
respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e) obligations of
third parties which are being guarantied or indemnified against by such Person
or which are secured by the property of such Person; (f) any obligation of such
Person under a employee stock ownership plan or other similar employee benefit
plan; and (g) any obligation of such Person or a Commonly Controlled Entity to a
Multiemployer Plan; but excluding trade and other accounts payable in the
ordinary course of business in accordance with customary trade terms and which
are not overdue (as determined in accordance with customary trade practices) or
which are being disputed in good faith by such Person and for which adequate
reserves are being provided on the books of such Person in accordance with GAAP.
"Indenture" means that certain Indenture dated as of July 1,
1997 (as amended, supplemented or otherwise modified from time to time), between
Merger Company and the Trustee, to which the Borrower is a party as successor by
merger to the Merger Company, a copy of which is attached to this Agreement as
EXHIBIT D.
"Interest Payment Date" means each date for the payment of
interest provided under Section 2.3.5.
"Interest Period" means as to any LIBOR Loan, the period
commencing on and including the date such LIBOR Loan is made (or on the
effective date of the Borrower's election to convert any Base Rate Loan to a
LIBOR Loan in accordance with the provisions of this Agreement) and ending on
and including the day which is 30, 60, 90, 180, or 360 days thereafter, as
selected by the Borrower in accordance with the provisions of this Agreement,
and thereafter, each period commencing on the last day of the then preceding
Interest Period for such LIBOR Loan and ending on and including the day which is
30, 60, 90, 180 or 360 days thereafter, as selected by the Borrower in
accordance with the provisions of this Agreement; provided, however that:
(a) the first day of any Interest Period shall be a
Eurodollar Business Day;
(b) if any Interest Period would end on a day that shall not
be a Eurodollar Business Day, such Interest Period shall be extended to
the next succeeding Eurodollar Business Day unless such next succeeding
Eurodollar Business Day would fall in the next calendar month, in which
case, such Interest
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Period shall end on the next preceding Eurodollar Business
Day; and
(c) no Interest Period shall extend beyond the Revolving
Credit Expiration Date.
"Interest Rate Election Notice" has the meaning described
in Section 2.3.2(e).
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the Income Tax Regulations issued and
proposed to be issued thereunder.
"Instrument" means with respect to the Borrower a negotiable
instrument (as defined under Article 3 of the applicable Uniform Commercial
Code), a "certificated security" (as defined under Article 8 of the applicable
Uniform Commercial Code), or any other writing which evidences a right to
payment of money and is not itself a security agreement or lease and is of a
type which is in the ordinary course of business transferred by delivery with
any necessary indorsement.
"Inventory" means all inventory of the Borrower and all right,
title and interest of the Borrower in and to all of its now owned and hereafter
acquired goods, merchandise and other personal property furnished under any
contract of service or intended for sale or lease, including, without
limitation, all raw materials, work-in-progress, finished goods and materials
and supplies of any kind, nature or description which are used or consumed in
the Borrower's business or are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise and other licenses, warranties, franchises, general
intangibles,personal property and all documents of title or documents relating
to the same and all proceeds (cash and non-cash) of the foregoing.
"Item of Payment" means with respect to the Borrower each
check, draft, cash, money, instrument, item, and other remittance in payment or
on account of payment of the Receivables or otherwise with respect to any
Collateral, including, without limitation, cash proceeds of any returned,
rejected or repossessed goods, the sale or lease of which gave rise to a
Receivable, and other proceeds of Collateral; and "Items of Payment" means the
collective reference to all of the foregoing.
"Key Entity" shall have the meaning set forth in Section
7.1.12.
"Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs, or decrees of any Governmental Authority with
applicable jurisdiction.
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"Lease Obligations" of a Person means for any period the
rental commitments of such Person for such period under leases for real and/or
personal property (net of rent from subleases thereof, but including taxes,
insurance, maintenance and similar expenses which the lessee, is obligated to
pay under the terms of said leases, except to the extent that such taxes,
insurance, maintenance and similar expenses are payable by sublessees),
including rental commitments under Capital Leases.
"Letter of Credit" and "Letters of Credit" shall have the
meanings described in Section 2.2.1 hereof.
"Letter of Credit Agreement" means the collective reference to
each letter of credit application and agreement substantially in the form of the
Lender's then standard form of application for letter of credit or such other
form as may be approved by the Lender, executed and delivered by the Borrower in
connection with the issuance of a Letter of Credit, as the same may from time to
time be amended, restated, supplemented or modified and "Letter of Credit
Agreements" means all of the foregoing in effect at any time and from time to
time.
"Letter of Credit Documents" means any and all drafts under or
purporting to be under a Letter of Credit, any Letter of Credit Agreement, and
any other instrument, document or agreement executed and/or delivered by the
Borrower or any other Person under, pursuant to or in connection with a Letter
of Credit or any Letter of Credit Agreement.
"Letter of Credit Facility" means the facility established by
the Lender pursuant to Section 2.2 (Letter of Credit Facility) of this
Agreement.
"Letter of Credit Fee" and "Letter of Credit Fees" have the
meanings described in Section 2.2.2 hereof.
"Letter of Credit Obligations" means all Obligations of the
Borrower with respect to the Letters of Credit and the Letter of Credit
Agreements.
"Liabilities" means at any date all liabilities that in
accordance with GAAP consistently applied should be classified as liabilities on
a consolidated balance sheet of the Borrower and its Subsidiaries.
"LIBOR Base Rate" means for any Interest Period with respect
to any LIBOR Loan, the rate per annum (rounded upward, if necessary, to the
nearest next 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in United States Dollars
at approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior
to the first day of such Interest Period for a term comparable to such
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Interest Period. If for any reason such rate is not available, the term "LIBOR
Base Rate" shall mean, for any LIBOR Loan for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in United States Dollars for a term comparable to the Interest Period
at approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior
to the first day of such Interest Period; PROVIDED, HOWEVER, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates. For purposes of this definition, Telerate
Page 3750 refers to the British Bankers Association Libor Rates (determined at
approximately 11:00 a.m (London time)) that are published by Dow Jones Telerate,
Inc.
"LIBOR Loan" means any Loan for which interest is to be
computed with reference to the LIBOR Rate.
"LIBOR Rate" means for any Interest Period with respect to any
LIBOR Loan, (i) the Applicable Margin, PLUS (ii) the per annum rate of interest
calculated pursuant to the following formula:
LIBOR Base Rate
-------------------------
1.00 - Reserve Percentage
"Lien" means any mortgage, deed of trust, deed to secure debt,
grant, pledge, security interest, assignment, encumbrance, judgment, lien,
hypothecation, provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, claim or charge of any
kind, whether perfected or unperfected, avoidable or unavoidable, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction,
excluding the precautionary filing of any financing statement by any lessor in a
true lease transaction, by any bailor in a true bailment transaction or by any
consignor in a true consignment transaction under the Uniform Commercial Code of
any jurisdiction or the agreement to give any financing statement by any lessee
in a true lease transaction, by any bailee in a true bailment transaction or by
any consignee in a true consignment transaction.
"Loan" means each of the Revolving Loan, as the case may be,
and "Loans" means the collective reference to the advances under the Revolving
Loan.
"Loan Notice" has the meaning described in Section 2.1.2
(Procedure for Making Advances).
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"Lockbox" has the meaning described in Section 7.2.4 (The
Collateral Account).
"Material Adverse Effect" means an effect, either in any case
or in the aggregate, which would result in a material adverse change for the
Borrower (w) in the business, condition, or operations of the Borrower, (x) to
any of the material properties or Assets of the Borrower, (y) in the right or
ability of the Borrower to carry on a substantial portion of its operations, or
(z) to the value of, or the ability of the Lender to realize upon, the
Collateral in any material respect.
"Merger Agreement" means that certain agreement and plan of
merger dated June 5, 1997 by and among Holding, the Borrower and the Merger
Company.
"Merger Agreement Documents" means collectively the Merger
Agreement and any and all other agreements, documents or instruments (together
with any and all amendments, modifications, and supplements thereto,
restatements thereof, and substitutes therefor) previously, now or hereafter
executed and delivered by Holding, the Borrower, the Merger Company, or any
other Person in connection with the Merger Agreement Transaction.
"Merger Agreement Transaction" means the merger transaction
contemplated by the provisions of the Merger Agreement under which the Merger
Company and the Borrower merge, with the Borrower being the survivor.
"Merger Company" means Glasstech Sub Co., a corporation
organized under the laws of the State of Delaware.
"Mortgage" means that certain mortgage dated the date hereof
from the Borrower to the Lender, as the same may from time to time be amended,
restated, supplemented or modified.
"Mortgaged Property" means the real property covered by
the Mortgage.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Net Proceeds" means when used with respect to any
Condemnation Awards, insurance proceeds resulting from any Casualty, or from
Asset Dispositions other than Permitted Asset Dispositions, the gross proceeds
(other than Unrestricted Proceeds) from any Casualty, Condemnation or Asset
Disposition remaining after payment of all reasonable expenses (including
reasonable attorneys' fees) incurred in the collection of such gross proceeds.
"Net Worth" means as to the Borrower its shareholders equity,
as determined in accordance with GAAP.
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"Note" means the Revolving Credit Note, and "Notes" means
collectively the Revolving Credit Note and any other promissory note which may
from time to time evidence all or any portion of the Obligations.
"Obligations" means all present and future indebtedness,
duties, obligations, and liabilities, whether now existing or contemplated or
hereafter arising, of the Borrower to the Lender under, arising pursuant to, in
connection with and/or on account of the provisions of this Agreement, each
Note, each Security Document, and/or any of the other Financing Documents, the
Loans, and/or any of the Facilities including, without limitation, the principal
of, and interest on, each Note, late charges, the Fees, Enforcement Costs, and
prepayment fees (if any), letter of credit fees or fees charged with respect to
any guaranty of any letter of credit; also means all other present and future
indebtedness, liabilities and obligations, whether now existing or contemplated
or hereafter arising, of the Borrower to the Lender of any nature whatsoever
regardless of whether such indebtedness, obligations and liabilities be direct,
indirect, primary, secondary, joint, several, joint and several, fixed or
contingent; and also means any and all renewals, extensions, substitutions,
amendments, restatements and rearrangements of any such indebtedness,
obligations and liabilities.
"Offering Memorandum" means the Borrower's Offering Memorandum
dated June 27, 1997, pursuant to which the Senior Notes were offered.
"Offering Transaction" means the sale of the Senior Notes
as described in the Offering Memorandum.
"Outstanding Letter of Credit Obligations" has the
meaning described in Section 2.2.3 hereof.
"Origination Fee" has the meaning described in Section
(Origination Fee).
"Patent and Trademark Security Agreement" means that certain
patent and trademark security agreement dated the date hereof from the Borrower
for the benefit of the Lender, as the same may from time to time be amended,
restated, supplemented or otherwise modified.
"Patents" means and includes, in each case whether now
existing or hereafter arising, all of the Borrower's rights, title and interest
in and to (a) any and all patents and patent applications, (b) any and all
inventions and improvements described and claimed in such patents and patent
applications, (c) reissues, divisions, continuations, renewals, extensions and
continuations- in-part of any patents and patent applications, (d) income,
royalties, damages, claims and payments now or hereafter due and/or
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payable under and with respect to any patents or patent applications, including,
without limitation, damages and payments for past and future infringements, (e)
rights to sue for past, present and future infringements of patents, and (f) all
rights corresponding to any of the foregoing throughout the world.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquisition" means an acquisition involving all or
substantially all of the assets, or all of the capital stock, of a Person in the
line of business of the Borrower described in Section 6.1.6, with respect to
which the Borrower has complied with Section 6.1.11 and upon the consummation
of which the Lender obtains a Lien on the assets acquired or, if applicable,
the assets of the Subsidiary so acquired, subject only to Permitted Liens and
securing the Obligations.
"Permitted Asset Disposition" means any one or more of the
following Asset Dispositions provided that unless otherwise expressly provided
in this definition, each such Asset Disposition shall be made in the ordinary
course of business:
(a) sales of Inventory,
(b) licensing of Patents, Trademarks, Copyrights and/or other
intellectual property,
(c) dispositions of worn, used, surplus or obsolete Equipment
or intellectual property deemed uneconomical or obsolete,
(d) leases of real property to the extent not otherwise
prohibited by the provisions of this Agreement,
(e) intercompany sales, leases or other Asset Dispositions
among and between the Borrower and its Subsidiaries, provided, that any such
Assets sold, leased or otherwise disposed of as between the Borrower and its
Subsidiaries shall continuously remain subject to the then existing first
priority Liens of the Lender, under this Agreement and under the other Financing
Documents, and shall be subject only to Permitted Liens,
(f) usual and customary write-downs and other reductions of
Accounts in connection with the compromise and collection of Accounts,
(g) Asset Dispositions which are the subject of a Casualty or
Condemnation, provided, that the Net Proceeds of any such Casualty or
Condemnation are used by the Borrower in accordance with the provisions of this
Agreement and the other Financing Documents; and
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(h) any other Asset Disposition; provided that the aggregate
net proceeds from all such other Asset Dispositions during any fiscal year shall
not exceed $250,000.
"Permitted Liens" means: (a) Liens for Taxes which are not
delinquent or which the Lender has determined in the exercise of its reasonable
discretion (i) are being diligently contested in good faith and by appropriate
proceedings, and such contest operates to suspend collection of the contested
Taxes and enforcement of a Lien, (ii) the Borrower has the financial ability to
pay, with all penalties and interest, at all times without materially and
adversely affecting the Borrower, and (iii) are not, and will not be with
appropriate filing, the giving of notice and/or the passage of time, entitled to
priority over any Lien of the Lender; (b) deposits or pledges to secure
obligations under workers' compensation, social security or similar laws, or
under unemployment insurance in the ordinary course of business; (c) Liens in
favor of the Lender; (d) judgment Liens to the extent the entry of such judgment
does not constitute a Default or an Event of Default under the terms of this
Agreement or result in the sale or levy of, or execution on, any of the
Collateral; (e) Purchase Money Security Interests and Capital Leases not
exceeding $500,000 in the aggregate; (f) liens imposed by law, such as
carriers', warehousemen's and mechanics' liens and other similar liens arising
in the ordinary course of business which secure payment of obligations not more
than 30 days past due for warehousemans' liens or 60 days for other such liens
or which are being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on its books; (g) easements,
zoning or deed restrictions and such other encumbrances or charges (other than
liens or security interests) against real property which do not in any material
way affect the marketability or value of the same or interfere with the
ownership or use thereof in the business of the Borrower or its Subsidiaries;
(h) any transfer of a check or other medium of payment for deposit or collection
through normal banking channels or any similar transaction in the normal course
of business; (i) any Lien or cash or cash equivalents securing or given in the
ordinary course of the Borrower's business to secure surety or performance
bonds, or securing performance of contracts or bids (other than contracts for
the payment of money borrowed) or deposits required by Law or as a condition to
the transaction of business or the exercise of any right, privilege or license;
(j) other consensual liens not exceeding $500,000 in the aggregate; (k) security
interests in favor of the Borrower's customers to secure amounts which the
customer paid to Borrower as a deposit or progress payment for the manufacture
of identified equipment, but only to the extent such security interests cover
only the identified equipment, secure only those amounts, and do not have
priority over the security interests of the Lender arising under this Agreement;
(l) Liens in favor of the Borrower or any of its Subsidiaries which do not
encumber the Collateral, (m) Liens securing reimbursement obligations with
respect to commercial
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letters of credit that encumber only the documents and, as a result thereof,
other property relating to such letters of credit; (n) Liens on property or
assets of a Person existing at the time such Person becomes a Subsidiary of the
Borrower or merges into the Borrower, but only to the extent such Liens are not
incurred in connection with, or in contemplation of, such Person's becoming a
Subsidiary or merging into the Borrower; (o) such other Liens, if any, as are
set forth on SCHEDULE 4.1.20 attached hereto and made a part hereof; and (p) any
extensions, substitutions, replacements or renewals of the foregoing, to the
extent such extensions, substitutions, replacements and renewals, to the extent
the Lien does not cover any additional property or secure any additional debt.
"Permitted Uses" means the payment of expenses incurred in the
ordinary course of the Borrower's business and the general corporate purposes of
the Borrower which do not violate this Agreement.
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a limited liability company or partnership, a
trust, an unincorporated association, a Governmental Authority, or any other
organization or entity.
"Plan" means any pension plan which is covered by Title IV of
ERISA and in respect of which the Borrower or a Commonly Controlled Entity is an
"employer" as defined in Section 3 of ERISA.
"Post-Default Rate" means the Applicable Interest Rate in
effect from time to time plus 200 basis points.
"Prime Rate" means the floating and fluctuating per annum
prime commercial lending rate of interest of the Lender, as established and
declared by the Lender at any time or from time to time. The Prime Rate shall be
adjusted automatically, without notice, as of the effective date of any change
in such prime commercial lending rate. The Prime Rate does not necessarily
represent the lowest rate of interest charged by the Lender to borrowers.
"Proforma Financial Projections" has the meaning
described in Section 4.1.12 (Proforma Financial Statements) below.
"Proforma Financial Statements" has the meaning described
in Section 4.1.12 (Proforma Financial Statements) below.
"Purchase Money Security Interest" means the interest of the
lessor under a Capital Lease and also means a purchase money security interest,
attaching at the time of acquisition, in Equipment, or construction or
improvement of any real or personal property, acquired after the date of this
Agreement; provided,
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however, that (i) the indebtedness secured by any such security interest shall
not exceed 100% of the cost of the property covered plus finance charges, fees,
costs and expenses (including attorneys fees) of documentation, perfection,
collection and enforcement, (ii) each such security interest shall attach only
to the property so acquired for the purchase money for the property so acquired,
constructed or improved, and (iii) the acquisition to which any such security
interest relates shall not result in a Default or Event of Default under this
Agreement.
"Receivable" means one of the Borrower's now owned and
hereafter owned, acquired or created Accounts, Chattel Paper, General
Intangibles and Instruments; and "Receivables" means all of the Borrower's now
or hereafter owned, acquired or created Accounts, Chattel Paper, General
Intangibles and Instruments, and all cash and non-cash proceeds and products
thereof.
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder.
"Reserve Percentage" means, at any time, the then current
maximum rate for which reserves (including any basic, supplemental, marginal and
emergency reserves) are required to be maintained by member banks of the Federal
Reserve System under Regulation D of the Board of Governors of the Federal
Reserve System against "Eurocurrency liabilities", as that term is defined in
Regulation D. The LIBOR Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Percentage.
"Responsible Officer" means the chief executive officer, the
chief financial officer, any senior vice president or the president of the
Borrower.
"Restricted Payment" shall have the meaning given that term
and its constituent definitions in the Indenture on the Closing Date.
"Revolving Credit Commitment" means the agreement of the
Lender relating to the making of the Revolving Loan and advances thereunder
subject to and in accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period" means the period of time
from the Closing Date to the Business Day preceding the Revolving Credit
Termination Date.
"Revolving Credit Committed Amount" has the meaning
described in Section 2.1.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means June 30, 2002,
extending automatically for successive periods of one (1) year (but in no event
later than June 30, 2007) unless the Lender in the
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exercise of its sole and absolute discretion has notified the Borrower, or the
Borrower in the exercise of its sole and absolute discretion has notified the
Lender, no later than the April 30, immediately preceding the next scheduled
Revolving Credit Expiration Date of its intention to terminate the Revolving
Credit Facility as of the next scheduled Revolving Credit Expiration Date.
"Revolving Credit Facility" means the facility established by
the Lender pursuant to Section 2.1 (Revolving Credit Facility) of this
Agreement.
"Revolving Credit Note" has the meaning described in
Section 2.1.3 (Revolving Credit Note).
"Revolving Credit Termination Date" means the earlier of (a)
the Revolving Credit Expiration Date, or (b) the date on which the Revolving
Credit Commitment is terminated pursuant to Section 7.2 or otherwise.
"Revolving Credit Unused Line Fee" and "Revolving Credit
Unused Line Fees" have the meanings described in Section 2.1.5 (Revolving Credit
Unused Line Fee).
"Revolving Loan" has the meaning described in Section 2.1.1
(Revolving Credit Facility).
"Revolving Loan Account" has the meaning described in
Section 2.1.4 (Revolving Loan Account).
"Securities" means the collective reference to each and every
certificated or uncertificated security which constitutes a "security" under the
provisions of Title 8 of the Uniform Commercial Code and to each and every
"investment property" under the provisions of Title 9 of the Uniform Commercial
Code (if that definition is included in that Title), and all proceeds (cash and
non-cash) of the foregoing.
"Security Documents" means collectively any assignment, pledge
agreement, security agreement, mortgage, deed of trust, deed to secure debt,
financing statement and any similar instrument, document or agreement under or
pursuant to which a Lien is now or hereafter granted to, or for the benefit of,
the Lender on any real or personal property of any Person to secure all or any
portion of the Obligations, all as the same may from time to time be amended,
restated, supplemented or otherwise modified, including, without limitation,
this Agreement, the Mortgage, and the Assignment of Patents.
"Security Procedures" means the rules, policies and procedures
adopted and implemented by the Lender and its Affiliates at any time and from
time to time with respect to security procedures and measures relating to
electronic funds transfers, all
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as the same may be amended, restated, supplemented, terminated, or otherwise
modified at any time and from time to time by the Lender in its sole and
absolute discretion.
"Senior Notes" means any and all 12-3/4% Senior Notes due 2007
to be issued from time to time under the Indenture, in the original principal
amount of $70,000,000.
"Senior Notes Documents" means, collectively, the
Offering Memorandum, the Indenture and the Senior Notes.
"Servicing Fee" and "Servicing Fees" have the meanings
described in Section 2.4.4 (Servicing Fees).
"State" means the State of Maryland.
"Stir Melter" shall have the meaning set forth in Section
3.4.1(b).
"Subordinated Indebtedness" means all Indebtedness incurred at
any time by the Borrower, which is in amounts, subject to repayment terms, and
subordinated to the Obligations, as set forth in one or more written agreements,
all in form and substance satisfactory to the Lender in its sole and absolute
discretion.
"Subsidiary" means any corporation the majority of the voting
shares of which at the time are owned directly by the Borrower and/or by one or
more Subsidiaries of the Borrower.
"Taxes" means all taxes and assessments whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character (including all penalties or interest thereon), which at any time may
be assessed, levied, confirmed or imposed by any Governmental Authority on the
Borrower or any of its properties or assets or any part thereof or in respect of
any of its franchises, businesses, income or profits.
"Trademarks" means and includes in each case whether now
existing or hereafter arising, all of the Borrower's rights, title and interest
in and to (a) any and all trademarks (including service marks), trade names and
trade styles, and applications for registration thereof and the goodwill of the
business symbolized by any of the foregoing, (b) any and all licenses of
trademarks, service marks, trade names and/or trade styles, whether as licensor
or licensee, (c) any renewals of any and all trademarks, service marks, trade
names, trade styles and/or licenses of any of the foregoing, (d) income,
royalties, damages and payments now or hereafter due and/or payable with respect
thereto, including, without limitation, damages, claims, and payments for past,
present and future infringements thereof, (e) rights to sue for past, present
and future infringements of any of the foregoing, including the right to settle
suits involving claims and demands for
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royalties owing, and (f) all rights corresponding to any of the
foregoing throughout the world.
"Trustee" means United States Trust Company of New York and
its successor and assigns as Trustee under the Indenture.
"Uniform Commercial Code" means, unless otherwise provided in
this Agreement, the Uniform Commercial Code as adopted by and in effect from
time to time in the State or in any other jurisdiction, as applicable.
"Unrestricted Proceeds" means $200,000 in the aggregate in any
year for any event or any group of related event.
"Wholly Owned Subsidiary" means any domestic United States
corporation all the shares of stock of all classes of which (other than
directors' qualifying shares) at the time are owned directly or indirectly by
the Borrower and/or by one or more Wholly Owned Subsidiaries of the Borrower.
"Wire Transfer Procedures" means the rules, policies and
procedures adopted and implemented by the Lender and its Affiliates at any time
and from time to time with respect to electronic funds transfers, including,
without limitation, the Security Procedures, all as the same may be amended,
restated, supplemented, terminated or otherwise modified at any time and from
time to time by the Lender in its sole and absolute discretion.
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL
PROVISIONS.
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP. All computations determining compliance with financial
covenants, including definitions used therein and calculations made after the
Closing Date, shall be made giving effect to GAAP as in effect on the Closing
Date in determining the financial covenants contained in this Agreement. Unless
otherwise defined herein, all terms used herein which are defined by the Uniform
Commercial Code shall have the same meanings as assigned to them by the Uniform
Commercial Code unless and to the extent varied by this Agreement. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, subsection, schedule and
exhibit references are references to articles, sections or subsections of, or
schedules or exhibits to, as the case may be, this Agreement unless otherwise
specified. As used herein, the singular number shall include the plural, the
plural the singular and the use of the masculine,
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feminine or neuter gender shall include all genders, as the context may require.
Reference to any one or more of the Financing Documents shall mean the same as
the foregoing may from time to time be amended, restated, substituted, extended,
renewed, supplemented or otherwise modified.
ARTICLE 2
THE CREDIT FACILITIES
SECTION 2.1 THE REVOLVING CREDIT FACILITY.
2.1.1 REVOLVING CREDIT FACILITY. Subject to and
upon the provisions of this Agreement, the Lender establishes a revolving credit
facility in favor of the Borrower. The aggregate of all advances under the
Revolving Credit Facility are sometimes referred to in this Agreement
collectively as the "Revolving Loan".
The principal amount of Ten Million Dollars ($10,000,000) is the
"Revolving Credit Committed Amount". If at any time the unpaid principal balance
of the Revolving Loan and of the Letter of Credit Obligations exceed the
Revolving Credit Committed Amount in effect from time to time, the Borrower
shall pay such excess to the Lender ON DEMAND.
During the Revolving Credit Commitment Period, the Lender agrees to
make advances under the Revolving Loan requested by the Borrower from time to
time.
Unless sooner paid, the unpaid Revolving Loan, together with interest
accrued and unpaid thereon, and all other Obligations shall be due and payable
in full on the Revolving Credit Expiration Date.
2.1.2 PROCEDURE FOR MAKING ADVANCES UNDER THE
REVOLVING LOAN; LENDER PROTECTION LOANS.
The Borrower may borrow, prepay and reborrow under the Revolving Credit
Commitment on any Business Day. Advances under the Revolving Loan shall be
deposited to a demand deposit account of the Borrower with the Lender (or an
Affiliate of the Lender) or shall be otherwise applied as directed by the
Borrower, which direction the Lender may require to be in writing. No later than
noon (Baltimore time) on the date of the requested borrowing, the Borrower shall
give the Lender oral or written notice (a "Loan Notice") of the amount and (if
requested by the Lender) the purpose of the requested borrowing. Any oral Loan
Notice shall be confirmed in writing by the Borrower within three (3) Business
Days after the making of the requested Revolving Loan. In addition, the Borrower
hereby irrevocably authorizes the Lender at any time and from time to time,
without further request from or notice to the Borrower, to make advances under
the Revolving Loan which the
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Lender, in its reasonable discretion, deems necessary or appropriate to protect
the Lender's interests under this Agreement, including, without limitation,
advances under the Revolving Loan made to cover debit balances in the Revolving
Loan Account, principal of, and/or interest on, any Loan, any of the
Obligations, and/or Enforcement Costs, prior to, on, or after the termination of
other advances under this Agreement, regardless of whether the outstanding
principal amount of the Revolving Loan which the Lender may make hereunder
exceeds the Revolving Credit Committed Amount.
2.1.3 REVOLVING CREDIT NOTE. The obligation of the Borrower
to pay the Revolving Loan, with interest, shall be evidenced by a promissory
note (as from time to time extended, amended, restated, supplemented or
otherwise modified, the "Revolving Credit Note") substantially in the form of
EXHIBIT "A-1" attached hereto and made a part hereof, with appropriate
insertions. The Revolving Credit Note shall be dated as of the Closing Date,
shall be payable to the order of the Lender at the times provided in the
Revolving Credit Note, and shall be in the principal amount of the Revolving
Credit Committed Amount. The Borrower acknowledges and agrees that, if the
outstanding principal balance of the Revolving Loan outstanding from time to
time exceeds the face amount of the Revolving Credit Note, the excess shall bear
interest at the Base Rate for the Revolving Loan and shall be payable, with
accrued interest, ON DEMAND. The Revolving Credit Note shall not operate as a
novation of any of the Obligations or nullify, discharge, or release any such
Obligations or the continuing contractual relationship of the parties hereto in
accordance with the provisions of this Agreement. On the first day of each
month, the Borrower shall pay the Lender as part of the Obligations an amount
equal to the additional interest which would have accrued on the Revolving Loan
during the preceding month if prepayments of the Revolving Loan during the
preceding month had been received one (1) Business Day subsequent to their
actual receipt.
2.1.4 REVOLVING LOAN ACCOUNT. The Lender will establish and
maintain a loan account on its books (the "Revolving Loan Account") to which the
Lender will (a) DEBIT (i) the principal amount of each advance of the Revolving
Loan made by the Lender hereunder as of the date made, (ii) the amount of any
interest accrued on the Revolving Loan as and when due, and (iii) any other
amounts due and payable by the Borrower to the Lender from time to time under
the provisions of this Agreement in connection with the Revolving Loan,
including, without limitation, Enforcement Costs, Fees, late charges, and
service, collection and audit fees, as and when due and payable, and (b) CREDIT
all payments made by the Borrower to the Lender on account of the Revolving Loan
as of the date made including, without limitation, funds credited to the
Revolving Loan Account from the Collateral Account. The Lender may debit the
Revolving Loan Account for the amount of any Item of Payment which is returned
to the Lender unpaid. All credit entries
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to the Revolving Loan Account are conditional and shall be readjusted as of the
date made if final and indefeasible payment is not received by the Lender in
cash or solvent credits. Any and all periodic or other statements or
reconciliations, and the information contained in those statements or
reconciliations, of the Revolving Loan Account shall be examined by the Borrower
within ninety (90) days after receipt. If following that examination the
Borrower believes those statements or reconciliations to be incorrect, the
Borrower shall within five (5) Business Days after completion of its
examination, notify the Lender of the Borrower's beliefs and the reasons
therefor.
2.1.5 REVOLVING CREDIT UNUSED LINE FEE. The Borrower shall
pay to the Lender a quarterly revolving credit facility fee (collectively, the
"Revolving Credit Unused Line Fees" and individually, a "Revolving Credit Unused
Line Fee") in an amount equal to one-quarter percent (0.25%) per annum of the
average daily unused and undisbursed portion of the Revolving Credit Committed
Amount in effect from time to time accruing during each calendar quarter in
arrears. The accrued and unpaid portion of the Revolving Credit Unused Line Fee
shall be paid by the Borrower to the Lender on the first day of each month,
commencing on the first such date following the date hereof, and on the
Revolving Credit Termination Date.
2.1.6 EARLY TERMINATION FEE. In the event of the termination
by, or on behalf of, the Borrower, of the Revolving Credit Commitment, the
Borrower shall pay a fee (the "Early Termination Fee") equal to following amount
at the following times:
PERIOD EARLY TERMINATION FEE
- ------ ---------------------
Closing Date through and
including June 30, 1998 $75,000.00
July 1, 1998 through and
including June 30, 1999 $50,000.00
July 1, 1999 through and
including June 30, 2000 $35,000.00
Thereafter No Early Termination Fee
Payment of the Revolving Loan in whole or in part by or on behalf of the
Borrower, by court order or otherwise, following and as a result of the
institution of any bankruptcy proceeding by or against the Borrower, shall be
deemed to be a prepayment of the Revolving Loan subject to the Early Termination
Fee provided in this subsection, except that there shall not, however, be an
Early Termination Fee due if the termination of the Revolving Credit Commitment
and repayment of the Revolving Credit Facility is made solely as a result of (i)
the closing and consummation of an
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initial public offering of Securities by Holding which generates sufficient
proceeds and is in fact used to repay all Obligations in full, (ii) acceleration
of the Obligations by the Lender or demand for payment under Section 7.2.1,
(iii) the sale by the Borrower of all or substantially all of its Assets which
generates sufficient proceeds and is in fact used to repay all Obligations in
full, (iv) a simultaneous initial public offering of Borrower's common stock
with net proceeds to the Parent and/or the Borrower of $25,000,000 or more, (v)
the sale by Holdings of its securities or of all of the securities issued by the
Borrower to Holding which generates sufficient proceeds and is in fact used to
repay all Obligations in full, or (vi) the generation and retention of excess
cash flow sufficient to have maintained the outstanding principal balance of the
Revolving Loan at zero for at least one fiscal quarter and the Lender's
reasonable satisfaction based on projections provided by the Borrower that there
is no use, need for, or contemplation of senior debt (other than that evidenced
by the Senior Notes) for the then next four (4) fiscal quarters.
SECTION 2.2 THE LETTER OF CREDIT FACILITY.
-----------------------------
2.2.1 LETTERS OF CREDIT. Subject to and upon the provisions
of this Agreement, and as a part of the Revolving Credit Commitment, the
Borrower may, upon the prior approval of the Lender, obtain standby letters of
credit (as the same may from time to time be amended, supplemented or otherwise
modified, each a "Letter of Credit" and collectively the "Letters of Credit")
from the Lender from time to time from the Closing Date until the Business Day
preceding the Revolving Credit Termination Date. The Borrower will not be
entitled to obtain a Letter of Credit hereunder unless (a) after giving effect
to the request, the outstanding principal balance of the Revolving Loan and of
the Letter of Credit Obligations would not exceed the Revolving Credit Committed
Amount, and (b) the sum of the aggregate face amount of the then outstanding
Letters of Credit (including the face amount of the requested Letter of Credit)
does not exceed Five Million Dollars ($5,000,000).
2.2.2 LETTER OF CREDIT FEES. Prior to or simultaneously with
the opening of each Letter of Credit, the Borrower shall pay to the Lender, a
letter of credit fee (each a "Letter of Credit Fee" and collectively the "Letter
of Credit Fees") in an amount equal to 200 basis points per annum of the amount
of the Letter of Credit, based on a term beginning with the date of issuance and
ending on the expiration date of the Letter of Credit. Such Letter of Credit
Fees shall be paid upon the opening of the Letter of Credit and upon each
anniversary thereof, if any. In addition, the Borrower shall pay to the Lender
any and all additional issuance, negotiation, processing, transfer or other fees
to the extent and as and when required by the provisions of any Letter of Credit
Agreement, which shall be no greater than the fees therefor customarily charged
by the Lender; such additional
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fees are included in and a part of the "Fees" payable by the Borrower under the
provisions of this Agreement.
2.2.3 TERMS OF LETTERS OF CREDIT. Each Letter of Credit shall
(a) be opened pursuant to a Letter of Credit Agreement, and (b) expire on a date
not later than the Business Day preceding the Revolving Credit Expiration Date;
provided, however, if any Letter of Credit does have an expiration date later
than the Business Day preceding the Revolving Credit Termination Date, as of the
Business Day preceding the Revolving Credit Termination Date an advance of the
Revolving Credit Facility shall be made by the Lender in the face amount of such
Letter of Credit (or Letters of Credit) and the proceeds thereof shall be
deposited in an interest bearing account selected by the Lender titled in the
name of the Lender as trustee for the Borrower. The proceeds of the trustee
account referred to in the immediately preceding sentence shall be held as
collateral for the Letter of Credit (or Letters of Credit) and in the event of a
draw under the Letter of Credit (or Letters of Credit), used to pay any such
draw. The aggregate face amount of all Letters of Credit at any one time
outstanding and issued by the Lender pursuant to the provisions of this
Agreement, plus the amount of any unpaid Letter of Credit Fees accrued or
scheduled to accrue thereon, and less the aggregate amount of all drafts issued
under or purporting to have been issued under such Letters of Credit that have
been paid by the Lender, is herein called the "Outstanding Letter of Credit
Obligations".
2.2.4 PROCEDURE FOR LETTERS OF CREDIT. The Borrower shall
give the Lender written notice at least three (3) Business Days prior to the
date on which a Letter of Credit is requested to be opened of their request for
a Letter of Credit. Such notice shall be accompanied by a duly executed and
delivered Letter of Credit Agreement. Upon receipt of the Letter of Credit
Agreement and the Letter of Credit Fee, the Lender shall process such Letter of
Credit Agreement in accordance with its customary procedures and open such
Letter of Credit on the Business Day specified in such notice.
2.2.5 CHANGE IN LAW; INCREASED COST. If any change in any law
or regulation or in the interpretation thereof by any court or other
Governmental Authority charged with the administration thereof shall either (a)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against Letters of Credit issued by the Lender, or (b) impose on the
Lender any other condition regarding this Agreement or any Letter of Credit, and
the result of any event referred to in clauses (a) or (b) above shall be to
increase the cost to the Lender of issuing, maintaining or extending the Letter
of Credit or the cost to the Lender of funding any obligation under or in
connection with the Letter of Credit, then, upon the earlier of thirty (30) days
after demand therefor by the Lender or the Revolving Credit Termination Date,
the Borrower shall immediately
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pay to the Lender from time to time as specified by the Lender, additional
amounts which shall be sufficient to compensate the Lender for such increased
cost, together with interest on each such amount from the date demanded until
payment in full thereof at a rate per annum equal to the then highest current
rate of interest on the Revolving Loan. A certificate as to such increased cost
incurred by the Lender, submitted by the Lender to the Borrower, shall be
conclusive, absent manifest error.
SECTION 2.3 INTEREST.
2.3.1 APPLICABLE INTEREST RATES.
(a) Each Loan shall bear interest until maturity (whether by
acceleration, declaration, extension or otherwise) at either the Base Rate or
the LIBOR Rate, as selected and specified by the Borrower in an Interest Rate
Election Notice furnished to the Lender in accordance with the provisions of
Section 2.3.2(e), or as otherwise determined in accordance with the provisions
of this Section 2.3, and as may be adjusted from time to time in accordance
with the provisions of Section 2.3.3.
(b) Notwithstanding the foregoing, following the occurrence
and during the continuance of an Event of Default, at the option of the Lender,
all Loans and all other Obligations shall bear interest at the Post-Default
Rate.
(c) The Applicable Margin for (i) LIBOR Loans shall be 200
basis points per annum, and (ii) Base Rate Loans shall be zero basis points per
annum.
2.3.2 SELECTION OF INTEREST RATES.
(a) The Borrower may select the initial Applicable Interest
Rate or Applicable Interest Rates to be charged on the Loans.
(b) From time to time after the date of this Agreement as
provided in this Section, by a proper and timely Interest Rate Election Notice
furnished to the Lender in accordance with the provisions of Section 2.3.2(e),
the Borrower may select an initial Applicable Interest Rate or Applicable
Interest Rates for any Loans or may convert the Applicable Interest Rate and,
when applicable, the Interest Period, for any existing Loan to any other
Applicable Interest Rate or, when applicable, any other Interest Period.
(c) The Borrower's selection of an Applicable Interest Rate
and/or an Interest Period, the Borrower's election to convert an Applicable
Interest Rate and/or an Interest Period to another Applicable Interest Rate or
Interest Period, and any other
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adjustments in an interest rate are subject to the following
limitations:
(i) the Borrower shall not at any time select or change to an
Interest Period that extends beyond the Revolving Credit Expiration
Date in the case of the Revolving Loan,
(ii) except as otherwise provided in Section 2.3.4, no change
from the LIBOR Rate to the Base Rate shall become effective on a day
other than a Business Day and on a day which is the last day of the
then current Interest Period, no change of an Interest Period shall
become effective on a day other than the last day of the then current
Interest Period, and no change from the Base Rate to the LIBOR Rate
shall become effective on a day other than a day which is a
Eurodollar Business Day.
(iii) any Applicable Interest Rate change for any Loan to be
effective on a date on which any principal payment on account of such
Loan is scheduled to be paid shall be made only after such payment
shall have been made,
(iv) no more than three (3) different LIBOR Rates may be
outstanding at any time and from time to time with respect to the
Revolving Loan,
(v) the first day of each Interest Period shall be a
Eurodollar Business Day,
(vi) as of the effective date of a selection, there shall not
exist a Default or an Event of Default, and
(vii) the minimum principal amount of a LIBOR Loan shall be
Five Hundred Dollars ($500,000).
(d) If a request for an advance under the Loans is not
accompanied by an Interest Rate Election Notice or does not otherwise include a
selection of an Applicable Interest Rate and, if applicable, an Interest Period,
or if, after having made a selection of an Applicable Interest Rate and, if
applicable, an Interest Period, the Borrower fails or is not otherwise entitled
under the provisions of this Agreement to continue such Applicable Interest Rate
or Interest Period, the Borrower shall be deemed to have selected the Base Rate
as the Applicable Interest Rate until such time as the Borrower has selected a
different Applicable Interest Rate and specified an Interest Period in
accordance with, and subject to, the provisions of this Section.
(e) The Lender will not be obligated to make Loans, to
convert the Applicable Interest Rate on Loans to another
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Applicable Interest Rate, or to change Interest Periods, unless the Lender shall
have received an irrevocable written or telephonic notice (an "Interest Rate
Election Notice") from the Borrower specifying the following information:
(i) the amount to be borrowed or converted,
(ii) a selection of the Base Rate or the LIBOR Rate,
(iii) the length of the Interest Period if the Applicable
Interest Rate selected is the LIBOR Rate, and
(iv) the requested date on which such election is to be
effective.
Any telephonic notice must be confirmed in writing within three (3) Business
Days. Each Interest Rate Election Notice must be received by the Lender not
later than noon (Baltimore City time) on the Business Day of any requested
borrowing or conversion in the case of a selection of the Base Rate and not
later than noon (Baltimore City time) on the third Business Day before the
effective date of any requested borrowing or conversion in the case of a
selection of the LIBOR Rate.
2.3.3 INABILITY TO DETERMINE LIBOR BASE RATE. In the event
that (i) the Lender shall have determined that, by reason of circumstances
affecting the London interbank eurodollar market, adequate and reasonable means
do not exist for ascertaining the LIBOR Base Rate for any requested Interest
Period with respect to a Loan the Borrower has requested to be made as or to be
converted to a LIBOR Loan or (ii) the Lender shall determine that the LIBOR Base
Rate for any requested Interest Period with respect to a Loan the Borrower has
requested to be made as or to be converted to a LIBOR Loan does not adequately
and fairly reflect the cost to the Lender of funding or converting such Loan,
the Lender shall give telephonic or written notice of such determination to the
Borrower at least one (1) day prior to the proposed date for funding or
converting such Loan. If such notice is given, any request for a LIBOR Loan
shall be made as or converted to a Base Rate Loan. Until such notice has been
withdrawn by the Lender, the Borrower will not request that any Loan be made as
or converted to a LIBOR Loan.
2.3.4 INDEMNITY. The Borrower agrees to indemnify and
reimburse the Lender and to hold the Lender harmless from any loss, cost
(including administrative costs) or expense which the Lender may sustain or
incur as a consequence of (a) a default by the Borrower in payment when due of
the principal amount of or interest on any LIBOR Loan, (b) the failure of the
Borrower to make, or convert the Applicable Interest Rate of, a Loan after
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the Borrower has given a Loan Notice or an Interest Rate Election Notice, (c)
the failure of the Borrower to make any prepayment of a LIBOR Loan after the
Borrower has given notice of such intention to make such a prepayment, and/or
(d) the making by the Borrower of a prepayment of a LIBOR Loan on a day which is
not the last day of the Interest Period for such LIBOR Loan, including, without
limitation, any such loss or expense arising from the reemployment of funds
obtained by the Lender to maintain any LIBOR Loan or from fees payable to
terminate the deposits from which such funds were obtained. This agreement and
covenant of the Borrower shall survive termination or expiration of this
Agreement and payment of the other Obligations.
2.3.5 PAYMENT OF INTEREST.
(a) Unpaid and accrued interest on any advance of the
Revolving Loan which consists of a Base Rate Loan shall be paid monthly, in
arrears, on the first day of each calendar month, commencing on the first such
date after the date of this Agreement, and on the first day of each calendar
month thereafter, and at maturity (whether by acceleration, declaration,
extension or otherwise).
(b) Notwithstanding the foregoing, any and all unpaid
and accrued interest on any Base Rate Loan converted to a Eurodollar Loan or
prepaid shall be paid immediately upon such conversion and/or prepayment, as
appropriate.
(c) Unpaid and accrued interest on any LIBOR Loan shall
be paid on the last Business Day of each Interest Period for such LIBOR Loan
(and, in addition, for an Interest Period of 180 days, on the first Business Day
after the 89th day after the commencement of the Interest Period and for an
Interest Period of 360 days, on the first Business Day after the 89th day, on
the first Business Day after 179th day and on the on the first Business Day
after the 269th day after the commencement of the Interest Period) and at
maturity (whether by acceleration, declaration, extension or otherwise);
provided, however that any and all unpaid and accrued interest on any LIBOR Loan
prepaid prior to expiration of the then current Interest Period for such LIBOR
Loan shall be paid immediately upon prepayment.
SECTION 2.4 GENERAL FINANCING PROVISIONS.
2.4.1 BORROWER'S REPRESENTATIVES. The Lender is
hereby irrevocably authorized by the Borrower to make advances under the Loans
to the Borrower pursuant to the provisions of this Agreement upon the written,
oral or telephone request of any one of the Persons who is from time to time a
Responsible Officer of the Borrower under the provisions of the most recent
"Certificate" of corporate resolutions of the Borrower on file with the Lender
or who is an officer or employee of the Borrower whom a Responsible
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<PAGE> 32
Officer from time to time authorizes in writing to do so. The Lender does not
and shall not assume any responsibility or liability for any errors, mistakes,
and/or discrepancies in the oral, telephonic, written or other transmissions of
any instructions, orders, requests and confirmations between the Lender and the
Borrower in connection with the Credit Facilities, any Loan or any other
transaction in connection with the provisions of this Agreement.
2.4.2 USE OF PROCEEDS OF THE LOANS. The proceeds of each
advance under the Loans shall be used by the Borrower for Permitted Uses, and
for no other purposes except as may otherwise be agreed by the Lender in
writing. The Borrower shall use the proceeds of the Loans promptly.
2.4.3 ORIGINATION FEE. The Borrower shall pay to the Lender
on or before the Closing Date a loan origination fee (the "Origination Fee") in
the amount of Fifty Thousand Dollars ($50,000), which fee has been fully earned
and is non-refundable.
2.4.4 SERVICING FEES. The Borrower shall pay to the Lender an
annual servicing fee (collectively, the "Servicing Fees" and individually a
"Servicing Fee") in the amount of $10,000 which shall be deemed earned on the
Closing Date and on each anniversary of the Closing Date, and which shall be
payable in installments of $2,500 each, the first installment being due on the
Closing Date and subsequent installments being due on the first day of each
September, December, March and June thereafter, with any unpaid installments
being due and payable on the Revolving Credit Termination Date.
2.4.5 COMPUTATION OF INTEREST AND FEES. All applicable Fees
and interest shall be calculated on the basis of a year of 360 days for the
actual number of days elapsed. Any change in the interest rate on any of the
Obligations resulting from a change in the Base Rate shall become effective as
of the opening of business on the day on which such change in the Base Rate is
announced.
2.4.6 PAYMENTS. All payments of the Obligations, including,
without limitation, principal, interest, prepayments, and Fees, shall be paid by
the Borrower without setoff, recoupment or counterclaim to the Lender in
immediately available funds not later than 12:00 noon, Baltimore, Maryland time
on the due date of such payment. All such payments shall be made to the Lender's
principal office in Baltimore, Maryland or at such other location as the Lender
may at any time and from time to time notify the Borrower. Alternatively, at its
sole discretion, the Lender may charge any deposit account of the Borrower at
the Lender or any Affiliate of the Lender with all or any part of any amount due
to the Lender under this Agreement or any of the other Financing Documents to
the extent that the Borrower shall have not
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otherwise tendered payment to the Lender. All payments shall be applied first to
any unpaid Fees, second to any and all accrued and unpaid late charges and
Enforcement Costs, third to any and all accrued and unpaid interest on the
Obligations, and then to the then unpaid principal balance of the Obligations,
all in such order and manner as shall be determined by the Lender in its sole
and absolute discretion.
2.4.7 LIENS; SETOFF. In addition to the Liens set forth in
ARTICLE 3, the Borrower hereby grants to the Lender as additional collateral and
security for all of the Obligations, a continuing Lien on any and all monies,
Securities, and other personal property of the Borrower and any and all proceeds
thereof, now or hereafter held or received by, or in transit to, the Lender or
any Affiliate of the Lender from, or for the account of, the Borrower, and also
upon any and all depository accounts (whether general or special) and credits of
the Borrower, if any, with the Lender or any Affiliate of the Lender, at any
time existing, excluding any depository accounts held by the Borrower in its
capacity as trustee for Persons who are not Affiliates of the Borrower. Without
implying any limitation on any other rights the Lender may have under the
Financing Documents or applicable Laws, during the continuance of an Event of
Default, the Lender is hereby authorized by the Borrower at any time and from
time to time at the Lender's option, without notice to, or consent of, the
Borrower, to set off, appropriate, seize, freeze and apply any or all items
hereinabove referred to against all Obligations then outstanding (whether or not
then due), all in such order and manner as shall be determined by the Lender in
its sole and absolute discretion. The Lender shall promptly after taking such
action give the Borrower notice thereof by fax or telephone advice or overnight
messenger.
2.4.8 REQUIREMENTS OF LAW. In the event that the Lender shall
have determined in good faith that (a) the adoption of any Laws regarding
capital adequacy, or (b) any change in such Laws or in the interpretation or
application thereof or (c) compliance by the Lender or any corporation
controlling the Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority or
central bank, does or shall have the effect of reducing the rate of return on
the capital of the Lender or such controlling corporation as a consequence of
the Lender's obligations under this Agreement to a level below that which the
Lender or such corporation would have achieved but for such adoption, change or
compliance (taking into consideration the policies of the Lender and its
controlling corporation with respect to capital adequacy) by an amount deemed by
the Lender, in its discretion, to be material, then from time to time, after
submission by the Lender to the Borrower of a written request therefor and a
statement of the basis for the Lender's determination, the Borrower shall pay to
the Lender, upon the earlier of thirty (30) days after demand by the Lender
therefor or the Revolving Credit Termination Date, such additional amount or
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amounts in order to compensate the Lender or its controlling
corporation for any such reduction.
2.4.9 FUNDS TRANSFER SERVICES.
(a) The Borrower has requested that the Lender and its
Affiliates make available to the Borrower electronic funds transfer services and
related security measures in connection with the Obligations. A copy of the
Lender's current Wire Transfer Procedures, including the Security Procedures, is
attached to this Agreement as EXHIBIT B. The Borrower acknowledges and agrees
that all electronic funds transfers made by the Lender or any Affiliate of the
Lender to, or for the account of, the Borrower shall be governed by, and subject
to, the Wire Transfer Procedures and the Security Procedures in effect from time
to time. The Borrower and the Lender agree that the current Wire Transfer
Procedures and the Security Procedures are commercially reasonable. The Borrower
further acknowledges and agrees, however, that the full scope of the Security
Procedures which the Lender and its Affiliates offer and strongly recommend for
electronic funds transfers is available only if the Borrower communicates
directly with the Lender or its Affiliate, as applicable, in accordance with and
as required by the Wire Transfer Procedures and the Security Procedures. If the
Borrower attempts to communicate with the Lender or any Affiliate of the Lender
by any other method or otherwise does not communicate with the Lender and/or its
Affiliate, as appropriate, in accordance with the Wire Transfer Procedures and
the Security Procedures, the Lender and/or its Affiliate, as applicable, shall
not be required to execute the instructions of the Borrower, but if the Lender
or such Affiliate, as applicable, does so, the Borrower will be deemed to have
refused and waived the Security Procedures that the Lender or its Affiliate, as
applicable, offers and strongly recommends, and the Borrower will be bound by
any funds transfer, whether or not authorized, which is issued in the Borrower's
name and accepted by the Lender or any Affiliate, as applicable, in good faith.
The Lender or its Affiliate, as applicable, may modify the Wire Transfer
Procedures including, without limitation, the Security Procedures at such time
or times and in such manner as the Lender and/or any Affiliate of the Lender, as
applicable, in its or their sole and absolute discretion, deems appropriate to
meet then prevailing standards of good banking practice. The Lender shall notify
the Borrower of any material change or modification to the Wire Transfer
Procedures and/or the Security Procedures. By continuing to use the wire
transfer services of the Lender and/or any Affiliate of the Lender following
notice to the Borrower of any such change or modification to the Wire Transfer
Procedures and/or the Security Procedures, the Borrower shall be deemed
automatically to have agreed to the Wire Transfer Procedures and the Security
Procedures, as changed and/or modified and to have further agreed that the Wire
Transfer Procedures and the Security Procedures, as changed and/or modified, are
likewise commercially reasonable. The Borrower further agrees to establish and
maintain procedures to
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safeguard the Security Procedures and any information related thereto. Neither
the Lender nor any Affiliate of the Lender is responsible for detecting any
error in any payment order sent by the Borrower to the Lender or any Affiliate
of the Lender.
(b) The Lender and its Affiliates, as applicable, will
generally use the Fedwire funds transfer system for domestic funds transfers,
and the funds transfer system operated by the Society for Worldwide
International Financial Telecommunication (SWIFT) for international funds
transfers. International funds transfers may also be initiated through the
Clearing House InterBank Payment System (CHIPs) or international cable. However,
the Lender and/or its Affiliates, as applicable, may use any means and routes
that the Lender or any such Affiliate, as applicable, in its sole discretion,
may consider suitable for the transmission of funds. Each payment order, or
cancellation thereof, carried out through a funds transfer system or a
clearinghouse will be governed by all applicable funds transfer system rules and
clearing house rules and clearing arrangements, whether or not the Lender or any
Affiliate, as applicable, is a member of the system, clearinghouse or
arrangement and the Borrower acknowledges that the right of the Lender or any
Affiliate, as applicable, to reverse, adjust, stop payment or delay posting of
an executed payment order is subject to the Laws, regulations, rules, circulars
and arrangements described herein.
ARTICLE 3
THE COLLATERAL
SECTION 3.1 DEBT AND OBLIGATIONS SECURED. All property and Liens
assigned, pledged or otherwise granted under or in connection with this
Agreement (including, without limitation, those under Section 3.2 (Grant of
Liens) below) or any of the Financing Documents shall secure (a) the payment of
all of the Obligations, and (b) the performance, compliance with and observance
by the Borrower of the provisions of this Agreement and all of the other
Financing Documents or otherwise under the Obligations.
SECTION 3.2 GRANT OF LIENS. The Borrower hereby assigns, pledges and
grants to the Lender, and agrees that the Lender shall have a perfected and
continuing security interest in, and Lien on, (a) all of the Borrower's
Accounts, Inventory, Chattel Paper, Documents, Instruments, Equipment,
Securities, and General Intangibles, whether now owned or existing or hereafter
acquired or arising, (b) all returned, rejected or repossessed goods, the sale
or lease of which shall have given or shall give rise to an Account or Chattel
Paper, (c) all insurance policies relating to the foregoing, (d) all books and
records in whatever media (paper, electronic or otherwise) recorded or stored,
with respect to the foregoing and all Equipment and General Intangibles
necessary or beneficial to retain, access and/or process the information
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contained in those books and records, and (e) all cash and non-cash proceeds and
products of the foregoing. The Borrower further agrees that the Lender shall
have in respect thereof all of the rights and remedies of a secured party under
the Uniform Commercial Code as well as those provided in this Agreement, under
each of the other Financing Documents and under applicable Laws.
Notwithstanding any other provision of this Agreement and the other
Security Documents, the Lender agrees that it will not record the Assignment of
Patents except during the continuance of an Event of Default and that the
failure of the Lender to have a perfected security interest in the Patents and
Trademarks until such recording shall not be breach of any provision of this
Agreement or the other Financing Documents.
SECTION 3.3 COLLATERAL DISCLOSURE LIST. On or prior to the Closing
Date, the Borrower shall deliver to the Lender a list (the "Collateral
Disclosure List") which shall contain such information with respect to the
Borrower's business and real and personal property as the Lender may require and
shall be certified by a Responsible Officer of the Borrower, all in the form
provided to the Borrower by the Lender. Promptly after demand by the Lender, the
Borrower shall furnish to the Lender an update of the information contained in
the Collateral Disclosure List at any time and from time to time as may be
requested by the Lender.
SECTION 3.4 PERSONAL PROPERTY. The Borrower acknowledges and agrees
that it is the intention of the parties to this Agreement that the Lender shall
have a first priority, perfected Lien, in form and substance satisfactory to the
Lender and its counsel, on all of the Borrower's personal property of any kind
and nature whatsoever, whether now owned or hereafter acquired, subject only to
the Permitted Liens, if any. In furtherance of the foregoing:
3.4.1 SECURITIES, CHATTEL PAPER, PROMISSORY NOTES, ETC.
(a) On the Closing Date and without implying
any limitation on the scope of Section 3.2 (Grant of Liens) above, the Borrower
shall deliver to the Lender all originals of all of the Borrower's letters of
credit, stock certificates, Chattel Paper, Documents and Instruments and, if the
Lender so requires, shall execute and deliver to the Lender separate pledges,
assignments and security agreements in form and content acceptable to the
Lender, which pledges, assignments and security agreements shall assign, pledge
and grant a Lien to the Lender on all letters of credit, stock certificates,
Chattel Paper, Documents, and Instruments.
(b) The Borrower acknowledges and agrees that
its Securities include, without limitation, one hundred percent
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(100%) of the equity interests of Stir-Melter, Inc., a corporation organized
under the Laws of the State of Delaware ("Stir Melter"). During the continuance
of an Event of Default, the Borrower shall receive no dividend or distribution
or other benefit with respect to Stir Melter without the Lender's prior written
consent, and shall not vote, consent, waive or ratify any action taken, which
would violate or be inconsistent with any of the terms and provisions of this
Agreement or any of the other Financing Documents or which would materially
impair the position or interest of the Lender in the such Securities or dilute
the percentage of the ownership interests of Stir Melter pledged to the Lender
hereunder, except as expressly permitted by this Agreement.
(c) In the event that the Borrower shall acquire after
the Closing Date any letters of credit, Securities, Chattel Paper, Documents, or
Instruments, the Borrower shall promptly so notify the Lender and deliver the
originals of all of the foregoing to the Lender promptly and in any event within
ten (10) days of each acquisition.
(d) All letters of credit, stock certificates, Chattel
Paper, Documents and Instruments shall be delivered to the Lender endorsed
and/or assigned as required by any pledge, assignment and security agreement
and/or as the Lender may require and, if applicable, shall be accompanied by
blank irrevocable and unconditional stock or bond powers and/or notices as the
Lender may require.
3.4.2 PATENTS, COPYRIGHTS AND OTHER PROPERTY REQUIRING
ADDITIONAL STEPS TO PERFECT.
On the Closing Date and without implying any limitation on the scope of
Section 3.2 above, the Borrower shall execute and deliver all Financing
Documents and take all actions requested by the Lender in order to perfect a
first priority assignment of Patents, Copyrights, Trademarks or any other type
or kind of intellectual property acquired by the Borrower after the Closing
Date.
SECTION 3.5 RECORD SEARCHES. As of the Closing Date and thereafter at
the time any Financing Document is executed and delivered by the Borrower
pursuant to this Section, the Lender shall have received, in form and substance
satisfactory to the Lender, such Lien or record searches with respect to the
Borrower and/or any other Person, as appropriate, and the property covered by
such Financing Document showing that the Lien of such Financing Document will be
a perfected first priority Lien on the property covered by such Financing
Document subject only to Permitted Liens or to such other matters as the Lender
may approve.
SECTION 3.6 REAL PROPERTY. The Borrower acknowledges and agrees that it
is the intention of the parties to this Agreement that the Lender shall have a
first priority, perfected Lien, in
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form and substance satisfactory to the Lender and its counsel, on all of the
Borrower's real property of any kind and nature whatsoever, whether now owned or
hereafter acquired, subject only to the Permitted Liens, if any. In furtherance
of the foregoing:
With respect to each parcel of real property now owned by the
Borrower, the Borrower shall on the Closing Date execute and deliver a deed of
trust or a mortgage or other document, as appropriate, which deed of trust,
mortgage and/or other document shall be included among the Financing Documents.
With respect to real property acquired by the Borrower after
the Closing Date, the Borrower shall, promptly after acquisition thereof, grant
a Lien covering such real property to the Lender under the provisions of a
mortgage, deed of trust or other document, as appropriate. Each Financing
Document to be executed and delivered pursuant hereto shall:
(a) be in form and substance reasonably satisfactory to the
Lender;
(b) create a first priority Lien in such real property in
favor of the Lender subject only to Permitted Liens, zoning ordinances,
and such other matters as the Lender may approve;
(c) except for the Mortgaged Property, be accompanied by a
current appraisal of the fair market value of the subject real property
prepared by appraisers reasonably satisfactory to the Lender;
(d) be accompanied by a current survey reasonably satisfactory
in all respects to the Lender of the subject real property, prepared by
a registered land surveyor or engineer reasonably satisfactory to the
Lender;
(e) be accompanied by evidence reasonably satisfactory to the
Lender regarding the current and past pollution control practices at
such real property in connection with the discharge, emission,
handling, disposal or existence of Hazardous Materials, which may
include, at the Lender's request, an environmental audit of such real
property prepared by a person or firm acceptable to the Lender;
(f) be accompanied by a mortgagee's title insurance policy or
marked-up unconditional commitment or binder for such insurance in form
and substance reasonably satisfactory to the Lender and issued by a
title insurance company reasonably satisfactory to the Lender; and
(g) upon request of the Lender, be accompanied by a signed
opinion of counsel, in form and substance
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reasonably satisfactory to the Lender, and from counsel, satisfactory
to the Lender, licensed to practice in the state where the subject real
property is located.
SECTION 3.7 COSTS. The Borrower agrees to pay, as part of the
Enforcement Costs and to the fullest extent permitted by applicable Laws, on
demand all reasonable costs, fees and expenses incurred by the Lender in
connection with the taking, perfection, preservation, protection and/or release
of a Lien on the Collateral, including, without limitation:
(a) customary fees and expenses incurred in preparing
Financing Documents from time to time (including, without limitation,
reasonable attorneys' fees incurred in connection with preparing the
Financing Documents);
(b) all filing and/or recording taxes or fees;
(c) all title insurance premiums and costs;
(d) all costs of Lien and record searches;
(e) reasonable attorneys' fees in connection with all legal
opinions required;
(f) appraisal and/or survey costs; and
(g) all related costs, fees and expenses.
SECTION 3.8 RELEASE. Upon the indefeasible repayment in full in cash of
the Obligations and performance of all Obligations of the Borrower (other than
Contingent Indemnification Obligations) under this Agreement and all other
Financing Documents, the termination and/or expiration of the Commitment and all
Letter of Credit Obligations, upon the Borrower's request and at the Borrower's
sole cost and expense, the Lender shall release and/or terminate any Financing
Document but only if and provided that there is no commitment or obligation
(whether or not conditional) of the Lender to re-advance amounts which would be
secured thereby.
SECTION 3.9 INCONSISTENT PROVISIONS. In the event that the provisions
of any Financing Document directly conflict with any provision of this
Agreement, the provisions of this Agreement govern.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Lender, as follows:
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4.1.1 SUBSIDIARIES. Except as acquired or created as
permitted by this Agreement, the Borrower has the Subsidiaries listed on the
Collateral Disclosure List attached hereto and made a part hereof and no others.
As of the Closing Date, each of the Subsidiaries is a Wholly Owned Subsidiary
except as shown on the Collateral Disclosure List, which correctly indicates the
nature and amount of the Borrower's ownership interests therein.
4.1.2 GOOD STANDING. Each of the Borrower and its
Subsidiaries (a) is a corporation duly organized, existing and in good standing
under the laws of the jurisdiction of its incorporation, (b) has the corporate
power to own its property and to carry on its business as now being conducted,
and (c) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary and in
which the failure to qualify would materially adversely affect the business,
operations or properties of the Borrower and/or their Subsidiaries.
4.1.3 POWER AND AUTHORITY. The Borrower has full corporate
power and authority to execute and deliver this Agreement, the other Financing
Documents to which it is a party, to make the borrowings under this Agreement,
and to incur and perform the Obligations whether under this Agreement, the other
Financing Documents or otherwise, all of which have been duly authorized by all
proper and necessary corporate action. No consent or approval of shareholders or
any creditors of the Borrower, and no consent, approval, filing or registration
with or notice to any Governmental Authority on the part of the Borrower, is
required as a condition to the execution, delivery, validity or enforceability
of this Agreement, the other Financing Documents, the performance by the
Borrower of the Obligations.
4.1.4 BINDING AGREEMENTS. This Agreement and the other
Financing Documents executed and delivered by the Borrower have been properly
executed and delivered and constitute the valid and legally binding obligations
of the Borrower and are fully enforceable against the Borrower in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties, and general principles of equity
regardless of whether applied in a proceeding in equity or at law.
4.1.5 NO CONFLICTS. Neither the execution, delivery and
performance of the terms of this Agreement or of any of the other Financing
Documents executed and delivered by the Borrower nor the consummation of the
transactions contemplated by this Agreement will conflict with, violate or be
prevented by (a) the Borrower's charter or bylaws, (b) any existing mortgage,
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indenture, contract or agreement binding on the Borrower or
affecting its property, or (c) any Laws.
4.1.6 NO DEFAULTS, VIOLATIONS.
(a) No Default or Event of Default has occurred and is
continuing.
(b) Neither the Borrower nor any of its Subsidiaries is
in default under or with respect to any obligation under any existing mortgage,
indenture, contract or agreement binding on it or affecting its property in any
respect which could be materially adverse to the business, operations, property
or financial condition of the Borrower, or which could materially adversely
affect the ability of the Borrower to perform its obligations under this
Agreement or the other Financing Documents, to which the Borrower is a party.
4.1.7 COMPLIANCE WITH LAWS. Neither the Borrower nor any of
its Subsidiaries is in violation of any applicable Laws (including, without
limitation, any Laws relating to employment practices, to environmental,
occupational and health standards and controls) or order, writ, injunction,
decree or demand of any court, arbitrator, or any Governmental Authority
affecting the Borrower or any of its properties, the violation of which,
considered in the aggregate, could materially adversely affect the business,
operations or properties of the Borrower and/or its Subsidiaries, the violation
of which, considered in the aggregate would materially adversely affect the
business, operations or properties of the Borrower and/or their Subsidiaries.
4.1.8 MARGIN STOCK. None of the proceeds of the Loans will be
used, directly or indirectly, by the Borrower or any Subsidiary for the purpose
of purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System or for any other purpose which might
make the transactions contemplated in this Agreement a "purpose credit" within
the meaning of said Regulation G or Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any of
such statutes.
4.1.9 INVESTMENT COMPANY ACT; MARGIN SECURITIES.
Neither the Borrower nor any of its Subsidiaries is an
"investment company" within the meaning of the Investment Company
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Act of 1940, as amended, nor is it, directly or indirectly, controlled by or
acting on behalf of any Person which is an investment company within the meaning
of said Act. Neither the Borrower nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying "margin security" within the
meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning
of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System.
4.1.10 LITIGATION. Except as otherwise disclosed to the
Lender on SCHEDULE 4.1.10 attached to and made a part of this Agreement, there
are no proceedings, actions or investigations pending or, so far as the
Borrower knows, threatened before or by any court, arbitrator or any
Governmental Authority which, in any one case or in the aggregate, if
determined adversely to the interests of the Borrower or any Subsidiary, would
have a material adverse effect on the business, properties, condition
(financial or otherwise) or operations, present or prospective, of the
Borrower.
4.1.11 FINANCIAL CONDITION. The consolidated financial
statements of the Borrower dated March 31, 1997, fairly present in all material
respects the financial position of the Borrower and its Subsidiaries and the
results of their operations and transactions in their surplus accounts as of the
date and for the period referred to and have been prepared in accordance with
GAAP applied on a consistent basis throughout the period involved, subject to
year-end adjustments and footnotes. There are no liabilities, direct or
indirect, fixed or contingent, of the Borrower or its Subsidiaries as of the
date of such financial statements which are not reflected therein or in the
notes thereto. There has been no material adverse change in the financial
condition or operations of the Borrower or its Subsidiaries since the date of
such financial statements and to the Borrower's knowledge no such adverse change
is pending or threatened. Neither the Borrower nor any Subsidiary has guaranteed
the obligations of, or made any investment in or advances to, any Person, except
as disclosed in such financial statements. The representations and warranties
contained in this Section shall also cover financial statements of the Borrower
furnished from time to time to the Lender pursuant to Section 6.1.1 (Financial
Statements) of this Agreement.
4.1.12 PROFORMA FINANCIAL STATEMENTS. The Offering Memorandum
contains a proforma consolidated and consolidating balance sheet of Holding and
its Subsidiaries as of immediately after consummation of the Merger Agreement
Transactions and the transactions incident thereto (the "Proforma Balance
Sheet"). The Borrower has furnished to the Lender proforma financial projections
for the five (5) year period subsequent to the closing of the Merger Agreement
Transactions (the "Proforma Financial Projections"). The Proforma Balance Sheet
has been
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prepared substantially in accordance with GAAP, and fairly presents the
consolidated financial condition of the Borrower and its Subsidiaries as of
immediately after consummation of the Merger Agreement Transactions, this
Agreement and the transactions incident thereto. The Proforma Financial
Projections represent the Borrower's good faith estimate of the future
operations of the Borrower and are based on reasonable and conservative
assumptions of the Borrower.
4.1.13 FULL DISCLOSURE. The financial statements referred to
in Section 4.1.11 (Financial Condition) of this Agreement, the Financing
Documents (including, without limitation, this Agreement), and the written
statements, reports or certificates furnished by the Borrower in connection
with the Financing Documents (a) do not contain any untrue statement of a
material fact and (b) when taken in their entirety, do not omit any material
fact necessary to make the statements contained therein not misleading. The
budgets and projections under Section 6.1.1(f) represent the Borrower's good
faith estimate of the future operations of the Borrower.
4.1.14 INDEBTEDNESS FOR BORROWED MONEY. Except for the
Obligations and the indebtedness under the Senior Notes, and except as set
forth in SCHEDULE 4.1.14 attached to and made a part of this Agreement, the
Borrower has no Indebtedness for Borrowed Money. The Lender has received
photocopies of all promissory notes evidencing any Indebtedness for Borrowed
Money set forth in SCHEDULE 4.1.14, together with any and all subordination
agreements, other agreements, documents, or instruments securing, evidencing,
guarantying or otherwise executed and delivered in connection therewith.
4.1.15 TAXES. Each of the Borrower and its Subsidiaries has
filed all returns, reports and forms for Taxes which, to the knowledge of the
Borrower, are required to be filed, and has paid all Taxes as shown on such
returns or on any assessment received by it, to the extent that such Taxes have
become due, unless and to the extent only that such Taxes, assessments and
governmental charges are currently contested in good faith and by appropriate
proceedings by the Borrower, such Taxes are not the subject of any Liens other
than Permitted Liens, and adequate reserves therefor have been established as
required under GAAP. All tax liabilities of the Borrower were as of the date of
audited financial statements referred to in Section 4.1.11 (Financial
Condition) above, and are now, adequately provided for on the books of the
Borrower or its Subsidiaries, as appropriate. As of the Closing Date, no tax
liability has been asserted by the Internal Revenue Service or any state or
local authority against the Borrower for Taxes in excess of those already paid.
4.1.16 ERISA. With respect to any "pension plan" as defined
in SECTION 3(2) of ERISA, which plan is now or
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previously has been maintained or contributed to by the Borrower and/or by any
commonly controlled entity: (a) no "accumulated funding deficiency" as defined
in Code Section 412 or ERISA Section 302 in a material amount has occurred,
whether or not that accumulated funding deficiency has been waived; (b) no
Reportable Event has occurred that will have Material Adverse Effect; (c) no
termination of any plan subject to Title IV of ERISA has occurred that will
have Material Adverse Effect; (d) neither the Borrower nor any commonly
controlled entity (as defined under ERISA) has incurred a "complete withdrawal"
within the meaning of ERISA Section 4203 from any Multiemployer Plan that will
have Material Adverse Effect; (e) neither the Borrower nor any commonly
controlled entity has incurred a "partial withdrawal" within the meaning of
ERISA Section 4205 with respect to any Multiemployer Plan; (f) no Multiemployer
Plan to which the Borrower or any commonly controlled entity has an obligation
to contribute is in "reorganization" within the meaning of ERISA Section 4241
nor has notice been received by the Borrower or any commonly controlled entity
that such a Multiemployer Plan will be placed in "reorganization," if such
reorganization would reasonably be expected to have a Material Adverse Effect.
4.1.17 TITLE TO PROPERTIES. Subject to the Permitted Liens,
the Borrower has good and marketable title to all of its properties, including,
without limitation, the Collateral and the properties and assets reflected in
the balance sheets described in Section 4.1.11 (Financial Condition) above.
Subject to the Permitted Liens, the Borrower has legal, enforceable and
uncontested rights to use freely such property and assets. All of such
properties, including, without limitation, the Collateral which were purchased,
were purchased for fair consideration and reasonably equivalent value in the
ordinary course of business.
4.1.18 PATENTS, TRADEMARKS, ETC. Each of the Borrower and its
Subsidiaries owns, possesses, or has the right to use all necessary Patents,
licenses, Trademarks, Copyrights, permits and franchises to own its properties
and to conduct its business as now conducted, without known conflict with the
rights of any other Person.
4.1.19 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS
CONTAMINATION.
To the Borrower's knowledge, (a) no Hazardous Materials are located on
any real property owned, controlled or operated by of the Borrower or for which
the Borrower is, or is claimed to be, responsible, except for reasonable
quantities of necessary supplies for use by the Borrower in the ordinary course
of its current line of business and stored, used and disposed in accordance with
applicable Laws; and (b) no property owned, controlled or operated by the
Borrower or for which the Borrower has, or is claimed to have, responsibility
has ever been used as a manufacturing,
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storage, or dump site for Hazardous Materials nor is affected by Hazardous
Materials Contamination at any other property.
4.1.20 PERFECTION AND PRIORITY OF COLLATERAL. The Lender has,
or upon execution and recording of this Agreement and the Security Documents
will have, and will continue to have as security for the Obligations, a valid
and perfected Lien on and security interest in all Collateral, free of all other
Liens, claims and rights of third parties whatsoever except Permitted Liens.
4.1.21 PLACES OF BUSINESS AND LOCATION OF COLLATERAL.
The information contained in the Collateral Disclosure List is complete
and correct as of the Closing Date in all material respects.
4.1.22 MERGER AGREEMENT TRANSACTION.
(a) The Lender has received true and correct
photocopies of the Merger Agreement and each of the other Merger Agreement
Documents, executed, delivered and/or furnished on or before the Closing Date in
connection with the Merger Agreement Transaction. Neither the Merger Agreement
nor any of the other Merger Agreement Documents have been modified, changed,
supplemented, canceled, amended or otherwise altered or affected, except as
otherwise disclosed to the Lender in writing on or before the Closing Date.
(b) The Merger Agreement Transaction has been effected,
closed and consummated pursuant to, and in accordance with, the terms and
conditions of the Merger Agreement and with all applicable Laws.
(c) As part of the closing of the Merger Agreement
Transaction, the Merger Company received paid-in cash Equity aggregating not
less than Fifteen Million Dollars ($15,000,000), which Equity was paid to the
Merger Company at such times, by such purchasers, and on such terms and
conditions as shall have been disclosed to, and approved by, the Lender in
writing on or before the Closing Date and in accordance with all applicable
Laws.
(d) The Lender has received true and correct
photocopies of the Indenture, the Offering Memorandum, and each of the Senior
Notes Documents, executed, delivered and/or furnished on or before the Closing
Date in connection with the transactions contemplated by the Senior Notes
Documents. Neither the Indenture, the Offering Memorandum nor any of the Senior
Notes Documents have been modified, changed, supplemented, canceled, amended or
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otherwise altered or affected, except as otherwise disclosed to the Lender in
writing on or before the Closing Date.
(e) As part of the closing of the Merger Agreement
Transaction, the Offering Transaction has been effected, closed and consummated
pursuant to, and in accordance with, the terms and conditions of the Indenture
and all applicable Laws and the Merger Company received proceeds from the sale
of the Senior Notes aggregating not less than Seventy Million Dollars
($70,000,000).
4.1.23 SECURITIES ACTS. The Borrower has not issued any
unregistered securities in violation of the registration requirements of Section
5 of the Securities Act of 1933, as amended, or any other Law, and is not in
violation of any rule, regulation, or requirement under the Securities Act of
1933, as amended, or the Securities and Exchange Act of 1934, as amended. The
Borrower is not required to qualify any indenture under the Trust Indenture Act
of 1939, as amended, in connection with the execution and delivery of any of the
Notes.
4.1.24 GOVERNMENTAL REGULATION. Neither the Borrower nor any
of its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act or the Interstate Commerce Act or to
any Federal or state Laws limiting its ability to incur Indebtedness for
Borrowed Money.
SECTION 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND
WARRANTIES.
All representations and warranties contained in or made under or in
connection with this Agreement and the other Financing Documents shall survive
the Closing Date, the making of any advance under the Loans and extension of
credit made hereunder, and the incurring of any other Obligations and shall be
deemed to have been made at the time of each request for, and again at the time
the making of, each advance under the Loans and each the issuance of each Letter
of Credit except that the representations and warranties which relate to
financial statements which are referred to in Section 4.1.11, shall also be
deemed to cover financial statements furnished from time to time to the Lender
pursuant to Section 6.1.1 (Financial Statements) of this Agreement.
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE.
The making of the initial advance under the Loans or, if sooner, the
issuance of the initial Letter of Credit is subject to the fulfillment on or
before the Closing Date of the following
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conditions precedent in a manner satisfactory in form and substance
to the Lender and its counsel:
5.1.1 ORGANIZATIONAL DOCUMENTS - BORROWER. The Lender shall
have received:
(a) a certificate of good standing for the Borrower certified
by the Secretary of State, or other appropriate Governmental Authority,
of the state of incorporation for the Borrower;
(b) a certificate of qualification to do business for the
Borrower certified by the Secretary of State or other Governmental
Authority of each state in which the Borrower conducts business and
where the failure to qualify would have a Material Adverse Effect;
(c) a certificate dated as of the Closing Date by the
Secretary or an Assistant Secretary of the Borrower covering:
(i) true and complete copies of the Borrower's
corporate charter, bylaws, and all amendments thereto;
(ii) true and complete copies of the resolutions of
its Board of Directors authorizing (i) the execution, delivery
and performance of the Financing Documents, the Senior Notes
Documents and the Merger Agreement Documents to which the
Borrower is a party, (ii) the borrowings by the Borrower
hereunder, (iii) the granting of the Liens contemplated by
this Agreement and the Financing Documents to which the
Borrower is a party, and (iv) the Merger Agreement
Transaction;
(iii) the incumbency, authority and signatures of the
officers of the Borrower authorized to sign this Agreement and
the other Financing Documents to which the Borrower is a
party; and
(iv) the identity of the Borrower's current
directors, common stock holders and other equity holders, as
well as their respective percentage ownership interests.
5.1.2 OPINION OF BORROWER'S COUNSEL. The Lender shall have
received the favorable opinion of counsel for the Borrower addressed to the
Lender.
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5.1.3 CONSENTS, LICENSES, APPROVALS, ETC. The Lender shall
have received copies of all consents, licenses and approvals, required in
connection with the execution, delivery, performance, validity and
enforceability of the Financing Documents, the Senior Notes Documents and the
Merger Agreement Documents, and such consents, licenses and approvals shall be
in full force and effect.
5.1.4 NOTES. The Lender shall have received the Revolving
Credit Note, each conforming to the requirements hereof and executed by a
Responsible Officer of the Borrower and attested by a duly authorized
representative of the Borrower.
5.1.5 FINANCING DOCUMENTS AND COLLATERAL. The Borrower shall
have executed and delivered the Financing Documents to be executed by it, and
shall have delivered original Chattel Paper, Instruments, Securities, and
related Collateral and all opinions, title insurance, and other documents
contemplated by Article 3 hereof, including, without limitation, that each
original stock certificate of Stir Melter and blank stock powers with respect
thereto.
5.1.6 OTHER FINANCING DOCUMENTS. In addition to the Financing
Documents to be delivered by the Borrower, the Lender shall have received the
Financing Documents duly executed and delivered by Persons other than the
Borrower.
5.1.7 OTHER DOCUMENTS, ETC. The Lender shall have received
such other certificates, opinions, documents and instruments confirmatory of or
otherwise relating to the transactions contemplated hereby as may have been
reasonably requested by the Lender.
5.1.8 PAYMENT OF FEES. The Lender shall have received payment
of any Fees due on or before the Closing Date.
5.1.9 COLLATERAL DISCLOSURE LIST. The Borrower shall have
delivered the Collateral Disclosure List required under the provisions of
Section (Collateral Disclosure List) hereof duly executed by a Responsible
Officer of the Borrower.
5.1.10 RECORDINGS AND FILINGS. The Borrower shall have: (a)
executed and delivered all Financing Documents (including, without limitation,
UCC-1 and UCC-3 statements) required to be filed, registered or recorded in
order to create, in favor of the Lender, a perfected Lien in the Collateral
(subject only to the Permitted Liens) in form and in sufficient number for
filing, registration, and recording in each office in each jurisdiction in which
such filings, registrations and recordations are required, and (b) delivered
such evidence as the Lender require that all necessary filing fees and all
recording and other similar
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fees, and all Taxes and other expenses related to such filings, registrations
and recordings will be or have been paid in full.
5.1.11 INSURANCE CERTIFICATE. The Lender shall have received
an insurance certificate in accordance with the provisions of Section 6.1.7
(Insurance) and Section 6.1.8 (Insurance With Respect to Equipment, the
Inventory and the Mortgaged Property) of this Agreement.
5.1.12 LANDLORD'S WAIVERS. The Lender shall have received a
waiver from each landlord of each and every business premise leased by the
Borrower and on which any of the Collateral is or may hereafter be located,
which landlords' waivers must be reasonably acceptable to the Lender and its
counsel.
5.1.13 BAILEE ACKNOWLEDGEMENTS. The Lender shall have
received an agreement acknowledging the Lender's Liens from each bailee,
warehouseman, consignee or similar third party which has possession of any of
the Collateral with a fair market value in excess of $500,000, which agreements
must be reasonably acceptable to the Lender and its counsel in their reasonable
discretion.
5.1.14 FIELD EXAMINATION. The Lender shall have completed a
field examination and audit of the Borrower's business, operations and income,
the results of which field examination and audit shall be in all respects
reasonably acceptable to the Lender in its sole but reasonable discretion and
shall include reference discussions with key customers and vendors.
5.1.15 PROFORMA BALANCE SHEET AND PROJECTIONS. The Lender
shall have received and approved the Borrower's Proforma Balance Sheet and
Proforma Financial Projections, which Proforma Balance Sheet and Proforma
Financial Projections must be in form and content acceptable to the Lender in
its sole but reasonable discretion.
5.1.16 OFFERING. The Lender shall have received a certificate
signed by a Responsible Officer of the Borrower, certifying to the Lender that
the Merger Company (a) received the proceeds from the sale of the Senior Notes,
in accordance with, and pursuant to, the terms and conditions of the Offering
Memorandum, the Indenture, and the Senior Notes Documents, and applied the same
to such purposes as has been previously disclosed to, and approved by, the
Lender, and (b) has delivered to the Lender true and correct photocopies of all
Senior Notes Documents. The Borrower shall have delivered such evidence of the
receipt of such proceeds as may be requested by the Lender. The Lender must be
satisfied that such proceeds have been paid to the Merger Company on such terms
and conditions as shall have been previously disclosed to, and approved by, the
Lender.
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5.1.17 CAPITAL FUNDS. The Lender shall have received a
certificate signed by a Responsible Officer of the Borrower, certifying to the
Lender that the Merger Company received paid-in cash Equity aggregating not less
than Fifteen Million Dollars ($15,000,000), which Equity was paid to the Merger
Company at such times, by such purchasers, and on such terms and conditions as
shall have been disclosed to, and approved by, the Lender in writing on or
before the Closing Date and in accordance with all applicable Laws. The Borrower
shall have delivered such evidence of the Equity as may be requested by the
Lender. The Lender must be satisfied that such Equity has been paid to the
Merger Company on such terms and conditions as shall have been previously
disclosed to, and approved by, the Lender.
5.1.18 MERGER AGREEMENT TRANSACTION.
(a) The Lender shall be satisfied that the Merger
Agreement Transaction shall have been completed and closed in accordance with
the Merger Agreement and applicable Laws.
(b) The Lender shall have received photocopies of all
Merger Agreement Documents executed, delivered and/or furnished in connection
with the Merger Agreement Transaction, together with a certificate signed by a
Responsible Officer of the Borrower certifying that (i) the Merger Agreement and
the other Merger Agreement Documents furnished to the Lender are true, correct,
in full force and effect and the provisions thereof have not been in any way
modified, amended or waived, and (ii) the Merger Agreement Transaction has been
closed and completed in accordance with the Merger Agreement and the other
Merger Agreement Documents furnished to the Lender and in accordance with all
applicable Laws.
SECTION 5.2. CONDITIONS TO ALL EXTENSIONS OF CREDIT. The making of all
advances under the Loans and the issuance of all Letters of Credit is subject to
the fulfillment of the following conditions precedent:
5.2.1 COMPLIANCE. The Borrower shall have complied and shall
then be in compliance with all terms, covenants, conditions and provisions of
this Agreement and the other Financing Documents which are binding upon it.
5.2.2 DEFAULT. There shall exist no Event of Default or
Default hereunder.
5.2.3 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Borrower contained among the provisions of this Agreement
shall be true in all material respects and with the same effect as though such
representations and warranties had been made at the time of the making of, and
of the request for, each advance under the Loans, and the issuance of each
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Letter of Credit except that the representation and warranty pertaining to
balance sheets, financial statements and other financial condition information
or data shall refer to the latest balance sheets, financial statements, and
financial condition information and data furnished to the Lender pursuant to the
provisions of this Agreement.
5.2.4 LEGAL MATTERS. All legal documents incident to each
advance under the Loans and each of the Letters of Credit shall be reasonably
satisfactory to counsel for the Lender.
ARTICLE 6
COVENANTS OF THE BORROWER
SECTION 6.1 AFFIRMATIVE COVENANTS. So long as any of the
Obligations (other than Contingent Indemnification Obligations) or the
Commitment shall be outstanding hereunder, the Borrower agrees with the Lender
as follows:
6.1.1 FINANCIAL STATEMENTS. The Borrower shall furnish to the
Lender:
(a) ANNUAL STATEMENTS AND CERTIFICATES. The Borrower
shall furnish to the Lender as soon as available, but in no event more than one
hundred twenty (120) days after the close of each fiscal year of the Borrower,
(i) a copy of the annual financial statement in reasonable detail reasonably
satisfactory to the Lender relating to the Borrower and its Subsidiaries,
prepared in accordance with GAAP and examined and certified by independent
certified public accountants reasonably satisfactory to the Lender, which
financial statement shall include a consolidated balance sheet of the Borrower
and its Subsidiaries, as of the end of such fiscal year and consolidated
statements of income, cash flows and changes in shareholders equity of the
Borrower and its Subsidiaries, for such fiscal year, (ii) a Compliance
Certificate, in substantially the form attached to this Agreement as EXHIBIT C,
as may be amended by the Lender and the Borrower from time to time, containing a
detailed computation of each financial covenant which is applicable for the
period reported, a certification that no material change has occurred to the
information contained in the Collateral Disclosure List (except as set forth in
a schedule attached to the certification), and a cash flow projection report,
each prepared by a Responsible Officer of the Borrower in a format reasonably
acceptable to the Lender, and (iii) a management letter in the form prepared by
the Borrower's independent certified public accountants.
(b) ANNUAL OPINION OF ACCOUNTANT. The Borrower shall
furnish to the Lender as soon as available, but in no event more than one
hundred twenty (120) days after the close of the Borrower's fiscal years, a
letter or opinion of the accountant
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who examined and certified the annual financial statement relating to the
Borrower and its Subsidiaries stating whether anything in such accountant's
examination has revealed the occurrence of a Default or an Event of Default
hereunder, and, if so, stating the facts with respect thereto.
(c) QUARTERLY STATEMENTS AND CERTIFICATES. The Borrower
shall furnish to the Lender as soon as available, but in no event more than
thirty (30) days after the end of each fiscal quarter, a financial statement in
reasonable detail satisfactory to the Lender relating to the Borrower and its
Subsidiaries, prepared in accordance with GAAP, which financial statement shall
include a consolidated balance sheet of the Borrower and its Subsidiaries, as of
the end of such fiscal quarter and consolidated statements of income, cash flows
and changes in shareholders equity of the Borrower and its Subsidiaries for such
fiscal quarter, and (ii) a Compliance Certificate, in substantially the form
attached to this Agreement as EXHIBIT C, containing a detailed computation of
each financial covenant which is applicable for the period reported and a
certification that no change has occurred to the information contained in the
Collateral Disclosure List (except as set forth on any schedule attached to the
certification), all as prepared and certified by a Responsible Officer of the
Borrower and accompanied by a certificate of that officer stating whether any
event has occurred which constitutes a Default or an Event of Default hereunder,
and, if so, stating the facts with respect thereto.
(d) OTHER QUARTERLY REPORTS. The Borrower shall furnish
to the Lender within thirty (30) days after the end of each fiscal quarter, a
report containing the following information:
(i) a summary aging schedule of all Receivables by
Account Debtor;
(ii) a summary aging of all accounts payable; and
(iii) such other information as the Lender may
reasonably request.
(e) ANNUAL BUDGET AND PROJECTIONS. The Borrower shall furnish
to the Lender as soon as available, but in no event later than the 30th day
after the end of each fiscal year a consolidated budget and pro forma financial
statements on a quarterly basis for the following fiscal year.
(f) ADDITIONAL REPORTS AND INFORMATION. The Borrower shall
furnish to the Lender promptly, such additional information, reports or
statements as the Lender may from time to time reasonably request.
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(g) CERTAIN INFORMATION FURNISHED TO SENIOR
NOTE HOLDERS.
Unless otherwise furnished to the Lender, the Borrower will furnish to
the Lender, at the same time sent to the Trustee and/or the holders of the
Senior Notes, at least one (l) copy of all financial statements, reports, and
other information sent by the Borrower to the Trustee and/or holders of the
Senior Notes.
6.1.2 RECORDKEEPING, RIGHTS OF INSPECTION,
FIELD EXAMINATION, ETC.
(a) The Borrower shall, and shall cause each of its
Subsidiaries to, maintain (i) a standard system of accounting in accordance with
GAAP, and (ii) proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
properties, business and activities.
(b) The Borrower shall, and shall cause each of its
Subsidiaries to, permit authorized representatives of the Lender to visit and
inspect the properties of the Borrower and its Subsidiaries, to review, audit,
check and inspect the Collateral at any time to review, audit, check and inspect
the Borrower's other books of record at any time with or without notice and to
make abstracts and photocopies thereof, and to discuss the affairs, finances and
accounts of the Borrower and its Subsidiaries, with the officers, directors,
employees and other representatives of the Borrower and its Subsidiaries and
their respective accountants, all at such times during normal business hours and
other reasonable times and as often as the Lender may reasonably request;
provided, however, that prior to initiating discussions with the Borrower's
employees, the Lender shall advise an officer of the Borrower of the Lender's
intention to do so and shall allow the Borrower's officers to be present during
such discussion. The Lender shall give the Borrower reasonable notice of visits
and inspections, which the Lender agrees will be no less than two (2) Business
Days, unless special circumstances exist, provided, however, the Borrower
acknowledges and agrees that (i) no notice need be given if there exists an
Event of Default or if the Lender has information which the Lender believes is
consistent with a conclusion that information provided by or at the direction of
the Borrower regarding the Collateral or the Borrower's financial condition has
been intentionally misstated; and (ii) the Borrower shall not prevent any visit
or inspection if the Lender or a representative thereof advises (which advice
may be oral) the Borrower that no notice is required because the inspection is
being made pursuant to Section 6.1.2(b)(ii) of this Agreement. For the purpose
of the foregoing, the Lender shall have, and are hereby granted, a right of
ingress and egress to the places where the Collateral is located, and may
proceed over and through any of the Borrower's owned or leased property.
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(c) Any and all reasonable costs and expenses incurred
by, or on behalf of, the Lender in connection with the conduct of any of the
foregoing shall be part of the Enforcement Costs and shall be payable to the
Lender upon demand. The Borrower acknowledges and agrees that such expenses may
include, but shall not be limited to, any and all reasonable out-of-pocket costs
and expenses of the Lender's employees and agents in, and when, travel- ling to
the Borrower's facilities.
6.1.3 CORPORATE EXISTENCE. The Borrower shall maintain, and
cause each of its Subsidiaries to maintain, its corporate existence in good
standing in the jurisdiction in which it is incorporated and in each other
jurisdiction where it is required to register or qualify to do business if the
failure to do so in such other jurisdiction would reasonably be expected to have
a Material Adverse Effect.
6.1.4 COMPLIANCE WITH LAWS. The Borrower shall comply, and
cause each of its Subsidiaries to comply, with all applicable Laws and observe
the valid requirements of Governmental Authorities, the noncompliance with or
the nonobservance of which would reasonably be expected to have a Material
Adverse Effect.
6.1.5 PRESERVATION OF PROPERTIES. The Borrower will, and will
cause each of its Subsidiaries to, at all times (a) maintain, preserve, protect
and keep its properties, whether owned or leased, in good operating condition,
working order and repair (ordinary wear and tear and Casualty excepted), and
from time to time will make all proper repairs, maintenance, replacements,
additions and improvements thereto needed to maintain such properties in good
operating condition, working order and repair, and (b) do or cause to be done
all things necessary to preserve and to keep in full force and effect its
material franchises, leases of real and personal property, trade names, Patents,
Trademarks, Copyrights and permits which are necessary for the orderly
continuance of its business.
6.1.6 LINE OF BUSINESS. The Borrower will continue to engage
substantially only in the business of design and assembly of glass bending and
tempering systems used by glass manufacturers and processors in the conversion
of flat glass into safety glass and the sale of new and aftermarket related
products and services and related businesses and services.
6.1.7 INSURANCE. Without implying any limitation to the
provisions of Section , the Borrower will, and will cause each of its
Subsidiaries to, at all times maintain with A- or better rated insurance
companies such insurance as is required by applicable Laws and such other
insurance, all in such amounts, of such types and against such risks, hazards,
liabilities, casualties and contingencies as are usually insured against in the
same geographic areas by business entities engaged in the
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same or similar business. Without limiting the generality of the foregoing, the
Borrower will, and will cause each of its Subsidiaries to, keep adequately
insured all of its property against loss or damage resulting from fire or other
risks insured against by extended coverage and maintain public liability
insurance against claims for personal injury, death or property damage occurring
upon, in or about any properties occupied or controlled by it, or arising in any
manner out of the businesses carried on by it. The Borrower shall deliver to the
Lender on the Closing Date (and thereafter on each date there is a material
change in the insurance coverage) a certificate of a Responsible Officer of the
Borrower containing a detailed list of the insurance then in effect and stating
the names of the insurance companies, the types, the amounts and rates of the
insurance, dates of the expiration thereof and the properties and risks covered
thereby.
6.1.8 INSURANCE WITH RESPECT TO EQUIPMENT,
INVENTORY AND MORTGAGED PROPERTY.
The Borrower will maintain and cause each of its Subsidiaries to
maintain hazard insurance with fire and extended coverage and naming the Lender
as an additional insured (or mortgagee, in the case of the Mortgaged Property)
with loss payable to the Lender as its interest may appear on the Equipment, the
Inventory and the Mortgaged Property in an amount at least equal to the lesser
amount of the outstanding principal amount of the Obligations or the fair market
value of Equipment, the Inventory and the Mortgaged Property (but in any event
sufficient to avoid any co-insurance obligations) and with a specific
endorsement to each such insurance policy pursuant to which the insurer agrees
to give the Lender at least thirty (30) days written notice before any
alteration or cancellation of such insurance policy and agrees to pay any loss
to the Lender as its interest may appear and that no act or default of the
Borrower shall affect the right of the Lender to recover under such policy in
the event of loss or damage. If there exists no Event of Default and the
insurance proceeds from a casualty is $500,000 or the less, such proceeds shall
be applied at the election of the Borrower promptly to replace or restore the
Equipment, the Inventory and the Mortgaged Property or the Obligations. The
Lender agrees that if the cost to repair or restore the Equipment, the Inventory
and the Mortgaged Property exceeds $500,000, and so long as there exists no
Event of Default at the time such proceeds are paid to the Lender or at any time
thereafter during which proceeds are held by the Lender, the proceeds shall be
held in an interest bearing escrow account and shall be available for the
replacement of such Equipment, the Inventory and the Mortgaged Property,
promptly, but in no event more than one (1) year after the Lender's receipt of
the proceeds. The Borrower hereby assigns to the Lender, and grants the Lender a
security interest in, such escrow account and the funds therein to secure the
payment and performance of the Obligations. Immediately upon the occurrence and
during the continuance of any Event of
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Default, or on the sooner expiration of the replacement period provided in this
Section, the Lender may apply such proceeds and other sums so deposited with the
Lender to the repayment of the Obligations in such order as the Lender may
elect.
6.1.9 TAXES. Except to the extent that the validity or amount
thereof is being contested in good faith and by appropriate proceedings, the
Borrower will, and will cause each of its Subsidiaries to, pay and discharge all
Taxes prior to the date when any interest or penalty would accrue for the
nonpayment thereof. The Borrower shall furnish to the Lender at such times as
the Lender may require proof satisfactory to the Lender of the making of
payments or deposits required by applicable Laws including, without limitation,
payments or deposits with respect to amounts withheld by the Borrower from wages
and salaries of employees and amounts contributed by the Borrower on account of
federal and other income or wage taxes and amounts due under the Federal
Insurance Contributions Act, as amended.
6.1.10 ERISA. The Borrower will, and will cause each of its
Subsidiaries and Affiliates to, comply with the funding requirements of ERISA
with respect to employee pension benefit plans for its respective employees. The
Borrower will not permit with respect to any employee benefit plan or plans
covered by Title IV of ERISA (a) any prohibited transaction or transactions
under ERISA or the Internal Revenue Code, which results, or may result, in any
material liability of the Borrower and/or any Subsidiary and/or Affiliate, or
(b) any Reportable Event if, upon termination of the plan or plans with respect
to which one or more such Reportable Events shall have occurred, there is or
would be any material liability of the Borrower and/or any Subsidiary and/or
Affiliate to the PBGC. Upon the Lender's request, the Borrower will deliver to
the Lender a copy of the most recent actuarial report, financial statements and
annual report completed with respect to any "defined benefit plan", as defined
in ERISA.
6.1.11 NOTIFICATION OF MERGERS AND ACQUISITIONS
AND OWNERSHIP CHANGES.
(a) The Borrower will notify and cause each of the
Subsidiaries to notify the Lender not less than twenty (20) days prior to
entering into any agreement of merger or agreement to acquire all or
substantially all of the assets as part of an acquisition of an on-going
business of any Person and will at the time of such notification provide the
Lender with the following, in form and substance reasonably acceptable to the
Lender:
(i) a proforma balance sheet of the
Borrower as of immediately after consummation of the
proposed merger or acquisition;
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(ii) proforma financial projections for the three (3)
year period subsequent to the consummation of the proposed
merger or acquisition;
(iii) a detailed calculation by a Responsible Officer
of the Borrower of the financial covenants contained in this
Agreement based on the balance sheet described in item (A) and
the projections described in item (B), which calculations
shall not show that a Default or an Event of Default on
account of a failure to comply with Section shall arise at the
time of or after the proposed merger or acquisition; and
(iv) a certificate from that Responsible Officer that
(A) the statements proforma balance sheet described in item
(i) has been prepared in a manner consistent with GAAP, and
fairly presents in all material respects the financial
condition of the Borrower as of immediately after the
consummation of the proposed merger or acquisition and that
the proforma financial projections described in item (ii)
represent the Borrower's good faith estimate of the future
operations of the Borrower and (B) no Default or Event of
Default results on account of the proposed merger or
acquisition.
(b) The Borrower will notify and cause each of the
Subsidiaries to notify the Lender not less than twenty (20) days prior to any
change in the ownership of Holding such that a Key Entity ceases to own
collectively at least seventy-five percent (75%) of the voting power of Holding
(determined as if all equity securities held by a Person and convertible into
voting securities were so converted) entitled to vote in the election of members
of the board of directors of Holding.
6.1.12 NOTIFICATION OF EVENTS OF DEFAULT AND
ADVERSE DEVELOPMENTS.
The Borrower shall promptly notify the Lender upon obtaining knowledge
of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or threatened
against the Borrower or its Subsidiaries and of the entry of any
judgment or Lien (other than any Permitted Liens) against any of the
assets or properties of the Borrower or any Subsidiary where the claims
against the Borrower or any of its Subsidiaries exceed One Million Five
Hundred Thousand Dollars ($1,500,000) and are not covered by insurance;
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(d) any event, development or circumstance whereby the
financial statements furnished hereunder fail in any material respect
to present fairly, in accordance with GAAP, the financial condition and
operational results of the Borrower or any of its Subsidiaries;
(e) any judicial, administrative or arbitral proceeding
pending against the Borrower or any of its Subsidiaries and any
judicial or administrative proceeding known by the Borrower to be
threatened against it or any of its Subsidiaries which, if adversely
decided, could materially adversely affect its financial condition or
operations (present or prospective);
(f) the receipt by the Borrower or any of its Subsidiaries of
any notice, claim or demand from any Governmental Authority which
alleges that the Borrower or any Subsidiary is in violation of any of
the terms of, or has failed to comply with any applicable Laws
regulating its operation and business, including, but not limited to,
the Occupational Safety and Health Act and the Environmental Protection
Act; and
(g) any other development in the business or affairs of the
Borrower and any of its Subsidiaries which may be materially adverse;
in each case describing in detail reasonably satisfactory to the Lender
the nature thereof and the action the Borrower proposes to take with
respect thereto.
6.1.13 HAZARDOUS MATERIALS; CONTAMINATION. The Borrower
agrees to:
(a) give notice to the Lender immediately upon the Borrower's
acquiring knowledge of the presence of any Hazardous Materials and of
any Hazardous Materials Contamination on any property owned or
controlled by the Borrower or for which the Borrower is, or is claimed
to be, responsible (provided that such notice shall not be required for
Hazardous Materials placed or stored on such property in accordance in
all material respects with applicable Laws in the ordinary course
(including, without limitation, quantity) of the Borrower's line of
business expressly described in this Agreement) or of any Hazardous
Materials Contamination, with a full description thereof;
(b) promptly comply in all material respects with any Laws
requiring the removal, treatment or disposal of Hazardous Materials or
Hazardous Materials
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Contamination and provide the Lender with reasonably
satisfactory evidence of such compliance; and
(c) as part of the Obligations, defend,
indemnify and hold harmless the Lender and its agents, employees,
trustees, successors and assigns from any and all claims (except for
those arising because of their own gross negligence or wilful
misconduct) which may now or in the future (whether before or after the
termination of this Agreement) be asserted as a result of the presence
of any Hazardous Materials or of any Hazardous Materials Contamination
on any property owned or controlled by the Borrower or for which the
Borrower is, or is claimed to be, responsible. The Borrower
acknowledges and agrees that this indemnification shall survive the
termination of this Agreement and the Commitment and the payment and
performance of all of the other Obligations.
6.1.14 DISCLOSURE OF SIGNIFICANT TRANSACTIONS. The Borrower
shall deliver to the Lender a written notice describing in detail each
transaction by it involving the purchase, sale, lease, or other acquisition or
Casualty to or disposition or Condemnation of an interest in Fixed or Capital
Assets which exceeds Two Hundred Fifty Thousand Dollars ($250,000.00), said
notices to be delivered to the Lender within thirty (30) days of the occurrence
of each such transaction.
6.1.15 FINANCIAL COVENANTS.
(a) Fixed Charge Coverage Ratio. The Borrower will
maintain, tested for each four (4) quarter period ending as of the last day of
each of the Borrower's fiscal quarters commencing September 30, 1997, a Fixed
Charge Coverage Ratio of not less than 1.0 to 1.0.
(b) Net Worth. The Borrower will at all times maintain,
tested on the Closing Date and as of the end of each of the Borrower's fiscal
quarters commencing September 30, 1997, a Net Worth of not less than the
following:
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- ----------------------------------------------------------------
Period Amount
- ----------------------------------------------------------------
Closing Date $15,000,000
- ----------------------------------------------------------------
The day next following the $14,500,000
Closing Date through and
including June 29, 1999
- ----------------------------------------------------------------
June 30, 1999 through and $16,500,000
including June 29, 2000
- ----------------------------------------------------------------
June 30, 2000 through and $14,500,000
including June 29, 2001
- ----------------------------------------------------------------
June 30, 2001 and thereafter $16,000,000
- ----------------------------------------------------------------
6.1.16 COLLECTION OF RECEIVABLES. Until such time that the
Lender shall notify the Borrower of the revocation of such privilege following
and during the continuance of an Event of Default, the Borrower and each of the
Subsidiaries shall at its own expense have the privilege for the account of, and
in trust for, the Lender of collecting its Receivables and receiving in respect
thereto all Items of Payment and shall otherwise completely service all of the
Receivables including (a) the billing, posting and maintaining of complete
records applicable thereto, (b) the taking of such action with respect to the
Receivables as the Lender may request or in the absence of such request, as the
Borrower and each of the Subsidiaries may deem advisable; and (c) the granting,
in the ordinary course of business, to any Account Debtor, any rebate, refund or
adjustment to which the Account Debtor may be lawfully entitled, and may accept,
in connection therewith, the return of goods, the sale or lease of which shall
have given rise to a Receivable and may take such other actions relating to the
settling of any Account Debtor's claim as may be commercially reasonable. The
Lender may, at its option, at any time or from time to time after and during the
continuance of an Event of Default hereunder, revoke the collection privilege
given in this Agreement to the Borrower and any one or more of the Subsidiaries
by either giving notice of its assignment of, and lien on the Collateral to the
Account Debtors or giving notice of such revocation to the Borrower. The Lender
shall not have any duty to, and the Borrower hereby releases the Lender from all
claims of loss or damage caused by the delay or failure to collect or enforce
any of the Receivables or to preserve any rights against any other party with an
interest in the Collateral, except to the extent caused by the Lender's gross
negligence or wilful misconduct of the Lender. The Lender shall be entitled at
any time and from time to time to confirm and verify Receivables.
6.1.17 ASSIGNMENTS OF RECEIVABLES. Following and during the
continuance of an Event of Default, the Borrower will promptly, upon request,
execute and deliver to the Lender written
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assignments, in form and content acceptable to the Lender, of specific
Receivables or groups of Receivables; provided, however, the Lien and/or
security interest granted to the Lender under this Agreement shall not be
limited in any way to or by the inclusion or exclusion of Receivables within
such assignments. Receivables so assigned shall secure payment of the
Obligations and are not sold to the Lender whether or not any assignment
thereof, which is separate from this Agreement, is in form absolute. The
Borrower agrees that neither any assignment to the Lender nor any other
provision contained in this Agreement or any of the other Financing Documents
shall impose on the Lender any obligation or liability of the Borrower with
respect to that which is assigned and the Borrower hereby agrees to indemnify
the Lender and hold the Lender harmless from any and all claims, actions, suits,
losses, damages, costs, expenses, fees, obligations and liabilities (except
those arising with respect to the Lender's own gross negligence or wilful
misconduct) which may be incurred by or imposed upon the Lender by virtue of the
assignment of and Lien on the Borrower's rights, title and interest in, to, and
under the Collateral.
6.1.18 GOVERNMENT ACCOUNTS. At the request of the Lender, the
Borrower will immediately notify the Lender if any of the Receivables arise out
of contracts with the United States or with any other Governmental Authority,
and execute any instruments and take any steps reasonably required by the Lender
in order that all moneys due and to become due under such contracts shall be
assigned to the Lender and notice thereof given to the Governmental Authority
under the Federal Assignment of Claims Act or any other applicable Laws.
6.1.19 DEFENSE OF TITLE AND FURTHER ASSURANCES. At its
expense the Borrower will defend the title to the Collateral (and any part
thereof), and will immediately execute, acknowledge and deliver any financing
statement, renewal, affidavit, deed, assignment, continuation statement,
security agreement, certificate or other document which the Lender may
reasonably require in order to perfect, preserve, maintain, continue, protect
and/or extend the Lien granted to the Lender under this Agreement or under any
of the other Financing Documents and the first priority of that Lien subject
only to the Permitted Liens. The Borrower will from time to time do whatever the
Lender may reasonably require by way of obtaining, executing, delivering, and/or
filing financing statements, landlords', mortgagees' or bailees' waivers,
notices of assignment and other notices and amendments and renewals thereof and
the Borrower will take any and all steps and observe such formalities as the
Lender may require, in order to create and maintain a valid Lien upon, pledge
of, or paramount security interest in, the Collateral, subject to the Permitted
Liens; provided, however, that the Lender agrees that the Borrower shall not be
deemed to be in default under this sentence if, despite its continuing best
reasonable efforts, a third party (such as a landlord) refuses to execute and
deliver a required document;
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provided further, however, that, by so agreeing, the Lender is not waiving any
rights or remedies or limiting the affect of any other provision of this
Agreement (including, by way of illustration and not limitation, the existence
of Liens which are not Permitted Liens). The Borrower shall pay to the Lender,
upon the earlier of thirty (30) days after demand by the Lender therefor or the
Revolving Credit Termination Date, all taxes, costs and expenses incurred by the
Lender in connection with the preparation, execution, recording and filing of
any such document or instrument. To the extent that the proceeds of any of the
Accounts or Receivables of the Borrower are expected to become subject to the
control of, or in the possession of, a party other than the Borrower or the
Lender, the Borrower shall cause all such parties to execute and deliver on the
Closing Date security documents, financing statements or other documents as
requested by the Lender and as may be necessary to evidence and/or perfect the
security interest of the Lender in those proceeds. The Borrower agrees that a
copy of a fully executed security agreement and/or financing statement shall be
sufficient to satisfy for all purposes the requirements of a financing statement
as set forth in Article 9 of the applicable Uniform Commercial Code. The
Borrower hereby irrevocably appoints the Lender as the Borrower's
attorney-in-fact, with power of substitution, in the name of the Lender or in
the name of the Borrower or otherwise, for the use and benefit of the Lender,
but at the cost and expense of the Borrower and without notice to the Borrower,
to execute and deliver any and all of the financing statements and other
instruments which the Lender may require pursuant the foregoing provisions of
this Section 6.1.19 in order to perfect or to continue the perfection of the
Lender's security interests in all or any part of the Collateral.
6.1.20 BUSINESS NAMES; LOCATIONS. The Borrower will notify
and cause each of the Subsidiaries to notify the Lender not less than thirty
(30) days prior to (a) any change in the name under which the Borrower or the
applicable Subsidiary conducts its business, (b) any change of the location of
the chief executive office of the Borrower or the applicable Subsidiary, and (c)
the opening of any new place of business or the closing of any existing place of
business, in either case, in which the book value of the Assets located therein
exceed in the aggregate $100,000, and any change in the location of the places
where the Collateral, or any part thereof, or the books and records, or any part
thereof, are kept.
6.1.21 SUBSEQUENT OPINION OF COUNSEL AS TO
RECORDING REQUIREMENTS.
In the event that the Borrower or any Subsidiary shall transfer its
principal place of business or the office where it keeps its records pertaining
to the Collateral, upon the Lender's request, the Borrower will provide to the
Lender a subsequent opinion of counsel as to the filing, recording and other
require-
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ments with which the Borrower and the Subsidiaries have complied to maintain the
Lien and security interest in favor of the Lender in the Collateral.
6.1.22 USE OF PREMISES AND EQUIPMENT. The Borrower agrees
that until the Obligations (other than Contingent Indemnification Obligations)
are fully paid and this Agreement has been terminated, the Lender (a) after and
during the continuance of a Default or an Event of Default, may use any of the
Borrower's owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (b) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any of the Borrower's owned or
leased property.
6.1.23 PROTECTION OF COLLATERAL. The Borrower agrees that the
Lender may at any time following the occurrence and during the continuance of an
Event of Default take such steps as the Lender deems reasonably necessary to
protect the Lender's interest in, and to preserve the Collateral, including, the
hiring of such security guards or the placing of other security protection
measures as the Lender deems appropriate, may employ and maintain at any of the
Borrower's premises a custodian who shall have full authority to do all acts
necessary to protect the Lender's interests in the Collateral and may lease
warehouse facilities to which the Lender may move all or any part of the
Collateral to the extent commercially reasonable. The Borrower agrees to
cooperate fully with the Lender's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as the Lender may reasonably
direct. All of the Lender's expenses of preserving the Collateral, including any
reasonable expenses relating to the compensation and bonding of a custodian,
shall be part of the Enforcement Costs.
6.1.24 SENIOR MANAGEMENT. The Borrower will promptly notify
the Lender of changes in the Borrower's senior management.
6.1.25 APPRAISALS. On or before August 1, 1997, the Lender
shall be provided with an appraisal (made on a fair market value basis) by an
appraiser chosen by the Lender with respect to the Mortgaged Property and of
Norman Levy Company (made on an orderly liquidation value basis) with respect to
the Equipment located at the Mortgaged Property. The basis of the appraisal
calculations shown on such appraisal report and all other aspects of the
appraisal report must be reasonably satisfactory to the Lender in all respects.
6.1.26 Application of Net Proceeds.
(a) Net Proceeds must be applied to either the payment
of the Obligations or to the restoration, repair or
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replacement of the Equipment or other Fixed or Capital Asset which gave rise to
the Net Proceeds.
(b) In the event that, and to the extent that, Net
Proceeds are to be applied to the restoration or repair of a Fixed or Capital
Asset subject to the Lien of the Mortgage or other Financing Document
encumbering real property, the Borrower shall so notify the Lender and the
restoration or repair shall be subject to the conditions contained in Section
4.4 of the Mortgage.
(c) In the event that, and to the extent that, Net
Proceeds are to be applied to the replacement, restoration or repair of
Equipment or other Fixed or Capital Assets, or the replacement of Equipment or
other Fixed or Capital Assets, the Borrower shall so notify the Lender, such
replacement, restoration or repair shall be promptly undertaken, diligently
pursued and, to the extent reasonably practicable, completed no later than one
(1) year following a Borrower's receipt of such Net Proceeds. Until so used,
such Net Proceeds shall be applied to and reserved against future advances
under, the Revolving Loan.
(d) In the event that, and to the extent that, Net
Proceeds are not used as provided in subparagraphs (b) or (c) above, such unused
Net Proceeds shall be paid to the Lender and applied by the Lender to, or held
as additional security for, the Obligations.
(e) Notwithstanding the foregoing, in the event the
Lender reasonably determines that a Casualty or Condemnation could reasonably be
expected to result in an Event of Default under Section 6.1.15 of this
Agreement, the Lender shall so notify the Borrower and five (5) Business Days
thereafter Net Proceeds shall be applied to, or held as additional security
for, the Obligations in such order and manner of application as the Lender may
from time to time in its sole and absolute discretion determine.
SECTION 6.2 NEGATIVE COVENANTS. So long as any of the Obligations
(other than Contingent Indemnification Obligations) or the Commitment shall be
outstanding hereunder, the Borrower agrees with the Lender as follows:
6.2.1 MERGER, ACQUISITION OR SALE OF ASSETS.
The Borrower will not enter into any merger or consolidation or
amalgamation, windup or dissolve itself (or suffer any liquidation or
dissolution) or acquire all or substantially all the assets of any Person
(unless in the case of a merger or acquisition, other than a Permitted
Acquisition with respect to which the Borrower has complied with Section
6.1.11(a) and is the survivor in the case of a merger), or make any Asset
Disposition other than Permitted Asset Dispositions made at time when no Event
of Default is continuing.
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Any required consent to an Asset Disposition other than a Permitted Asset
Disposition may be conditioned on a specified use of the Net Proceeds generated
by such Asset Disposition.
6.2.2 PURCHASE OR REDEMPTION OF SECURITIES,
DIVIDEND RESTRICTIONS.
The Borrower will not make any payment or take any action which would
be a Restricted Payment, other than those which are permitted under Section 4.09
of the Indenture on the Closing Date, except that payments or actions which
would result in a Default or an Event of Default under any provision of this
Agreement (other than this Section) or under any of the other Financing
Documents, shall not be permitted notwithstanding any provision of Section 4.09
of the Indenture.
6.2.3 INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist any
Indebtedness for Borrowed Money, or permit any Subsidiary so to do, except:
(a) the Obligations;
(b) Indebtedness of a Subsidiary to a Borrower;
(c) Indebtedness represented by the Senior Notes;
(d) Indebtedness secured by Permitted Liens;
(e) Subordinated Indebtedness;
(f) Indebtedness of the Borrower existing on the
date hereof and reflected on the financial statements furnished
pursuant to Section 4.1.11 (Financial Condition); and
(g) other Indebtedness not exceeding $500,000 in
the aggregate and not secured by any Lien.
6.2.4 INVESTMENTS, LOANS AND OTHER
TRANSACTIONS.
Except as otherwise provided in this Agreement, the Borrower will not,
and will not permit any of its Subsidiaries to, (a) make, assume, acquire or
continue to hold any investment in any realproperty (unless used in connection
with its business and treated as a Fixed or Capital Asset of the Borrower or the
Subsidiary) or any Person, whether by stock purchase, capital contribution,
acquisition of indebtedness of such Person or otherwise (including, without
limitation, investments in any joint venture or partnership), (b) guaranty or
otherwise become contingently liable for the indebtedness or obligations of any
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Person, or (c) make any loans or advances, or otherwise extend credit to any
Person, except:
(a) any advance to an officer of the Borrower or of any
Subsidiary for travel or other business expenses in the ordinary course
of business, provided that the aggregate amount of all such advances by
the Borrower and its Subsidiaries (taken as a whole) outstanding at any
time shall not exceed Two Hundred Fifty Thousand Dollars ($250,000);
(b) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business;
(c) any investment in Cash Equivalents in the ordinary course
of business;
(d) trade credit extended to customers in the ordinary course
of business;
(e) those investments, if any, more particularly set forth in
SCHEDULE 6.2.4 attached hereto and made a part hereof;
(f) Unsecured letters of credit, bankers' acceptances and/or
unsecured interest rate protection agreements between a Borrower and
any other financial institution reasonably acceptable to the Lender,
providing for the transfer or mitigation of foreign exchange risks or
interest rate risks either generally or under specific contingencies;
(g) advances and loans to officers and employees of any
Borrower to enable such officers and employees to purchase stock issued
by one or more of the Borrowers in the ordinary course of business,
provided that the aggregate amount of all such advances and loans by
all of the Borrowers (taken as a whole) outstanding at any time shall
not exceed Five Hundred Thousand Dollars ($500,000);
(h) deposits or pledges to secure obligations under leases in
the ordinary course of business;
(i) Securities acquired by and issued to the Borrower in
connection with the reorganization or bankruptcy of any of its Account
Debtors or suppliers; provided that the Lender is granted a first
priority perfected Lien on and security interest in such Securities;
(j) Securities acquired by and issued to the Borrower as part
of the closing and consummation of a Permitted Asset Disposition;
provided that the Lender is
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granted a first priority perfected Lien on and security
interest in such Securities;
(k) loans by the Borrower, not to exceed $700,000 in the
aggregate, to Holding to be paid by Holding to cover a portion of the
income tax liability of the holders of Holding's Class C shares as a
result of those holders' election under Section 83(b) of the Internal
Revenue Code with respect to those shares; and
(l) Permitted Acquisitions in an aggregate amount not to
exceed at any time One Million Five Hundred Thousand Dollars
($1,500,000).
6.2.5 SUBORDINATED INDEBTEDNESS. The Borrower will not, and
will not permit any Subsidiary to make:
(a) any payment of principal of, or interest on, any of the
Subordinated Indebtedness, if a Default or an Event of Default then
exists hereunder or would result from such payment;
(b) any payment of the principal or interest due on the
Subordinated Indebtedness as a result of acceleration thereunder or a
mandatory prepayment thereunder;
(c) any material amendment or modification of or supplement to
the documents evidencing or securing the Subordinated Indebtedness; or
(d) payment of principal or interest on the Subordinated
Indebtedness other than when due (without giving effect to any
acceleration of maturity or mandatory prepayment).
6.2.6 LIENS; CONFESSED JUDGMENT. The Borrower agrees that it
(a) will not create, incur, assume or suffer to exist any Lien upon any of its
properties or assets, whether now owned or hereafter acquired, or permit any
Subsidiary so to do, except for Liens securing the Obligations and Permitted
Liens, (b) will not agree to, assume or suffer to exist any provision in any
instrument or other document for confession of judgment, cognovit or other
similar right or remedy, except that, with respect to the items covered in the
definition of Permitted Liens, a Lien superior to the Liens securing all or any
part of the Obligations may exist (i) under item (a) of that definition, only
for Liens for real and personal property taxes, items (b), (c), (e), (g), (h),
(i), (j), (k), (m) and (ii) for no Liens under items (d) or (l) of that
definition, (iii) only for possessory Liens arising under item (f) of that
definition, and (iv) to no Liens under item (n) of that definition except to the
extent the same is expressly identified as superior on Schedule 1.1 (Permitted
Liens), provided, however, by
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agreeing that a Lien may have priority, the Lender shall not be deemed to have
conceded that such Lien in fact is entitled to or has priority or to have waived
or subordinated, or to be estopped from asserting, the priority of the Lender's
Liens, (d) will not enter into any contracts for the consignment of goods to the
Borrower, (e) will not execute or suffer the filing of any financing statements
or the posting of any signs giving notice of consignments to the Borrower, (f)
will not, as a material part of its business, engage in the sale of goods
belonging to others, and (g) will not allow or suffer to exist the failure of
any Lien described in the Security Documents to attach to, and/or remain at all
times perfected on, any of the property described in the Security Documents.
6.2.7 TRANSACTIONS WITH AFFILIATES. The Borrower and its
Subsidiaries will not enter into or participate in any transaction with any
Affiliate other than (a) an advisory fee payable to Key Equity Capital
Corporation, which will not exceed $250,000 in any twelve-month period and which
shall not be paid at any time during which there shall exist a Default or Event
of Default under Section 7.1.1, or under Section 7.1.3 on account of the
Borrower's failure to comply with Section 6.1.1 or 6.1.15; or (b) transactions
(other than transactions which involve Indebtedness for Borrowed Money or which
would constitute a Default or an Event of Default under this Agreement) in the
ordinary course of business of the Borrower and such Affiliate upon terms no
less favorable to the Borrower than the Borrower could obtain in a comparable
arm's-length transaction; (c) provided there shall exist and there shall be
caused no Default or Event of Default, payment to Holding to cover the
reasonable and necessary expenses incurred by Holding on account of the
Borrower (for example, accounting fees incurred in the preparation of Holding's
consolidated financial statements); and (d) payment to Holding to cover cash
Taxes to be paid immediately by Holding on account of the Borrower's income
being reported by Holding on a consolidated basis.
6.2.8 PROHIBITION ON HAZARDOUS MATERIALS. The Borrower shall
not place, manufacture or store or permit to be placed, manufactured or stored
any Hazardous Materials on any property owned, operated or controlled by the
Borrower or for which the Borrower is responsible other than Hazardous Materials
placed or stored on such property in accordance with applicable Laws in the
ordinary course, the violation of which would reasonably be expected to have a
Material Adverse Effect.
6.2.9 METHOD OF ACCOUNTING; FISCAL YEAR.
(a) The Borrower shall not change the method of
accounting employed in the preparation of any financial statements furnished to
the Lender under the provisions of Section (Financial Statements) of this
Agreement, unless required to conform to GAAP and on the condition that the
Borrower's
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accountants shall furnish such information as the Lender may request to
reconcile the changes with the Borrower's prior financial statements.
(b) The Borrower will not change its fiscal year from
a year ending on June 30.
6.2.10 COMPENSATION. Except as permitted by Section 6.2.7,
neither the Borrower nor any of its Subsidiaries will pay any bonuses, fees,
compensation, commissions, salaries, drawing accounts, or other payments (cash
and non-cash), whether direct or indirect, to any stockholders of the Borrower
or its Subsidiaries, or any Affiliate of the Borrower or its Subsidiaries, other
than reasonable compensation for actual services rendered by stockholders in
their capacity as officers or employees of the Borrower.
6.2.11 TRANSFER OF COLLATERAL. Unless the Borrower has
complied with Section 6.1.19 and Section 6.1.20, the Borrower and the
Subsidiaries will not transfer, or permit the transfer, to another location of
any of the Collateral or the books and records related to any of the Collateral.
6.2.12 INVENTORY. With respect to the Inventory with an
aggregate fair market value of greater than $500,000, the Borrower and the
Subsidiaries will not store any of its Inventory with a consignee, bailee,
warehouseman or similar Person without prior written notice to the Lender.
ARTICLE 7
DEFAULT AND RIGHTS AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under the provisions of
this Agreement:
7.1.1 FAILURE TO PAY. The failure of the Borrower to pay any
of the Obligations as and when due and payable in accordance with the provisions
of this Agreement, the Notes and/or any of the other Financing Documents and,
except in the case of the failure make any payment of principal and in the case
of the failure to pay any Obligation at its maturity (whether by acceleration or
otherwise) or when due on demand, such failure continues uncured for a period of
five (5) Business Days.
7.1.2 BREACH OF REPRESENTATIONS AND WARRANTIES.
Any representation or warranty made in this Agreement or in any report,
statement, schedule, certificate, financial statement or other document
furnished in connection with this Agreement, any of the other Financing
Documents, or the Obligations, shall prove
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to have been false or misleading when made (or, if applicable, when reaffirmed)
in any material respect.
7.1.3 FAILURE TO COMPLY WITH COVENANTS. The failure of the
Borrower to perform, observe or comply with any covenant, condition or agreement
contained in this Agreement and, (i) only with respect to a failure under
Section (a) through (e), such failure continues uncured for a period of five (5)
days after notice thereof from the Lender to the Borrower, or (ii) only with
respect to a failure under Sections 6.1.2(a) (Recordkeeping), 6.1.3 (Corporate
Existence), 6.1.5(a) (Preservation of Properties), or Section 6.1.9 (Taxes)
which does not relate to Taxes due or claimed to be due in excess of $250,000
in the aggregate, if the Borrower after discovering such failure, fails to
diligently and continuously pursue the cure of such failure or such failure
continues uncured thirty (30) days after discovery.
7.1.4 DEFAULT UNDER OTHER FINANCING DOCUMENTS
OR OBLIGATIONS.
A default shall occur under any of the other Financing Documents or
under any other Obligations, and such default is not cured within any applicable
grace period provided therein.
7.1.5 RECEIVER; BANKRUPTCY. The Borrower or any Subsidiary
shall (a) apply for or consent to the appointment of a receiver, trustee or
liquidator of itself or any of its property, (b) admit in writing its inability
to pay its debts as they mature, (c) make a general assignment for the benefit
of creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary
petition in bankruptcy or a petition or an answer seeking or consenting to
reorganization or an arrangement with creditors or to take advantage of any
bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute, or an answer admitting the material allegations of a
petition filed against it in any proceeding under any such law, or take
corporate action for the purposes of effecting any of the foregoing, or (f) by
any act indicate its consent to, approval of or acquiescence in any such
proceeding or the appointment of any receiver of or trustee for any of its
property, or suffer any such receivership, trusteeship or proceeding to continue
undischarged for a period of sixty (60) days, or (g) by any act indicate its
consent to, approval of or acquiescence in any order, judgment or decree by any
court of competent jurisdiction or any Governmental Authority enjoining or
otherwise prohibiting the operation of a material portion of the Borrower's or
any Subsidiary's business or the use or disposition of a material portion of the
Borrower's or any Subsidiary's assets.
7.1.6 INVOLUNTARY BANKRUPTCY, ETC. (a) An order for relief
shall be entered in any involuntary case brought against the Borrower or any
Subsidiary under the Bankruptcy Code, or (b)
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any such case shall be commenced against the Borrower or any Subsidiary and
shall not be dismissed within sixty (60) days after the filing of the petition,
or (c) an order, judgment or decree under any other Law is entered by any court
of competent jurisdiction or by any other Governmental Authority on the
application of a Governmental Authority or of a Person other than the Borrower
or any Subsidiary (i) adjudicating the Borrower, or any Subsidiary bankrupt or
insolvent, or (ii) appointing a receiver, trustee or liquidator of the Borrower
or of any Subsidiary, or of a material portion of the Borrower's or any
Subsidiary's assets, or (iii) enjoining, prohibiting or otherwise limiting the
operation of a material portion of the Borrower's or any Subsidiary's business
or the use or disposition of a material portion of the Borrower's or any
Subsidiary's assets, and such order, judgment or decree continues unstayed and
in effect for a period of thirty (30) days from the date entered.
7.1.7 JUDGMENT. Unless adequately insured in the opinion of
the Lender, the entry of a final judgment for the payment of money involving
more than $1,500,000 against the Borrower or any Subsidiary, and the failure by
the Borrower or such Subsidiary to discharge the same, or cause it to be
discharged, within thirty (30) days from the date of the order, decree or
process under which or pursuant to which such judgment was entered, or to secure
a stay of execution pending appeal of such judgment.
7.1.8 EXECUTION; ATTACHMENT. Any execution or attachment, if
together with all other existing executions or attachments aggregates more than
$1,500,000, shall be levied against the Collateral, or any part thereof, and
such execution or attachment shall not be set aside, discharged or stayed within
thirty (30) days after the same shall have been levied.
7.1.9 DEFAULT UNDER OTHER BORROWINGS. Default shall be made
with respect to any Indebtedness for Borrowed Money (other than the Loans) in
the aggregate in excess of $1,500,000 if the effect of such default is to
accelerate the maturity of such Indebtedness for Borrowed Money or to permit the
holder or obligee thereof or other party thereto to cause any such Indebtedness
for Borrowed Money to become due prior to its stated maturity, except that to
the extent Indebtedness for Borrowed Money arises under item (d) of that term
with respect to security interests in favor of the Borrower's customers to
secure amounts which the customer paid to Borrower as a deposit or progress
payment for the manufacture of identified equipment, the Borrower shall not be
deemed to be in default under this Section 7.1.9 so long as such customer's
claims (i) are being diligently contested (by way of assertions of offsets or
otherwise) by the Borrower in good faith and by appropriate proceedings, and
(ii) no Lien (other than a Permitted Lien), injunction or other restraining
order has been obtained by such customer.
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7.1.10 CHALLENGE TO AGREEMENTS. The Borrower or any guarantor
of any Obligations shall challenge the validity and binding effect of any
provision of any of the Financing Documents or shall state its intention to make
such a challenge of any of the Financing Documents or any of the Financing
Documents shall for any reason (except to the extent permitted by its express
terms) cease to be effective or to create a valid and perfected first priority
Lien (except for Permitted Liens) on, or security interest in, any of the
Collateral purported to be covered thereby.
7.1.11 MATERIAL ADVERSE CHANGE. If the Lender reasonably
determines that an event which has a Material Adverse Effect has occurred,
notifies the Borrower of that determination and such condition continues
unremedied to the reasonable satisfaction of the Lender for thirty (30) days
after such notice.
7.1.12 CHANGE IN CONTROL. If there shall occur a "change of
control," meaning any event or circumstance upon which (a) Holding ceases to own
one hundred percent (100%) (minus no more than forty-nine percent (49.9%) of the
capital stock granted to management of the Borrower as compensation for
services) of the capital stock of the Borrower, or (b) Key Equity Capital
Corporation, Key Equity Partners 97 or any other Person wholly owned by Key
Corp. (a "Key Entity") ceases to own collectively at least fifty and one-tenth
percent (50.1%) of the voting power of Holding (determined as if all equity
securities convertible into voting securities were so converted) entitled to
vote in the election of members of the board of directors of Holding; PROVIDED,
that a "change of control" shall not be deemed to have occurred hereunder upon
any transfer of all of the debt and equity securities of Holding owned by the
Key Entities to any Person if (i) at least a majority of the voting power and
equity interests in such Person is owned by at least a majority of the officers
(including all members of the Board of Directors of Holding designated by Key
Equity Capital Corporation) of Key Equity Capital Corporation at the time of
such transfer, (ii) such Person has at least $50,000,000 in cash funds available
for investment and (iii) such Person is under no contractual restriction
(whether pursuant to its governing documents or otherwise) to make further
investments in Holding or its subsidiaries.
7.1.13 LIQUIDATION, TERMINATION, DISSOLUTION,
ETC.
The Borrower shall liquidate, dissolve or terminate its existence or
shall suspend or terminate a substantial portion of its business operations.
SECTION 7.2 REMEDIES. Upon the occurrence of and during the continuance
of an Event of Default, the Lender may at any time thereafter exercise any one
or more of the following rights, powers or remedies:
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7.2.1 ACCELERATION. The Lender may declare the Obligations to
be immediately due and payable, notwithstanding anything contained in this
Agreement or in any of the other Financing Documents to the contrary, without
presentment, demand, protest, notice of protest or of dishonor, or other notice
of any kind, all of which the Borrower hereby waives.
7.2.2 FURTHER ADVANCES. The Lender may from time to time
without notice to the Borrower suspend, terminate or limit any further loans or
other extensions of credit under this Agreement and under any of the other
Financing Documents. Further, upon the occurrence of an Event of Default or
Default specified in Sections 7.1.5 (Receiver; Bankruptcy) or 7.1.6
(Involuntary Bankruptcy, etc.) above, the Revolving Credit Commitment and any
agreement in any of the Financing Documents to provide additional credit shall
immediately and automatically terminate and the unpaid principal amount of the
Notes (with accrued interest thereon) and all other Obligations then
outstanding, shall immediately become due and payable without further action of
any kind and without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Borrower. Upon termination of the
Revolving Credit Facility, the outstanding principal balance under the
Revolving Loan, and any accrued and unpaid interest thereon, shall be
immediately due and payable, and the Lender shall not make any further advances
under the Revolving Loan, unless it elects to do so in the exercise of its
sole and absolute discretion.
7.2.3 UNIFORM COMMERCIAL CODE. The Lender shall have all of
the rights and remedies of a secured party under the applicable Uniform
Commercial Code and other applicable Laws. Upon demand by the Lender, the
Borrower shall assemble the Collateral and make it available to the Lender, at a
place designated by the Lender. The Lender or its agents may without notice from
time to time enter upon the Borrower's premises to take possession of the
Collateral, to remove it, to render it unusable, to process it or otherwise
prepare it for sale, or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action by
the Lender with respect to the Collateral which is sent by regular mail, postage
prepaid, to the Borrower at the address set forth in Section 8.1 of this
Agreement, or such other address of the Borrower which may from time to time be
shown on the Lender's records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute commercially reasonable notice to
the Borrower. The Lender may alternatively or additionally give such notice in
any other commercially reasonable manner. Nothing in this Agreement shall
require the Lender to give any notice not required by applicable Laws.
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If any consent, approval, or authorization of any state, municipal or
other governmental department, agency or authority or of any person, or any
person, corporation, partnership or other entity having any interest therein,
should be necessary to effectuate any sale or other disposition of the
Collateral, the Borrower agrees to execute all such applications and other
instruments, and to take all other action, as may be required in connection with
securing any such consent, approval or authorization.
The Borrower recognizes that the Lender may be unable to effect a
public sale of all or a part of the Collateral consisting of securities by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and other applicable federal and state Laws. The Lender may, therefore,
in its discretion, take such steps as it may deem appropriate to comply with
such Laws and may, for example, at any sale of the Collateral consisting of
securities restrict the prospective bidders or purchasers as to their number,
nature of business and investment intention, including, without limitation, a
requirement that the Persons making such purchases represent and agree to the
satisfaction of the Lender that they are purchasing such securities for their
account, for investment, and not with a view to the distribution or resale of
any thereof. The Borrower covenants and agrees to do or cause to be done
promptly all such acts and things as the Lender may request from time to time
and as may be necessary to offer and/or sell the securities or any part thereof
in a manner which is valid and binding and in conformance with all applicable
Laws. Upon any such sale or disposition, the Lender shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral consisting
of securities so sold.
7.2.4 THE COLLATERAL ACCOUNT. If the Lender shall direct in
the exercise of its sole and absolute discretion, the Borrower will deposit, or
cause to be deposited, all Items of Payment to a bank account designated by the
Lender and from which the Lender alone has power of access and withdrawal (the
"Collateral Account"). Each deposit shall be made not later than the next
Business Day after the date of receipt of the Items of Payment. The Items of
Payment shall be deposited in precisely the form received, except for the
endorsements of the Borrower where necessary to permit the collection of any
such Items of Payment, the Borrower hereby agreeing to make such endorsement. In
the event the Borrower shall fail to do so, the Lender is hereby authorized by
the Borrower to make the endorsement in the name of the Borrower. Prior to such
a deposit, the Borrower will not commingle any Items of Payment with any of the
other funds or property of the Borrower, but will hold them separate and apart
in trust and for the account of the Lender.
In addition, if so directed by the Lender in the exercise of
its sole and absolute discretion, the Borrower shall direct the
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mailing of all Items of Payment from its Account Debtors to a post-office box
designated by the Lender, or to such other additional or replacement post-office
boxes pursuant to the request of the Lender from time to time (collectively, the
"Lockbox"). The Lender shall have unrestricted and exclusive access to the
Lockbox.
The Borrower hereby authorizes the Lender to inspect all Items of
Payment, endorse all Items of Payment in the name of the Borrower, and deposit
Items of Payment in the Collateral Account. The Lender reserves the right,
exercised in its sole and absolute discretion from time to time, to provide to
the Collateral Account credit prior to final collection of an Item of Payment
and to disallow credit for any Item of Payment which is unsatisfactory to the
Lender. In the event Items of Payment are returned to the Lender for any reason
whatsoever, the Lender may, in the exercise of its discretion from time to time,
forward such Items of Payment a second time. Any returned Items of Payment shall
be charged back to the Collateral Account, the Revolving Loan Account, or other
account, as appropriate.
The Lender will apply the whole or any part of the collected funds
credited to the Collateral Account against the Revolving Loan (or with respect
to Items of Payment which are not proceeds of accounts or inventory or after an
Event of Default, against any of the Obligations) or credit such collected funds
to the depository account of the Borrower with the Lender (or an Affiliate of
the Lender), the order and method of such application to be in the sole
discretion of the Lender.
7.2.5 SPECIFIC RIGHTS WITH REGARD TO
COLLATERAL.
In addition to all other rights and remedies provided hereunder or as
shall exist at law or in equity from time to time, the Lender may (but shall be
under no obligation to), without notice to the Borrower, and the Borrower hereby
irrevocably appoints the Lender as its attorney-in-fact, with power of
substitution, in the name of the Lender or in the name of the Borrower or
otherwise, for the use and benefit of the Lender, but at the cost and expense of
the Borrower and without notice to the Borrower:
(a) request any account debtor obligated on any of the
Accounts to make payments thereon directly to the Lender, with the
Lender taking control of the cash and non-cash proceeds thereof;
(b) compromise, extend or renew any of the Collateral or deal
with the same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any
part of the Collateral;
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(d) copy, transcribe, or remove from any place of business of
the Borrower or any Subsidiary all books, records, ledger sheets,
correspondence, invoices and documents, relating to or evidencing any
of the Collateral or without cost or expense to the Lender, make such
use of the Borrower's or any Subsidiary's place(s) of business as may
be reasonably necessary to administer, control and collect the
Collateral;
(e) repair, alter or supply goods if necessary to fulfill in
whole or in part the purchase order of any Account Debtor;
(f) demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or
adjust claims in respect of any of the Collateral or any legal
proceedings brought in respect thereof;
(i) endorse or sign the name of the Borrower upon any Items of
Payment, certificates of title, Instruments, Securities, stock powers,
documents, documents of title, financing statements, assignments,
notices, or other writing relating to or part of the Collateral and on
any Proof of Claim in Bankruptcy against an Account Debtor;
(j) notify the Post Office authorities to change the address
for the delivery of mail to the Borrower to such address or Post Office
Box as the Lender may designate and receive and open all mail addressed
to the Borrower; and
(k) take any other action necessary or beneficial to realize
upon or dispose of the Collateral or to carry out the terms of this
Agreement.
7.2.6 APPLICATION OF PROCEEDS. Any proceeds of sale or other
disposition of the Collateral will be applied by the Lender to the payment of
the Enforcement Costs, and any balance of such proceeds will be applied by the
Lender to the payment of the balance of the Obligations in such order and manner
of application as the Lender may from time to time in its sole and absolute
discretion determine. If the sale or other disposition of the Collateral fails
to fully satisfy the Obligations, the Borrower shall remain liable to the Lender
for any deficiency, except as applicable Laws provide otherwise.
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7.2.7 PERFORMANCE BY LENDER. Upon the occurrence and
continuation of an Event of Default, the Lender without notice to or demand upon
the Borrower and without waiving or releasing any of the Obligations or any
Default or Event of Default, may (but shall be under no obligation to) at any
time thereafter make such payment or perform such act for the account and at the
expense of the Borrower, and may enter upon the premises of the Borrower for
that purpose and take all such action thereon as the Lender may consider
necessary or appropriate for such purpose and the Borrower hereby irrevocably
appoints the Lender as its attorney-in-fact to do so, with power of
substitution, in the name of the Lender or in the name of the Borrower or
otherwise, for the use and benefit of the Lender, but at the cost and expense of
the Borrower and without notice to the Borrower. All sums so paid or advanced by
the Lender together with interest thereon from the date of payment, advance or
incurring until paid in full at the Post-Default Rate and all costs and
expenses, shall be deemed part of the Enforcement Costs, shall be paid by the
Borrower to the Lender on demand, and shall constitute and become a part of the
Obligations.
7.2.8 OTHER REMEDIES. The Lender may from time to time
proceed to protect or enforce its rights by an action or actions at law or in
equity or by any other appropriate proceeding, whether for the specific
performance of any of the covenants contained in this Agreement or in any of the
other Financing Documents, or for an injunction against the violation of any of
the terms of this Agreement or any of the other Financing Documents, or in aid
of the exercise or execution of any right, remedy or power granted in this
Agreement, the Financing Documents, and/or applicable Laws. The Lender is
authorized to offset and apply to all or any part of the Obligations all moneys,
credits and other property of any nature whatsoever of the Borrower now or at
any time hereafter in the possession of, in transit to or from, under the
control or custody of, or on deposit with, the Lender.
7.2.9 EXERCISE OF REMEDIES. Notwithstanding any provision of
this Agreement to the contrary, the Lender acknowledges and agrees that the
rights and remedies under SECTION 7.2 may only be exercised upon the occurrence
of and during the continuance of an Event of Default.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 NOTICES. All notices, requests and demands to or upon the
parties to this Agreement shall be in writing and shall be deemed to have been
given or made when delivered by hand on a Business Day, or two (2) days after
the date when deposited in the mail, postage prepaid by registered or certified
mail, return receipt requested, or when sent by overnight courier, on the
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Business Day next following the day on which the notice is delivered to such
overnight courier, addressed as follows:
Borrower:
with a copy to:
Key Equity
127 Public Square
6th Floor
Cleveland, Ohio 44144
Attention: Sean P. Ward
with a copy to:
Baker & Hostetler
3200 National City Center
1900 East 9th Street
Cleveland, Ohio 44114-3485
Attention: R. Steven Kestner, Esquire
Lender: NationsBank, N.A.
NationsBank Business Credit
100 South Charles Street
MD4-325-04-14
Baltimore, Maryland 21201
Attention: Melba B. Quizon
with a copy to:
Frederick W. Runge, Jr., Esquire
Miles & Stockbridge
10 Light Street
Baltimore, Maryland 21202
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
SECTION 8.2 AMENDMENTS; WAIVERS. This Agreement and the other Financing
Documents may not be amended, modified, or changed in any respect except by an
agreement in writing signed by the Lender and the Borrower. No waiver of any
provision of this Agreement or of any of the other Financing Documents, nor
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing. No course of dealing between the
Borrower and the Lender and no act or failure to act from time to time on the
part of the Lender shall constitute a waiver, amendment or modification of any
provision of this
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Agreement or any of the other Financing Documents or any right or remedy under
this Agreement, under any of the other Financing Documents or under applicable
Laws.
Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective only in the
specific instance, for the terms and purpose for which given, subject to such
conditions as the Lender may specify in any such instrument.
(b) No waiver of any Default or Event of Default shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereto.
(c) No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in the same,
similar or other circumstance.
(d) No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, shall constitute a waiver,
amendment or modification of any such term, condition, covenant or agreement or
of any such breach or preclude the Lender from exercising any such right, power
or remedy at any time or times.
(e) By accepting payment after the due date of any amount
payable under this Agreement or under any of the other Financing Documents, the
Lender shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.
SECTION 8.3 CUMULATIVE REMEDIES. The rights, powers and remedies
provided in this Agreement and in the other Financing Documents are cumulative,
may be exercised concurrently or separately, may be exercised from time to time
and in such order as the Lender shall determine and are in addition to, and not
exclusive of, rights, powers and remedies provided by existing or future
applicable Laws. In order to entitle the Lender to exercise any remedy reserved
to it in this Agreement, it shall not be necessary to give any notice, other
than such notice as may be expressly required in this Agreement. Without
limiting the generality of the foregoing, the Lender may:
(a) proceed against the Borrower with or without proceeding
against any Person who may be liable (by endorsement, guaranty,
indemnity or otherwise) for all or any part of the Obligations;
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(b) proceed against the Borrower with or without proceeding
under any of the other Financing Documents or against any Collateral or
other collateral and security for all or any part of the Obligations;
(c) without reducing or impairing the obligation of the
Borrower and without notice, release or compromise with any guarantor
or other Person liable for all or any part of the Obligations under the
Financing Documents or otherwise;
(d) without reducing or impairing the obligations of the
Borrower and without notice thereof: (i) fail to perfect the Lien in
any or all Collateral or to release any or all the Collateral or to
accept substitute Collateral, (ii) approve the making of advances under
the Revolving Loan under this Agreement, (iii) waive any provision of
this Agreement or the other Financing Documents, (iv) exercise or fail
to exercise rights of set-off or other rights, or (v) accept partial
payments or extend from time to time the maturity of all or any part of
the Obligations.
SECTION 8.4 SEVERABILITY. In case one or more provisions, or part
thereof, contained in this Agreement or in the other Financing Documents shall
be invalid, illegal or unenforceable in any respect under any Law, then without
need for any further agreement, notice or action:
(a) the validity, legality and enforceability of the remaining
provisions shall remain effective and binding on the parties thereto
and shall not be affected or impaired thereby;
(b) the obligation to be fulfilled shall be reduced to the
limit of such validity;
(c) if such provision or part thereof pertains to repayment of
the Obligations, then, at the sole and absolute discretion of the
Lender, all of the Obligations of the Borrower to the Lender shall
become immediately due and payable; and
(d) if the affected provision or part thereof does not pertain
to repayment of the Obligations, but operates or would prospectively
operate to invalidate this Agreement in whole or in part, then such
provision or part thereof only shall be void, and the remainder of this
Agreement shall remain operative and in full force and effect.
SECTION 8.5 ASSIGNMENTS BY LENDER. The Lender may sell, assign or
transfer (x) to any Person at any time with the prior written consent of the
Borrower, which consent shall not be
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unreasonably delayed or withheld, or (y) if there shall exist an Event of
Default, to any Person without notice to or the consent of the Borrower, all or
any part of the Obligations, and each such Person or Persons shall have the
right to enforce the provisions of this Agreement and any of the other Financing
Documents as fully as the Lender, provided that the Lender shall continue to
have the unimpaired right to enforce the provisions of this Agreement and any of
the other Financing Documents as to so much of the Obligations that the Lender
has not sold, assigned or transferred.
SECTION 8.6 PARTICIPATIONS BY LENDER. The Lender may at any time sell
participating interests in any of the Lender's Obligations or Commitments;
provided, however, that (a) no such participation shall relieve the Lender from
its obligations under this Agreement or under any of the other Financing
Documents to which it is a party, (b) the Lender shall remain solely responsible
for the performance of its obligations under this Agreement and under all of the
other Financing Documents to which it is a party, (c) the Borrower shall
continue to deal solely and directly with such Lender in connection with the
Lender's rights and obligations under this Agreement and the other Financing
Documents, and (d) unless there shall exist an Event of Default at the time of
sale, the purchaser shall be a Financial Institution or an affiliate of a
Financial Institution.
SECTION 8.7 DISCLOSURE OF INFORMATION BY LENDER. Each of the Lender,
each assignee of and participant in the Commitment hereby (a) acknowledges that
each of the Borrower and its Subsidiaries have trade secrets and financial,
marketing and other data and information the confidentiality of which is
important to its business and (b) agrees to keep confidential (i) any trade
secret of the Borrower and its Subsidiaries and (ii) any financial, marketing
and other data and information of the Borrower or any of its Subsidiaries
designated by it as confidential or that such Lender knows is confidential,
PROVIDED that this Section shall not preclude any Lender from furnishing any
such trade secret, data or information (i) as may be required by order of any
court of competent jurisdiction or requested by any governmental agency having
any regulatory authority over that Lender or its securities, (ii) to any other
party to this Agreement, (iii) to any actual or prospective transferee (so long
as such prospective transferee is a financial institution) of all or part of
that Lender's rights arising out of or in connection with this Agreement so
long as such prospective transferee to whom disclosure is made agrees to be
bound by the provisions of this Section 9.7, (iv) to anyone if it shall have
been already publicly disclosed (other than by that Lender in contravention of
this Section 9.7, (v) to the extent reasonably required in connection with the
exercise of any right or remedy under this Agreement or applicable Laws and
(vi) to that Lender's legal counsel, auditors and accountants.
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SECTION 8.8 SUCCESSORS AND ASSIGNS. This Agreement and all other
Financing Documents shall be binding upon and inure to the benefit of the
Borrower and the Lender and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Lender.
SECTION 8.9 CONTINUING AGREEMENTS. All covenants, agreements,
representations and warranties made by the Borrower in this Agreement, in any of
the other Financing Documents, and in any certificate delivered pursuant hereto
or thereto shall survive the making by the Lender of the Loans and the execution
and delivery of the Notes, shall be binding upon the Borrower regardless of how
long before or after the date hereof any of the Obligations were or are
incurred, and shall continue in full force and effect so long as any of the
Obligations are outstanding and unpaid. From time to time upon the Lender's
request, and as a condition of the release of any one or more of the Security
Documents, the Borrower and other Persons obligated with respect to the
Obligations shall provide the Lender with such acknowledgments and agreements as
the Lender may require to the effect that there exists no defenses, rights of
setoff or recoupment, claims, counterclaims, actions or causes of action of any
kind or nature whatsoever against the Lender, its agents and others, or to the
extent there are, the same are waived and released.
SECTION 8.10 ENFORCEMENT COSTS. The Borrower shall pay to the Lender on
demand all Enforcement Costs, together with interest thereon from the date
incurred or advanced until paid in full at a per annum rate of interest equal at
all times to the Post-Default Rate. Enforcement Costs shall be immediately due
and payable at the time advanced or incurred, whichever is earlier. Without
implying any limitation on the foregoing, the Borrower shall pay, as part of the
Enforcement Costs, upon demand any and all stamp and other Taxes and fees
payable or determined to be payable in connection with the execution and
delivery of this Agreement and the other Financing Documents and to save the
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay any Taxes or fees referred
to in this Section. The provisions of this Section shall survive the execution
and delivery of this Agreement, the repayment of the other Obligations and shall
survive the termination of this Agreement.
SECTION 8.11 APPLICABLE LAW; JURISDICTION.
8.11.1 As a material inducement to the Lender to enter into
this Agreement, the Borrower acknowledges and agrees that the Financing
Documents, including, this Agreement, shall be governed by the Laws of the
State, as if each of the Financing Documents and this Agreement had each been
executed, delivered, administered and performed solely within the State even
though for
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the convenience and at the request of the Borrower, one or more of the Financing
Documents may be executed elsewhere. The Lender acknowledges, however, that
remedies under certain of the Financing Documents which relate to property
outside the State may be subject to the laws of the state in which the property
is located.
8.11.2 The Borrower irrevocably submits to the jurisdiction
of any state or federal court sitting in the State over any suit, action or
proceeding arising out of or relating to this Agreement or any of the other
Financing Documents. The Borrower irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. Final judgment in any such suit,
action or proceeding brought in any such court shall be conclusive and binding
upon the Borrower and may be enforced in any court in which the Borrower is
subject to jurisdiction, by a suit upon such judgment, PROVIDED that service of
process is effected upon the Borrower in one of the manners specified in this
Section or as otherwise permitted by applicable Laws.
8.11.3 The Borrower hereby irrevocably designates and
appoints The Corporation Trust, Incorporated, 32 South Street, Baltimore,
Maryland 21202, as the Borrower's authorized agent to receive on the Borrower's
behalf service of any and all process that may be served in any suit, action or
proceeding of the nature referred to in this Section in any state or federal
court sitting in the State. If such agent shall cease so to act, the Borrower
shall irrevocably designate and appoint without delay another such agent in the
State satisfactory to the Lender and shall promptly deliver to the Lender
evidence in writing of such other agent's acceptance of such appointment and its
agreement that such appointment shall be irrevocable.
8.11.4 The Borrower hereby consents to process being served
in any suit, action or proceeding of the nature referred to in this Section by
(a) the mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the Borrower at the Borrower's address
designated in or pursuant to Section hereof, and (b) serving a copy thereof upon
the agent, if any, designated and appointed by the Borrower as the Borrower's
agent for service of process by or pursuant to this Section. The Borrower
irrevocably agrees that such service (y) shall be deemed in every respect
effective service of process upon the Borrower in any such suit, action or
proceeding, and (z) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon the Borrower. Nothing in this Section
shall affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender other-
-82-
<PAGE> 84
wise to bring proceedings against the Borrower in the courts of any
jurisdiction or jurisdictions.
SECTION 8.12 DUPLICATE ORIGINALS AND COUNTERPARTS. This Agreement may
be executed in any number of duplicate originals or counterparts, each of such
duplicate originals or counterparts shall be deemed to be an original and all
taken together shall constitute but one and the same instrument.
SECTION 8.13 HEADINGS. The headings in this Agreement are included
herein for convenience only, shall not constitute a part of this Agreement for
any other purpose, and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.
SECTION 8.14 NO AGENCY. Nothing herein contained shall be construed to
constitute the Borrower as the Lender's agent for any purpose whatsoever or to
permit the Borrower to pledge any of the Lender's credit. The Lender shall not
be responsible nor liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof. The Lender shall not, by anything herein or in
any of the Financing Documents or otherwise, assume any of the Borrower's
obligations under any contract or agreement assigned to the Lender, and the
Lender shall not be responsible in any way for the performance by the Borrower
of any of the terms and conditions thereof.
SECTION 8.15 DATE OF PAYMENT. Should the principal of or interest on
any of the Notes become due and payable on other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day and in
the case of principal, interest shall be payable thereon at the rate per annum
specified in the Notes during such extension.
SECTION 8.16 ENTIRE AGREEMENT. This Agreement is intended by the Lender
and the Borrower to be a complete, exclusive and final expression of the
agreements contained herein. Neither the Lender nor the Borrower shall hereafter
have any rights under any prior agreements pertaining to the matters addressed
by this Agreement but shall look solely to this Agreement for definition and
determination of all of their respective rights, liabilities and
responsibilities under this Agreement.
SECTION 8.17 WAIVER OF TRIAL BY JURY. THE BORROWER AND THE LENDER
HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY
PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE
COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.
-83-
<PAGE> 85
This waiver is knowingly, willingly and voluntarily made by
the Borrower and the Lender, and the Borrower and the Lender hereby represent
that no representations of fact or opinion have been made by any individual to
induce this waiver of trial by jury or to in any way modify or nullify its
effect. The Borrower and the Lender further represent that they have been
represented in the signing of this Agreement and in the making of this waiver by
independent legal counsel, selected of their own free will, and that they have
had the opportunity to discuss this waiver with counsel.
SECTION 8.18 LIABILITY OF THE LENDER. The Borrower hereby agrees that
the Lender shall not be chargeable for any negligence, mistake, act or omission
of any accountant, examiner, agency or attorney employed by the Lender in making
examinations, investigations or collections, or otherwise in perfecting,
maintaining, protecting or realizing upon any lien or security interest or any
other interest in the Collateral or other security for the Obligations.
By inspecting the Collateral or any other properties of the
Borrower or by accepting or approving anything required to be observed,
performed or fulfilled by the Borrower or to be given to the Lender pursuant to
this Agreement or any of the other Financing Documents, the Lender shall not be
deemed to have warranted or represented the condition, sufficiency, legality,
effectiveness or legal effect of the same, and such acceptance or approval shall
not constitute any warranty or representation with respect thereto by the
Lender.
IN WITNESS WHEREOF, each of the parties hereto have executed and
delivered this Agreement under their respective seals as of the day and year
first written above.
WITNESS: NATIONSBANK, N.A.
/s/ Sean P. Ward By: /s/ Joseph J. Virzi (SEAL)
- ------------------------- ----------------------------
Joseph J. Virzi
Vice President
WITNESS: GLASSTECH, INC.
/s/ Kenneth H. Wetmore By: /s/ Mark D. Christman (SEAL)
- ------------------------- ----------------------------
Mark D. Christman
President
-84-
<PAGE> 86
LIST OF EXHIBITS
----------------
A-1. Revolving Credit Note
B. Security Procedures
C. Form of Compliance Certificate
D. Indenture
-85-
<PAGE> 87
EXHIBIT B
NATIONSBANK BUSINESS CREDIT
WIRE TRANSFER PROCEDURES
The transfer of funds by means of wire may be made by NationsBank
(lender) at the request of its customer (borrower). Such wire transfers are
categorized by lender as either repetitive or non-repetitive.
Repetitive:
- ----------
Repetitive wire transfers may vary in amount, but are consistent in terms of the
payee, the location to which funds are wired, the bank name, account number and
the routing transit number.
Either borrower or lender may initiate a repetitive wire transfer. The borrower
may identify the repetitive nature of transfers and request they be established
as such via the "Repetitive Wire Transfer Authorization Form" (copy attached).
Lender, after observing numerous transfers to the same recipient and
destination, may initiate the repetitive process by faxing or mailing the
"Repetitive Wire Authorization Form" to the borrower for completion and return.
Although a first request for a repetitive wire transfer may be honored from a
faxed copy of the "Repetitive Wire Transfer Authorization Form", a copy of the
form containing an original signature must be received from the borrower. All
transfer authorization forms must be approved by and contain the signature of a
person authorized by the borrower to advance funds from borrower's line of
credit with the lender.
After receipt of the original "Repetitive Wire Transfer Authorization Form" by
the lender, subsequent wire transfers to the recipient named thereon may be
initiated by telephone request, provided the requesting party is identified by
the lender as a person authorized by borrower to advance funds from the
borrower's line of credit with lender.
Non-Repetitive:
- --------------
Non-Repetitive wire transfers are directed to recipients on a one-time or
infrequent basis or are directed to varied destinations. Non-repetitive wire
transfers require that written notification be provided to lender by borrower,
showing payee, location, account number, routing transit number and name and
location of bank into which funds are to be transferred. Such written
notification may be provided by means of a "Non-Repetitive Wire Transfer
Authorization Form" (copy attached).
-86-
<PAGE> 88
Required information may be faxed to lender in order to expedite the transfer;
however, a copy of the transfer authorization form with an original signature(s)
must be received by lender from borrower. The transfer authorization form must
be approved by and contain the signature of a person authorized by the borrower
to advance funds from borrower's line of credit with the lender.
For any non-repetitive wire transfer, Lender may, at its discretion, perform a
telephone verification with an authorized representative (the original signer or
another authorized representative) of borrower prior to initiating the transfer.
-87-
<PAGE> 89
NATIONSBANK BUSINESS CREDIT
REPETITIVE WIRE TRANSFER AUTHORIZATION
CUSTOMER INFORMATION
CUSTOMER NAME: ___________________________ DATE: ___________________________
NAME OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER:_____________________________
NOTE:MUST BE PERSON AUTHORIZED
TO ADVANCE FUNDS
SIGNATURE OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER: ________________________
PAYEE
NAME OF RECIPIENT OF FUNDS: ___________________________________________________
LOCATION: _____________________________________________________________________
ACCOUNT NUMBER INTO WHICH FUNDS ARE TO BE TRANSFERRED: ________________________
DESTINATION OF FUNDS
NAME AND LOCATION OF BANK RECEIVING FUNDS:
BANK NAME: ___________________________________________________________________
ROUTING INFORMATION (ABA NUMBER): ____________________________________________
BANK LOCATION: CITY:_____________________________________________________
STATE: ___________________________________________________
(FOR INTERNATIONAL WIRES) COUNTRY: ___________________________________________
SPECIAL INSTRUCTIONS: ________________________________________________________
________________________________________________________
________________________________________________________
BANK USE ONLY
BUSINESS CREDIT DEPARTMENT
BUSINESS CREDIT AUTHORIZATION:__________________________________________________
PRINT NAME OF PERSON AT BANK APPROVED TO AUTHORIZE
WIRE TRANSFERS
BUSINESS CREDIT AUTHORIZATION: _________________________________________________
SIGNATURE OF PERSON AT BANK APPROVED TO AUTHORIZE
WIRE TRANSFERS
WIRE TRANSFER DEPARTMENT
F.D. NUMBER ASSIGNED: __________________________________________________________
ACCOUNT NUMBER TO DEBIT: _______________________________________________________
-88-
<PAGE> 90
NATIONSBANK BUSINESS CREDIT
NON-REPETITIVE WIRE TRANSFER AUTHORIZATION
CUSTOMER INFORMATION
CUSTOMER NAME: ___________________________ DATE: ___________________________
NAME OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER:_______________________________
NOTE: MUST BE PERSON AUTHORIZED
TO ADVANCE FUNDS
SIGNATURE OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER: _________________________
PAYEE
NAME OF RECIPIENT OF FUNDS: ___________________________________________________
LOCATION: _____________________________________________________________________
ACCOUNT NUMBER INTO WHICH FUNDS ARE TO BE TRANSFERRED: ________________________
DESTINATION OF FUNDS
NAME AND LOCATION OF BANK RECEIVING FUNDS:
BANK NAME: ____________________________________________________________________
ROUTING INFORMATION (ABA NUMBER): _____________________________________________
BANK LOCATION: CITY:___________________________________________________
STATE: _________________________________________________
(FOR INTERNATIONAL WIRES) COUNTRY: ____________________________________________
SPECIAL INSTRUCTIONS: _________________________________________________________
-89-
<PAGE> 91
EXHIBIT C
FINANCING AGREEMENT
COMPLIANCE CERTIFICATE
----------------------
THIS CERTIFICATE is made as of __________________, 199_ , by
____________________________________, a ________________ organized under the
laws of the State of ___________________ (the "Borrower"), to
_______________________________, a national banking association (the "Lender"),
pursuant to Section of the Financing and Security Agreement dated
______________, 199_, (as amended, modified, restated, substituted, extended and
renewed at any time and from time to time, the "Financing Agreement") by and
between the Borrower and the Lender.
I, ____________________, hereby certify that I am the ______________ of
the Borrower and am a Responsible Officer (as that term is defined in the
Financing Agreement) authorized to certify to the Lender on behalf the Borrower
as follows:
1. This Certificate is given to induce the Lender to make advances to
the Borrower under the Financing Agreement.
2. This Certificate accompanies the _____________ financial statements
for the period ended ___________________, 199__ (the "Current Financials") which
the Borrower is furnishing to the Lender pursuant to Section 6.1.1(__) of the
Financing Agreement. The Current Financials have been prepared in accordance
with GAAP (as that term is defined in the Financing Agreement).
3. As required by Section 6.1.1(__) of the Financing Agreement, I have
set forth on SCHEDULE 1 a detailed computation of each financial covenant in
Financing Agreement and a cash flow projection report.
4. No change has occurred to the information contained in the
Collateral Disclosure List except as set forth on SCHEDULE 2 to this
Certificate. By way of example and not limitation, the Collateral Disclosure
List, together with SCHEDULE 2, contains a listing of all of the Borrower's
Patents, Trademarks, Copyrights (as those terms are defined in the Financing
Agreement), all locations (owned, leased, warehouses or otherwise) where any
Collateral (as that term is defined in the Financing Agreement) is located, all
Subsidiaries (as that term is defined in the Financing Agreement).
5. As of the date hereof, there exists no Default or Event of Default,
as defined in the Article 7 of the Financing Agreement, nor any event which,
upon notice or the lapse of time, or both, would constitute such an Event of
Default.
6. On the date hereof, the representations and warranties contained in
Article 4 of the Financing Agreement are true with the same effect as though
such representations and warranties had been made on the date hereof.
WITNESS my signature this _____ day of ____________, 199_.
-90-
<PAGE> 92
------------------------------
Name:
Title:
-91-
<PAGE> 93
Schedule 1
----------
-92-
<PAGE> 94
Schedule 2
----------
-93-
<PAGE> 95
LIST OF SCHEDULES
-----------------
Schedule 4.1.10 Litigation
- ---------------
Schedule 4.1.14 Other Indebtedness
- ---------------
Schedule 4.1.20 Permitted Liens
- ---------------
Schedule 6.2.4 Investments
- --------------
-94-
<PAGE> 96
LITIGATION
----------
-95-
<PAGE> 97
SCHEDULE 4.1.14
OTHER INDEBTEDNESS
------------------
-96-
<PAGE> 98
Schedule 4.1.20
--------
LIENS ON COLLATERAL
Unpaid
Principal
Asset Covered Lienholder Balance
- ------------- ---------- -------
-97-
<PAGE> 99
Schedule 6.2.4
--------
Other Investments
-----------------
NONE
-98-
<PAGE> 100
<TABLE>
<CAPTION>
ARTICLE 1
DEFINITIONS
<S> <C> <C>
SECTION 1.1 Certain Defined Terms........................................................................ 1
---------------------
ARTICLE 2
THE CREDIT FACILITIES
SECTION 2.1 The Revolving Credit Facility................................................................ 22
-----------------------------
2.1.1 Revolving Credit Facility.................................................................... 22
-------------------------
2.1.2 Procedure for Making Advances Under the Revolving
Loan; Lender Protection Loans................................................................ 22
-----------------------------
2.1.3 Revolving Credit Note........................................................................ 23
---------------------
2.1.4 Revolving Loan Account....................................................................... 23
----------------------
2.1.5 Revolving Credit Unused Line Fee............................................................. 24
--------------------------------
2.1.6 Early Termination Fee........................................................................ 24
---------------------
SECTION 2.2 The Letter of Credit Facility................................................................ 25
-----------------------------
2.2.1 Letters of Credit............................................................................ 25
-----------------
2.2.2 Letter of Credit Fees........................................................................ 25
---------------------
2.2.3 Terms of Letters of Credit................................................................... 26
--------------------------
2.2.4 Procedure for Letters of Credit.............................................................. 26
-------------------------------
2.2.5 Change In Law; Increased Cost................................................................ 26
-----------------------------
SECTION 2.3 Interest..................................................................................... 27
--------
2.3.2 Selection of Interest Rates.................................................................. 27
---------------------------
2.3.3 Inability to Determine LIBOR Base Rate....................................................... 29
--------------------------------------
2.3.4 Indemnity.................................................................................... 29
---------
2.3.5 Payment of Interest.......................................................................... 30
-------------------
SECTION 2.4 General Financing Provisions................................................................. 30
----------------------------
2.4.1 Borrower's Representatives................................................................... 30
--------------------------
2.4.2 Use of Proceeds of the Loans................................................................. 31
----------------------------
2.4.3 Origination Fee.............................................................................. 31
---------------
2.4.4 Servicing Fees............................................................................... 31
--------------
2.4.5 Computation of Interest and Fees............................................................. 31
--------------------------------
2.4.6 Payments..................................................................................... 31
--------
2.4.7 Liens; Setoff................................................................................ 32
-------------
2.4.8 Requirements of Law.......................................................................... 32
-------------------
SECTION 3.1 Debt and Obligations Secured................................................................. 34
----------------------------
SECTION 3.2 Grant of Liens............................................................................... 34
--------------
SECTION 3.3 Collateral Disclosure List................................................................... 35
--------------------------
SECTION 3.4 Personal Property............................................................................ 35
-----------------
3.4.1 Securities, Chattel Paper, Promissory Notes, etc............................................. 35
-------------------------------------------------
3.4.2 Patents, Copyrights and Other Property Requiring
Additional Steps to Perfect.................................................................. 36
---------------------------
SECTION 3.5 Record Searches.............................................................................. 36
---------------
SECTION 3.6 Real Property................................................................................ 36
-------------
SECTION 3.7 Costs........................................................................................ 38
-----
SECTION 3.8 Release...................................................................................... 38
-------
SECTION 3.9 Inconsistent Provisions...................................................................... 38
-----------------------
</TABLE>
i
<PAGE> 101
<TABLE>
<CAPTION>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
SECTION 4.1 Representations and Warranties............................................................... 38
------------------------------
4.1.1 Subsidiaries................................................................................. 39
------------
4.1.2 Good Standing................................................................................ 39
-------------
4.1.3 Power and Authority.......................................................................... 39
-------------------
4.1.4 Binding Agreements........................................................................... 39
------------------
4.1.5 No Conflicts................................................................................. 39
------------
4.1.6 No Defaults, Violations...................................................................... 40
-----------------------
4.1.7 Compliance with Laws......................................................................... 40
--------------------
4.1.8 Margin Stock................................................................................. 40
------------
4.1.9 Investment Company Act; Margin Securities.................................................... 40
-----------------------------------------
4.1.10 Litigation................................................................................... 41
----------
4.1.11 Financial Condition.......................................................................... 41
-------------------
4.1.12 Proforma Financial Statements................................................................ 41
-----------------------------
4.1.13 Full Disclosure.............................................................................. 42
---------------
4.1.14 Indebtedness for Borrowed Money.............................................................. 42
-------------------------------
4.1.15 Taxes........................................................................................ 42
-----
4.1.16 ERISA........................................................................................ 42
-----
4.1.17 Title to Properties.......................................................................... 43
-------------------
4.1.18 Patents, Trademarks, Etc. .................................................................. 43
-------------------------
4.1.19 Presence of Hazardous Materials or Hazardous
--------------------------------------------
Materials Contamination...................................................................... 43
-----------------------
4.1.20 Perfection and Priority of Collateral........................................................ 44
-------------------------------------
4.1.21 Places of Business and Location of Collateral................................................ 44
---------------------------------------------
4.1.22 Merger Agreement Transaction................................................................. 44
----------------------------
4.1.23 Securities Acts.............................................................................. 45
---------------
4.1.24 Governmental Regulation...................................................................... 45
-----------------------
SECTION 4.2 Survival; Updates of Representations and
----------------------------------------
Warranties................................................................................... 45
----------
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to the Initial Advance............................................................ 45
---------------------------------
5.1.1 Organizational Documents - Borrower. ....................................................... 46
-----------------------------------
5.1.2 Opinion of Borrower's Counsel................................................................ 46
-----------------------------
5.1.3 Consents, Licenses, Approvals, Etc. ........................................................ 47
-----------------------------------
5.1.4 Notes........................................................................................ 47
-----
5.1.5 Financing Documents and Collateral........................................................... 47
----------------------------------
5.1.6 Other Financing Documents.................................................................... 47
-------------------------
5.1.7 Other Documents, Etc. ...................................................................... 47
---------------------
5.1.8 Payment Of Fees.............................................................................. 47
---------------
5.1.9 Collateral Disclosure List................................................................... 47
--------------------------
5.1.10 Recordings and Filings....................................................................... 47
----------------------
5.1.11 Insurance Certificate........................................................................ 48
---------------------
5.1.12 Landlord's Waivers........................................................................... 48
------------------
5.1.13 Bailee Acknowledgements...................................................................... 48
-----------------------
5.1.14 Field Examination............................................................................ 48
-----------------
5.1.15 Proforma Balance Sheet and Projections....................................................... 48
--------------------------------------
5.1.16 Offering..................................................................................... 48
--------
5.1.17 Capital Funds................................................................................ 49
-------------
</TABLE>
ii
<PAGE> 102
<TABLE>
<S> <C> <C>
5.1.18 Merger Agreement Transaction................................................................. 49
----------------------------
SECTION 5.2. Conditions to all Extensions of Credit....................................................... 49
--------------------------------------
5.2.1 Compliance................................................................................... 49
----------
5.2.2 Default...................................................................................... 49
-------
5.2.3 Representations and Warranties............................................................... 49
------------------------------
5.2.4 Legal Matters................................................................................ 50
-------------
ARTICLE 6
COVENANTS OF THE BORROWER
SECTION 6.1 Affirmative Covenants........................................................................ 50
---------------------
6.1.1 Financial Statements......................................................................... 50
--------------------
6.1.2 Recordkeeping, Rights of Inspection, Field Examination, Etc.................................. 52
-----------------------------------------------------------
6.1.3 Corporate Existence.......................................................................... 53
-------------------
6.1.4 Compliance with Laws......................................................................... 53
--------------------
6.1.5 Preservation of Properties................................................................... 53
--------------------------
6.1.6 Line of Business............................................................................. 53
----------------
6.1.7 Insurance.................................................................................... 53
---------
6.1.8 Insurance with Respect to Equipment, Inventory and
--------------------------------------------------
Mortgaged Property........................................................................... 54
6.1.9 Taxes........................................................................................ 55
-----
6.1.10 ERISA........................................................................................ 55
-----
6.1.11 Notification of Mergers and Acquisitions and
Ownership Changes............................................................................ 55
-----------------
6.1.12 Notification of Events of Default and Adverse
Developments................................................................................. 56
------------
6.1.13 Hazardous Materials; Contamination........................................................... 57
----------------------------------
6.1.14 Disclosure of Significant Transactions....................................................... 58
--------------------------------------
6.1.15 Financial Covenants.......................................................................... 58
-------------------
6.1.16 Collection of Receivables.................................................................... 59
-------------------------
6.1.17 Assignments of Receivables................................................................... 59
--------------------------
6.1.18 Government Accounts.......................................................................... 60
-------------------
6.1.19 Defense of Title and Further Assurances...................................................... 60
---------------------------------------
6.1.20 Business Names; Locations.................................................................... 61
-------------------------
6.1.21 Subsequent Opinion of Counsel as to Recording
---------------------------------------------
Requirements................................................................................. 61
------------
6.1.22 Use of Premises and Equipment................................................................ 62
-----------------------------
6.1.23 Protection of Collateral..................................................................... 62
------------------------
6.1.24 Senior Management............................................................................ 62
-----------------
6.1.25 Appraisals................................................................................... 62
----------
6.1.26 Application of Net Proceeds.................................................................. 62
SECTION 6.2 Negative Covenants........................................................................... 63
------------------
6.2.1 Merger, Acquisition or Sale of Assets........................................................ 63
-------------------------------------
6.2.2 Purchase or Redemption of Securities, Dividend
Restrictions................................................................................. 64
------------
6.2.3 Indebtedness................................................................................. 64
------------
6.2.4 Investments, Loans and Other Transactions.................................................... 64
-----------------------------------------
6.2.5 Subordinated Indebtedness.................................................................... 66
-------------------------
6.2.6 Liens; Confessed Judgment.................................................................... 66
-------------------------
6.2.7 Transactions with Affiliates................................................................. 67
----------------------------
6.2.8 Prohibition on Hazardous Materials........................................................... 67
----------------------------------
6.2.9 Method of Accounting; Fiscal Year............................................................ 67
---------------------------------
6.2.10 Compensation................................................................................. 68
------------
</TABLE>
iii
OP
<PAGE> 103
<TABLE>
<S> <C> <C>
6.2.11 Transfer of Collateral....................................................................... 68
----------------------
6.2.12 Inventory.................................................................................... 68
---------
ARTICLE 7
DEFAULT AND RIGHTS AND REMEDIES
SECTION 7.1 Events of Default............................................................................ 68
-----------------
7.1.1 Failure to Pay............................................................................... 68
--------------
7.1.2 Breach of Representations and Warranties..................................................... 68
----------------------------------------
7.1.3 Failure to Comply with Covenants............................................................. 69
--------------------------------
7.1.4 Default Under Other Financing Documents or
Obligations.................................................................................. 69
-----------
7.1.5 Receiver; Bankruptcy......................................................................... 69
--------------------
7.1.6 Involuntary Bankruptcy, etc.................................................................. 69
----------------------------
7.1.7 Judgment..................................................................................... 70
--------
7.1.8 Execution; Attachment........................................................................ 70
---------------------
7.1.9 Default Under Other Borrowings............................................................... 70
------------------------------
7.1.11 Material Adverse Change...................................................................... 71
-----------------------
7.1.12 Change in Control............................................................................ 71
-----------------
7.1.13 Liquidation, Termination, Dissolution, Etc................................................... 71
-------------------------------------------
SECTION 7.2 Remedies..................................................................................... 71
--------
7.2.1 Acceleration................................................................................. 72
------------
7.2.2 Further Advances............................................................................. 72
----------------
7.2.3 Uniform Commercial Code...................................................................... 72
-----------------------
7.2.4 The Collateral Account....................................................................... 73
----------------------
7.2.5 Specific Rights With Regard to Collateral.................................................... 74
-----------------------------------------
7.2.6 Application of Proceeds...................................................................... 75
-----------------------
7.2.7 Performance by Lender........................................................................ 76
---------------------
7.2.8 Other Remedies............................................................................... 76
--------------
7.2.9 Exercise of Remedies......................................................................... 76
--------------------
ARTICLE 8
MISCELLANEOUS
Section 8.1 Notices...................................................................................... 76
-------
Section 8.2 Amendments; Waivers.......................................................................... 77
-------------------
Section 8.3 Cumulative Remedies.......................................................................... 78
-------------------
Section 8.4 Severability................................................................................. 79
------------
Section 8.5 Assignments by Lender........................................................................ 79
---------------------
Section 8.6 Participations by Lender..................................................................... 80
------------------------
Section 8.7 Disclosure of Information by Lender.......................................................... 80
-----------------------------------
Section 8.8 Successors and Assigns....................................................................... 81
----------------------
Section 8.9 Continuing Agreements........................................................................ 81
---------------------
Section 8.10 Enforcement Costs............................................................................ 81
-----------------
Section 8.11 Applicable Law; Jurisdiction................................................................. 81
----------------------------
Section 8.12 Duplicate Originals and Counterparts......................................................... 83
------------------------------------
Section 8.13 Headings..................................................................................... 83
--------
Section 8.14 No Agency.................................................................................... 83
---------
Section 8.15 Date of Payment.............................................................................. 83
---------------
Section 8.16 Entire Agreement............................................................................. 83
----------------
Section 8.17 Waiver of Trial by Jury...................................................................... 83
-----------------------
Section 8.18 Liability of the Lender...................................................................... 84
-----------------------
</TABLE>
iv
<PAGE> 1
Exhibit 10.2
LEASE
THIS INSTRUMENT OF LEASE, made and entered into on the day and year
hereinafter set forth by and between H.N.F. REALTY CO., an Ohio General
Partnership, ("Landlord") and GLASSTECH, INC., a Delaware corporation,
("Tenant").
WITNESS THAT:
WHEREAS, Landlord is the owner of the property described in Exhibit A
attached hereto and made a part hereof ("Premises").
WHEREAS, the parties mutually desire to enter into this Lease Agreement
setting forth the terms and conditions whereby Tenant will lease the Premises
from Landlord.
NOW THEREFORE, In consideration of the rents and covenants hereinafter
stipulated to be paid and performed by Tenant, Landlord does hereby demise, let
and lease unto Tenant the Premises to have and to hold the same unto said Tenant
for the terms as hereinafter set forth, on the conditions hereinafter set forth,
and the parties do agree as follows.
1. PREMISES. The premises leased hereunder shall be the Premises,
including all improvements thereon.
2. CONDITION OF PREMISES. Tenant accepts the Premises in the condition
it exists at the commencement of the term.
3. USE OF PREMISES. Tenant may occupy and use the Premises for any and
all lawful purposes but shall not permit the same to be occupied or used
contrary to any statute, rule, order, ordinance, requirement or regulation
applicable thereto of any public authority or in a manner which would cause
injury to the improvements or the value or usefulness of the Premises.
Any changes or alterations on the Premises which may be required by any
governmental authority after the beginning of the term of this Lease, including
without limitation on the generality of the foregoing, any pollution control or
conservation orientated structure or equipment required as a condition for the
continued use of the Premises shall be made and installed at the sole cost and
expense of Tenant.
4. INSPECTION OF PREMISES. Tenant shall not commit or permit any waste
to the Premises and shall permit Landlord and its agents to enter the Premises
at all reasonable times, after notice, (a) to examine the condition thereof; or
(b) upon breach by Tenant of the provisions of paragraph 11 below, and after
notice of such breach and of Tenant's apparent failure to cure, to make repairs.
additions or alterations for the safety, preservation or improvement thereof; or
(c) to exhibit the Premises during the last six (6) months of any term, in the
event Tenant has not exercised its options to extend or purchase as provided
herein.
5. SURRENDER OF PREMISES. Tenant shall deliver up and surrender the
Premises to Landlord upon expiration or termination of this Lease, in as good
order and condition as the same
<PAGE> 2
are at the commencement of the Lease, reasonable use, wear and tear, fire,
unavoidable casualty and acts of God excepted.
6. TERM. The term of this Lease shall be for a period of five (5) years
commencing on January 1, 1995 and ending December 31, 1999 (the "First Term").
7. RENT. Tenant shall pay a rent of Three Hundred Thousand Dollars
($300,000.00) per annum during the First Term, payable in equal monthly
installments of Twenty-Five Thousand Dollars ($25,000.00) each without demand
upon the first day of each calendar month in advance during the First Term. Such
monthly payments which are sometimes referred to as "Net Monthly Rental' shall
be paid to Landlord at its address as hereinafter set forth or at such other
place as Landlord may from time to time designate in writing.
8. OPTIONS TO EXTEND. Tenant shall have the right and option to extend
the term of this Lease for the periods set forth below, provided Tenant is not
in default of any of the material terms of the Lease. Tenant shall exercise its
option by delivering to Landlord written notice of Its intent to exercise its
option at least six (6) months prior to the expiration of any term. If Tenant
exercises its option to extend the term, the rent due to Landlord shall be in
the following amounts.
NET
TERM DATES ANNUAL RENT MONTHLY RENTAL
---- ----- ----------- --------------
Second Term January 1, 2000 -
December 31, 2004 $330,000.00 $27,500.00
Third Term January 1, 2005 -
December 31, 2009 $360,000.00 $30,000.00
9. TAXES AND ASSESSMENTS. Tenant shall pay all real estate taxes and
assessments against the Premises during the term as the same shall become due
and payable without permitting any of them to become delinquent and shall
provide Landlord with satisfactory evidence of payment thereof. In the event the
methods of taxation prevailing at the execution of this Lease shall be changed
so that in lieu or as a supplement to in whole or in part of the real estate
taxes and assessments now levied on the Premises, there shall be levied any tax
or assessment on the rental received therefrom, whether designated as a license
fee, capital charge, or however designated, then for purposes of this Lease, any
such tax or assessment shall be included in the real estate taxes and
assessments payable by Tenant hereunder. Nothing contained in this Lease shall
require Tenant to pay any estate, inheritance, succession, capital levy,
corporate franchise, gross receipts, transfer or income tax of Landlord or any
tax payable by Tenant on rentals, nor shall any of the same be deemed real
estate taxes or assessments.
10. UTILITIES. Tenant shall pay all charges for electricity, sewer,
heating and air conditioning, telephone service, water or other services
furnished to or used upon the Premises, together with all taxes or other charges
levied on such utility services.
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<PAGE> 3
11. MAINTENANCE AND REPAIR. Tenant shall maintain at its sole cost and
expense, the Premises, both exterior and interior, structural and
non-structural, in good state of repair.
If Tenant neglects to complete repairs within a reasonable period of
time after such repairs become necessary, Landlord may, but shall not be
required to, complete said repairs and Tenant shall pay the cost thereof to
Landlord upon demand.
12. INSURANCE. Tenant shall insure the improvements on the Premises
against loss by fire and other risks customarily included within the term
"Extended Coverage" in an amount equal to 100% of the replacement cost thereof.
Tenant shall keep and maintain a comprehensive public liability
insurance policy with respect to the Premises with liability limits of at least
$2,000,000.00 per occurrence and property Units of at least $500,000.00 per
occurrence. The liability insurance policy shall protect Landlord, Tenant and
any designee of Landlord against any liability which arises from any occurrence
on or about the Premises.
All insurance policies required hereunder shall be issued by insurance
companies rated A+ or better by Best's Insurance Reports and shall be reasonably
satisfactory to Landlord in form and substance. Tenant shall furnish Landlord
with certificates evidencing such coverage with provisions requiring at least 30
days notice to Landlord and any mortgagee of the Premises prior to any
cancellation or nonrenewal thereof. Landlord and any mortgagee shall be named as
additional insured on all such policies of insurance. Upon request, policies of
such insurance shall be delivered to Landlord.
13. FIRE OR CASUALTY. If, during the term of this Lease, the Premises
or any part thereof shall be destroyed or damaged by fire or other casualty, the
Tenant will give immediate written notice of such damage or destruction to
Landlord. The Tenant, at its own cost and expense, shall promptly repair,
replace and restore the same to at least as good a condition as the Premises
immediately prior to such occurrence; provided, however, that in the event the
Premises are destroyed or damaged to the extent of 40% or more of then value of
the improvements therein, then Tenant may terminate this Lease as of the date of
such damage or destruction by giving written notice to the Landlord within 30
days thereafter of its election to terminate, and all insurance proceeds shall
be promptly paid to Landlord.
Unless this Lease is terminated in accordance with the first paragraph
in this Section 13, this Lease shall not be affected in any way by reason of the
untenantability of the Premises or any part thereof, due to any damage,
destruction or other cause whatsoever, and all rents, including taxes, Insurance
and other charges, shall continue to be paid by Tenant in accordance with the
terms, covenants and conditions hereof, without reduction or abatement. It is
Tenant's responsibility to protect itself against such contingency by insurance
or otherwise.
14. WAIVER OF SUBROGATION. Each party does hereby waive any and all
claims against the other for any loss or damage to the Premises covered by
insurance to the extent of such insurance. The policies evidencing such
insurance shall contain waiver of subrogation clauses for the benefit of all the
parties hereto, their respective heirs, successors and assigns.
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<PAGE> 4
15. INDEMNIFICATION. Tenant shall protect, indemnify and save harmless
Landlord from and against any liability or damages on account of any injury to
any persons, including death or damage to any property of any nature arising out
of the Tenant's use, occupation and control of the Premises during the term.
16. ALTERATIONS. Tenant shall have no right to make material changes or
alterations to the Premises without first obtaining the written consent of
Landlord, which consent shall not be unreasonably withheld. All alterations and
changes will be made in conformance with good engineering and building practices
and shall attach tot he freehold and the property of Landlord.
17. TRADE FIXTURES. If Tenant shall install any trade fixtures or
signs, they shall remain the property of Tenant and may be removed by the Tenant
at any time during the term of this Lease or promptly after its termination,
provided that any damage caused by such removal shall be promptly repaired at
Tenant's expense.
18. MECHANIC'S LIENS. Tenant will not permit any mechanic's or other
liens to stand against the Premises for work, labor, services or materials
furnished to Tenant, provided however, If Tenant share contest the validity of
any lien or claim, Tenant share first post bond to insure that upon a final
determination of the validity thereof said lien shall be released without cost
to Landlord.
19. CONDEMNATION. If all or a substantial portion of the improvements
on the Premises shall be taken by virtue of eminent domain or condemnation
proceedings such that the Premises can no longer be used by Tenant for its
intended purposes, the total amount of the award for the portion of the Premises
taken and damages to the remainder, excepting any awards made for Tenant's
moving expenses, or for Tenant's costs relating to condemnation proceedings,
shall be paid to Landlord, and this Lease shall terminate on the date the
condemning authority takes possession of the Premises.
If the Premises can continue to be used by Tenant for its intended
purposes after any taking by eminent domain or condemnation proceedings, then
this Lease shall continue in effect, the proceeds of any such award share be
paid to Landlord and future rent will be adjusted proportionately to the extent
of any reduction in the value of the Lease to Tenant.
20. QUIET ENJOYMENT. So long as Tenant shall pay the rent and
additional rents reserved under this Lease whenever the same shall become due
and payable, and shall keep all the covenants and agreements required herein,
Tenant shall peaceably hold and enjoy the Premises during the term hereof
without hindrance or molestation by Landlord or any person lawfully claiming by,
through or under Landlord.
21. DEFAULT. In the event that Tenant shall fail to pay any rent when
due and the same shall remain unpaid for a period of thirty (30) days, or share
be in default under any other material provisions of this Lease for a period of
thirty (30) days after notice of such default, or shall file a voluntary
petition in bankruptcy or make an assignment for benefit of creditors, or shall
be adjudicated a bankrupt in any involuntary bankruptcy proceeding, or shall
vacate or abandon the Premises, then Landlord may elect by written notice to
Tenant to terminate the Tenant's right to possession only without terminating
the Lease, and Landlord may, at Landlord's
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<PAGE> 5
option, enter into the Premises and take and hold possession thereof without
terminating the Lease or releasing the Tenant from Tenant's obligations to pay
the rent hereunder for the full stated term. In any such event, Landlord may in
its sole discretion, relet the Premises to others for the account of Tenant upon
such terms as Landlord shall determine, and in connection therewith, Landlord
may make alterations, repairs and decorate the Premises to the extent Landlord
deems necessary or desirable. and Tenant shall. upon demand. pay the cost
thereof together with Landlord's expense of reletting. If any such rentals
collected by Landlord for Tenant's account are not sufficient to pay the full
amount of all rents reserved in this Lease, Tenant shall pay Landlord the
deficiency upon demand.
Landlord shall also have the right to elect at any time after default
or at any time after Landlord has terminated Tenant's right to possession only,
to cancel and terminate this Lease by serving written notice on Tenant of such
election, and to pursue any remedy at law or in equity that may be available to
Landlord.
All installments of rent not paid by Tenant when due hereunder shall
bear interest at the rate of ten percent (10%) per annum until paid. AR other
payments which Landlord may make by virtue of Tenant's default under the terms
and conditions of this Lease on behalf of Tenant shall be payable upon demand
and. if not paid upon demand, shall bear interest from the date such payments
are made at the rate of ten percent (10%) per annum.
No waiver by Landlord of any breach hereunder shall be construed to be
a waiver of any other or future breach. No receipt of money by Landlord from
Tenant after notice of default, or after the termination of this Lease, or after
the commencement of any suit or after final judgment of possession of the
Premises, shall reinstate, continue or extend the term of this Lease or affect
any notice, demand or suit. The rights and remedies hereby created are
cumulative and the use of one remedy shall not be taken to exclude or waive the
right to the use of another.
22. INDEMNIFICATION AND ENVIRONMENTAL MATTERS. Tenant shall defend,
indemnify and hold harmless Landlord, its agents, employees and assigns, from
and against any and all loss, liability, cost or expense, including defense
costs and attorney's fees, incurred by Landlord in connection with or arising
out of any and all claims, demands actions, or causes of action, of any
description whatsoever, arising directly or indirectly out of Tenant's use,
occupation and control of the Premises during the term of this Lease, or any
extension hereof.
Tenant shall not maintain or cause to be maintained on the Premises any
toxic or hazardous substance or waste or any other pollutants in violation of
any provision of any material federal, state or local law or regulation.
Tenant shall indemnify Landlord for any and all claims, obligations and
liabilities, based upon or arising out of any obligation, liability, loss,
damage or expense incurred by or imposed by any provision of federal, state or
local law or regulation or by common law pertaining to health, safety or
environmental protection (including without limitation, costs incurred for
Investigation, testing, remedial or corrective action) and arising out of any
contract, strict liability or any act or omission of Tenant, its employees,
agents, subcontractors, representatives or assigns arising out of Tenant's
lease, use or possession of the Premises including, without limitation, such
loss pertaining to the storage, transportation, handling, disposal, discharge,
release, presence or
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<PAGE> 6
use of any hazardous material, hazardous substance, toxic material, toxic
substance, or pollutant or contaminant as defined under state laws, laws of the
State of Ohio, or any federal law including but not limited to, RCRA, CERCLA,
SARA, TSCA, CWA, Clean Air Act, Safe Drinking Water Act, or Hazardous Materials
Transportation Act.
23. AMERICANS WITH DISABILITIES ACT. Landlord and Tenant acknowledge
that landlords and tenants may both be subject to the commercial facility
provisions of the Americans With Disabilities Act (the "ADA") and that this
Lease may be used to determine the extent of each parties responsibility.
Landlord and Tenant agree to the following allocation of responsibility.
Tenant shall be responsible for ensuring any and all compliance with
commercial facility requirements of the ADA required on the Premises, including
but not limited to, any responsibility for accommodation of employees, agents,
clients, customers and visitors within the Premises, including any obligation to
provide auxiliary aids. Tenant hereby agrees to indemnify the Landlord for any
costs, damages or attorneys fees to the extent permissible by law, incurred in
defending any claims by any private or governmental person or entity under the
ADA which claims arise from the obligations described herein as the
responsibility of the Tenant.
24. NON-WAIVER. The waiver of any provision, term or condition of this
Lease shall not be taken to be a waiver of any subsequent breach of the same or
any other provision, term or condition.
25. ASSIGNMENT AND SUBLETTING. Tenant shall have no right to assign
this Lease nor to sublet the Premises without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, and in the event of
any assignment or subletting, Tenant shall continue to remain liable for the
performance of all of Tenant's obligations hereunder.
Notwithstanding anything contained herein to the contrary, Landlord's
consent shall not be required to a transfer of this Lease to a corporation into
or with which Tenant is merged or consolidated or to which substantially all of
Tenant's assets are transferred or to any corporation which controls or is
controlled by Tenant or is under common control with Tenant. For purposes of
this Section 25, the term "control" shall mean, in the case of a corporation,
ownership, directly or indirectly, of at least fifty percent (50%) of all the
voting stock, and in the case of a joint venture or partnership or similar
entity, ownership, directly or indirectly, of at least fifty percent (50%) of
all the interests therein.
26. OPTION TO PURCHASE. Tenant shall have the right and option to
purchase the Premises hereunder ("Option") at the applicable price set forth as
follows ("Option Price") during any term hereof, provided Tenant is not in
default of any of the material terms of the Lease.
The Option price shall be in accordance with the following schedule:
AT ANY TIME DURING THE: OPTION PRICE
----------------------- ------------
First Term $2,000,000.00
Second Term $2,100,000.00
Third Term $2,200,000.00
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<PAGE> 7
27. EXERCISE OF OPTION TO PURCHASE. Tenant may exercise its Option at
any time by delivering to Landlord written notice of its intent to exercise its
Option; provided however, that Tenant may not exercise its Option within six
months of the end of a term unless Tenant has first exercised its option to
extend pursuant to paragraph 8 hereof. Landlord will convey good and marketable
title to the Premises insurable by a reputable title insurance company at
standard rates, free and clear of all defects and encumbrances other than
defects created by Tenant, easements and restrictions of record, ordinances and
zoning regulations which do not materially interfere with Tenant's use of the
Premises, and real estate taxes and assessments due and payable after delivery
of title to the Premises to Tenant.
Closing of the purchase of the Premises ("Closing") shall take place
within sixty (60) days of the date of receipt by Landlord of notice of Tenant's
election to exercise Its Option. During the period between exercise of Option
and Closing, all terms and provisions of this Lease shall continue in full force
and effect. At Closing, title shall be conveyed to Tenant by a warranty deed.
28. MORTGAGES. Tenant's rights in the Premises shall be subordinate to
the lien of any present or future mortgage against the Premises which may be
given by Landlord, provided however, Tenant shall not be disturbed in its
possession of the Premises under this Lease for any reason other than that which
would entitle Landlord to terminate Tenant's possession or to terminate the
Lease. Tenant shall have no right to terminate this Lease by reason of the
foreclosure of any such mortgage. Until Closing, all the terms of the Lease
shall continue to apply. Any such mortgagee shall provide Tenant with written
confirmation of its recognition of the provisions of paragraphs 20 and 26 of
this Lease.
29. ESTOPPEL CERTIFICATES. Each party agrees, upon the request of the
other party to execute and deliver a statement certifying that this Lease is in
full force and effect, the dates to which the rent, additional rent and other
charges have been paid, and whether or not the other party is in default in the
performance of any material covenants, terms or conditions in this Lease which
may be relied upon by any prospective purchaser or mortgagee of the Premises or
the lease period.
30. RECORDING. This Lease shall not be recorded but upon the request of
either party a short form of this Lease in recordable form for filing in the
office of the Recorder of the county in which the Premises are located shall be
executed which short form of Lease shall identify the parties, the Premises, the
use thereof, the term of the Lease and shall incorporate the balance of this
Lease by reference.
31. HOLDING OVER. It is specifically agreed between the parties that in
the event Tenant remains on the Premises after termination of this Lease, said
occupancy shall not constitute a renewal of any of the provisions hereunder.
32. ARBITRATION. Landlord and Tenant agree that upon written notice by
either party hereto to the other any dispute arising under this Lease shall be
submitted to binding arbitration to be conducted in Toledo, Ohio under the
Commercial Arbitration Rules then in effect of the American Arbitration
Association. No arbitrator may award punitive damages. The award of any
arbitration shall be final, binding and nonappealable.
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<PAGE> 8
33. NOTICE. No notice, request, consent, approval, waiver or other
communication under this Lease shall be effective unless the same is in writing
and is mailed by registered or certified mail, postage pre-paid, as follows:
LANDLORD:
Norman C. Nitschke
H.N.F. Realty Co.
29737 E. River Rd.
Perrysburg, OH 43551
TENANT:
Mark D. Christman, President
Glasstech, Inc.
995 Fourth St.
Perrysburg, OH 43552
34. GENERAL. This Lease contains the entire agreement between the
parties and shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns.
35. AMENDMENTS. This Lease may be altered, amended or revoked during
the term hereof only by a written agreement signed by all of the parties hereto.
-8-
<PAGE> 9
36. OHIO LAW. The validity, nature, obligations, effect and
interpretation of this Lease Agreement, or of any of the terms and conditions
hereof, and any and all questions arising hereunder or in connection herewith
shall be governed by the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Lease this
28th day of December, 1994.
Witness: H.N.F. REALTY CO., an Ohio General
Partnership, Landlord:
/s/ Katherine Raup O'Connell By: /s/ Scott J. Savage
- ----------------------------- ----------------------------------
Scott J. Savage, as Attorney in Fact for
/s/ Julia A. Probasco Harold A. McMaster
- -----------------------------
/s/ Katherine Raup O'Connell By: /s/ Norman C. Nitschke
- ----------------------------- ----------------------------------
Norman C. Nitschke
/s/ Julia A. Probasco
- -----------------------------
/s/ Katherine Raup O'Connell By: /s/ Ronald M. Cooperman
- ----------------------------- ----------------------------------
Ronald M. Cooperman, as Attorney in Fact
/s/ Julia A. Probasco for Frank A. Larimer
- -----------------------------
GLASSTECH, INC., a Delaware Corporation
/s/ Diane S. Tymiak By: /s/ Mark D. Christman
- ----------------------------- ----------------------------------
Mark D. Christman, President
/s/ Jennifer M. Bierley
- -----------------------------
-9-
<PAGE> 10
PARTNERSHIP ACKNOWLEDGEMENT
STATE OF OHIO
COUNTY OF LUCAS
The foregoing instrument was acknowledged before me this 28th day of
December, 1994 by Scott J. Savage, as Attorney in Fact for HAROLD A. MCMASTER,
partner, on behalf of H.N.F. REALTY CO., An Ohio General Partnership.
/s/ Katherine Raup O'Connell
-----------------------------------
Notary Public
PARTNERSHIP ACKNOWLEDGEMENT
STATE OF OHIO
COUNTY OF WOOD
The foregoing instrument was acknowledged before me this 28th of
December, 1994 NORMAN C. NITSCHKE, partner, on behalf of H.N.F. REALTY CO., an
Ohio General Partnership.
/s/ Sandra Fore
-----------------------------------
Notary Public
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<PAGE> 11
PARTNERSHIP ACKNOWLEDGEMENT
STATE OF OHIO
COUNTY OF LUCAS
The foregoing instrument was acknowledged before me this 28th day of
December, 1994 by Ronald M. Cooperman, as Attorney in Fact for Frank A. Larimer,
partner, on behalf of H.N.F. REALTY CO., An Ohio General Partnership.
-----------------------------------
Notary Public
CORPORATE ACKNOWLEDGEMENT
STATE OF OHIO
COUNTY OF WOOD
The foregoing instrument was acknowledged before me this 28th day of
December, 1994 MARK D. CHRISTMAN, PRESIDENT of GLASSTECH, INC., a Delaware
corporation, on behalf of the corporation.
-----------------------------------
Notary Public
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<PAGE> 1
Exhibit 10.3
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") made and entered into as
of this 1st day of February, 1995, by and between AMPOINT, a division of Webb
Corporation, an Ohio corporation ("Lessor"), and GLASSTECH, INC., an Ohio
corporation ("Lessee").
WITNESSETH:
WHEREAS, Lessor desires to lease to Lessee and Lessee desires
to lease and take from Lessor the premises identified on Exhibit "C" (the
"Premises") and consisting of approximately 43,200 square feet of space located
in Building 9, Zone 3, at 350 "J" Street, in that certain industrial park
located in Perrysburg Township, Wood County, Ohio, and commonly known as Ampoint
Industrial Complex (the "Complex") upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the rents herein reserved,
the other terms and conditions hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
each of the parties hereto, Lessor and Lessee hereby agree as follows:
SECTION 1. PREMISES.
Upon the terms and conditions hereinafter set forth, Lessor
hereby leases to Lessee and Lessee hereby hires and takes from Lessor the
Premises. In addition, Lessee shall have the non-exclusive right during the Term
(as hereinafter defined) for Lessee and its agents, employees, and invitees to
use those parking areas adjacent to the Premises and which are designated on
Exhibit "A," for the purpose of passenger vehicle (and truck) parking, subject
to Section 4.
SECTION 2. TERM.
The term of this Lease (the "Term"), shall commence on
February 1, 1995, and unless sooner terminated as hereinafter provided, shall
end at 11:59 p.m. on January 31, 1998.
SECTION 3. RENT AND SURVIVAL OF OBLIGATIONS.
3.1 Lessee shall pay Lessor as base rent (the "Base Rent") for
the Premises during the Term of this Lease the total sum of Two Hundred Fifty
Two Thousand, Seven Hundred Twenty Dollars ($252,720), payable in monthly
installments as set forth on Exhibit "B," each in advance on the first day of
each calendar month, in lawful money of the United States of America at the
address of Lessor specified for notices to Lessor in Section 34 or at such other
place designated from time to time by written notice from Lessor to Lessee,
except that the first monthly installment shall be paid at the signing of this
Lease. To the extent that the Term commences on a day other than the first day
or ends other than on the last day of a calendar month, Base Rent for such month
shall be prorated based on the number of days of such month which are included
in the Term divided by the total number of days in such month.
<PAGE> 2
3.2 In addition to the Base Rent, during the Term Lessee shall
pay to Lessor promptly (and in no event later than twenty (20) days after
written request therefor from Lessor or such shorter period provided herein) any
and all charges, costs and expenses of every kind and nature whatsoever, other
than the Base Rent, payable by Lessee to Lessor, pursuant to this Lease
("Additional Rent"). For the purposes of this Lease, the term "Rent" shall mean
Base Rent and Additional Rent.
3.3 In the event real estate taxes and assessments payable
with respect to the Premises exceed such taxes and assessments paid with respect
to the 1994 calendar year, Lessee shall pay as Additional Rent thereafter the
entire increase in such real property taxes and assessments attributable to the
Premises during the entire period of the Term.
3.4 The covenant and obligation of Lessee to pay Rent
hereunder shall be unconditional and independent of any other covenant or
condition imposed on either Lessor or Lessee whether under this Lease, at law,
or in equity.
3.5 Any Rent or other amounts payable by Lessee to Lessor
which are not paid on or before the date provided in this Lease (or, in the case
of amounts due pursuant to Sections 18 or 21, from the date paid, advanced, or
expended by Lessor) shall bear interest at a rate equal to the lesser of: (a)
the highest rate permitted by law or (b) two percent (2%) per annum above the
prime rate published from time to time in the WALL STREET JOURNAL.
3.6 Any and all covenants and obligations of Lessee pursuant
to this Lease which are not or may not be fully observed and performed by Lessee
prior to the termination or expiration of this Lease (by lapse of time or
otherwise) shall survive such termination or expiration unless and except to the
extent hereafter expressly released by Lessor in writing.
SECTION 4. USE OF PREMISES.
4.1 Lessee shall occupy and use the Premises ceramic casting,
manufacturing, storage, and for no other purpose whatsoever. Lessee shall not
use, occupy, or permit the Premises or any portion thereof to be used or
occupied for any illegal purpose or for any business, use or purpose deemed by
Lessor to be disreputable or inconsistent with the character, quality, or
operation of the Complex as warehouse, distribution, or office facilities.
Lessee, in its use and occupancy of the Premises, shall not permit storage or
the accumulation of debris of any kind whatsoever on the exterior of the
building of which the Premises are a part.
4.2 Lessee shall, in its use and occupancy of the Premises and
in the exercise of its rights and the observance and performance of its
covenants and obligations hereunder, comply at its sole expense with all laws,
rules, regulations, orders, permits, and other requirements imposed by federal,
state, or local authorities having competent jurisdiction over the subject
matter thereof (collectively, "Applicable Legal Requirements") and with the
requirements of all policies of insurance of whatsoever nature which Lessor or
Lessee are required or permitted to maintain pursuant to this Lease
(collectively, "Insurance Requirements") and shall perform all construction of
and maintenance, repairs, alterations, additions and
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<PAGE> 3
improvements to the Premises permitted or required by this Lease in a
first-class and workmanlike manner.
4.3 In its use and occupancy of the Premises, Lessee, its
agents, employees, and invitees shall observe faithfully and comply strictly
with the reasonable rules and regulations set by Lessor with respect to the
Premises as such rules and regulations exist on the date of execution of this
Lease and as the same may be amended from time to time hereafter.
SECTION 5. ENVIRONMENTAL MATTERS,
5.1 Lessee shall not cause or permit: (i) the presence of any
Hazardous Materials (as hereinafter defined) at, in or on the Premises, or (ii)
the release on or in, or other contamination of, the Premises with any Hazardous
Materials. Lessee shall indemnify, defend, and hold Lessor harmless from and
against any and all liability, damage, claims, causes of action, suits,
proceedings, costs and expenses (including without limitation reasonable
attorneys' and consultants' fees) of every kind or nature (collectively,
"Liabilities and Costs"), including, but not limited to, any liability under or
pursuant to any Environmental Laws (as hereinafter defined), arising from or
related to, or alleged to have arisen from or related to, the use, handling,
generation, storage, treatment, disposal, transportation or release of any
Hazardous Materials by, or permitted or authorized by, Lessee or its agents,
employees, or invitees. The provisions of this Section 5 shall survive the
termination or expiration of this Lease.
5.2 As used in this Section 5: (i) the term "Hazardous
Materials" shall mean asbestos or asbestos-containing materials, polychlorinated
byphenyls, urea formaldehyde, or waste, materials, chemicals or other substances
the use, disposal, storage, generation or treatment of which is governed or
regulated by any Environmental Laws; and (ii) the term "Environmental Laws"
shall mean any Applicable Legal Requirements now in effect or hereinafter
enacted, published, promulgated or issued relating to any Hazardous Materials,
health and safety, or pollution or protection of the environment.
SECTION 6. UTILITIES AND SERVICES.
6.1 During the Term, Lessor shall provide water, fire lines,
and sanitary sewer services to the Premises and shall charge Lessee therefor as
Additional Rent on the same basis and rate from time to time generally charged
for similar volume, or rate of water, or sewage to other tenants of the Complex
receiving such services and being separately charged therefor. Lessee shall
neither take nor suffer or permit any act, whether of commission or omission,
which would or might change, alter or modify the type or composition or which
would or might materially increase the volume or accelerate the rate of flow of
the sanitary sewage to be transported from the Premises from that existing on
the commencement date of the Term (without limiting the generality of the
foregoing, Lessee shall not use, suffer, or permit the use of, the sanitary
sewer system serving the Premises for the transportation of any materials,
chemicals or substances other than lavatory wastes). Notwithstanding anything to
the contrary in this Section 6.1, Lessor may at any time: (a) dedicate, sell, or
otherwise transfer to any governmental or quasi-governmental authority or other
person or entity the sanitary sewer system serving the Premises, or (b) elect to
have said water, fire lines or sewer services provided to the Premises by a
third party, in either of which events Lessee shall thereafter pay all charges
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therefor directly in the same manner provided for other utilities in Section 6.2
and Lessor shall have no further obligation pursuant to this Section 6.1 with
respect thereto.
6.2 Lessee shall pay as and when due and payable, directly to
the utility or third party providing the same, all charges for all gas,
electricity, telephone and other utilities, security systems, garbage collection
and similar services used or consumed in the Premises during the Term (other
than services provided by Lessor pursuant to Section 6.1).
SECTION 7. CONDITION OF PREMISES.
Lessee acknowledges and agrees that prior to the execution of
this Lease Lessee has inspected the Premises, that Lessee accepts the Premises
"as is," and that there have been no representations or warranties made by or on
behalf of Lessor with respect to the Premises or with respect to the suitability
of the Premises for the conduct of Lessee's business. The taking of possession
of the Premises by Lessee shall conclusively establish that the Premises were at
that time in satisfactory condition, order, and repair.
SECTION 8. LIABILITY OF LESSOR.
8.1 Neither Lessor nor any of its agents, employees, directors
or officers shall be liable for any injury, damage, or loss of any nature
whatsoever to persons or property (whether of Lessee or any other person)
occurring in, upon, or about the Premises, even if such injury, damage, or loss
arises out of or is due to or is asserted or alleged to arise out of or be due
to any act (whether of commission or omission) of Lessor or any of its agents,
employees, directors or officers; excepting any physical injury to persons or
physical damage to tangible property of third parties (expressly excluding
Lessee) caused solely by the negligence or willful misconduct of Lessor or
Lessor's employees acting within the scope of their employment. The liability of
Lessor under this Lease shall in any event be strictly limited to the interest
of Lessor in the Complex, and Lessor shall not be liable, either personally or
otherwise, for any deficiency.
8.2 Lessor shall not be responsible for and Lessee shall not
be entitled to any compensation or any abatement or diminution of Rent (or the
release from any of its other covenants or obligations under this Lease) or be
considered to be evicted due to any suspension, interruption or termination of
utilities or other services to the Premises, the necessity or desirability of
any maintenance, repairs, alterations, additions, improvements or replacements
in or to the Premises or the Complex, the existence, imposition or enforcement
of any Applicable Legal Requirements or Insurance Requirements, or the existence
pursuant to Section 26 of any event of force majeure.
SECTION 9. INDEMNIFICATION OF LESSOR BY LESSEE.
Lessee shall indemnify, defend, and hold Lessor harmless from
and against any and all Liabilities and Costs (including without limitation
claims for injury to any person or damage to property of Lessor, Lessee, or any
third party), whenever arising on or after the date hereof arising out of or due
to, or asserted or alleged to arise out of or be due to, any act (whether of
commission or omission) of Lessee or any of its agents, employees, or invitees
with respect to the Premises or in the exercise of Lessee's rights or the
observance or performance
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of Lessee's covenants and obligations under this Lease (or in breach or excess
thereof) or the use or occupancy of the Premises by Lessee or any of its agents,
employees, or invitees, whether or not any such Liabilities or Costs are
asserted by an agent, employee, or invitee of Lessee, and whether or not any
such Liabilities or Costs are based upon negligence; provided, however, that
Lessee shall not be responsible to indemnify, defend or hold Lessor harmless
with respect to any Liabilities or Costs caused solely by the negligence or
willful misconduct of Lessor or Lessor's employees acting within the scope of
their employment. Lessor shall have the right (but shall have no obligation) to
conduct its own defense with attorneys of its own selection, and Lessor shall
have the absolute right to approve or disapprove in its sole discretion any
settlement or compromise proposed by Lessee with any third party relating to any
claim asserted against or alleged liability of Lessor.
SECTION 10. INSURANCE.
10.1 At all times during the Term, Lessor at its sole expense
shall maintain fire and extended coverage insurance on a replacement cost basis
with such co-insurance and deductible provisions as Lessor may elect from time
to time covering the Premises; provided, however, that any such policy or
policies shall not insure the contents of the Premises which are the property of
any party other than Lessor or any improvements or installations made by Lessee.
Lessor may at its sole election obtain such insurance under a blanket insurance
policy or policies which cover not only the Premises but other properties. All
claims under such policies may be adjusted and all proceeds thereof shall be
received by and belong to Lessor only and Lessee shall have no rights thereto or
interest therein.
10.2 At all times during the Term, Lessee shall maintain at
its sole expense commercial general liability insurance (including without
limitation broadened coverage provisions insuring liability for explosion,
collapse, and damage to underground property) against claims for personal
injury, bodily injury, wrongful death and property damage occurring upon, in or
about the Premises or the Complex endorsed to cover all contractual and other
liabilities of Lessee pursuant to this Lease, affording at a minimum insurance
protection with a combined single limit of not less than $3,000,000. Such
insurance shall be underwritten by a reputable insurance company licensed to do
business in the State of Ohio and reasonably approved by Lessor. Lessor (and at
Lessor's request any mortgagees of the Premises) shall be named as an additional
insured on each such policy with the same single limit of coverage any
additional premium therefor to be paid by Lessee. Each such policy of insurance
shall to the extent obtainable at no extra premium provide: (a) that any claim
shall be payable notwithstanding any act, whether of commission or omission,
negligent or otherwise, of Lessor or Lessee, or of any agent, employee, or
invitee of either of them, which act might otherwise result in the forfeiture of
the insurance afforded by such policy and (b) that the policy will not be
canceled or modified to reduce coverage as to risk, amount or named insured
without at least fifteen (15) days prior written notice to both Lessor and
Lessee. Certificates evidencing such insurance and all replacements thereof
shall be delivered to Lessor prior to the commencement of the Term, and
thereafter, promptly and in no event later than fifteen (15) days prior to the
expiration of the policy being replaced. All certificates of insurance must
indicate thirty (30) days of cancellation or non-renewal to be provided to
Lessor.
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SECTION 11. WAIVER OF SUBROGATION.
Each policy of insurance required by either Sections 10. 1 or
10.2 shall provide an unconditional waiver and release by the insurer of any and
all claims and rights (including without limitation any and all rights of
subrogation) which said insurer might otherwise have against Lessor or Lessee,
as the case may be, for any casualty or liability insured by said insurance even
if such casualty or liability shall be caused or contributed to by any act
(whether of commission or omission, negligent or otherwise) of Lessor or Lessee,
as the case may be, or its agents, employees, invitees, or anyone for whom it
may be responsible (any additional premium or expense for which shall be paid by
Lessee or in the case of the insurance provided in Section 10.1 reimbursed to
Lessor by Lessee).
SECTION 12. DAMAGE AND DESTRUCTION.
12.1 In the event of any damage to or destruction of the
Premises or any portion thereof (or any building of which the Premises may then
be part) by fire or other casualty ("Damage or Destruction"), Lessor shall have
the obligation, to the extent and only to the extent of any recovery under the
fire and extended coverage insurance maintained by Lessor from time to time with
respect to the Premises, to repair or restore the Premises (as applicable) as
promptly and reasonably as possible (after first allowing a sufficient period
for the exercise of any right pursuant to Section 12.2). There shall be no
abatement or diminution of Rent with respect to any deprivation of Lessee of the
use or occupancy of the Premises or of any common areas of the Premises
whatsoever in connection with any such Damage or Destruction for the period in
which any portion of the Premises is unusable.
12.2 Notwithstanding anything contained in Section 12.1 to the
contrary, in the event of any Damage or Destruction which, in the judgment of a
reputable architect (the "Architect") selected by Lessor within thirty (30) days
thereof, cannot reasonably be repaired or restored within a period of six (6)
months of the occurrence of such Damage or Destruction, Lessor and (only in the
event of Damage or Destruction to the Premises) Lessee shall each have the right
to terminate this Lease by notice to the other party within ten (10) days after
notice of the determination by the Architect. Lessor may (but shall have no
obligation to) request a determination by the Architect unless Lessee shall,
within five (5) days after any Damage or Destruction occurs with respect to the
Premises request in writing to Lessor that such determination be made, in which
event such determination shall be made at Lessee's expense. In the event of the
termination of this Lease pursuant to this Section 12.2: (a) such termination
shall be effective sixty (60) days after the giving of such notice to terminate,
(b) there shall be no abatement or diminution of Rent prior to the date of such
termination, and (c) Lessor shall have no obligation to repair or restore the
Premises.
SECTION 13. EMINENT DOMAIN.
13.1 If the Premises shall be permanently taken as a result of
or in lieu of condemnation or eminent domain, this Lease shall terminate upon
the transfer of title in connection therewith.
13.2 If any of the following events occur: (a) any portion,
but less than all of the Premises (or any building of which the Premises may
then be a part), shall be permanently
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taken as a result of or in lieu of condemnation or eminent domain and as a
result of such event structural alterations or reconstruction of a portion of
the Premises are necessary or desirable in Lessor's judgment, or (b) as a result
of any such event specified in Subsection 13.2(a) hereof or as a result of any
other portion or portions of the Complex being so taken or as a result of all or
any portion of the Premises or the Complex being temporarily so taken, the area
of the Premises (as the case may be) remaining after such taking (taking into
consideration the period of time involved if a temporary taking), is such as to
render continued operation of either the Premises or the Complex economically
unfeasible by Lessor, then Lessor may at its sole option terminate this Lease by
notice given to Lessee within thirty (30) days after the latter of the
following: (i) the date upon which the proposed taking by such entity as a
result of or in lieu of condemnation or eminent domain becomes final or (ii) the
date upon which title to or possession of such portion of the Premises or
Lessee's interest in such portion of the Premises transfers to such entity. If
any of the foregoing events shall have occurred and this Lease is not terminated
by Lessor pursuant to this Section 13.2, this Lease shall be and remain in full
force and effect for the balance of the Term except that Base Rent shall abate
in the proportion which that portion of the Premises of which Lessee is so
deprived (if any, and only for the period of deprivation in the event of a
temporary taking) bears to the entire Premises.
13.3 Lessor shall be entitled to receive the entirety of any
and all proceeds, awards, damages, or other compensation received in connection
with such taking and Lessee shall have no right to share in such proceeds,
awards, damages, or other compensation. Lessee hereby forever assigns to Lessor
all right, title, and interest which Lessee may now or hereafter have in any
such proceeds, awards, damages, or other compensation whatsoever; provided,
however, that nothing in this Section 13 shall preclude Lessee from separately
claiming or receiving from any such person, if legally payable, compensation for
the taking of Lessee's tangible property and for Lessee's removal and relocation
costs to the extent that the same are specifically and separately awarded by not
otherwise.
SECTION 14. LIENS AND ENCUMBRANCES.
Lessee shall not suffer or permit any lien or encumbrance
whatsoever to exist upon the Premises or the Complex or any of Lessee's right,
title, or interest in this Lease by reason of any act (whether of commission or
omission) of Lessee or any of its agents, employees, or invitees. If any such
lien or encumbrance suffered or permitted by Lessee shall at any time exist; (a)
Lessee shall cause any such lien or encumbrance suffered or permitted by Lessee
to be removed by bonding or discharge within fifteen (15) days after notice from
Lessor to do so, and (b) Lessee shall at Lessee's sole cost and expense defend
Lessor against any action, suit or proceeding which may be brought thereon for
the enforcement of the same, and shall indemnify, defend, and hold Lessor, the
Premises and the Complex, harmless from and against any and all Liabilities and
Costs and all judgments, liens, or charges arising by reason of or in connection
with any such action, suit, or proceeding.
SECTION 15. MAINTENANCE AND REPAIR.
15.1 Lessor shall, at its sole expense (except to the extent
chargeable to Lessee pursuant to Section 6.1) make all repairs necessary to
maintain in as good condition as on the date hereof the roof, gutters and
downspouts, foundation, floor slab, exterior walls (excluding
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windows, window frames, doors, door checks, door jams, overhead doors and
operators, door and window locks and hardware, and all glass), and structural
supporting columns. Lessor shall have no obligation to make any such repairs
until the expiration of a reasonable period of time after written notice that
such repair is needed is received by Lessor from Lessee. Lessor shall to the
extent reasonably feasible make all repairs required to be made by Lessor in
such a manner as will not unreasonably interfere with Lessee's use and occupancy
of the Premises. Lessor shall not be liable or responsible for any injury or
inconvenience to or interference with Lessee's use or occupancy of the Premises
or Lessee's business arising from the making of any repairs, alterations,
additions, or improvements in or to the Premises or to any fixtures,
appurtenances, or equipment therein and there shall be no abatement or
diminution of Rent by virtue of any such repairs, alterations, additions, or
improvements. Nothing in this Section 15.1 shall relieve Lessee from any
liability to Lessor pursuant to this Lease for any damage to the Premises or the
Complex caused by Lessee or any of its agents, employees, or invitees.
15.2 Lessee shall at its sole expense take good care of the
Premises and the fixtures, appurtenances, and equipment therein and shall keep
the same in good order and condition, excepting only normal wear and tear and
those matters as to which Lessor has the obligation to repair pursuant to
Section 12.1 or Section 15.1. Lessee shall not permit the accumulation of
garbage, rubbish, or other waste upon, in, or about the Premises.
15.3 Lessee shall at its sole cost and expense replace plate
glass and glass in doors in the Premises and shall repair or replace windows,
window frames, door checks, door jams, door and window locks and hardware,
overhead doors and operators, and any door operators in the Premises. In the
event Lessee substitutes tangible personal property or fixtures for any portion
of the Premises, the personal property or fixtures so substituted shall be
included under this Lease as part of the Premises.
SECTION 16. ALTERATIONS.
Lessee shall have the right at its sole expense to make from
time to time non-structural alterations, additions, improvements, and
replacements in and to the Premises; provided, however, that Lessee shall have
first obtained the written consent of Lessor in each instance. Lessee shall
comply with all terms and conditions established by Lessor in connection with
Lessor's consent. Lessee shall have no right to make any structural alterations,
additions, improvements, or replacements in or to the Premises.
SECTION 17. POSSESSION AND REMOVAL OF PROPERTY.
All alterations, additions, improvements and replacements made
by Lessee in and to the Premises as permitted or required by this Lease
(including without limitation Sections 15.2 and 16) shall become the property of
Lessor automatically upon construction or installation in the Premises and
without any payment to Lessee. Upon or before the termination or expiration of
this Lease, Lessee shall have the right to remove all of its furniture and other
personal property located upon, in, or about the Premises; provided, however,
that Lessee shall at its own expense repair any damage or injury caused to the
Premises by such removal. At the request of Lessor and at Lessee's sole expense,
Lessee shall remove any alterations, additions, improvements, and replacements
made by Lessee in and to the Premises as permitted or required
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by this Lease and shall restore the Premises to their condition prior to the
time such alterations, additions, improvements, or replacements were made.
SECTION 18. LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS.
If Lessee shall at any time fail or refuse to perform any of
its covenants or obligations hereunder, Lessor shall have the right upon five
(5) days' prior notice to Lessee, but shall not be obligated, to perform such
covenant or obligation without waiving or releasing Lessee from any liability.
All sums paid, advanced, or expended by Lessor pursuant to this Section 18 shall
be repaid to Lessor by Lessee on demand.
SECTION 19. SUBORDINATION AND ATTORNMENT; ESTOPPEL
CERTIFICATE.
This Lease is subject and subordinate to any and all mortgages
and other financings (and modifications) and to any dedication to any
governmental or quasi-governmental authority of a fee interest or easement in
the Premises for public rights of way, public utilities and related facilities,
or any similar purpose which may now or hereafter affect the Premises. Lessee
shall execute such estoppel certificates, attornments, and other instruments in
connection therewith as reasonably requested by Lessor or any such mortgagee or
other holder. The holder of any interest to which this Lease is subordinate or
any such purchaser or transferee shall not be (a) subject to any offsets or
deficiencies which Lessee might be entitled to assert against Lessor, (b) bound
by any payment of rent by Lessee to Lessor for more than one (1) month in
advance, or (c) bound by any amendment or modification to this Lease made
without the consent of such mortgagee or other holder. The provisions of this
Section 19 shall be self-operative, and no further instrument of subordination
shall be required by the mortgagee or other holder of any interest to which this
Lease is subordinate. Lessee agrees, however, whenever requested to do so upon
reasonable notice by Lessor, to execute such instruments and documents
reasonably necessary or desirable to confirm the provisions of this Section 19.
SECTION 20. SIGNS.
Lessee shall not place, install, affix, or permit any sign of
any nature on the exterior or in the windows of the Premises without first
obtaining the written consent of Lessor. All such approved signs shall be
installed and maintained by Lessee in compliance with all Applicable Legal
Requirements. Lessee shall pay all expenses and all license and permit fees
relating to the installation and maintenance of authorized signs and shall pay
all expenses for removal and costs of repairs resulting therefrom.
SECTION 21. SURRENDER OF PREMISES.
21.1 Upon the expiration or termination of this Lease (by
lapse of time or otherwise), Lessee shall deliver up and surrender the Premises
to Lessor, together with all additions, alterations, improvements and
replacements thereto (whether the same shall have been made by Lessor or Lessee
and without compensation or credit whatsoever to Lessee) in broom clean
condition and in good order and repair, normal wear and tear which Lessee is not
obligated under this Lease to repair only excepted, failing which Lessor may
restore the Premises to such condition, order, and repair at Lessee's sole
expense payable by Lessee to Lessor within ten (10) days after the date upon
which Lessee receives an invoice from Lessor. In connection with such delivery
and surrender of the Premises, Lessee shall subject to Section
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17 hereof remove all personal property located upon, in or about the Premises
whether belonging to Lessee or any person claiming under or through Lessee and
any such personal property not so removed by Lessee upon the termination of this
Lease (or in the case of any termination of this Lease by Lessor other than by
lapse of time within ten (10) business days after notice of such termination)
shall be considered abandoned by Lessee and Lessor may dispose of the same as it
deems expedient without any liability therefor to Lessee or any third party, at
Lessee's sole expense, payable by Lessee to Lessor within ten (10) days after
the date upon which Lessee receives an invoice from Lessor. Lessee shall deliver
up and surrender the Premises to Lessor at the end of the Term of this Lease
without notice of any kind and Lessee hereby waives all right to any such notice
as may be provided under any present or future laws.
21.2 Upon the expiration or termination of this Lease (by
lapse of time or otherwise), Lessee shall, if no Event of Default (as
hereinafter defined) then exists, have the right prior to such expiration or
termination to remove any trade fixtures owned by Lessee installed upon, in or
about the Premises and Lessee shall promptly repair and restore the Premises to
their condition prior to the time such trade fixtures were so installed. In any
event, Lessee shall at Lessee's sole expense remove any and all such trade
fixtures at Lessor's request and shall so repair and restore the Premises.
SECTION 22. RIGHT OF LESSOR TO CHANGE PUBLIC PORTIONS OF
PROJECT.
At any time Lessor shall have the right in its sole and
absolute discretion: (a) to change and to relocate the common areas of the
Complex from time to time; provided, however, that in no event shall Lessor make
any change which shall diminish the area of the Premises or which shall
unreasonably deprive Lessee of access to the Premises, and (b) to change the
name of the Complex from time to time hereafter and Lessor shall have no
obligation for any loss or damage to Lessee by reason thereof.
SECTION 23. HOLDOVER.
23.1 If, at the expiration of the Term, Lessee continues to
occupy the Premises with the written consent of Lessor, Lessee shall be a tenant
from month to month at a monthly base rent equivalent to 150% of Base Rent paid
by Lessee at the expiration of the then Term of this Lease, subject to all of
the other terms and conditions of this Lease and Lessee shall perform all of
Lessee's covenants and obligations hereunder (including without limitation all
obligations to pay Additional Rent as provided herein).
23.2 If, at the expiration of the Tenn or other termination of
this Lease, Lessee continues to occupy the Premises without the written consent
of Lessor or if no new agreement shall have been entered into by the parties
hereto, Lessee shall be a tenant at will only and such continued occupancy shall
not defeat Lessor's right to possession of the Premises at any time with or
without notice. In such event, Lessee shall pay to Lessor all damages sustained
by reason of Lessee's retention or possession of the Premises after such
expiration.
SECTION 24. DEFAULT.
24.1 Any of the following shall constitute an event of default
by Lessee under this Lease ("Event of Default"):
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a. the failure of Lessee to pay Rent or any other
amounts payable by Lessee hereunder at the time and
in the manner provided herein;
b. the failure of Lessee to perform any other covenant
or obligation or to comply with any other term or
condition imposed upon Lessee under this Lease, if
such failure shall continue for a period of ten (10)
days after Lessee receives written notice thereof
from Lessor;
c. if Lessee becomes insolvent (either in the bankruptcy
sense or equity sense), makes an assignment for the
benefit of creditors, applies for the appointment of
a trustee, liquidator, or receiver of any substantial
part of its assets, or commences any proceeding
relating to itself under any bankruptcy,
reorganization, arrangement, or similar law; or
d. if any such application is filed, any such proceeding
is commenced against Lessee and Lessee indicates its
consent thereto, or an order is entered appointing
any such trustee, liquidator, or receiver, or
approving a petition in any such proceeding and with
such order remaining in effect for sixty (60) days.
24.2 If an Event of Default shall have occurred, then, in
addition to all other rights and remedies which Lessor may have whether
hereunder, at law, or in equity, Lessor may by three (3) days' prior notice to
Lessee terminate this Lease or without terminating this Lease and without notice
re-enter the Premises by summary proceedings or otherwise and in any event may
dispossess Lessee. No re-entry or taking of possession of the Premises by Lessor
shall be construed as an election on Lessor's part to terminate this Lease,
unless a written notice of such intention is given to Lessee. Lessee agrees to
be and remain liable for: (a) all Rent and other charges and sums due hereunder;
and (b) all Liabilities and Costs that may be based upon any breach of or
default under any of the terms, covenants, obligations, and conditions of this
Lease by Lessee which liability shall survive the termination of this Lease, the
re-entry of Lessor, and the issuance of any action to secure possession of the
Premises. Lessor shall have the right to maintain successive actions against
Lessee for recovery of all Liabilities and Costs or for said Rent and other
charges and sums payable hereunder as and when said Rent and other charges and
sums are payable hereunder and Lessor shall not be required to wait to begin
such actions or legal proceedings until the date this Lease would have expired.
In the event of re-entry, Lessor may, on behalf of Lessee, or, if this Lease is
terminated, on its own behalf, without being obliged to do so in either event,
relet the Premises, in whole or in part, for any period for any sum (including
without limitation any rental concession and rent-free occupancy) which it may
deem reasonable to any tenant which it may deem suitable and satisfactory and
for any use and purpose which it may deem appropriate. In the event of
reletting, Lessor may apply the rent therefrom first to the payment of its
expenses (including without limitation attorneys' fees) in reletting the
Premises or any part thereof, commissions, and the repair, improvement and
alteration of the Premises or the portions so leased, and then to the payment of
Rent and all other charges and sums due from Lessee hereunder, Lessee remaining
liable for any deficiency. The failure of Lessor to relet, or if relet, to
collect the rent under such reletting, shall not
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release or affect Lessee's liability hereunder for all Liabilities and Costs.
Lessee waives all right and privilege of redemption of the Premises or
continuation of this Lease which it might otherwise have hereunder, at law, or
in equity after an Event of Default.
SECTION 25. RIGHT OF ACCESS.
25.1 Lessor, any mortgagee or holder of any interest in the
Premises or the Complex, and their agents and employees shall have the right to
enter any portion of the Premises at all reasonable times for the purpose of
examining and inspecting the Premises, for any purpose whatsoever related to the
safety and preservation of the Premises, exhibiting the same to any prospective
purchaser or mortgagee or tenant, making such repairs, replacements,
alterations, or improvements to the Premises or the Complex as Lessor may deem
necessary or desirable, and performing or carrying out any of Lessor's rights
under this Lease.
25.2 Lessor shall have the right to erect, use, and maintain
in and through the Premises plumbing and electrical pipes, conduits, wire,
heating, ventilating, and air-conditioning ducts serving the Complex as Lessor
shall deem necessary or desirable in and through the Premises providing that
installation will not unreasonably interfere with Lessee's use of the Premises.
SECTION 26. FORCE MAJEURE.
Lessor shall have no responsibility or liability whatsoever
for and shall be excused from the observance or performance of any covenant or
obligation of Lessor hereunder (including without limitation Lessor's
obligations pursuant to Section 6.1 hereof) to the extent that the same is
rendered impossible, impracticable or economically unfeasible in whole or in
part, by an act of God (including without limitation lightning, storm, flood,
tornado or earthquake); fire; explosion; Applicable Legal Requirements
(including without limitation any prohibition or restriction upon the charges
which may be made by Lessor to Lessee or other tenants or third parties
receiving the types of services contemplated by Section 6.1 hereof); strikes;
lockouts; shortages of labor, fuel or materials; acts of the public enemy; war
(declared or undeclared); riot or insurrection; the discontinuation, suspension,
or interruption of or interference with any utility service supplied to Lessor
or Lessee by any third party; or any other cause or circumstance beyond the
control of Lessor. In no event shall any such delay or hindrance in or
prevention from the performance of any such covenant or obligation constitute a
termination of this Lease or the eviction of Lessee from the Premises. Lessor
shall in no event be required to settle or compromise any strike, lockout or
other labor difficulties or disputes, the resolution thereof being within the
sole discretion of Lessor.
SECTION 27. RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy specified herein or otherwise conferred
upon or reserved to Lessor or Lessee, as the case may be, shall be considered
exclusive of any other right or remedy, but the same shall be cumulative and
shall be in addition to every other right and remedy whether hereunder, at law,
or in equity, and every such right and remedy may be exercised by Lessor or
Lessee as the case may be from time to time and as often as occasion may arise
or as may be deemed expedient.
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SECTION 28. WAIVER.
No waiver by either party to this Lease of any default or
breach by the other party in the performance of any of the covenants or
obligations of such other party under this Lease shall be deemed to have been
made unless contained in writing executed by the party waiving the breach or
default. No such consent or waiver shall be deemed or construed to be a consent
to or waiver of any other such breach or default. Failure or delay on the part
of either party hereto to complain of any act (whether of commission of
omission) of the other party hereto or to declare a breach of or default under
this Lease, irrespective of how long such failure or delay continues, shall not
constitute a waiver by such party hereto of its rights hereunder. No acceptance
by Lessor of any payment of Rent or other amount due or owing under this Lease
shall be deemed a waiver of any default or breach by Lessee in the performance
of any of Lessee's covenants or obligations under this Lease. The receipt by
Lessor of less than the full Rent due under this Lease shall not be construed to
be other than a payment on account of Rent then due under this Lease, nor shall
any statement on Lessee's check or any letter accompanying Lessee's check be
deemed an accord and satisfaction with respect to any such Rent, and Lessor may
accept such payment without prejudice to Lessor's right to recover the balance
of Rent due or to pursue any other rights and remedies provided in this Lease,
at law, or in equity. No act (whether of commission or omission) of Lessor or
Lessor's agents, employees, directors or officers during the Term of this Lease
shall be deemed an acceptance of the surrender of the Premises, and no agreement
to accept such surrender shall be valid unless in writing and signed by Lessor.
SECTION 29. MORTGAGEE'S APPROVALS, CONSENT AND REQUIREMENTS.
Any provisions of this Lease requiring the approval or consent
of Lessor shall not be deemed to have been unreasonably withheld if any
mortgagee or other holder of an interest in the Premises or any portion thereof
shall refuse or withhold its approval or consent thereto. Any requirement of
Lessor pursuant to this Lease which is imposed pursuant to the direction of any
mortgagee of the Premises or any portion thereof shall be deemed to have been
reasonably imposed by Lessor if made in good faith.
SECTION 30. SUCCESSORS AND ASSIGNS.
This Lease shall be binding upon and shall inure to the
benefit of Lessor and Lessee and their respective heirs, administrators,
executors, successors, and permitted assigns.
SECTION 31. THIRD PARTY RIGHTS.
Nothing herein expressed or implied is intended to or shall be
construed to confer upon or give to any person or entity other than the parties
hereto any right or remedy under or by reason of this Lease.
SECTION 32. TIME OF THE ESSENCE,
Time is of the essence of this Lease and each and every term
and condition hereof.
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<PAGE> 14
SECTION 33. BROKERS.
Lessee represents and warrants to Lessor that it has
negotiated this Lease solely and directly with Lessor and that no other person
or entity assisted in or brought about on Lessee's behalf the negotiation of
this Lease in the capacity of broker, agent, finder or originator. Lessee agrees
to indemnify and hold harmless Lessor from any Liabilities and Costs that may be
based upon or may be asserted or alleged to be based upon any broker's or
agent's commission or finder's or originator's fee or any other compensation to
any person or entity with respect to the transaction contemplated by this Lease
where such Liabilities and Costs arise out of or are asserted or alleged to
arise out of any act (whether of commission or omission) of Lessee or any of its
agents, employees, officers and directors.
SECTION 34. NOTICES.
34.1 All notices and other communications required or
permitted hereunder to be given by either party to the other party shall be in
writing and shall be deemed to have been given if delivered personally to a
corporate officer or managing agent of such other party or two (2) days after
mailed by certified or registered mail, postage prepaid, return receipt
requested, and addressed to such other party as follows:
If to Lessor: AMPOINT
P.O. Box 9040
Toledo, Ohio 43697-9040
Attention: Susan W. Webb
If to Lessee: GLASSTECH, INC.
995 4th Street - Ampoint
Perrysburg, Ohio 43551
or to such other address or representative as may be designated from time to
time by such other party by notice given in the manner provided in this Section
34.1 or with respect to Lessee by leaving said notice at the Premises.
34.2 In the event that the Premises or any part thereof are
now or at any time hereafter during the Term subject to a mortgage or other
interest and provided that Lessee has been notified in writing of the name and
address of the holder thereof, Lessee shall, as long as said mortgage interest
shall exist, simultaneously with the giving of any notice to Lessor give a copy
of said notice to the mortgagee or other holder of said interest.
SECTION 35. FLOOR LOAD.
Lessee shall not place or permit to be placed upon any floor
of the Premises any item of any nature or items the aggregate weight of which
shall exceed the floor's rated floor load limit of one thousand pounds (1,000
lbs.) per square foot.
SECTION 36. ASSIGNMENT AND SUBLETTING.
Lessee shall not assign or in any manner transfer this Lease
or any estate or interest therein or sublet the Premises or any part thereof
without the prior written consent of
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<PAGE> 15
Lessor in each instance, which consent shall not be unreasonably withheld.
Notwithstanding any assignment or subletting, Lessee shall at all times remain
fully responsible and liable for the performance of all of Lessee's covenants
and obligations under this Lease. Lessee shall not mortgage, pledge or otherwise
encumber its interest or estate in this Lease or in the Premises. The consent of
Lessor to any assignment, subletting, or transfer shall not constitute a waiver
of Lessor's right to consent to any subsequent assignment, subletting, or
transfer.
SECTION 37. QUIET ENJOYMENT.
Upon observing and performing the covenants and obligations on
Lessee's part to be observed and performed under this Lease, Lessee shall and
may peaceably and quietly have, hold, and enjoy the Premises during the Term
without any hindrance of any person whomsoever claiming by or through Lessor,
subject, however, to all the terms and provisions of this Lease.
SECTION 38. SEVERABILITY.
If any term or condition of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such term or
condition to any other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
SECTION 39. ENTIRE AGREEMENT: NO ORAL MODIFICATIONS.
Lessor and Lessee acknowledge and agree that as between them
there are no terms, conditions, covenants, obligations, representations, or
warranties, expressed or implied, collateral or otherwise, forming part of or in
any way affecting or relating to this Lease, except as expressly set forth
herein, and that this Lease constitutes the entire agreement between them. This
Lease may not be modified, amended, or supplemented, except by a subsequent
agreement in writing, executed by both Lessor and Lessee.
SECTION 40. APPLICABLE LAW.
This Lease has been executed in the State of Ohio and shall be
governed in all respects by the laws of the State of Ohio.
SECTION 41. EXECUTION.
This Lease shall become effective when it has been signed by a
duly authorized officer or representative of each of the parties and has been
delivered to the other party hereto. This Lease is being executed simultaneously
in multiple counterparts. Each fully executed counterpart shall be deemed an
original and it shall not be necessary in making proof of this Lease to produce
or account for more than one such counterpart.
SECTION 42. CAPTIONS AND EXHIBITS.
The section captions contained in this Lease are for
convenience of reference only and are not intended and shall not be deemed or
construed to limit, enlarge or affect the scope or meaning of this Lease or any
term or condition hereof. Section references are TO the corresponding Sections
of this Lease. All capitalized references to "Exhibit" in this Lease shall mean
the corresponding exhibit attached to, and made a part of, this Lease.
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<PAGE> 16
SECTION 43. MEMORANDUM OF LEASE.
Each of the parties hereto agrees that it shall not publicly
record this Lease. Each of the parties agrees to execute and deliver, upon the
request of the other party hereto, a memorandum of this Lease in form and
substance reasonably satisfactory to each party hereto ("Memorandum of Lease")
which may be publicly recorded by either party.
SECTION 44. RELOCATION
44.1 Lessor shall have the right at any time from the date of
this Lease through the end of the Term, inclusive, to relocate the Premises or
any part thereof to another part of the Complex upon the following conditions:
(1) the Premises or such part thereof as so relocated shall be substantially the
same in size, dimensions, configuration, decor and nature as the Premises or
such part thereof before such relocation, and shall be placed in that condition
by Lessor at its sole cost and expense, (2) Lessor shall give Lessee at least
thirty (30) days written notice of Lessor's intention to so relocate the
Premises or such part thereof, (3) the physical relocation of the personal
property of Lessee upon, in and about the Premises or such part thereof at the
time of such relocation shall be accomplished (a) at the sole cost and expense
of Lessor, and (b) in a manner so as to interrupt and inconvenience Lessee and
its use and occupancy of the premises or such part thereof to the minimum extent
reasonably possible, and (4) if the Premises or such part thereof as so
relocated comprise a greater amount of rentable space than that in the Premises
or such part thereof before such relocation, the Base Rent shall be increased by
a proportion equal to the proportion of such increase in such rentable space.
44.2 Upon the occurrence of any such relocation pursuant to
Section 44.1, the parties hereto shall immediately execute an amendment to this
Lease reflecting the relocation of the Premises and the increase of Base Rent,
if any, and at the request of either party hereto an amendment to the Memorandum
of Lease (as defined in Section 43), if any, which amendment to the Memorandum
of Lease may thereafter be recorded by either party.
SECTION 45. SECURITY DEPOSIT.
($6,840) as security for the full and faithful performance of each of the
obligations and covenants imposed upon Lessee under this Lease. If Lessee shall
default in the payment of Rent or in the performance of any other covenant or
obligation, Lessee hereby authorizes Lessor, at Lessor's election, without
notice and without terminating this Lease, to apply the funds so deposited as
security in the payment of any Rent due hereunder or in remedying any other
default hereunder. Any action taken by Lessor under this Section 45 shall not be
construed to be a waiver of any other rights or remedies of Lessor whether under
this Lease, at law, or in equity, or any of Lessor's rights in case of any
subsequent default to enforce any such right or remedy including without
limitation the rights and remedies set forth in this Section 45. If said
security or any part thereof is used, applied, or retained in curing any such
default, Lessee upon demand shall immediately deposit with Lessor as additional
security an amount in cash equal to the amounts so used, applied, or retained,
and if Lessee shall fail to do so, such failure shall constitute a default under
this Lease, affording Lessor the same rights and remedies as a default in
payment of Rent. Within sixty (60) days after the expiration of the Term,
whether by lapse of time or otherwise, provided Lessee shall not be in default
under this Lease and shall have complied with all of the covenants and
obligations imposed upon Lessee under this Lease,
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<PAGE> 17
including, without limitation, the yielding up of the immediate possession of
the Premises to Lessor, Lessor shall upon being furnished with affidavits and
other satisfactory evidence by Lessee that Lessee has paid all bills incurred by
Lessee in connection with Lessee's performance of all such covenants and
obligations, return to Lessee said sum on deposit or such portion thereof then
remaining on deposit with Lessor hereunder. No interest shall be payable on
Lessee's security deposit, which deposit shall not be held in trust by Lessor
and may be co-mingled with Lessor's other funds.
IN WITNESS WHEREOF, the parties hereto have executed or caused
to be executed this Lease on the day and year first above written.
AMPOINT,
a division of Webb Corporation
By: /s/ Susan W. Webb
-------------------------------
Susan W. Webb, President
GLASSTECH, INC.
By: /s/ Thomas Hulane
-------------------------------
V.P. Manufacturing (Title)
------------------
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<PAGE> 1
EXHIBIT 10.4
ADVISORY AGREEMENT
ADVISORY AGREEMENT ("Agreement"), dated July 2, 1997, by and
between Key Equity Capital Corporation ("KECC"), and Glasstech Sub Co., a
Delaware corporation (the "Company").
BACKGROUND
The Company desires to receive general financial and other
business advisory services from KECC, and thereby obtain the benefit of the
experience of KECC in business and financial matters generally and its knowledge
of the Company and the Company's financial affairs in particular. KECC is
willing to provide general financial and other business advisory services to the
Company. Accordingly, the compensation arrangements set forth in this Agreement
are designed to compensate KECC for such services.
NOW, THEREFORE, in consideration of the foregoing premises and
the respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, KECC and the Company hereby agree as follows:
TERMS
1. ENGAGEMENT. The Company hereby engages KECC as a general
financial and business advisor, and KECC hereby agrees to
provide only general financial and business advisory
<PAGE> 2
services to the Company, all on the terms and subject to the conditions
set forth below. This Agreement shall be effective as of the date the
Company merges (the "Merger") with and into Glasstech, Inc., a Delaware
corporation (the "Effective Date"). This Agreement shall survive the
Merger and shall be binding upon Glasstech, Inc. in all respects after
the consummation of the Merger. All references in this Agreement to the
Company shall mean and include Glasstech Sub Co. and Glasstech, Inc.,
after the consummation of the Merger.
2. SERVICES OF KECC.
(a) KECC hereby agrees during the term of this engagement to
consult with the Company's board of directors (the "Board")
and management of the Company and its subsidiaries in such
manner and on such general business and financial matters as
may be reasonably requested from time to time by the Board,
including but not limited to:
(i) corporate strategy;
(ii) budgeting of future corporate
investments; and
(iii) acquisition and divestiture strategies.
The parties hereto agree that the services to be
provided hereunder shall include only general financial
and other advisory services. In the event the Company
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<PAGE> 3
requests extraordinary services (e.g., obtaining debt or
equity financing or coordinating or negotiating the
consummation of acquisitions or divestitures), additional fees
may be charged pursuant to arrangements to be mutually agreed
upon by the Company and KECC.
(b) The services provided pursuant to this Agreement are advisory
only and the Company is free to accept or reject the advice
rendered by officers or employees of KECC or its affiliates.
3. COMPENSATION.
(a) The Company agrees to pay to KECC as compensation for
services to be rendered by KECC hereunder, a fee based
upon the number of hours of service rendered by KECC at
such rates as are in effect from time to time; provided
that the fee for all services hereunder ("Advisory
Fees") shall in no event exceed $200,000 for each
calendar year. Payments shall be made quarterly in
arrears on the last business day of March, June,
September and December each year and any hours actually
worked during a period which exceed the number of hours
charged for such period shall be carried forward to
future periods.
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<PAGE> 4
(b) The parties hereto reasonably believe that services rendered
pursuant to this Agreement will require payment of Advisory
Fees averaging $50,000 per calendar quarter. Therefore, the
Company many, in its sole discretion, choose to make estimated
payments of $50,000 per calendar quarter.
4. EXPENSE REIMBURSEMENT. The Company shall promptly reimburse
KECC for such reasonable travel expenses and other out-of-
pocket fees and expenses as may be incurred by KECC, its
directors, officers and employees in connection with the
rendering of services hereunder. Such expenses shall be in
addition to any Advisory Fees and shall not affect the
maximum amount of Advisory Fees payable pursuant to
paragraph 3 above.
5. TERM.
(a) This Agreement shall be in effect for an initial term
commencing on the Effective Date and terminating on the
tenth anniversary date of the Effective Date; provided,
however, that this Agreement may be terminated upon 30
days notice at any time by the Company's Board of
Directors, and further provided that this Agreement
shall terminate on the first to occur of (i) the date
of a Qualified Public Offering (as defined below), (ii)
the date of the sale of all or substantially all of the
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<PAGE> 5
assets of the Company or all of its material subsidiaries,
(iii) the date of the delivery by the Company to KECC of a
notice of termination for Cause, or (iv) 30 days after the
date of the delivery by KECC to the Company of a notice of
termination for any reason, including any breach of this
Agreement by the Company. No termination of this Agreement,
whether pursuant to this paragraph or otherwise, shall affect
the Company's obligations with respect to the fees, costs and
expenses incurred by KECC in rendering services hereunder and
not reimbursed by the Company as of the effective date of such
termination.
(b) "Cause" means (i) the conviction of KECC or any
individual employed by KECC and providing consulting
services hereunder on behalf of KECC (a "Consultant")
of any crime involving dishonesty or moral turpitude or
(ii) the commission by any Consultant of any act which
in any material respect undermines the integrity,
reputation or financial viability of the Company (other
than acts based upon the exercise of good faith
business judgment), all as determined by a resolution
of the Board.
(c) "Affiliate" means, with respect to any person, any other
person which, directly or indirectly, controls, is controlled
by or under common control with, such
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<PAGE> 6
person and includes any person that would be deemed to be an
"affiliate" or "associate" of such person as each term is
defined in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities and Exchange Act of 1934, as
amended.
(d) "Qualified Public Offering" means the sale of shares of
the Company's common stock by the Company in one or
more public offerings pursuant to a registration
statement (other than (i) a registration statement on
Forms S-4 or S-8 or any successor forms or any other
registration statement relating to a special offering
to the Company's employees or then-existing security
holders or (ii) a registration statement registering
shares of the Company's common stock to be sold in an
underwritten public offering of a combination of debt
and the Company's common stock in which not more than
20% of the gross proceeds received from the sale of
such securities is attributed to such common stock)
filed with, and declared effective by, the Securities
and Exchange Commission pursuant to the Securities Act
of 1933, as amended, resulting in receipt by the
Company of at least [$30,000,000] in aggregate gross
proceeds' provided that at or about the time of such
sale shares of the Company's common stock shall be
listed for trading on the New York Stock Exchange or
the American Stock Exchange, or shall be quoted on the
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<PAGE> 7
National Association of Securities Dealers Automated
Quotations System.
6. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
KECC, its directors, officers and employees against and from any and
all loss, liability, suits, claims, costs, damages and expenses
(including attorneys' fees) arising from their performance hereunder,
except as a result of their gross negligence or intentional wrongdoing.
7. KECC AN INDEPENDENT CONTRACTOR. KECC and the Company agree
that KECC shall perform services hereunder as an independent
contractor, retaining control over and responsibility for
its own operations and personnel. Neither KECC nor its
directors, officers, or employees shall be considered
employees or agents of the Company as a result of this
Agreement nor shall any of them have authority under this
Agreement to contract in the name of or bind the Company,
except as expressly agreed to in writing by the Company.
8. NOTICES. Any notice, report or payment required or
permitted to be given or made under this Agreement by one
party to the other shall be deemed to have been duly given
or made if personally delivered or, if mailed, when mailed
by registered or certified mail, postage prepaid, to the
other party at the following addresses (or at such other
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<PAGE> 8
address as shall be given in writing by one party to the
other):
If to KECC:
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio 44114-1306
Attention: David Given
If to the Company:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
9. ENTIRE AGREEMENT. This Agreement (a) contains the complete and entire
understanding and agreement of KECC and the Company with respect to the
subject matter hereof; and (b) supersedes all prior and contemporaneous
understandings, conditions and agreements, oral or written, express or
implied, respecting the engagement of KECC in connection with the
subject matter hereof.
10. AMENDMENT. This Agreement may be amended only with the
written consent of both KECC and the Company.
11. WAIVER OF BREACH. The waiver by either party of a breach of
any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any subsequent breach
of that provision or any other provision hereof.
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<PAGE> 9
12. ASSIGNMENT. Neither KECC nor the Company may assign its
rights or obligations under this Agreement without the
express written consent of the other.
13. CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Ohio, without giving
effect to any choice of law or conflict of law provision or rule
(whether of the State of Ohio or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Ohio.
IN WITNESS WHEREOF, KECC and the parties hereto have caused
this Agreement to be duly executed and delivered on the date and year first
above written.
KEY EQUITY CAPITAL CORPORATION
By: /s/ David P. Given
Its: President
GLASSTECH SUB CO.
By: /s/ Mark D. Christman
Its: President
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<PAGE> 1
Exhibit 10.5
__________, 1997
EXCHANGE AGENT AGREEMENT
United States Trust Company of New York
111 Broadway, Lower Level
New York, New York 10006
Attention: Corporate Trust
Ladies and Gentlemen:
Glasstech, Inc., a Delaware corporation ("the Company"),
proposes to make an offer (the "Exchange Offer") to exchange its 12 3/4% Senior
Notes Due 2004 (the "Old Notes") for its Series B 12 3/4% Senior Notes Due 2004
which we expect to be registered under the Securities Act of 1933, as amended
(the "New Notes"). The terms and conditions of the Exchange Offer, as currently
contemplated are set forth in a prospectus, dated ___________, 1997 (the
"Prospectus"), proposed to be distributed to all record holders of the Old
Notes. The Old Notes and the New Notes are collectively referred to herein as
the "Notes."
The Company hereby appoints United States Trust Company of New
York to act as exchange agent (the "Exchange Agent") in connection with the
Exchange Offer. References hereinafter to "you" shall refer to United States
Trust Company of New York.
The Exchange Offer is expected to be commenced by the Company
on or about ____________, 1997. 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 Notes to accept the Exchange Offer and contains
instructions with respect to the delivery of certificates for Old Notes tendered
in connection therewith.
The Exchange Offer shall expire at 5:00 P.M., New York City
time, on ____________, 1997, 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 within 24 hours) 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 any Old Notes 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
- -- Conditions." The Company will give oral (confirmed in writing) or written
notice of any amendment, termination or nonacceptance to you as promptly as
practicable.
<PAGE> 2
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 Prospectus 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 Notes
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
Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes
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 Notes (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 Notes 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 Notes 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 Notes are not in proper form for
transfer or some other irregularity in connection with the acceptance of the
Exchange Offer exists, you will use all reasonable efforts 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 Mark D. Christmann or Kenneth H.
Wetmore of the Company (such approval, if given orally, to be confirmed in
writing) or any other party designated by such officers in writing, you are
authorized to waive any irregularities in connection with any tender of Old
Notes pursuant to the Exchange Offer.
5. Tenders of Old Notes may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer -- Procedures for Tendering," and Old Notes 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 Notes
which Mark D. Christmann or Kenneth H. Wetmore 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 Notes
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Old Notes.
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<PAGE> 3
7. You shall accept tenders:
(a) in cases where the Old Notes 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 Notes provided that customary transfer requirements, including any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Notes where so
indicated, and as permitted in the Letter of Transmittal, and deliver
certificates for Old Notes to the transfer agent for split-up and return any
untendered Old Notes 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 Notes properly tendered and you, on behalf of the Company, will exchange
such Old Notes for New Notes and cause such Old Notes to be canceled. Delivery
of New Notes will be made on behalf of the Company by you at the rate of $1,000
principal amount of New Notes for each $1,000 principal amount of Old Notes
tendered promptly after notice (such notice if given orally, to be confirmed in
writing) of acceptance of said Old Notes by the Company; provided, however, that
in all cases, Old Notes tendered pursuant to the Exchange Offer will be
exchanged only after timely receipt by you of certificates for such Old Notes
(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 Notes 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 Notes 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
Notes 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 Notes
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 Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer --
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<PAGE> 4
Conditions" or otherwise, you shall (as soon as practicable after the expiration
or termination of the Exchange Offer) return those certificates for unaccepted
Old Notes (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 Notes, unaccepted Old
Notes or for New Notes shall be forwarded by first-class mail.
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 use 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;
(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 Notes 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
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<PAGE> 5
(h) shall not advise any person tendering Old Notes
pursuant to the Exchange Offer as to the appropriateness of making such
tender or as to the market value or decline or appreciation in market
value of any Old Notes.
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 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: Kenneth H. Wetmore.
16. You shall advise by facsimile transmission or telephone,
and promptly thereafter confirm in writing to Kenneth H. Wetmore 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
Notes 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 authorized by the Company, upon oral
request made from time to time prior to the Expiration Date, 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 Notes tendered, the aggregate principal amount of Old
Notes accepted, and shall 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 setoff 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.
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<PAGE> 6
19. For services rendered as Exchange Agent hereunder, you
shall be entitled to such compensation as set forth on the fee schedule
delivered pursuant to the initial offering of the Old Notes.
20. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you 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 Notes 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 Notes; 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 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 Notes, your check in the amount of all transfer
taxes so payable, and the Company shall reimburse you for the amount of any and
all transfer taxes payable in respect of the exchange of Old Notes; 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.
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<PAGE> 7
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:
If to the Company:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Facsimile: (419) 661-9366
Attention: Kenneth H. Wetmore
If to the Exchange Agent:
United States Trust Company of New York
111 Broadway, Lower Level
New York, New York 10006
Facsimile: (212) 780-0592
Attention: Corporate Trust
Corporate Trust Window
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
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<PAGE> 8
Agreement, you shall promptly deliver to the Company any certificates for 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.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
GLASSTECH, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Accepted as of the date
first above written:
United States Trust Company of New York,
as Exchange Agent
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-8-
<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
OF
JOHN S. BAXTER
WITH
GLASSTECH, INC.
This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made
by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH
HOLDING CO., a Delaware corporation with its principal place of business at
Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding")
and JOHN S. BAXTER (SSN ###-##-####), an individual residing at 9689 Oakhaven,
Perrysburg, Ohio 43551 (the "Executive Employee").
BACKGROUND
----------
This Employment Agreement covers the employment of the
Executive Employee by Glasstech.
Now therefore, Glasstech and the Executive Employee, in
consideration of the mutual promises herein contained and intending to be
legally bound hereby, agree as follows:
1. TERM. Glasstech hereby employs the Executive Employee as
Senior Vice President, Marketing & Sales, and the Executive Employee hereby
accepts such employment, from the date of this Employment Agreement to June 30,
2002 unless sooner terminated in accordance with the provisions of Sections 4,
5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual
anniversary thereafter, this Employment Agreement shall automatically renew for
an additional one (1) year period (the "Renewal Term" or the "Renewal Terms")
unless either party notifies
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the other party in writing of its or his intention not to renew the Employment
Agreement (the "Renewal Termination Notice") not less than six (6) months prior
to the expiration of the last year of the Term or of any Renewal Term. The
provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination
of this Employment Agreement.
2. DUTIES. The Executive Employee, in his capacity as Senior
Vice President, Marketing & Sales of Glasstech (or such other and comparable
titles and positions as shall be given the Executive Employee by Holding Board
of Directors), shall perform for Glasstech the services currently performed by
him for Glasstech (or comparable services or other reasonable duties as he and
Glasstech may agree upon), subject to the reasonable direction of Holding's
Board of Directors. The Executive Employee shall perform such services in Wood
County, Ohio, or at such other location or locations where he may be assigned by
Glasstech from time to time, provided, however, that the Executive Employee
shall not be required, in connection with his performance of such services, to
travel on behalf of Glasstech in a manner inconsistent with the scope of his
duties and the past practices of Glasstech. The Executive Employee shall devote
his business time and effort to the Employment Agreement performance of his
duties as described herein as reasonably required. It is understood that the
Executive Employee may attend to outside investments, serve as a director and/or
officer of a non-competing company and serve as an officer, director, or
participant in educational, welfare, social, religious, and civic organizations
so long as such activities do
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not materially interfere with the Executive Employee's employment
hereunder.
3. COMPENSATION.
3.1 BASE SALARY. Glasstech shall pay the Executive Employee
during each calendar year of the Term and each Renewal Term hereunder, a minimum
salary of Two Hundred Thirteen Thousand Four Hundred Thirty-Eight Dollars
($213,438) per calendar year adjusted as provided in Section 3.5 (hereinafter
referred to as the "Base Salary"). The Base Salary shall be payable in equal
bi-weekly installments, less such deductions as shall be required to be withheld
by applicable law and regulations. Part of this salary may be payable by
Glasstech Limited in the United Kingdom as renumeration for duties there.
3.2 PERFORMANCE BONUS.
Executive Employee shall participate in Glasstech's cash
performance bonus pool (the "Pool"). At the end of each fiscal year (commencing
with the fiscal year ending June 30, 1998), Holding's Board of Directors will
establish the Pool which, at a minimum, shall be calculated according to the
following bonus chart (the "Bonus Chart"):
Percentage of Total
Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool
- ---------------------------- ------------------ ----------
$14,000,000 to $14,999,999 5.0% $700,000 to $750,000
$15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000
$16,000,000 and Above 10.0 $1,600,000 and Above
For purposes of this Section, EBITDA shall be subject to the following
adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses
paid to middle managers other than
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executive managers; and (Z) EBITDA shall be increased in the amount of any
advisory fees paid to Key Equity Capital Corporation or its affiliates.
Notwithstanding the foregoing, in the event Glasstech's EBITDA
for any fiscal year after the year ending June 30, 1998 (the "Base Year") is
less than $16,000,000 (the "Target"), the Board of Directors shall calculate the
average EBITDA of Glasstech from the Base Year through and including the fiscal
year in which the Target was not achieved. Using the Bonus Chart above, the
Board of Directors shall pay the participants (including but not limited to the
Executive Employee) the greater of (i) the amount of the Pool using the actual
EBITDA for such fiscal year or (ii) an amount equal to the percentage in the
Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for
such fiscal year.
If the Pool is not ten (10%) percent of the EBITDA in any
fiscal year during the Term of this Employment Agreement, such as in year 2001
in the example below, the Board of Directors shall, in each succeeding fiscal
year during the Term of this Employment Agreement, calculate the average EBITDA
of Glasstech from the Base Year through and including such succeeding fiscal
year. If the average EBITDA is greater than the actual EBITDA for any prior
fiscal year (or the average EBITDA used in a prior fiscal year), then the Board
of Directors, using the Bonus Chart, shall pay the participants (including but
not limited to the Executive Employee) an amount equal to (i) an amount equal to
the percentage in the Bonus Chart based upon the average EBITDA calculated in
such succeeding fiscal year, multiplied by the actual EBITDA for such
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<PAGE> 5
fiscal year less (ii) the amount of the Pool actually distributed to
participants in such prior fiscal year.
EXAMPLE:
- --------
Fiscal Year Percentage of Total Bonus
Year EBITDA Fiscal Year EBITDA Pool
- ---- ------ ------------------ ----
1998 $18,000,000 10% $1,800,000
1999 $20,000,000 10% $2,000,000
2000 $13,000,000(1) 10% $1,300,000
2001 $12,000,000(2) 7.5% $ 900,000
2002 $20,000,000 10% $2,000,000
$ 300,000(3)
----------
$2,300,000
Not later than 10 business days after delivery to Glasstech of
its fiscal year audit at the end of each fiscal year commencing with the fiscal
year ending June 30, 1998, the Board of Directors of Holding, in consultation
with the President and Chief Executive Officer, shall distribute the Pool to the
participants therein (including but not limited to the Executive Employee) in
such percentages as the Board of Directors determines appropriate; provided,
that, in no event shall the Board of Directors distribute less than the entire
Pool as calculated above in any fiscal year commencing with the fiscal year
ending June 30, 1998.
- --------
1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 +
$20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon
10% of EBITDA for that year.
2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 +
$20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is
calculated based upon 7.5% of EBITDA for that year.
3 The average EBITDA in fiscal year 2002 is $16,500,000
($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the
Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA
for fiscal year 2001 ($1,200,000) less amount of the Pool actually
distributed for fiscal year 2001 ($900,000).
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3.3 RESTRICTED STOCK PROGRAM.
(a) Holding hereby awards to Executive Employee 266.72 shares
of restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"),
which shall be subject to forfeiture in accordance with the provisions set forth
herein. On each of the first four anniversary dates of this Employment
Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long
as his employment has not been terminated on or before such date pursuant to the
provisions of Section 6 of this Employment Agreement. Subject to the forfeiture
provisions set forth herein, Executive Employee shall be entitled to full and
complete ownership of the Class C Shares and will be treated as the record and
beneficial owner of such for all purposes including, but not limited to, payment
of dividends and liquidation rights, provided that Executive Employee shall be
bound by all of the provisions of the Stockholders' Agreement of even date
herewith, among the Company, Executive Employee and the other stockholders of
the Company (the "Stockholders' Agreement).
(b) The certificates representing awarded Class C Shares shall
not be delivered to Executive Employee until the restrictions as to such Class C
Shares have lapsed. If Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a), Executive Employee shall forfeit to Holding
all such Class C Shares for which the restrictions have not yet lapsed. In this
regard, simultaneously with the issuance of certificates representing awarded
Class C Shares, Executive Employee shall execute and deliver stock powers
forfeiting to
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<PAGE> 7
Holding Class C Shares awarded hereunder for which the restrictions have not yet
lapsed in the event Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a). Executive Employee acknowledges that Class
C Shares awarded hereunder shall be subject to the restrictions and risks of
forfeiture contained herein and in the Stockholders' Agreement.
(c) Subject to Section 3.3(h), Executive Employee hereby
agrees that he shall pay to Holding, in cash, any foreign, United States
federal, state or local taxes of any kind required by law to be withheld with
respect to the Class C Shares awarded to him hereunder. If Executive Employee
does not make such payment to Holding, then Holding shall have the right to
deduct from any payment of any kind otherwise due to Executive Employee from
Holding (or from any subsidiary of Holding), any foreign, United States federal,
state or local taxes of any kind required by law to be withheld with respect to
the Class C Shares awarded to Executive Employee hereunder.
(d) Holding shall not issue Preferred Stock, Options or
Warrants or any otherwise dilutive securities without the consent of the
representative(s) of Key Equity Capital Corporation and the representative(s) of
executive management on the Board of Directors and unless such securities are
sold for fair market value, the proceeds of which are used for appropriate
corporate purposes as determined by the Board of Directors. All shareholders of
Class A, Class B or Class C Common Stock have the pre-emptive rights described
in the Stockholders' Agreement.
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<PAGE> 8
(e) "Change of Control" shall mean any one of the following
events: (i) the transfer, sale or other disposition of the Common Stock of
Holding which results in the current stockholders of Holding (determined as of
the date hereof) owning in the aggregate less than a majority of the outstanding
voting capital stock of Holding; (ii) any consolidation of Holding with, or
merger of Holding into, any other entity, any merger of another entity into
Holding, or any sale or transfer (in any one transaction or a series of
transactions) of all or substantially all of the assets of Holding to another
entity (other than (x) a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock, (y)
a merger which is effected solely to change the jurisdiction of incorporation of
Holding or (z) any consolidation with or merger of Holding into a wholly owned
subsidiary of Holding, or any sale or transfer by Holding of all or
substantially all of its assets to one or more of its wholly owned subsidiaries
in any one transaction or a series of transactions). Notwithstanding the
foregoing, a "Change in Control" shall not include any transaction permitted
under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to
the contrary in this Employment Agreement, so long as Executive Employee's
employment has not been terminated pursuant to the provisions of Section 6
before the date of a Change of Control, the restrictions with respect to all of
the Class C Shares shall immediately lapse upon a Change of Control.
(f) Executive Employee understands that the Class C Shares
have not been registered under the Securities Act of 1993, as amended (the "1933
Act") or any state securities laws.
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<PAGE> 9
Executive Employee represents that the Class C Shares awarded hereunder are not
being acquired by Executive Employee with a view toward resale or distribution
and Executive Employee will not sell or otherwise transfer such Class C Shares
except in compliance with the 1933 Act. The certificates representing the Class
C Shares shall bear such legends and statements evidencing the restrictions
contained in this Employment Agreement and as the Board of Directors of Holding
shall deem advisable to assure compliance with federal and state securities laws
and regulations.
(g) The award of the Class C Shares to Executive Employee
hereunder shall not confer any right to Executive Employee to continue in the
employ of Glasstech or any of its subsidiaries and shall not restrict or
interfere in any way with the right of Glasstech to terminate his employment
with or without cause, at any time.
(h) Executive Employee may file an "83(b) election" with the
Internal Revenue Service with respect to the Class C Shares. If Executive
Employee does file such an 83(b) election, Holding shall loan Executive Employee
an amount equal to 80% of Executive Employee's tax liability resulting from such
83(b) election (the "Loan Amount") subject to the following terms: (i) Executive
Employee shall execute and deliver to Holding a Promissory Note in the form of
Exhibit A attached hereto and made a part hereof (the "Class C Note"); (ii) the
principal amount of the Class C Note shall be equal to the Loan Amount and shall
accrue interest at the annual applicable federal rate for mid-term obligations
as of the month in which the Class C Note is issued; and (iii) the Executive
Employee shall execute and deliver to
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<PAGE> 10
Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a
part hereof with respect to all shares of Class A Voting Common Stock of Holding
and all Class C Shares held by Executive Employee.
3.4 CLASS D SHARES. Executive Employee shall also be issued
1,800 shares of Class D Non-voting Common Stock of Holding issued pursuant to
Schedule II of the Stockholders' Agreement (the "Performance Share Program") and
subject to the terms and conditions of Section 9 of the Stockholders' Agreement.
3.5 COST OF LIVING INCREASE. The Base Salary provided for in
Section 3.1 hereof shall be adjusted annually to reflect the increase, if any,
in the cost of living by adding to the Base Salary an amount obtained by
multiplying the Base Salary by the percentage by which the level of the Consumer
Price Index North Central Region (for all items for urban wage earners and
clerical workers as reported for December 31 of each calendar period by the
Bureau of Labor Statistics of the United States Department of Labor) has
increased over its level as of January I of the same calendar year.
3.6 BENEFITS. The Executive Employee shall be entitled during
the Term and during any Renewal Terms to participate in such group life,
hospitalization and/or disability insurance benefits, health programs, qualified
or non-qualified deferred compensation plans or similar benefits which are
comparable to those made available by Glasstech on the date of this Employment
Agreement or thereafter to its executive employees generally, subject to the
eligibility provisions of such plans.
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<PAGE> 11
3.7 VACATIONS. The Executive Employee shall be entitled to
vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE
HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which
relating to vacation and personal leave are hereby incorporated into this
Employment Agreement by reference.
3.8 INSURANCE. Glasstech agrees to pay life insurance and/or
annuity premiums on a policy(ies) selected by and insuring the life of the
Executive Employee with a beneficiary(ies) to be named by the Executive
Employee. The parties hereto agree that Glasstech shall not be obligated to pay
any premium greater than Five Thousand Dollars ($5,000) during the first year of
the Term and such amount shall be increased by Five Hundred Dollars ($500) each
year thereafter during the Term or during any of the Renewal Terms. The parties
further agree that the Executive Employee shall be permitted from time to time,
during the Term, or any Renewal Terms, to maintain such policy(ies), or to
exchange such policy(ies), or to acquire any new life insurance and/or annuity
products, provided however, that the portion of the premiums and costs to be
paid by Glasstech in connection with such policy(ies) shall not exceed the
amounts specified above. Glasstech expressly acknowledges that it shall have no
right, title or interest in and to such policy(ies), the same being the
exclusive property of the Executive Employee.
3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse
the Executive Employee for all reasonable expenses actually incurred or paid by
the Executive Employee during the Term or any Renewal Term in performance of the
Executive Employee's
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services under this Employment Agreement, subject to receipt by Glasstech of
reasonable supporting documentation.
Glasstech shall pay or reimburse the Executive Employee for
round trip coach air travel up to four (4) times per year between Perrysburg and
the United Kingdom for the Executive Employee and up to two (2) guests.
Glasstech shall pay or reimburse the Executive Employee for
costs incurred in connection with the relocation of the Executive Employee and
his dependents to the United Kingdom upon the termination of his employment or
his death.
4. TERMINATION UPON DEATH. In the event the Executive Employee
dies during the Term or any Renewal Term, for a period of six (6) months
following such death Glasstech agrees to continue to pay to the surviving spouse
of the Executive Employee the Base Salary rate of the deceased Executive
Employee in effect at the time of death in equal bi-weekly installments less
such deductions required to be withheld by applicable law and regulations. The
salary continuation payable as provided herein shall be in addition to any right
of the estate of the deceased Executive Employee to (a) participate in the Pool
(in accordance with Section 3.2 above) in the fiscal year in which such death
occurred and to receive a prorated amount for the portion of the fiscal year in
which Executive Employee was alive, provided, however, that the level of such
participation shall be subject to the discretion of Holding Board of Directors,
and (b) to participate in the Performance Share Program as set forth therein.
Upon the death of the Executive Employee, the restrictions on all Class C Shares
shall lapse and
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<PAGE> 13
such Class C Shares shall be released to the estate of the deceased Executive
Employee. Glasstech shall also remit to the estate of the deceased Executive
Employee any other benefits earned and accrued or payable up to the date of such
death and shall reimburse to the estate of the deceased Executive Employee any
outstanding unreimbursed expenses incurred by such Executive Employee on behalf
of Glasstech and documented as provided herein.
In the event the deceased Executive Employee is not survived
by a spouse or in the further event the deceased Executive Employee and his
spouse are separated at the time of death by agreement, court order or decree,
or otherwise, then such salary continuation shall be remitted to the estate of
the deceased Executive Employee.
5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON
DISABILITY. In the event the Executive Employee becomes disabled during the Term
or any Renewal Term by virtue of ill health or other disability and is thereby
unable to perform on a full time basis substantially and continuously the duties
assigned to him by Glasstech, Glasstech agrees to continue the Executive
Employee's Base Salary until such time as Executive Employee is eligible to
collect benefits under Glasstech's long term disability insurance coverage. At
such time as Executive Employee is eligible to collect benefits under
Glasstech's long term disability insurance coverage (a "Disability"), Glasstech
shall have no further obligation to compensate the Executive Employee (except
that Glasstech shall continue to provide group life and health benefits to
Executive Employee consistent with those provided to other executive employees
for a period of two (2) years from the
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<PAGE> 14
date on which Executive Employee's long term disability benefits commence) and
further Glasstech shall have the right to terminate the employment of the
Executive Employee hereunder upon written notice delivered pursuant to Section
13. In the event of such Disability, the restrictions on all Class C Shares
shall lapse and such Class C Shares shall be released to the Executive Employee.
Executive Employee shall participate in the Performance Share Program as set
forth therein.
6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION.
(a) Notwithstanding any other provision of this
Employment Agreement, Glasstech may terminate the Executive Employee's
employment at any time for Cause (as hereinafter defined) and the Executive
Employee may voluntarily terminate the Executive Employee's employment with
Glasstech. Upon such termination for Cause or upon Executive Employee's
voluntary termination, Executive Employee shall not participate in the
Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his
termination occurred, and Executive Employee shall automatically forfeit those
shares of Restricted Stock for which the restrictions would have lapsed
(pursuant to Section 3.3) in the contract year in which his termination occurred
and any subsequent year and shall participate in the Performance Share Program
as set forth therein. Upon such termination for Cause or upon Executive
Employee's voluntary termination, the Executive Employee shall be entitled to,
except as restricted in the preceding sentence, receive any salary and other
benefits earned or accrued, and reimbursement for expenses incurred, prior to
the date of termination.
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<PAGE> 15
(b) "Cause" shall mean (i) the Executive Employee's willful
and continuing affirmative refusal to perform his or her duties hereunder (other
than as a result of a Disability); (ii) dishonesty in the performance of his or
her duties hereunder which results in criminal indictment of the Executive
Employee; (iii) the Executive Employee's breach of any material term of this
Employment Agreement (provided that Glasstech shall give the Executive Employee
written notice of such breach and a thirty (30) day period after notice to cure
such breach, except that no notice or cure period shall be given or extended
with respect to breach of the provisions of Section 8 of this Employment
Agreement); or (iv) the Executive Employee's conviction for a felony or for a
crime which, in the reasonable judgment of Glasstech, renders the Executive
Employee unable to perform his duties as described in this Employment Agreement.
7. TERMINATION WITHOUT CAUSE. If the Executive Employee is
terminated prior to the end of the Term or any Renewal Term other than pursuant
to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a
termination "Without Cause"), the Executive Employee shall be entitled to (in
addition to such other rights as he may have, or damages to which he may be
entitled at law or in equity) (i) all payments when due of any salary and other
benefits (including, without limitation, participation in the Performance Bonus
pursuant to Section 3.2) accrued through the date of termination, including the
payment of all salary due for the remainder of the Term or Renewal Term as
though the Executive Employee had remained employed through the full Term (or,
if renewed, the Renewal Term) of the Employment Agreement, (ii) the
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<PAGE> 16
restrictions on all Class C Shares shall lapse and such Class C Shares shall be
released to the Executive Employee, and (iii) participation in the Performance
Share Program as set forth therein.
8. COVENANT AGAINST COMPETITION. The Executive Employee
acknowledges that (i) the principal business of Glasstech is design,
manufacture, marketing, sale, distribution and servicing of glass bending,
tempering and annealing equipment worldwide to both automotive glass fabricators
and architectural glass producers and the principal business of Stir-Melter,
Inc. is the vitrification of hazardous waste (collectively, the "Glasstech
Business"); (ii) Glasstech is one of a limited number of persons throughout the
world which has developed such business; (iii) the Glasstech Business is, in
large part, international in scope and Glasstech's customers, potential
customers and competitors are located throughout the world; (iv) the Executive
Employee's work for Glasstech has given and will continue to give him access to
the confidential affairs and proprietary information of Glasstech; (v) this
Employment Agreement has been entered into as part of a series of transactions
pursuant to which Executive Employee and others have purchased an equity
interest in Glasstech and sold their equity interest in Glasstech; and (vi)
Glasstech would not have entered into this Employment Agreement but for the
agreements and covenants of the Executive Employee contained in this Section 8.
Accordingly, the Executive Employee covenants and agrees that:
(a) he shall not, anywhere in the world directly or
indirectly, (1) engage in Glasstech Business for his own account or
that of any other person; (2) render any services related to the
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<PAGE> 17
Glasstech Business to any person (other than Glasstech) engaged in such
activities; or (3) become interested in any such person (other than Glasstech)
as a partner, stockholder, member, principal, agent, trustee, consultant or in
any other relationship or capacity for a period commencing on the date of this
Employment Agreement and terminating on the day which is: (i) the later of (A)
five (5) years following the date hereof, or (B) two (2) years following the
termination of the Executive Employee's employment pursuant to a Renewal
Termination Notice if given by Executive Employee, or (ii) if the Executive
Employee's employment has been terminated for Cause, then two (2) years
following termination of Executive Employee's employment; (collectively the
"Restricted Period") provided, however, that there shall be no Restricted Period
if Executive Employee's employment is terminated Without Cause or if Glasstech
delivers a Renewal Termination Notice to Executive Employee. Notwithstanding the
above, the Executive Employee may own, directly or indirectly, solely as an
investment, securities of any such person which are traded on any national
securities exchange or NASDAQ if the Executive Employee is not a controlling
person of, or a member of a group which controls such person and does not,
directly or indirectly, own one percent (1%) or more of any class of securities
of such person.
(b) at all times during and after this Employment
Agreement is in force he shall keep secret and retain in strictest confidence,
and shall not use for his benefit or the benefit of others, except in connection
with the business and affairs of Glasstech and its affiliates, all confidential
matters relating to Glasstech Business and to Glasstech and its affiliates
learned by
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<PAGE> 18
the Executive Employee heretofore or hereafter directly or indirectly from
Glasstech or its affiliates or any of their predecessors or successors (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone outside of Glasstech and its affiliates except
with Glasstech's express written consent. The requirements of this Section 8(b)
shall not apply to Confidential Company Information which is: (1) at the time of
receipt or thereafter publicly known through no wrongful act of the Executive
Employee: (2) received from a third party not under any obligation to keep such
information confidential; or (3) required to be disclosed by law.
(c) during the Restricted Period, he shall not, without
Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit
employees of Glasstech or its affiliates to leave the employ of Glasstech or any
of its affiliates or (ii) hire any employee who has left the employ of Glasstech
or any of its affiliates within one year of the termination of such employee's
employment with Glasstech or any of its affiliates.
(d) at any time upon written request from
Glasstech, he shall deliver to Glasstech all memoranda, notes, lists, records
and other documents (and all copies thereof) made or compiled by the Executive
Employee or made available to him concerning Glasstech Business or Glasstech or
any of its affiliates all of which shall at all times be the property of
Glasstech.
9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee
breaches any of the provisions of Section 8 (the "Restrictive Covenants"),
Glasstech shall have the following rights and remedies (upon compliance with any
necessary prerequisites
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<PAGE> 19
imposed by law upon the availability of such remedies), each of which rights and
remedies shall be independent of the other and severally enforceable, and all of
which rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to Glasstech under law or in equity:
(a) The right to have the Restrictive Covenants specifically
enforced by any court having jurisdiction over the parties to this Employment
Agreement; and
(b) The right to entry of restraining orders and/or
injunctions (preliminary, mandatory, temporary and permanent) against the
Executive Employee against violations, threatened or actual, and whether or not
then continuing, of such covenants, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury to Glasstech and
that money damages will not provide an adequate remedy to Glasstech; and
(c) The right and remedy to require the Executive Employee to
account for and pay over to Glasstech all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by him as the result of any transactions constituting a breach of the
Restrictive Covenants, and the Executive Employee shall account for and pay over
such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech
under this Section 9 against any amounts owed to the Executive Employee.
10. MEDIATION, ARBITRATION. Except for a dispute under Section
8 which shall be subject to the provisions of Section 9, neither party shall
institute an arbitration proceeding hereunder, before that party has sought to
resolve the dispute through direct
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<PAGE> 20
negotiation with the other party. If the dispute is not resolved within three
weeks after a demand for direct negotiation, the parties shall attempt to
resolve the dispute through nonbinding mediation. If the parties do not promptly
agree on a mediator, then either party may notify the CPR Institute for Dispute
Resolution, 366 Madison Avenue, New York, New York, to initiate selection of a
mediator from the CPR Panel of Neutrals. The fees and expenses of the mediator
shall be paid one-half each by each party. If the mediator is unable to
facilitate a settlement of the dispute within a reasonable period of time, as
determined by the mediator, the mediator shall issue a written statement to the
parties to that effect and the aggrieved party may then seek relief through
arbitration, which shall be binding, before a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association (the
"Association"). The place of arbitration shall be Detroit, Michigan. Arbitration
may be commenced at any time by any party hereto after giving written notice in
the manner described in Section 13 of this Employment Agreement. The arbitrator
shall be selected by the joint agreement of each party, but if they do not so
agree within twenty (20) days after the date of the notice referred to above,
the selection shall be made pursuant to the rules from the panels of the
arbitrators maintained by such Association. The arbitrator shall render his
decision within one hundred eighty (180) days of appointment. Any award rendered
by the arbitrator shall be conclusive and binding upon the parties hereto;
provided, however, that any such award shall be accompanied by a written opinion
of the arbitrator giving the reasons for the award. This provision for
arbitration shall be
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<PAGE> 21
specifically enforceable by the parties and the decision of the arbitrator in
accordance herewith shall be final and binding and there shall be no right of
appeal therefrom. Judgment upon the award rendered by the arbitrator in
accordance herewith shall be final and binding and there shall be no right of
appeal therefrom. Judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof. The costs and expenses of
arbitration, including attorneys' fees and expenses of the arbitrator shall be
paid entirely by the nonprevailing party and in addition the nonprevailing party
shall reimburse the other party for the fees and expenses of mediation incurred
by such party, unless the arbitrator determines that the costs, expenses and
attorneys' fees should be apportioned between the parties, then as the
arbitrator may assess. The arbitrator shall not be permitted to award punitive
or similar type damages under any circumstances. As set forth in the first
phrase of the first sentence of this section 10, this arbitration provision
shall constitute the sole and exclusive remedy for any dispute under this
Employment Agreement.
11. BLUE PENCILING. The Executive Employee acknowledges and
agrees that (i) he has had an opportunity to seek advice of counsel in
connection with this Employment Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, whether because of the duration or geographical scope
of such provision, the duration or scope of such provision, as the case may be,
shall be reduced so that such provision becomes
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<PAGE> 22
enforceable and. in its reduced form, such provision shall then be
enforceable and shall be enforced.
12. SEVERABILITY. If any court determines that any covenant or
provision of this Employment Agreement is unenforceable for any reason, the
remaining covenants or provisions shall remain in full force and effect.
13. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be (a) delivered personally,
(b) sent by facsimile transmission, (c) sent by certified or registered mail,
postage prepaid, return receipt requested, or (d) sent by overnight delivery
service, to the following addresses:
(i) if to Glasstech, to:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: Mark Christman, President
Fax: (419) 661-9366
and
Kenneth H. Wetmore, Esquire
Vice President, General Counsel and Secretary
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Fax: (419) 661-9616
and
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Attention: David P. Given
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<PAGE> 23
(ii) if to the Executive Employee, to:
John S. Baxter
9689 Oakhaven
Perrysburg, Ohio 43551
Any such notice shall be deemed given (a) when so delivered
personally, (b) if sent by certified or registered mail, return receipt
requested, on the date the return receipt is signed, or (c) if sent by overnight
delivery service. on the next normal business day after the date of sender
receipt.
Any such person may, by giving notice in accordance with this
section to the other parties hereto, designate another address or person for
receipt by such person of notices hereunder.
14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This
Employment Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreement(s),
written or oral with respect thereto. This Employment Agreement will be
effective upon the consummation of the Agreement and Plan of Merger (the "Merger
Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub
Co. If the Merger Agreement is not consummated within the time set forth
therein, this Employment Agreement shall be null and void and of no further
force and effect. The Employment Agreement dated December 6, 1994 between
Glasstech and the Executive Employee is hereby terminated and is null and void
and of no further force and effect.
15. INDEMNIFICATION. During the Term or any Renewal Term
hereof and subject to the continuing compliance by the Executive Employee with
his obligations hereunder, Glasstech shall provide the Executive Employee with
indemnification against liabilities or claims arising by reason of the fact that
he is an
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<PAGE> 24
employee. officer and/or director of Glasstech, and against expenses incurred in
connection therewith, to the fullest extent of indemnification then available to
any officer and/or director of Glasstech under and in accordance with the laws
of the State of Delaware. Also, Glasstech shall purchase and/or maintain
Directors' and Officers' insurance on or inuring to the Executive Employee's
benefit with respect to such liabilities, claims, or expenses as described in
the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding,
dated June 5, 1997.
16. WAIVERS AND AMENDMENTS. This Employment Agreement may be
amended, superseded, canceled, renewed, or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power,
or privilege, nor shall any single or partial exercise of any such right, power,
or privilege, preclude any other or further exercise thereof or the exercise of
any other such right, power, or privilege.
17. GOVERNING LAW. This Employment Agreement shall be governed
by and construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed within the State.
18. ASSIGNMENT. This Employment Agreement, and the Executive
Employee's rights and obligations hereunder, may not be assigned by either party
hereto without the consent of the other and any purported assignment by the
Executive Employee or Glasstech
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<PAGE> 25
in violation hereof shall be null and void; provided, however, that Glasstech
may assign its rights and obligations hereunder without the Executive Employee's
consent in connection with a sale of all or substantially all of Glasstech's
assets.
19. BINDING EFFECT. This Employment Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors, and legal representatives.
20. COUNTERPARTS. This Employment Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument. Each counterpart may consist of two (2)
copies hereof each signed by one of the parties hereto.
21. HEADING. The headings in this Employment Agreement are for
reference only and shall not affect the interpretation of this Employment
Agreement.
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed. or
caused to be executed, this Employment Agreement as of the day and year first
above written.
GLASSTECH HOLDING CO.
By: /s/ Mark D. Christman
----------------------------
Its: President
---------------------------
GLASSTECH, INC.
By: /s/ Mark D. Christman
----------------------------
Its: President
---------------------------
EXECUTIVE EMPLOYEE
/s/ John S. Baxter
-------------------------------
John S. Baxter
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<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
OF
MARK D. CHRISTMAN
WITH
GLASSTECH, INC.
This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made
by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH
HOLDING CO., a Delaware corporation with its principal place of business at
Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding")
and MARK D. CHRISTMAN (SSN ###-##-####), an individual residing at 30125
Morningside Drive, Perrysburg, Ohio 43551 (the "Executive Employee").
BACKGROUND
----------
This Employment Agreement covers the employment of the
Executive Employee by Glasstech.
Now therefore, Glasstech and the Executive Employee, in
consideration of the mutual promises herein contained and intending to be
legally bound hereby, agree as follows:
1. TERM. Glasstech hereby employs the Executive Employee as
President and Chief Executive Officer, and the Executive Employee hereby accepts
such employment, from the date of this Employment Agreement to June 30, 2002
unless sooner terminated in accordance with the provisions of Sections 4, 5, 6
or 7 hereof (the "Term"). At the expiration of the Term and each annual
anniversary thereafter, this Employment Agreement shall automatically renew for
an additional one (1) year period (the
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<PAGE> 2
"Renewal Term" or the "Renewal Terms") unless either party notifies the other
party in writing of its or his intention not to renew the Employment Agreement
(the "Renewal Termination Notice") not less than six (6) months prior to the
expiration of the last year of the Term or of any Renewal Term. The provisions
of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this
Employment Agreement.
2. DUTIES. The Executive Employee, in his capacity as
President and Chief Executive Officer of Glasstech (or such other and comparable
titles and positions as shall be given the Executive Employee by Holding Board
of Directors), shall perform for Glasstech the services currently performed by
him for Glasstech (or comparable services or other reasonable duties as he and
Glasstech may agree upon), subject to the reasonable direction of Holding's
Board of Directors. The Executive Employee shall perform such services in Wood
County, Ohio, or at such other location or locations where he may be assigned by
Glasstech from time to time, provided, however, that the Executive Employee
shall not be required, in connection with his performance of such services, to
travel on behalf of Glasstech in a manner inconsistent with the scope of his
duties and the past practices of Glasstech. The Executive Employee shall devote
his business time and effort to the Employment Agreement performance of his
duties as described herein as reasonably required. It is understood that the
Executive Employee may attend to outside investments, serve as a director and/or
officer of a non-competing company and serve as an officer, director, or
participant in educational, welfare, social, religious, and civic organizations
so long as such activities do
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<PAGE> 3
not materially interfere with the Executive Employee's employment hereunder.
3. COMPENSATION.
3.1 BASE SALARY. Glasstech shall pay the Executive Employee
during each calendar year of the Term and each Renewal Term hereunder, a minimum
salary of Two Hundred Seventy-Two Thousand Seven Hundred Sixty Dollars
($272,760) per calendar year adjusted as provided in Section 3.5 (hereinafter
referred to as the "Base Salary"). The Base Salary shall be payable in equal
bi-weekly installments, less such deductions as shall be required to be withheld
by applicable law and regulations.
3.2 PERFORMANCE BONUS.
Executive Employee shall participate in Glasstech's
cash performance bonus pool (the "Pool"). At the end of each fiscal year
(commencing with the fiscal year ending June 30, 1998), Holding's Board of
Directors will establish the Pool which, at a minimum, shall be calculated
according to the following bonus chart (the "Bonus Chart"):
Percentage of Total
Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool
- ---------------------------- ------------------ ----------
$14,000,000 to $14,999,999 5.0% $700,000 to $750,000
$15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000
$16,000,000 and Above 10.0 $1,600,000 and Above
For purposes of this Section, EBITDA shall be subject to the following
adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses
paid to middle managers other than executive managers; and (Z) EBITDA shall be
increased in the amount
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<PAGE> 4
of any advisory fees paid to Key Equity Capital Corporation or its
affiliates.
Notwithstanding the foregoing, in the event Glasstech's EBITDA
for any fiscal year after the year ending June 30, 1998 (the "Base Year") is
less than $16,000,000 (the "Target"), the Board of Directors shall calculate the
average EBITDA of Glasstech from the Base Year through and including the fiscal
year in which the Target was not achieved. Using the Bonus Chart above, the
Board of Directors shall pay the participants (including but not limited to the
Executive Employee) the greater of (i) the amount of the Pool using the actual
EBITDA for such fiscal year or (ii) an amount equal to the percentage in the
Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for
such fiscal year.
If the Pool is not ten (10%) percent of the EBITDA in any
fiscal year during the Term of this Employment Agreement, such as in year 2001
in the example below, the Board of Directors shall, in each succeeding fiscal
year during the Term of this Employment Agreement, calculate the average EBITDA
of Glasstech from the Base Year through and including such succeeding fiscal
year. If the average EBITDA is greater than the actual EBITDA for any prior
fiscal year (or the average EBITDA used in a prior fiscal year), then the Board
of Directors, using the Bonus Chart, shall pay the participants (including but
not limited to the Executive Employee) an amount equal to (i) an amount equal to
the percentage in the Bonus Chart based upon the average EBITDA calculated in
such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal
year less (ii) the amount of the Pool actually distributed to participants in
such prior fiscal year.
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<PAGE> 5
EXAMPLE:
- --------
Fiscal Year Percentage of Total Bonus
Year EBITDA Fiscal Year EBITDA Pool
- ---- ------ ------------------ ----
1998 $18,000,000 10% $1,800,000
1999 $20,000,000 10% $2,000,000
2000 $13,000,000(1) 10% $1,300,000
2001 $12,000,000(2) 7.5% $ 900,000
2002 $20,000,000 10% $2,000,000
$ 300,000(3)
----------
$2,300,000
Not later than 10 business days after delivery to
Glasstech of its fiscal year audit at the end of each fiscal year commencing
with the fiscal year ending June 30, 1998, the Board of Directors of Holding, in
consultation with the President and Chief Executive Officer, shall distribute
the Pool to the participants therein (including but not limited to the Executive
Employee) in such percentages as the Board of Directors determines appropriate;
provided, that, in no event shall the Board of Directors distribute less than
the entire Pool as calculated above in any fiscal year commencing with the
fiscal year ending June 30, 1998, and further provided that the Executive
Employee shall receive a minimum of 40% of the aggregate Pool in any fiscal
year.
- --------
1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 +
$20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon
10% of EBITDA for that year.
2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 +
$20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is
calculated based upon 7.5% of EBITDA for that year.
3 The average EBITDA in fiscal year 2002 is $16,500,000
($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the
Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA
for fiscal year 2001 ($1,200,000) less amount of the Pool actually
distributed for fiscal year 2001 ($900,000).
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<PAGE> 6
3.3 RESTRICTED STOCK PROGRAM.
(a) Holding hereby awards to Executive Employee 833.50
shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C
Shares"), which shall be subject to forfeiture in accordance with the provisions
set forth herein. On each of the first four anniversary dates of this Employment
Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long
as his employment has not been terminated on or before such date pursuant to the
provisions of Section 6 of this Employment Agreement. Subject to the forfeiture
provisions set forth herein, Executive Employee shall be entitled to full and
complete ownership of the Class C Shares and will be treated as the record and
beneficial owner of such for all purposes including, but not limited to, payment
of dividends and liquidation rights, provided that Executive Employee shall be
bound by all of the provisions of the Stockholders' Agreement of even date
herewith, among the Company, Executive Employee and the other stockholders of
the Company (the "Stockholders' Agreement).
(b) The certificates representing awarded Class C
Shares shall not be delivered to Executive Employee until the restrictions as to
such Class C Shares have lapsed. If Executive Employee's employment is
terminated pursuant to Section 6 of this Employment Agreement on or before any
applicable anniversary date as described in Section 3.3(a), Executive Employee
shall forfeit to Holding all such Class C Shares for which the restrictions have
not yet lapsed. In this regard, simultaneously with the issuance of certificates
representing awarded Class C Shares, Executive Employee shall execute and
deliver stock powers forfeiting to
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<PAGE> 7
Holding Class C Shares awarded hereunder for which the restrictions have not yet
lapsed in the event Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a). Executive Employee acknowledges that Class
C Shares awarded hereunder shall be subject to the restrictions and risks of
forfeiture contained herein and in the Stockholders' Agreement.
(c) Subject to Section 3.3(h), Executive Employee
hereby agrees that he shall pay to Holding, in cash, any foreign, United States
federal, state or local taxes of any kind required by law to be withheld with
respect to the Class C Shares awarded to him hereunder. If Executive Employee
does not make such payment to Holding, then Holding shall have the right to
deduct from any payment of any kind otherwise due to Executive Employee from
Holding (or from any subsidiary of Holding), any foreign, United States federal,
state or local taxes of any kind required by law to be withheld with respect to
the Class C Shares awarded to Executive Employee hereunder.
(d) Holding shall not issue Preferred Stock, Options or
Warrants or any otherwise dilutive securities without the consent of the
representative(s) of Key Equity Capital Corporation and the representative(s) of
executive management on the Board of Directors and unless such securities are
sold for fair market value, the proceeds of which are used for appropriate
corporate purposes as determined by the Board of Directors. All shareholders of
Class A, Class B or Class C Common Stock have the pre-emptive rights described
in the Stockholders' Agreement.
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<PAGE> 8
(e) "Change of Control" shall mean any one of the
following events: (i) the transfer, sale or other disposition of the Common
Stock of Holding which results in the current stockholders of Holding
(determined as of the date hereof) owning in the aggregate less than a majority
of the outstanding voting capital stock of Holding; (ii) any consolidation of
Holding with, or merger of Holding into, any other entity, any merger of another
entity into Holding, or any sale or transfer (in any one transaction or a series
of transactions) of all or substantially all of the assets of Holding to another
entity (other than (x) a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock, (y)
a merger which is effected solely to change the jurisdiction of incorporation of
Holding or (z) any consolidation with or merger of Holding into a wholly owned
subsidiary of Holding, or any sale or transfer by Holding of all or
substantially all of its assets to one or more of its wholly owned subsidiaries
in any one transaction or a series of transactions). Notwithstanding the
foregoing, a "Change in Control" shall not include any transaction permitted
under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to
the contrary in this Employment Agreement, so long as Executive Employee's
employment has not been terminated pursuant to the provisions of Section 6
before the date of a Change of Control, the restrictions with respect to all of
the Class C Shares shall immediately lapse upon a Change of Control.
(f) Executive Employee understands that the Class C
Shares have not been registered under the Securities Act of 1993, as amended
(the "1933 Act") or any state securities laws.
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<PAGE> 9
Executive Employee represents that the Class C Shares awarded hereunder are not
being acquired by Executive Employee with a view toward resale or distribution
and Executive Employee will not sell or otherwise transfer such Class C Shares
except in compliance with the 1933 Act. The certificates representing the Class
C Shares shall bear such legends and statements evidencing the restrictions
contained in this Employment Agreement and as the Board of Directors of Holding
shall deem advisable to assure compliance with federal and state securities laws
and regulations.
(g) The award of the Class C Shares to Executive
Employee hereunder shall not confer any right to Executive Employee to continue
in the employ of Glasstech or any of its subsidiaries and shall not restrict or
interfere in any way with the right of Glasstech to terminate his employment
with or without cause, at any time.
(h) Executive Employee may file an "83(b) election"
with the Internal Revenue Service with respect to the Class C Shares. If
Executive Employee does file such an 83(b) election, Holding shall loan
Executive Employee an amount equal to 80% of Executive Employee's tax liability
resulting from such 83(b) election (the "Loan Amount") subject to the following
terms: (i) Executive Employee shall execute and deliver to Holding a Promissory
Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class
C Note"); (ii) the principal amount of the Class C Note shall be equal to the
Loan Amount and shall accrue interest at the annual applicable federal rate for
mid-term obligations as of the month in which the Class C Note is issued; and
(iii) the Executive Employee shall execute and deliver to
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<PAGE> 10
Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a
part hereof with respect to all shares of Class A Voting Common Stock of Holding
and all Class C Shares held by Executive Employee.
3.4 CLASS D SHARES. Executive Employee shall also be
issued 4,000 shares of Class D Non-voting Common Stock of Holding issued
pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share
Program") and subject to the terms and conditions of Section 9 of the
Stockholders' Agreement.
3.5 COST OF LIVING INCREASE. The Base Salary provided
for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if
any, in the cost of living by adding to the Base Salary an amount obtained by
multiplying the Base Salary by the percentage by which the level of the Consumer
Price Index North Central Region (for all items for urban wage earners and
clerical workers as reported for December 31 of each calendar period by the
Bureau of Labor Statistics of the United States Department of Labor) has
increased over its level as of January I of the same calendar year.
3.6 BENEFITS. The Executive Employee shall be entitled
during the Term and during any Renewal Terms to participate in such group life,
hospitalization and/or disability insurance benefits, health programs, qualified
or non-qualified deferred compensation plans or similar benefits which are
comparable to those made available by Glasstech on the date of this Employment
Agreement or thereafter to its executive employees generally, subject to the
eligibility provisions of such plans.
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3.7 VACATIONS. The Executive Employee shall be entitled
to vacations and personal leave days more fully set forth in the GLASSTECH
EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of
which relating to vacation and personal leave are hereby incorporated into this
Employment Agreement by reference.
3.8 INSURANCE. Glasstech agrees to pay life insurance
and/or annuity premiums on a policy(ies) selected by and insuring the life of
the Executive Employee with a beneficiary(ies) to be named by the Executive
Employee. The parties hereto agree that Glasstech shall not be obligated to pay
any premium greater than Five Thousand Dollars ($5,000) during the first year of
the Term and such amount shall be increased by Five Hundred Dollars ($500) each
year thereafter during the Term or during any of the Renewal Terms. The parties
further agree that the Executive Employee shall be permitted from time to time,
during the Term, or any Renewal Terms, to maintain such policy(ies), or to
exchange such policy(ies), or to acquire any new life insurance and/or annuity
products, provided however, that the portion of the premiums and costs to be
paid by Glasstech in connection with such policy(ies) shall not exceed the
amounts specified above. Glasstech expressly acknowledges that it shall have no
right, title or interest in and to such policy(ies), the same being the
exclusive property of the Executive Employee.
3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or
reimburse the Executive Employee for all reasonable expenses actually incurred
or paid by the Executive Employee during the Term or any Renewal Term in
performance of the Executive Employee's
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services under this Employment Agreement, subject to receipt by Glasstech of
reasonable supporting documentation.
4. TERMINATION UPON DEATH. In the event the Executive Employee
dies during the Term or any Renewal Term, for a period of six (6) months
following such death Glasstech agrees to continue to pay to the surviving spouse
of the Executive Employee the Base Salary rate of the deceased Executive
Employee in effect at the time of death in equal bi-weekly installments less
such deductions required to be withheld by applicable law and regulations. The
salary continuation payable as provided herein shall be in addition to any right
of the estate of the deceased Executive Employee to (a) participate in the Pool
(in accordance with Section 3.2 above) in the fiscal year in which such death
occurred and to receive a prorated amount for the portion of the fiscal year in
which Executive Employee was alive, provided, however, that the level of such
participation shall be subject to the discretion of Holding Board of Directors,
and (b) to participate in the Performance Share Program as set forth therein.
Upon the death of the Executive Employee, the restrictions on all Class C Shares
shall lapse and such Class C Shares shall be released to the estate of the
deceased Executive Employee. Glasstech shall also remit to the estate of the
deceased Executive Employee any other benefits earned and accrued or payable up
to the date of such death and shall reimburse to the estate of the deceased
Executive Employee any outstanding unreimbursed expenses incurred by such
Executive Employee on behalf of Glasstech and documented as provided herein.
In the event the deceased Executive Employee is not
survived by a spouse or in the further event the deceased Executive
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Employee and his spouse are separated at the time of death by agreement, court
order or decree, or otherwise, then such salary continuation shall be remitted
to the estate of the deceased Executive Employee.
5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON
DISABILITY. In the event the Executive Employee becomes disabled during the Term
or any Renewal Term by virtue of ill health or other disability and is thereby
unable to perform on a full time basis substantially and continuously the duties
assigned to him by Glasstech, Glasstech agrees to continue the Executive
Employee's Base Salary until such time as Executive Employee is eligible to
collect benefits under Glasstech's long term disability insurance coverage. At
such time as Executive Employee is eligible to collect benefits under
Glasstech's long term disability insurance coverage (a "Disability"), Glasstech
shall have no further obligation to compensate the Executive Employee (except
that Glasstech shall continue to provide group life and health benefits to
Executive Employee consistent with those provided to other executive employees
for a period of two (2) years from the date on which Executive Employee's long
term disability benefits commence) and further Glasstech shall have the right to
terminate the employment of the Executive Employee hereunder upon written notice
delivered pursuant to Section 13. In the event of such Disability, the
restrictions on all Class C Shares shall lapse and such Class C Shares shall be
released to the Executive Employee. Executive Employee shall participate in the
Performance Share Program as set forth therein.
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6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION.
(a) Notwithstanding any other provision of this Employment
Agreement, Glasstech may terminate the Executive Employee's employment at any
time for Cause (as hereinafter defined) and the Executive Employee may
voluntarily terminate the Executive Employee's employment with Glasstech. Upon
such termination for Cause or upon Executive Employee's voluntary termination,
Executive Employee shall not participate in the Performance Bonus (pursuant to
Section 3.2) for the fiscal year in which his termination occurred, and
Executive Employee shall automatically forfeit those shares of Restricted Stock
for which the restrictions would have lapsed (pursuant to Section 3.3) in the
contract year in which his termination occurred and any subsequent year and
shall participate in the Performance Share Program as set forth therein. Upon
such termination for Cause or upon Executive Employee's voluntary termination,
the Executive Employee shall be entitled to, except as restricted in the
preceding sentence, receive any salary and other benefits earned or accrued, and
reimbursement for expenses incurred, prior to the date of termination.
(b) "Cause" shall mean (i) the Executive Employee's willful
and continuing affirmative refusal to perform his or her duties hereunder (other
than as a result of a Disability); (ii) dishonesty in the performance of his or
her duties hereunder which results in criminal indictment of the Executive
Employee; (iii) the Executive Employee's breach of any material term of this
Employment Agreement (provided that Glasstech shall give the Executive Employee
written notice of such breach and a thirty (30) day period
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after notice to cure such breach, except that no notice or cure period shall be
given or extended with respect to breach of the provisions of Section 8 of this
Employment Agreement); or (iv) the Executive Employee's conviction for a felony
or for a crime which, in the reasonable judgment of Glasstech, renders the
Executive Employee unable to perform his duties as described in this Employment
Agreement.
7. TERMINATION WITHOUT CAUSE. If the Executive Employee is
terminated prior to the end of the Term or any Renewal Term other than pursuant
to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a
termination "Without Cause"), the Executive Employee shall be entitled to (in
addition to such other rights as he may have, or damages to which he may be
entitled at law or in equity) (i) all payments when due of any salary and other
benefits (including, without limitation, participation in the Performance Bonus
pursuant to Section 3.2) accrued through the date of termination, including the
payment of all salary due for the remainder of the Term or Renewal Term as
though the Executive Employee had remained employed through the full Term (or,
if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions
on all Class C Shares shall lapse and such Class C Shares shall be released to
the Executive Employee, and (iii) participation in the Performance Share Program
as set forth therein.
8. COVENANT AGAINST COMPETITION. The Executive Employee
acknowledges that (i) the principal business of Glasstech is design,
manufacture, marketing, sale, distribution and servicing of glass bending,
tempering and annealing equipment worldwide to
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both automotive glass fabricators and architectural glass producers and the
principal business of Stir-Melter, Inc. is the vitrification of hazardous waste
(collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited
number of persons throughout the world which has developed such business; (iii)
the Glasstech Business is, in large part, international in scope and Glasstech's
customers, potential customers and competitors are located throughout the world;
(iv) the Executive Employee's work for Glasstech has given and will continue to
give him access to the confidential affairs and proprietary information of
Glasstech; (v) this Employment Agreement has been entered into as part of a
series of transactions pursuant to which Executive Employee and others have
purchased an equity interest in Glasstech and sold their equity interest in
Glasstech; and (vi) Glasstech would not have entered into this Employment
Agreement but for the agreements and covenants of the Executive Employee
contained in this Section 8. Accordingly, the Executive Employee covenants and
agrees that:
(a) he shall not, anywhere in the world directly or
indirectly, (1) engage in Glasstech Business for his own account or that of any
other person; (2) render any services related to the Glasstech Business to any
person (other than Glasstech) engaged in such activities; or (3) become
interested in any such person (other than Glasstech) as a partner, stockholder,
member, principal, agent, trustee, consultant or in any other relationship or
capacity for a period commencing on the date of this Employment Agreement and
terminating on the day which is: (i) the later of (A) five (5) years following
the date hereof, or (B) two (2) years following the termination of the Executive
Employee's employment pursuant to a
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Renewal Termination Notice if given by Executive Employee, or (ii) if the
Executive Employee's employment has been terminated for Cause, then two (2)
years following termination of Executive Employee's employment; (collectively
the "Restricted Period") provided, however, that there shall be no Restricted
Period if Executive Employee's employment is terminated Without Cause or if
Glasstech delivers a Renewal Termination Notice to Executive Employee.
Notwithstanding the above, the Executive Employee may own, directly or
indirectly, solely as an investment, securities of any such person which are
traded on any national securities exchange or NASDAQ if the Executive Employee
is not a controlling person of, or a member of a group which controls such
person and does not, directly or indirectly, own one percent (1%) or more of any
class of securities of such person.
(b) at all times during and after this Employment Agreement
is in force he shall keep secret and retain in strictest confidence, and shall
not use for his benefit or the benefit of others, except in connection with the
business and affairs of Glasstech and its affiliates, all confidential matters
relating to Glasstech Business and to Glasstech and its affiliates learned by
the Executive Employee heretofore or hereafter directly or indirectly from
Glasstech or its affiliates or any of their predecessors or successors (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone outside of Glasstech and its affiliates except
with Glasstech's express written consent. The requirements of this Section 8(b)
shall not apply to Confidential Company Information which is: (1) at the time of
receipt or thereafter publicly known
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through no wrongful act of the Executive Employee: (2) received from a third
party not under any obligation to keep such information confidential; or (3)
required to be disclosed by law.
(c) during the Restricted Period, he shall not, without
Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit
employees of Glasstech or its affiliates to leave the employ of Glasstech or any
of its affiliates or (ii) hire any employee who has left the employ of Glasstech
or any of its affiliates within one year of the termination of such employee's
employment with Glasstech or any of its affiliates.
(d) at any time upon written request from Glasstech, he
shall deliver to Glasstech all memoranda, notes, lists, records and other
documents (and all copies thereof) made or compiled by the Executive Employee or
made available to him concerning Glasstech Business or Glasstech or any of its
affiliates all of which shall at all times be the property of Glasstech.
9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee
breaches any of the provisions of Section 8 (the "Restrictive Covenants"),
Glasstech shall have the following rights and remedies (upon compliance with any
necessary prerequisites imposed by law upon the availability of such remedies),
each of which rights and remedies shall be independent of the other and
severally enforceable, and all of which rights and remedies shall be in addition
to, and not in lieu of, any other rights and remedies available to Glasstech
under law or in equity:
(a) The right to have the Restrictive Covenants
specifically enforced by any court having jurisdiction over the parties to this
Employment Agreement; and
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(b) The right to entry of restraining orders and/or
injunctions (preliminary, mandatory, temporary and permanent) against the
Executive Employee against violations, threatened or actual, and whether or not
then continuing, of such covenants, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury to Glasstech and
that money damages will not provide an adequate remedy to Glasstech; and
(c) The right and remedy to require the Executive Employee
to account for and pay over to Glasstech all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by him as the result of any transactions constituting a breach of the
Restrictive Covenants, and the Executive Employee shall account for and pay over
such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech
under this Section 9 against any amounts owed to the Executive Employee.
10. MEDIATION, ARBITRATION. Except for a dispute under Section
8 which shall be subject to the provisions of Section 9, neither party shall
institute an arbitration proceeding hereunder, before that party has sought to
resolve the dispute through direct negotiation with the other party. If the
dispute is not resolved within three weeks after a demand for direct
negotiation, the parties shall attempt to resolve the dispute through nonbinding
mediation. If the parties do not promptly agree on a mediator, then either party
may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New
York, New York, to initiate selection of a mediator from the CPR Panel of
Neutrals. The fees and expenses of the mediator shall be paid one-half each by
each
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party. If the mediator is unable to facilitate a settlement of the dispute
within a reasonable period of time, as determined by the mediator, the mediator
shall issue a written statement to the parties to that effect and the aggrieved
party may then seek relief through arbitration, which shall be binding, before a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Association"). The place of arbitration shall be
Detroit, Michigan. Arbitration may be commenced at any time by any party hereto
after giving written notice in the manner described in Section 13 of this
Employment Agreement. The arbitrator shall be selected by the joint agreement of
each party, but if they do not so agree within twenty (20) days after the date
of the notice referred to above, the selection shall be made pursuant to the
rules from the panels of the arbitrators maintained by such Association. The
arbitrator shall render his decision within one hundred eighty (180) days of
appointment. Any award rendered by the arbitrator shall be conclusive and
binding upon the parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reasons for the
award. This provision for arbitration shall be specifically enforceable by the
parties and the decision of the arbitrator in accordance herewith shall be final
and binding and there shall be no right of appeal therefrom. Judgment upon the
award rendered by the arbitrator in accordance herewith shall be final and
binding and there shall be no right of appeal therefrom. Judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The costs and expenses of arbitration, including attorneys' fees and
expenses of the
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arbitrator shall be paid entirely by the nonprevailing party and in addition the
nonprevailing party shall reimburse the other party for the fees and expenses of
mediation incurred by such party, unless the arbitrator determines that the
costs, expenses and attorneys' fees should be apportioned between the parties,
then as the arbitrator may assess. The arbitrator shall not be permitted to
award punitive or similar type damages under any circumstances. As set forth in
the first phrase of the first sentence of this section 10, this arbitration
provision shall constitute the sole and exclusive remedy for any dispute under
this Employment Agreement.
11. BLUE PENCILING. The Executive Employee acknowledges and
agrees that (i) he has had an opportunity to seek advice of counsel in
connection with this Employment Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, whether because of the duration or geographical scope
of such provision, the duration or scope of such provision, as the case may be,
shall be reduced so that such provision becomes enforceable and. in its reduced
form, such provision shall then be enforceable and shall be enforced.
12. SEVERABILITY. If any court determines that any covenant or
provision of this Employment Agreement is unenforceable for any reason, the
remaining covenants or provisions shall remain in full force and effect.
13. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be (a)
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delivered personally, (b) sent by facsimile transmission, (c) sent by certified
or registered mail, postage prepaid, return receipt requested, or (d) sent by
overnight delivery service, to the following addresses:
(i) if to Glasstech, to:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: Mark Christman, President
Fax: (419) 661-9366
and
Kenneth H. Wetmore, Esquire
Vice President, General Counsel and Secretary
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Fax: (419) 661-9616
and
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Attention: David P. Given
(ii) if to the Executive Employee, to:
Mark D. Christman
30125 Morningside Drive
Perrysburg, Ohio 43551
Any such notice shall be deemed given (a) when so delivered
personally, (b) if sent by certified or registered mail, return receipt
requested, on the date the return receipt is signed, or (c) if sent by overnight
delivery service. on the next normal business day after the date of sender
receipt.
Any such person may, by giving notice in accordance with this
section to the other parties hereto, designate another address or person for
receipt by such person of notices hereunder.
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14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This
Employment Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreement(s),
written or oral with respect thereto. This Employment Agreement will be
effective upon the consummation of the Agreement and Plan of Merger (the "Merger
Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub
Co. If the Merger Agreement is not consummated within the time set forth
therein, this Employment Agreement shall be null and void and of no further
force and effect. The Employment Agreement dated December 6, 1994 between
Glasstech and the Executive Employee is hereby terminated and is null and void
and of no further force and effect. The Employment Agreement dated June 10, 1997
among Glasstech, Holding and the Executive Employee is hereby terminated and is
null and void and of no further force and effect.
15. INDEMNIFICATION. During the Term or any Renewal Term
hereof and subject to the continuing compliance by the Executive Employee with
his obligations hereunder, Glasstech shall provide the Executive Employee with
indemnification against liabilities or claims arising by reason of the fact that
he is an employee. officer and/or director of Glasstech, and against expenses
incurred in connection therewith, to the fullest extent of indemnification then
available to any officer and/or director of Glasstech under and in accordance
with the laws of the State of Delaware. Also, Glasstech shall purchase and/or
maintain Directors' and Officers' insurance on or inuring to the Executive
Employee's benefit with respect to such liabilities, claims, or
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expenses as described in the Agreement and Plan of Merger among Glasstech,
Glasstech Sub Co. and Holding, dated June 5, 1997.
16. WAIVERS AND AMENDMENTS. This Employment Agreement may be
amended, superseded, canceled, renewed, or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power,
or privilege, nor shall any single or partial exercise of any such right, power,
or privilege, preclude any other or further exercise thereof or the exercise of
any other such right, power, or privilege.
17. GOVERNING LAW. This Employment Agreement shall be governed
by and construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed within the State.
18. ASSIGNMENT. This Employment Agreement, and the Executive
Employee's rights and obligations hereunder, may not be assigned by either party
hereto without the consent of the other and any purported assignment by the
Executive Employee or Glasstech in violation hereof shall be null and void;
provided, however, that Glasstech may assign its rights and obligations
hereunder without the Executive Employee's consent in connection with a sale of
all or substantially all of Glasstech's assets.
19. BINDING EFFECT. This Employment Agreement shall be binding
upon and inure to the benefit of the parties and their
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respective successors, permitted assigns, heirs, executors, and
legal representatives.
20. COUNTERPARTS. This Employment Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument. Each counterpart may consist of two (2)
copies hereof each signed by one of the parties hereto.
21. HEADING. The headings in this Employment Agreement are for
reference only and shall not affect the interpretation of this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed. or
caused to be executed, this Employment Agreement as of the day and year first
above written.
GLASSTECH HOLDING CO.
By: /s/ Kenneth H. Wetmore
----------------------------
Its: VP
---------------------------
GLASSTECH, INC.
By: /s/ Kenneth H. Wetmore
----------------------------
Its: VP
---------------------------
EXECUTIVE EMPLOYEE
/s/ Mark D. Christman
-------------------------------
Mark D. Christman
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<PAGE> 1
Exhibit 10.8
EMPLOYMENT AGREEMENT
OF
LARRY E. ELLIOTT
WITH
GLASSTECH, INC.
This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made
by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH
HOLDING CO., a Delaware corporation with its principal place of business at
Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding")
and LARRY E. ELLIOTT (SSN ###-##-####), an individual residing at 365 Osage
Court, Perrysburg, Ohio 43551 (the "Executive Employee").
BACKGROUND
----------
This Employment Agreement covers the employment of the
Executive Employee by Glasstech.
Now therefore, Glasstech and the Executive Employee, in
consideration of the mutual promises herein contained and intending to be
legally bound hereby, agree as follows:
1. TERM. Glasstech hereby employs the Executive Employee as
Vice President, Manufacturing & Engineering, and the Executive Employee hereby
accepts such employment, from the date of this Employment Agreement to June 30,
2002 unless sooner terminated in accordance with the provisions of Sections 4,
5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual
anniversary thereafter, this Employment Agreement shall automatically renew for
an additional one (1) year period (the "Renewal Term" or the "Renewal Terms")
unless either party notifies
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the other party in writing of its or his intention not to renew the Employment
Agreement (the "Renewal Termination Notice") not less than six (6) months prior
to the expiration of the last year of the Term or of any Renewal Term. The
provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination
of this Employment Agreement.
2. DUTIES. The Executive Employee, in his capacity as Vice
President, Manufacturing & Engineering of Glasstech (or such other and
comparable titles and positions as shall be given the Executive Employee by
Holding Board of Directors), shall perform for Glasstech the services currently
performed by him for Glasstech (or comparable services or other reasonable
duties as he and Glasstech may agree upon), subject to the reasonable direction
of Holding's Board of Directors. The Executive Employee shall perform such
services in Wood County, Ohio, or at such other location or locations where he
may be assigned by Glasstech from time to time, provided, however, that the
Executive Employee shall not be required, in connection with his performance of
such services, to travel on behalf of Glasstech in a manner inconsistent with
the scope of his duties and the past practices of Glasstech. The Executive
Employee shall devote his business time and effort to the Employment Agreement
performance of his duties as described herein as reasonably required. It is
understood that the Executive Employee may attend to outside investments, serve
as a director and/or officer of a non-competing company and serve as an officer,
director, or participant in educational, welfare, social, religious, and civic
organizations so long as such activities do
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not materially interfere with the Executive Employee's employment
hereunder.
3. COMPENSATION.
3.1 BASE SALARY. Glasstech shall pay the Executive
Employee during each calendar year of the Term and each Renewal Term hereunder,
a minimum salary of One Hundred Fifty-Three Thousand Nine Hundred Fourteen
Dollars ($153,914) per calendar year adjusted as provided in Section 3.5
(hereinafter referred to as the "Base Salary"). The Base Salary shall be payable
in equal bi-weekly installments, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 PERFORMANCE BONUS.
Executive Employee shall participate in Glasstech's cash
performance bonus pool (the "Pool"). At the end of each fiscal year (commencing
with the fiscal year ending June 30, 1998), Holding's Board of Directors will
establish the Pool which, at a minimum, shall be calculated according to the
following bonus chart (the "Bonus Chart"):
Percentage of Total
Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool
- ---------------------------- ------------------ ----------
$14,000,000 to $14,999,999 5.0% $700,000 to $750,000
$15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000
$16,000,000 and Above 10.0 $1,600,000 and Above
For purposes of this Section, EBITDA shall be subject to the following
adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses
paid to middle managers other than executive managers; and (Z) EBITDA shall be
increased in the amount
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of any advisory fees paid to Key Equity Capital Corporation or its
affiliates.
Notwithstanding the foregoing, in the event Glasstech's EBITDA
for any fiscal year after the year ending June 30, 1998 (the "Base Year") is
less than $16,000,000 (the "Target"), the Board of Directors shall calculate the
average EBITDA of Glasstech from the Base Year through and including the fiscal
year in which the Target was not achieved. Using the Bonus Chart above, the
Board of Directors shall pay the participants (including but not limited to the
Executive Employee) the greater of (i) the amount of the Pool using the actual
EBITDA for such fiscal year or (ii) an amount equal to the percentage in the
Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for
such fiscal year.
If the Pool is not ten (10%) percent of the EBITDA in any
fiscal year during the Term of this Employment Agreement, such as in year 2001
in the example below, the Board of Directors shall, in each succeeding fiscal
year during the Term of this Employment Agreement, calculate the average EBITDA
of Glasstech from the Base Year through and including such succeeding fiscal
year. If the average EBITDA is greater than the actual EBITDA for any prior
fiscal year (or the average EBITDA used in a prior fiscal year), then the Board
of Directors, using the Bonus Chart, shall pay the participants (including but
not limited to the Executive Employee) an amount equal to (i) an amount equal to
the percentage in the Bonus Chart based upon the average EBITDA calculated in
such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal
year less (ii) the amount of the Pool actually distributed to participants in
such prior fiscal year.
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<PAGE> 5
EXAMPLE:
- --------
Fiscal Year Percentage of Total Bonus
Year EBITDA Fiscal Year EBITDA Pool
- ---- ------ ------------------ ----
1998 $18,000,000 10% $1,800,000
1999 $20,000,000 10% $2,000,000
2000 $13,000,000(1) 10% $1,300,000
2001 $12,000,000(2) 7.5% $ 900,000
2002 $20,000,000 10% $2,000,000
$ 300,000(3)
----------
$2,300,000
Not later than 10 business days after delivery to Glasstech of
its fiscal year audit at the end of each fiscal year commencing with the fiscal
year ending June 30, 1998, the Board of Directors of Holding, in consultation
with the President and Chief Executive Officer, shall distribute the Pool to the
participants therein (including but not limited to the Executive Employee) in
such percentages as the Board of Directors determines appropriate; provided,
that, in no event shall the Board of Directors distribute less than the entire
Pool as calculated above in any fiscal year commencing with the fiscal year
ending June 30, 1998.
- --------
1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 +
$20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon
10% of EBITDA for that year.
2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 +
$20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is
calculated based upon 7.5% of EBITDA for that year.
3 The average EBITDA in fiscal year 2002 is $16,500,000
($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the
Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA
for fiscal year 2001 ($1,200,000) less amount of the Pool actually
distributed for fiscal year 2001 ($900,000).
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<PAGE> 6
3.3 RESTRICTED STOCK PROGRAM.
(a) Holding hereby awards to Executive Employee 133.36
shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C
Shares"), which shall be subject to forfeiture in accordance with the provisions
set forth herein. On each of the first four anniversary dates of this Employment
Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long
as his employment has not been terminated on or before such date pursuant to the
provisions of Section 6 of this Employment Agreement. Subject to the forfeiture
provisions set forth herein, Executive Employee shall be entitled to full and
complete ownership of the Class C Shares and will be treated as the record and
beneficial owner of such for all purposes including, but not limited to, payment
of dividends and liquidation rights, provided that Executive Employee shall be
bound by all of the provisions of the Stockholders' Agreement of even date
herewith, among the Company, Executive Employee and the other stockholders of
the Company (the "Stockholders' Agreement).
(b) The certificates representing awarded Class C Shares
shall not be delivered to Executive Employee until the restrictions as to such
Class C Shares have lapsed. If Executive Employee's employment is terminated
pursuant to Section 6 of this Employment Agreement on or before any applicable
anniversary date as described in Section 3.3(a), Executive Employee shall
forfeit to Holding all such Class C Shares for which the restrictions have not
yet lapsed. In this regard, simultaneously with the issuance of certificates
representing awarded Class C Shares, Executive Employee shall execute and
deliver stock powers forfeiting to
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<PAGE> 7
Holding Class C Shares awarded hereunder for which the restrictions have not yet
lapsed in the event Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a). Executive Employee acknowledges that Class
C Shares awarded hereunder shall be subject to the restrictions and risks of
forfeiture contained herein and in the Stockholders' Agreement.
(c) Subject to Section 3.3(h), Executive Employee hereby
agrees that he shall pay to Holding, in cash, any foreign, United States
federal, state or local taxes of any kind required by law to be withheld with
respect to the Class C Shares awarded to him hereunder. If Executive Employee
does not make such payment to Holding, then Holding shall have the right to
deduct from any payment of any kind otherwise due to Executive Employee from
Holding (or from any subsidiary of Holding), any foreign, United States federal,
state or local taxes of any kind required by law to be withheld with respect to
the Class C Shares awarded to Executive Employee hereunder.
(d) Holding shall not issue Preferred Stock, Options or
Warrants or any otherwise dilutive securities without the consent of the
representative(s) of Key Equity Capital Corporation and the representative(s) of
executive management on the Board of Directors and unless such securities are
sold for fair market value, the proceeds of which are used for appropriate
corporate purposes as determined by the Board of Directors. All shareholders of
Class A, Class B or Class C Common Stock have the pre-emptive rights described
in the Stockholders' Agreement.
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<PAGE> 8
(e) "Change of Control" shall mean any one of the
following events: (i) the transfer, sale or other disposition of the Common
Stock of Holding which results in the current stockholders of Holding
(determined as of the date hereof) owning in the aggregate less than a majority
of the outstanding voting capital stock of Holding; (ii) any consolidation of
Holding with, or merger of Holding into, any other entity, any merger of another
entity into Holding, or any sale or transfer (in any one transaction or a series
of transactions) of all or substantially all of the assets of Holding to another
entity (other than (x) a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock, (y)
a merger which is effected solely to change the jurisdiction of incorporation of
Holding or (z) any consolidation with or merger of Holding into a wholly owned
subsidiary of Holding, or any sale or transfer by Holding of all or
substantially all of its assets to one or more of its wholly owned subsidiaries
in any one transaction or a series of transactions). Notwithstanding the
foregoing, a "Change in Control" shall not include any transaction permitted
under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to
the contrary in this Employment Agreement, so long as Executive Employee's
employment has not been terminated pursuant to the provisions of Section 6
before the date of a Change of Control, the restrictions with respect to all of
the Class C Shares shall immediately lapse upon a Change of Control.
(f) Executive Employee understands that the Class C Shares
have not been registered under the Securities Act of 1993, as amended (the "1933
Act") or any state securities laws.
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<PAGE> 9
Executive Employee represents that the Class C Shares awarded hereunder are not
being acquired by Executive Employee with a view toward resale or distribution
and Executive Employee will not sell or otherwise transfer such Class C Shares
except in compliance with the 1933 Act. The certificates representing the Class
C Shares shall bear such legends and statements evidencing the restrictions
contained in this Employment Agreement and as the Board of Directors of Holding
shall deem advisable to assure compliance with federal and state securities laws
and regulations.
(g) The award of the Class C Shares to Executive Employee
hereunder shall not confer any right to Executive Employee to continue in the
employ of Glasstech or any of its subsidiaries and shall not restrict or
interfere in any way with the right of Glasstech to terminate his employment
with or without cause, at any time.
(h) Executive Employee may file an "83(b) election" with
the Internal Revenue Service with respect to the Class C Shares. If Executive
Employee does file such an 83(b) election, Holding shall loan Executive Employee
an amount equal to 80% of Executive Employee's tax liability resulting from such
83(b) election (the "Loan Amount") subject to the following terms: (i) Executive
Employee shall execute and deliver to Holding a Promissory Note in the form of
EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the
principal amount of the Class C Note shall be equal to the Loan Amount and shall
accrue interest at the annual applicable federal rate for mid-term obligations
as of the month in which the Class C Note is issued; and (iii) the Executive
Employee shall execute and deliver to
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<PAGE> 10
Holding a Pledge Agreement in the form of Exhibit B attached hereto and made a
part hereof with respect to all shares of Class A Voting Common Stock of Holding
and all Class C Shares held by Executive Employee.
3.4 CLASS D SHARES. Executive Employee shall also be issued
1,000 shares of Class D Non-voting Common Stock of Holding issued pursuant to
Schedule II of the Stockholders' Agreement (the "Performance Share Program") and
subject to the terms and conditions of Section 9 of the Stockholders' Agreement.
3.5 COST OF LIVING INCREASE. The Base Salary provided for in
Section 3.1 hereof shall be adjusted annually to reflect the increase, if any,
in the cost of living by adding to the Base Salary an amount obtained by
multiplying the Base Salary by the percentage by which the level of the Consumer
Price Index North Central Region (for all items for urban wage earners and
clerical workers as reported for December 31 of each calendar period by the
Bureau of Labor Statistics of the United States Department of Labor) has
increased over its level as of January I of the same calendar year.
3.6 BENEFITS. The Executive Employee shall be entitled during
the Term and during any Renewal Terms to participate in such group life,
hospitalization and/or disability insurance benefits, health programs, qualified
or non-qualified deferred compensation plans or similar benefits which are
comparable to those made available by Glasstech on the date of this Employment
Agreement or thereafter to its executive employees generally, subject to the
eligibility provisions of such plans.
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<PAGE> 11
3.7 VACATIONS. The Executive Employee shall be entitled to
vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE
HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which
relating to vacation and personal leave are hereby incorporated into this
Employment Agreement by reference; provided, however, that the Executive
Employee shall be entitled to a minimum of three (3) weeks vacation per year.
3.8 INSURANCE. Glasstech agrees to pay life insurance and/or
annuity premiums on a policy(ies) selected by and insuring the life of the
Executive Employee with a beneficiary(ies) to be named by the Executive
Employee. The parties hereto agree that Glasstech shall not be obligated to pay
any premium greater than Five Thousand Dollars ($5,000) during the first year of
the Term and such amount shall be increased by Five Hundred Dollars ($500) each
year thereafter during the Term or during any of the Renewal Terms. The parties
further agree that the Executive Employee shall be permitted from time to time,
during the Term, or any Renewal Terms, to maintain such policy(ies), or to
exchange such policy(ies), or to acquire any new life insurance and/or annuity
products, provided however, that the portion of the premiums and costs to be
paid by Glasstech in connection with such policy(ies) shall not exceed the
amounts specified above. Glasstech expressly acknowledges that it shall have no
right, title or interest in and to such policy(ies), the same being the
exclusive property of the Executive Employee.
3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse
the Executive Employee for all reasonable expenses actually incurred or paid by
the Executive Employee during the Term
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<PAGE> 12
or any Renewal Term in performance of the Executive Employee's services under
this Employment Agreement, subject to receipt by Glasstech of reasonable
supporting documentation.
4. TERMINATION UPON DEATH. In the event the Executive Employee
dies during the Term or any Renewal Term, for a period of six (6) months
following such death Glasstech agrees to continue to pay to the surviving spouse
of the Executive Employee the Base Salary rate of the deceased Executive
Employee in effect at the time of death in equal bi-weekly installments less
such deductions required to be withheld by applicable law and regulations. The
salary continuation payable as provided herein shall be in addition to any right
of the estate of the deceased Executive Employee to (a) participate in the Pool
(in accordance with Section 3.2 above) in the fiscal year in which such death
occurred and to receive a prorated amount for the portion of the fiscal year in
which Executive Employee was alive, provided, however, that the level of such
participation shall be subject to the discretion of Holding Board of Directors,
and (b) to participate in the Performance Share Program as set forth therein.
Upon the death of the Executive Employee, the restrictions on all Class C Shares
shall lapse and such Class C Shares shall be released to the estate of the
deceased Executive Employee. Glasstech shall also remit to the estate of the
deceased Executive Employee any other benefits earned and accrued or payable up
to the date of such death and shall reimburse to the estate of the deceased
Executive Employee any outstanding unreimbursed expenses incurred by such
Executive Employee on behalf of Glasstech and documented as provided herein.
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<PAGE> 13
In the event the deceased Executive Employee is not survived
by a spouse or in the further event the deceased Executive Employee and his
spouse are separated at the time of death by agreement, court order or decree,
or otherwise, then such salary continuation shall be remitted to the estate of
the deceased Executive Employee.
5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON
DISABILITY. In the event the Executive Employee becomes disabled during the Term
or any Renewal Term by virtue of ill health or other disability and is thereby
unable to perform on a full time basis substantially and continuously the duties
assigned to him by Glasstech, Glasstech agrees to continue the Executive
Employee's Base Salary until such time as Executive Employee is eligible to
collect benefits under Glasstech's long term disability insurance coverage. At
such time as Executive Employee is eligible to collect benefits under
Glasstech's long term disability insurance coverage (a "Disability"), Glasstech
shall have no further obligation to compensate the Executive Employee (except
that Glasstech shall continue to provide group life and health benefits to
Executive Employee consistent with those provided to other executive employees
for a period of two (2) years from the date on which Executive Employee's long
term disability benefits commence) and further Glasstech shall have the right to
terminate the employment of the Executive Employee hereunder upon written notice
delivered pursuant to Section 13. In the event of such Disability, the
restrictions on all Class C Shares shall lapse and such Class C Shares shall be
released to the Executive Employee.
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<PAGE> 14
Executive Employee shall participate in the Performance Share Program as set
forth therein.
6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION.
(a) Notwithstanding any other provision of this Employment
Agreement, Glasstech may terminate the Executive Employee's employment at any
time for Cause (as hereinafter defined) and the Executive Employee may
voluntarily terminate the Executive Employee's employment with Glasstech. Upon
such termination for Cause or upon Executive Employee's voluntary termination,
Executive Employee shall not participate in the Performance Bonus (pursuant to
Section 3.2) for the fiscal year in which his termination occurred, and
Executive Employee shall automatically forfeit those shares of Restricted Stock
for which the restrictions would have lapsed (pursuant to Section 3.3) in the
contract year in which his termination occurred and any subsequent year and
shall participate in the Performance Share Program as set forth therein. Upon
such termination for Cause or upon Executive Employee's voluntary termination,
the Executive Employee shall be entitled to, except as restricted in the
preceding sentence, receive any salary and other benefits earned or accrued, and
reimbursement for expenses incurred, prior to the date of termination.
(b) "Cause" shall mean (i) the Executive Employee's
willful and continuing affirmative refusal to perform his or her duties
hereunder (other than as a result of a Disability); (ii) dishonesty in the
performance of his or her duties hereunder which results in criminal indictment
of the Executive Employee; (iii) the
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<PAGE> 15
Executive Employee's breach of any material term of this Employment Agreement
(provided that Glasstech shall give the Executive Employee written notice of
such breach and a thirty (30) day period after notice to cure such breach,
except that no notice or cure period shall be given or extended with respect to
breach of the provisions of Section 8 of this Employment Agreement); or (iv) the
Executive Employee's conviction for a felony or for a crime which, in the
reasonable judgment of Glasstech, renders the Executive Employee unable to
perform his duties as described in this Employment Agreement.
7. TERMINATION WITHOUT CAUSE. If the Executive Employee is
terminated prior to the end of the Term or any Renewal Term other than pursuant
to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a
termination "Without Cause"), the Executive Employee shall be entitled to (in
addition to such other rights as he may have, or damages to which he may be
entitled at law or in equity) (i) all payments when due of any salary and other
benefits (including, without limitation, participation in the Performance Bonus
pursuant to Section 3.2) accrued through the date of termination, including the
payment of all salary due for the remainder of the Term or Renewal Term as
though the Executive Employee had remained employed through the full Term (or,
if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions
on all Class C Shares shall lapse and such Class C Shares shall be released to
the Executive Employee, and (iii) participation in the Performance Share Program
as set forth therein.
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<PAGE> 16
8. COVENANT AGAINST COMPETITION. The Executive Employee
acknowledges that (i) the principal business of Glasstech is design,
manufacture, marketing, sale, distribution and servicing of glass bending,
tempering and annealing equipment worldwide to both automotive glass fabricators
and architectural glass producers and the principal business of Stir-Melter,
Inc. is the vitrification of hazardous waste (collectively, the "Glasstech
Business"); (ii) Glasstech is one of a limited number of persons throughout the
world which has developed such business; (iii) the Glasstech Business is, in
large part, international in scope and Glasstech's customers, potential
customers and competitors are located throughout the world; (iv) the Executive
Employee's work for Glasstech has given and will continue to give him access to
the confidential affairs and proprietary information of Glasstech; (v) this
Employment Agreement has been entered into as part of a series of transactions
pursuant to which Executive Employee and others have purchased an equity
interest in Glasstech and sold their equity interest in Glasstech; and (vi)
Glasstech would not have entered into this Employment Agreement but for the
agreements and covenants of the Executive Employee contained in this Section 8.
Accordingly, the Executive Employee covenants and agrees that:
(a) he shall not, anywhere in the world directly or
indirectly, (1) engage in Glasstech Business for his own account or that of any
other person; (2) render any services related to the Glasstech Business to any
person (other than Glasstech) engaged in such activities; or (3) become
interested in any such person (other than Glasstech) as a partner, stockholder,
member, principal, agent, trustee, consultant or in any other relationship or
capacity
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<PAGE> 17
for a period commencing on the date of this Employment Agreement and terminating
on the day which is: (i) the later of (A) five (5) years following the date
hereof, or (B) two (2) years following the termination of the Executive
Employee's employment pursuant to a Renewal Termination Notice if given by
Executive Employee, or (ii) if the Executive Employee's employment has been
terminated for Cause, then two (2) years following termination of Executive
Employee's employment; (collectively the "Restricted Period") provided, however,
that there shall be no Restricted Period if Executive Employee's employment is
terminated Without Cause or if Glasstech delivers a Renewal Termination Notice
to Executive Employee. Notwithstanding the above, the Executive Employee may
own, directly or indirectly, solely as an investment, securities of any such
person which are traded on any national securities exchange or NASDAQ if the
Executive Employee is not a controlling person of, or a member of a group which
controls such person and does not, directly or indirectly, own one percent (1%)
or more of any class of securities of such person.
(b) at all times during and after this Employment
Agreement is in force he shall keep secret and retain in strictest confidence,
and shall not use for his benefit or the benefit of others, except in connection
with the business and affairs of Glasstech and its affiliates, all confidential
matters relating to Glasstech Business and to Glasstech and its affiliates
learned by the Executive Employee heretofore or hereafter directly or indirectly
from Glasstech or its affiliates or any of their predecessors or successors (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to
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<PAGE> 18
anyone outside of Glasstech and its affiliates except with Glasstech's express
written consent. The requirements of this Section 8(b) shall not apply to
Confidential Company Information which is: (1) at the time of receipt or
thereafter publicly known through no wrongful act of the Executive Employee: (2)
received from a third party not under any obligation to keep such information
confidential; or (3) required to be disclosed by law.
(c) during the Restricted Period, he shall not, without
Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit
employees of Glasstech or its affiliates to leave the employ of Glasstech or any
of its affiliates or (ii) hire any employee who has left the employ of Glasstech
or any of its affiliates within one year of the termination of such employee's
employment with Glasstech or any of its affiliates.
(d) at any time upon written request from Glasstech, he
shall deliver to Glasstech all memoranda, notes, lists, records and other
documents (and all copies thereof) made or compiled by the Executive Employee or
made available to him concerning Glasstech Business or Glasstech or any of its
affiliates all of which shall at all times be the property of Glasstech.
9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee
breaches any of the provisions of Section 8 (the "Restrictive Covenants"),
Glasstech shall have the following rights and remedies (upon compliance with any
necessary prerequisites imposed by law upon the availability of such remedies),
each of which rights and remedies shall be independent of the other and
severally enforceable, and all of which rights and remedies shall
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<PAGE> 19
be in addition to, and not in lieu of, any other rights and remedies available
to Glasstech under law or in equity:
(a) The right to have the Restrictive Covenants
specifically enforced by any court having jurisdiction over the parties to this
Employment Agreement; and
(b) The right to entry of restraining orders and/or
injunctions (preliminary, mandatory, temporary and permanent) against the
Executive Employee against violations, threatened or actual, and whether or not
then continuing, of such covenants, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury to Glasstech and
that money damages will not provide an adequate remedy to Glasstech; and
(c) The right and remedy to require the Executive Employee
to account for and pay over to Glasstech all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by him as the result of any transactions constituting a breach of the
Restrictive Covenants, and the Executive Employee shall account for and pay over
such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech
under this Section 9 against any amounts owed to the Executive Employee.
10. MEDIATION, ARBITRATION. Except for a dispute under Section
8 which shall be subject to the provisions of Section 9, neither party shall
institute an arbitration proceeding hereunder, before that party has sought to
resolve the dispute through direct negotiation with the other party. If the
dispute is not resolved within three weeks after a demand for direct
negotiation, the parties shall attempt to resolve the dispute through nonbinding
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<PAGE> 20
mediation. If the parties do not promptly agree on a mediator, then either party
may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New
York, New York, to initiate selection of a mediator from the CPR Panel of
Neutrals. The fees and expenses of the mediator shall be paid one-half each by
each party. If the mediator is unable to facilitate a settlement of the dispute
within a reasonable period of time, as determined by the mediator, the mediator
shall issue a written statement to the parties to that effect and the aggrieved
party may then seek relief through arbitration, which shall be binding, before a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Association"). The place of arbitration shall be
Detroit, Michigan. Arbitration may be commenced at any time by any party hereto
after giving written notice in the manner described in Section 13 of this
Employment Agreement. The arbitrator shall be selected by the joint agreement of
each party, but if they do not so agree within twenty (20) days after the date
of the notice referred to above, the selection shall be made pursuant to the
rules from the panels of the arbitrators maintained by such Association. The
arbitrator shall render his decision within one hundred eighty (180) days of
appointment. Any award rendered by the arbitrator shall be conclusive and
binding upon the parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reasons for the
award. This provision for arbitration shall be specifically enforceable by the
parties and the decision of the arbitrator in accordance herewith shall be final
and binding and there shall be no right of appeal therefrom. Judgment upon the
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<PAGE> 21
award rendered by the arbitrator in accordance herewith shall be final and
binding and there shall be no right of appeal therefrom. Judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The costs and expenses of arbitration, including attorneys' fees and
expenses of the arbitrator shall be paid entirely by the nonprevailing party and
in addition the nonprevailing party shall reimburse the other party for the fees
and expenses of mediation incurred by such party, unless the arbitrator
determines that the costs, expenses and attorneys' fees should be apportioned
between the parties, then as the arbitrator may assess. The arbitrator shall not
be permitted to award punitive or similar type damages under any circumstances.
As set forth in the first phrase of the first sentence of this section 10, this
arbitration provision shall constitute the sole and exclusive remedy for any
dispute under this Employment Agreement.
11. BLUE PENCILING. The Executive Employee acknowledges and
agrees that (i) he has had an opportunity to seek advice of counsel in
connection with this Employment Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, whether because of the duration or geographical scope
of such provision, the duration or scope of such provision, as the case may be,
shall be reduced so that such provision becomes enforceable and. in its reduced
form, such provision shall then be enforceable and shall be enforced.
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<PAGE> 22
12. SEVERABILITY. If any court determines that any covenant or
provision of this Employment Agreement is unenforceable for any reason, the
remaining covenants or provisions shall remain in full force and effect.
13. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be (a) delivered personally,
(b) sent by facsimile transmission, (c) sent by certified or registered mail,
postage prepaid, return receipt requested, or (d) sent by overnight delivery
service, to the following addresses:
(i) if to Glasstech, to:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: Mark Christman, President
Fax: (419) 661-9366
and
Kenneth H. Wetmore, Esquire
Vice President, General Counsel and Secretary
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Fax: (419) 661-9616
and
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Attention: David P. Given
(ii) if to the Executive Employee, to:
Larry E. Elliott
365 Osage Court
Perrysburg, Ohio 43551
Any such notice shall be deemed given (a) when so delivered
personally, (b) if sent by certified or registered mail,
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return receipt requested, on the date the return receipt is signed, or (c) if
sent by overnight delivery service. on the next normal business day after the
date of sender receipt.
Any such person may, by giving notice in accordance with this
section to the other parties hereto, designate another address or person for
receipt by such person of notices hereunder.
14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This
Employment Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreement(s),
written or oral with respect thereto. This Employment Agreement will be
effective upon the consummation of the Agreement and Plan of Merger (the "Merger
Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub
Co. If the Merger Agreement is not consummated within the time set forth
therein, this Employment Agreement shall be null and void and of no further
force and effect. The Employment Agreement dated December 19, 1996 between
Glasstech and the Executive Employee is hereby terminated and is null and void
and of no further force and effect.
15. INDEMNIFICATION. During the Term or any Renewal Term
hereof and subject to the continuing compliance by the Executive Employee with
his obligations hereunder, Glasstech shall provide the Executive Employee with
indemnification against liabilities or claims arising by reason of the fact that
he is an employee. officer and/or director of Glasstech, and against expenses
incurred in connection therewith, to the fullest extent of indemnification then
available to any officer and/or director of Glasstech under and in accordance
with the laws of the State of Delaware. Also, Glasstech shall purchase and/or
maintain
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<PAGE> 24
Directors' and Officers' insurance on or inuring to the Executive Employee's
benefit with respect to such liabilities, claims, or expenses as described in
the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding,
dated June 5, 1997.
16. WAIVERS AND AMENDMENTS. This Employment Agreement may be
amended, superseded, canceled, renewed, or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power,
or privilege, nor shall any single or partial exercise of any such right, power,
or privilege, preclude any other or further exercise thereof or the exercise of
any other such right, power, or privilege.
17. GOVERNING LAW. This Employment Agreement shall be governed
by and construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed within the State.
18. ASSIGNMENT. This Employment Agreement, and the Executive
Employee's rights and obligations hereunder, may not be assigned by either party
hereto without the consent of the other and any purported assignment by the
Executive Employee or Glasstech in violation hereof shall be null and void;
provided, however, that Glasstech may assign its rights and obligations
hereunder without the Executive Employee's consent in connection with a sale of
all or substantially all of Glasstech's assets.
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<PAGE> 25
19. BINDING EFFECT. This Employment Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors, and legal representatives.
20. COUNTERPARTS. This Employment Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument. Each counterpart may consist of two (2)
copies hereof each signed by one of the parties hereto.
21. HEADING. The headings in this Employment Agreement are for
reference only and shall not affect the interpretation of this Employment
Agreement.
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed. or
caused to be executed, this Employment Agreement as of the day and year first
above written.
GLASSTECH HOLDING CO.
By: /s/ Mark D. Christman
----------------------------
Its: President
---------------------------
GLASSTECH, INC.
By: /s/ Mark D. Christman
----------------------------
Its: President
---------------------------
EXECUTIVE EMPLOYEE
/s/ Larry E. Elliott
-------------------------------
Larry E. Elliott
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<PAGE> 1
Exhibit 10.9
EMPLOYMENT AGREEMENT
OF
RONALD A. MCMASTER
WITH
GLASSTECH, INC.
This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made
by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH
HOLDING CO., a Delaware corporation with its principal place of business at
Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding")
and RONALD A. MCMASTER (SSN ###-##-####), an individual residing at 29794
Foxhill Road, Perrysburg, Ohio 43551 (the "Executive Employee").
BACKGROUND
----------
This Employment Agreement covers the employment of the
Executive Employee by Glasstech.
Now therefore, Glasstech and the Executive Employee, in
consideration of the mutual promises herein contained and intending to be
legally bound hereby, agree as follows:
1. TERM. Glasstech hereby employs the Executive Employee as
Vice President, Corporate Development, and the Executive Employee hereby accepts
such employment, from the date of this Employment Agreement to June 30, 2002
unless sooner terminated in accordance with the provisions of Sections 4, 5, 6
or 7 hereof (the "Term"). At the expiration of the Term and each annual
anniversary thereafter, this Employment Agreement shall automatically renew for
an additional one (1) year period (the "Renewal Term" or the "Renewal Terms")
unless either party notifies
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<PAGE> 2
the other party in writing of its or his intention not to renew the Employment
Agreement (the "Renewal Termination Notice") not less than six (6) months prior
to the expiration of the last year of the Term or of any Renewal Term. The
provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination
of this Employment Agreement.
2. DUTIES. The Executive Employee, in his capacity as Vice
President, Corporate Development of Glasstech (or such other and comparable
titles and positions as shall be given the Executive Employee by Holding Board
of Directors), shall perform for Glasstech the services currently performed by
him for Glasstech (or comparable services or other reasonable duties as he and
Glasstech may agree upon), subject to the reasonable direction of Holding's
Board of Directors. The Executive Employee shall perform such services in Wood
County, Ohio, or at such other location or locations where he may be assigned by
Glasstech from time to time, provided, however, that the Executive Employee
shall not be required, in connection with his performance of such services, to
travel on behalf of Glasstech in a manner inconsistent with the scope of his
duties and the past practices of Glasstech. The Executive Employee shall devote
his business time and effort to the Employment Agreement performance of his
duties as described herein as reasonably required. It is understood that the
Executive Employee may attend to outside investments, serve as a director and/or
officer of a non-competing company and serve as an officer, director, or
participant in educational, welfare, social, religious, and civic organizations
so long as such activities do
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<PAGE> 3
not materially interfere with the Executive Employee's employment hereunder.
3. COMPENSATION.
-------------
3.1 BASE SALARY. Glasstech shall pay the Executive
Employee during each calendar year of the Term and each Renewal Term hereunder,
a minimum salary of One Hundred Seventy-Five Thousand Eight Hundred Forty-Four
Dollars ($175,844) per calendar year adjusted as provided in Section 3.5
(hereinafter referred to as the "Base Salary"). The Base Salary shall be payable
in equal bi-weekly installments, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 PERFORMANCE BONUS.
------------------
Executive Employee shall participate in
Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal
year (commencing with the fiscal year ending June 30, 1998), Holding's Board of
Directors will establish the Pool which, at a minimum, shall be calculated
according to the following bonus chart (the "Bonus Chart"):
<TABLE>
<CAPTION>
Percentage of Total
Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool
- ---------------------------- ------------------ ----------
<S> <C> <C>
$14,000,000 to $14,999,999 5.0% $700,000 to $750,000
$15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000
$16,000,000 and Above 10.0 $1,600,000 and Above
</TABLE>
For purposes of this Section, EBITDA shall be subject to the following
adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses
paid to middle managers other than executive managers; and (Z) EBITDA shall be
increased in the amount
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<PAGE> 4
of any advisory fees paid to Key Equity Capital Corporation or its affiliates.
Notwithstanding the foregoing, in the event Glasstech's EBITDA
for any fiscal year after the year ending June 30, 1998 (the "Base Year") is
less than $16,000,000 (the "Target"), the Board of Directors shall calculate the
average EBITDA of Glasstech from the Base Year through and including the fiscal
year in which the Target was not achieved. Using the Bonus Chart above, the
Board of Directors shall pay the participants (including but not limited to the
Executive Employee) the greater of (i) the amount of the Pool using the actual
EBITDA for such fiscal year or (ii) an amount equal to the percentage in the
Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for
such fiscal year.
If the Pool is not ten (10%) percent of the EBITDA in any
fiscal year during the Term of this Employment Agreement, such as in year 2001
in the example below, the Board of Directors shall, in each succeeding fiscal
year during the Term of this Employment Agreement, calculate the average EBITDA
of Glasstech from the Base Year through and including such succeeding fiscal
year. If the average EBITDA is greater than the actual EBITDA for any prior
fiscal year (or the average EBITDA used in a prior fiscal year), then the Board
of Directors, using the Bonus Chart, shall pay the participants (including but
not limited to the Executive Employee) an amount equal to (i) an amount equal to
the percentage in the Bonus Chart based upon the average EBITDA calculated in
such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal
year less (ii) the amount of the Pool actually distributed to participants in
such prior fiscal year.
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<PAGE> 5
EXAMPLE:
- --------
<TABLE>
<CAPTION>
Fiscal Year Percentage of Total Bonus
Year EBITDA Fiscal Year EBITDA Pool
- ---- ------ ------------------ ----
<S> <C> <C> <C>
1998 $18,000,000 10% $1,800,000
1999 $20,000,000 10% $2,000,000
2000 $13,000,000(1) 10% $1,300,000
2001 $12,000,000(2) 7.5% $ 900,000
2002 $20,000,000 10% $2,000,000
$ 300,000(3)
----------
$2,300,000
</TABLE>
Not later than 10 business days after delivery to Glasstech of
its fiscal year audit at the end of each fiscal year commencing with the fiscal
year ending June 30, 1998, the Board of Directors of Holding, in consultation
with the President and Chief Executive Officer, shall distribute the Pool to the
participants therein (including but not limited to the Executive Employee) in
such percentages as the Board of Directors determines appropriate; provided,
that, in no event shall the Board of Directors distribute less than the entire
Pool as calculated above in any fiscal year commencing with the fiscal year
ending June 30, 1998.
- ----------------
1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 +
$20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10%
of EBITDA for that year.
2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 +
$20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated
based upon 7.5% of EBITDA for that year.
3 The average EBITDA in fiscal year 2002 is $16,500,000
($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the Pool
for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal
year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal
year 2001 ($900,000).
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<PAGE> 6
3.3 RESTRICTED STOCK PROGRAM.
-------------------------
(a) Holding hereby awards to Executive Employee 66.68
shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C
Shares"), which shall be subject to forfeiture in accordance with the provisions
set forth herein. On each of the first four anniversary dates of this Employment
Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long
as his employment has not been terminated on or before such date pursuant to the
provisions of Section 6 of this Employment Agreement. Subject to the forfeiture
provisions set forth herein, Executive Employee shall be entitled to full and
complete ownership of the Class C Shares and will be treated as the record and
beneficial owner of such for all purposes including, but not limited to, payment
of dividends and liquidation rights, provided that Executive Employee shall be
bound by all of the provisions of the Stockholders' Agreement of even date
herewith, among the Company, Executive Employee and the other stockholders of
the Company (the "Stockholders' Agreement").
(b) The certificates representing awarded Class C
Shares shall not be delivered to Executive Employee until the restrictions as to
such Class C Shares have lapsed. If Executive Employee's employment is
terminated pursuant to Section 6 of this Employment Agreement on or before any
applicable anniversary date as described in Section 3.3(a), Executive Employee
shall forfeit to Holding all such Class C Shares for which the restrictions have
not yet lapsed. In this regard, simultaneously with the issuance of certificates
representing awarded Class C Shares, Executive Employee shall execute and
deliver stock powers forfeiting to
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<PAGE> 7
Holding Class C Shares awarded hereunder for which the restrictions have not yet
lapsed in the event Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a). Executive Employee acknowledges that Class
C Shares awarded hereunder shall be subject to the restrictions and risks of
forfeiture contained herein and in the Stockholders' Agreement.
(c) Subject to Section 3.3(h), Executive Employee
hereby agrees that he shall pay to Holding, in cash, any foreign, United States
federal, state or local taxes of any kind required by law to be withheld with
respect to the Class C Shares awarded to him hereunder. If Executive Employee
does not make such payment to Holding, then Holding shall have the right to
deduct from any payment of any kind otherwise due to Executive Employee from
Holding (or from any subsidiary of Holding), any foreign, United States federal,
state or local taxes of any kind required by law to be withheld with respect to
the Class C Shares awarded to Executive Employee hereunder.
(d) Holding shall not issue Preferred Stock, Options
or Warrants or any otherwise dilutive securities without the consent of the
representative(s) of Key Equity Capital Corporation and the representative(s) of
executive management on the Board of Directors and unless such securities are
sold for fair market value, the proceeds of which are used for appropriate
corporate purposes as determined by the Board of Directors. All shareholders of
Class A, Class B or Class C Common Stock have the pre-emptive rights described
in the Stockholders' Agreement.
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<PAGE> 8
(e) "Change of Control" shall mean any one of the
following events: (i) the transfer, sale or other disposition of the Common
Stock of Holding which results in the current stockholders of Holding
(determined as of the date hereof) owning in the aggregate less than a majority
of the outstanding voting capital stock of Holding; (ii) any consolidation of
Holding with, or merger of Holding into, any other entity, any merger of another
entity into Holding, or any sale or transfer (in any one transaction or a series
of transactions) of all or substantially all of the assets of Holding to another
entity (other than (x) a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock, (y)
a merger which is effected solely to change the jurisdiction of incorporation of
Holding or (z) any consolidation with or merger of Holding into a wholly owned
subsidiary of Holding, or any sale or transfer by Holding of all or
substantially all of its assets to one or more of its wholly owned subsidiaries
in any one transaction or a series of transactions). Notwithstanding the
foregoing, a "Change in Control" shall not include any transaction permitted
under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to
the contrary in this Employment Agreement, so long as Executive Employee's
employment has not been terminated pursuant to the provisions of Section 6
before the date of a Change of Control, the restrictions with respect to all of
the Class C Shares shall immediately lapse upon a Change of Control.
(f) Executive Employee understands that the Class C
Shares have not been registered under the Securities Act of 1993, as amended
(the "1933 Act") or any state securities laws.
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<PAGE> 9
Executive Employee represents that the Class C Shares awarded hereunder are not
being acquired by Executive Employee with a view toward resale or distribution
and Executive Employee will not sell or otherwise transfer such Class C Shares
except in compliance with the 1933 Act. The certificates representing the Class
C Shares shall bear such legends and statements evidencing the restrictions
contained in this Employment Agreement and as the Board of Directors of Holding
shall deem advisable to assure compliance with federal and state securities laws
and regulations.
(g) The award of the Class C Shares to Executive
Employee hereunder shall not confer any right to Executive Employee to continue
in the employ of Glasstech or any of its subsidiaries and shall not restrict or
interfere in any way with the right of Glasstech to terminate his employment
with or without cause, at any time.
(h) Executive Employee may file an "83(b) election"
with the Internal Revenue Service with respect to the Class C Shares. If
Executive Employee does file such an 83(b) election, Holding shall loan
Executive Employee an amount equal to 80% of Executive Employee's tax liability
resulting from such 83(b) election (the "Loan Amount") subject to the following
terms: (i) Executive Employee shall execute and deliver to Holding a Promissory
Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class
C Note"); (ii) the principal amount of the Class C Note shall be equal to the
Loan Amount and shall accrue interest at the annual applicable federal rate for
mid-term obligations as of the month in which the Class C Note is issued; and
(iii) the Executive Employee shall execute and deliver to
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<PAGE> 10
Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a
part hereof with respect to all shares of Class A Voting Common Stock of Holding
and all Class C Shares held by Executive Employee.
3.4 CLASS D SHARES. Executive Employee shall also be
issued 500 shares of Class D Non-voting Common Stock of Holding issued pursuant
to Schedule II of the Stockholders' Agreement (the "Performance Share Program")
and subject to the terms and conditions of Section 9 of the Stockholders'
Agreement.
3.5 COST OF LIVING INCREASE. The Base Salary provided
for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if
any, in the cost of living by adding to the Base Salary an amount obtained by
multiplying the Base Salary by the percentage by which the level of the Consumer
Price Index North Central Region (for all items for urban wage earners and
clerical workers as reported for December 31 of each calendar period by the
Bureau of Labor Statistics of the United States Department of Labor) has
increased over its level as of January I of the same calendar year.
3.6 BENEFITS. The Executive Employee shall be
entitled during the Term and during any Renewal Terms to participate in such
group life, hospitalization and/or disability insurance benefits, health
programs, qualified or non-qualified deferred compensation plans or similar
benefits which are comparable to those made available by Glasstech on the date
of this Employment Agreement or thereafter to its executive employees generally,
subject to the eligibility provisions of such plans.
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<PAGE> 11
3.7 VACATIONS. The Executive Employee shall be
entitled to vacations and personal leave days more fully set forth in the
GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific
provisions of which relating to vacation and personal leave are hereby
incorporated into this Employment Agreement by reference.
3.8 INSURANCE. Glasstech agrees to pay life insurance
and/or annuity premiums on a policy(ies) selected by and insuring the life of
the Executive Employee with a beneficiary(ies) to be named by the Executive
Employee. The parties hereto agree that Glasstech shall not be obligated to pay
any premium greater than Five Thousand Dollars ($5,000) during the first year of
the Term and such amount shall be increased by Five Hundred Dollars ($500) each
year thereafter during the Term or during any of the Renewal Terms. The parties
further agree that the Executive Employee shall be permitted from time to time,
during the Term, or any Renewal Terms, to maintain such policy(ies), or to
exchange such policy(ies), or to acquire any new life insurance and/or annuity
products, provided however, that the portion of the premiums and costs to be
paid by Glasstech in connection with such policy(ies) shall not exceed the
amounts specified above. Glasstech expressly acknowledges that it shall have no
right, title or interest in and to such policy(ies), the same being the
exclusive property of the Executive Employee.
3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or
reimburse the Executive Employee for all reasonable expenses actually incurred
or paid by the Executive Employee during the Term or any Renewal Term in
performance of the Executive Employee's
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<PAGE> 12
services under this Employment Agreement, subject to receipt by Glasstech of
reasonable supporting documentation.
4. TERMINATION UPON DEATH. In the event the Executive Employee
dies during the Term or any Renewal Term, for a period of six (6) months
following such death Glasstech agrees to continue to pay to the surviving spouse
of the Executive Employee the Base Salary rate of the deceased Executive
Employee in effect at the time of death in equal bi-weekly installments less
such deductions required to be withheld by applicable law and regulations. The
salary continuation payable as provided herein shall be in addition to any right
of the estate of the deceased Executive Employee to (a) participate in the Pool
(in accordance with Section 3.2 above) in the fiscal year in which such death
occurred and to receive a prorated amount for the portion of the fiscal year in
which Executive Employee was alive, provided, however, that the level of such
participation shall be subject to the discretion of Holding Board of Directors,
and (b) to participate in the Performance Share Program as set forth therein.
Upon the death of the Executive Employee, the restrictions on all Class C Shares
shall lapse and such Class C Shares shall be released to the estate of the
deceased Executive Employee. Glasstech shall also remit to the estate of the
deceased Executive Employee any other benefits earned and accrued or payable up
to the date of such death and shall reimburse to the estate of the deceased
Executive Employee any outstanding unreimbursed expenses incurred by such
Executive Employee on behalf of Glasstech and documented as provided herein.
In the event the deceased Executive Employee is not survived
by a spouse or in the further event the deceased Executive
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<PAGE> 13
Employee and his spouse are separated at the time of death by agreement, court
order or decree, or otherwise, then such salary continuation shall be remitted
to the estate of the deceased Executive Employee.
5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON
DISABILITY. In the event the Executive Employee becomes disabled during the Term
or any Renewal Term by virtue of ill health or other disability and is thereby
unable to perform on a full time basis substantially and continuously the duties
assigned to him by Glasstech, Glasstech agrees to continue the Executive
Employee's Base Salary until such time as Executive Employee is eligible to
collect benefits under Glasstech's long term disability insurance coverage. At
such time as Executive Employee is eligible to collect benefits under
Glasstech's long term disability insurance coverage (a "Disability"), Glasstech
shall have no further obligation to compensate the Executive Employee (except
that Glasstech shall continue to provide group life and health benefits to
Executive Employee consistent with those provided to other executive employees
for a period of two (2) years from the date on which Executive Employee's long
term disability benefits commence) and further Glasstech shall have the right to
terminate the employment of the Executive Employee hereunder upon written notice
delivered pursuant to Section 13. In the event of such Disability, the
restrictions on all Class C Shares shall lapse and such Class C Shares shall be
released to the Executive Employee. Executive Employee shall participate in the
Performance Share Program as set forth therein.
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<PAGE> 14
6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION.
------------------------------------------------
(a) Notwithstanding any other provision of this
Employment Agreement, Glasstech may terminate the Executive Employee's
employment at any time for Cause (as hereinafter defined) and the Executive
Employee may voluntarily terminate the Executive Employee's employment with
Glasstech. Upon such termination for Cause or upon Executive Employee's
voluntary termination, Executive Employee shall not participate in the
Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his
termination occurred, and Executive Employee shall automatically forfeit those
shares of Restricted Stock for which the restrictions would have lapsed
(pursuant to Section 3.3) in the contract year in which his termination occurred
and any subsequent year and shall participate in the Performance Share Program
as set forth therein. Upon such termination for Cause or upon Executive
Employee's voluntary termination, the Executive Employee shall be entitled to,
except as restricted in the preceding sentence, receive any salary and other
benefits earned or accrued, and reimbursement for expenses incurred, prior to
the date of termination.
(b) "Cause" shall mean (i) the Executive Employee's willful
and continuing affirmative refusal to perform his or her duties hereunder (other
than as a result of a Disability); (ii) dishonesty in the performance of his or
her duties hereunder which results in criminal indictment of the Executive
Employee; (iii) the Executive Employee's breach of any material term of this
Employment Agreement (provided that Glasstech shall give the Executive Employee
written notice of such breach and a thirty (30) day period
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<PAGE> 15
after notice to cure such breach, except that no notice or cure period shall be
given or extended with respect to breach of the provisions of Section 8 of this
Employment Agreement); or (iv) the Executive Employee's conviction for a felony
or for a crime which, in the reasonable judgment of Glasstech, renders the
Executive Employee unable to perform his duties as described in this Employment
Agreement.
7. TERMINATION WITHOUT CAUSE. If the Executive Employee is
terminated prior to the end of the Term or any Renewal Term other than pursuant
to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a
termination "Without Cause"), the Executive Employee shall be entitled to (in
addition to such other rights as he may have, or damages to which he may be
entitled at law or in equity) (i) all payments when due of any salary and other
benefits (including, without limitation, participation in the Performance Bonus
pursuant to Section 3.2) accrued through the date of termination, including the
payment of all salary due for the remainder of the Term or Renewal Term as
though the Executive Employee had remained employed through the full Term (or,
if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions
on all Class C Shares shall lapse and such Class C Shares shall be released to
the Executive Employee, and (iii) participation in the Performance Share Program
as set forth therein.
8. COVENANT AGAINST COMPETITION. The Executive Employee
acknowledges that (i) the principal business of Glasstech is design,
manufacture, marketing, sale, distribution and servicing of glass bending,
tempering and annealing equipment worldwide to
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<PAGE> 16
both automotive glass fabricators and architectural glass producers and the
principal business of Stir-Melter, Inc. is the vitrification of hazardous waste
(collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited
number of persons throughout the world which has developed such business; (iii)
the Glasstech Business is, in large part, international in scope and Glasstech's
customers, potential customers and competitors are located throughout the world;
(iv) the Executive Employee's work for Glasstech has given and will continue to
give him access to the confidential affairs and proprietary information of
Glasstech; (v) this Employment Agreement has been entered into as part of a
series of transactions pursuant to which Executive Employee and others have
purchased an equity interest in Glasstech and sold their equity interest in
Glasstech; and (vi) Glasstech would not have entered into this Employment
Agreement but for the agreements and covenants of the Executive Employee
contained in this Section 8. Accordingly, the Executive Employee covenants and
agrees that:
(a) he shall not, anywhere in the world directly or
indirectly, (1) engage in Glasstech Business for his own account or that of any
other person; (2) render any services related to the Glasstech Business to any
person (other than Glasstech) engaged in such activities; or (3) become
interested in any such person (other than Glasstech) as a partner, stockholder,
member, principal, agent, trustee, consultant or in any other relationship or
capacity for a period commencing on the date of this Employment Agreement and
terminating on the day which is: (i) the later of (A) five (5) years following
the date hereof, or (B) two (2) years following the termination of the Executive
Employee's employment pursuant to a
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<PAGE> 17
Renewal Termination Notice if given by Executive Employee, or (ii) if the
Executive Employee's employment has been terminated for Cause, then two (2)
years following termination of Executive Employee's employment; (collectively
the "Restricted Period") provided, however, that there shall be no Restricted
Period if Executive Employee's employment is terminated Without Cause or if
Glasstech delivers a Renewal Termination Notice to Executive Employee.
Notwithstanding the above, the Executive Employee may own, directly or
indirectly, solely as an investment, securities of any such person which are
traded on any national securities exchange or NASDAQ if the Executive Employee
is not a controlling person of, or a member of a group which controls such
person and does not, directly or indirectly, own one percent (1%) or more of any
class of securities of such person.
(b) at all times during and after this Employment
Agreement is in force he shall keep secret and retain in strictest confidence,
and shall not use for his benefit or the benefit of others, except in connection
with the business and affairs of Glasstech and its affiliates, all confidential
matters relating to Glasstech Business and to Glasstech and its affiliates
learned by the Executive Employee heretofore or hereafter directly or indirectly
from Glasstech or its affiliates or any of their predecessors or successors (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone outside of Glasstech and its affiliates except
with Glasstech's express written consent. The requirements of this Section 8(b)
shall not apply to Confidential Company Information which is: (1) at the time of
receipt or thereafter publicly known
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<PAGE> 18
through no wrongful act of the Executive Employee: (2) received from a third
party not under any obligation to keep such information confidential; or (3)
required to be disclosed by law.
(c) during the Restricted Period, he shall not, without
Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit
employees of Glasstech or its affiliates to leave the employ of Glasstech or any
of its affiliates or (ii) hire any employee who has left the employ of Glasstech
or any of its affiliates within one year of the termination of such employee's
employment with Glasstech or any of its affiliates.
(d) at any time upon written request from Glasstech,
he shall deliver to Glasstech all memoranda, notes, lists, records and other
documents (and all copies thereof) made or compiled by the Executive Employee or
made available to him concerning Glasstech Business or Glasstech or any of its
affiliates all of which shall at all times be the property of Glasstech.
9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee
breaches any of the provisions of Section 8 (the "Restrictive Covenants"),
Glasstech shall have the following rights and remedies (upon compliance with any
necessary prerequisites imposed by law upon the availability of such remedies),
each of which rights and remedies shall be independent of the other and
severally enforceable, and all of which rights and remedies shall be in addition
to, and not in lieu of, any other rights and remedies available to Glasstech
under law or in equity:
(a) The right to have the Restrictive Covenants
specifically enforced by any court having jurisdiction over the parties to this
Employment Agreement; and
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<PAGE> 19
(b) The right to entry of restraining orders and/or
injunctions (preliminary, mandatory, temporary and permanent) against the
Executive Employee against violations, threatened or actual, and whether or not
then continuing, of such covenants, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury to Glasstech and
that money damages will not provide an adequate remedy to Glasstech; and
(c) The right and remedy to require the Executive
Employee to account for and pay over to Glasstech all compensation, profits,
monies, accruals, increments or other benefits (collectively, "Benefits")
derived or received by him as the result of any transactions constituting a
breach of the Restrictive Covenants, and the Executive Employee shall account
for and pay over such Benefits to Glasstech. Glasstech may set off any amounts
due to Glasstech under this Section 9 against any amounts owed to the Executive
Employee.
10. MEDIATION, ARBITRATION. Except for a dispute under Section
8 which shall be subject to the provisions of Section 9, neither party shall
institute an arbitration proceeding hereunder, before that party has sought to
resolve the dispute through direct negotiation with the other party. If the
dispute is not resolved within three weeks after a demand for direct
negotiation, the parties shall attempt to resolve the dispute through nonbinding
mediation. If the parties do not promptly agree on a mediator, then either party
may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New
York, New York, to initiate selection of a mediator from the CPR Panel of
Neutrals. The fees and expenses of the mediator shall be paid one-half each by
each
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<PAGE> 20
party. If the mediator is unable to facilitate a settlement of the dispute
within a reasonable period of time, as determined by the mediator, the mediator
shall issue a written statement to the parties to that effect and the aggrieved
party may then seek relief through arbitration, which shall be binding, before a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Association"). The place of arbitration shall be
Detroit, Michigan. Arbitration may be commenced at any time by any party hereto
after giving written notice in the manner described in Section 13 of this
Employment Agreement. The arbitrator shall be selected by the joint agreement of
each party, but if they do not so agree within twenty (20) days after the date
of the notice referred to above, the selection shall be made pursuant to the
rules from the panels of the arbitrators maintained by such Association. The
arbitrator shall render his decision within one hundred eighty (180) days of
appointment. Any award rendered by the arbitrator shall be conclusive and
binding upon the parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reasons for the
award. This provision for arbitration shall be specifically enforceable by the
parties and the decision of the arbitrator in accordance herewith shall be final
and binding and there shall be no right of appeal therefrom. Judgment upon the
award rendered by the arbitrator in accordance herewith shall be final and
binding and there shall be no right of appeal therefrom. Judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The costs and expenses of arbitration, including attorneys' fees and
expenses of the
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<PAGE> 21
arbitrator shall be paid entirely by the nonprevailing party and in addition the
nonprevailing party shall reimburse the other party for the fees and expenses of
mediation incurred by such party, unless the arbitrator determines that the
costs, expenses and attorneys' fees should be apportioned between the parties,
then as the arbitrator may assess. The arbitrator shall not be permitted to
award punitive or similar type damages under any circumstances. As set forth in
the first phrase of the first sentence of this section 10, this arbitration
provision shall constitute the sole and exclusive remedy for any dispute under
this Employment Agreement.
11. BLUE PENCILING. The Executive Employee acknowledges and
agrees that (i) he has had an opportunity to seek advice of counsel in
connection with this Employment Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, whether because of the duration or geographical scope
of such provision, the duration or scope of such provision, as the case may be,
shall be reduced so that such provision becomes enforceable and, in its reduced
form, such provision shall then be enforceable and shall be enforced.
12. SEVERABILITY. If any court determines that any covenant or
provision of this Employment Agreement is unenforceable for any reason, the
remaining covenants or provisions shall remain in full force and effect.
13. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be (a)
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<PAGE> 22
delivered personally, (b) sent by facsimile transmission, (c) sent by certified
or registered mail, postage prepaid, return receipt requested, or (d) sent by
overnight delivery service, to the following addresses:
(i) if to Glasstech, to:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: Mark Christman, President
Fax: (419) 661-9366
and
Kenneth H. Wetmore, Esquire
Vice President, General Counsel and Secretary
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Fax: (419) 661-9616
and
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Attention: David P. Given
(ii) if to the Executive Employee, to:
Ronald A. McMaster
29794 Foxhill Road
Perrysburg, Ohio 43551
Any such notice shall be deemed given (a) when so delivered
personally, (b) if sent by certified or registered mail, return receipt
requested, on the date the return receipt is signed, or (c) if sent by overnight
delivery service. on the next normal business day after the date of sender
receipt.
Any such person may, by giving notice in accordance with this
section to the other parties hereto, designate another address or person for
receipt by such person of notices hereunder.
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<PAGE> 23
14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This
Employment Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreement(s),
written or oral with respect thereto. This Employment Agreement will be
effective upon the consummation of the Agreement and Plan of Merger (the "Merger
Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub
Co. If the Merger Agreement is not consummated within the time set forth
therein, this Employment Agreement shall be null and void and of no further
force and effect. The Employment Agreement dated December 6, 1994 between
Glasstech and the Executive Employee is hereby terminated and is null and void
and of no further force and effect.
15. INDEMNIFICATION. During the Term or any Renewal Term
hereof and subject to the continuing compliance by the Executive Employee with
his obligations hereunder, Glasstech shall provide the Executive Employee with
indemnification against liabilities or claims arising by reason of the fact that
he is an employee. officer and/or director of Glasstech, and against expenses
incurred in connection therewith, to the fullest extent of indemnification then
available to any officer and/or director of Glasstech under and in accordance
with the laws of the State of Delaware. Also, Glasstech shall purchase and/or
maintain Directors' and Officers' insurance on or inuring to the Executive
Employee's benefit with respect to such liabilities, claims, or expenses as
described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co.
and Holding, dated June 5, 1997.
16. WAIVERS AND AMENDMENTS. This Employment Agreement may be
amended, superseded, canceled, renewed, or extended, and the
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<PAGE> 24
terms hereof may be waived, only by a written instrument signed by the parties
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power, or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power, or privilege, nor shall any single or partial exercise of
any such right, power, or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power, or privilege.
17. GOVERNING LAW. This Employment Agreement shall be governed
by and construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed within the State.
18. ASSIGNMENT. This Employment Agreement, and the Executive
Employee's rights and obligations hereunder, may not be assigned by either party
hereto without the consent of the other and any purported assignment by the
Executive Employee or Glasstech in violation hereof shall be null and void;
provided, however, that Glasstech may assign its rights and obligations
hereunder without the Executive Employee's consent in connection with a sale of
all or substantially all of Glasstech's assets.
19. BINDING EFFECT. This Employment Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors, and legal representatives.
20. COUNTERPARTS. This Employment Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all
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<PAGE> 25
such counterparts together shall constitute one and the same instrument. Each
counterpart may consist of two (2) copies hereof each signed by one of the
parties hereto.
21. HEADING. The headings in this Employment Agreement are for
reference only and shall not affect the interpretation of this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed. or
caused to be executed, this Employment Agreement as of the day and year first
above written.
GLASSTECH HOLDING CO.
By: /s/ Mark D. Christman
----------------------------
Its: President
---------------------------
GLASSTECH, INC.
By: /s/ Mark D. Christman
----------------------------
Its: President
---------------------------
EXECUTIVE EMPLOYEE
/s/ Ronald A. McMaster
-------------------------------
Ronald A. McMaster
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<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
OF
JAMES P. SCHNABEL, JR.
WITH
GLASSTECH, INC.
This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and
among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING
CO., a Delaware corporation with its principal place of business at Ampoint
Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and JAMES
P. SCHNABEL, JR. (SSN ###-##-####), an individual residing at 1915 Wexford Hill
Lane, Holland, Ohio 43528 (the "Executive Employee").
BACKGROUND
----------
This Employment Agreement covers the employment of the Executive
Employee by Glasstech.
Now therefore, Glasstech and the Executive Employee, in consideration of
the mutual promises herein contained and intending to be legally bound hereby,
agree as follows:
1. TERM. Glasstech hereby employs the Executive Employee as Vice
President, Product Development, and the Executive Employee hereby accepts such
employment, from the date of this Employment Agreement to June 30, 2002 unless
sooner terminated in accordance with the provisions of Sections 4, 5, 6 or 7
hereof (the "Term"). At the expiration of the Term and each annual anniversary
thereafter, this Employment Agreement shall automatically renew for an
additional one (1) year period (the "Renewal Term" or the "Renewal Terms")
unless either party notifies the other party in
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<PAGE> 2
writing of its or his intention not to renew the Employment Agreement (the
"Renewal Termination Notice") not less than six (6) months prior to the
expiration of the last year of the Term or of any Renewal Term. The provisions
of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this
Employment Agreement.
2. DUTIES. The Executive Employee, in his capacity as Vice
President, Product Development of Glasstech (or such other and comparable titles
and positions as shall be given the Executive Employee by Holding Board of
Directors), shall perform for Glasstech the services currently performed by him
for Glasstech (or comparable services or other reasonable duties as he and
Glasstech may agree upon), subject to the reasonable direction of Holding's
Board of Directors. The Executive Employee shall perform such services in Wood
County, Ohio, or at such other location or locations where he may be assigned by
Glasstech from time to time, provided, however, that the Executive Employee
shall not be required, in connection with his performance of such services, to
travel on behalf of Glasstech in a manner inconsistent with the scope of his
duties and the past practices of Glasstech. The Executive Employee shall devote
his business time and effort to the Employment Agreement performance of his
duties as described herein as reasonably required. It is understood that the
Executive Employee may attend to outside investments, serve as a director and/or
officer of a non-competing company and serve as an officer, director, or
participant in educational, welfare, social, religious, and civic organizations
so long as such activities do not materially interfere with the Executive
Employee's employment hereunder.
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<PAGE> 3
3. COMPENSATION.
-------------
3.1 BASE SALARY. Glasstech shall pay the Executive
Employee during each calendar year of the Term and each Renewal Term hereunder,
a minimum salary of One Hundred Thirty-Two Thousand Eight Hundred Forty-Three
Dollars ($132,843) per calendar year adjusted as provided in Section 3.5
(hereinafter referred to as the "Base Salary"). The Base Salary shall be payable
in equal bi-weekly installments, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 PERFORMANCE BONUS.
------------------
Executive Employee shall participate in Glasstech's cash
performance bonus pool (the "Pool"). At the end of each fiscal year (commencing
with the fiscal year ending June 30, 1998), Holding's Board of Directors will
establish the Pool which, at a minimum, shall be calculated according to the
following bonus chart (the "Bonus Chart"):
<TABLE>
<CAPTION>
Percentage of Total
Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool
- ---------------------------- ------------------ ----------
<C> <C> <C>
$14,000,000 to $14,999,999 5.0% $700,000 to $750,000
$15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000
$16,000,000 and Above 10.0 $1,600,000 and Above
</TABLE>
For purposes of this Section, EBITDA shall be subject to the following
adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses
paid to middle managers other than executive managers; and (Z) EBITDA shall be
increased in the amount of any advisory fees paid to Key Equity Capital
Corporation or its affiliates.
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<PAGE> 4
Notwithstanding the foregoing, in the event Glasstech's EBITDA for any
fiscal year after the year ending June 30, 1998 (the "Base Year") is less than
$16,000,000 (the "Target"), the Board of Directors shall calculate the average
EBITDA of Glasstech from the Base Year through and including the fiscal year in
which the Target was not achieved. Using the Bonus Chart above, the Board of
Directors shall pay the participants (including but not limited to the Executive
Employee) the greater of (i) the amount of the Pool using the actual EBITDA for
such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart
based upon the average EBITDA multiplied by the actual EBITDA for such fiscal
year.
If the Pool is not ten (10%) percent of the EBITDA in any fiscal year
during the Term of this Employment Agreement, such as in year 2001 in the
example below, the Board of Directors shall, in each succeeding fiscal year
during the Term of this Employment Agreement, calculate the average EBITDA of
Glasstech from the Base Year through and including such succeeding fiscal year.
If the average EBITDA is greater than the actual EBITDA for any prior fiscal
year (or the average EBITDA used in a prior fiscal year), then the Board of
Directors, using the Bonus Chart, shall pay the participants (including but not
limited to the Executive Employee) an amount equal to (i) an amount equal to the
percentage in the Bonus Chart based upon the average EBITDA calculated in such
succeeding fiscal year, multiplied by the actual EBITDA for such fiscal year
less (ii) the amount of the Pool actually distributed to participants in such
prior fiscal year.
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<PAGE> 5
<TABLE>
<CAPTION>
EXAMPLE:
- --------
Fiscal Year Percentage of Total Bonus
Year EBITDA Fiscal Year EBITDA Pool
- ---- ------ ------------------ ----
<C> <C> <C> <C>
1998 $18,000,000 10% $1,800,000
1999 $20,000,000 10% $2,000,000
2000 $13,000,000(1) 10% $1,300,000
2001 $12,000,000(2) 7.5% $ 900,000
2002 $20,000,000 10% $2,000,000
$ 300,000(3)
----------
$2,300,000
</TABLE>
Not later than 10 business days after delivery to Glasstech of its
fiscal year audit at the end of each fiscal year commencing with the fiscal year
ending June 30, 1998, the Board of Directors of Holding, in consultation with
the President and Chief Executive Officer, shall distribute the Pool to the
participants therein (including but not limited to the Executive Employee) in
such percentages as the Board of Directors determines appropriate; provided,
that, in no event shall the Board of Directors distribute less than the entire
Pool as calculated above in any fiscal year commencing with the fiscal year
ending June 30, 1998.
- --------------------
1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 +
$20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon
10% of EBITDA for that year.
2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 +
$20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is
calculated based upon 7.5% of EBITDA for that year.
3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000 +
20,000,000 + 13,000,000 + 12,000,000 + 20,000,000 / 5). Therefore, the Pool
for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal
year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal
year 2001 ($900,000).
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<PAGE> 6
3.3 RESTRICTED STOCK PROGRAM.
-------------------------
(a) Holding hereby awards to Executive Employee 133.36 shares of
restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"),
which shall be subject to forfeiture in accordance with the provisions set forth
herein. On each of the first four anniversary dates of this Employment
Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long
as his employment has not been terminated on or before such date pursuant to the
provisions of Section 6 of this Employment Agreement. Subject to the forfeiture
provisions set forth herein, Executive Employee shall be entitled to full and
complete ownership of the Class C Shares and will be treated as the record and
beneficial owner of such for all purposes including, but not limited to, payment
of dividends and liquidation rights, provided that Executive Employee shall be
bound by all of the provisions of the Stockholders' Agreement of even date
herewith, among the Company, Executive Employee and the other stockholders of
the Company (the "Stockholders' Agreement).
(b) The certificates representing awarded Class C Shares shall not
be delivered to Executive Employee until the restrictions as to such Class C
Shares have lapsed. If Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a), Executive Employee shall forfeit to Holding
all such Class C Shares for which the restrictions have not yet lapsed. In this
regard, simultaneously with the issuance of certificates representing awarded
Class C Shares, Executive Employee shall execute and deliver stock powers
forfeiting to
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<PAGE> 7
Holding Class C Shares awarded hereunder for which the restrictions have not yet
lapsed in the event Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a). Executive Employee acknowledges that Class
C Shares awarded hereunder shall be subject to the restrictions and risks of
forfeiture contained herein and in the Stockholders' Agreement.
(c) Subject to Section 3.3(h), Executive Employee hereby agrees
that he shall pay to Holding, in cash, any foreign, United States federal, state
or local taxes of any kind required by law to be withheld with respect to the
Class C Shares awarded to him hereunder. If Executive Employee does not make
such payment to Holding, then Holding shall have the right to deduct from any
payment of any kind otherwise due to Executive Employee from Holding (or from
any subsidiary of Holding), any foreign, United States federal, state or local
taxes of any kind required by law to be withheld with respect to the Class C
Shares awarded to Executive Employee hereunder.
(d) Holding shall not issue Preferred Stock, Options or Warrants or
any otherwise dilutive securities without the consent of the representative(s)
of Key Equity Capital Corporation and the representative(s) of executive
management on the Board of Directors and unless such securities are sold for
fair market value, the proceeds of which are used for appropriate corporate
purposes as determined by the Board of Directors. All shareholders of Class A,
Class B or Class C Common Stock have the pre-emptive rights described in the
Stockholders' Agreement.
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<PAGE> 8
(e) "Change of Control" shall mean any one of the following events:
(i) the transfer, sale or other disposition of the Common Stock of Holding which
results in the current stockholders of Holding (determined as of the date
hereof) owning in the aggregate less than a majority of the outstanding voting
capital stock of Holding; (ii) any consolidation of Holding with, or merger of
Holding into, any other entity, any merger of another entity into Holding, or
any sale or transfer (in any one transaction or a series of transactions) of all
or substantially all of the assets of Holding to another entity (other than (x)
a merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock, (y) a merger which is
effected solely to change the jurisdiction of incorporation of Holding or (z)
any consolidation with or merger of Holding into a wholly owned subsidiary of
Holding, or any sale or transfer by Holding of all or substantially all of its
assets to one or more of its wholly owned subsidiaries in any one transaction or
a series of transactions). Notwithstanding the foregoing, a "Change in Control"
shall not include any transaction permitted under Section 2.2(b) of the
Stockholders' Agreement. Notwithstanding anything to the contrary in this
Employment Agreement, so long as Executive Employee's employment has not been
terminated pursuant to the provisions of Section 6 before the date of a Change
of Control, the restrictions with respect to all of the Class C Shares shall
immediately lapse upon a Change of Control.
(f) Executive Employee understands that the Class C Shares have not
been registered under the Securities Act of 1993, as amended (the "1933 Act") or
any state securities laws.
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<PAGE> 9
Executive Employee represents that the Class C Shares awarded hereunder are not
being acquired by Executive Employee with a view toward resale or distribution
and Executive Employee will not sell or otherwise transfer such Class C Shares
except in compliance with the 1933 Act. The certificates representing the Class
C Shares shall bear such legends and statements evidencing the restrictions
contained in this Employment Agreement and as the Board of Directors of Holding
shall deem advisable to assure compliance with federal and state securities laws
and regulations.
(g) The award of the Class C Shares to Executive Employee hereunder
shall not confer any right to Executive Employee to continue in the employ of
Glasstech or any of its subsidiaries and shall not restrict or interfere in any
way with the right of Glasstech to terminate his employment with or without
cause, at any time.
(h) Executive Employee may file an "83(b) election" with the
Internal Revenue Service with respect to the Class C Shares. If Executive
Employee does file such an 83(b) election, Holding shall loan Executive Employee
an amount equal to 80% of Executive Employee's tax liability resulting from such
83(b) election (the "Loan Amount") subject to the following terms: (i) Executive
Employee shall execute and deliver to Holding a Promissory Note in the form of
EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the
principal amount of the Class C Note shall be equal to the Loan Amount and shall
accrue interest at the annual applicable federal rate for mid-term obligations
as of the month in which the Class C Note is issued; and (iii) the Executive
Employee shall execute and deliver to
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<PAGE> 10
Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a
part hereof with respect to all shares of Class A Voting Common Stock of Holding
and all Class C Shares held by Executive Employee.
3.4 CLASS D SHARES. Executive Employee shall also be issued
1,000 shares of Class D Non-voting Common Stock of Holding issued pursuant to
Schedule II of the Stockholders' Agreement (the "Performance Share Program") and
subject to the terms and conditions of Section 9 of the Stockholders' Agreement.
3.5 COST OF LIVING INCREASE. The Base Salary provided for in
Section 3.1 hereof shall be adjusted annually to reflect the increase, if any,
in the cost of living by adding to the Base Salary an amount obtained by
multiplying the Base Salary by the percentage by which the level of the Consumer
Price Index North Central Region (for all items for urban wage earners and
clerical workers as reported for December 31 of each calendar period by the
Bureau of Labor Statistics of the United States Department of Labor) has
increased over its level as of January I of the same calendar year.
3.6 BENEFITS. The Executive Employee shall be entitled during
the Term and during any Renewal Terms to participate in such group life,
hospitalization and/or disability insurance benefits, health programs, qualified
or non-qualified deferred compensation plans or similar benefits which are
comparable to those made available by Glasstech on the date of this Employment
Agreement or thereafter to its executive employees generally, subject to the
eligibility provisions of such plans.
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<PAGE> 11
3.7 VACATIONS. The Executive Employee shall be entitled to
vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE
HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which
relating to vacation and personal leave are hereby incorporated into this
Employment Agreement by reference.
3.8 INSURANCE. Glasstech agrees to pay life insurance and/or
annuity premiums on a policy(ies) selected by and insuring the life of the
Executive Employee with a beneficiary(ies) to be named by the Executive
Employee. The parties hereto agree that Glasstech shall not be obligated to pay
any premium greater than Five Thousand Dollars ($5,000) during the first year of
the Term and such amount shall be increased by Five Hundred Dollars ($500) each
year thereafter during the Term or during any of the Renewal Terms. The parties
further agree that the Executive Employee shall be permitted from time to time,
during the Term, or any Renewal Terms, to maintain such policy(ies), or to
exchange such policy(ies), or to acquire any new life insurance and/or annuity
products, provided however, that the portion of the premiums and costs to be
paid by Glasstech in connection with such policy(ies) shall not exceed the
amounts specified above. Glasstech expressly acknowledges that it shall have no
right, title or interest in and to such policy(ies), the same being the
exclusive property of the Executive Employee.
3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the
Executive Employee for all reasonable expenses actually incurred or paid by the
Executive Employee during the Term or any Renewal Term in performance of the
Executive Employee's
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<PAGE> 12
services under this Employment Agreement, subject to receipt by Glasstech of
reasonable supporting documentation.
4. TERMINATION UPON DEATH. In the event the Executive Employee dies
during the Term or any Renewal Term, for a period of six (6) months following
such death Glasstech agrees to continue to pay to the surviving spouse of the
Executive Employee the Base Salary rate of the deceased Executive Employee in
effect at the time of death in equal bi-weekly installments less such deductions
required to be withheld by applicable law and regulations. The salary
continuation payable as provided herein shall be in addition to any right of the
estate of the deceased Executive Employee to (a) participate in the Pool (in
accordance with Section 3.2 above) in the fiscal year in which such death
occurred and to receive a prorated amount for the portion of the fiscal year in
which Executive Employee was alive, provided, however, that the level of such
participation shall be subject to the discretion of Holding Board of Directors,
and (b) to participate in the Performance Share Program as set forth therein.
Upon the death of the Executive Employee, the restrictions on all Class C Shares
shall lapse and such Class C Shares shall be released to the estate of the
deceased Executive Employee. Glasstech shall also remit to the estate of the
deceased Executive Employee any other benefits earned and accrued or payable up
to the date of such death and shall reimburse to the estate of the deceased
Executive Employee any outstanding unreimbursed expenses incurred by such
Executive Employee on behalf of Glasstech and documented as provided herein.
In the event the deceased Executive Employee is not survived by a spouse
or in the further event the deceased Executive
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<PAGE> 13
Employee and his spouse are separated at the time of death by agreement, court
order or decree, or otherwise, then such salary continuation shall be remitted
to the estate of the deceased Executive Employee.
5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON
DISABILITY. In the event the Executive Employee becomes disabled during the Term
or any Renewal Term by virtue of ill health or other disability and is thereby
unable to perform on a full time basis substantially and continuously the duties
assigned to him by Glasstech, Glasstech agrees to continue the Executive
Employee's Base Salary until such time as Executive Employee is eligible to
collect benefits under Glasstech's long term disability insurance coverage. At
such time as Executive Employee is eligible to collect benefits under
Glasstech's long term disability insurance coverage (a "Disability"), Glasstech
shall have no further obligation to compensate the Executive Employee (except
that Glasstech shall continue to provide group life and health benefits to
Executive Employee consistent with those provided to other executive employees
for a period of two (2) years from the date on which Executive Employee's long
term disability benefits commence) and further Glasstech shall have the right to
terminate the employment of the Executive Employee hereunder upon written notice
delivered pursuant to Section 13. In the event of such Disability, the
restrictions on all Class C Shares shall lapse and such Class C Shares shall be
released to the Executive Employee. Executive Employee shall participate in the
Performance Share Program as set forth therein.
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<PAGE> 14
6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION.
------------------------------------------------
(a) Notwithstanding any other provision of this Employment Agreement,
Glasstech may terminate the Executive Employee's employment at any time for
Cause (as hereinafter defined) and the Executive Employee may voluntarily
terminate the Executive Employee's employment with Glasstech. Upon such
termination for Cause or upon Executive Employee's voluntary termination,
Executive Employee shall not participate in the Performance Bonus (pursuant to
Section 3.2) for the fiscal year in which his termination occurred, and
Executive Employee shall automatically forfeit those shares of Restricted Stock
for which the restrictions would have lapsed (pursuant to Section 3.3) in the
contract year in which his termination occurred and any subsequent year and
shall participate in the Performance Share Program as set forth therein. Upon
such termination for Cause or upon Executive Employee's voluntary termination,
the Executive Employee shall be entitled to, except as restricted in the
preceding sentence, receive any salary and other benefits earned or accrued, and
reimbursement for expenses incurred, prior to the date of termination.
(b) "Cause" shall mean (i) the Executive Employee's willful and
continuing affirmative refusal to perform his or her duties hereunder (other
than as a result of a Disability); (ii) dishonesty in the performance of his or
her duties hereunder which results in criminal indictment of the Executive
Employee; (iii) the Executive Employee's breach of any material term of this
Employment Agreement (provided that Glasstech shall give the Executive Employee
written notice of such breach and a thirty (30) day period
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<PAGE> 15
after notice to cure such breach, except that no notice or cure period shall be
given or extended with respect to breach of the provisions of Section 8 of this
Employment Agreement); or (iv) the Executive Employee's conviction for a felony
or for a crime which, in the reasonable judgment of Glasstech, renders the
Executive Employee unable to perform his duties as described in this Employment
Agreement.
7. TERMINATION WITHOUT CAUSE. If the Executive Employee is
terminated prior to the end of the Term or any Renewal Term other than pursuant
to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a
termination "Without Cause"), the Executive Employee shall be entitled to (in
addition to such other rights as he may have, or damages to which he may be
entitled at law or in equity) (i) all payments when due of any salary and other
benefits (including, without limitation, participation in the Performance Bonus
pursuant to Section 3.2) accrued through the date of termination, including the
payment of all salary due for the remainder of the Term or Renewal Term as
though the Executive Employee had remained employed through the full Term (or,
if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions
on all Class C Shares shall lapse and such Class C Shares shall be released to
the Executive Employee, and (iii) participation in the Performance Share Program
as set forth therein.
8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges
that (i) the principal business of Glasstech is design, manufacture, marketing,
sale, distribution and servicing of glass bending, tempering and annealing
equipment worldwide to
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<PAGE> 16
both automotive glass fabricators and architectural glass producers and the
principal business of Stir-Melter, Inc. is the vitrification of hazardous waste
(collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited
number of persons throughout the world which has developed such business; (iii)
the Glasstech Business is, in large part, international in scope and Glasstech's
customers, potential customers and competitors are located throughout the world;
(iv) the Executive Employee's work for Glasstech has given and will continue to
give him access to the confidential affairs and proprietary information of
Glasstech; (v) this Employment Agreement has been entered into as part of a
series of transactions pursuant to which Executive Employee and others have
purchased an equity interest in Glasstech and sold their equity interest in
Glasstech; and (vi) Glasstech would not have entered into this Employment
Agreement but for the agreements and covenants of the Executive Employee
contained in this Section 8. Accordingly, the Executive Employee covenants and
agrees that:
(a) he shall not, anywhere in the world directly or indirectly,
(1) engage in Glasstech Business for his own account or that of any other
person; (2) render any services related to the Glasstech Business to any person
(other than Glasstech) engaged in such activities; or (3) become interested in
any such person (other than Glasstech) as a partner, stockholder, member,
principal, agent, trustee, consultant or in any other relationship or capacity
for a period commencing on the date of this Employment Agreement and terminating
on the day which is: (i) the later of (A) five (5) years following the date
hereof, or (B) two (2) years following the termination of the Executive
Employee's employment pursuant to a
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<PAGE> 17
Renewal Termination Notice if given by Executive Employee, or (ii) if the
Executive Employee's employment has been terminated for Cause, then two (2)
years following termination of Executive Employee's employment; (collectively
the "Restricted Period") provided, however, that there shall be no Restricted
Period if Executive Employee's employment is terminated Without Cause or if
Glasstech delivers a Renewal Termination Notice to Executive Employee.
Notwithstanding the above, the Executive Employee may own, directly or
indirectly, solely as an investment, securities of any such person which are
traded on any national securities exchange or NASDAQ if the Executive Employee
is not a controlling person of, or a member of a group which controls such
person and does not, directly or indirectly, own one percent (1%) or more of
any class of securities of such person.
(b) at all times during and after this Employment Agreement is
in force he shall keep secret and retain in strictest confidence, and shall not
use for his benefit or the benefit of others, except in connection with the
business and affairs of Glasstech and its affiliates, all confidential matters
relating to Glasstech Business and to Glasstech and its affiliates learned by
the Executive Employee heretofore or hereafter directly or indirectly from
Glasstech or its affiliates or any of their predecessors or successors (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone outside of Glasstech and its affiliates except
with Glasstech's express written consent. The requirements of this Section 8(b)
shall not apply to Confidential Company Information which is: (1) at the time of
receipt or thereafter publicly known
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<PAGE> 18
through no wrongful act of the Executive Employee: (2) received from a third
party not under any obligation to keep such information confidential; or (3)
required to be disclosed by law.
(c) during the Restricted Period, he shall not, without
Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit
employees of Glasstech or its affiliates to leave the employ of Glasstech or any
of its affiliates or (ii) hire any employee who has left the employ of Glasstech
or any of its affiliates within one year of the termination of such employee's
employment with Glasstech or any of its affiliates.
(d) at any time upon written request from Glasstech, he shall
deliver to Glasstech all memoranda, notes, lists, records and other documents
(and all copies thereof) made or compiled by the Executive Employee or made
available to him concerning Glasstech Business or Glasstech or any of its
affiliates all of which shall at all times be the property of Glasstech.
9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee
breaches any of the provisions of Section 8 (the "Restrictive Covenants"),
Glasstech shall have the following rights and remedies (upon compliance with any
necessary prerequisites imposed by law upon the availability of such remedies),
each of which rights and remedies shall be independent of the other and
severally enforceable, and all of which rights and remedies shall be in addition
to, and not in lieu of, any other rights and remedies available to Glasstech
under law or in equity:
(a) The right to have the Restrictive Covenants specifically
enforced by any court having jurisdiction over the parties to this Employment
Agreement; and
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<PAGE> 19
(b) The right to entry of restraining orders and/or injunctions
(preliminary, mandatory, temporary and permanent) against the Executive Employee
against violations, threatened or actual, and whether or not then continuing, of
such covenants, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to Glasstech and that money
damages will not provide an adequate remedy to Glasstech; and
(c) The right and remedy to require the Executive Employee to
account for and pay over to Glasstech all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by him as the result of any transactions constituting a breach of the
Restrictive Covenants, and the Executive Employee shall account for and pay over
such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech
under this Section 9 against any amounts owed to the Executive Employee.
10. MEDIATION, ARBITRATION. Except for a dispute under Section 8
which shall be subject to the provisions of Section 9, neither party shall
institute an arbitration proceeding hereunder, before that party has sought to
resolve the dispute through direct negotiation with the other party. If the
dispute is not resolved within three weeks after a demand for direct
negotiation, the parties shall attempt to resolve the dispute through nonbinding
mediation. If the parties do not promptly agree on a mediator, then either party
may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New
York, New York, to initiate selection of a mediator from the CPR Panel of
Neutrals. The fees and expenses of the mediator shall be paid one-half each by
each
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<PAGE> 20
party. If the mediator is unable to facilitate a settlement of the dispute
within a reasonable period of time, as determined by the mediator, the mediator
shall issue a written statement to the parties to that effect and the aggrieved
party may then seek relief through arbitration, which shall be binding, before a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Association"). The place of arbitration shall be
Detroit, Michigan. Arbitration may be commenced at any time by any party hereto
after giving written notice in the manner described in Section 13 of this
Employment Agreement. The arbitrator shall be selected by the joint agreement of
each party, but if they do not so agree within twenty (20) days after the date
of the notice referred to above, the selection shall be made pursuant to the
rules from the panels of the arbitrators maintained by such Association. The
arbitrator shall render his decision within one hundred eighty (180) days of
appointment. Any award rendered by the arbitrator shall be conclusive and
binding upon the parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reasons for the
award. This provision for arbitration shall be specifically enforceable by the
parties and the decision of the arbitrator in accordance herewith shall be final
and binding and there shall be no right of appeal therefrom. Judgment upon the
award rendered by the arbitrator in accordance herewith shall be final and
binding and there shall be no right of appeal therefrom. Judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The costs and expenses of arbitration, including attorneys' fees and
expenses of the
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<PAGE> 21
arbitrator shall be paid entirely by the nonprevailing party and in addition the
nonprevailing party shall reimburse the other party for the fees and expenses of
mediation incurred by such party, unless the arbitrator determines that the
costs, expenses and attorneys' fees should be apportioned between the parties,
then as the arbitrator may assess. The arbitrator shall not be permitted to
award punitive or similar type damages under any circumstances. As set forth in
the first phrase of the first sentence of this section 10, this arbitration
provision shall constitute the sole and exclusive remedy for any dispute under
this Employment Agreement.
11. BLUE PENCILING. The Executive Employee acknowledges and agrees
that (i) he has had an opportunity to seek advice of counsel in connection with
this Employment Agreement and (ii) the Restrictive Covenants are reasonable in
geographical and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, whether because of the duration or geographical scope
of such provision, the duration or scope of such provision, as the case may be,
shall be reduced so that such provision becomes enforceable and. in its reduced
form, such provision shall then be enforceable and shall be enforced.
12. SEVERABILITY. If any court determines that any covenant or
provision of this Employment Agreement is unenforceable for any reason, the
remaining covenants or provisions shall remain in full force and effect.
13. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be (a)
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<PAGE> 22
delivered personally, (b) sent by facsimile transmission, (c) sent by certified
or registered mail, postage prepaid, return receipt requested, or (d) sent by
overnight delivery service, to the following addresses:
(i) if to Glasstech, to:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: Mark Christman, President
Fax: (419) 661-9366
and
Kenneth H. Wetmore, Esquire
Vice President, General Counsel and Secretary
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Fax: (419) 661-9616
and
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Attention: David P. Given
(ii) if to the Executive Employee, to:
James P. Schnabel, Jr.
1915 Wexford Hill Lane
Holland, Ohio 43528
Any such notice shall be deemed given (a) when so delivered
personally, (b) if sent by certified or registered mail, return receipt
requested, on the date the return receipt is signed, or (c) if sent by overnight
delivery service. on the next normal business day after the date of sender
receipt.
Any such person may, by giving notice in accordance with this
section to the other parties hereto, designate another address or person for
receipt by such person of notices hereunder.
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<PAGE> 23
14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreement(s), written or oral
with respect thereto. This Employment Agreement will be effective upon the
consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated
June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger
Agreement is not consummated within the time set forth therein, this Employment
Agreement shall be null and void and of no further force and effect. The
Employment Agreement dated December 6, 1994 between Glasstech and the Executive
Employee is hereby terminated and is null and void and of no further force and
effect.
15. INDEMNIFICATION. During the Term or any Renewal Term hereof
and subject to the continuing compliance by the Executive Employee with his
obligations hereunder, Glasstech shall provide the Executive Employee with
indemnification against liabilities or claims arising by reason of the fact that
he is an employee. officer and/or director of Glasstech, and against expenses
incurred in connection therewith, to the fullest extent of indemnification then
available to any officer and/or director of Glasstech under and in accordance
with the laws of the State of Delaware. Also, Glasstech shall purchase and/or
maintain Directors' and Officers' insurance on or inuring to the Executive
Employee's benefit with respect to such liabilities, claims, or expenses as
described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co.
and Holding, dated June 5, 1997.
16. WAIVERS AND AMENDMENTS. This Employment Agreement may be
amended, superseded, canceled, renewed, or extended, and the
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<PAGE> 24
terms hereof may be waived, only by a written instrument signed by the parties
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power, or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power, or privilege, nor shall any single or partial exercise of
any such right, power, or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power, or privilege.
17. GOVERNING LAW. This Employment Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed within the State.
18. ASSIGNMENT. This Employment Agreement, and the Executive
Employee's rights and obligations hereunder, may not be assigned by either party
hereto without the consent of the other and any purported assignment by the
Executive Employee or Glasstech in violation hereof shall be null and void;
provided, however, that Glasstech may assign its rights and obligations
hereunder without the Executive Employee's consent in connection with a sale of
all or substantially all of Glasstech's assets.
19. BINDING EFFECT. This Employment Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors, and legal representatives.
20. COUNTERPARTS. This Employment Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all
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<PAGE> 25
such counterparts together shall constitute one and the same instrument. Each
counterpart may consist of two (2) copies hereof each signed by one of the
parties hereto.
21. HEADING. The headings in this Employment Agreement are for
reference only and shall not affect the interpretation of this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed. or caused to
be executed, this Employment Agreement as of the day and year first above
written.
GLASSTECH HOLDING CO.
By: /s/ Mark D. Christman
---------------------------
Its: President
--------------------------
GLASSTECH, INC.
By: /s/ Mark D. Christman
---------------------------
Its: President
--------------------------
EXECUTIVE EMPLOYEE
/s/ James P. Schnabel, Jr.
-------------------------------
James P. Schnabel, Jr.
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<PAGE> 1
Exhibit 10.11
EMPLOYMENT AGREEMENT
OF
DIANE S. TYMIAK
WITH
GLASSTECH, INC.
This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and
among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING
CO., a Delaware corporation with its principal place of business at Ampoint
Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and DIANE
S. TYMIAK (SSN ###-##-####), an individual residing at 7850 Finzel Road,
Whitehouse, Ohio 43571 (the "Executive Employee").
BACKGROUND
----------
This Employment Agreement covers the employment of the Executive
Employee by Glasstech.
Now therefore, Glasstech and the Executive Employee, in consideration of
the mutual promises herein contained and intending to be legally bound hereby,
agree as follows:
1. TERM. Glasstech hereby employs the Executive Employee as Vice
President & Chief Financial Officer, and the Executive Employee hereby accepts
such employment, from the date of this Employment Agreement to June 30, 2002
unless sooner terminated in accordance with the provisions of Sections 4, 5, 6
or 7 hereof (the "Term"). At the expiration of the Term and each annual
anniversary thereafter, this Employment Agreement shall automatically renew for
an additional one (1) year period (the "Renewal Term" or the "Renewal Terms")
unless either party notifies
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<PAGE> 2
the other party in writing of its or her intention
not to renew the Employment Agreement (the "Renewal Termination Notice") not
less than six (6) months prior to the expiration of the last year of the Term or
of any Renewal Term. The provisions of Sections 8, 9, 10, 11 and 12 hereof shall
survive any termination of this Employment Agreement.
2. DUTIES. The Executive Employee, in her capacity as Vice President &
Chief Financial Officer of Glasstech (or such other and comparable titles and
positions as shall be given the Executive Employee by Holding Board of
Directors), shall perform for Glasstech the services currently performed by her
for Glasstech (or comparable services or other reasonable duties as she and
Glasstech may agree upon), subject to the reasonable direction of Holding's
Board of Directors. The Executive Employee shall perform such services in Wood
County, Ohio, or at such other location or locations where she may be assigned
by Glasstech from time to time, provided, however, that the Executive Employee
shall not be required, in connection with her performance of such services, to
travel on behalf of Glasstech in a manner inconsistent with the scope of her
duties and the past practices of Glasstech. The Executive Employee shall devote
her business time and effort to the Employment Agreement performance of her
duties as described herein as reasonably required. It is understood that the
Executive Employee may attend to outside investments, serve as a director and/or
officer of a non-competing company and serve as an officer, director, or
participant in educational, welfare, social, religious, and civic organizations
so long as such activities do
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<PAGE> 3
not materially interfere with the Executive Employee's employment hereunder.
3. COMPENSATION.
------------
3.1 BASE SALARY. Glasstech shall pay the Executive Employee during
each calendar year of the Term and each Renewal Term hereunder, a minimum salary
of One Hundred Thirty-Eight Thousand Four Hundred Fifty-Two Dollars ($138,452)
per calendar year adjusted as provided in Section 3.5 (hereinafter referred to
as the "Base Salary"). The Base Salary shall be payable in equal bi-weekly
installments, less such deductions as shall be required to be withheld by
applicable law and regulations.
3.2 PERFORMANCE BONUS.
-----------------
Executive Employee shall participate in Glasstech's cash
performance bonus pool (the "Pool"). At the end of each fiscal year (commencing
with the fiscal year ending June 30, 1998), Holding's Board of Directors will
establish the Pool which, at a minimum, shall be calculated according to the
following bonus chart (the "Bonus Chart"):
<TABLE>
<CAPTION>
Percentage of Total
Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool
- ---------------------------- ------------------ ----------
<C> <C> <C>
$14,000,000 to $14,999,999 5.0% $700,000 to $750,000
$15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000
$16,000,000 and Above 10.0 $1,600,000 and Above
</TABLE>
For purposes of this Section, EBITDA shall be subject to the following
adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses
paid to middle managers other than executive managers; and (Z) EBITDA shall be
increased in the amount
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<PAGE> 4
of any advisory fees paid to Key Equity Capital Corporation or its affiliates.
Notwithstanding the foregoing, in the event Glasstech's EBITDA for any
fiscal year after the year ending June 30, 1998 (the "Base Year") is less than
$16,000,000 (the "Target"), the Board of Directors shall calculate the average
EBITDA of Glasstech from the Base Year through and including the fiscal year in
which the Target was not achieved. Using the Bonus Chart above, the Board of
Directors shall pay the participants (including but not limited to the Executive
Employee) the greater of (i) the amount of the Pool using the actual EBITDA for
such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart
based upon the average EBITDA multiplied by the actual EBITDA for such fiscal
year.
If the Pool is not ten (10%) percent of the EBITDA in any fiscal year
during the Term of this Employment Agreement, such as in year 2001 in the
example below, the Board of Directors shall, in each succeeding fiscal year
during the Term of this Employment Agreement, calculate the average EBITDA of
Glasstech from the Base Year through and including such succeeding fiscal year.
If the average EBITDA is greater than the actual EBITDA for any prior fiscal
year (or the average EBITDA used in a prior fiscal year), then the Board of
Directors, using the Bonus Chart, shall pay the participants (including but not
limited to the Executive Employee) an amount equal to (i) an amount equal to the
percentage in the Bonus Chart based upon the average EBITDA calculated in such
succeeding fiscal year, multiplied by the actual EBITDA for such fiscal year
less (ii) the amount of the Pool actually distributed to participants in such
prior fiscal year.
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<PAGE> 5
EXAMPLE:
- --------
<TABLE>
<CAPTION>
Fiscal Year Percentage of Total Bonus
Year EBITDA Fiscal Year EBITDA Pool
- ---- ------ ------------------ ----
<C> <C> <C> <C>
1998 $18,000,000 10% $1,800,000
1999 $20,000,000 10% $2,000,000
2000 $13,000,0001 10% $1,300,000
2001 $12,000,0002 7.5% $ 900,000
2002 $20,000,000 10% $2,000,000
$ 300,0003
-----------
$2,300,000
</TABLE>
Not later than 10 business days after delivery to Glasstech of its
fiscal year audit at the end of each fiscal year commencing with the fiscal year
ending June 30, 1998, the Board of Directors of Holding, in consultation with
the President and Chief Executive Officer, shall distribute the Pool to the
participants therein (including but not limited to the Executive Employee) in
such percentages as the Board of Directors determines appropriate; provided,
that, in no event shall the Board of Directors distribute less than the entire
Pool as calculated above in any fiscal year commencing with the fiscal year
ending June 30, 1998.
- --------------------
1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 +
$20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon
10% of EBITDA for that year.
2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 +
$20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is
calculated based upon 7.5% of EBITDA for that year.
3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000 +
20,000,000 + 13,000,000 + 12,000,000 + 20,000,000 / 5). Therefore, the Pool
for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal
year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal
year 2001 ($900,000).
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<PAGE> 6
3.3 RESTRICTED STOCK PROGRAM.
-------------------------
(a) Holding hereby awards to Executive Employee 100.02 shares of
restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"),
which shall be subject to forfeiture in accordance with the provisions set forth
herein. On each of the first four anniversary dates of this Employment
Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long
as her employment has not been terminated on or before such date pursuant to the
provisions of Section 6 of this Employment Agreement. Subject to the forfeiture
provisions set forth herein, Executive Employee shall be entitled to full and
complete ownership of the Class C Shares and will be treated as the record and
beneficial owner of such for all purposes including, but not limited to, payment
of dividends and liquidation rights, provided that Executive Employee shall be
bound by all of the provisions of the Stockholders' Agreement of even date
herewith, among the Company, Executive Employee and the other stockholders of
the Company (the "Stockholders' Agreement).
(b) The certificates representing awarded Class C Shares shall not
be delivered to Executive Employee until the restrictions as to such Class C
Shares have lapsed. If Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a), Executive Employee shall forfeit to Holding
all such Class C Shares for which the restrictions have not yet lapsed. In this
regard, simultaneously with the issuance of certificates representing awarded
Class C Shares, Executive Employee shall execute and deliver stock powers
forfeiting to
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<PAGE> 7
Holding Class C Shares awarded hereunder for which the restrictions have not yet
lapsed in the event Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a). Executive Employee acknowledges that Class
C Shares awarded hereunder shall be subject to the restrictions and risks of
forfeiture contained herein and in the Stockholders' Agreement.
(c) Subject to Section 3.3(h), Executive Employee hereby agrees
that she shall pay to Holding, in cash, any foreign, United States federal,
state or local taxes of any kind required by law to be withheld with respect to
the Class C Shares awarded to her hereunder. If Executive Employee does not make
such payment to Holding, then Holding shall have the right to deduct from any
payment of any kind otherwise due to Executive Employee from Holding (or from
any subsidiary of Holding), any foreign, United States federal, state or local
taxes of any kind required by law to be withheld with respect to the Class C
Shares awarded to Executive Employee hereunder.
(d) Holding shall not issue Preferred Stock, Options or Warrants or
any otherwise dilutive securities without the consent of the representative(s)
of Key Equity Capital Corporation and the representative(s) of executive
management on the Board of Directors and unless such securities are sold for
fair market value, the proceeds of which are used for appropriate corporate
purposes as determined by the Board of Directors. All shareholders of Class A,
Class B or Class C Common Stock have the pre-emptive rights described in the
Stockholders' Agreement.
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<PAGE> 8
(e) "Change of Control" shall mean any one of the following events:
(i) the transfer, sale or other disposition of the Common Stock of Holding which
results in the current stockholders of Holding (determined as of the date
hereof) owning in the aggregate less than a majority of the outstanding voting
capital stock of Holding; (ii) any consolidation of Holding with, or merger of
Holding into, any other entity, any merger of another entity into Holding, or
any sale or transfer (in any one transaction or a series of transactions) of all
or substantially all of the assets of Holding to another entity (other than (x)
a merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock, (y) a merger which is
effected solely to change the jurisdiction of incorporation of Holding or (z)
any consolidation with or merger of Holding into a wholly owned subsidiary of
Holding, or any sale or transfer by Holding of all or substantially all of its
assets to one or more of its wholly owned subsidiaries in any one transaction or
a series of transactions). Notwithstanding the foregoing, a "Change in Control"
shall not include any transaction permitted under Section 2.2(b) of the
Stockholders' Agreement. Notwithstanding anything to the contrary in this
Employment Agreement, so long as Executive Employee's employment has not been
terminated pursuant to the provisions of Section 6 before the date of a Change
of Control, the restrictions with respect to all of the Class C Shares shall
immediately lapse upon a Change of Control.
(f) Executive Employee understands that the Class C Shares have not
been registered under the Securities Act of 1993, as amended (the "1933 Act") or
any state securities laws.
-8-
<PAGE> 9
Executive Employee represents that the Class C Shares awarded hereunder are not
being acquired by Executive Employee with a view toward resale or distribution
and Executive Employee will not sell or otherwise transfer such Class C Shares
except in compliance with the 1933 Act. The certificates representing the Class
C Shares shall bear such legends and statements evidencing the restrictions
contained in this Employment Agreement and as the Board of Directors of Holding
shall deem advisable to assure compliance with federal and state securities laws
and regulations.
(g) The award of the Class C Shares to Executive Employee hereunder
shall not confer any right to Executive Employee to continue in the employ of
Glasstech or any of its subsidiaries and shall not restrict or interfere in any
way with the right of Glasstech to terminate her employment with or without
cause, at any time.
(h) Executive Employee may file an "83(b) election" with the
Internal Revenue Service with respect to the Class C Shares. If Executive
Employee does file such an 83(b) election, Holding shall loan Executive Employee
an amount equal to 80% of Executive Employee's tax liability resulting from such
83(b) election (the "Loan Amount") subject to the following terms: (i) Executive
Employee shall execute and deliver to Holding a Promissory Note in the form of
EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the
principal amount of the Class C Note shall be equal to the Loan Amount and shall
accrue interest at the annual applicable federal rate for mid-term obligations
as of the month in which the Class C Note is issued; and (iii) the Executive
Employee shall execute and deliver to
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<PAGE> 10
Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a
part hereof with respect to all shares of Class A Voting Common Stock of Holding
and all Class C Shares held by Executive Employee.
3.4 CLASS D SHARES. Executive Employee shall also be issued 700
shares of Class D Non-voting Common Stock of Holding issued pursuant to Schedule
II of the Stockholders' Agreement (the "Performance Share Program") and subject
to the terms and conditions of Section 9 of the Stockholders' Agreement.
3.5 COST OF LIVING INCREASE. The Base Salary provided for in
Section 3.1 hereof shall be adjusted annually to reflect the increase, if any,
in the cost of living by adding to the Base Salary an amount obtained by
multiplying the Base Salary by the percentage by which the level of the Consumer
Price Index North Central Region (for all items for urban wage earners and
clerical workers as reported for December 31 of each calendar period by the
Bureau of Labor Statistics of the United States Department of Labor) has
increased over its level as of January I of the same calendar year.
3.6 BENEFITS. The Executive Employee shall be entitled during the
Term and during any Renewal Terms to participate in such group life,
hospitalization and/or disability insurance benefits, health programs, qualified
or non-qualified deferred compensation plans or similar benefits which are
comparable to those made available by Glasstech on the date of this Employment
Agreement or thereafter to its executive employees generally, subject to the
eligibility provisions of such plans.
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<PAGE> 11
3.7 VACATIONS. The Executive Employee shall be entitled to
vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE
HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which
relating to vacation and personal leave are hereby incorporated into this
Employment Agreement by reference.
3.8 INSURANCE. Glasstech agrees to pay life insurance and/or
annuity premiums on a policy(ies) selected by and insuring the life of the
Executive Employee with a beneficiary(ies) to be named by the Executive
Employee. The parties hereto agree that Glasstech shall not be obligated to pay
any premium greater than Five Thousand Dollars ($5,000) during the first year of
the Term and such amount shall be increased by Five Hundred Dollars ($500) each
year thereafter during the Term or during any of the Renewal Terms. The parties
further agree that the Executive Employee shall be permitted from time to time,
during the Term, or any Renewal Terms, to maintain such policy(ies), or to
exchange such policy(ies), or to acquire any new life insurance and/or annuity
products, provided however, that the portion of the premiums and costs to be
paid by Glasstech in connection with such policy(ies) shall not exceed the
amounts specified above. Glasstech expressly acknowledges that it shall have no
right, title or interest in and to such policy(ies), the same being the
exclusive property of the Executive Employee.
3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the
Executive Employee for all reasonable expenses actually incurred or paid by the
Executive Employee during the Term or any Renewal Term in performance of the
Executive Employee's
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<PAGE> 12
services under this Employment Agreement, subject to receipt by Glasstech of
reasonable supporting documentation.
4. TERMINATION UPON DEATH. In the event the Executive Employee dies
during the Term or any Renewal Term, for a period of six (6) months following
such death Glasstech agrees to continue to pay to the surviving spouse of the
Executive Employee the Base Salary rate of the deceased Executive Employee in
effect at the time of death in equal bi-weekly installments less such deductions
required to be withheld by applicable law and regulations. The salary
continuation payable as provided herein shall be in addition to any right of the
estate of the deceased Executive Employee to (a) participate in the Pool (in
accordance with Section 3.2 above) in the fiscal year in which such death
occurred and to receive a prorated amount for the portion of the fiscal year in
which Executive Employee was alive, provided, however, that the level of such
participation shall be subject to the discretion of Holding Board of Directors,
and (b) to participate in the Performance Share Program as set forth therein.
Upon the death of the Executive Employee, the restrictions on all Class C Shares
shall lapse and such Class C Shares shall be released to the estate of the
deceased Executive Employee. Glasstech shall also remit to the estate of the
deceased Executive Employee any other benefits earned and accrued or payable up
to the date of such death and shall reimburse to the estate of the deceased
Executive Employee any outstanding unreimbursed expenses incurred by such
Executive Employee on behalf of Glasstech and documented as provided herein.
In the event the deceased Executive Employee is not survived by a spouse
or in the further event the deceased Executive
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Employee and her spouse are separated at the time of death by agreement, court
order or decree, or otherwise, then such salary continuation shall be remitted
to the estate of the deceased Executive Employee.
5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON DISABILITY.
In the event the Executive Employee becomes disabled during the Term or any
Renewal Term by virtue of ill health or other disability and is thereby unable
to perform on a full time basis substantially and continuously the duties
assigned to her by Glasstech, Glasstech agrees to continue the Executive
Employee's Base Salary until such time as Executive Employee is eligible to
collect benefits under Glasstech's long term disability insurance coverage. At
such time as Executive Employee is eligible to collect benefits under
Glasstech's long term disability insurance coverage (a "Disability"), Glasstech
shall have no further obligation to compensate the Executive Employee (except
that Glasstech shall continue to provide group life and health benefits to
Executive Employee consistent with those provided to other executive employees
for a period of two (2) years from the date on which Executive Employee's long
term disability benefits commence) and further Glasstech shall have the right to
terminate the employment of the Executive Employee hereunder upon written notice
delivered pursuant to Section 13. In the event of such Disability, the
restrictions on all Class C Shares shall lapse and such Class C Shares shall be
released to the Executive Employee. Executive Employee shall participate in the
Performance Share Program as set forth therein.
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<PAGE> 14
6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION.
(a) Notwithstanding any other provision of this Employment Agreement,
Glasstech may terminate the Executive Employee's employment at any time for
Cause (as hereinafter defined) and the Executive Employee may voluntarily
terminate the Executive Employee's employment with Glasstech. Upon such
termination for Cause or upon Executive Employee's voluntary termination,
Executive Employee shall not participate in the Performance Bonus (pursuant to
Section 3.2) for the fiscal year in which her termination occurred, and
Executive Employee shall automatically forfeit those shares of Restricted Stock
for which the restrictions would have lapsed (pursuant to Section 3.3) in the
contract year in which her termination occurred and any subsequent year and
shall participate in the Performance Share Program as set forth therein. Upon
such termination for Cause or upon Executive Employee's voluntary termination,
the Executive Employee shall be entitled to, except as restricted in the
preceding sentence, receive any salary and other benefits earned or accrued, and
reimbursement for expenses incurred, prior to the date of termination.
(b) "Cause" shall mean (i) the Executive Employee's willful and
continuing affirmative refusal to perform his or her duties hereunder (other
than as a result of a Disability); (ii) dishonesty in the performance of his or
her duties hereunder which results in criminal indictment of the Executive
Employee; (iii) the Executive Employee's breach of any material term of this
Employment Agreement (provided that Glasstech shall give the Executive Employee
written notice of such breach and a thirty (30) day period
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<PAGE> 15
after notice to cure such breach, except that no notice or cure period shall be
given or extended with respect to breach of the provisions of Section 8 of this
Employment Agreement); or (iv) the Executive Employee's conviction for a felony
or for a crime which, in the reasonable judgment of Glasstech, renders the
Executive Employee unable to perform her duties as described in this Employment
Agreement.
7. TERMINATION WITHOUT CAUSE. If the Executive Employee is terminated
prior to the end of the Term or any Renewal Term other than pursuant to Section
4, Section 5, or Section 6 hereof (hereinafter referred to as a termination
"Without Cause"), the Executive Employee shall be entitled to (in addition to
such other rights as she may have, or damages to which she may be entitled at
law or in equity) (i) all payments when due of any salary and other benefits
(including, without limitation, participation in the Performance Bonus pursuant
to Section 3.2) accrued through the date of termination, including the payment
of all salary due for the remainder of the Term or Renewal Term as though the
Executive Employee had remained employed through the full Term (or, if renewed,
the Renewal Term) of the Employment Agreement, (ii) the restrictions on all
Class C Shares shall lapse and such Class C Shares shall be released to the
Executive Employee, and (iii) participation in the Performance Share Program as
set forth therein.
8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges
that (i) the principal business of Glasstech is design, manufacture, marketing,
sale, distribution and servicing of glass bending, tempering and annealing
equipment worldwide to
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<PAGE> 16
both automotive glass fabricators and architectural glass producers and the
principal business of Stir-Melter, Inc. is the vitrification of hazardous waste
(collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited
number of persons throughout the world which has developed such business; (iii)
the Glasstech Business is, in large part, international in scope and Glasstech's
customers, potential customers and competitors are located throughout the world;
(iv) the Executive Employee's work for Glasstech has given and will continue to
give her access to the confidential affairs and proprietary information of
Glasstech; (v) this Employment Agreement has been entered into as part of a
series of transactions pursuant to which Executive Employee and others have
purchased an equity interest in Glasstech and sold their equity interest in
Glasstech; and (vi) Glasstech would not have entered into this Employment
Agreement but for the agreements and covenants of the Executive Employee
contained in this Section 8. Accordingly, the Executive Employee covenants and
agrees that:
(a) he shall not, anywhere in the world directly or indirectly, (1)
engage in Glasstech Business for her own account or that of any other person;
(2) render any services related to the Glasstech Business to any person (other
than Glasstech) engaged in such activities; or (3) become interested in any such
person (other than Glasstech) as a partner, stockholder, member, principal,
agent, trustee, consultant or in any other relationship or capacity for a period
commencing on the date of this Employment Agreement and terminating on the day
which is: (i) the later of (A) five (5) years following the date hereof, or (B)
two (2) years following the termination of the Executive Employee's employment
pursuant to a
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<PAGE> 17
Renewal Termination Notice if given by Executive Employee, or (ii) if the
Executive Employee's employment has been terminated for Cause, then two (2)
years following termination of Executive Employee's employment; (collectively
the "Restricted Period") provided, however, that there shall be no Restricted
Period if Executive Employee's employment is terminated Without Cause or if
Glasstech delivers a Renewal Termination Notice to Executive Employee.
Notwithstanding the above, the Executive Employee may own, directly or
indirectly, solely as an investment, securities of any such person which are
traded on any national securities exchange or NASDAQ if the Executive Employee
is not a controlling person of, or a member of a group which controls such
person and does not, directly or indirectly, own one percent (1%) or more of any
class of securities of such person.
(b) at all times during and after this Employment Agreement is in
force she shall keep secret and retain in strictest confidence, and shall not
use for her benefit or the benefit of others, except in connection with the
business and affairs of Glasstech and its affiliates, all confidential matters
relating to Glasstech Business and to Glasstech and its affiliates learned by
the Executive Employee heretofore or hereafter directly or indirectly from
Glasstech or its affiliates or any of their predecessors or successors (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone outside of Glasstech and its affiliates except
with Glasstech's express written consent. The requirements of this Section 8(b)
shall not apply to Confidential Company Information which is: (1) at the time of
receipt or thereafter publicly known
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<PAGE> 18
through no wrongful act of the Executive Employee: (2) received from a third
party not under any obligation to keep such information confidential; or (3)
required to be disclosed by law.
(c) during the Restricted Period, she shall not, without
Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit
employees of Glasstech or its affiliates to leave the employ of Glasstech or any
of its affiliates or (ii) hire any employee who has left the employ of Glasstech
or any of its affiliates within one year of the termination of such employee's
employment with Glasstech or any of its affiliates.
(d) at any time upon written request from Glasstech, she shall
deliver to Glasstech all memoranda, notes, lists, records and other documents
(and all copies thereof) made or compiled by the Executive Employee or made
available to her concerning Glasstech Business or Glasstech or any of its
affiliates all of which shall at all times be the property of Glasstech.
9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee breaches
any of the provisions of Section 8 (the "Restrictive Covenants"), Glasstech
shall have the following rights and remedies (upon compliance with any necessary
prerequisites imposed by law upon the availability of such remedies), each of
which rights and remedies shall be independent of the other and severally
enforceable, and all of which rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to Glasstech under law
or in equity:
(a) The right to have the Restrictive Covenants specifically
enforced by any court having jurisdiction over the parties to this Employment
Agreement; and
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<PAGE> 19
(b) The right to entry of restraining orders and/or injunctions
(preliminary, mandatory, temporary and permanent) against the Executive Employee
against violations, threatened or actual, and whether or not then continuing, of
such covenants, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to Glasstech and that money
damages will not provide an adequate remedy to Glasstech; and
(c) The right and remedy to require the Executive Employee to
account for and pay over to Glasstech all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by her as the result of any transactions constituting a breach of the
Restrictive Covenants, and the Executive Employee shall account for and pay over
such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech
under this Section 9 against any amounts owed to the Executive Employee.
10. MEDIATION, ARBITRATION. Except for a dispute under Section 8 which
shall be subject to the provisions of Section 9, neither party shall institute
an arbitration proceeding hereunder, before that party has sought to resolve the
dispute through direct negotiation with the other party. If the dispute is not
resolved within three weeks after a demand for direct negotiation, the parties
shall attempt to resolve the dispute through nonbinding mediation. If the
parties do not promptly agree on a mediator, then either party may notify the
CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, New York, to
initiate selection of a mediator from the CPR Panel of Neutrals. The fees and
expenses of the mediator shall be paid one-half each by each
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<PAGE> 20
party. If the mediator is unable to facilitate a settlement of the dispute
within a reasonable period of time, as determined by the mediator, the mediator
shall issue a written statement to the parties to that effect and the aggrieved
party may then seek relief through arbitration, which shall be binding, before
a single arbitrator pursuant to the Commercial Arbitration Rules of the
American Arbitration Association (the "Association"). The place of arbitration
shall be Detroit, Michigan. Arbitration may be commenced at any time by any
party hereto after giving written notice in the manner described in Section 13
of this Employment Agreement. The arbitrator shall be selected by the joint
agreement of each party, but if they do not so agree within twenty (20) days
after the date of the notice referred to above, the selection shall be made
pursuant to the rules from the panels of the arbitrators maintained by such
Association. The arbitrator shall render her decision within one hundred eighty
(180) days of appointment. Any award rendered by the arbitrator shall be
conclusive and binding upon the parties hereto; provided, however, that any
such award shall be accompanied by a written opinion of the arbitrator giving
the reasons for the award. This provision for arbitration shall be specifically
enforceable by the parties and the decision of the arbitrator in accordance
herewith shall be final and binding and there shall be no right of appeal
therefrom. Judgment upon the award rendered by the arbitrator in accordance
herewith shall be final and binding and there shall be no right of appeal
therefrom. Judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction thereof. The costs and expenses of arbitration,
including attorneys' fees and expenses of the
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arbitrator shall be paid entirely by the nonprevailing party and in addition the
nonprevailing party shall reimburse the other party for the fees and expenses of
mediation incurred by such party, unless the arbitrator determines that the
costs, expenses and attorneys' fees should be apportioned between the parties,
then as the arbitrator may assess. The arbitrator shall not be permitted to
award punitive or similar type damages under any circumstances. As set forth in
the first phrase of the first sentence of this section 10, this arbitration
provision shall constitute the sole and exclusive remedy for any dispute under
this Employment Agreement.
11. BLUE PENCILING. The Executive Employee acknowledges and agrees that
(i) she has had an opportunity to seek advice of counsel in connection with this
Employment Agreement and (ii) the Restrictive Covenants are reasonable in
geographical and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, whether because of the duration or geographical scope
of such provision, the duration or scope of such provision, as the case may be,
shall be reduced so that such provision becomes enforceable and. in its reduced
form, such provision shall then be enforceable and shall be enforced.
12. SEVERABILITY. If any court determines that any covenant or provision
of this Employment Agreement is unenforceable for any reason, the remaining
covenants or provisions shall remain in full force and effect.
13. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be (a)
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delivered personally, (b) sent by facsimile transmission, (c) sent by certified
or registered mail, postage prepaid, return receipt requested, or (d) sent by
overnight delivery service, to the following addresses:
(i) if to Glasstech, to:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: Mark Christman, President
Fax: (419) 661-9366
and
Kenneth H. Wetmore, Esquire
Vice President, General Counsel and Secretary
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Fax: (419) 661-9616
and
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Attention: David P. Given
(ii) if to the Executive Employee, to:
Diane S. Tymiak
7850 Finzel Road
Whitehouse, Ohio 43571
Any such notice shall be deemed given (a) when so delivered personally,
(b) if sent by certified or registered mail, return receipt requested, on the
date the return receipt is signed, or (c) if sent by overnight delivery service.
on the next normal business day after the date of sender receipt.
Any such person may, by giving notice in accordance with this section to
the other parties hereto, designate another address or person for receipt by
such person of notices hereunder.
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14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreement(s), written or oral
with respect thereto. This Employment Agreement will be effective upon the
consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated
June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger
Agreement is not consummated within the time set forth therein, this Employment
Agreement shall be null and void and of no further force and effect. The
Employment Agreement dated December 6, 1994 between Glasstech and the Executive
Employee is hereby terminated and is null and void and of no further force and
effect.
15. INDEMNIFICATION. During the Term or any Renewal Term hereof and
subject to the continuing compliance by the Executive Employee with her
obligations hereunder, Glasstech shall provide the Executive Employee with
indemnification against liabilities or claims arising by reason of the fact that
she is an employee. officer and/or director of Glasstech, and against expenses
incurred in connection therewith, to the fullest extent of indemnification then
available to any officer and/or director of Glasstech under and in accordance
with the laws of the State of Delaware. Also, Glasstech shall purchase and/or
maintain Directors' and Officers' insurance on or inuring to the Executive
Employee's benefit with respect to such liabilities, claims, or expenses as
described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co.
and Holding, dated June 5, 1997.
16. WAIVERS AND AMENDMENTS. This Employment Agreement may be amended,
superseded, canceled, renewed, or extended, and the
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terms hereof may be waived, only by a written instrument signed by the parties
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power, or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power, or privilege, nor shall any single or partial exercise of
any such right, power, or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power, or privilege.
17. GOVERNING LAW. This Employment Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed within the State.
18. ASSIGNMENT. This Employment Agreement, and the Executive
Employee's rights and obligations hereunder, may not be assigned by either party
hereto without the consent of the other and any purported assignment by the
Executive Employee or Glasstech in violation hereof shall be null and void;
provided, however, that Glasstech may assign its rights and obligations
hereunder without the Executive Employee's consent in connection with a sale of
all or substantially all of Glasstech's assets.
19. BINDING EFFECT. This Employment Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors, and legal representatives.
20. COUNTERPARTS. This Employment Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all
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<PAGE> 25
such counterparts together shall constitute one and the same instrument. Each
counterpart may consist of two (2) copies hereof each signed by one of the
parties hereto.
21. HEADING. The headings in this Employment Agreement are for
reference only and shall not affect the interpretation of this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed. or caused to be
executed, this Employment Agreement as of the day and year first above written.
GLASSTECH HOLDING CO.
By: /s/ Mark D. Christman
---------------------------
Its: President
--------------------------
GLASSTECH, INC.
By: /s/ Mark D. Christman
---------------------------
Its: President
--------------------------
EXECUTIVE EMPLOYEE
Diane S. Tymiak
-------------------------------
Diane S. Tymiak
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<PAGE> 1
Exhibit 10.12
EMPLOYMENT AGREEMENT
OF
KENNETH H. WETMORE
WITH
GLASSTECH, INC.
This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made
by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH
HOLDING CO., a Delaware corporation with its principal place of business at
Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding")
and KENNETH H. WETMORE (SSN ###-##-####), an individual residing at 647 Oak
Knoll Drive, Perrysburg, Ohio 43551 (the "Executive Employee").
BACKGROUND
----------
This Employment Agreement covers the employment of the
Executive Employee by Glasstech.
Now therefore, Glasstech and the Executive Employee, in
consideration of the mutual promises herein contained and intending to be
legally bound hereby, agree as follows:
1. TERM. Glasstech hereby employs the Executive Employee as
Vice President, General Counsel & Secretary, and the Executive Employee hereby
accepts such employment, from the date of this Employment Agreement to June 30,
2002 unless sooner terminated in accordance with the provisions of Sections 4,
5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual
anniversary thereafter, this Employment Agreement shall automatically renew for
an additional one (1) year period (the "Renewal Term" or the "Renewal Terms")
unless either party notifies
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<PAGE> 2
the other party in writing of its or his intention not to renew the Employment
Agreement (the "Renewal Termination Notice") not less than six (6) months prior
to the expiration of the last year of the Term or of any Renewal Term. The
provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination
of this Employment
Agreement.
2. DUTIES. The Executive Employee, in his capacity as Vice
President, General Counsel & Secretary of Glasstech (or such other and
comparable titles and positions as shall be given the Executive Employee by
Holding Board of Directors), shall perform for Glasstech the services currently
performed by him for Glasstech (or comparable services or other reasonable
duties as he and Glasstech may agree upon), subject to the reasonable direction
of Holding's Board of Directors. The Executive Employee shall perform such
services in Wood County, Ohio, or at such other location or locations where he
may be assigned by Glasstech from time to time, provided, however, that the
Executive Employee shall not be required, in connection with his performance of
such services, to travel on behalf of Glasstech in a manner inconsistent with
the scope of his duties and the past practices of Glasstech. The Executive
Employee shall devote his business time and effort to the Employment Agreement
performance of his duties as described herein as reasonably required. It is
understood that the Executive Employee may attend to outside investments, serve
as a director and/or officer of a non-competing company and serve as an officer,
director, or participant in educational, welfare, social, religious, and civic
organizations so long as such activities do
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not materially interfere with the Executive Employee's employment hereunder.
3. COMPENSATION.
-------------
3.1 BASE SALARY. Glasstech shall pay the Executive
Employee during each calendar year of the Term and each Renewal Term hereunder,
a minimum salary of One Hundred Eighty-Two Thousand Two Hundred Ten Dollars
($182,210) per calendar year adjusted as provided in Section 3.5 (hereinafter
referred to as the "Base Salary"). The Base Salary shall be payable in equal
bi-weekly installments, less such deductions as shall be required to be withheld
by applicable law and regulations.
3.2 PERFORMANCE BONUS.
------------------
Executive Employee shall participate in
Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal
year (commencing with the fiscal year ending June 30, 1998), Holding's Board of
Directors will establish the Pool which, at a minimum, shall be calculated
according to the following bonus chart (the "Bonus Chart"):
<TABLE>
<CAPTION>
Percentage of Total
Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool
- ---------------------------- ------------------ ----------
<S> <C> <C>
$14,000,000 to $14,999,999 5.0% $700,000 to $750,000
$15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000
$16,000,000 and Above 10.0 $1,600,000 and Above
</TABLE>
For purposes of this Section, EBITDA shall be subject to the following
adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses
paid to middle managers other than executive managers; and (Z) EBITDA shall be
increased in the amount
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<PAGE> 4
of any advisory fees paid to Key Equity Capital Corporation or its affiliates.
Notwithstanding the foregoing, in the event Glasstech's EBITDA
for any fiscal year after the year ending June 30, 1998 (the "Base Year") is
less than $16,000,000 (the "Target"), the Board of Directors shall calculate the
average EBITDA of Glasstech from the Base Year through and including the fiscal
year in which the Target was not achieved. Using the Bonus Chart above, the
Board of Directors shall pay the participants (including but not limited to the
Executive Employee) the greater of (i) the amount of the Pool using the actual
EBITDA for such fiscal year or (ii) an amount equal to the percentage in the
Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for
such fiscal year.
If the Pool is not ten (10%) percent of the EBITDA in any
fiscal year during the Term of this Employment Agreement, such as in year 2001
in the example below, the Board of Directors shall, in each succeeding fiscal
year during the Term of this Employment Agreement, calculate the average EBITDA
of Glasstech from the Base Year through and including such succeeding fiscal
year. If the average EBITDA is greater than the actual EBITDA for any prior
fiscal year (or the average EBITDA used in a prior fiscal year), then the Board
of Directors, using the Bonus Chart, shall pay the participants (including but
not limited to the Executive Employee) an amount equal to (i) an amount equal to
the percentage in the Bonus Chart based upon the average EBITDA calculated in
such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal
year less (ii) the amount of the Pool actually distributed to participants in
such prior fiscal year.
-4-
<PAGE> 5
EXAMPLE:
- --------
<TABLE>
<CAPTION>
Fiscal Year Percentage of Total Bonus
Year EBITDA Fiscal Year EBITDA Pool
- ---- ------ ------------------ ----
<S> <C> <C> <C>
1998 $18,000,000 10% $1,800,000
1999 $20,000,000 10% $2,000,000
2000 $13,000,0001 10% $1,300,000
2001 $12,000,0002 7.5% $ 900,000
2002 $20,000,000 10% $2,000,000
$ 300,000(3)
----------
$2,300,000
</TABLE>
Not later than 10 business days after delivery to Glasstech of
its fiscal year audit at the end of each fiscal year commencing with the fiscal
year ending June 30, 1998, the Board of Directors of Holding, in consultation
with the President and Chief Executive Officer, shall distribute the Pool to the
participants therein (including but not limited to the Executive Employee) in
such percentages as the Board of Directors determines appropriate; provided,
that, in no event shall the Board of Directors distribute less than the entire
Pool as calculated above in any fiscal year commencing with the fiscal year
ending June 30, 1998.
- -------------
1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 +
$20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10%
of EBITDA for that year.
2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 +
$20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated
based upon 7.5% of EBITDA for that year.
3 The average EBITDA in fiscal year 2002 is $16,500,000
($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the Pool
for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal
year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal
year 2001 ($900,000).
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<PAGE> 6
3.3 RESTRICTED STOCK PROGRAM.
-------------------------
(a) Holding hereby awards to Executive Employee
133.36 shares of restricted Class C Non-Voting Common Stock of Holding (the
"Class C Shares"), which shall be subject to forfeiture in accordance with the
provisions set forth herein. On each of the first four anniversary dates of this
Employment Agreement, the restrictions shall lapse as to 25% of the Class C
Shares so long as his employment has not been terminated on or before such date
pursuant to the provisions of Section 6 of this Employment Agreement. Subject to
the forfeiture provisions set forth herein, Executive Employee shall be entitled
to full and complete ownership of the Class C Shares and will be treated as the
record and beneficial owner of such for all purposes including, but not limited
to, payment of dividends and liquidation rights, provided that Executive
Employee shall be bound by all of the provisions of the Stockholders' Agreement
of even date herewith, among the Company, Executive Employee and the other
stockholders of the Company (the "Stockholders' Agreement).
(b) The certificates representing awarded Class C
Shares shall not be delivered to Executive Employee until the restrictions as to
such Class C Shares have lapsed. If Executive Employee's employment is
terminated pursuant to Section 6 of this Employment Agreement on or before any
applicable anniversary date as described in Section 3.3(a), Executive Employee
shall forfeit to Holding all such Class C Shares for which the restrictions have
not yet lapsed. In this regard, simultaneously with the issuance of certificates
representing awarded Class C Shares, Executive Employee shall execute and
deliver stock powers forfeiting to
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<PAGE> 7
Holding Class C Shares awarded hereunder for which the restrictions have not yet
lapsed in the event Executive Employee's employment is terminated pursuant to
Section 6 of this Employment Agreement on or before any applicable anniversary
date as described in Section 3.3(a). Executive Employee acknowledges that Class
C Shares awarded hereunder shall be subject to the restrictions and risks of
forfeiture contained herein and in the Stockholders' Agreement.
(c) Subject to Section 3.3(h), Executive Employee
hereby agrees that he shall pay to Holding, in cash, any foreign, United States
federal, state or local taxes of any kind required by law to be withheld with
respect to the Class C Shares awarded to him hereunder. If Executive Employee
does not make such payment to Holding, then Holding shall have the right to
deduct from any payment of any kind otherwise due to Executive Employee from
Holding (or from any subsidiary of Holding), any foreign, United States federal,
state or local taxes of any kind required by law to be withheld with respect to
the Class C Shares awarded to Executive Employee hereunder.
(d) Holding shall not issue Preferred Stock, Options
or Warrants or any otherwise dilutive securities without the consent of the
representative(s) of Key Equity Capital Corporation and the representative(s) of
executive management on the Board of Directors and unless such securities are
sold for fair market value, the proceeds of which are used for appropriate
corporate purposes as determined by the Board of Directors. All shareholders of
Class A, Class B or Class C Common Stock have the pre-emptive rights described
in the Stockholders' Agreement.
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<PAGE> 8
(e) "Change of Control" shall mean any one of the
following events: (i) the transfer, sale or other disposition of the Common
Stock of Holding which results in the current stockholders of Holding
(determined as of the date hereof) owning in the aggregate less than a majority
of the outstanding voting capital stock of Holding; (ii) any consolidation of
Holding with, or merger of Holding into, any other entity, any merger of another
entity into Holding, or any sale or transfer (in any one transaction or a series
of transactions) of all or substantially all of the assets of Holding to another
entity (other than (x) a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock, (y)
a merger which is effected solely to change the jurisdiction of incorporation of
Holding or (z) any consolidation with or merger of Holding into a wholly owned
subsidiary of Holding, or any sale or transfer by Holding of all or
substantially all of its assets to one or more of its wholly owned subsidiaries
in any one transaction or a series of transactions). Notwithstanding the
foregoing, a "Change in Control" shall not include any transaction permitted
under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to
the contrary in this Employment Agreement, so long as Executive Employee's
employment has not been terminated pursuant to the provisions of Section 6
before the date of a Change of Control, the restrictions with respect to all of
the Class C Shares shall immediately lapse upon a Change of Control.
(f) Executive Employee understands that the Class C
Shares have not been registered under the Securities Act of 1993, as amended
(the "1933 Act") or any state securities laws.
-8-
<PAGE> 9
Executive Employee represents that the Class C Shares awarded hereunder are not
being acquired by Executive Employee with a view toward resale or distribution
and Executive Employee will not sell or otherwise transfer such Class C Shares
except in compliance with the 1933 Act. The certificates representing the Class
C Shares shall bear such legends and statements evidencing the restrictions
contained in this Employment Agreement and as the Board of Directors of Holding
shall deem advisable to assure compliance with federal and state securities laws
and regulations.
(g) The award of the Class C Shares to Executive
Employee hereunder shall not confer any right to Executive Employee to continue
in the employ of Glasstech or any of its subsidiaries and shall not restrict or
interfere in any way with the right of Glasstech to terminate his employment
with or without cause, at any time.
(h) Executive Employee may file an "83(b) election"
with the Internal Revenue Service with respect to the Class C Shares. If
Executive Employee does file such an 83(b) election, Holding shall loan
Executive Employee an amount equal to 80% of Executive Employee's tax liability
resulting from such 83(b) election (the "Loan Amount") subject to the following
terms: (i) Executive Employee shall execute and deliver to Holding a Promissory
Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class
C Note"); (ii) the principal amount of the Class C Note shall be equal to the
Loan Amount and shall accrue interest at the annual applicable federal rate for
mid-term obligations as of the month in which the Class C Note is issued; and
(iii) the Executive Employee shall execute and deliver to
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<PAGE> 10
Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a
part hereof with respect to all shares of Class A Voting Common Stock of Holding
and all Class C Shares held by Executive Employee.
3.4 CLASS D SHARES. Executive Employee shall also be
issued 1,000 shares of Class D Non-voting Common Stock of Holding issued
pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share
Program") and subject to the terms and conditions of Section 9 of the
Stockholders' Agreement.
3.5 COST OF LIVING INCREASE. The Base Salary provided
for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if
any, in the cost of living by adding to the Base Salary an amount obtained by
multiplying the Base Salary by the percentage by which the level of the Consumer
Price Index North Central Region (for all items for urban wage earners and
clerical workers as reported for December 31 of each calendar period by the
Bureau of Labor Statistics of the United States Department of Labor) has
increased over its level as of January I of the same calendar year.
3.6 BENEFITS. The Executive Employee shall be
entitled during the Term and during any Renewal Terms to participate in such
group life, hospitalization and/or disability insurance benefits, health
programs, qualified or non-qualified deferred compensation plans or similar
benefits which are comparable to those made available by Glasstech on the date
of this Employment Agreement or thereafter to its executive employees generally,
subject to the eligibility provisions of such plans.
-10-
<PAGE> 11
3.7 VACATIONS. The Executive Employee shall be
entitled to vacations and personal leave days more fully set forth in the
GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific
provisions of which relating to vacation and personal leave are hereby
incorporated into this Employment Agreement by reference.
3.8 INSURANCE. Glasstech agrees to pay life insurance
and/or annuity premiums on a policy(ies) selected by and insuring the life of
the Executive Employee with a beneficiary(ies) to be named by the Executive
Employee. The parties hereto agree that Glasstech shall not be obligated to pay
any premium greater than Five Thousand Dollars ($5,000) during the first year of
the Term and such amount shall be increased by Five Hundred Dollars ($500) each
year thereafter during the Term or during any of the Renewal Terms. The parties
further agree that the Executive Employee shall be permitted from time to time,
during the Term, or any Renewal Terms, to maintain such policy(ies), or to
exchange such policy(ies), or to acquire any new life insurance and/or annuity
products, provided however, that the portion of the premiums and costs to be
paid by Glasstech in connection with such policy(ies) shall not exceed the
amounts specified above. Glasstech expressly acknowledges that it shall have no
right, title or interest in and to such policy(ies), the same being the
exclusive property of the Executive Employee.
3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or
reimburse the Executive Employee for all reasonable expenses actually incurred
or paid by the Executive Employee during the Term or any Renewal Term in
performance of the Executive Employee's
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<PAGE> 12
services under this Employment Agreement, subject to receipt by Glasstech of
reasonable supporting documentation.
4. TERMINATION UPON DEATH. In the event the Executive Employee
dies during the Term or any Renewal Term, for a period of six (6) months
following such death Glasstech agrees to continue to pay to the surviving spouse
of the Executive Employee the Base Salary rate of the deceased Executive
Employee in effect at the time of death in equal bi-weekly installments less
such deductions required to be withheld by applicable law and regulations. The
salary continuation payable as provided herein shall be in addition to any right
of the estate of the deceased Executive Employee to (a) participate in the Pool
(in accordance with Section 3.2 above) in the fiscal year in which such death
occurred and to receive a prorated amount for the portion of the fiscal year in
which Executive Employee was alive, provided, however, that the level of such
participation shall be subject to the discretion of Holding Board of Directors,
and (b) to participate in the Performance Share Program as set forth therein.
Upon the death of the Executive Employee, the restrictions on all Class C Shares
shall lapse and such Class C Shares shall be released to the estate of the
deceased Executive Employee. Glasstech shall also remit to the estate of the
deceased Executive Employee any other benefits earned and accrued or payable up
to the date of such death and shall reimburse to the estate of the deceased
Executive Employee any outstanding unreimbursed expenses incurred by such
Executive Employee on behalf of Glasstech and documented as provided herein.
In the event the deceased Executive Employee is not survived
by a spouse or in the further event the deceased Executive
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<PAGE> 13
Employee and his spouse are separated at the time of death by agreement, court
order or decree, or otherwise, then such salary continuation shall be remitted
to the estate of the deceased Executive Employee.
5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON
DISABILITY. In the event the Executive Employee becomes disabled during the Term
or any Renewal Term by virtue of ill health or other disability and is thereby
unable to perform on a full time basis substantially and continuously the duties
assigned to him by Glasstech, Glasstech agrees to continue the Executive
Employee's Base Salary until such time as Executive Employee is eligible to
collect benefits under Glasstech's long term disability insurance coverage. At
such time as Executive Employee is eligible to collect benefits under
Glasstech's long term disability insurance coverage (a "Disability"), Glasstech
shall have no further obligation to compensate the Executive Employee (except
that Glasstech shall continue to provide group life and health benefits to
Executive Employee consistent with those provided to other executive employees
for a period of two (2) years from the date on which Executive Employee's long
term disability benefits commence) and further Glasstech shall have the right to
terminate the employment of the Executive Employee hereunder upon written notice
delivered pursuant to Section 13. In the event of such Disability, the
restrictions on all Class C Shares shall lapse and such Class C Shares shall be
released to the Executive Employee. Executive Employee shall participate in the
Performance Share Program as set forth therein.
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<PAGE> 14
6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION.
------------------------------------------------
(a) Notwithstanding any other provision of this
Employment Agreement, Glasstech may terminate the Executive Employee's
employment at any time for Cause (as hereinafter defined) and the Executive
Employee may voluntarily terminate the Executive Employee's employment with
Glasstech. Upon such termination for Cause or upon Executive Employee's
voluntary termination, Executive Employee shall not participate in the
Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his
termination occurred, and Executive Employee shall automatically forfeit those
shares of Restricted Stock for which the restrictions would have lapsed
(pursuant to Section 3.3) in the contract year in which his termination occurred
and any subsequent year and shall participate in the Performance Share Program
as set forth therein. Upon such termination for Cause or upon Executive
Employee's voluntary termination, the Executive Employee shall be entitled to,
except as restricted in the preceding sentence, receive any salary and other
benefits earned or accrued, and reimbursement for expenses incurred, prior to
the date of termination.
(b) "Cause" shall mean (i) the Executive Employee's willful
and continuing affirmative refusal to perform his or her duties hereunder (other
than as a result of a Disability); (ii) dishonesty in the performance of his or
her duties hereunder which results in criminal indictment of the Executive
Employee; (iii) the Executive Employee's breach of any material term of this
Employment Agreement (provided that Glasstech shall give the Executive Employee
written notice of such breach and a thirty (30) day period
-14-
<PAGE> 15
after notice to cure such breach, except that no notice or cure period shall be
given or extended with respect to breach of the provisions of Section 8 of this
Employment Agreement); or (iv) the Executive Employee's conviction for a felony
or for a crime which, in the reasonable judgment of Glasstech, renders the
Executive Employee unable to perform his duties as described in this Employment
Agreement.
7. TERMINATION WITHOUT CAUSE. If the Executive Employee is
terminated prior to the end of the Term or any Renewal Term other than pursuant
to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a
termination "Without Cause"), the Executive Employee shall be entitled to (in
addition to such other rights as he may have, or damages to which he may be
entitled at law or in equity) (i) all payments when due of any salary and other
benefits (including, without limitation, participation in the Performance Bonus
pursuant to Section 3.2) accrued through the date of termination, including the
payment of all salary due for the remainder of the Term or Renewal Term as
though the Executive Employee had remained employed through the full Term (or,
if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions
on all Class C Shares shall lapse and such Class C Shares shall be released to
the Executive Employee, and (iii) participation in the Performance Share Program
as set forth therein.
8. COVENANT AGAINST COMPETITION. The Executive Employee
acknowledges that (i) the principal business of Glasstech is design,
manufacture, marketing, sale, distribution and servicing of glass bending,
tempering and annealing equipment worldwide to
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<PAGE> 16
both automotive glass fabricators and architectural glass producers and the
principal business of Stir-Melter, Inc. is the vitrification of hazardous waste
(collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited
number of persons throughout the world which has developed such business; (iii)
the Glasstech Business is, in large part, international in scope and Glasstech's
customers, potential customers and competitors are located throughout the world;
(iv) the Executive Employee's work for Glasstech has given and will continue to
give him access to the confidential affairs and proprietary information of
Glasstech; (v) this Employment Agreement has been entered into as part of a
series of transactions pursuant to which Executive Employee and others have
purchased an equity interest in Glasstech and sold their equity interest in
Glasstech; and (vi) Glasstech would not have entered into this Employment
Agreement but for the agreements and covenants of the Executive Employee
contained in this Section 8. Accordingly, the Executive Employee covenants and
agrees that:
(a) he shall not, anywhere in the world directly or
indirectly, (1) engage in Glasstech Business for his own account or that of any
other person; (2) render any services related to the Glasstech Business to any
person (other than Glasstech) engaged in such activities; or (3) become
interested in any such person (other than Glasstech) as a partner, stockholder,
member, principal, agent, trustee, consultant or in any other relationship or
capacity for a period commencing on the date of this Employment Agreement and
terminating on the day which is: (i) the later of (A) five (5) years following
the date hereof, or (B) two (2) years following the termination of the Executive
Employee's employment pursuant to a
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<PAGE> 17
Renewal Termination Notice if given by Executive Employee, or (ii) if the
Executive Employee's employment has been terminated for Cause, then two (2)
years following termination of Executive Employee's employment; (collectively
the "Restricted Period") provided, however, that there shall be no Restricted
Period if Executive Employee's employment is terminated Without Cause or if
Glasstech delivers a Renewal Termination Notice to Executive Employee.
Notwithstanding the above, the Executive Employee may own, directly or
indirectly, solely as an investment, securities of any such person which are
traded on any national securities exchange or NASDAQ if the Executive Employee
is not a controlling person of, or a member of a group which controls such
person and does not, directly or indirectly, own one percent (1%) or more of any
class of securities of such person.
(b) at all times during and after this Employment
Agreement is in force he shall keep secret and retain in strictest confidence,
and shall not use for his benefit or the benefit of others, except in connection
with the business and affairs of Glasstech and its affiliates, all confidential
matters relating to Glasstech Business and to Glasstech and its affiliates
learned by the Executive Employee heretofore or hereafter directly or indirectly
from Glasstech or its affiliates or any of their predecessors or successors (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone outside of Glasstech and its affiliates except
with Glasstech's express written consent. The requirements of this Section 8(b)
shall not apply to Confidential Company Information which is: (1) at the time of
receipt or thereafter publicly known
-17-
<PAGE> 18
through no wrongful act of the Executive Employee: (2) received from a third
party not under any obligation to keep such information confidential; or (3)
required to be disclosed by law.
(c) during the Restricted Period, he shall not, without
Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit
employees of Glasstech or its affiliates to leave the employ of Glasstech or any
of its affiliates or (ii) hire any employee who has left the employ of Glasstech
or any of its affiliates within one year of the termination of such employee's
employment with Glasstech or any of its affiliates.
(d) at any time upon written request from Glasstech,
he shall deliver to Glasstech all memoranda, notes, lists, records and other
documents (and all copies thereof) made or compiled by the Executive Employee or
made available to him concerning Glasstech Business or Glasstech or any of its
affiliates all of which shall at all times be the property of Glasstech.
9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee
breaches any of the provisions of Section 8 (the "Restrictive Covenants"),
Glasstech shall have the following rights and remedies (upon compliance with any
necessary prerequisites imposed by law upon the availability of such remedies),
each of which rights and remedies shall be independent of the other and
severally enforceable, and all of which rights and remedies shall be in addition
to, and not in lieu of, any other rights and remedies available to Glasstech
under law or in equity:
(a) The right to have the Restrictive Covenants
specifically enforced by any court having jurisdiction over the parties to this
Employment Agreement; and
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<PAGE> 19
(b) The right to entry of restraining orders and/or
injunctions (preliminary, mandatory, temporary and permanent) against the
Executive Employee against violations, threatened or actual, and whether or not
then continuing, of such covenants, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury to Glasstech and
that money damages will not provide an adequate remedy to Glasstech; and
(c) The right and remedy to require the Executive
Employee to account for and pay over to Glasstech all compensation, profits,
monies, accruals, increments or other benefits (collectively, "Benefits")
derived or received by him as the result of any transactions constituting a
breach of the Restrictive Covenants, and the Executive Employee shall account
for and pay over such Benefits to Glasstech. Glasstech may set off any amounts
due to Glasstech under this Section 9 against any amounts owed to the Executive
Employee.
10. MEDIATION, ARBITRATION. Except for a dispute under Section
8 which shall be subject to the provisions of Section 9, neither party shall
institute an arbitration proceeding hereunder, before that party has sought to
resolve the dispute through direct negotiation with the other party. If the
dispute is not resolved within three weeks after a demand for direct
negotiation, the parties shall attempt to resolve the dispute through nonbinding
mediation. If the parties do not promptly agree on a mediator, then either party
may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New
York, New York, to initiate selection of a mediator from the CPR Panel of
Neutrals. The fees and expenses of the mediator shall be paid one-half each by
each
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<PAGE> 20
party. If the mediator is unable to facilitate a settlement of the dispute
within a reasonable period of time, as determined by the mediator, the mediator
shall issue a written statement to the parties to that effect and the aggrieved
party may then seek relief through arbitration, which shall be binding, before a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Association"). The place of arbitration shall be
Detroit, Michigan. Arbitration may be commenced at any time by any party hereto
after giving written notice in the manner described in Section 13 of this
Employment Agreement. The arbitrator shall be selected by the joint agreement of
each party, but if they do not so agree within twenty (20) days after the date
of the notice referred to above, the selection shall be made pursuant to the
rules from the panels of the arbitrators maintained by such Association. The
arbitrator shall render his decision within one hundred eighty (180) days of
appointment. Any award rendered by the arbitrator shall be conclusive and
binding upon the parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reasons for the
award. This provision for arbitration shall be specifically enforceable by the
parties and the decision of the arbitrator in accordance herewith shall be final
and binding and there shall be no right of appeal therefrom. Judgment upon the
award rendered by the arbitrator in accordance herewith shall be final and
binding and there shall be no right of appeal therefrom. Judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The costs and expenses of arbitration, including attorneys' fees and
expenses of the
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<PAGE> 21
arbitrator shall be paid entirely by the nonprevailing party and in addition the
nonprevailing party shall reimburse the other party for the fees and expenses of
mediation incurred by such party, unless the arbitrator determines that the
costs, expenses and attorneys' fees should be apportioned between the parties,
then as the arbitrator may assess. The arbitrator shall not be permitted to
award punitive or similar type damages under any circumstances. As set forth in
the first phrase of the first sentence of this section 10, this arbitration
provision shall constitute the sole and exclusive remedy for any dispute under
this Employment Agreement.
11. BLUE PENCILING. The Executive Employee acknowledges and
agrees that (i) he has had an opportunity to seek advice of counsel in
connection with this Employment Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, whether because of the duration or geographical scope
of such provision, the duration or scope of such provision, as the case may be,
shall be reduced so that such provision becomes enforceable and. in its reduced
form, such provision shall then be enforceable and shall be enforced.
12. SEVERABILITY. If any court determines that any covenant or
provision of this Employment Agreement is unenforceable for any reason, the
remaining covenants or provisions shall remain in full force and effect.
13. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be (a)
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<PAGE> 22
delivered personally, (b) sent by facsimile transmission, (c) sent by certified
or registered mail, postage prepaid, return receipt requested, or (d) sent by
overnight delivery service, to the following addresses:
(i) if to Glasstech, to:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Attention: Mark Christman, President
Fax: (419) 661-9366
and
Kenneth H. Wetmore, Esquire
Vice President, General Counsel and Secretary
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Fax: (419) 661-9616
and
Key Equity Capital Corporation
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Attention: David P. Given
(ii) if to the Executive Employee, to:
Kenneth H. Wetmore
647 Oak Knoll Drive
Perrysburg, Ohio 43551
Any such notice shall be deemed given (a) when so delivered
personally, (b) if sent by certified or registered mail, return receipt
requested, on the date the return receipt is signed, or (c) if sent by overnight
delivery service. on the next normal business day after the date of sender
receipt.
Any such person may, by giving notice in accordance with this
section to the other parties hereto, designate another address or person for
receipt by such person of notices hereunder.
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<PAGE> 23
14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This
Employment Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreement(s),
written or oral with respect thereto. This Employment Agreement will be
effective upon the consummation of the Agreement and Plan of Merger (the "Merger
Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub
Co. If the Merger Agreement is not consummated within the time set forth
therein, this Employment Agreement shall be null and void and of no further
force and effect. The Employment Agreement dated December 6, 1994 between
Glasstech and the Executive Employee is hereby terminated and is null and void
and of no further force and effect.
15. INDEMNIFICATION. During the Term or any Renewal Term
hereof and subject to the continuing compliance by the Executive Employee with
his obligations hereunder, Glasstech shall provide the Executive Employee with
indemnification against liabilities or claims arising by reason of the fact that
he is an employee. officer and/or director of Glasstech, and against expenses
incurred in connection therewith, to the fullest extent of indemnification then
available to any officer and/or director of Glasstech under and in accordance
with the laws of the State of Delaware. Also, Glasstech shall purchase and/or
maintain Directors' and Officers' insurance on or inuring to the Executive
Employee's benefit with respect to such liabilities, claims, or expenses as
described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co.
and Holding, dated June 5, 1997.
16. WAIVERS AND AMENDMENTS. This Employment Agreement may be
amended, superseded, canceled, renewed, or extended, and the
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<PAGE> 24
terms hereof may be waived, only by a written instrument signed by the parties
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power, or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power, or privilege, nor shall any single or partial exercise of
any such right, power, or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power, or privilege.
17. GOVERNING LAW. This Employment Agreement shall be governed
by and construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed within the State.
18. ASSIGNMENT. This Employment Agreement, and the Executive
Employee's rights and obligations hereunder, may not be assigned by either party
hereto without the consent of the other and any purported assignment by the
Executive Employee or Glasstech in violation hereof shall be null and void;
provided, however, that Glasstech may assign its rights and obligations
hereunder without the Executive Employee's consent in connection with a sale of
all or substantially all of Glasstech's assets.
19. BINDING EFFECT. This Employment Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors, and legal representatives.
20. COUNTERPARTS. This Employment Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all
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<PAGE> 25
such counterparts together shall constitute one and the same instrument. Each
counterpart may consist of two (2) copies hereof each signed by one of the
parties hereto.
21. HEADING. The headings in this Employment Agreement are for
reference only and shall not affect the interpretation of this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed. or
caused to be executed, this Employment Agreement as of the day and year first
above written.
GLASSTECH HOLDING CO.
By: /s/ Mark D. Christman
----------------------------
Its: President
---------------------------
GLASSTECH, INC.
By: /s/ Mark D. Christman
----------------------------
Its: President
---------------------------
EXECUTIVE EMPLOYEE
/s/ Kenneth H. Wetmore
-------------------------------
Kenneth H. Wetmore
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<PAGE> 1
EXHIBIT 10.13
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
by and among
GLASSTECH HOLDING CO
GLASSTECH SUB CO.
and
CIBC WOOD GUNDY SECURITIES CORP.,
as Initial Purchaser
---------------------------------
Dated as of June 27, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
Section 1.1. Definitions ................................................. 1
Section 1.2. Accounting Terms; Financial Statements....................... 7
ARTICLE II
ISSUE OF SECURITIES; PURCHASE AND SALE OF
SECURITIES; RIGHTS OF HOLDERS OF SECURITIES;
OFFERING BY INITIAL PURCHASER
Section 2.1. Issue of Securities ......................................... 7
Section 2.2. Purchase, Sale and Delivery of Securities.................... 8
Section 2.3. Registration Rights of Holders of Securities................. 9
Section 2.4. Offering by the Initial Purchaser............................ 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF SECURITIES
Section 3.1. Representations and Warranties of the Issuer................ 10
Section 3.2. Representations and Warranties of Holding................... 23
Section 3.3. Resale of Securities ....................................... 24
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of
the Initial Purchaser..................................... 25
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<PAGE> 3
Page
----
ARTICLE V
COVENANTS
Section 5.1. Covenants of Holding and the Issuer......................... 29
ARTICLE VI
FEES
Section 6.1. Costs, Expenses and Taxes .................................. 32
ARTICLE VII
INDEMNITY
Section 7.1. Indemnity .................................................. 33
Section 7.2. Contribution ............................................... 37
Section 7.3. Registration Rights Agreements ............................. 38
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Provisions ..................................... 38
Section 8.2. Termination ................................................ 38
Section 8.3. No Waiver; Modifications in Writing......................... 39
Section 8.4. Information Supplied by the Initial Purchaser............... 40
Section 8.5. Communications ............................................. 40
Section 8.6. Execution in Counterparts .................................. 41
Section 8.7. Successors ................................................. 41
Section 8.8. Governing Law .............................................. 42
Section 8.9. Severability of Provisions ................................. 42
Section 8.10. Headings ................................................... 42
SIGNATURE PAGE
EXHIBITS
Exhibit 1 Form of Opinion of Baker and Hostetler
Exhibit 2 Form of Opinion of Cahill Gordon & Reindel
Exhibit 3 Form of Report of Brooks & Kushman
-ii-
<PAGE> 4
SECURITIES PURCHASE AGREEMENT, dated as of June 27, 1997 (the
"AGREEMENT"), by and among GLASSTECH HOLDING CO., a Delaware corporation
("HOLDING"), GLASSTECH SUB CO., a Delaware corporation (the "ISSUER") and a
wholly owned subsidiary of Holding, and CIBC WOOD GUNDY SECURITIES CORP. (the
"INITIAL PURCHASER").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"ACCREDITED INVESTOR" has the meaning provided therefor in Section 3.2
of this Agreement.
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Person in question. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise; PROVIDED, HOWEVER, that beneficial ownership of at least 10% of
the voting securities of a Person shall be deemed to be control.
"AGREEMENT" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"BASIC DOCUMENTS" means, collectively, the Indenture, the Supplemental
Indenture, the Notes, the Registration Rights
<PAGE> 5
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Agreement, the Warrant Agreement, the Warrants, the Common Stock Registration
Rights Agreement and this Agreement.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of New York
are authorized or obligated by law to close.
"CLASS A COMMON STOCK" means the Class A Common Stock, par value $0.01
per share, of Holding.
"CLOSING" has the meaning provided therefor in Section 2.2(b) of this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Act.
"COMMON STOCK REGISTRATION RIGHTS AGREEMENT" means the common stock
registration rights agreement between Holding, the Initial Purchaser and certain
stockholders named therein.
"COMMONLY CONTROLLED ENTITY" has the meaning provided therefor in
Section 3.1(t).
"CREDIT AGREEMENT" has the meaning provided therefor in Section 2.1 of
this Agreement.
"DEFAULT" means any event, act or condition which, with notice or lapse
of time or both, would constitute an Event of Default.
"EFFECTIVE TIME" has the meaning provided therefor in Section 2.1 of
this Agreement.
"ENVIRONMENTAL LAW" has the meaning provided therefor in Section
3.1(aa).
"EQUITY CONTRIBUTION" has the meaning provided therefor in Section 2.1
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
<PAGE> 6
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"ERNST & YOUNG" has the meaning set forth in Section 1.3(b) hereof.
"EVENT OF DEFAULT" means any event defined as an Event of Default in
the Indenture.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"EXCHANGE NOTES" shall have the meaning provided therefor in the Note
Registration Rights Agreement.
"EXISTING NOTES" means Glasstech's 10% Senior Notes due 2001.
"FINAL MEMORANDUM" has the meaning provided therefor in Section 2.1 of
this Agreement.
"FOREIGN PLANS" has the meaning provided therefor in Section 3.1(t).
"GLASSTECH" has the meaning provided therefor in Section 2.1 of this
Agreement.
"GLASSTECH ENTITIES" has the meaning provided therefor in Section 2.1
of this Agreement.
"HOLDING" has the meaning provided therefor in the introductory
paragraph of this Agreement.
"INDEMNIFIED PARTY" has the meaning provided therefor in Section 7.1(c)
of this Agreement.
"INDEMNIFYING PARTY" has the meaning provided therefor in Section
7.1(c) of this Agreement.
"INDENTURE" means the indenture dated as of July 2, 1997 by and between
the Issuer and the Trustee under which the Notes will be issued.
"INITIAL PURCHASER" has the meaning provided therefor in the
introductory paragraph of this Agreement.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning provided therefor in
Section 3.1(x).
<PAGE> 7
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"ISSUER" has the meaning provided therefor in the introductory
paragraph of this Agreement.
"LIEN" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge,
easement, encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such property or assets (including without limitation, any Capitalized Lease
Obligation (as defined in the Indenture), conditional sales, or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"MATERIAL ADVERSE EFFECT" means, with respect to the Glasstech Entities
and Glasstech's Subsidiaries and, at and immediately after the Effective Time,
the Surviving Company and its Subsidiaries, a material adverse effect on the
business, condition (financial or otherwise), results of operations or prospects
of the Glasstech Entities and Glasstech's Subsidiaries and, at and immediately
after the Effective Time, the Surviving Company and its Subsidiaries, taken as a
whole; PROVIDED that, with respect to the Glasstech Entities and, at and
immediately after the Effective Time, the Surviving Company, "Material Adverse
Effect" shall also mean a material adverse effect on the ability of any of the
Glasstech Entities and, at and immediately after the Effective Time, the
Surviving Company to perform its respective obligations under this Agreement or
the Other Transaction Documents.
"MEMORANDUM" has the meaning provided therefor in Section 2.1 of this
Agreement.
"MERGER" has the meaning provided therefor in Section 2.1 of this
Agreement.
"MERGER AGREEMENT" has the meaning provided therefor in Section 2.1 of
this Agreement.
"NOTES" means the 12:% Senior Notes due 2004 of the Issuer.
"OFFERING" has the meaning provided therefor in Section 2.1 of this
Agreement.
"OFFERING MATERIALS" has the meaning provided therefor in Section 7.1
of this Agreement.
<PAGE> 8
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"OTHER TRANSACTION DOCUMENTS" means the Merger Agreement and the
Revolving Credit Facility.
"PERSON" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint-stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"PORTAL" means the Private Offerings, Resales and Trading through
Automated Linkages Market.
"PRELIMINARY MEMORANDUM" has the meaning provided therefor in Section
2.1 of this Agreement.
"PRIVATE EXCHANGE NOTES" shall have the meaning provided therefor in
the Registration Rights Agreement.
"PROCEEDING" has the meaning provided therefor in Section 7.1(c) of
this Agreement.
"QIB" has the meaning provided therefor in Section 3.2 of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement
by and between the Issuer and the Initial Purchaser relating to the Notes.
"REVOLVING CREDIT FACILITY" has the meaning provided therefor in the
Final Memorandum.
"SECURITIES" has the meaning provided therefor in Section 2.1 of this
Agreement.
"STATE" means each of the states of the United States, the District of
Columbia and the Commonwealth of Puerto Rico.
"STATE COMMISSION" means any agency of any State having jurisdiction to
enforce such State's securities laws.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the capital stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or
<PAGE> 9
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(ii) in the case of a partnership, joint venture, association or other business
entity, with respect to which such first-named Person or any of its Subsidiaries
has the power to direct or cause the direction of the management and policies of
such entity by contract or otherwise or if in accordance with generally accepted
accounting principles such entity is consolidated with the first-named Person
for financial statement purposes.
"SUPPLEMENTAL INDENTURE" has the meaning provided therefor in Section
2.1 of this Agreement.
"SURVIVING COMPANY" has the meaning provided therefor in Section 2.1 of
this Agreement.
"TAXES" has the meaning provided therefor in Section 3.1(w) of this
Agreement.
"TIME OF PURCHASE" has the meaning provided therefor in Section 2.2(b)
of this Agreement.
"TRANSACTION DOCUMENTS" means the Basic Documents and the Other
Transaction Documents.
"TRANSACTIONS" means the Merger, the Offering, the Equity Contribution
and the Revolving Credit Facility.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended, and the rules and regulations of the Commission thereunder.
"TRUSTEE" means United States Trust Company of New York, as trustee
under the Indenture.
"UNITS" has the meaning provided therefor in Section 2.1 of this
Agreement.
"WARRANT AGENT" means United States Trust Company of New York, as
warrant agent under the Warrant Agreement.
"WARRANT AGREEMENT" means the warrant agreement dated as of July 2,
1997 by and between Holding and the Warrant Agent under which the Warrants will
be issued.
"WARRANT SHARES" means the shares of Class A Common Stock issued or
issuable upon the exercise of Warrants.
<PAGE> 10
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"WARRANTS" means the warrants of Holding, each Warrant initially
entitling the holder thereof to purchase 0.01253157 shares of Class A Common
Stock of Holding.
Section 1.2. ACCOUNTING TERMS; FINANCIAL STATEMENTS. All accounting
terms used herein not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with generally accepted
accounting principles in the United States as the same may be in effect from
time to time.
ARTICLE II
ISSUE OF SECURITIES; PURCHASE AND SALE OF
SECURITIES; RIGHTS OF HOLDERS OF SECURITIES;
OFFERING BY INITIAL PURCHASER
Section 2.1. ISSUE OF SECURITIES. Holding and the Issuer have
authorized the issuance of 70,000 units (the "UNITS") consisting of $1,000
principal amount of the Notes and one Warrant (the "OFFERING"). The Notes are to
be issued pursuant to the Indenture and the Warrants are to be issued pursuant
to the Warrant Agreement. The Units, Notes and Warrants are referred to herein
as the "SECURITIES". Each Note will be substantially in the form of the Note set
forth as Exhibit A to the Indenture. Each Warrant will be substantially in the
form of the Warrant set forth as Exhibit A to the Warrant Agreement.
The Securities will be offered and sold to the Initial Purchaser
without being registered under the Act, in reliance on exemptions therefrom.
The Securities are being offered in connection with a Merger Agreement
dated June 5, 1997 (as amended through the date hereof and together with all
ancillary agreements entered into therewith, the "MERGER AGREEMENT"). Pursuant
to the Merger Agreement, (i) the net proceeds of the Offering, together with the
proceeds from an equity contribution of up to $15,000,000 (the "EQUITY
CONTRIBUTION") from Holding, will be used by the Issuer to acquire all of the
outstanding capital stock of Glasstech, Inc. ("GLASSTECH") from its existing
stockholders and (ii) the Issuer will be merged with and into Glasstech (the
"MERGER"), with Glasstech surviving the Merger (the "SURVIVING COMPANY"). In
addition, concurrently with the consummation of the Merger, the Surviving
Company will execute and deliver a credit agreement (the "CREDIT AGREEMENT")
con-
<PAGE> 11
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sisting of a $10.0 million revolving credit facility (the "REVOLVING CREDIT
FACILITY"). The time of consummation of the Merger is referred to herein as the
"EFFECTIVE TIME."
At the Effective Time, the Surviving Company and the Trustee will enter
into a first supplemental indenture to the Indenture (the "SUPPLEMENTAL
INDENTURE") providing for the express assumption by the Surviving Company of the
covenants, agreements and undertakings of the Issuer in the Indenture and under
the Notes.
In connection with the sale of the Securities, Holding, the Issuer and
Glasstech (collectively, the "GLASSTECH ENTITIES") have prepared a preliminary
offering memorandum dated June 10, 1997 (the "PRELIMINARY MEMORANDUM") and
prepared a final offering memorandum dated June 27, 1997 (the "FINAL MEMORANDUM"
and, together with the Preliminary Memorandum, the "MEMORANDUM") setting forth
or including a description of the terms of the Notes, the terms of the Offering,
a description of the Glasstech Entities and Glasstech's Subsidiaries and any
material developments relating to the Glasstech Entities and Glasstech's
Subsidiaries occurring after the date of the most recent financial statements
included therein.
Section 2.2. PURCHASE, SALE AND DELIVERY OF SECURITIES. (a) On the
basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and conditions herein set forth, Holding and
the Issuer agree that they will sell to the Initial Purchaser, and the Initial
Purchaser agrees that it will purchase at the Time of Purchase, 70,000 Units
consisting of $70,000,000 aggregate principal amount of the Notes of the Issuer
and 877.21 Warrants to purchase Class A Common Stock of Holding at a price equal
to 97.00% of the principal amount of the Notes. The Notes will be issued by the
Issuer and the warrants will be issued by Holding.
Each Unit will consist of $1,000 principal amount of the Notes and one
Warrant to purchase 0.01253157 shares of Class A Common Stock of Holding. The
Notes and the Warrants will be separately transferable immediately after the
Issue Date.
(b) The purchase, sale and delivery of the Securities will take place
at a closing (the "CLOSING") at the offices of Baker & Hostetler LLP, 3200
National City Center, Cleveland, Ohio, at 10:00 A.M., New York time, on
July 2, 1997, or such later date and time, if any, as the Initial Pur-
<PAGE> 12
-9-
chaser, Holding and the Issuer shall agree. The time at which such Closing is
concluded is herein called the "TIME OF PURCHASE."
(c) One or more certificates in definitive form for each of the Notes
and the Warrants that the Initial Purchaser has agreed to purchase hereunder,
and in such denomination or denominations and registered in such name or names
as the Initial Purchaser requests upon notice to the Issuer at least 48 hours
prior to the Closing, shall be delivered by or on behalf of Holding, in the case
of the Warrants, and the Issuer, in the case of the Notes, to the Initial
Purchaser, against payment by or on behalf of the Initial Purchaser of the
purchase price therefor by wire transfer of immediately available funds wired in
accordance with the written instructions of Holding and the Issuer. Holding
shall make such certificate or certificates for the Warrants available and the
Issuer will make such certificate or certificates for the Notes available for
checking and packaging by the Initial Purchaser at the offices of the Initial
Purchaser, or such other place as the Initial Purchaser may designate, at least
24 hours prior to the Closing.
Section 2.3. REGISTRATION RIGHTS OF HOLDERS OF SECURITIES. The Initial
Purchaser and its direct and indirect transferees of the Notes shall have such
rights with respect to the registration thereof under the Act and qualification
of the Indenture under the Trust Indenture Act as are set forth in the
Registration Rights Agreement. The Initial Purchaser and its direct and indirect
transferees of the Warrants shall have such rights with respect to the
registration thereof under the Act as are set forth in the Common Stock
Registration Rights Agreement.
Section 2.4. OFFERING BY THE INITIAL PURCHASER. The Initial Purchaser
proposes to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum, as soon as practicable after this Agreement
is entered into and as in the judgment of the Initial Purchaser is advisable.
<PAGE> 13
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ARTICLE III
REPRESENTATIONS AND WARRANTIES;
RESALE OF SECURITIES
-------------------------------
Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer
represents and warrants to and agrees with the Initial Purchaser as follows:
(a) The Final Memorandum, as of its date and at the Time of
Purchase, 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 3.1(a) do not apply to statements or omissions made in
reliance upon and in conformity with information relating to the
Initial Purchaser furnished to the Issuer in writing by the Initial
Purchaser expressly for use in the Final Memorandum or any amendment or
supplement thereto or relating to the manner of sale of the Notes by
the Initial Purchaser.
(b) The audited consolidated financial statements of Glasstech
and its Subsidiaries included in the Final Memorandum present fairly
the financial position, results of operations and cash flows of
Glasstech and its Subsidiaries at the dates and for the periods to
which they relate and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as
otherwise stated therein. The summary and selected financial data in
the Final Memorandum present fairly in all material respects the
financial information shown therein and have been prepared and compiled
on a basis consistent with the audited financial statements included
therein, except as otherwise stated therein. Ernst & Young LLP ("ERNST
& YOUNG") is an independent public accounting firm within the meaning
of the Act and the rules and regulations promulgated thereunder. The
pro forma financial statements (including the notes thereto) and the
other pro forma financial information included in the Final Memorandum
have been prepared using assumptions which Glasstech believes to be
reasonable and in accordance with the applicable requirements of the
Act and include all adjustments necessary to present fairly the pro
forma financial information included within the Final Memorandum at the
respective dates and for the respective periods indicated.
<PAGE> 14
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(c) Each of the Glasstech Entities is and, immediately after
the Effective Time, the Surviving Company will be, a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has or, in the case of the Surviving Company,
will have filed all reports with the Secretary of State of Delaware
required to obtain a certificate with respect to continued subsistence
in good standing from that office. Each Subsidiary of Glasstech is a
corporation duly incorporated or organized, validly existing and in
good standing under the laws of the state or other jurisdiction of its
incorporation or organization. Each of Glasstech and its Subsidiaries
is and, immediately after the Effective Time, each of the Surviving
Company and its Subsidiaries will be, duly qualified and in good
standing as a foreign corporation, and authorized to do business, in
each jurisdiction in which the ownership or leasing of any property or
the character of its operations makes such qualification necessary and
in which the failure so to qualify is reasonably likely to have a
Material Adverse Effect.
(d) At and as of the Effective Time, the Surviving Company
will have the authorized, issued and outstanding capitalization of
1,000 shares of common stock, par value $0.01 per share. All of the
issued and outstanding shares of capital stock of the Glasstech
Entities and Glasstech's Subsidiaries are and, at and as of the
Effective Time, of the Surviving Company and its Subsidiaries will be
validly issued, fully paid and nonassessable and none of such shares
were issued in violation of any preemptive or similar rights. Except as
set forth in the Final Memorandum and the Merger Agreement in the case
of the Glasstech Entities and the Glasstech Subsidiaries, and except as
set forth in the Final Memorandum in the case of the Surviving Company
and its Subsidiaries, (i) there are no outstanding subscriptions,
options, warrants, rights, convertible securities or other binding
agreements or commitments of any character obligating any of the
Glasstech Entities or Glasstech's Subsidiaries or, at and as of the
Effective Time, the Surviving Company or any of its Subsidiaries, to
issue any securities and (ii) there is no agreement, understanding or
arrangement among any of the Glasstech Entities or any of Glasstech's
Subsidiaries and, at and as of the Effective Time, there will be no
agreement, understanding or arrangement among the Surviving Company or
its Subsidiaries and their respective stockholders or any other Person
relating to the ownership or disposition of any capital stock in any of
the Glasstech Entities or any of Glasstech's Subsidiaries or the
Surviving Company or any of its Subsidiaries, the election of directors
of any of the Glasstech Entities or any
<PAGE> 15
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of Glasstech's Subsidiaries or the Surviving Company or any of its
Subsidiaries or the governance of any of the Glasstech Entities' or any
of Glasstech's Subsidiaries' or the Surviving Company's or any of its
Subsidiaries' affairs, and such agreements, arrangements or
understandings will not be breached or violated as a result of the
execution and delivery of, or the consummation of the transactions
contemplated by, this Agreement and the Other Transaction Documents.
(e) This Agreement has been duly authorized, executed and
delivered by the Issuer and (assuming the due authorization, execution
and delivery by the Initial Purchaser) is a valid and legally binding
agreement of the Issuer and, at and as of the Effective Time, will be a
valid and legally binding agreement of the Surviving Company,
enforceable against the Issuer and, at and as of the Effective Time,
against the Surviving Company in accordance with its terms except (i)
that the enforcement hereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and
to general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (ii) as any rights to
indemnity or contribution hereunder may be limited by federal and state
securities laws and public policy considerations.
(f) The Indenture has been duly authorized by the Issuer and,
when executed and delivered by the Issuer (assuming the due
authorization, execution and delivery by the Trustee), will constitute
a valid and legally binding agreement of the Issuer, enforceable
against it in accordance with its terms except (i) that the enforcement
thereof may be subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and to
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (ii) as any rights to
indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
<PAGE> 16
-13-
(g) The Supplemental Indenture has been duly and validly
authorized by the Issuer and Glasstech. The Supplemental Indenture,
when executed and delivered by the Surviving Company (assuming the due
authorization, execution and delivery thereof by the Trustee), will be
duly executed and delivered and will constitute the valid and legally
binding obligation of the Surviving Company, enforceable against the
Surviving Company in accordance with its terms, except (i) that the
enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and
to general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (ii) as any rights to
indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
(h) The Registration Rights Agreement has been duly authorized
by the Issuer and (assuming the due authorization, execution and
delivery by the Initial Purchaser) is a valid and legally binding
agreement of the Issuer and, at and as of the Effective Time, will be a
valid and legally binding agreement of the Surviving Company,
enforceable against it in accordance with its terms except (i) that the
enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and
to general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (ii) as any rights to
indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
(i) The Notes have each been duly authorized by the Issuer
and, when executed by the Issuer and authenticated by the Trustee in
accordance with the provisions of the Indenture and delivered to and
paid for by the Initial Purchaser in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture and will
constitute valid and legally binding obligations of the Issuer and,
following the execution of the Supplemental Indenture, the Surviving
Company, enforceable in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to credi-
<PAGE> 17
-14-
tors' rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(j) The Exchange Notes and the Private Exchange Notes have
each been duly authorized by the Issuer and Glasstech and, when
executed by the Surviving Company and authenticated by the Trustee in
accordance with the provisions of the Registration Rights Agreement and
the Indenture, as amended by the Supplemental Indenture, will be
entitled to the benefits of the Indenture, as amended by the
Supplemental Indenture, and will constitute valid and legally binding
obligations of the Surviving Company, enforceable in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought.
(k) Immediately after the consummation of the Transactions
(including the use of proceeds from the sale of Notes at the Time of
Purchase), to the best of the Issuer's knowledge: (i) on a pro forma
basis, the fair value and present fair saleable value of the Surviving
Company's assets would exceed the Surviving Company's stated
liabilities and identified contingent liabilities; (ii) the Surviving
Company should be able to pay its debts as they become absolute and
mature; and (iii) the capital remaining in the Surviving Company after
the Transactions would not be unreasonably small for the business in
which the Surviving Company is engaged, as management has indicated it
is now conducted and is proposed to be conducted following the
consummation of the Transactions.
(l) Each of the Glasstech Entities has and, immediately after
the Effective Time, the Surviving Company will have all requisite
corporate power and authority to (i) execute, deliver and perform its
obligations under each of the Basic Documents (to the extent each is a
party thereto), (ii) execute, deliver and perform its obligations under
each of the Other Transaction Documents (to the extent each is a party
thereto), (iii) execute, deliver and perform its obligations under all
other agreements and instruments (to the extent each is a party
thereto) to be executed and delivered by each of them pursuant to or in
connection with each of the Basic Documents
<PAGE> 18
-15-
and the Other Transaction Documents, (iv) in the case of the Issuer,
issue the Notes and, in the case of Holding, issue the Warrants in the
manner and for the purpose contemplated by this Agreement and (v)
consummate each of the Transactions.
(m) Subsequent to the date as of which information is given in
the Final Memorandum to the date hereof, except as contemplated in the
Final Memorandum, there has not been (i) any event or condition that
has had or that could reasonably be expected to have a Material Adverse
Effect, (ii) any transaction entered into by any of the Glasstech
Entities or any of Glasstech's Subsidiaries, other than in the ordinary
course of business, that is material to the Glasstech Entities and
Glasstech's Subsidiaries, taken as a whole, or (iii) any dividend or
distribution of any kind declared, paid or made by any of the Glasstech
Entities on its capital stock.
(n) Except as set forth in the Final Memorandum, there is no
action, suit, investigation or proceeding, governmental or otherwise,
pending or, to the best knowledge of the Issuer, threatened to which
the Glasstech Entities or any of Glasstech's Subsidiaries is or would
be a party or of which the properties or assets of the Glasstech
Entities or any of Glasstech's Subsidiaries are or may be the subject
that (i) seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance and sale of the Notes by the Issuer or
any of the other transactions contemplated hereby, (ii) questions the
legality or validity of any such transactions or seeks to recover
damages or obtain other relief in connection with any such transactions
or (iii) could reasonably be expected to have a Material Adverse
Effect.
(o) The execution, delivery and performance by each of the
Glasstech Entities and, at and immediately after the Effective Time,
the Surviving Company of the Transaction Documents (to the extent each
is a party thereto), the issuance and sale by the Issuer and Holding of
the Securities, and the execution, delivery and performance by each of
the Glasstech Entities and, at and immediately
<PAGE> 19
-16-
after the Effective Time, the Surviving Company of all other agreements
and instruments (to the extent each is a party thereto) to be executed
and delivered by it pursuant hereto or thereto or in connection
herewith or therewith or in connection with any of the Transactions,
and compliance by each of the Glasstech Entities and, immediately after
the Effective Time, the Surviving Company with the terms and provisions
hereof and thereof, do not and will not (i) (assuming compliance with
all applicable state securities or "Blue Sky" laws) violate any
provision of any law, rule or regulation (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, decree, determination
or award presently in effect or in effect at the Effective Time having
applicability to any such party, (ii) conflict with or result in a
breach of or constitute a default under the certificate of
incorporation or by-laws (or similar organizational document) of any of
the Glasstech Entities or any of Glasstech's Subsidiaries or, at and
immediately after the Effective Time, the Surviving Company, or, as of
the Effective Time, any indenture or loan or credit agreement, or any
other material agreement or instrument, to which any Glasstech Entity
or the Surviving Company or any of its Subsidiaries is a party or by
which any Glasstech Entity or the Surviving Company or any of its
Subsidiaries or any of their respective properties or assets may be
bound or affected, or (iii) except as contemplated by the Basic
Documents or the Revolving Credit Facility, result in, or require the
creation or imposition of, any Lien upon or with respect to any of the
properties or assets now owned or hereafter acquired by the Issuer or
any of its Subsidiaries, except, in each case, where such violation,
conflict, default or creation or imposition of any Lien would not
(individually or in the aggregate) be reasonably likely to have a
Material Adverse Effect.
(p) Each of the Other Transaction Documents and each agreement
or instrument (other than the Basic Documents) executed and delivered
by each of the Glasstech Entities and, at and immediately after the
Effective Time, the Surviving Company in connection with the Basic
Documents and the Transactions (to the extent each is a party thereto)
has been duly and validly authorized, and, when executed and delivered
by it, will constitute a valid and legally binding obligation
enforceable against it in accordance with its terms, except (i) that
the enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and
to general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (ii) as any rights to
indemnity and
<PAGE> 20
-17-
contribution hereunder and thereunder may be limited by applicable law.
(q) None of the Glasstech Entities or any of Glasstech's
Subsidiaries is currently or, immediately after the Effective Time,
will be, and neither the Surviving Company nor any of its Subsidiaries,
immediately after the Effective Time, will be, (i) in violation of its
respective certificate of incorporation or by-laws (or similar
organizational document (including any partnership agreement or
certificate of limited partnership)), (ii) in default (nor will an
event occur which with notice or passage of time or both would
constitute such a default) under or in violation of any indenture or
loan or credit agreement or any other material agreement or instrument
to which it is a party or by which it or any of its properties or
assets may be bound or affected (except as set forth in the Final
Memorandum), (iii) in violation of any order of any court, arbitrator
or governmental body, or (iv) (assuming compliance with all applicable
state securities or "Blue Sky" laws) in violation of or will have
violated any statute, rule or regulation of any governmental authority,
except in each case, which default or violation (individually or in the
aggregate) could reasonably be expected to (y) affect the legality,
validity or enforceability of any of the Basic Documents in any
material respect or (z) have a Material Adverse Effect.
(r) Except as set forth in the Final Memorandum, and assuming
the accuracy of the Initial Purchaser's representations and warranties
set forth in Section 3.2 hereof, and the due performance by the Initial
Purchaser of the covenants and agreements set forth in Section 3.2
hereof, no authorization, consent, approval, license, qualification or
formal exemption from, nor any filing, declaration or registration
with, any court, governmental agency or regulatory authority or any
securities exchange is required in connection with the execution,
delivery or performance by any Glasstech Entity or, at and immediately
after the Effective Time, the Surviving Company or any of its
Subsidiaries (to the extent they are a party thereto) of any of the
Basic Documents or any of the Other Transaction Documents, except (i)
as may be required under state securities or "blue sky" laws or the
laws of any foreign jurisdiction in connection with the offer and sale
of the Notes or (ii) as would not (individually or in the aggregate) be
reasonably likely to have a Material Adverse Effect. All such
authorizations, consents, approvals, li-
<PAGE> 21
-18-
censes, qualifications, exemptions, filings, declarations and
registrations set forth in the Final Memorandum (other than as
disclosed therein) which are required to have been obtained by the date
hereof have been obtained or made, as the case may be, and are in full
force and effect and not the subject of any pending or, to the
knowledge of the Issuer, threatened attack by appeal or direct
proceeding or otherwise.
(s) The Issuer is not, and immediately after the execution of
the Supplemental Indenture, the Surviving Company will not be, an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(t) (i) No Reportable Event (as defined in Section 4043 of
ERISA) has occurred during the five-year period prior to the date on
which this representation is made with respect to any Employee Benefit
Plan (as defined in Section 3(3) of ERISA), (ii) Glasstech and its
Subsidiaries have complied in all material respects with the applicable
provisions of ERISA and the code in connection with each Employee
Benefit Plan, (iii) neither Glasstech nor any person or entity treated
with Glasstech as a single employer under Section 414 of ERISA (a
"COMMONLY CONTROLLED ENTITY") has had a complete or partial withdrawal
from any Multiemployer Plan (as defined in ERISA), (iv) neither
Glasstech nor any Commonly Controlled Entity would become subject to
any liability under ERISA if Glasstech or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this
representation is made, and (v) no such Multiemployer Plan is in
reorganization or insolvent, which, in any such case under clause (i),
(ii), (iii), (iv) or (v), individually or in the aggregate, will result
in a Material Adverse Effect.
(u) At and as of the Effective Time, the Surviving Company
will have good and marketable title to all real property and good title
to all personal property described in the Final Memorandum as being
owned by it and good and marketable title to a leasehold estate in the
real and personal property described in the Final Memorandum as being
leased by it free and clear of all liens, charges, encumbrances or
restrictions, except as described in the Final Memorandum or to the
extent the failure to have such title or the existence of such liens,
charges, encum-
<PAGE> 22
-19-
brances or restrictions would not, individually or in the
aggregate, have a Material Adverse Effect. All leases, contracts and
agreements to which any Glasstech Entity is or, at and as of the
Effective Time, the Surviving Company will be, a party or by which any
of them is bound are valid and enforceable against such party, and are
valid and enforceable against the other party or parties thereto and
are in full force and effect with only such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect.
(v) No form of general solicitation or general advertising was
used by any Glasstech Entity or any of Glasstech's Subsidiaries or any
of their respective representatives in connection with the offer and
sale of the Notes. None of the Glasstech Entities or any of Glasstech's
Subsidiaries nor any Person authorized to act for any of them has,
either directly or indirectly, sold or offered for sale any of the
Notes or any other similar security of the Issuer to, or solicited any
offers to buy any thereof from, or has otherwise approached or
negotiated in respect thereof with, any Person or Persons other than
with or through the Initial Purchaser; and the Issuer agrees that none
of the Glasstech Entities or any of Glasstech's Subsidiaries and, at
and as of the Effective Time, the Surviving Company, or any Person
acting on its or their behalf will sell or offer for sale any
Securities to, or solicit any offers to buy any Securities from, or
otherwise approach or negotiate in respect thereof with, any Person or
Persons so as thereby to bring the issuance or sale of any of the
Securities within the provisions of Section 5 of the Act.
(w) All tax returns required to be filed by the Glasstech
Entities or any of Glasstech's Subsidiaries in any jurisdiction
(including foreign jurisdictions) have been duly filed and all taxes,
assessments, fees and other charges including, without limitation,
withholding taxes, penalties and interest ("TAXES") due or claimed to
be due have been paid, other than those Taxes being contested in good
faith and for which adequate reserves or accruals have been established
in accordance with generally accepted accounting principles, except
where the failure to file such returns or to pay such Taxes is not
reasonably likely to have, singly or in the aggregate, a Material
Adverse Effect. The Issuer knows of no actual or proposed additional
tax assessments for any fiscal period against the Glasstech Entities or
any of Glasstech's Subsidiaries
<PAGE> 23
-20-
or, immediately after the Effective Time, the Surviving Company and its
Subsidiaries that, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect.
(x) Glasstech and its Subsidiaries own or possess and, at and
as of the Effective Time, the Surviving Company and its Subsidiaries
will own or possess, the patents, patent rights, licenses, inventions,
trademarks, service marks, trade names, copyrights and know-how,
including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures
(collectively, the "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct
the businesses now or proposed to be operated by it as described in the
Final Memorandum, except as would not, individually or in the
aggregate, have a Material Adverse Effect, and none of the Glasstech
Entities or Glasstech's Subsidiaries has and, at and as of the
Effective Time, the Surviving Company or its Subsidiaries will not
have, received any notice of infringement of or conflict with (or know
of any such infringement of or conflict with) alleged rights of others
with respect to any Intellectual Property Rights which, if such alleged
infringement or conflict were sustained, would have a Material Adverse
Effect.
(y) Each of the Transactions and the Transaction Documents
conform in all material respects to the descriptions thereof in the
Final Memorandum.
(z) Assuming the accuracy of the Initial Purchaser's
representations and warranties set forth in Section 3.2 hereof, and the
due performance by the Initial Purchaser of the covenants and
agreements set forth in Section 3.2 hereof, the offer and sale of the
Securities to the Initial Purchaser in the manner contemplated by this
Agreement and the Memorandum does not require registration under the
Act and the Indenture does not require qualification under the Trust
Indenture Act of 1939, as amended.
(aa) Except as described in the Final Memorandum, each of the
Glasstech Entities and Glasstech's Subsidiaries is and, at and as of
the Effective Time, the Surviving Company and each of its Subsidiaries
will be, in compliance with all federal, state, local and foreign laws,
and any rules, regulations, orders, decrees, judgments or injunctions
issued or promulgated thereunder relating to pollution and protection
of public and employee health and
<PAGE> 24
-21-
the environment ("ENVIRONMENTAL LAW") and with the terms and conditions
of any permit, license or approval required thereunder in connection
with the ownership, operation or use of its business, property and
assets where the failure to be in such compliance could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect; except as disclosed in the Final Memorandum, and to the
knowledge of the Issuer, none of the Glasstech Entities or Glasstech's
Subsidiaries is, and at and as of the Effective Time none of the
Surviving Company or its Subsidiaries will be, subject to any
liability, absolute or contingent, under any Environmental Law which
liability would, individually or in the aggregate, be reasonably likely
to result in a Material Adverse Effect; except as disclosed in the
Final Memorandum, there is no civil, criminal or administrative action,
suit, demand, hearing, notice of violation or deficiency,
investigation, proceeding or notice of potential responsibility or
liability or demand letter or request for information pending or, to
the knowledge of the Issuer, threatened against any of the Glasstech
Entities or any of Glasstech's Subsidiaries under any Environmental Law
which, if determined adversely to such Glasstech Entity or any such
Subsidiary, would, individually or in the aggregate, be reasonably
likely to result in a Material Adverse Effect.
(bb) Except as set forth in the Final Memorandum, there is no
strike, labor dispute, slowdown or work stoppage with the employees of
Glasstech or any of its Subsidiaries which is pending or, to the best
knowledge of the Issuer, threatened.
(cc) Each of the Glasstech Entities and Glasstech's
Subsidiaries carry and, immediately after the Effective Time, each of
the Surviving Company and its Subsidiaries will carry, insurance
(including self insurance) in such amounts and covering such risks as
in its reasonable determination is adequate for the conduct of its
business and the value of its properties.
(dd) No securities of any Glasstech Entity or any of
Glasstech's Subsidiaries are and, upon execution of the Supplemental
Indenture, no securities of the Surviving Company or any of its
Subsidiaries will be, of the same class (within the meaning of Rule
144A under the Act) as the Securities and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or
quoted in a U.S. automated inter-dealer quotation system.
<PAGE> 25
-22-
(ee) None of the Glasstech Entities or any of Glasstech's
Subsidiaries has taken, nor will any of them take, nor, after the
Effective Time, will the Surviving Company or any of its Subsidiaries
take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities.
(ff) None of the Glasstech Entities or Glasstech's
Subsidiaries, any of their respective Affiliates or any person acting
on its or their behalf (other than the Initial Purchaser) has engaged
in any directed selling efforts (as that term is defined in Regulation
S under the Act ("REGULATION S") with respect to the Securities and
each of the Glasstech Entities and Glasstech's Subsidiaries and their
respective Affiliates and any person acting on its or their behalf
(other than the Initial Purchaser) have acted in accordance with the
offering restrictions requirement of Regulation S.
(gg) Each of the Glasstech Entities has duly authorized each
of the Transactions.
(hh) The Surviving Company will have all requisite corporate
power and authority to execute, deliver and perform its obligations
under the Revolving Credit Facility and to consummate the transactions
contemplated thereby. The Revolving Credit Facility has been duly
authorized by the Issuer and Glasstech and, when executed and delivered
by the Surviving Company, will constitute a valid and legally binding
agreement of the Surviving Company, enforceable against the Surviving
Company in accordance with its terms, except (i) that the enforcement
thereof may be subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and to
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (ii) as any rights to
indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
(ii) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Issuer
believes to be reliable and accurate or represents the Issuer's good
faith estimates that are made on the basis of data derived from such
sources.
<PAGE> 26
-23-
(jj) Except as stated in the Final Memorandum, the Issuer does
not know of any claims for services, either in the nature of a finder's
fee or financial advisory fee, with respect to the offering of the
Notes and the transactions contemplated by the Final Memorandum.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF HOLDING. Holding
represents and warrants to and agrees with the Initial Purchaser as follows:
(a) This Agreement has been duly authorized, executed and
delivered by Holding and (assuming the due authorization, execution and
delivery by the Initial Purchaser) is a valid and legally binding
agreement of Holding enforceable against Holding in accordance with its
terms except (i) that the enforcement hereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and to general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought and (ii) as any rights to indemnity or contribution hereunder
may be limited by federal and state securities laws and public policy
considerations.
(b) Holding has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Warrant
Agreement, the Units and the Warrants; the Warrant Agreement has been
duly authorized by Holding and, when executed and delivered by Holding
(assuming the due authorization, execution and delivery by the Warrant
Agent), will constitute a valid and legally binding agreement of
Holding, enforceable against Holding in accordance with its terms
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of any court before
which any proceeding therefor may be brought.
(c) The Warrants have been duly and validly authorized by
Holding and, when executed by Holding and countersigned by the Warrant
Agent in accordance with the provisions of the Warrant Agreement, and
delivered to and paid for by the Initial Purchaser in accordance with
the terms hereof, will be entitled to the benefits of the Warrant
Agreement and will constitute valid and binding obliga-
<PAGE> 27
-24-
tions of Holding enforceable in accordance with their terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of any court before
which any proceeding therefor may be brought.
(d) When issued in accordance with the terms and conditions
contained in the Warrant Agreement upon exercise of the Warrants, the
Warrant Shares so exercised will be duly authorized, validly issued,
fully paid and non-assessable and will not be subject to any preemptive
or similar rights. The Warrant Shares have been duly reserved for
issuance in accordance with the terms of the Warrants and the Warrant
Agreement.
(e) The Common Stock Registration Rights Agreement has been
duly authorized by Holding and (assuming the due authorization,
execution and delivery by the Initial Purchaser) is a valid and legally
binding agreement of Holding, enforceable against it in accordance with
its terms except (i) that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and to general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought and (ii) as any rights to indemnity or contribution thereunder
may be limited by federal and state securities laws and public policy
considerations.
(f) Holding is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Section 3.3. RESALE OF SECURITIES. The Initial Purchaser represents and
warrants that it is a "qualified institutional buyer" as defined in Rule 144A
under the Act ("QIB"). The Initial Purchaser agrees with Holding and the Issuer
that it (a) has not and will not, directly or indirectly, solicit offers for, or
offer or sell, the Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act; (b) has not and will not, directly or indirectly, engage in any "directed
selling efforts" (as defined in Regulation S under the Act); and (c) has
solicited
<PAGE> 28
-25-
and will solicit offers for the Securities only from, and will offer the
Securities only to (A) in the case of offers inside the United States, (i)
Persons whom the Initial Purchaser reasonably believes to be QIBs or, if any
such Person is buying for one or more institutional accounts for which such
Person is acting as fiduciary or agent, only when such Person has represented to
the Initial Purchaser that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A or (ii) a limited number of other
institutional investors reasonably believed by the Initial Purchaser to be
"Accredited Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of the
Act) that, prior to their purchase of the Notes, deliver to the Initial
Purchaser a letter containing the representations and agreements set forth in
Annex 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)); PROVIDED, HOWEVER, that, in the case of this clause (B), in
purchasing such Notes such Persons are deemed to have represented and agreed as
provided under the caption "Notice to Investors" contained in the Final
Memorandum.
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
Section 4.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INITIAL
PURCHASER. The obligation of the Initial Purchaser to purchase the Securities to
be purchased by it hereunder is subject to the satisfaction of the following
conditions:
(a) The Initial Purchaser shall have received, at the Time of
Purchase, a signed opinion of Baker & Hostetler LLP, as counsel to
Holding and the Issuer, substantially in the form of EXHIBIT 1 hereto,
dated the Time of Purchase and addressed to the Initial Purchaser and
satisfactory to counsel for the Initial Purchaser.
(b) The Initial Purchaser shall have received, at the Time of
Purchase, a signed opinion of Cahill Gordon & Reindel, counsel to the
Initial Purchaser, substantially in the form of EXHIBIT 2 hereto, dated
the Time of Pur-
<PAGE> 29
-26-
chase and addressed to the Initial Purchaser and satisfactory to the
Initial Purchaser.
In rendering such opinions in accordance with Sections 4.1(a)
and (b), each such counsel may rely as to factual matters upon
certificates or other documents furnished by officers and directors of
the Glasstech Entities and representations of the Initial Purchaser and
by government officials, and upon such other documents as such counsel
deem appropriate as a basis for their opinion. Each such counsel may
specify the jurisdictions in which it is admitted to practice and that
it is not admitted to practice in any other jurisdiction or an expert
in the law of any other jurisdiction. To the extent such opinion
concerns the laws of any other such jurisdiction such counsel may rely
upon the opinion of counsel (satisfactory to the Initial Purchaser)
admitted to practice in such jurisdiction. Any opinion relied upon by
such counsel as aforesaid shall be delivered to the Initial Purchaser
together with the opinion of such counsel, which opinion shall state
that such counsel believes that their and the Initial Purchaser's
reliance thereon is justified.
(c) The Initial Purchaser shall have received from Ernst &
Young a comfort letter or letters dated the date hereof and the Time of
Purchase in form and substance reasonably satisfactory to counsel to
the Initial Purchaser.
(d) The representations and warranties made by Holding and the
Issuer herein shall be true and correct in all material respects
(except for changes expressly provided for in this Agreement) on and as
of the Time of Purchase with the same effect as though such
representations and warranties had been made on and as of the Time of
Purchase, each of the Glasstech Entities shall have complied in all
material respects with all agreements as set forth in or contemplated
hereunder and in the other Basic Documents required to be performed by
it at or prior to the Time of Purchase.
(e) Subsequent to the date of the Final Memorandum, (i) there
shall not have been any change, or any development involving a
prospective change, which has had or could be reasonably likely to have
a Material Adverse Effect, and (ii) the Glasstech Entities and
Glasstech's Subsidiaries shall have conducted their respective
businesses only in the ordinary course.
<PAGE> 30
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(f) At the Time of Purchase and after giving effect to the
consummation of the transactions contemplated by this Agreement and the
other Basic Documents, there shall exist no Default or Event of
Default.
(g) The purchase of and payment for the Securities by the
Initial Purchaser hereunder shall not be prohibited or enjoined
(temporarily or permanently) by any applicable law or governmental
regulation (including, without limitation, Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System).
(h) At the Time of Purchase, the Initial Purchaser shall have
received a certificate, dated the Time of Purchase, from the
appropriate officer of each of the Glasstech Entities stating that the
conditions specified in Sections 4.1(d), (e), (f) and (l) have been
satisfied or duly waived at the Time of Purchase.
(i) Each of the Basic Documents shall be reasonably
satisfactory in form and substance to the Initial Purchaser and shall
have been executed and delivered by all the respective parties thereto
and shall be in full force and effect.
(j) All proceedings taken in connection with the issuance of
the Securities and the transactions contemplated by this Agreement, the
other Basic Documents and all documents and papers relating thereto
shall be reasonably satisfactory to the Initial Purchaser and counsel
to the Initial Purchaser. The Initial Purchaser and counsel to the
Initial Purchaser shall have received copies of such papers and
documents as they may reasonably request in connection therewith, all
in form and substance reasonably satisfactory to them.
(k) The Issuer shall have furnished to the Initial Purchaser
the form of Revolving Credit Facility and a true and correct executed
copy of the Merger Agreement including all schedules and exhibits
thereto.
(l) The sale of the Securities hereunder shall not have been
enjoined (temporarily or permanently) at the Time of Purchase.
(m) There shall not have been any announcement by any
"nationally recognized statistical rating organization," as defined for
purposes of Rule 436(g) under the
<PAGE> 31
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Act, that (A) it is downgrading its rating assigned to any debt
securities of Glasstech, or (B) it is reviewing its rating assigned to
any debt securities of Glasstech with a view to possible downgrading,
or with negative implications, or direction not determined.
(n) At the Time of Purchase, each Glasstech Entity shall have,
to the extent it is a party thereto, complied in all material respects
with all agreements and covenants in the Transaction Documents and
performed all conditions specified therein (other than agreements or
covenants which have been waived but only if such waivers are not
required to be set forth in the Final Memorandum) to be complied with
or performed at or prior to the Time of Purchase, and each of the
Transaction Documents shall be in full force and effect.
(o) At the Time of Purchase, the Initial Purchaser shall have
received copies of all certificates, documents and opinions, reasonably
requested by the Initial Purchaser, delivered by any of the Glasstech
Entities or any of their counsels and such other certificates,
documents and opinions reasonably obtainable by the Glasstech Entities
under the Transaction Documents in connection with any of the
Transactions, together with letters addressed to the Initial Purchaser,
stating that the Initial Purchaser may rely on such certificates and
opinions as if they had been addressed to the Initial Purchaser.
(p) Each of the Transactions (other than the Offering) shall
have been consummated, or shall be consummated simultaneously with the
Offering, on the terms and conditions set forth in the Transaction
Documents in the forms previously delivered to the Initial Purchaser
and to which it shall not have reasonably objected.
(q) At the Effective Time, a certificate of merger with
respect to the Merger shall have been filed with the Secretary of State
of the State of Delaware.
(r) At the Time of Purchase, the Surviving Company shall have
executed and delivered to the Initial Purchaser an agreement, in such
form as is satisfactory to the Initial Purchaser, assuming the
obligations of the Issuer under this Agreement, the Indenture and the
Notes.
(s) The Initial Purchaser shall have received, in the form and
substance satisfactory to the Initial Pur-
<PAGE> 32
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chaser and dated the Time of Purchase, a signed report of Brooks &
Kushman, special patent counsel to Glasstech, substantially in the form
of EXHIBIT 3 hereto.
(t) Glasstech shall have received an opinion, in form and
substance satisfactory to the Initial Purchaser and counsel for the
Initial Purchaser and dated the Time of Purchase, of Houlihan, Lokey,
Howard & Zukin, Inc., with respect to the solvency of the Surviving
Company.
(u) The redemption of the Existing Notes shall have been
consummated or shall be consummated simultaneously with the Offering.
(v) The Trustee shall have received letters, addressed to the
Trustee, from Baker & Hostetler LLP to the effect that their respective
opinions delivered in accordance with Section 4.1(a) may be relied upon
by the Trustee as though the same were delivered to it.
(w) The Initial Purchaser shall have sold 70,000 Units in
accordance with the provisions of Section 3.3 hereof.
On or before the Closing, the Initial Purchaser and counsel to the
Initial Purchaser shall have received such further documents, opinions,
certificates and schedules or other instruments relating to the business,
corporate, legal and financial affairs of the Glasstech Entities and Glasstech's
Subsidiaries as they may reasonably request.
ARTICLE V
COVENANTS
---------
Section 5.1. COVENANTS OF HOLDING AND THE ISSUER. Holding and the
Issuer jointly and severally covenant and agree with the Initial Purchaser that:
(a) Neither Holding nor the Issuer nor, after the
Effective Time, the Surviving Company will amend or supplement the
Final Memorandum or any amendment or supplement thereto of which the
Initial Purchaser shall not previously have been advised and
furnished a copy for a reasonable period of time prior to the
proposed amendment or supplement and as to which the Initial
Purchaser shall not have given its consent, which consent shall not
be unrea-
<PAGE> 33
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sonably withheld. Holding and the Issuer and, after the Effective
Time, the Surviving Company will promptly, upon the reasonable
request of the Initial Purchaser or counsel to the Initial Purchaser,
make any amendments or supplements to the Preliminary Memorandum or
the Final Memorandum that may be necessary or advisable in the
opinion of the Initial Purchaser or counsel to the Initial Purchaser
in connection with the resale of the Notes by the Initial Purchaser.
(b) Holding and the Issuer and, after the Effective Time,
the Surviving Company will cooperate with the Initial Purchaser in
arranging for the qualification of the Securities for offering and
sale under the securities or "Blue Sky" laws of such jurisdictions as
the Initial Purchaser may designate and will continue such
qualifications in effect for as long as may be reasonably necessary
to complete the resale of the Securities; PROVIDED, HOWEVER, that in
connection therewith, Holding and the Issuer and, after the Effective
Time, the Surviving Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of
process in any jurisdiction or subject itself to taxation in any such
jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchaser of the Securities, the Exchange
Notes or the Private Exchange Notes, any event occurs or information
becomes known as a result of which the Final Memorandum as then
amended or supplemented would include 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, or if for any other reason it is
necessary at any time to amend or supplement the Final Memorandum to
comply with applicable law, Holding and the Issuer and, after the
Effective Time, the Surviving Company will promptly notify the
Initial Purchaser thereof (who thereafter will not use such Final
Memorandum until appropriately amended or supplemented) and will
prepare, at the expense of Holding and the Issuer and, after the
Effective Time, the Surviving Company, an amendment or supplement to
the Final Memorandum that corrects such statement or omission or
effects such compliance; PROVIDED, HOWEVER, that Holding's and the
Issuer's and, after the Effective Time, the Surviving Company's
respective obligations hereunder shall not be applicable to the
extent resale by the Initial Purchaser may be accomplished pursu-
<PAGE> 34
-31-
ant to a Registration Statement or Registration Statements (as
defined in the Registration Rights Agreement).
(d) The Issuer and, after the Effective Time, the
Surviving Company will, without charge, provide to the Initial
Purchaser and to counsel to the Initial Purchaser as many copies of
the Preliminary Memorandum and the Final Memorandum or any amendment
or supplement thereto as the Initial Purchaser may reasonably
request.
(e) The Surviving Company will apply the net proceeds from
the sale of the Notes as set forth under "Use of Proceeds" in the
Final Memorandum.
(f) From the Time of Purchase through the period ending on
the date no Notes are outstanding, the Surviving Company will furnish
to the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by the Surviving
Company to the Trustee or the holders of the Notes and, promptly
after available, copies of any reports or financial statements
furnished to or filed by the Surviving Company with the Commission or
any national securities exchange on which any class of securities of
the Surviving Company may be listed.
(g) Prior to the Time of Purchase, the Issuer will furnish
to the Initial Purchaser, as soon as they have been prepared, a copy
of any unaudited interim financial statements of Glasstech and its
Subsidiaries for any period subsequent to the period covered by the
most recent financial statements appearing in the Final Memorandum.
(h) None of Holding, the Issuer and, after the Effective
Time, the Surviving Company or 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 Act) which
could be integrated with the sale of the Securities in a manner which
would require the registration under the Act of the Securities.
(i) Holding and the Issuer will not, and will not permit
any of the respective Subsidiaries to, and, after the Effective Date,
the Surviving Company will not, and will not permit any of its
Subsidiaries to, 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 Act)
or
<PAGE> 35
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in any manner involving a public offering within the meaning of
Section 4(2) of the Act.
(j) For so long as any of the Securities remain
outstanding and are "restricted securities" within the meaning of
Rule 144(a)(3) under the Act and not salable in full under Rule 144
under the Act (or any successor provision), Holding, in the case of
the Units and Warrants, and the Surviving Company, in the case of the
Notes, will make available, upon request, to any seller of such
Securities the information specified in Rule 144A(d)(4) under the
Act, unless Holding or the Surviving Company, as the case may be, is
then subject to Section 13 or 15(d) of the Exchange Act.
(k) Each of Holding and the Issuer will use its best
efforts to (i) permit the Securities to be included for quotation on
PORTAL and (ii) permit the Securities to be eligible for clearance
and settlement through The Depository Trust Company.
(l) Each of Holding and the Issuer and, after the
Effective Time, the Surviving Company will use its best efforts to do
and perform all things required to be done and performed by it under
this Agreement and the other Basic Documents prior to or after the
Closing and to satisfy all conditions precedent on its part to the
obligations of the Initial Purchaser to purchase and accept delivery
of the Securities.
ARTICLE VI
FEES
----
Section 6.1. COSTS, EXPENSES AND TAXES. Holding and the Issuer
jointly and severally agree to pay and, after the Effective Time, the Surviving
Company will pay, upon consummation of the Offering, all costs and expenses
incident to the performance of their obligations under this Agreement,
including, but not limited to, all costs and expenses incident to (i) its
negotiation, preparation, printing, typing, reproduction, execution and delivery
of this Agreement and each of the other Basic Documents, any amendment or
supplement to or modification of any of the foregoing and any and all other
documents furnished pursuant hereto or thereto or in connection herewith or
therewith, (ii) any costs of printing the Preliminary Memorandum and the Final
Memorandum and any amend-
<PAGE> 36
-33-
ment or supplement thereto, any other marketing related materials and any "Blue
Sky" memoranda (which shall include the reasonable disbursements of counsel to
the Initial Purchaser in respect thereof), (iii) all arrangements relating to
the delivery to the Initial Purchaser of copies of the foregoing documents, (iv)
the fees and disbursements of the counsel, the accountants and any other experts
or advisors retained by the Glasstech Entities and of Cahill Gordon & Reindel,
counsel for the Initial Purchaser, (v) preparation (including printing),
issuance and delivery to the Initial Purchaser of the Notes, (vi) the
qualification of the Notes under state securities and "Blue Sky" laws, including
filing fees and reasonable fees and disbursements of counsel to the Initial
Purchaser relating thereto, (vii) its expenses and the cost of any private or
chartered jets in connection with any meetings with prospective investors in the
Notes, (viii) fees and expenses of the Trustee including fees and expenses of
counsel to the Trustee, (ix) all expenses and listing fees incurred in
connection with the application for quotation of the Notes on PORTAL, (x) any
fees charged by investment rating agencies for the rating of the Notes and (xi)
except as limited by Article VII, all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses), if any, in connection with
the enforcement of this Agreement, the Securities or any other agreement
furnished pursuant hereto or thereto or in connection herewith or therewith. In
addition, Holding and the Issuer and, after the Effective Time, the Surviving
Company shall pay any and all stamp, transfer and other similar taxes (but
excluding any income, franchise, personal property, ad valorem or gross receipts
taxes) payable or determined to be payable in connection with the execution and
delivery of this Agreement, any of the other Basic Documents or the issuance of
the Securities, and shall save and hold the Initial Purchaser harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying, or omission to pay, such taxes (other than if such delay is caused by
the Initial Purchaser).
ARTICLE VII
INDEMNITY
---------
Section 7.1. INDEMNITY.
(a) INDEMNIFICATION BY HOLDING AND THE ISSUER. Each of Holding and
the Issuer jointly and severally agrees and covenants to and, after the
Effective Time, the Surviving
<PAGE> 37
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Company will, hold harmless and indemnify the Initial Purchaser and any
Affiliates thereof (including any director, officer, employee, agent or
controlling Person of any of the foregoing) from and against any losses, claims,
damages, liabilities and expenses (including expenses of investigation) to which
the Initial Purchaser and its Affiliates may become subject arising out of or
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Memorandum and any amendments or supplements thereto, the Basic
Documents, any documents filed with the Commission or any State Commission
(collectively, the "OFFERING MATERIALS") or arising out of or based upon the
omission or alleged omission to state in any of the Offering Materials a
material fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that Holding and the Issuer and,
after the Effective Time, the Surviving Company shall not be liable under this
paragraph (a) to the extent that such losses, claims, damages or liabilities
arose out of or are based upon an untrue statement or omission made in any of
the documents referred to in this paragraph (a) in reliance upon and in
conformity with the information relating to the Initial Purchaser furnished in
writing by the Initial Purchaser for inclusion therein (or for a breach by the
Initial Purchaser of any representation or warranty contained in this
Agreement), PROVIDED, FURTHER, that Holding and the Issuer and, after the
Effective Time, the Surviving Company shall not be liable under this paragraph
(a) to the extent that such losses, claims, damages or liabilities arose out of
or are based upon an untrue statement or omission made in any Preliminary
Memorandum that is corrected in the Final Memorandum (or any amendment or
supplement thereto) if the person asserting such loss, claim, damage or
liability purchased Securities from the Initial Purchaser in reliance on such
Preliminary Memorandum and was not given the Final Memorandum (or any amendment
or supplement thereto) on or prior to the confirmation of the sale of such
Notes. Holding and the Issuer and, after the Effective Time, the Surviving
Company further agree to reimburse the Initial Purchaser for any reasonable
legal and other expenses as they are incurred by it in connection with
investigating, preparing to defend or defending any lawsuits, claims or other
proceedings or investigations arising in any manner out of or in connection with
such Person being the Initial Purchaser; PROVIDED that if Holding and the Issuer
and, after the Effective Time, the Surviving Company reimburse the Initial
Purchaser hereunder for any expenses incurred in connection with a lawsuit,
claim or other proceeding for which indemnification is sought, the Initial
Purchaser hereby agrees to refund such reimbursement of expenses to the extent
that
<PAGE> 38
-35-
the losses, claims, damages or liabilities arise out of or are based upon an
untrue statement or omission made in any of the documents referred to in this
paragraph (a) in reliance upon and in conformity with the information relating
to the Initial Purchaser furnished in writing by the Initial Purchaser for
inclusion therein (or for a breach by the Initial Purchaser of any
representation or warranty contained in this Agreement). Holding and the Issuer
and, after the Effective Time, the Surviving Company further agree that the
indemnification, contribution and reimbursement commitments set forth in this
Article VII shall apply whether or not the Initial Purchaser is a formal party
to any such lawsuits, claims or other proceedings. The indemnity, contribution
and expense reimbursement obligations of Holding and the Issuer under this
Article VII shall be in addition to any liability Holding and the Issuer may
otherwise have.
(b) INDEMNIFICATION BY THE INITIAL PURCHASER. The Initial Purchaser
agrees and covenants to hold harmless and indemnify Holding and the Issuer and,
after the Effective Time, the Surviving Company and any Affiliates thereof
(including any director, officer, employee, agent or controlling Person of any
of the foregoing) from and against any losses, claims, damages, liabilities and
expenses insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement of any material fact contained in
the Offering Materials, or any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or omission was made in reliance upon and in conformity with the
information relating to the Initial Purchaser furnished in writing by the
Initial Purchaser for inclusion therein. The indemnity, contribution and expense
reimbursement obligations of the Initial Purchaser under this Article VII shall
be in addition to any liability the Initial Purchaser may otherwise have.
(c) PROCEDURE. If any Person shall be entitled to indemnity hereunder
(each an "INDEMNIFIED PARTY"), such Indemnified Party shall give prompt written
notice to the party or parties from which such indemnity is sought (each an
"Indemnifying Party") of the commencement of any action, suit, investigation or
proceeding, governmental or otherwise (a "PROCEEDING"), with respect to which
such Indemnified Party seeks indemnification or contribution pursuant hereto;
PROVIDED, HOWEVER, that the failure so to notify the Indemnifying Parties shall
not relieve the Indemnifying Parties from any
<PAGE> 39
-36-
obligation or liability except to the extent that the Indemnifying Parties have
been prejudiced materially by such failure. The Indemnifying Parties shall have
the right, exercisable by giving written notice to an Indemnified Party promptly
after the receipt of written notice from such Indemnified Party of such
Proceeding, to assume, at the Indemnifying Parties' expense, the defense of any
such Proceeding, with counsel reasonably satisfactory to such Indemnified Party;
PROVIDED, HOWEVER, that an Indemnified Party or parties (if more than one such
Indemnified Party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or parties unless: (1) the Indemnifying Parties agree to
pay such fees and expenses; or (2) the Indemnifying Parties fail promptly to
assume the defense of such Proceeding or fail to employ counsel reasonably
satisfactory to such Indemnified Party or parties; or (3) the named parties to
any such Proceeding (including any impleaded parties) include both such
Indemnified Party or parties and the Indemnifying Party or an Affiliate of the
Indemnifying Party and such Indemnified Parties, and the Indemnified Parties
shall have been advised in writing by counsel that there may be one or more
legal defenses available to such Indemnified Party or parties that are different
from or additional to those available to the Indemnifying Parties, in which
case, if such Indemnified Party or parties notifies the Indemnifying Parties in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Parties, the Indemnifying Parties shall not have the right to
assume the defense thereof with respect to the Indemnified Parties and such
counsel shall be at the expense of the Indemnifying Parties, it being
understood, however, that the Indemnifying Parties shall not, in connection with
any one such Proceeding or separate but substantially similar or related
Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such Indemnified Party or parties, or for fees and expenses that are
not reasonable. No Indemnified Party or Parties will settle any Proceeding
without the consent of the Indemnifying Party or parties (but such consent shall
not be unreasonably withheld). 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
<PAGE> 40
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release of such Indemnified Party from all liability or claims that are the
subject of such Proceeding.
Section 7.2. CONTRIBUTION. If for any reason the indemnification
provided for in Section 7.1 of this Agreement is unavailable to an Indemnified
Party, or insufficient to hold it harmless, in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other, but
also the relative fault of the Indemnifying and Indemnified Parties in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Indemnifying and
Indemnified Parties shall be deemed to be in the same proportion as the total
proceeds from the offering of the Securities (before deducting expenses, but
after giving effect to the Initial Purchaser's discount) received by the Issuer
bear to the total discounts and commissions received by the Initial Purchaser.
The relative fault of the Indemnifying and Indemnified 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 Indemnifying or
Indemnified Parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses incurred by such party in connection with investigating or
defending any such claim.
Holding and the Issuer and the Initial Purchaser agree that it would
not be just and equitable if contribution pursuant to the immediately preceding
paragraph were determined pro rata or per capita or by any other method of
allocation which does not take into account the equitable considerations
referred to in such paragraph. Notwithstanding any other provision of this
Section 7.2, the Initial Purchaser shall not be obligated to make contributions
hereunder that in the aggregate exceed the total discounts, commissions and
other compensation received by the Initial Purchaser under this Agreement, less
<PAGE> 41
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the aggregate amount of any damages that the Initial Purchaser has otherwise
been required to pay by reason of the untrue or alleged untrue statements or a
breach of a representation or warranty or the omissions or alleged omissions to
state a material fact. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Section 7.3. REGISTRATION RIGHTS AGREEMENTS. Notwithstanding anything
to the contrary in this Article VII, the indemnification and contribution
provisions of the Registration Rights Agreement and the Common Stock
Registration Rights Agreements shall govern any claim with respect thereto.
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. SURVIVAL OF PROVISIONS. The representations, warranties
and covenants of Holding and the Issuer, their respective officers and the
Initial Purchaser made herein, the indemnity and contribution agreements
contained herein and each of the provisions of Articles VI, VII and VIII shall
remain operative and in full force and effect regardless of (a) the
investigation made by or on behalf of Holding, the Issuer and, after the
Effective Time, the Surviving Company, the Initial Purchaser or any Indemnified
Party, (b) acceptance of any of the Securities and payment therefor, (c) any
termination of this Agreement or (d) disposition of the Securities by the
Initial Purchaser whether by redemption, exchange, sale or otherwise.
Section 8.2. TERMINATION. (a) This Agreement may be terminated in the
sole discretion of the Initial Purchaser by notice to Holding and the Issuer
given prior to the Time of Purchase in the event that Holding or the Issuer
shall have failed, refused or been unable to perform in all material respects
all obligations and satisfy all conditions on its part to be performed or
satisfied hereunder at or prior thereto or, in the event at or prior to the
Closing:
(i) any Glasstech Entity or any of Glasstech's
Subsidiaries shall have sustained any loss or interference with
respect to its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or
from any strike, labor dis-
<PAGE> 42
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pute, slow down or work stoppage or any legal or governmental
proceeding, which loss or interference, in the sole judgment of the
Initial Purchaser, has had or has a Material Adverse Effect, or there
shall have been, in the sole judgment of the Initial Purchaser, any
event or development that, individually or in the aggregate, has or
could be reasonably likely to have a Material Adverse Effect
(including without limitation a change in control of any of the
Glasstech Entities or any of Glasstech's Subsidiaries), except in
each case as described in the Final Memorandum (exclusive of any
amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the Nasdaq National Market shall
have been suspended or minimum or maximum prices shall have been
established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation
of hostilities between the United States and any foreign power, or
(B) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or
international calamity or emergency, or (C) any material change in
the financial markets of the United States which, in the case of (A),
(B) or (C) above and in the sole judgment of the Initial Purchaser,
makes it impracticable or inadvisable to proceed with the offering or
the delivery of the Securities as contemplated by the Final
Memorandum; or
(v) any securities of any of the Glasstech Entities shall
have been downgraded or placed on any "watch list" for possible
downgrading by any nationally recognized statistical rating
organization.
(b) Termination of this Agreement pursuant to this Section
8.2 shall be without liability of any party to any other party except
as provided in Section 8.1 hereof.
Section 8.3. NO WAIVER; MODIFICATIONS IN WRITING. No failure or delay
on the part of the Initial Purchaser, Holding or the Issuer and, after the
Effective Time, the Surviving Company in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy pre-
<PAGE> 43
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clude any other or further exercise thereof or the exercise of any other right,
power or remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to the Initial Purchaser,
Holding or the Issuer and, after the Effective Time, the Surviving Company at
law or in equity or otherwise. No waiver of or consent to any departure by the
Initial Purchaser, Holding or the Issuer and, after the Effective Time, the
Surviving Company from any provision of this Agreement shall be effective unless
signed in writing by the party entitled to the benefit thereof, PROVIDED that
notice of any such waiver shall be given to each party hereto as set forth
below. Except as otherwise provided herein, no amendment, modification or
termination of any provision of this Agreement shall be effective unless signed
in writing by or on behalf of each of the Initial Purchaser, Holding, and the
Issuer and, after the Effective Time, the Surviving Company. Any amendment,
supplement or modification of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure by the
Initial Purchaser, Holding or the Issuer and, after the Effective Time, the
Surviving Company from the terms of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for which
made or given. Except where notice is specifically required by this Agreement,
no notice to or demand on Holding or the Issuer and, after the Effective Time,
the Surviving Company in any case shall entitle Holding or the Issuer and, after
the Effective Time, the Surviving Company to any other or further notice or
demand in similar or other circumstances.
Section 8.4. INFORMATION SUPPLIED BY THE INITIAL PURCHASER. The
statements set forth in the fourth and fifth sentences of the third paragraph
and in the seventh and eighth paragraph under the heading "Plan of Distribution"
in the Final Memorandum (to the extent such statements relate to the Initial
Purchaser) constitute the only information furnished by the Initial Purchaser to
Holding and the Issuer for the purposes of Sections 3.1(a) and 7.1(a) and (b)
hereof.
Section 8.5. COMMUNICATIONS. All notices, demands and other
communications provided for hereunder shall be in writing, and, (a) if to the
Initial Purchaser, shall be given by registered or certified mail, return
receipt requested, telex, telegram, telecopy, courier service or personal
delivery, addressed to CIBC Wood Gundy Securities Corp., 425 Lexington Avenue,
3rd Floor, New York, New York 10017, Attention: Mark Dalton, with a copy to
Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention:
Roger Meltzer,
<PAGE> 44
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Esq., and (b) if to Holding and/or the Issuer and, after the Effective Time, the
Surviving Company, shall be given by similar means to Glasstech, Inc., Ampoint
Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551, Attention:
President, with a copy to Baker & Hostetler LLP, 3200 National City Center, 1900
East Ninth Street, Cleveland, Ohio 44114-3485, Attention: William Appleton, Esq.
In each case notices, demands and other communications shall be deemed given
when received.
Section 8.6. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 8.7. SUCCESSORS. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchaser, Holding, the Issuer and, after the
Effective Time, the Surviving Company and their respective successors and legal
representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other Person any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained; this Agreement and all conditions and provisions hereof being
intended of this Agreement, or any provisions herein contained; this to be and
being for the sole and exclusive benefit of such Persons and for the benefit of
no other Person except that (i) the indemnities of Holding, the Issuer and,
after the Effective Time, the Surviving Company contained in Section 7.1(a) of
this Agreement shall also be for the benefit of the directors, officers,
employees and agents of the Initial Purchaser and any Person or Persons who
control the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchaser
contained in Section 7.1(b) of this Agreement shall also be for the benefit of
the respective directors of Holding and the Issuer and, after the Effective
Time, the Surviving Company, their respective officers, employees and agents and
any Person or Persons who control Holding or the Issuer and, after the Effective
Time, the Surviving Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Securities from the Initial
Purchaser will be deemed a successor because of such purchase.
<PAGE> 45
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Section 8.8. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 8.9. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.10. HEADINGS. The Article and Section headings and Table of
Contents used or contained in this Agreement are for convenience of reference
only and shall not affect the construction of this Agreement.
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed as of the date first written above.
GLASSTECH HOLDING CO.
By: /s/ Mark D. Christman
--------------------------------
Name: Mark D. Christman
Title: President
GLASSTECH SUB CO.
By: /s/ Mark D. Christman
--------------------------------
Name: Mark D. Christman
Title: President
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Mark Dalton
-----------------------------
Name: Mark Dalton
Title: Managing Director
<PAGE> 47
Exhibit 1
[FORM OF OPINION OF BAKER & HOSTETLER] 1
1. Each of the Glasstech Entities and Glasstech's Subsidiaries is and,
after giving effect to the Merger, the Surviving Company and its
Subsidiaries will be duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power and authority to
own its properties and to conduct its business as described in the
Final Memorandum. Each of the Glasstech Entities and Glasstech's
Subsidiaries is and, after giving effect to the Merger, the Surviving
Company and its Subsidiaries, will be duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions
where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to
be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect.
2. Glasstech has and, after giving effect to the Merger, the Surviving
Company will have the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all of the
outstanding shares of capital stock of Glasstech and Glasstech's
Subsidiaries have and, after giving effect to the Merger, the
Surviving Company will have been duly authorized and validly issued,
are fully paid and nonassessable and were not issued in violation of
any preemptive or similar rights; except as set forth in the Final
Memorandum, all of the outstanding shares of capital stock of
Glasstech's Subsidiaries are owned, directly or indirectly, by
Glasstech and, after giving effect to the Merger, all of the
outstanding shares of capital stock of the Surviving Company's
Subsidiaries will be owned, directly or indirectly, by the Surviving
Company, in each case free and clear of all perfected security
interests and, to the knowledge of such counsel, free and clear of
all other liens, encumbrances, equities and
_________________________
1 Optionally, sections of this opinion can be provided by Kenneth
Wetmore, General Counsel of the Company.
<PAGE> 48
-2-
claims or restrictions on transferability (other than those imposed
by the Act and the securities or "Blue Sky" laws of certain
jurisdictions) or voting.
3. Except as set forth in the Final Memorandum, (A) no options, warrants
or other rights to purchase from Glasstech or any of its Subsidiaries
shares of capital stock or ownership interests in Glasstech or any of
its Subsidiaries are outstanding, (B) no agreements or other
obligations to issue, or other rights to convert, any obligation
into, or exchange any securities for, shares of capital stock or
ownership interests in Glasstech or any of its Subsidiaries are
outstanding and (C) no holder of securities of Glasstech or any of
its Subsidiaries is entitled to have such securities registered under
a registration statement filed by the Surviving Company pursuant to
the Registration Rights Agreement.
4. The Issuer has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the
Indenture, the Notes, the Exchange Notes and the Private Exchange
Notes; the Indenture meets the requirements for qualification under
the TIA; the Indenture has been duly and validly authorized by the
Issuer and, when duly executed and delivered by the Issuer (assuming
the due authorization, execution and delivery thereof by the
Trustee), will constitute the valid and legally binding agreement of
the Issuer in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor
may be brought.
5. Upon consummation of the Merger, the Surviving Company will have all
requisite corporate power and authority to execute, deliver and
perform each of its obligations under the Indenture, the Supplemental
Indenture, the Notes, the Exchange Notes and the Private Exchange
Notes; the Supplemental Indenture has been duly and validly
authorized by the Issuer and Glasstech and, when duly executed and
delivered by the Surviving Company (assuming the due authorization,
execution and delivery thereof by the Trustee), will constitute the
valid and legally binding agreement of the Surviving Company,
enforceable against the Surviving Company, in accordance with its
terms, except that the enforcement thereof may be subject to (i)
bank-
<PAGE> 49
-3-
ruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
6. The Notes are in the form contemplated by the Indenture. The Notes
have each been duly and validly authorized by the Issuer and, when
duly executed and delivered by the Issuer and paid for by the Initial
Purchaser in accordance with the terms of the Purchase Agreement
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the
Notes by the Trustee in accordance with the Indenture), will
constitute the valid and legally binding obligations of the Issuer
and, upon consummation of the Merger, the Surviving Company, entitled
to the benefits of the Indenture, as amended by the Supplemental
Indenture, and enforceable against the Issuer and, upon consummation
of the Merger, the Surviving Company in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
7. The Exchange Notes and the Private Exchange Notes have been duly and
validly authorized by the Issuer and Glasstech and, when the Exchange
Notes and the Private Exchange Notes have been duly executed and
delivered by the Surviving Company in accordance with the terms of
the Registration Rights Agreement and the Indenture, as amended by
the Supplemental Indenture (assuming the due authorization, execution
and delivery of the Indenture by the Trustee and due authentication
and delivery of the Exchange Notes and the Private Exchange Notes by
the Trustee in accordance with the Indenture, as amended by the
Supplemental Indenture), will constitute the valid and legally
binding obligations of the Surviving Company, entitled to the
benefits of the Indenture, as amended by the Supplemental Indenture,
and enforceable against the Surviving Company in accordance with
their terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the
<PAGE> 50
-4-
discretion of the court before which any proceeding therefor may be
brought.
8. The Surviving Company will have all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Registration Rights Agreement; the Registration Rights Agreement has
been duly and validly authorized by the Issuer and Glasstech and,
when duly executed and delivered by the Surviving Company (assuming
due authorization, execution and delivery thereof by the Initial
Purchaser), will constitute the valid and legally binding agreement
of the Surviving Company, enforceable against the Surviving Company
in accordance with its terms, except that (A) the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor
may be brought (B) the enforcement of provisions imposing liquidating
damages, penalties or an increase in interest rate upon the
occurrence of a default may be limited in certain circumstances and
(C) any rights to indemnity or contribution thereunder may be limited
by federal and state securities laws and public policy
considerations.
9. The Issuer has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Purchase
Agreement and to consummate the transactions contemplated thereby;
after giving effect to the Merger, the Surviving Company will have
all requisite corporate power and authority to perform its
obligations under the Purchase Agreement and to consummate the
transactions contemplated thereby; the Purchase Agreement and the
consummation by the Glasstech Entities and the Surviving Company of
the Transactions have been duly and validly authorized by each of the
Glasstech Entities, and, when duly executed and delivered by the
Issuer (assuming due authorization, execution and delivery thereof by
the Initial Purchaser), will constitute the valid and legally binding
agreement of the Issuer, and upon consummation of the Merger, the
Surviving Company, enforceable against the Issuer, and upon
consummation of the Merger, the Surviving Company in accordance with
its terms, except that (A) the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discre-
<PAGE> 51
-5-
tion of the court before which any proceeding therefor may be brought
and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy
considerations.
10. The Indenture, the Supplemental Indenture, the Notes and the
Registration Rights Agreement conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
11. No legal or governmental proceedings are pending or, to the knowledge
of such counsel, threatened to which any of the Glasstech Entities or
Glasstech's Subsidiaries is a party or to which the property or
assets of any of the Glasstech Entities or any of Glasstech's
Subsidiaries is or, after giving effect to the Merger, the Surviving
Company or any of its Subsidiaries will be subject which, if
determined adversely to such party, would result, individually or in
the aggregate, in a Material Adverse Effect, or which seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Notes to be sold hereunder or the
consummation of the other Transactions.
12. None of Glasstech or its Subsidiaries is or, after giving effect to
the Merger, none of the Surviving Company or its Subsidiaries will be
(i) in violation of its certificate of incorporation or bylaws (or
similar organizational document), (ii) to the knowledge of such
counsel, in breach or violation of any statute, judgment, decree,
order, rule or regulation applicable to any of them or any of their
respective properties or assets, except for any such breach or
violation which would not, individually or in the aggregate, have a
Material Adverse Effect, or (iii) in breach or default under (nor has
any event occurred which, with notice or passage of time or both,
would constitute a default under) or in violation of any of the terms
or provisions of any contract known to such counsel, except for any
such breach, default, violation or event which would not,
individually or in the aggregate, have a Material Adverse Effect.
13. The execution, delivery and performance of the Purchase Agreement,
the Indenture, the Supplemental Indenture, the Registration Rights
Agreement and the consummation of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and
sale of the Notes to the Initial Purchaser) will not conflict with or
consti-
<PAGE> 52
-6-
tute or result in a breach or a default under (or an event which with
notice or passage of time or both would constitute a default under)
or violation of any of (i) the terms or provisions of all other
agreements and instruments to be executed and delivered by the
Glasstech Entities or, upon consummation of the Merger, of the
Surviving Company known to such counsel, except for any such
conflict, breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse Effect,
(ii) the certificate of incorporation or bylaws (or similar
organizational document) of the Glasstech Entities or any of
Glasstech's Subsidiaries or, upon consummation of the Merger, of the
Surviving Company or its Subsidiaries, or (iii) (assuming compliance
with all applicable state securities or "Blue Sky" laws) any statute,
judgment, decree, order, rule or regulation known to such counsel to
be applicable to the Glasstech Entities or any of Glasstech
Subsidiaries or, upon consummation of the Merger, of the Surviving
Company or its Subsidiaries or any of their respective properties or
assets, except for any such conflict, breach or violation which would
not, individually or in the aggregate, have a Material Adverse
Effect.
14. No consent, approval, authorization or order of any governmental
authority is required for (i) the issuance and sale by the Issuer of
the Notes to the Initial Purchasers or the consummation by the
Company of the other transactions contemplated hereby or (ii) the
consummation by the Issuer of the transactions contemplated by the
RevolvingCredit Facility, except such as may be required under Blue
Sky laws, as to which such counsel need express no opinion, and those
which have previously been obtained.
15. Glasstech and its Subsidiaries and, upon consummation of the Merger,
the Surviving Company and its Subsidiaries will own or possess the
Intellectual Property Rights necessary to conduct the businesses now
or proposed to be operated by them as described in the Final
Memorandum, and none of the Glasstech Entities or Glasstech's
Subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any Intellectual
Property Rights which, if such assertion of infringement or conflict
were sustained, would have a Material Adverse Effect.
16. To the knowledge of such counsel, there are no legal or governmental
proceedings involving or affecting the
<PAGE> 53
-7-
Glasstech Entities or Glasstech's Subsidiaries or any of their
respective properties or assets which would be required to be
described in a prospectus pursuant to the Act that are not described
in the Final Memorandum, nor are there any material contracts or
other documents which would be required to be described in a
prospectus pursuant to the Act that are not described in the Final
Memorandum.
17. The Issuer is not and, immediately after the sale of the Notes to be
sold hereunder and the application of the proceeds from such sale (as
described in the Final Memorandum under the caption "Use of
Proceeds"), the Surviving Company will not be an "investment company"
as such term is defined in the Investment Company Act of 1940, as
amended.
18. No registration under the Act of the Notes is required in connection
with the sale of the Notes to the Initial Purchaser as contemplated
by the Purchase Agreement and the Final Memorandum or in connection
with the initial resale of the Notes by the Initial Purchaser in
accordance with Section 3.2 of the Purchase Agreement, and prior to
the commencement of the Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights
Agreement), the Indenture is not required to be qualified under the
TIA, in each case assuming (A) that the purchasers who buy such Notes
in the initial resale thereof are qualified institutional buyers as
defined in Rule 144A promulgated under the Act ("QIBs") or accredited
investors as defined in Rule 501(a) (1), (2), (3) or (7) promulgated
under the Act ("Accredited Investors") or (B) that the offer or sale
of the Notes is made in an offshore transaction as defined in
Regulation S.
19. Neither the consummation of the transactions contemplated by the
Purchase Agreement nor the sale, issuance, execution or delivery of
the Notes will violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
20. At the time the foregoing opinion is delivered, such counsel shall
additionally state that it has participated in conferences with
officers and other representatives of the Glasstech Entities,
representatives of the independent public accountants for the
Glasstech Entities, representatives of the Initial Purchaser and
counsel for the Initial Purchaser, at which conferences the contents
of the Final Memorandum and related matters were discussed, and,
al-
<PAGE> 54
-8-
though it has not independently verified and is not passing upon and
assumes no responsibility for the accuracy, completeness or fairness
of the statements contained in the Final Memorandum (except to the
extent specified in paragraph 6), no facts have come to its attention
which lead it to believe that the Final Memorandum, on the date
thereof or at the Time of Purchase, contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements contained therein,
in light of the circumstances under which they were made, not
misleading (it being understood that such firm need express no
opinion with respect to the financial statements and related notes
thereto and the other financial, statistical and accounting data
included in the Final Memorandum). The opinion of such counsel
described on this Exhibit 1 shall be rendered to the Initial
Purchaser at the request of the Glasstech Entities and shall so state
therein.
References to the Final Memorandum in this Exhibit 1 shall include
any amendment or supplement thereto prepared in accordance with the provisions
of the Purchase Agreement at the Time of Purchase.
<PAGE> 55
EXHIBIT 2
[FORM OF OPINION OF CAHILL GORDON & REINDEL]
1. The Purchase Agreement has been duly authorized, executed and
delivered by the Issuer and constitutes a legal, valid and binding agreement of
the Issuer and, upon consummation of the Merger, will constitute a legal, valid
and binding agreement of the Surviving Company, enforceable against the Issuer
and, upon consummation of the Merger, against the Surviving Company in
accordance with its terms, except that (A) the enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect affecting creditors'
rights generally and by general principles of equity and discretion of the court
before which any proceedings therefor may be brought and (B) rights to
indemnification and contribution may be limited by federal or state securities
laws or public policy considerations with respect thereto.
2. The Registration Rights Agreement has been duly authorized,
executed and delivered by the Issuer and constitutes a legal, valid and binding
agreement of the Issuer and, upon consummation of the Merger, will constitute a
legal, valid and binding agreement of the Surviving Company, enforceable against
the Issuer and, upon consummation of the Merger, against the Surviving Company
in accordance with its terms, except that (A) the enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect affecting creditors'
rights generally and by general principles of equity and discretion of the court
before which any proceedings therefor may be brought, (B) the enforceability of
provisions imposing liquidated damages, penalties or an increase in interest
rate upon the occurrence of a default may be limited in certain circumstances
and (C) rights to indemnification and contribution may be limited by federal or
state securities laws or public policy considerations with respect thereto.
3. The Indenture has been duly authorized, executed and delivered
by the Issuer and, assuming the due authorization, execution and delivery
thereof by the Trustee is a legal, valid and binding agreement of the Issuer,
enforceable against the Issuer in accordance with its terms, except that the
enforceability thereof may be subject to bankruptcy, insolvency,
<PAGE> 56
-2-
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect affecting creditors' rights generally and by general
principles of equity and the discretion of the court before which any
proceedings therefor may be brought.
4. The Supplemental Indenture has been duly authorized by the
Issuer and Glasstech and when executed and delivered by the Surviving Company
and, assuming the due authorization, execution and delivery thereof by the
Trustee is a legal, valid and binding agreement of the Surviving Company,
enforceable against the Surviving Company in accordance with its terms, except
that the enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect affecting creditors' rights generally and by general
principles of equity and the discretion of the court before which any
proceedings therefor may be brought.
5. The Notes have been duly authorized, executed and delivered by
the Issuer and, assuming due authentication of the Notes by the Trustee in
accordance with the terms of the Indenture, are legal, valid and binding
obligations of the Issuer and, upon consummation of the Merger, the Surviving
Company, entitled to the benefits of the Indenture, as amended by the
Supplemental Indenture, and enforceable against the Issuer and, upon
consummation of the Merger, the Surviving Company in accordance with their
terms, except that the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect affecting creditors' rights generally and by
general principles of equity and the discretion of the court before which any
proceedings therefor may be brought.
6. Assuming, without independent investigation, (a) that the Notes
are sold to the Initial Purchaser, and initially resold by the Initial
Purchaser, in accordance with the terms of, and in the manner contemplated by,
the Purchase Agreement and the Offering Memorandum, (b) the accuracy of the
representations and warranties of the Glasstech Entities set forth in the
Purchase Agreement and in the certificates delivered by officers of the
Glasstech Entities pursuant to the Purchase Agreement, (c) the accuracy of the
Initial Purchaser's representations and warranties set forth in the Purchase
Agreement, (d) the due performance by the Issuer of the covenants and agreements
set forth in the Purchaser Agreement and the due performance by the Initial
Purchaser of the covenants and agreements set forth in the Purchase Agreement,
(e) the Initial
<PAGE> 57
-3-
Purchaser's compliance with the offering and transfer procedures and
restrictions described in the Offering Memorandum, (f) the accuracy of the
representations and warranties deemed to be made pursuant to the Offering
Memorandum by purchasers to whom the Initial Purchaser initially resells the
Notes and (g) that each purchaser to whom the Initial Purchaser initially
resells Notes receives a copy of the Offering Memorandum prior to such sale, it
is not necessary in connection with the issuance and sale to you of the Notes by
the Issuer under the circumstances contemplated by the Purchase Agreement or in
connection with the initial resale of the Notes by the Initial Purchaser in
accordance with the offering and transfer procedures and restrictions described
in the Offering Memorandum and in the Purchase Agreement, to register any of the
Notes under the Securities Act of 1933, as amended, or to qualify the Indenture
under the Trust Indenture Act of 1939, as amended, it being understood that no
opinion is expressed as to any subsequent resale of the Notes.
7. The Notes, the Indenture and the Supplemental Indenture conform
in all material respect to the descriptions thereof in the Offering Memorandum
under the caption "Description of the Notes."
<PAGE> 58
EXHIBIT 3
[FORM OF OPINION OF BROOKS & KUSHMAN]
1. To the best of such counsel's knowledge, all patents, trademarks and
service marks (registered or unregistered), and trade names, including
pending applications for any of the foregoing, that are owned, licensed
or used by Glasstech or any of its Subsidiaries in the United States or
abroad, are listed on Schedule A attached to such counsel's opinion
(the "Intellectual Property"; Intellectual Property licensed or
registered abroad the "Foreign Intellectual Property." Intellectual
Property other than Foreign Intellectual Property the "Domestic
Intellectual Property.").
2. Except as disclosed in the Offering Memorandum, Glasstech is the sole
and exclusive owner of all right, title and interest in and to the
Domestic Intellectual Property free and clear of all liens, claims,
charges, rights of use, encumbrances, and restrictions whatsoever and
to the best knowledge of such counsel, Glasstech is the sole and
exclusive owner of all right, title and interest in and to the Foreign
Intellectual Property free and clear of all liens, claims, charges,
rights of use, encumbrances, and restrictions whatsoever (in all cases
without payment to any other person or entity, except as set forth in
any sales contract in the ordinary course of business, and except for
maintenance fees payable to governmental entities in the ordinary
course of business).
3. Except as disclosed in the Final Memorandum, to the best of such
counsel's knowledge, the business of Glasstech or any of its
Subsidiaries, as conducted prior to the Time of Purchase, and the
consummation of the Offering and the other Transactions was not, is
not, and will not be in contravention of any patent, trademark, service
mark, trade name, copyright, or other proprietary right of any third
party.
4. Except as disclosed in the Final Memorandum, to the best of such
counsel's knowledge, the Intellectual Property rights are not infringed
by any person or other entity.
5. To the best of such counsel's knowledge, no product, process method or
operation presently sold, engaged in or em-
<PAGE> 59
-2-
ployed by Glasstech or any of its Subsidiaries infringes upon any
rights owned by any other person, firm, corporation or other legal
entity.
6. Such statements in the Final Memorandum as counsel shall have
reasonably determined relate to Intellectual Property rights, insofar
as such statements constitute summaries of matters of law, are accurate
and complete statements or summaries of such matters of law set forth
therein.
References to the Final Memorandum in this Exhibit 2 shall include any
amendment or supplement thereto prepared in accordance with the provisions of
the Purchase Agreement at the Time of Purchase.
<PAGE> 1
EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
Dated as of July 2, 1997
by and between
GLASSTECH SUB CO.
and
CIBC WOOD GUNDY SECURITIES CORP.,
as Initial Purchaser
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
PAGE
----
<S> <C> <C>
1. Definitions............................................................................... 1
2. Exchange Offer............................................................................ 5
3. Shelf Registration........................................................................ 9
(a) Initial Shelf Registration.......................................................... 9
(b) Subsequent Shelf Registrations...................................................... 10
(c) Supplements and Amendments.......................................................... 10
4. Additional Interest....................................................................... 10
5. Registration Procedures................................................................... 12
6. Registration Expenses..................................................................... 23
7. Indemnification........................................................................... 24
8. Rules 144 and 144A........................................................................ 28
9. Underwritten Registrations................................................................ 28
10. Miscellaneous............................................................................. 29
(a) Remedies............................................................................ 29
(b) Enforcement......................................................................... 29
(c) No Inconsistent Agreements.......................................................... 29
(d) Adjustments Affecting Registrable Notes............................................. 29
(e) Amendments and Waivers.............................................................. 29
(f) Notices............................................................................. 30
(g) Successors and Assigns.............................................................. 31
(h) Counterparts........................................................................ 31
(i) Headings............................................................................ 31
(j) Governing Law....................................................................... 31
(k) Severability........................................................................ 31
(l) Entire Agreement.................................................................... 31
(m) Notes Held by the Company or Its Affiliates......................................... 31
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") dated as of
July 2, 1997, by and between GLASSTECH SUB CO., a Delaware corporation (the
"ISSUER"), and CIBC WOOD GUNDY SECURITIES CORP., as initial purchaser (the
"INITIAL PURCHASER").
This Agreement is entered into in connection with the
Securities Purchase Agreement, dated as of June 27, 1997, by and among Glasstech
Holding Co., a Delaware corporation ("HOLDING"), the Issuer and the Initial
Purchaser (the "PURCHASE AGREEMENT") relating to the sale by Holding and the
Issuer to the Initial Purchaser of 70,000 units (the "UNITS") consisting of
$70,000,000 aggregate principal amount of 12 3/4% Senior Notes due 2004 of the
Issuer (the "NOTES") and Warrants to purchase 877.21 shares of Class A Common
Stock, par value $0.01 per share, of Holding (the "WARRANTS" and, together with
the Units and the Notes, the "SECURITIES"). Upon completion of the sale of the
Notes, the Issuer will be merged (the "MERGER") into Glasstech, Inc., a Delaware
corporation ("GLASSTECH", and Glasstech shall become the surviving corporation
(the "SURVIVING COMPANY") and obligor on the Notes. Upon consummation of the
Merger, the Surviving Company shall assume each and every covenant, agreement
and undertaking of the Issuer in this Agreement.
In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Company (as defined herein) has agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchaser. The execution and delivery of this Agreement is a condition to the
Initial Purchaser's obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4(a).
ADVICE: See Section 5.
APPLICABLE PERIOD: See Section 2(b).
CLOSING: See the Purchase Agreement.
<PAGE> 4
-2-
COMPANY: Prior to the effective time of the Merger, the Issuer
and, at and subsequent to the effective time of the Merger, the Surviving
Company.
EFFECTIVENESS DATE: The 150th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
EVENT DATE: See Section 4(b).
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a).
EXCHANGE OFFER: See Section 2(a).
EXCHANGE REGISTRATION STATEMENT: See Section 2(a).
FILING DATE: The 60th day after the Issue Date.
HOLDER: Any holder of a Registrable Note or Registrable
Notes.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The Indenture, dated as of July 2, 1997, by and
between the Issuer and United States Trust Company of New York, as trustee,
pursuant to which the Notes are being issued, as supplemented by the
Supplemental Indenture and as further amended or supplemented from time to time
in accordance with the terms thereof.
INITIAL PURCHASER: See the introductory paragraph to this
Agreement.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(o).
ISSUE DATE: The date on which the original Notes are sold to
the Initial Purchaser pursuant to the Purchase Agreement.
<PAGE> 5
-3-
ISSUER: See the introductory paragraph to this Agreement.
LIEN: See the Indenture.
MERGER: See the introductory paragraphs to this Agreement.
NASD: See Section 5(t).
NOTES: See the introductory paragraphs to this Agreement.
PARTICIPANT: See Section 7(a).
PARTICIPATING BROKER-DEALER: See Section 2(b).
PERSON: An individual, corporation, partnership, joint
VENTURE, association, joint stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
PRIVATE EXCHANGE: See Section 2(b).
PRIVATE EXCHANGE NOTES: See Section 2(b).
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs to this
Agreement.
RECORDS: See Section 5(o).
REGISTRABLE NOTES: The Notes upon original issuance of the
Notes and at all times subsequent thereto and, if issued, the Private Exchange
Notes, until in the case of any such Notes or any such Private Exchange Notes,
as the case may be,
<PAGE> 6
-4-
(i) a Registration Statement covering such Notes or such Private Exchange Notes
has been declared effective by the SEC and such Notes or such Private Exchange
Notes, as the case may be, have been disposed of in accordance with such
effective Registration Statement, (ii) such Notes or such Private Exchange
Notes, as the case may be, are sold in compliance with Rule 144, (iii) in the
case of any Note, the Exchange Offer has been consummated, (iv) such Notes or
such Private Exchange Notes, as the case may be, cease to be outstanding or (v)
two years have passed from the Issue Date.
REGISTRATION DEFAULT: See Section 4(a).
REGISTRATION STATEMENT: Any registration statement of the
Company, including, but not limited to, the Exchange Registration Statement,
which covers any of the Registrable Notes pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted BY the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES: See the introductory paragraph to this Agreement.
<PAGE> 7
-5-
SECURITIES ACT: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c).
SHELF REGISTRATION: See Section 3(b).
SUBSEQUENT SHELF REGISTRATION: See Section 3(b).
SUPPLEMENTAL INDENTURE: The Supplemental Indenture dated July
2, 1997 by and between the Surviving Company and the Trustee pursuant to which
the Surviving Company assumes the obligations of the Issuer under the Indenture
and the Notes.
SURVIVING COMPANY: See the introductory paragraphs to this
Agreement.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter(s)
for reoffering to the public.
UNITS: See the introductory paragraphs to this Agreement.
WARRANTS: See the introductory paragraphs to this Agreement.
2. EXCHANGE OFFER
--------------
(a) The Company agrees to use its best efforts to file with
the SEC as soon as practicable after the Closing, but in no event later than the
Filing Date, an offer to exchange (the "EXCHANGE OFFER") any and all of the
Notes for a like aggregate principal amount of debt securities of the Company
which are identical to the Notes (the "EXCHANGE NOTES") (and which are entitled
to the benefits of the Indenture or a trust indenture which is substantially
identical to the Indenture (other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any requirements of
the SEC to effect or maintain the qualification thereof under the TIA) and
which, in either case, has been
<PAGE> 8
-6-
qualified under the TIA), except that the Exchange Notes shall have been
registered pursuant to an effective Registration Statement under the Securities
Act. The Exchange Offer will be registered under the Securities Act on an
appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Company agrees to use its best efforts to (x) cause the Exchange Registration
Statement to become effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days (or
longer if required by applicable law) after the date that notice of the Exchange
Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to
the 60th day following the date on which the Exchange Registration Statement is
declared effective. Each Holder who participates in the Exchange Offer will be
required to represent that any Exchange Notes received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes, and that such
Holder is not an affiliate of the Company within the meaning of Rule 405
promulgated under the Securities Act or if it is such an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this Agreement shall
continue to apply, MUTATIS MUTANDIS, solely with respect to Registrable Notes
that are Private Exchange Notes and Exchange Notes held by Participating
Broker-Dealers (as defined below), and the Company shall have no further
obligation to register Registrable Notes (other than Private Exchange Notes and
Exchange Notes held by Participating Broker-Dealers) pursuant to Section 3 of
this Agreement.
(b) The Company shall include within the Prospectus contained
in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchaser, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or
policies have been publicly disseminated by the staff of the SEC or such
positions or policies, in the reasonable judgment of the Initial Purchaser,
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also al-
<PAGE> 9
-7-
low the use of the Prospectus by all persons subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers,
and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes, PROVIDED that such period shall not
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) after the date of the consummation of the Exchange Offer
(the "APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status as an unsold allotment in the
initial distribution, the Company upon the request of the Initial Purchaser
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchaser, in exchange (the "PRIVATE
EXCHANGE") for the Notes held by such Initial Purchaser, a like principal amount
of debt securities of the Company that are identical in all material respects to
the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and which are issued pursuant
to the same indenture as the Exchange Notes). The Private Exchange Notes shall
bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes
and any Private Exchange Notes will accrue from (A) the later of (i) the last
interest payment date on which interest was paid on the Notes surrendered in
exchange therefor or (ii) if the Notes are surrendered for exchange on a date in
a period which includes the record date for an interest payment date to occur on
or after the date of such exchange and as to which interest will be paid, the
date of such interest payment date or (B), if no interest has been paid on the
Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement,
<PAGE> 10
-8-
together with an appropriate letter of transmittal and related
documents;
(ii) utilize the services of a depository for the Exchange
Offer with an address in the Borough of Manhattan, The City of
New York; and
(iii) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last
business day on which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes
of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture substantially identical to
the Indenture, which in either event will provide that the Exchange Notes will
not be subject to the transfer restrictions set forth in the Indenture and that
the Exchange Notes, the Private Exchange Notes and the Notes will vote and
consent together on all matters as one class and that neither the Exchange
Notes, the Private Exchange Notes nor the Notes will have the right to vote or
consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer,
the Company or Holders of at least a majority in aggregate principal amount of
the Registrable Notes reasonably determine in good faith that (i) the Exchange
Notes would not, upon receipt, be tradeable by such Holders which are not
affiliates (within the meaning of the Securities Act) of the Company without
restriction under the Securities Act and without restrictions under applicable
state securities laws, (ii) the
<PAGE> 11
-9-
interests of the Holders under this Agreement would be adversely affected by
the consummation of the Exchange Offer or (iii) after conferring with counsel,
the SEC is unlikely to permit the consummation of the Exchange Offer prior to 60
days after the Effectiveness Date, (2) subsequent to the consummation of the
Private Exchange, any holder of the Private Exchange Notes so requests, or (3)
the Exchange Offer is commenced and not consummated within 210 days of the date
of this Agreement, then the Company shall promptly deliver to the Holders and
the Trustee written notice thereof (the "SHELF NOTICE") and shall file an
Initial Shelf Registration pursuant to Section 3. Following the delivery of a
Shelf Notice to the Holders of Registrable Notes (in the circumstances
contemplated by clauses (1) and (3) of the preceding sentence), the Company
shall not have any further obligation to conduct the Exchange Offer or the
Private Exchange under this Section 2.
3. SHELF REGISTRATION
------------------
If a Shelf Notice is delivered as contemplated by Section
2(c), then:
(a) INITIAL SHELF REGISTRATION. The Company shall prepare and
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the
"INITIAL SHELF REGISTRATION"). If the Company shall have not yet filed an
Exchange Registration Statement, the Company shall use its best efforts to file
with the SEC the Initial Shelf Registration on or prior to the Filing Date. In
any other instance, the Company shall use its best efforts to file with the SEC
the Initial Shelf Registration within 30 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
such Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Company shall not permit
any securities other than the Registrable Notes to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration (as defined below). The
Company shall use its best efforts to cause the Initial Shelf Registration to be
declared effective under the Securities Act on or prior to the Effectiveness
Date and to keep the Initial Shelf Registration continuously effective under the
Securities Act until two years from the Issue Date (the "EFFECTIVENESS PERIOD"),
or such shorter period ending when (i) all Registrable Notes covered by the
Initial Shelf Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or
<PAGE> 12
-10-
(ii) a Subsequent Shelf Registration covering all of the Registrable Notes has
been declared effective under the Securities Act.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (prior to the sale of all of
the securities registered thereunder), the Company shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 45 days of such cessation of effectiveness amend
the Shelf Registration in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Notes (a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is
filed, the Company shall use its best efforts to cause the Subsequent Shelf
Registration to be declared effective as soon as practicable after such filing
and to keep such Registration Statement continuously effective during the
Effectiveness Period. As used herein the term "SHELF REGISTRATION" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any
underwriter(s) of such Registrable Notes.
4. ADDITIONAL INTEREST
-------------------
(a) The Company and the Initial Purchaser agree that the
Holders of Registrable Notes will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional interest on the Notes ("ADDITIONAL
INTEREST") under the circumstances set forth below:
(i) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the Filing
Date;
<PAGE> 13
-11-
(ii) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been declared effective on or prior
to the Effectiveness Date; and/or
(iii) if either (A) the Company has not exchanged the Exchange
Notes for all Notes validly tendered in accordance with the terms of
the Exchange Offer on or prior to 60 days after the date on which
the Exchange Registration Statement was declared effective or (B)
the Exchange Registration Statement ceases to be effective at any
time prior to the time that the Exchange Offer is consummated or (C)
if applicable, the Shelf Registration has been declared effective
and such Shelf Registration ceases to be effective at any time prior
to the earlier of the date on which all Registrable Notes covered by
the Shelf Registration have been sold in the manner set forth and as
contemplated in the Shelf Registration or the third anniversary of
the Issue Date;
(each such event referred to in clauses (i) through (iii) above is a
"REGISTRATION DEFAULT"), the sole remedy available to holders of the Notes will
be the immediate accrual of Additional Interest as follows: the per annum
interest rate on the Notes will increase by 0.5% upon the occurrence of a
Registration Default; and the per annum interest rate will increase by an
additional 0.25% for each subsequent 90-day period during which the Registration
Default remains uncured, up to a maximum additional interest rate of 2.0% per
annum, PROVIDED, HOWEVER, that (1) upon the filing of the Exchange Registration
Statement or the Initial Shelf Registration (in the case of (i) above), (2) upon
the effectiveness of the Exchange Registration Statement or a Shelf Registration
(in the case of (ii) above) or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of (iii)(A) above), or upon the effectiveness of the
Exchange Registration Statement which had ceased to remain effective (in the
case of (iii)(B) above), or upon the effectiveness of the Shelf Registration
which had ceased to remain effective (in the case of (iii)(C) above), Additional
Interest on the Notes as a result of such clause (i), (ii) or (iii) (or the
relevant subclause thereof), as the case may be, shall cease to accrue and the
interest rate on the Notes will revert to the interest rate originally borne by
the Notes and PROVIDED, FURTHER, that in the case of a Registration Default
under (iii)(c) above, Additional Interest will only be payable with respect to
Notes so long as they are Registrable Notes.
(b) The Company shall notify the Trustee within one business
day after each and every date on which an event occurs
<PAGE> 14
-12-
in respect of which Additional Interest is required to be paid (an "EVENT
DATE"). Any amounts of Additional Interest due pursuant to (a)(i), (a)(ii) or
(a)(iii) of this Section 4 will be payable in cash semi-annually on each January
1 and July 1 (to the Holders of record on the December 15 and June 15
immediately preceding such dates), commencing with the first such date occurring
after any such Additional Interest commences to accrue. The amount of Additional
Interest with respect to each Note will be determined by multiplying the
applicable Additional Interest rate by the principal amount of such Note,
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.
5. REGISTRATION PROCEDURES
-----------------------
In connection with the registration of any Registrable Notes
or Private Exchange Notes pursuant to Section 2 or 3 hereof, the Company shall
effect such registrations to permit the sale of such Registrable Notes or
Private Exchange Notes in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and to use its best efforts to cause each such
Registration Statement to become effective and remain effective as
provided herein, PROVIDED that, if (1) such filing is pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall, if requested, furnish to and afford the
Holders of the Registrable Notes and each such Participating
Broker-Dealer, as the case may be, covered by such Registration
Statement, their counsel and the managing underwriter(s), if any, a
reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (at least 5
business days prior to such filing). The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportu-
<PAGE> 15
-13-
nity to review prior to the filing of such document, if the Holders of
a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement, or such Participating
Broker-Dealer, as the case may be, their counsel, or the managing
underwriter(s), if any, shall reasonably object; PROVIDED, HOWEVER,
during any delay in meeting the time frames contemplated by Section 4
hereof as a result of actions of any Holder of Registrable Notes, no
Additional Interest shall accrue or be payable to such Holder.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any prospectus
supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the
Securities Act, the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to them with respect to the
disposition of all securities covered by such Registration Statement as
so amended or in such Prospectus as so supplemented and with respect to
the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus; the Company shall be
deemed not to have used its best efforts to keep a Registration
Statement effective during the Applicable Period if it voluntarily
takes any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable
Notes or such Exchange Notes during that period unless such action is
required by applicable law or unless the Company complies with this
Agreement, including without limitation, the provisions of clause
5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the
<PAGE> 16
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managing underwriter(s), if any, promptly (but in any event within two
business days), and confirm such notice in writing, (i) when a
Prospectus or any prospectus supplement or post-effective amendment
thereto has been filed, and, with respect to a Registration Statement
or any post-effective amendment thereto, when the same has become
effective (including in such notice a written statement that any Holder
may, upon request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment thereto including
financial statements and schedules, documents incorporated or deemed to
be incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary Prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes the representations and warranties of the Company
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or threatening of any proceeding
for such purpose, (v) of the happening of any event or any information
becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in, or amendments or
supplements to, such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, and (vi) the Company's reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate.
<PAGE> 17
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(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use its best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use
of a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts
to obtain the withdrawal of any such order at the earliest possible
moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if reasonably requested by the managing underwriter(s), if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment thereto such information as the managing underwriter(s), if
any, or such Holders reasonably request to be included therein, (ii)
make all required filings of such Prospectus supplement or such
post-effective amendment thereto as soon as practicable after the
Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment thereto and
(iii) supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating
Broker-Dealer who so requests and to counsel and the managing
underwriter(s), if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
<PAGE> 18
-16-
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer,
as the case may be, their counsel, and the managing underwriter or
underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each form of preliminary Prospectus) and
each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject
to the last paragraph of this Section 5, the Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by
each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the managing
underwriter or underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered
by or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, to use its best efforts to register
or qualify, and to cooperate with the selling Holders of Registrable
Notes or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Notes or Exchange Notes for offer and sale under the securities or Blue
Sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters, if any, reasonably request in writing, PROVIDED that
where Exchange Notes held by Participating Broker-Dealers or
Registrable Notes are offered other than through an underwritten
offering, the Company agrees to cause its counsel to perform Blue Sky
investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
<PAGE> 19
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Registration Statement is required to be kept effective and do any and
all other acts or things reasonably necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; PROVIDED that the Company shall not
be required to (A) qualify generally to do business in any jurisdiction
where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where
it is not then so subject or (C) subject itself to taxation in excess
of a nominal dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request and which are
consistent with the terms of the indenture under which the Registrable
Notes are issued.
(j) Use its best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the managing underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature
of such selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals at such
sellers' cost and expense.
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi)
<PAGE> 20
-18-
above, as promptly as reasonably practicable prepare and (subject to
Section 5(a) above) file with the SEC, at the expense of the Company, a
supplement or post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the
Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer during the Applicable Period, any such
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(l) Use its best efforts to cause the Registrable Notes
covered by a Registration Statement or the Exchange Notes sold by a
Participating Broker-Dealer during the Applicable Period, as the case
may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement (provided such
Holders hold at least $20 million principal amount of Registrable
Notes) or the managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with printed certificates for the Registrable Notes in a form eligible
for deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Registrable Notes.
(n) In connection with an underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities
similar to the Notes and take all such other actions as are reasonably
requested by the managing underwriter(s), if any, in order to expedite
or facilitate the registration or the disposition of such Registrable
Notes, and in such connection, (i) make such representations and
warranties to the managing underwriter or underwriters on behalf of any
underwriters, with respect to the business of the Company and its
subsidiaries and the Registration Statement, Prospectus and documents,
if any, incorporated or deemed to be
<PAGE> 21
-19-
incorporated by reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten offerings of debt
securities, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Company and updates thereof in form and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the managing underwriter or underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities and such other matters as may
be reasonably requested by underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the Registration Statement), addressed to the
managing underwriter or underwriters on behalf of any underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities and such other matters as
reasonably requested by the managing underwriter or underwriters; and
(iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable
than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal
amount of Registrable Notes covered by such Registration Statement and
the managing underwriter or underwriters or agents) with respect to all
parties to be indemnified pursuant to said Section. The above shall be
done at each closing under such underwriting agreement, or as and to
the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold,
or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant
or other agent
<PAGE> 22
-20-
retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be (collectively, the "Inspectors"), at
the offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise
any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Company and its subsidiaries to supply
all information in each case reasonably requested by any such Inspector
in connection with such Registration Statement. Records which the
Company determines, in good faith, to be confidential and any Records
which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (i) the disclosure of such Records
is necessary to avoid or correct a material misstatement or material
omission in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) the information in such Records has
been made generally available to the public other than through the
Inspectors' breach of any confidentiality agreement. Each selling
Holder of such Registrable Notes and each such Participating
Broker-Dealer or underwriter will be required to agree that information
obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it for any purpose other than
discharging due diligence responsibilities. In addition, such
information shall not be used as the basis for any market transactions
in the securities of the Company unless and until such is made
generally available to the public. Each selling Holder of such
Registrable Notes and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company to undertake appropriate
action to prevent disclosure of the Records deemed confidential at its
expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the
Exchange Offer Registration Statement or the first Registration
Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any
<PAGE> 23
-21-
such indenture and the Holders of the Registrable Notes, to effect such
changes to such indenture as may be required for such indenture to be
so qualified in accordance with the terms of the TIA; and execute, and
use its best efforts to cause such trustee to execute, all documents as
may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to
be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, in a form
customary for underwritten offerings of debt securities similar to the
Notes, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i)
the Company has duly authorized, executed and delivered the Exchange
Notes and Private Exchange Notes and the related indenture and (ii)
each of the Exchange Notes or the Private Exchange Notes, as the case
may be, and related indenture constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its respective terms (with customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Company) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Company shall mark, or cause to be marked, on such
Regis-
<PAGE> 24
-22-
trable Notes that such Registrable Notes are being cancelled in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be; and, in no event shall such Registrable Notes be marked as
paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use its best efforts to take all other steps necessary to
effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller or Participating
Broker-Dealer who unreasonably fails to furnish such information within a
reasonable time after receiving such request, and during any delay in meeting
the time frames contemplated by Section 4 hereof as a result of a delay in
receiving any such information, no Additional Interest shall accrue or be
payable.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such Holder
or Participating Broker-Dealer, as the case may be, until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "ADVICE") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
<PAGE> 25
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amendments or supplements thereto. In the event the Company shall give any such
notice, the Applicable Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of Exchange Notes to be sold by such
Participating Broker-Dealer, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws of such jurisdictions (x) where the Holders of
Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h), in the case of Registrable Notes or Exchange Notes to
be sold by a Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Notes or Exchange Notes in a form eligible for
deposit with The Depository Trust Company and of printing Prospectuses if the
printing of Prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Notes or Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate principal amount of the Registrable Notes
included in any Registration Statement or of such Exchange Notes, as the case
may be), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and fees and disbursements of special
counsel for the sellers of Registrable Notes (subject to the provisions of
Section 6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the
<PAGE> 26
-24-
Company desires such insurance, (viii) fees and expenses of the Trustee
(including, without limitation, fees and disbursements of counsel), (ix) fees
and expenses of all other Persons retained by the Company, (x) internal expenses
of the Company (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(xi) the expense of any annual audit, (xii) the fees and expenses incurred in
connection with any listing of the securities to be registered on any securities
exchange if the Company elects to list any such securities and (xiii) the
expenses relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the
Company shall reimburse the Holders of the Registrable Notes being registered in
such registration for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and other reasonable out-of-pocket expenses of
the Holders of Registrable Notes incurred in connection with the registration of
the Registrable Notes. The Company shall not have any obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities.
7. INDEMNIFICATION
---------------
(a) The Company agrees to indemnify and hold harmless each
Holder of Registrable Notes and each Participating Broker-Dealer selling
Exchange Notes during the Applicable Period, the officers and directors of each
such person, and each person, if any, who controls any such person within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "PARTICIPANT"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, the reasonable legal
fees and other expenses incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any preliminary
Prospectus, or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein,
<PAGE> 27
-25-
in the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Participant or
underwriter furnished to the Company in writing by such Participant or
underwriter expressly for use therein; PROVIDED that the foregoing indemnity
with respect to any preliminary Prospectus shall not inure to the benefit of any
Participant or underwriter (or to the benefit of any person controlling such
Participant or underwriter) from whom the person asserting any such losses,
claims, damages or liabilities purchased Registrable Notes or Exchange Notes if
such untrue statement or omission or alleged untrue statement or omission made
in such preliminary Prospectus is eliminated or remedied in the related
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) and a copy of the related Prospectus (as so
amended or supplemented) shall have been furnished to such Participant or
underwriter at or prior to the sale of such Registrable Notes or Exchange Notes,
as the case may be, to such person or at a time the Company had notified persons
under the last paragraph of Section 5 hereof to cease using such Registration
Statement or Prospectus.
(b) Each Participant will be required to agree, severally and
not jointly, to indemnify and hold harmless the Company, its directors and
officers and each person who controls any such person within the meaning of
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 each Participant, but only
with reference to information relating to such Participant furnished to the
Company in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
Prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any person in respect of which indemnity may be sought pursuant
to either paragraph (a) or (b) of this Section 7, such person (the "INDEMNIFIED
Person") shall promptly notify the person against whom such indemnity may be
sought (the "INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon
request of the Indemnified Per-
<PAGE> 28
-26-
son, shall retain one counsel reasonably satisfactory to the Indemnified Person
to represent the Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses incurred by such counsel related to such proceeding. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representations 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 Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants and such control persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes sold by all such Participants and any such separate firm
for the Company, its directors, its officers and such control persons of the
Company shall be designated in writing by the Company. The Indemnifying Person
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 Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses incurred by counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Person
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 Person of the aforesaid request and (ii)
such Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; PROVIDED,
HOWEVER, that the Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying Party
is contesting, in
<PAGE> 29
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good faith, the request for reimbursement. No Indemnifying Person shall, without
the prior written consent of the Indemnified Person, effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified Person
is or could have been a party, unless such settlement includes an unconditional
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in paragraphs (a) and (b)
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraphs, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and the Participants on the other 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 fault of the Company on the one hand and the Participants on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Participants and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties shall agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes exceeds the amount of any damages that such Participant has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omis-
<PAGE> 30
-28-
sion. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
------------------
The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner and, if at any
time the Company is not required to file such reports, it will, upon the request
of any Holder of Registrable Notes, make publicly available other information of
a like nature until no longer necessary to permit sales pursuant to Rule 144 or
Rule 144A. The Company further covenants that so long as any Registrable Notes
remain outstanding to make available to any Holder of Registrable Notes in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to (a) such Rule 144A, or (b) any similar rule or regulation hereafter
adopted by the SEC, unless at such time the Registrable Notes are fully salable
under Rule 144 or any successor provision.
9. UNDERWRITTEN REGISTRATIONS
--------------------------
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
<PAGE> 31
-29-
10. MISCELLANEOUS
-------------
(a) REMEDIES. In the event of a breach by the Company of any
of its obligations under this Agreement, other than the occurrence of an event
which requires payment of Additional Interest, each Holder of Registrable Notes,
in addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement or
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach, it shall waive the defense that a remedy at law would be adequate.
(b) ENFORCEMENT. The Trustee shall be authorized to enforce
the provisions of this Agreement for the ratable benefit of the Holders.
(c) NO INCONSISTENT AGREEMENTS. The Company does not have, as
of the date hereof, and the Company shall not, after the date of this Agreement,
enter into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The Company has not
entered and will not enter into any agreement with respect to any of its
securities which will grant to any Person piggy-back rights with respect to a
Registration Statement.
(d) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company
shall not, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a registration
undertaken pursuant to this Agreement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of
<PAGE> 32
-30-
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold by such Holders pursuant to such Registration
Statement, PROVIDED that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(f) NOTICES. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most
current address given by the Trustee to the Company; and
(ii) if to the Company:
Glasstech, Inc.,
Ampoint Industrial Park,
995 Fourth Street,
Perrysburg, Ohio 43551,
Attention: President,
with a copy to:
Baker & Hostetler LLP,
3200 National City Center,
1900 East Ninth Street,
Cleveland, Ohio 44114-3485,
Attention: R. Steven Kestner, Esq.
All such notices and communications shall be deemed to have
been duly given: (i) when delivered by hand, if personally delivered; (ii) three
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one business day after being timely delivered to a next-day air courier;
and (iv) when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
<PAGE> 33
-31-
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Notes.
(h) 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.
(i) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.
(l) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein.
(m) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be
<PAGE> 34
-32-
deemed outstanding for such purpose and shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
<PAGE> 35
-33-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GLASSTECH SUB CO.
By: /s/ Mark D. Christman
------------------------
Name: Mark D. Christman
Title: President
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Mark Dalton
----------------------------
Name: Mark Dalton
Title: President
<PAGE> 1
Exhibit 12.1
<TABLE>
<CAPTION>
GLASSTECH, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PREDECESSOR
COMPANY REORGANIZED COMPANY
--------------- -----------------------------------------------------
PERIOD FROM PERIOD FROM
JULY 1, 1994 JANUARY 4, 1995
THROUGH THROUGH YEAR ENDED YEAR ENDED
JANUARY 3, 1995 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1997
--------------- --------------- ------------- -------------
<S> <C> | <C> <C> <C>
Consolidated income before income taxes $ 219 | $ 915 $ 3,400 $ 9,127
Add: |
Interest expense - | 2,077 4,200 4,200
Amortization of deferred financing costs - | - - -
Portion of operting lease rentals deemed |
to be interest 50 | 50 100 100
--------------- | --------------- ------------- -------------
Consolidated income as adjusted $ 269 | $ 3,042 $ 7,700 $ 13,427
=============== | =============== ============= =============
|
Fixed charges: |
Interest expense $ - | 2,077 4,200 4,200
Amortization of deferred financing costs - | - - -
Portion of operting lease rentals deemed |
to be interest 50 | 50 100 100
--------------- | --------------- ------------- -------------
Total fixed charges $ 50 | $ 2,127 $ 4,300 $ 4,300
=============== | =============== ============= =============
|
Ratio of earnings to fixed charges 5.40 | 1.40 1.80 3.12
|
</TABLE>
<PAGE> 1
Exhibit 21.1
LIST OF SUBSIDIARIES
--------------------
1. Stir-Melter, a Delaware corporation
2. Glasstech Ltd., a company organized under the laws of the
United Kingdom
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 15, 1997, in the Registration Statement and
related Prospectus of Glasstech, Inc. dated August 26, 1997.
/s/ Ernst & Young LLP
Ernst & Young LLP
Toledo, Ohio
August 26, 1997
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
GLASSTECH, INC.
(Exact name of OBLIGOR as specified in its charter)
Delaware 13-3440225
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
Ampoint Industrial Park 43551
995 Fourth Street (Zip code)
Perrysburg, OH
(Address of principal executive offices)
--------------------------
Series B 12-3/4% Senior Notes due 2004
(Title of the indenture securities)
================================================================================
<PAGE> 2
- 2 -
GENERAL
1. GENERAL INFORMATION
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
The obligor is currently not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and
15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
----------------
T-1.1 -- Organization Certificate, as amended, issued by
the State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 3
- 3 -
16. LIST OF EXHIBITS
----------------
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939, as amended
by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
- ----
As of August 20, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company 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 25th day
of August, 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Patricia Stermer
-----------------------------------
Patricia Stermer
Assistant Vice President
<PAGE> 4
EXHIBIT T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
_____________________________________
By: /S/Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
JUNE 30, 1997
-------------
(IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 83,529
Short-Term Investments 259,746
Securities, Available for Sale 924,165
Loans 1,437,342
Less: Allowance for Credit Losses 13,779
-----------
Net Loans 1,423,563
Premises and Equipment 61,515
Other Assets 122,696
-----------
TOTAL ASSETS $ 2,875,214
===========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 763,075
Interest Bearing 1,409,017
-----------
Total Deposits 2,172,092
Short-Term Credit Facilities 404,212
Accounts Payable and Accrued Liabilities 132,213
-----------
TOTAL LIABILITIES $ 2,708,517
===========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 100,930
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,231)
-----------
TOTAL STOCKHOLDER'S EQUITY 166,697
-----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 2,875,214
===========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
August 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 53,334
<SECURITIES> 0
<RECEIVABLES> 6,999
<ALLOWANCES> (141)
<INVENTORY> 4,265
<CURRENT-ASSETS> 64,938
<PP&E> 11,701
<DEPRECIATION> (3,311)
<TOTAL-ASSETS> 99,364
<CURRENT-LIABILITIES> 25,420
<BONDS> 42,000
<COMMON> 10
0
0
<OTHER-SE> 29,222
<TOTAL-LIABILITY-AND-EQUITY> 99,364
<SALES> 76,433
<TOTAL-REVENUES> 76,433
<CGS> 45,603
<TOTAL-COSTS> 45,603
<OTHER-EXPENSES> 19,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,200
<INCOME-PRETAX> 9,127
<INCOME-TAX> 2,629
<INCOME-CONTINUING> 6,498
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,498
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99.1
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES MAY
BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
GLASSTECH, INC.
LETTER OF TRANSMITTAL
SERIES B 12 3/4% SENIOR NOTES DUE 2004
TO: UNITED STATES TRUST COMPANY OF NEW YORK,
THE EXCHANGE AGENT
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.
<S> <C>
United States Trust Company of New York United States Trust Company of New York
P.O. Box 844 770 Broadway
Cooper Station New York, New York 10003
New York, New York 10276-0844 Attn: Corporate Trust
BY HAND TO 4:30 P.M.: BY FACSIMILE:
United States Trust Company of New York United States Trust Company of New York
111 Broadway (212) 780-0592
Lower Level Attn: Corporate Trust
New York, New York 10006
Corporate Trust Window CONFIRM BY TELEPHONE:
(800) 548-6565 (800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE
THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR
EXISTING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
The undersigned acknowledges receipt of the Prospectus dated
_____________ ___, 1997 (the "Prospectus") of GLASSTECH, INC. (the "Company")
and this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's Offer to Exchange (the "Exchange Offer") $1,000
principal amount of its Series B 12 3/4% Senior Notes Due 2004 (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus is a part, for each $1,000 principal amount of its outstanding 12
3/4% Senior Notes Due 2004 (the "Old Notes"), of which $70,000,000 principal
amount is outstanding, upon the terms and conditions set forth in the
Prospectus. Other capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
For each Old Note accepted for exchange, the holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. Interest on the New Notes will accrue from the last
interest payment date on which interest was paid on the Old Notes surrendered in
exchange therefor or, if no interest has been paid on the Old Notes, from the
date of original issue of the Old Notes. Holders of Old Notes accepted for
exchange will be deemed to have waived the right to receive any other payments
or accrued interest on the Old Notes. The Company reserves the right, at any
time or from time to time, to extend the Exchange Offer at its discretion, in
which event the term "Expiration Date" shall mean the latest time and date to
which the Exchange Offer is extended. The Company shall notify holders of the
Old Notes of any extension by means of a press release or other public
announcement prior to 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i)
certificates representing Old Notes are to be physically delivered to the
Exchange Agent herewith by Holders; (ii) tender of Old Notes is to be made by
book-entry transfer to the Exchange Agent's account at The Depository Trust
Company ("DTC"), pursuant to the procedures set forth in the Prospectus under
"The Exchange Offer--Procedures for Tendering" by any financial institution that
is a participant in DTC and whose name appears on a security position listing as
the owner of Old Notes; or (iii) tender of Old Notes is to be made according to
the guaranteed delivery procedures set forth in the prospectus under "The
Exchange Offer--Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person:
(i) 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 (ii) whose Old Notes are held of record by DTC who desires
to deliver such Old Notes by book-entry transfer at DTC. The undersigned has
completed, executed and delivered this Letter of Transmittal to indicate the
action the undersigned desires to take with respect to the Exchange Offer.
The instructions included with this Letter of Transmittal must be
followed. Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 11 herein.
-2-
<PAGE> 3
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. PLEASE READ THIS
ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
BOX 1 - DESCRIPTION OF 12 3/4% SENIOR NOTES DUE 2004 (OLD NOTES)
- -----------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REGISTERED BY TENDERED
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) (IF LESS THAN ALL)**
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
* Need not be completed by Holders tendering by book-entry transfer.
**Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the
entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)." If the
space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to
this Letter of Transmittal.
</TABLE>
The minimum permitted tender is $1,000 in principal amount of Old
Notes. All other tenders must be integral multiples of $1,000.
-3-
<PAGE> 4
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- ------------------------------------------------------------
BOX 2 BOX 3
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6)
<S> <C>
To be completed ONLY if certificates for Old Notes in a To be completed ONLY if certificates for Old
principal amount not tendered or not accepted for exchange, or Notes in a principal amount not tendered or not accepted
New Notes issued in exchange for Old Notes accepted for for exchange are to be sent to someone other than the
exchange, are to be issued in the name of someone other than the undersigned, or to the undersigned at an address other than
undersigned, or if the Old Notes tendered by book-entry transfer that shown above.
that are not accepted for exchange are to be credited to an
account maintained by DTC.
Issue certificate(s) to: Return mail to:
Name: Name:
------------------------------------------------- -----------------------------------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address: Address:
---------------------------------------------- ---------------------------------------------------
- ------------------------------------------------------ -----------------------------------------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
- ------------------------------------------------------ -----------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
- ------------------------------------------------------ ------------------------------------------------------------
- ---------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-------------------------------------------------
DTC Book-Entry Account:
---------------------------------------------------------
Transaction Code No.:
-----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s):
------------------------------------------------
Window Ticket Number (if any):
--------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number: Transaction Code Number:
----------------------- ---------------
- --------------------------------------------------------------------------------
-4-
<PAGE> 5
- --------------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND ARE RECEIVING NEW NOTES FOR YOUR
OWN ACCOUNT IN EXCHANGE FOR OLD NOTES THAT WERE ACQUIRED AS A RESULT OF
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-5-
<PAGE> 6
LADIES AND GENTLEMEN:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Old Notes tendered
hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company and as Trustee under the Indenture
for the Old Notes and New Notes) with respect to the tendered Old Notes with
full power of substitution to (i) deliver certificates for such Old Notes to the
Company, or transfer ownership of such Old Notes on the account books maintained
by DTC and deliver all accompanying evidence of transfer and authenticity to, or
upon the order of, the Company and (ii) present such Old Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Notes, all in accordance with the
terms and subject to the conditions of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the Holder receiving such New Notes, whether or not such person is
the Holder; that neither the Holder nor any such other person has any
arrangement or understanding with any person to participate in the distribution
of such New Notes; and that neither the Holder nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company or
any of its subsidiaries.
The undersigned also acknowledges that this Exchange Offer is being
made based on certain interpretations issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties in unrelated
transactions. Based on those interpretations, the Company believes that the New
Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof (other
than any such holder 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 such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangements or understandings with any person to participate in
the distribution of such New Notes. 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 Old 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 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.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Notes
tendered hereby. All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns, trustees in bankruptcy or other legal
representatives of the undersigned. This tender may be withdrawn only in
accordance with the procedures set forth in "The Exchange Offer--Withdrawal of
Tenders" section of the Prospectus.
For purposes of the Exchange Offer, 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.
-6-
<PAGE> 7
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except as noted below with respect to tenders through DTC),
without expense, to the undersigned at the address shown below or at a different
address as may be indicated under "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
The undersigned acknowledges that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged in the name(s) of the undersigned (or in either such event, in the
case of the Old Notes tendered through DTC, by credit to the undersigned's
account at DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and any certificates for Old
Notes not tendered or not exchanged (and accompanying documents, as appropriate)
to the undersigned at the address shown below the undersigned's signature(s),
unless, in either event, tender is being made through DTC. In the event that
both "Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and return any Old Notes not
tendered or not exchanged in the name(s) of, and send said certificates to, the
person(s) so indicated. The Company has no obligation pursuant to the "Special
Payment Instructions" and "Special Delivery Instructions" to transfer any Old
Notes from the name of the registered Holder(s) thereof if the Company does not
accept for exchange any of the Old Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i) whose
Old Notes are not immediately available or (ii) who cannot deliver their Old
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent, or cannot complete the procedure for book-entry transfer, prior
to the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of the Letter of Transmittal printed below.
-7-
<PAGE> 8
- --------------------------------------------------------------------------------
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X Date
---------------------------------- --------------------------------
X Date
---------------------------------- --------------------------------
Signature(s) of Registered Holder(s)
Or Authorized Signatory
Area Code and Telephone Number
-------------------------
The above lines must be signed by the registered Holder(s) of Old Notes
as their name(s) appear(s) on the Old Notes or, if the Old Notes are tendered by
a participant in DTC, as such participant's name appears on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
registered Holder(s) by a properly completed bond power from the registered
Holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Old Notes to which this Letter of Transmittal relates are held of record by
two or more joint Holders, then all such Holders must sign this Letter of
Transmittal. 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, such person must (i) set forth his or her full title
below and (ii) unless waived by the Company, submit evidence satisfactory to the
Company of such person's authority to act. See Instruction 4 regarding the
completion of this Letter of Transmittal printed below.
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Capacity:
-----------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(TITLE)
- --------------------------------------------------------------------------------
(NAME OF FIRM)
Dated:
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-8-
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by
noteholders, either if certificates are to be forwarded herewith or if tenders
are to be made pursuant to the procedures for delivery by book-entry transfer
set forth in "The Exchange Offer--Procedures for Tendering" section of the
Prospectus. Certificates for all physically tendered Old Notes, or Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile hereof) and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Old Notes tendered hereby must be in denominations
of principal amount of maturity of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution
(as defined in Instruction 4 below); (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, or a Book-Entry Confirmation, and any other documents required by this
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or Book-Entry confirmation, as the case may
be, and all other documents required by this Letter of Transmittal, are received
by the Exchange Agent within three NYSE trading days after the date of execution
of the Notice of Guaranteed Delivery.
The method of delivery of this Letter of Transmittal, the Old Notes and
all other required documents is at the election and risk of the tendering
holders, but the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested
that the mailing be made sufficiently in advance of the Expiration Date to
permit the delivery to the Exchange Agent prior to 5:00 p.m. New York City time,
on the Expiration Date. See "The Exchange Offer" section in the Prospectus.
2. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf or
must, prior to completing and executing this Letter of Transmittal and
delivering his or her 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.
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the fourth column of the box entitled "Description of 12 3/4% Senior
Notes Due 2004 (Old Notes)" above. The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, then Old Notes for the principal amount of Old Notes not tendered and
a certificate or certificates representing New Notes issued in exchange for any
Old Notes accepted will be sent to the holder at his or her registered address,
unless a
-9-
<PAGE> 10
different address is provided in the appropriate box on this Letter of
Transmittal promptly after the Old Notes are accepted for exchange.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; POWERS OF ATTORNEY AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder of the Old Notes tendered hereby, the signature must
correspond exactly with the name as written on the face of the certificates
without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the registered holder or
holders of the Old Notes specified herein and tendered hereby, no endorsements
of certificates or separate powers of attorney are required. If, however, the
New Notes are to be issued, or any untendered Old Notes are to be reissued, to a
person other than the registered holder, then endorsements of any certificates
transmitted hereby or separate powers of attorney are required.
Signatures on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the names on the registered holder or
holders appear(s) on the certificate(s) and signatures on such certificate(s)
must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or powers of attorney
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, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
Endorsements on certificates for Old Notes or signatures on powers of
attorney required by this Instruction 4 must be guaranteed by a firm which is a
participant in a recognized signature guarantee medallion program ("Eligible
Institutions").
Signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution unless the Old Notes are tendered (i) by a registered
holder of Old Notes (which term, for purposes of the Exchange Offer, includes
any participant in the Book-Entry Transfer Facility system whose name appears on
a security position listing as the holder of such Old Notes) who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on this Letter of Transmittal, or (ii) for the account of
an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal (or in the case of tender of Old
Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated. Noteholders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such noteholder may
designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name and address of the person signing this
Letter of Transmittal.
-10-
<PAGE> 11
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose offered Old Notes are accepted for exchange must provide the
Company (as payer) with his, her or its correct Taxpayer Identification Number
("TIN"), which, in the case of an exchanging holder who is an individual, is his
or her social security number. If the Company is not provided with the correct
TIN or an adequate basis for exemption, such holder may be subject to a $50
penalty imposed by the Internal Revenue Service (the "IRS"), and payments made
with respect to Old Notes purchased pursuant to the Exchange Offer may be
subject to backup withholding at a 31% rate. If withholding results in an
overpayment of taxes, a refund may be obtained. Exempt holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9."
To prevent backup withholding, each exchanging holder must provide his,
her or its correct TIN by completing the Substitute Form W-9 enclosed herewith,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the IRS that he, she or it is subject to backup
withholding as a result of a failure to report all interest or dividends, or
(iii) the IRS has notified the holder that he, she or it is no longer subject to
backup withholding. In order to satisfy the Exchange Agent that a foreign
individual qualifies as an exempt recipient, such holder must submit a statement
signed under penalty of perjury attesting to such exempt status. Such statements
may be obtained from the Exchange Agent. If the Old Notes are in more than one
name or are not in the name of the actual owner, consult the Substitute Form W-9
for information on which TIN to report. If you do not provide your TIN to the
Company within 60 days, backup withholding will begin and continue until you
furnish your TIN to the Company.
7. TRANSFER TAXES. 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 registered holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
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 on any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption 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 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this letter.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Existing Notes nor shall any of them incur any liability for failure
to give any such notice.
10. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering
holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
-11-
<PAGE> 12
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance for additional copies of the Prospectus, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to the
Exchange Agent at the address specified in the Prospectus.
(DO NOT WRITE IN THE SPACE BELOW)
CERTIFICATE OLD NOTES OLD NOTES
SURRENDERED TENDERED ACCEPTED
- ---------------------- ---------------------- ----------------------
- ---------------------- ---------------------- ----------------------
- ---------------------- ---------------------- ----------------------
- ---------------------- ---------------------- ----------------------
DELIVERY PREPARED BY:
Checked By
- --------------------------------------------------
Date
- --------------------------------------------------
-12-
<PAGE> 13
- --------------------------------------------------------------------------------
PAYER'S NAME: GLASSTECH, INC.
- --------------------------------------------------------------------------------
NAME (if joint names, list first and circle the name of the person or entity
whose number you enter in Part I below. See instructions if your name has
changed.)
- --------------------------------------------------------------------------------
ADDRESS
-------------------------------------------------------------------------
CITY, STATE AND ZIP CODE
--------------------------------------------------------
LIST ACCOUNT NUMBER(S) HERE (OPTIONAL)
------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR
FORM W-9 TAXPAYER IDENTIFICATION OR
TIN NUMBER ("TIN") IN THE BOX ________________________________
AT RIGHT AND CERTIFY BY Social security number or TIN
SIGNING AND DATING BELOW.
-----------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2--Check the box if you are NOT PART 3--
INTERNAL REVENUE SERVICE subject to backup withholding under the
provisions of section 3408(a)(1)(C) of the Awaiting TIN [ ]
Internal Revenue Code because (1) you
have not been notified that you are
subject to backup withholding as a
result of failure to report all
interest or dividends or (2) the
Internal Revenue Service has notified
you that you are no longer subject to
PAYER'S REQUEST FOR backup
TAXPAYER IDENTIFICATION withholding.
NUMBER (TIN) -----------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that the information
provided on this form is true, correct and complete.
Signature Date
--------------------------- ----------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
-13-
<PAGE> 1
Exhibit 99.2
GLASSTECH, INC.
NOTICE OF GUARANTEED DELIVERY
FOR
Series B 12 3/4% SENIOR NOTES DUE 2004
As set forth in the Prospectus dated ___________, 1997 (the
"Prospectus") of GLASSTECH, INC., a Delaware corporation (the "Company"), and in
the accompanying Letter of Transmittal and instructions thereto (the "Letter of
Transmittal"), this form or one substantially equivalent hereto must be used to
accept the Company's offer to exchange (the "Exchange Offer") all of its
outstanding 12 3/4% Senior Notes Due 2004 (the "Old Notes") for its Series B 12
3/4% Senior Notes Due 2004, which have been registered under the Securities Act
of 1933, as amended (the "New Notes"), if certificates for the Old Notes are not
immediately available or if the Old Notes, the Letter of Transmittal or any
other documents required thereby cannot be delivered to the Exchange Agent, or
the procedure for book-entry transfer cannot be completed, prior to 5:00 P.M.,
New York City time, on the Expiration Date (as defined in the Prospectus). This
form may be delivered by an Eligible Institution (as defined in the Prospectus),
by hand or transmitted by facsimile transmission, overnight courier or mail to
the Exchange Agent as set forth below. Capitalized terms used but not defined
herein have the meaning given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES
MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
TO: UNITED STATES TRUST COMPANY OF NEW YORK,
THE EXCHANGE AGENT
<TABLE>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.
<S> <C>
United States Trust Company of New York United States Trust Company of New York
P.O. Box 844 770 Broadway
Cooper Station New York, New York 10003
New York, New York 10276-0844 Attn: Corporate Trust
BY HAND TO 4:30 P.M.: BY FACSIMILE:
United States Trust Company of New York United States Trust Company of New York
111 Broadway (212) 780-0592
Lower Level Attn: Corporate Trust
New York, New York 10006
Corporate Trust Window CONFIRM BY TELEPHONE:
(800) 548-6565 (800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE, OTHER THAN AS SET FORTH
ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on
the Letter of Transmittal to be used to tender Old Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to GLASSTECH, INC., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus and the Letter of Transmittal (which together constitute
the "Exchange Offer"), receipt of which is hereby acknowledged, $_______________
principal amount of Old Notes pursuant to the guaranteed delivery procedures set
forth in Instruction 1 of the Letter of Transmittal.
The undersigned acknowledges that tenders of Old Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned acknowledges that tenders of Old Notes pursuant to the Exchange
Offer may not be withdrawn after 5:00 p.m., New York City time, on the
Expiration Date.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<CAPTION>
Certificate No(s). for Old Notes (if available Name(s) of Record Holder(s)
-----
<S> <C>
- ---------------------------------------------------- ---------------------------------------------
- ---------------------------------------------------- ---------------------------------------------
- ---------------------------------------------------- ---------------------------------------------
- ---------------------------------------------------- ---------------------------------------------
(PLEASE PRINT OR TYPE)
Principal Amount of Old Notes
---------------------
Address
- ---------------------------------------------------- ---------------------------------------
- ---------------------------------------------------- ---------------------------------------------
.
- ---------------------------------------------------- ---------------------------------------------
Area Code and Tel. No.
------------------------
Signature(s):
x
---------------------------------------------
x
---------------------------------------------
Dated:
----------------------------------------
If Old Notes will be delivered by book-entry
transfer at the Depository Trust Company, Depository
Account No.
-------------------------------------
</TABLE>
-2-
<PAGE> 3
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appears on certificates
for Old Notes or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
-----------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby (a) represents that the above named person(s) "own(s)" the Old Notes
tendered hereby within the meaning of Rule 14e-4 under the Exchange Act, (b)
represents that such tender of Old Notes complies with Rule 14e-4 under the
Exchange Act, and (c) guarantees that delivery to the Exchange Agent of
certificates for the Old Notes tendered hereby, in proper form for transfer (or
confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's Account at the Depository Trust Company, pursuant to the procedures for
book-entry transfer set forth in the Prospectus), with delivery of a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other required documents, will be
received by the Exchange Agent at one of its addresses set forth above within
three New York Stock Exchange ("NYSE") trading days after the execution of this
Notice of Guaranteed Delivery.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE
AGENT WITHIN THE TIME PERIOD SET FORTH AND THAT FAILURE TO
DO SO COULD RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED.
Name of Firm
------------------------------------------------------------------
Address
--------------------------- ----------------------------------
Authorized Signature
- ------------------------------------
- ------------------------------------
Name
- ------------------------------------ -------------------------------
(Please Print or Type)
Area Code
and Tel. No.
------------------------ Title
------------------------------
Dated: , 1997
-------------------------
NOTE: DO NOT SEND OLD NOTES WITH THIS FORM; OLD NOTES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT WITHIN
FIVE NYSE TRADING DAYS AFTER THE EXECUTION OF THIS NOTICE OF GUARANTEED
DELIVERY.
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